FINANCIAL STATEMENTS AND


INDEPENDENT AUDITOR'S REPORT




SENECA FALLS EAST APARTMENTS COMPANY II, L.P.




RD PROJECT NO. 37-050-161505050




DECEMBER 31, 2007






























SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




TABLE OF CONTENTS




PAGEINDEPENDENT AUDITOR'S REPORT
3FINANCIAL STATEMENTS:BALANCE SHEET
4STATEMENT OF OPERATIONS
6STATEMENT OF CHANGES IN PARTNERS' CAPITAL
7STATEMENT OF CASH FLOWS
8NOTES TO FINANCIAL STATEMENTS
9SUPPLEMENTAL INFORMATION:INDEPENDENT AUDITOR'S REPORT ON INFORMATION

ACCOMPANYING THE BASIC FINANCIAL STATEMENTS
16SUPPLEMENTAL INFORMATION - SCHEDULE OF EXPENSES
17INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASEDON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVERNMENTAL AUDITING STANDARDS
19

















PAILET MEUNIER AND LEBLANC, L.L.P.




Certified Public Accountants


Management Consultants




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Partners


Seneca Falls East Apartments Company II, L.P.




We have audited the accompanying balance sheet of Seneca Falls East Apartments Company II, L.P., as of December 31, 2007 and the related statements of operations, changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.




We conducted our audit in accordance with the Standards of the Public Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.




In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Seneca Falls East Apartments Company II, L.P. as of December 31, 2007 and the results of its operations, changes in partners' capital and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.




/s/  PAILET MEUNIER AND LEBLANC, L.L.P.




Metairie, Louisiana


March 1, 2008




3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002 Telephone (504) 837-0770. Fax (504) 837-7102


Member of


IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board


AICPA Centers . Center for Public Company Audit Firms (SEC)


Governmental Audit Quality Center . Private Companies Practice Section (PCPS)








3




SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




BALANCE SHEET




DECEMBER 31, 2007




ASSETSCurrent AssetsCash - Operating

$
35,088Rent receivable


6,339Miscellaneous receivables


309Prepaid expenses


346Total Current Assets


42,082Restricted Deposits and Funded ReservesTenants' security deposits


9,235Replacement reserve


39,548Taxes and insurance escrow


14,136Total Restricted Deposits and Funded Reserves


62,919Property and EquipmentLand


40,000Buildings


412,893Equipment


4,494Building - Rehab


640,256Carpeting and appliances


76,731Carpeting and appliances - Rehab


55,733Roads / walks and landscaping - Rehab


30,3511,260,458Less: Accumulated depreciation


(398,559
)Property and Equipment - Net


861,899Total Assets

$
966,900







See accompanying notes to financial statements.







4




SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




BALANCE SHEET




DECEMBER 31, 2007




LIABILITIES AND PARTNERS' CAPITALCurrent LiabilitiesAccounts payable

$
425Deferred rent


1,655Developers' fee payable


13,181Current portion of long-term debt


4,281Total Liabilities


19,542Tenants' Security Deposits


9,235Long-Term LiabilitiesMortgage payable


867,087Less: current portion


(4,281
)Total Long-Term Liabilities


862,806Total Liabilities


891,583Partners' Capital


75,317Total Liabilities and Partners' Capital

$
966,900







See accompanying notes to financial statements.







5




SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




STATEMENT OF OPERATIONS




DECEMBER 31, 2007




RevenueRental revenue

$
183,880Other revenue


5,608Total Revenue


189,488Operating expensesOperating and maintenance


27,727Utilities


29,359Tax and insurance


51,934Management fee


17,437General and administrative


12,967Total Operating expenses


139,424Operating Income


50,064Other ExpensesInterest income


2,581Interest expense


(20,083
)Depreciation expense


(35,107
)Net Other Expenses


(52,609
)Net Income (Loss)

$
(2,545
)







See accompanying notes to financial statements.







6





SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




STATEMENT OF CHANGES IN PARTNERS' CAPITAL




DECEMBER 31, 2007




Total

Partners'

CapitalBalance - January 1, 2007

$
77,862Net Income (Loss)


(2,545
)Balance - December 31, 2007

$
75,317







See accompanying notes to financial statements.







7




SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




STATEMENT OF CASH FLOWS




DECEMBER 31, 2007




Cash flows from operating activities:Net Income

$
(2,545
)Adjustments to reconcile net income to net cash provided by operating activities:Depreciation


35,107(Increase) decrease in accounts receivable


(1,660
)(Increase) decrease in miscellaneous receivable


(36
)(Increase) decrease in prepaid expenses


(23
)Increase (decrease) in accounts payable


(2,285
)Increase (decrease) in deferred rent


1,655Total adjustments


32,758Net cash provided (used) by operating activities


30,213(Deposit) withdrawal replacement reserve


(3,335
)(Deposit) withdrawal tax and insurance escrow


5,318Purchases of property and equipment


(3,603
)Net cash provided (used) by investing activities


(1,620
)Cash flows from financing activities:Principal payments on long-term debt


(4,002
)Net cash provided (used) by financing activities


(4,002
)Net increase (decrease) in cash and equivalents


24,591Cash and equivalents, beginning of year


10,497Cash and equivalents, end of year

$
35,088Supplemental disclosures of cash flow information:Cash paid during the year for:Interest Expense

$
20,083







See accompanying notes to financial statements.





8
 9


SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




NOTES TO FINANCIAL STATEMENTS




DECEMBER 31, 2007




NOTE A - NATURE OF OPERATIONS




Seneca Falls East Apartments Company II, L.P. was formed as a Limited Partnership in November 1997 to purchase, renovate and operate Senaca Falls East Apartments, a low and moderate income housing project in Seneca Falls, New York. The apartments (32 units) were available for lease in November 1997.




NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Basis of accounting


The Partnership prepares its financial statements on the accrual basis of accounting consistent with accounting principles generally accepted in the United States of America.




Estimates


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.




Receivables




The Partnership considers receivables to be fully collectible; accordingly, no allowance for doubtful accounts is required. If accounts become uncollectible, they will be charged to operations when that determination is made.




Property and Equipment




Depreciation of the buildings is provided by the straight-line method over an estimated useful life of 40 years. Depreciation of the equipment and fixtures is provided for by the double declining balance method over the estimated useful lives of 5 to 7 years. Depreciation expense for the year ended December 31, 2007 was $35,107.




Rental Income




Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and the tenants of the property are operating leases.








9


SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




NOTES TO FINANCIAL STATEMENTS




DECEMBER 31, 2007




NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Income Taxes




Since a partnership is not subject to income taxes, no provision for income taxes has been made in the accompanying financial statements. The taxable income or loss of the Partnership, however, is includable in the individual income tax returns of its respective partners.




Advertising Costs




Advertising costs, except for costs associated with direct-response advertising, are charged to operations when incurred. The costs of direct-response advertising are capitalized and amortized over the period during which future benefits are expected to be received.




NOTE C - RESTRICTED DEPOSITS AND FUNDED RESERVES




Tenant security deposits are held in a separate bank account in the name of the project. Interest earned on such deposits is credited to the individual tenants.




Restricted deposits and funded reserves are cash deposits, which have been placed into escrow accounts, and these deposits are not available for general business purposes.




All cash deposits are maintained in several banks located in New York State, which do not exceed and are insured by the Federal Deposit Insurance Corporation limits of $100,000.




NOTE D - ACCOUNTS RECEIVABLE




Accounts receivable at December 31, 2007 consists of the following:




Rent receivable

$
6,339Miscellaneous receivable


309Total Accounts receivable

$
6,648


10


SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




NOTES TO FINANCIAL STATEMENTS




DECEMBER 31, 2007




NOTE E - ACCOUNTS PAYABLE




Accounts payable at December 31, 2007 consists of the following:




Grounds maintenance

$
275Maintenance and repairs supplies


150Total Accounts Payable

$
425







NOTE F - MORTGAGES PAYABLE




The mortgage with Rural Development (RD) was restructured on April 29, 2002 and matures on April 29, 2028. It bears an annual interest rate of 6.75%. The mortgage is payable in principal and interest installments of $2,096 of which the Project pays $763 and Rural Development subsidizes the remaining $1,333. The mortgage is collateralized by the property and equipment.




In addition to the above mortgage, the Project received a subsequent loan from Rural Development on April 29, 1999, which was used to pay for the renovation of the project. The total amount of the loan is $535,821. On December 31, 1998, $489,267 was advanced with the remaining $46,554 being advanced in January 1999 (when amortization of the loan began). The loan matures on April 29, 2028, and is payable in principal and interest installments of $3,127 of which the Project pays $1,147 and Rural Development subsidizes the remaining $1,980. The mortgage is collateralized by the property and equipment.




Minimum principal payments of the mortgage are payable as follows:




Year ending December 31,

Original


SecondMortgage


Mortgage2008

$
1,718


$
2,5632009


1,838



2,7412010


1,966



2,9322011


2,103



3,1362012


2,248



3,355Thereafter


338,117



504,370$
347,990


$
519,097




Under the agreements with Rural Development, the Partnership is required to make monthly escrow deposits for taxes, insurance and a reserve for the replacement of project assets, and is subject to restrictions as to operating policies, rental charges, operating expenditures and distributions to partners.


11


SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




NOTES TO FINANCIAL STATEMENTS




DECEMBER 31, 2007




NOTE G - PARTNERS' CAPITAL




The Partners of Seneca Falls East Apartments Company II, L.P. and percentages of participation in profits and losses are as follows:




David R. Bacon
General Partner
0.005 %Frank Salvatore, Jr.
General Partner
0.005 %WNC Housing Tax Credit Fund IV, L.P.
Limited Partner
99.980 %WNC Housing, L.P.
Special Limited Partner
0.010 %




Distributions to the partners in any one fiscal year are limited by Rural Development to $9,730, which is 8.0% of the initial equipment investment of $121,625. Distributions refer to any withdrawals of cash or other assets of the project. If there is insufficient cash flow to allow a partner distribution in any particular year, that distribution can be made up only in the next year.




Return to Owner




In accordance with the Loan Agreement, the annual return to owner is as follows:




Maximum Return to Owner

$
9,730Budgeted Return to Owner

$
-Return to Owner Paid:Investor Asset Management Fee

$
-Partnership Management Fee


-General Partner Distribution


-Limited Partner Distribution


-$
-







NOTE H - CASH FLOWS INFORMATION




The Partnership considers all short-term investments with an original maturity of three months or less to be cash equivalents. There were no cash equivalents at December 31, 2007.




Cash paid for interest expense in 2007 was $20,083. Cash paid for income taxes in 2007 was $0.


12





SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




NOTES TO FINANCIAL STATEMENTS




DECEMBER 31, 2007




NOTE I - IDENTITIES OF INTEREST




Management Agreement




The management of the property is being provided for by Two Plus Four Management Company, Inc. under the direction of Mr. David R. Bacon.




There is an identity of interest in that Mr. David R. Bacon is the Principal Stockholder in Two Plus Four Management Company, Inc. and a General Partner in Seneca Falls East Apartments Company II, L.P. Amounts paid to related companies are either regulated by an agreement or approved by Rural Development to comply with Rural Development requirements concerning identity of interest situations.




The amounts paid to Two Plus Four Management Company, Inc. during 2007 were as follows:




Payroll, payroll taxes and benefits

$
21,131Bookkeeping / Accounting fee


1,855Management fee


17,437Total

$
40,423


Management Fee Calculation


The management fee is based on a fee per unit occupied by tenants during the month.


Total Qualified Units (32 units x 12 months)


384Less: Vacancies


13Total Occupied Units


371Fee per unit (Effective January 2007)

$
52Management Fee Expense

$
19,292







Asset Management Fee




The Partnership paid an asset management fee to WNC Housing Tax Credit Fund, IV, L.P. (a Limited Partner) of $0 in 2007.


13


SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




NOTES TO FINANCIAL STATEMENTS




DECEMBER 31, 2007




NOTE I - IDENTITIES OF INTEREST (CONTINUED)




Developers' Fee




Mr. David R. Bacon is owed an additional fee of $13,181 as of December 31, 2007. The developers' fee is paid from non-operating cash or out of distributions to partners.




Distributions




The Partnership paid no cash distributions in 2007.




NOTE J - INSURANCE




The Partnership maintains insurance coverage as follows:




Deductible


CoverageProperty Coverage on Buildings

$
2,500


$
1,707,273Comprehensive Business Liability

None



5,000,000Fidelity / Employee Dishonesty

$
5,000



500,000




NOTE K - CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS




The Partnership's sole asset is a 32-unit apartment project. The Partnership's operations are concentrated in the multi-family real estate market. In addition, the Partnership operates in a heavily regulated environment. The operations of the project are subject to the administrative directives, rules, and regulations of Federal, State, and local regulatory agencies. Such administrative directives, rules, and regulations are subject to change by an act of Congress or an administrative change mandated by Federal, State, and local regulatory agencies. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional burden to comply with a change.




NOTE L - CONTINGENCY




The Partnership's low-income housing credits are contingent on its ability to maintain compliance with applicable sections of Internal Revenue Code Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent or to correct noncompliance within a specified time period could result in the recapture of tax credits previously taken plus interest. In addition, such potential noncompliance may require an adjustment to the contributed capital by the Limited Partners.








14












SUPPLEMENTAL INFORMATION
















15





PAILET, MEUNIER AND LEBLANC, L.L.P.


Certified Public Accountants




Management Consultants








INDEPENDENT AUDITORS' REPORT ON INFORMATION


ACCOMPANYING THE BASIC FINANCIAL STATEMENTS




To the Partners


Seneca Falls East Apartments Company II, L.P.




Our audit of the 2007 financial statements presented in the preceding section of this report was for the purpose of forming an opinion on such financial statements taken as a whole. The accompanying information shown on the following pages is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the 2007 basic financial statements taken as a whole.




/s/ PAILET, MEUNIER AND LEBLANC, L.L.P.





Metairie, Louisiana


March 1, 2008




















3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002Telephone (504) 837-0770. Fax (504) 837-7102


Member of


IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board


AICPA Centers . Center for Public Company Audit Firms (SEC)


Governmental Audit Quality Center . Private Companies Practice Section (PCPS)


16


SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




SUPPLEMENTAL INFORMATION




FOR THE YEAR ENDED DECEMBER 31, 2007




A.
SCHEDULES OF OPERATING AND MAINTENANCE, UTILITIES, ADMINISTRATIVE, TAXES AND INSURANCE




Operating and Maintenance:

2007Maintenance and Repairs Payroll

$
14,306Maintenance and Repairs Supply


1,932Maintenance and Repairs Contract


1,188Snow removal


2,077Painting and Decorating


236Ground Maintenance


524Services / exterminating


713Capital Expenditures - Reserve


6,751Total

$
27,727Utilities:Electricity

$
5,375Water


7,311Garbage and Trash Removal


3,448Sewerage


7,311Gas


5,914Total

$
29,359Administrative:Accounting and Bookkeeping

$
1,855Project Auditing Expenses


4,900Advertising


79Telephone


1,844DHCR monitory fee


1,380Miscellaneous administrative


608Bad Debts


1,112Office Expenses


1,107Training Expenses


82Total

$
12,967


17


SENECA FALLS EAST APARTMENTS COMPANY II, L.P.


RD PROJECT NO. 37-050-161505050




SUPPLEMENTAL INFORMATION






FOR THE YEAR ENDED DECEMBER 31, 2007




Taxes and Insurance:

2007Real Estate Taxes

$
38,704Employee benefits and health insurance


1,354Payroll taxes


4,630Workers' compensation


841Property and Liability Insurance


6,405Total

$
51,934








18


PAILET, MEUNIER AND LEBLANC, L.L.P.


Certified Public Accountants


Management Consultants




INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING


AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL


STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS




To the Partners


Seneca Falls East Apartments Company II, L.P.


East Syracuse, New York




We have audited the financial statements of Seneca Falls East Apartments Company II, L.P. as of and for the year ended December 31, 2007 and have issued our report thereon dated March 1, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards,issued by the Comptroller General of the United States.




Internal Control Over Financial Reporting




In planning and performing our audit, we considered Seneca Falls East Apartments Company II, L.P.'s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Partnership's internal control over financial reporting.




A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Partnership's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Partnership's financial statements that is more than inconsequential will not be prevented or detected by the Partnership's internal control.




A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Partnership's internal control.




Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.








3421 N. Causeway Blvd., Suite 701. Metairie, LA 70002Telephone (504) 837-0770. Fax (504) 837-7102


Member of


IGAF Worldwide - Member Firms in Principal Cities . PCAOB - Public Company Accounting Oversight Board


AICPA Centers . Center for Public Company Audit Firms (SEC)


Governmental Audit Quality Center . Private Companies Practice Section (PCPS)


19








Compliance and Other Matters




As part of obtaining reasonable assurance about whether Seneca Falls East Apartments Company II,L.P.'s financial statements are free of material misstatement, we performed tests of its compliance withcertain provisions of laws, regulations, contracts, and grant agreements, noncompliance with whichcould have a direct and material effect on the determination of financial statement amounts. However,providing an opinion on compliance with those provisions was not an objective of our audit, andaccordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported underGovernment Auditing Standards.




This report is intended for the information and use of the partners, management and the United States Department of Agriculture, Rural Housing Services and is not intended to be and should not be used by anyone other than these specific parties.







Metairie, Louisiana


March 1, 2008