FINANCIAL STATEMENTS AND

INDEPENDENT
AUDITOR’S REPORT



MESA VERDE APARTMENTS, L.P.



DECEMBER 31, 2006 AND 2005















MESA VERDE APARTMENTS, L.P.



TABLE OF CONTENTS



|                                          |  | PAGE
|----------------------------------------- |  | ----
|                                          |  |     
|INDEPENDENT AUDITOR’S REPORT              |  | F-2 
|                                          |  |     
|FINANCIAL STATEMENT:                      |  |     
|                                          |  |     
|BALANCE SHEETS                            |  | F-3 
|                                          |  |     
|STATEMENTS OF INCOME                      |  | F-5 
|                                          |  |     
|STATEMENTS OF CHANGES IN PARTNERS’ EQUITY |  | F-6 
|                                          |  |     
|STATEMENTS OF CASH FLOWS                  |  | F-7 
|                                          |  |     
|NOTES TO FINANCIAL STATEMENT              |  | F-8 





F-1







PAILET, MEUNIER and LeBLANC,
L.L.P.

Certified Public Accountants

Management Consultants



INDEPENDENT AUDITOR’S REPORT



To the Partners

MESA VERDE APARTMENTS, LP.

Roswell, New Mexico



We have audited the accompanying
balance sheets of MESA VERDE APARTMENTS, L.P., as of December 31, 2006 and 2005 and the related statements of operations, changes
in partners’ equity (deficit) and cash flows for the years 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 audits.



We conducted our audits in accordance
with the Standards of the Public Company 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. 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 audits provide a reasonable basis for our opinion.



In our opinion, the financial
statements referred to above present fairly, in ail material respects, the financial position of MESA VERDE APARTMENTS, L.P. as
of December 31, 2006 and 2005 and the results of its operations, changes in partners’ equity and cash flows for the years then
ended in conformity with accounting principles generally accepted in the United States of America.





Metairie, Louisiana

April 27, 2007



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)



F-2







MESA VERDE APARTMENTS, L.P.



BALANCE
SHEETS



December 31, 2006 and 2005



|                                     |  | 2006 |            |   | 2005 |  
|------------------------------------ |  | ---- | ---------- | - | ---- | -
|ASSETS                               |  |      |            |   |      |  
|Current Assets                       |  |      |            |   |      |  
|Cash and Cash Equivalents            |  | $    | 28,147     |   |      | $
|Accounts Receivable                  |  |      | 19,973     |   |      |  
|Due from Affiliate                   |  |      | 37,000     |   |      |  
|Prepaid Insurance                    |  |      | 17,426     |   |      |  
|Total Current Assets                 |  |      | 102,546    |   |      |  
|                                     |  |      |            |   |      |  
|Restricted Deposits & Reserves       |  |      |            |   |      |  
|Operating Reserve                    |  |      | 19,586     |   |      |  
|Replacement Reserve                  |  |      | 44,508     |   |      |  
|Total Restricted Deposits & Reserves |  |      | 64,094     |   |      |  
|                                     |  |      |            |   |      |  
|Property and Equipment               |  |      |            |   |      |  
|Land                                 |  |      | 160,000    |   |      |  
|Building                             |  |      | 5,831,270  |   |      |  
|Furniture & Fixtures                 |  |      | 358,070    |   |      |  
|Accumulated Depreciation             |  |      | (1,702,655 | ) |      |  
|Total Property and Equipment         |  |      | 4,646,685  |   |      |  
|                                     |  |      |            |   |      |  
|Other Assets                         |  |      |            |   |      |  
|Financing Fees - Net                 |  |      | 39,575     |   |      |  
|Deposits                             |  |      | 1,120      |   |      |  
|Total Other Assets                   |  |      | 40,695     |   |      |  
|                                     |  |      |            |   |      |  
|TOTAL ASSETS                         |  | $    | 4,854,020  | $ |      |  



See accountant’s report and notes
to financial statements



F-3







MESA VERDE APARTMENTS, L.P.



BALANCE
SHEETS



December 31, 2006 and 2005



|                                                |  | 2006 |           |   | 2005 |  
|----------------------------------------------- |  | ---- | --------- | - | ---- | -
|LIABILITIES AND EQUITY                          |  |      |           |   |      |  
|Current Liabilities                             |  |      |           |   |      |  
|Accounts Payable                                |  | $    | 27,675    |   |      | $
|Tenant Security Deposits                        |  |      | 11,118    |   |      |  
|Accrued Interest Payable                        |  |      | 9,170     |   |      |  
|Accrued Real Estate Taxes                       |  |      | 12,362    |   |      |  
|Reporting Fees Payable                          |  |      | 25,000    |   |      |  
|Current Portion Long-Term Debt                  |  |      | 22,473    |   |      |  
|Total Current Liabilities                       |  |      | 107,798   |   |      |  
|                                                |  |      |           |   |      |  
|Long-Term Debt                                  |  |      |           |   |      |  
|Mortgage Payable                                |  |      | 1,725,467 |   |      |  
|Less Current Portion Long-Term Debt             |  |      | (22,473   | ) |      |  
|Mortgage Payable - Finance Authority            |  |      | 260,679   |   |      |  
|Accrued Interest - Deferred - Finance Authority |  |      | 78,060    |   |      |  
|Due to Related Parties                          |  |      | 702,123   |   |      |  
|Due to Developer                                |  |      | 509,084   |   |      |  
|Total Long-Term Debt                            |  |      | 3,252,940 |   |      |  
|                                                |  |      |           |   |      |  
|Total Liabilities                               |  |      | 3,360,738 |   |      |  
|                                                |  |      |           |   |      |  
|Partners’ Equity                                |  |      | 1,493,282 |   |      |  
|                                                |  |      |           |   |      |  
|TOTAL LIABILITIES AND EQUITY                    |  | $    | 4,854,020 |   |      | $



See accountant’s report and notes
to financial statements



F-4







MESA VERDE APARTMENTS, L.P.



STATEMENTS OF INCOME



For The Years Ended December 31, 2006 and 2005



|                                |  | 2006 |          |   | 2005 |  
|------------------------------- |  | ---- | -------- | - | ---- | -
|REVENUES                        |  |      |          |   |      |  
|Rent Revenue                    |  | $    | 652,296  |   |      | $
|Vacancy Loss                    |  |      | (136,398 | ) |      |  
|Laundry Revenue                 |  |      | 4,135    |   |      |  
|NSF & Late Fee Revenue          |  |      | 6,775    |   |      |  
|Insurance Proceeds              |  |      | 0        |   |      |  
|Other Revenue                   |  |      | 7,387    |   |      |  
|Total Revenue                   |  |      | 534,195  |   |      |  
|                                |  |      |          |   |      |  
|EXPENSES                        |  |      |          |   |      |  
|Administrative                  |  |      | 169,581  |   |      |  
|Utilities                       |  |      | 69,416   |   |      |  
|Operating and Maintenance       |  |      | 190,341  |   |      |  
|Taxes and Insurance             |  |      | 79,041   |   |      |  
|Interest Expense                |  |      | 122,651  |   |      |  
|Depreciation & Amortization     |  |      | 195,293  |   |      |  
|Total Expenses                  |  |      | 826,323  |   |      |  
|                                |  |      |          |   |      |  
|Net Operating Income (Loss)     |  |      | (292,128 | ) |      |  
|                                |  |      |          |   |      |  
|Other Revenue (Expense)         |  |      |          |   |      |  
|Interest Income                 |  |      | 195      |   |      |  
|Entity Expense - Reporting Fees |  |      | (5,000   | ) |      |  
|Total Other Revenue (Expense)   |  |      | (4,805   | ) |      |  
|                                |  |      |          |   |      |  
|NET INCOME (LOSS)               |  | $    | (296,933 | ) |      | $



See accountant’s report and notes
to financial statements



F-5







MESA VERDE APARTMENTS, L.P.



STATEMENTS OF CHANGES IN PARTNERS’ EQUITY



For The Years Ended December 31, 2006 and 2005



|                         |  | 2006 |           |   | 2005 |  
|------------------------ |  | ---- | --------- | - | ---- | -
|Balance, January 1       |  | $    | 1,790,215 |   |      | $
|Capital Contributions    |  |      | 0         |   |      |  
|Net Income (Loss)        |  |      | (296,933  | ) |      |  
|Distributions            |  |      | 0         |   |      |  
|Prior Period Adjustments |  |      | 0         |   |      |  
|Balance, December 31     |  | $    | 1,493,282 |   |      | $



See accountant’s report and notes to financial statements



F-6







MESA VERDE APARTMENTS, L.P.



STATEMENTS
OF CASH FLOWS



For The Years Ended December 31, 2006 and 2005



|                                                                                  |  | 2006 |          |   | 2005 |  
|--------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|Cash flows from operating activities                                              |  |      |          |   |      |  
|Net Income                                                                        |  | $    | (296,933 | ) |      | $
|Adjustments to reconcile net income to net cash provided by operating activities: |  |      |          |   |      |  
|Depreciation and amortization                                                     |  |      | 195,293  |   |      |  
|(Increase) decrease in accounts receivable                                        |  |      | 17,769   |   |      |  
|(Increase) decrease in prepaid expenses                                           |  |      | (8,351   | ) |      |  
|Increase (decrease) in accounts payable                                           |  |      | 11,193   |   |      |  
|Increase (decrease) in interest payable                                           |  |      | 198      |   |      |  
|Net change in tenants’ security deposits held                                     |  |      | (2,087   | ) |      |  
|Increase (decrease) in reporting fees payable                                     |  |      | 5,000    |   |      |  
|Increase (decrease) real estate taxes payable                                     |  |      | 0        |   |      |  
|Increase (decrease) in accrued liabilities                                        |  |      | (2,065   | ) |      |  
|Total adjustments                                                                 |  |      | 216,950  |   |      |  
|Net cash provided (used) by operating activities                                  |  |      | (79,983  | ) |      |  
|                                                                                  |  |      |          |   |      |  
|Cash flow from investing activities:                                              |  |      |          |   |      |  
|Transfer (to) from operating reserves                                             |  |      | 12,465   |   |      |  
|Transfer (to) from replacement reserve                                            |  |      | (12,636  | ) |      |  
|Net cash provided (used) by investing activities                                  |  |      | (171     | ) |      |  
|                                                                                  |  |      |          |   |      |  
|Cash flow from financing activities:                                              |  |      |          |   |      |  
|Increase (Payments) Related Party Debts                                           |  |      | 107,974  |   |      |  
|Increase Accrued Interest                                                         |  |      | 13,816   |   |      |  
|Principal payments on long-term debt                                              |  |      | (19,572  | ) |      |  
|Proceeds long term debt                                                           |  |      | 0        |   |      |  
|Net cash provided (used) by financing activities                                  |  |      | 102,218  |   |      |  
|                                                                                  |  |      |          |   |      |  
|Net increase (decrease) in cash and equivalents                                   |  |      | 22,064   |   |      |  
|Cash and equivalents, beginning of year                                           |  |      | 6,083    |   |      |  
|Cash and equivalents, end of year                                                 |  | $    | 28,147   |   |      | $
|                                                                                  |  |      |          |   |      |  
|Supplemental disclosures of cash flow information:                                |  |      |          |   |      |  
|Cash paid during the year for:                                                    |  |      |          |   |      |  
|Interest expense                                                                  |  | $    | 108,638  |   |      | $



See accountant’s report and notes
to financial statements



F-7







MESA VERDE APARTMENTS, L.P.



NOTES TO FINANCIAL STATEMENTS



DECEMBER 31, 2006 and 2005



NOTE A - ORGANIZATION



MESA VERDE APARTMENTS, L.P.
is a residential real estate property (the Property) consisting of 142 rental units located in Roswell, New Mexico. The property
was built for the purpose of providing affordable housing to qualified individuals and families in the Roswell community.



MESA VERDE APARTMENTS, L.P.
is a New Mexico limited partnership, which owns the Property. The general partners are Medlock Charitable Foundation and Shelter
Resource Corporation. WNC Housing Tax Credit Fund V, Series 3, L.P., a California limited partnership, was admitted as the sole
limited partner.



The general partner and the limited partner have
a 1% and 99% interest, respectively, in operating profits and losses and tax credits. Partnership cash flow after operating expenses,
debt service and required reserves is distributed per the terms of the Partnership agreement in varying percentages.



NOTE B - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES



A summary of the significant
accounting policies consistently applied in the preparation of the accompanying financial statements follows.



Basis of Accounting



The financial statements of the partnership are prepared
on the accrual basis of accounting and in accordance with accounting principles generally accepted in the United States of America.



Cash and Cash Equivalents



For purposes of statements of cash flows, cash and
cash equivalents represent unrestricted cash and certificates of deposit with original maturities of 90 days or less. The carrying
amount approximates fair value because of the short period to maturity of the instruments.



The partnership treats all non
replacement reserve, escrows and security deposit funds as cash equivalents. Cash on hand, in checking and savings accounts and
certificates of deposit are considered cash equivalents.



F-8







MESA VERDE APARTMENTS, L.P.



NOTES
TO FINANCIAL STATEMENTS



DECEMBER 31, 2006 and 2005



NOTE B - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)



Capitalization and Depreciation



Land, buildings and improvements are recorded at
cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated
service lives using the straight-line method. Buildings are depreciated over twenty-seven years using the straight line method.
Improvements, equipment and furnishings are depreciated over a period ranging from three to fifteen years using the straight line
method.



Income Taxes



No provision or benefit for income taxes has been
included in this financial statement since taxable income or loss passes through to, and is reportable by, the partners individually.
The Partnership is eligible to receive low income tax credits as provided by Section 42 of the Internal Revenue Code.



NOTE C-ESTIMATES



The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



NOTE D - LONG-TERM DEBT



Bank of America



The Partnership has a mortgage note payable to Bank
of America. The 9.18% mortgage was payable in monthly installments of $15,698, including interest, to June 1, 2028 at which time
the unpaid balance was due and payable in full. The note is collateralized by all real and personal property of the Partnership.



The loan was accelerated as
of August 1, 2003. All obligations outstanding under this loan have been due and payable in full since that date. Additionally,
unpaid principal has been accruing interest at the Default Rate (9.18% + 3.0%) since August 1, 2003. Consequently, the entire principal
is reported as current portion of long-term debt. This loan was refinanced in 2005.



F-9







MESA VERDE APARTMENTS, L.P.



NOTES TO FINANCIAL STATEMENTS



DECEMBER 31, 2006 and 2005



NOTE D - LONG-TERM DEBT (CONTINUED)



U.S. Bank



In July 2005, the Partnership
entered into a new loan agreement with U.S. Bank in the original amount of $1,750,000. The 6.17% mortgage is payable in monthly
installments of $10,684 through July 2015.



New Mexico Mortgage Finance
Authority



The Partnership has a note payable to the New Mexico
Mortgage Finance Authority. The 5.3% note provides that no principal or interest payments will be due until February, 2037. The
note is collateralized by a deed of trust on the property, which is subordinate to the Bank’s first deed of trust.



Estimated principal payments due
over the next five years are as follows:





|December 31, 2007 |  |  | $ | 22,473   
|----------------- |  |  | - | ---------
|2008              |  |  |   | 23,900   
|2009              |  |  |   | 25,417   
|2010              |  |  |   | 27,030   
|2011              |  |  |   | 28,746   
|and Thereafter    |  |  |   | 1,858,580
|                  |  |  |   |          
|Total             |  |  | $ | 1,986,146



NOTE E - MANAGEMENT FEES



The Partnership entered into
a management agreement with Monarch Properties, Inc., Albuquerque, New Mexico. Monarch Properties, Inc. is not related in any form
to any owners, either general or limited partners, of the Partnership. Management fees paid during the years ended December 31,
2006 were $25,193.



F-10







MESA VERDE APARTMENTS, L.P.



NOTES TO FINANCIAL STATEMENTS



DECEMBER 31, 2006 and 2005



NOTE F - RELATED PARTY TRANSACTIONS



The Partnership has agreed to pay a developer fee
in the amount of $735,611 to Trianon Development, the prior General Partner. As of December 31, 2006, $509,084 of this obligation
had not been paid.



The Partnership has agreed to pay the limited partner
an annual reporting fee of $5,000 for its services in connection with the Partnership’s accounting matters relating to the limited
partner and assisting with preparation of required tax returns and reports. If cash flow from operations is insufficient to pay
the full amount of the reporting fee, the unpaid portion accrues. As of December 31, 2006, cumulative unpaid fees under this agreement
were $25,000.



Due to Related Parties represents cash advances made
to the partnership by the limited partner and others. Amounts do not bear interest and are to be repaid when cash flow from operations
permits or upon sale of the rental property. As of December 31, 2006 this obligation was comprised of the following:





|Trianon Management                                |  | $ | 13,826  | 
|------------------------------------------------- |  | - | ------- | 
|WNC Nebraska.                                     |  |   | 377,805 | 
|WNC
    Housing Tax Credits Fund V, Series 3, L.P |  |   | 310,492 | 
|                                                  |  |   |         | 
|Total                                             |  | $ | 702,123 | 



F-11