DAVENPORT HOUSING VII, L.P.
  FINANCIAL REPORT
  December 31, 2008 and 2007
    
   TABLE OF CONTENTS
   PageINDEPENDENT AUDITOR'S REPORT
1FINANCIAL STATEMENT●
Balance sheets
2●
Statements of changes inpartners' equity
3●
Notes to financial statements
4 to 8
            
   Tom Engellmann CPA
  1111 East River Drive, Davenport, Iowa 52803
 (563) 323-3568 FAX (563) 326-6204
  Independent Auditor's Report
  To the Partners
 Davenport Housing VII, L.P.
 Davenport, Iowa
   I have audited the accompanying balance sheets ofDavenport Housing VII, L.P. as of December 31, 2008 and2007 and the statements of changes in partners' equity for the years thenended. These financial statements are the responsibility of the partnership's management. My responsibility is toexpress an opinion on these financial statements basedon my audits.
  I conducted my audits in accordance with U.S. generally accepted auditing standards. Those standards require that I plan and perform theaudit to obtain reasonable assurance about whether thefinancial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
  In my opinion, the financial statements referred to above present fairly, in all material respects, the financial positionof Davenport Housing VII, L.P. as of December31,2008 and 2007 and the changes in partners' equity for the years then ended, in conformity with U.S. generally accepted accounting principles.
 
 
 /s/ Tom Engelman, CPA
 March 29, 2010
 Davenport, Iowa
   1
  DAVENPORT HOUSING VII, LP
 BALANCE SHEETS
 December 31, 2008 and 2007
  2008



2007ASSETSCurrent assetsCash, operations

$
2,868


$
3,079Cash, restricted


—


206,797Related party receivables, net of allowance for bad debts


24,746



—Total current assets


27,614



209,876Rental assetsLand


50,000



50,000Construction in progress


4,519,800



3,561,4744,569,800



3,611,474Intangible asset, net


50



70Totalassets

$
4,597,464


$
3,821,420LIABILITIES AND PARTNERS' EQUITYCurrent liabilitiesAccounts payable

$
—


$
15,731Accrued interest payable


23,104



7,601Accrued real estate taxes


31,897



10,091Construction loan payable


1,750,000



1,041,000Current portion of long tent debt


96,064



6,018Total current liabilities


1,901,065



1,080,441Long term liabilitiesNotes payable, net of eutTent portion above


150,030



93,012Due to related parties


115,650



43,250Long team real estate taxes payable


4,946



10,269Total long term liabilities


270,626



146,531Total liabilities


2,171,691



1,226,972Partners' equity


2,425,773



2,594,448Total liabilities and partners' equity

$
4,597,464


$
3,821,420
    2
  DAVENPORT HOUSING VII, LP
 STATEMENTS OF CHANGES IN PARTNERS' EQUITY
 For the Years Ended December 31, 2008 and 2007
   Investment Limited Partners


General

Partner


Administrative

General PartnerWNC Housing Tax

Credit Fund VI


WNC Housing

L.P.


Chris Ales


Signature Holding Co


TotalBalances, December 31, 2006

$
-


$
-


$
788


$
29,765


$
30,553Capital contributions


1,974,000



-



200,000



385,163



2,559,163Net income


4,731



-



-



1



4,732Reclassifications of contributions


(203
)


226



(200,788
)


200,765



-Balances, December 31, 2007

$
1,978,528


$
226


$
-


$
615,694


$
2,594,448Capital contributions


52,406



-



-



-



52,406Net income


5,037



1



-



-



5,038Distributions


-



-



-



(226,119
)


(226,119
)Balances, December 31, 2008

$
2,035,971


$
227


$



$
389,575


$
2,425,773








3




DAVENPORT HOUSING Vii, L.P.
 NOTES TO FINANCIAL STATEMENT
 DECEMBER 31, 2008 and 2007
  Note Summaryof significant accounting policies
  Organization and nature of business
  Davenport Housing VII, L.P. (the "Partnership") was formed as an Iowa limited partnership on October 17, 2005, to acquire, construct, own, and operate the Project in order to provide low-income housing tax Credits to the Partners and to sell the Project. Effective June 6, 2007, the Partnership executed an amended and restated Certificate of Limited Partnership (the "Agreement") whereby partners withdrew and new partners were admitted. Signature Holding Company, au Iowa corporation, was the general partner and had a 0.005%.partnershipinterest. WNC Housing Tax Credit Fund VI, Series 13, LP is the investment limited partnerand has a 99.98%partnership interest, WNC Housing, LP is the special limited partner and has a 0.01% partnership interest, Iowa Tax Credit Fund X, LP is the Class B limited partner and has a 0.005% interest. The investment limited partner, acting within the limits of the Agreement, changed Signature Holding Company into the administrative general partner and installed Shelter Resources Corporation as managing general partner as of November 3, 2008. The term of the Partnership shall continue until December 31, 2500, unless sooner dissolved in accordance with the provisions of the Agreement.
  The Partnership was formed to acquire land and to construct and operate a residential apartment project located in Davenport, Iowa, known as Marycrest Senior Housing IV (the "Project"). The Project consists of twentyunits. The Project has been designed to meet the demand for affordable housing and is expected to be eligible to receive federallow-income housing tax credits, which are allocated to the partners. TheProject was not completed as of December 31, 2008. The Partnership used the services of affiliates of thegeneral partner, Signature Construction Company,  to construct, and Signature Management Company, to manage the property through November 3, 2008. Future operations could be affected by changes in economic or other conditions in that geographic area or by changes in federal low-income housing subsidies or the demand for such housing.
  Pursuant to the Agreement, as of December 31, 2008, the investment limited partner, the special limitedpartner and the prior general partner had made capital contributions of $2,026,203, $226 and $615,716,respectively. Per the Agreement, the investment limited partner is required to provide a total of$2,252,983 incapital contributions.
  The Partnershipshould qualify for "Low-income Housing Tax Credits" as currently allowable under Section 42 of the InternalRevenue Code and allocated by the Iowa Housing Authority. No provision has been made for income taxes inthe accompanying financial statements since such taxes, if any, are the liability of the respective partners.
  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. The financial statements do not include the assets and liabilities of the partners.






4




DAVENPORT HOUSING Vii, L.P.
 NOTES TO FINANCIAL STATEMENT
 DECEMBER 31, 2008 and 2007
  Note 1 Summary  of significant accounting policies, continued
  Rental property and depreciation
  Rental property is recorded at cost, including acquisition and construction in progress. Depreciation will he provided on the straight-line method over the estimated useful lives of the respective assets. For income tax purposes, depreciation will be provided using accelerated and straight-line methods over the cost recovery periods prescribed in the Internal Revenue Code.
  Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets Disposed Of', requires that management review the real estate and intangible assets' carrying values for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. No impairment losses were recognized for the years ended December 31, 2008 or 2007, respectively.
  Compensated absences
  The Partnership does not accrue for compensated absences because it does not have any direct employees. All wages and salaries are reimbursed to the construction contractor, an affiliate of the prior general partner.
  Estimates
  In preparing financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
  Note2 Relatedparty transactions
 
 Receivables
  Davenport Housing V, LP which has a limited partner (WNC Tax Credit Partnership XIX), that is a sister partnership with the Partnership's limited partner had $24,746 in loan interest paid by the Partnership.
  Development fee payable
  The Partnership entered into a development agreement with Signature Development Company, an affiliate of the administrative general partner, in the amount of $360,000, of which $180,000 had been earned and paid as of December 31, 2008. The development fee is payable from net cash flow in accordance with the Agreement, and is non interest bearing.
   5






DAVENPORT HOUSING Vii, L.P.
 NOTES TO FINANCIAL STATEMENT
 DECEMBER 31, 2008 and 2007




Note 2 Related partv transactions, continued
 
 Construction contract payable
  Signature Construction Company, an affiliateof the administrative general partner, signed a contract for $1,909,479 subsequently increased to $3,134,479, to construct the project. As of December 31, 2008, $3,913,500 had been paid on this contract.
  Change in general partner
  The investment limited partner, acting through the special limited partner and within the terms allowed under the Agreement changed the general partner into the administrative general partner for cause as of November 3, 2008 and installed Shelter Resources Corporation, an affiliate of the special limited partner as the new managing general partner.
  Capital contributions
  The investment limited partner made capital contributions in the amount of $1,973,797 and $52,406 during the years ended December 31, 2008 and 2007, respectively.
  Capital distributions
  The administrative general partner drew cash of $226,119 during the year ended December 31, 2008 in possible violation of the Agreement.
  Note3 Restricted assets
  Pursuant to the Agreement, a construction completion reserve account was funded with a certificate of deposit in the amount of $200,000 from proceeds of the first installment of limited partner capital. In addition, an escrow account had been established with a local supplier. Restricted assets are summarized as followsat December 31, 2008 and 2007:
  2008


2007Construction completion reserve

$
-


$
204,954Construction escrow account


-



1,843$
-


$
206,797
    6




DAVENPORT HOUSING Vii, L.P.


NOTES TO FINANCIAL STATEMENT


DECEMBER 31, 2008 and 2007









Note 4 Related party receivables
  Related party receivables consist of $24,746 of interest paid on Davenport Housing V, L.P.'s loan by the Partnership during the year ended December 31, 2008.
  Note 5 Rental assets
  Rental assets are summarized as follows at December 31, 2008 and 2007:
  2008


2007Land

$
50,000


$
50,000Construction in. progress4,519,800


3,561,474$
4,569,800


$
3,611,474






Note6 Intangible asset
 
 Intangible asset is summarized as follows at December 31, 2008 and 2007:
  2008


2007Start up cost

$
100


$
100Less accumulated amortization


(50
)


( 30
)$
50


$
70




Note 7 Notes payable
  Construction notepayable
  On June 8, 2007, the Partnership obtained a loan from Valley Bank, Eldridge, Iowa, secured by a mortgage held on the real estate owned for a maximum of $1,050,000 bearing interest at a rate of 7.95% per annum. This loan is a construction loan with interest only paid with an initial maturity dateofJune 8, 2008, and loan balance of $1,041,000 as of December 31, 2007. On April 11, 2008, this loan maximum was increased to $1,750,000, with the rate subsequently changing to 7.5% on June 8, 2008 and 5.5% on October 15, 2008. The total principal balance on this loan as of December 31, 2008 was $1,750,000.
    7
  DAVENPORT HOUSING Vii, L.P.
 NOTES TO FINANCIAL STATEMENT
 DECEMBER 31, 2008 and 2007
  Note 7Notespayable, continued
 
 Other notes payable
 On September 20, 2007, the Partnership obtained a loan from Scott County Housing Council, Davenport, Iowa, secured by the signature of the prior general partner for $100,000 bearing interest at a rate of 5.75% per anum. This loan is to be amortized over twelve years with a maturity date of October 1, 2019.
 
 On December 17, 2007, the Partnership obtained a HOME loan from the City of Davenport, Davenport, Iowa, secured by a mortgage on the real estate owned for $274,000 bearing a stated interest at a rate of 0% per arum. This loan is to be amortized over forty years with principal and interest accruing and due after fifteen years, with annual payments of interest only of $6,850 for the first fifteen years. The partnership has drawn $150,030 on this loan through December 31, 2008, with the balance due being $150,030 as of December 31, 2008.
 
 Scheduled below are the other notes payable balances as of December 31, 2008 and 2007, respectively:
 
 2008


2007Scott County Housing Council

$
96,064


$
99,030City of Davenport, HOME loan


150,030



-246,094



99,030Less current portion


( 96,064
)


(6,018
)$
150,030


$
93,012
 
 
 Interest expense amounted to $107,959 and $62,656 for the years ended December 31, 2008 and 2007, respectively, and was entirely capitalized into construction in progress.
 
 Aggregate annual maturities of the other notes payable at December 31, 2008 are:
 
 2009

$
96,064After 2013


150,030$
246,094
 
 Nate8 Subsequentevents
 
 The Partnership completed construction on the project in November, 2009, and received occupancy permits from the City of Davenport as of December 1, 2009.
 
 The investment limited parted removed the administrative general partner for cause in November, 2009.
 
 
 
 
 
 
 8