UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                     FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]

For the fiscal year ended         December 31, 1995
                          ------------------------------------------------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                         to
                               -----------------------    ----------------------

Commission file                    0-14645
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                        DIVERSIFIED HISTORIC INVESTORS II
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Pennsylvania                                         23-2361261
-------------------------------                         ------------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)

              SUITE 500, 1521 LOCUST STREET, PHILADELPHIA, PA 19102
--------------------------------------------------------------------------------
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code  (215) 735-5001
                                                   -----------------------------

Securities registered pursuant to Section 12(b) of the Act:        NONE
                                                            --------------------

Securities registered pursuant to Section 12(g) of the Act:    20,593.3 Units
                                                            --------------------

                      UNITS OF LIMITED PARTNERSHIP INTEREST
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.                                Yes ___  No_X_

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of Units held by non-affiliates  of the  Registrant:  Not
Applicable*

* Securities not quoted in any trading market to Registrant's knowledge.


<PAGE>


                                     PART I

Item 1.     Business

            a.   General Development of Business

            Diversified  Historic  Investors  II  ("Registrant")  is  a  limited
partnership  formed in 1984 under the Pennsylvania  Uniform Limited  Partnership
Act. As of December 31,  1995,  Registrant  had  outstanding  20,593.3  units of
limited partnership interest (the "Units").

            Registrant is presently in its operating  stage. It originally owned
four properties or interests therein. Its interest in one property has been lost
through  foreclosure.  See Item 2.  Properties,  for a description  thereof.  It
currently owns three  properties or interests  therein.  For a discussion of the
operations of the Registrant,  see Part II, Item 7. Management's  Discussion and
Analysis of Financial Conditions and Results of Operations.

            b.   Financial Information about Industry Segments

                 The Registrant operates in one industry segment.

            c.   Narrative Description of Business

                 Registrant is in the business of operating,  holding,  selling,
exchanging  and  otherwise  dealing  in  and  with  real  properties  containing
improvements which are "Certified Historic  Structures," as such term is defined
in the Internal Revenue Code (the "Code"), or which are eligible for designation
as such, for use as apartments,  offices,  hotels and commercial  spaces, or any
combination  thereof, or low income housing eligible for the tax credit provided
by Section  42 of the Code,  and such  other  uses as the  Registrant's  general
partner may deem appropriate.

                 Since the Registrant's  inception,  all the properties acquired
either by the  Registrant,  or the  subsidiary  partnerships  in which it has an
interest,  have been rehabilitated and certified as Historic Structures and have
received the related  Investment Tax Credit.  Two of the properties are held for
rental  operations  and one is operated as a hotel.  As of the date hereof it is
anticipated that all the properties will continue to be held for these purposes.
At such time as real  property  values begin to increase,  the  Registrant  will
re-evaluate its investment strategy regarding the properties.

                 As of December 31, 1995,  Registrant owned three properties (or
interests therein),  located in Pennsylvania (one),  Maryland (one), and Georgia
(one). In total, the three properties contain 269 apartment units, 72,307 square
feet ("sf") of  commercial/retail  space and 44 hotel rooms.  As of December 31,
1995,  253 of the  apartment  units were under  lease at  monthly  rental  rates
ranging from $650 to $1,315 and approximately  64,769 sf of commercial space was
under lease at annual  rental rates  ranging from $5.33 per sf to $24.53 per sf.

                                      -2-

<PAGE>

Throughout 1995, all of the hotel rooms were available for use. During 1995, the
hotel maintained an average nightly room rate of $94.54 and average occupancy of
78%.  Rental  of the  apartments  and  commercial  space is not  expected  to be
seasonal.  However the hotel does experience seasonal changes,  with the busiest
months  being April and May and the slowest  months  being  January,  August and
September. For further discussion of the properties, see Item 2. Properties.

                 The  Registrant  is  affected  by and  subject  to the  general
competitive  conditions of the residential and commercial real estate  industry.
As a result of the overbuilding that occurred in the 1980's,  the competition in
the local markets  where the  Registrant's  properties  are located is generally
strong.  As a  result,  the  Registrant  is  forced  to  keep  its  rent  levels
competitively low in order to maintain  moderate to high occupancy  levels.  One
residential  property is located in the suburbs of Philadelphia and the other is
located in the  Historic  District  of the Inner  Harbor in  Baltimore.  In both
locations  the  competition  for  tenants  remains  stiff  and  several  similar
buildings  exist.  The  apartment  market  remains  stable and new  construction
remains  virtually  nonexistent  although the  availability  of  favorable  home
financing has placed pressure on the rental tenant base.

                 The hotel is located in Savannah, Georgia and is one of several
historic  buildings  which have been  converted  into hotels and inns. The hotel
relies heavily on the tourist trade which is on the upswing in Savannah, in part
due to its proximity to Atlanta, the site of the 1996 Summer Olympics. The hotel
is generally  considered  to be a market  leader,  due to its location on "River
Street",  the main shopping and  entertainment  area on the river,  and the fact
that it provides a full array of hotel amenities, not just a "bed and breakfast"
atmosphere.

                 Registrant  has  no  employees.   Registrant's  activities  are
overseen by Brandywine Construction & Management,  Inc., ("BCMI"), a real estate
management firm.

            d.   Financial  Information  About Foreign and Domestic  Operations
and Export Sales.

                 See Item 8. Financial Statements and Supplementary Data.

Item 2.     Properties

            As of  the  date  hereof,  Registrant  owned  three  properties,  or
interests therein.  A summary  description of each property held at December 31,
1995 is given below.

            a. Tindeco Wharf - consists of 240 apartment units and approximately
41,307 sf of  commercial  space  located  at 2809  Boston  Street in the  Fell's
Point-Canton  Historic  District  of  Baltimore,   Maryland.  In  October  1985,
Registrant  was admitted  with an 85%  interest,  to Tindeco  Wharf  Partnership
("TWP"), a Maryland general partnership,  for a cash contribution of $7,271,300.
Registrant  subsequently  increased  its  ownership  interest  in  TWP to 90% by

                                      -3-

<PAGE>

purchasing  an   additional   5%  interest  for   $262,500.   TWP  acquired  and
rehabilitated  this Property at an approximate cost of $28,600,000 ($66 per sf),
funded by the equity  contribution  and mortgage  financing of $21,869,600.  The
mortgage   financing  is  comprised  of  mortgage  revenue  bonds  and  a  Urban
Development Action Grant ("UDAG") loan. Other financing includes a loan from the
developer  of  $2,300,000  and  operating  deficit  loans from both the property
manager and D, LTD (See Part III, Item 10e) in the original  amounts of $300,000
and $200,000 respectively.  The excess of equity and mortgage financing over the
acquisition  and  rehabilitation  costs was utilized to provide  various  escrow
deposits and required reserves.

                 The City of Baltimore issued mortgage revenue  refunding bonds,
Series  1992,  (GNMA  collateralized)  for the  purpose of  providing  permanent
financing for TWP. The bonds are backed by a HUD-insured  mortgage ("the note").
The note,  held by GNMA as lender,  bears  interest at a rate of 9.75% per annum
and is secured by a first  mortgage on the  property.  Principal and interest is
payable in monthly installments of $143,801. The note matures December 2028. The
refunding  issue bears  interest at an average rate of 6.62%.  The difference in
the  interest  on the  mortgage  and the  refunding  bonds  is  returned  to the
Partnership for operations.

                 The principal balance of the bonds were $16,980,349 at December
31, 1995. The bonds are comprised of both serial and revenue  bonds.  The serial
bonds bear interest  rates  ranging from 2.75% to 6.7% and mature  semi-annually
from June 1997  through  December  2006.  The term bonds bear  interest  at rate
ranging  from 6.5% to 6.7% and  mature in 2012,  2024,  and 2028.  The UDAG loan
(which has a balance of  $4,953,471  at December 31,  1995) bore  interest at 4%
through  August  1994 and at 7 1/2%  thereafter.  This loan is due in 2004.  The
developer's loan (principal  balance of $2,300,000 at December 31, 1995) and the
operating deficit loans (principal balances of $300,000 and $0, respectively, at
December 31, 1995) all bear interest at 12% and are payable on a pro-rata  basis
out of cash flow from the  property.  The  property  is managed  by BCMI.  As of
December 31, 1995, 225 apartment  units (94%) and 37,453 sf of commercial  space
(85%) were  under  lease.  Monthly  rental  rates  range from $725 to $1,315 for
apartments  and annual rental rates range from $5.33 per sf to $18.54 per sf for
commercial space.

                 All  residential  leases are renewable,  one-year  leases.  The
occupancy  for the  residential  units for the  previous  four years was 95% for
1994, 92% for 1993, 94% for 1992 and 100% for 1991. The monthly rental range has
been  approximately  the same since 1991. The occupancy for the commercial space
for the previous  four years has been 93% for 1994,  93% for 1993,  95% for 1992
and 100% for 1991.  The range for annual  rents has been $10.30 per sf to $22.39
per sf for 1994,  $5.88 to $21.36  per sf for 1993,  $5.28 to $15.96  per sf for
1992 and $7.08 to $14.16 per sf for 1991. There are four tenants who each occupy
ten percent or more of the rentable square footage.  They operate principally as
a medical office, restaurant, a fitness club and a travel agency.

                                      -4-

<PAGE>

            The following is a table showing  commercial  lease  expirations  at
Tindeco Wharf for the next five years.

                                                 Total annual       % of gross
                Number of       Total sf of     rental covered     annual rental
      Years  leases expiring  expiring leases  by expiring leases  from property

      1996           1            17,050           $264,504              8%
      1997           0                 0                  0              0%
      1998           1               950             11,324             <1%
      1999           3             8,199            127,805              4%
      2000           1             4,469             56,443              2%
      Thereafter     2             8,695             84,828              3%

            The  Registrant has entered into lease  negotiations  with the large
tenant whose lease is due to expire in October  1996.  The  Registrant  believes
that it is likely that a lease  extension will be signed,  extending the current
termination  date until  June 1997 at a rent  level  which is 30% lower than the
current rental rate. The Registrant believes that is probable that at the end of
the  extension  period,  a long-term  lease  (8-10  years) will be signed at the
reduced rental rate.

            For  tax  purposes,  this  property  has  a  federal  tax  basis  of
$28,105,775 and is depreciated using the straight-line method with a useful life
of 27.5 years.  The annual real estate taxes are  $407,185  which is based on an
assessed  value of  $6,719,220,  taxed at a rate of $6.06  per  $100.  It is the
opinion of the  management  of the  Registrant  that the property is  adequately
covered by insurance.

            b. River Street  Inn/Factor's  Walk - consists of 44 hotel rooms and
21,500 sf of  commercial  space  located  at 115 E.  River  Street in  Savannah,
Georgia. In August 1985, Registrant was admitted with a 99% interest in Factor's
Walk  Partners  ("FWP") a  Georgia  general  partnership,  for  $3,600,409.  FWP
acquired and rehabilitated the Property for $8,900,409 ($127 per sf),  including
financing,  through an issuance by a governmental  agency of tax-exempt bonds in
the principal amount of $5,800,000.  The excess of equity and mortgage financing
over the  acquisition and  rehabilitation  costs was utilized to provide working
capital  reserves of $500,000.  The bonds bear interest at TENR (a rate based on
yields of high quality,  short-term tax exempt obligations) plus 0.5% (5.375% at
December  31, 1995) The  principal  balance of the bonds at December 31, 1995 is
$5,800,000  and they are due in 2015.  The  property  is managed by BCMI.  As of
December  31,  1995,  17,816 sf of its 21,500 sf (83%) of  commercial  space was
under  lease at annual  rental  rates  ranging  from $5.53 to $24.53 per sf. The
Property also maintains 44 operating  hotel rooms at an average  nightly rate of
$94.54; average occupancy for 1995 was approximately 78%.

                 The hotel  occupancy  rate for the previous four years has been
74% for 1994,  71% for 1993,  72% for 1992 and 67% for 1991.  The  average  room
rates have been $90.18 for 1994, $86.59 for 1993, $86.44 for 1992 and $85.00 for

                                      -5-

<PAGE>

1991.  The  occupancy for the  commercial  space for the previous four years has
been 92% for 1994,  83% for 1993,  80% for 1992 and 63% for 1991.  The range for
annual  rents has been $1.58 to $23.12  per sf for 1994,  $1.56 to $23.16 per sf
for 1993,  $5.28 to $15.96  per sf for 1992 and $3.72 to $22.92 per sf for 1991.
There are two tenants who each occupy ten percent or more of the rentable square
footage. They operate principally as a restaurant and a retail store.

                 The following is a table showing  commercial lease  expirations
at Factor's Walk for the next five years.

                                                 Total annual       % of gross
               Number of        Total sf of     rental covered     annual rental
  Years     leases expiring   expiring leases  by expiring leases  from property

  1996              3             6,425           $80,544                 5%
  1997              0                -0-               -0-                0%
  1998              2             1,983            26,804                 2%
  1999              3             1,219            17,700                 1%
  2000              3             3,096            48,887                 3%
  Thereafter        1             5,093            37,661                 2%

            Although  no  firm   commitments  have  been  made,  the  Registrant
anticipates that the three leases which are scheduled to expire in 1996, will be
extended for at least an additional  year, due to the  long-standing  tenancy of
the merchants and the availability of renewal options under their leases.

            For  tax  purposes,  this  property  has  a  federal  tax  basis  of
$8,863,762 and is depreciated using the straight-line  method with a useful life
of 27.5 years.  The annual real  estate  taxes are $30,904  which is based on an
assessed value of $908,667, taxed at a rate of $3.40 per $100. It is the opinion
of the management of the Registrant  that the property is adequately  covered by
insurance.

            c. Washington  Square - consists of 9,500 sf of commercial space and
29  residential   units  located  at  320  N.  Church   Street,   West  Chester,
Pennsylvania.  In  October  1985,  Registrant  acquired  and  rehabilitated  the
Property  for  $2,750,000  ($79 per sf; such amount is  exclusive of $170,883 of
capitalized   fees   incurred   which  were   funded  by   Registrant's   equity
contributions),  including mortgage  financing of $1,600,000.  The mortgage loan
(principal  balance of  $1,155,227  at December 31, 1995) bears  interest at the
Federal Reserve  Discount rate plus 2% with a minimum of 7% and a maximum of 15%
(7.25%  at  December  31,  1995) and is  callable  on May 1, 1996 when the total
outstanding  balance will be $1,081,704.  The Registrant  anticipates  that upon
providing additional  information to the lender, the loan will be reinstated and
the  principal  balance  due in  October  2005.  The  property  is managed by an
independent  property  management  firm. As of December 31, 1995, all commercial
space is rented out at annual rates  ranging from $6.00 per sf to $12.00 per sf.

                                      -6-

<PAGE>

At December  31,  1995,  28 of the  residential  units (97%) were under lease at
monthly rental rates ranging from $650 to $1,050.

                 All  residential  leases are renewable,  one-year  leases.  The
occupancy  for the  residential  units for the  previous  four years was 98% for
1994, 92% for 1993, 97% for 1992 and 100% for 1991. The monthly rental range has
been  approximately  the same since 1991. The occupancy for the commercial space
for the previous four years has been 100% for 1994, 100% for 1993, 100% for 1992
and 100% for 1991.  The range for  annual  rents has been $6.00 to $13.23 per sf
for 1994,  $6.12 to $12.12 per sf for 1993,  $6.00 to $11.52 per sf for 1992 and
$6.00 to $11.52 per sf for 1991.

                 The following is a table showing  commercial lease  expirations
at Washington Square for the next five years.

                                                 Total annual       % of gross
               Number of        Total sf of     rental covered     annual rental
  Years     leases expiring   expiring leases  by expiring leases  from property

  1996              4             7,600           $ 61,639                18%
  1997              0                 0                  0                 0%
  1998              0                 0                  0                 0%
  1999              1             1,900             17,575                 5%
  2000              0                 0                  0                 0%
  Thereafter        0                 0                  0                 0%

                 Although no firm  commitments  have been made,  the  Registrant
anticipates  that four leases  which are  scheduled  to expire in 1996,  will be
extended for at least an additional  year, due to the  long-standing  tenancy of
the merchants and the availability of renewal options under their leases.

                 For tax purposes of depreciation, this property has federal tax
basis of $2,840,483 and is  depreciated  using the  straight-line  method with a
useful life of 27.5 years.  The annual  real estate  taxes are $29,059  which is
based on an assessed  value of $119,610  taxed at a rate of $242.95 per $100. It
is the  opinion  of the  management  of the  Registrant  that  the  property  is
adequately covered by insurance.

Item 3.     Legal Proceedings

            a.   For a  description  of legal proceedings involving Registrant's
properties, see Part II, Item 7. River Street Inn/Factor's Walk Partners.

Item 4.     Submission of Matters to a Vote of Security Holders

            No matter was  submitted  during the  fiscal  years  covered by this
report to a vote of security holders.

                                      -7-

<PAGE>

                                      PART II

Item 5.     Market for Registrant's Common Equity and Related Stockholder
Matters

            a.  There is no  established  public  trading  market for the Units.
Registrant  does not  anticipate  any such market will  develop.  Trading in the
Units occurs solely through private transactions. The Registrant is not aware of
the prices at which trades occur.  Registrant's  records indicate that 114 Units
of record were sold or exchanged in 1995.

            b.   As of December 31,  1995, there  are  2,562  record  holders of
Units.

            c.   Registrant has not declared any cash dividends in 1995 or 1994.

Item 6.     Selected Financial Data

            The following  selected  financial data are for the five years ended
December 31, 1995. The data should be read in conjunction  with the consolidated
financial  statements included elsewhere herein. This data is not covered by the
independent auditors' report.

                        1995       1994         1993        1992        1991
                        ----       ----         ----        ----        ----

  Rental income     $4,103,099  $3,950,879  $3,763,979  $3,418,773   $3,516,818
  Hotel revenues     1,230,057   1,108,942   1,227,925   3,007,997    2,697,852
  Interest income       28,988       9,219      10,300     121,721      121,721
  Net loss          (2,426,416) (2,869,321) (4,825,243) (4,348,359)  (4,348,359)
  Net loss per Unit    (116.65)    (137.94)    (231.97)    (209.04)     (209.04)
  Total assets      29,418,648  30,742,909  31,466,054  38,107,985   38,107,985
  (net of
  depreciation and
  amortization)
  Debt obligations  33,161,299  33,527,230  33,547,443  35,562,071   35,562,071

Note:  See Part II, Item 7.2 Results of  Operations  for a discussion of factors
which materially  affect the  comparability of the information  reflected in the
above table.

Item 7.     Management's Discussion and Analysis of Financial
            Conditions and Results of Operations

            (1)  Liquidity

                 At December  31,  1995,  Registrant  had cash of  approximately
$114,922.  Such funds are expected to be used to pay liabilities and general and
administrative  expenses  of  Registrant  and  to  fund  cash  deficits  of  the
properties.  Cash generated from  operations is used primarily to fund operating
expenses  and  debt  service.  If  cash  flow  proves  to be  insufficient,  the
Registrant will attempt to negotiate with the various lenders in order to remain
current  on all  obligations.  The  Registrant  is not  aware of any  additional
sources of liquidity.

                                      -8-

<PAGE>

                 As of December  31, 1995,  Registrant  had  restricted  cash of
$692,027  consisting  primarily of funds held as security deposits,  replacement
reserves and escrows for taxes.  As a consequence  of these  restrictions  as to
use, Registrant does not deem these funds to be a source of liquidity.

                 In recent years the Registrant has realized significant losses,
including the foreclosure of one property,  due to the properties'  inability to
generate  sufficient cash flow to pay their operating expenses and debt service.
At the  present  time,  all  three  remaining  properties  are able to pay their
operating  expenses  and debt  service but it is unlikely  that any cash will be
available to the Registrant to pay its general and administrative  expenses.  In
the legal proceeding  involving  Factor's Walk, if the final outcome was adverse
to the Registrant,  the property could be foreclosed.  If a foreclosure  were to
occur,  it is not  likely  to  have a  significant  impact  on the  Registrant's
liquidity,  as  this  property  has  generated  little  or no  cash  flow to the
Registrant.   In  addition,  if  Capital  Bank  executes  its  judgment  on  the
Registrant,  it is  expected  to have  significant  impact  on the  Registrant's
liquidity  as no cash will be  available  to pay the  operating  expenses of the
properties.

                 It is the  Registrant's  intention  to  continue  to  hold  the
properties  until they can no longer meet the debt service  requirements and the
properties are foreclosed,  or the market value of the properties increases to a
point  where  they can be sold at a price  which  is  sufficient  to  repay  the
underlying indebtedness (principal plus accrued interest).

            (2)  Capital Resources

                 Due to  the  recent  rehabilitations  of  the  properties,  any
capital  expenditures needed are generally  replacement items and are funded out
of cash from operations or replacement  reserves,  if any. The Registrant is not
aware of any factors which would cause historical  capital  expenditures  levels
not to be  indicative of capital  requirements  in the future.  Accordingly,  at
December 31, 1995,  Registrant's  material  commitment for capital  expenditures
consists solely of required debt service.

            (3)  Results of Operations

                 During  1995,  Registrant  incurred  a net  loss of  $2,426,416
($116.65 per limited  partnership  unit),  compared to a net loss of  $2,869,321
($137.94 per limited  partnership  unit),  in 1994 and a net loss of  $4,825,243
($231.97 per limited partnership unit), in 1993.

                 Rental and hotel income  increased  from  $4,991,904 in 1993 to
$5,059,821 in 1994 to $5,333,156 in 1995.  The increase from 1994 to 1995 is the
result of an increase of $152,000 in rental income and $121,000 in hotel income.
The  increase  in rental  income is mainly the result of an  increase in average
residential  occupancy  and  average  rental  rates at both  Tindeco  Wharf  and
Washington  Square and an increase in the occupancy of the  commercial  space at
Tindeco  Wharf.  The  increase  in hotel  income is the result of an increase in

                                      -9-

<PAGE>

average  room rates at  Factor's  Walk  ($90.18 to $94.54)  and an  increase  in
average  occupancy (74% to 78%). The increase from 1993 to 1994 is the result of
an  increase  of  $187,000  in rental  income and  decrease of $119,000 in hotel
income.  The  increase  in rental  income is mainly the result of an increase in
residential  occupancy  at both  Tindeco  Wharf  and  Washington  Square  and an
increase in the occupancy of commercial  space at Factor's Walk. The decrease in
hotel income is the result of an increase in average room rates at Factor's Walk
($86.59 to $90.18) and an increase in occupancy  partially offset by the loss of
one of the Registrant's  properties  (also a hotel) in 1993 through  foreclosure
(see below).

                 Interest  income  remained  constant  from  $10,300  in 1993 to
$9,219 in 1994 and increased to $28,988 in 1995.  The increase from 1994 to 1995
is the result of an increase in the restricted cash which generates the interest
income.

                 Rental operations expenses increased from $1,556,301 in 1993 to
$1,590,865 in 1994 and to $1,654,247 in 1995.  The increase from 1994 to 1995 is
due to higher operating  expenses at Tindeco Wharf including wages and salaries,
utilities,  management fees and insurance. The increase in operating expenses is
proportional  to the  increase in occupancy  in both the  residential  units and
commercial  space.  The  increase  from 1993 to 1994 is due to higher  operating
expenses at Tindeco Wharf  including  management  fees,  real estate taxes,  and
general and  administrative.  Hotel operations expense decreased from $1,333,260
in 1993 to $1,018,311 in 1994 and remained  constant to $1,037,365 in 1995.  The
decrease  from  1993  to  1994 is due to the  settlement  in  1993 of a  dispute
concerning  management fees owed to the previous  management company at Factor's
Walk (see below).

                 General and  administrative  expenses  remained  constant  from
$198,000 in 1993, 1994 and 1995.

                 Interest   expense   increased  from   $2,571,868  in  1993  to
$3,478,235 in 1994 and  decreased to $3,231,126 in 1995.  The decrease from 1994
to 1995 is the result of an the  accrual of  interest  at  Factor's  Walk on the
judgment in 1994 partially offset by an increase in the average interest rate on
both the Washington  Square and Factor's Walk loans combined with an increase at
Tindeco  Wharf due to  accrual  of  interest  on a higher  balance on the second
mortgage  in 1995.  The  increase  from 1993 to 1994 is due to the  increase  in
interest rates at Factor's Walk and the second  mortgage at Tindeco  Wharf,  the
accrual of  interest  at  Factor's  Walk in 1994,  on amounts  owed,  upon which
interest  had not been accrued in prior years and the accrual of interest on the
judgment  relating to the  Morrison-Clark  Inn.  The  interest on Factor's  Walk
should  have  been  accrued  in  previous  years  but due to  immateriality,  no
adjustment was made to prior years' financial  statements.  The increase is also
due to the accrual of interest on the  judgment at Factor's  Walk.  All interest
rate increases  reflected in the base indexes from which the Registrant's  rates
are derived.

                 Depreciation and amortization increased from $1,621,508 in 1993
to $1,652,950 in 1994 and to $1,667,832 in 1995.  The increase from 1993 to 1994
is the result of depreciation on additions to property  relating to the judgment
at Factor's Walk

                                      -10-

<PAGE>

                 In 1995, losses of $1,923,450 were incurred at the Registrant's
three  properties  compared to  $2,403,410 in 1994  and $4,338,971  in  1993.  A
discussion of property operations/activities follows:

            In 1995,  Tindeco  Wharf  sustained a loss of  $1,549,544  including
$1,151,400 of depreciation  and  amortization  expenses and $874,000 of deferred
interest  (reflecting  interest  accrued  but not  paid on the  developer's  and
operating  deficit  loans)  compared  to  $1,504,919   including  $1,135,336  of
depreciation and amortization  expense and $641,000 of deferred interest in 1993
and a loss of $1,419,504,  including $1,124,145 of depreciation and amortization
expense and $901,200 of deferred  interest in 1993. The increased loss is due to
an increase in interest  expense and other operating  expenses such as wages and
salaries,  utilities,  management  fees and  insurance  partially  offset  by an
increase in rental and interest income.  Interest  expense  increased due to the
accrual of interest on a higher balance on the second mortgage.  The increase in
operating  expenses and rental income is due to an increase in occupancy in both
the residential  units and commercial space and a proportionate  increase in the
operating  expenses.  Interest  income  increased  due to a higher cash  balance
throughout  the year. The increased loss from 1993 to 1994 is due to an increase
in interest  expense and other operating  expenses such as management fees, real
estate  taxes,  and general and  administrative  offset by an increase in rental
income.  Interest expense increased due to a scheduled  increase in the interest
rate (3% to 7.5%) on the second  mortgage.  The increase in rental income is the
result of an increase in  residential  occupancy from 92% to 95% and an increase
in the average rents.

            On June 30, 1992,  DHP, Inc.  assigned to D, LTD a note  receivable,
from TWP to the  Registrant,  that had been  assigned  to it,  in the  amount of
$261,600 which bears interest at 10% with the entire  principal and interest due
on June 30,  1997.  On March 23, 1993 D, LTD obtained a judgment on this note in
Common Pleas Court for Philadelphia County, Pennsylvania.  The judgment provides
that all future distributions,  in any form, due to the Registrant on account of
its ownership interest in TWP, be immediately  delivered to it. Interest accrued
during 1995 was $2,864. This note was repaid in 1995.

            In 1995,  River  Street Inn  sustained a loss of $354,314  including
$354,747  of  depreciation  expense  compared  to a loss of  $865,885  including
$353,669  of  depreciation  expense  in 1994 and a loss of  $510,687,  including
$333,478 of  depreciation  expense in 1993. The decreased loss from 1994 to 1995
is the result of an  increase  in hotel  income  combined  with an  increase  in
interest  expense.  The increase in hotel income is the result of an increase in
average  room rates at  Factor's  Walk  ($90.18 to $94.54)  and an  increase  in
average  occupancy (74% to 78%). The increase in interest rates is the result of
an increase in the average interest rate on the both the mortgage and on amounts
owed to the guarantor  which accrues  interest at prime plus 2%. The increase in
the loss from 1993 to 1994 is the result of the  judgment  entered  against  FWP
(see below) in  combination  with an increase in hotel  income and a decrease in
hotel operations  expense  partially offset by an increase in interest  expense.
Hotel  income  increased  due to an  increase in average  room rates  ($86.59 to

                                      -11-

<PAGE>

$90.18) and an increase in occupancy from 71% to 74%. Hotel  operations  expense
decreased due to the settlement in 1993 of a dispute concerning  management fees
owed to the previous management company (see below).  Interest expense increased
due to an increase in the interest rates on the bonds (4.5% to 6%).

            FWP has been involved in two legal proceedings as discussed below:

            (a) J. A. Jones Construction  Company ("Jones")  contracted with FWP
for the  renovation  of what was  originally a warehouse,  into the River Street
Inn/Factor's  Walk.  During  construction,  numerous  disputes arose between the
parties.  As a result of those  disputes,  Jones  abandoned the project prior to
completion  and filed suit in the matter of J.A. Jones  Construction  Company v.
Factor's  Walk  Partners in the United  States  District  Court for the Northern
District of Georgia.  On January 1, 1994,  the court entered a judgment in favor
of Jones and  against  FWP in the amount of  $1,069,017.  The  judgment  accrues
interest at 9.5% and $62,562 of interest was accrued in both 1995 and 1994.  FWP
filed an appeal and this  appeal is  currently  held in  abeyance  while FWP and
Jones  participate  in a court  sponsored  settlement  program.  Because  of the
complexity of the factual and legal issues involved, it is impossible to predict
with any  reasonable  degree of  certainty  the outcome of the  appeal.  A final
outcome adverse to FWP is a reasonable  probability.  However,  FWP continues to
participate in negotiations with Jones, which the Registrant  believes will lead
to a settlement that will allow FWP to retain  ownership of the property.  If no
settlement  occurs and an adverse  appellate ruling is handed down, the property
could be foreclosed.

            (b) In October 1992,  FWP  terminated its contract with the existing
management  company,  Great Inns of America ("GIA"),  and hired a new management
company.  In February 1993,  GIA filed suit in the United States  District Court
for the  Southern  District  of Georgia in the matter of Great Inns of  America,
Inc. v. Factor's Walk Partners for breach of contract and tortious interference.
On September 10, 1993 the lawsuit was settled for $102,670, of which $25,000 was
paid at the time of  settlement  and equal  monthly  installments  of $6,472 are
payable  commencing October 10, 1993 and continuing until September 10, 1994. As
of December 31, 1995, this obligation has been repaid.

            On June 30, 1992,  DHP, Inc.  assigned to D, LTD a note  receivable,
from FWP to the  Registrant,  that had been  assigned  to it,  in the  amount of
$55,951 which bears  interest at 10% with the entire  principal and interest due
on June 30, 1997. On January 13, 1994 D, LTD obtained a judgment on this note in
the  amount  of  $73,184  in  Common  Pleas  Court  for   Philadelphia   County,
Pennsylvania.  The judgment accrued interest at 15%. The judgment  provides that
all future  distributions,  in any form, due to the Registrant on account of its
ownership  interest in FWP, be  immediately  delivered to it.  Interest  accrued
during 1995 was $2,226. This note was repaid in 1995.

            In 1995,  Washington  Square  sustained a loss of $19,592  including
$110,227  of  depreciation  expense  compared  to a loss  of  $32,606  including
$110,003  of  depreciation  expense  in  1994  and a loss of  $52,039  including
$109,943 of  depreciation  expense in 1993. The decreased loss from 1994 to 1995

                                      -12-

<PAGE>

is mainly the result of an  increase  in rental  income due to a higher  average
rental rates.  The  decreased  loss from 1993 to 1994 is mainly the result of an
increase in rental income due to an increase in average  occupancy (92% to 97%).
The  decreased  loss from 1992 to 1993 is primarily due to the inclusion in 1992
of interest expense,  relating to previous years, due to the property manager on
amounts advanced to fund negative cash flow.  Registrant  expects  operations in
1996 to approximate those experienced in 1995.

            On June 30, 1992,  DHP,  Inc.  assigned to D, LTD a note  receivable
from the  Registrant in the amount of $404,046  which bears interest at 10% with
the entire principal and interest due on June 30, 1997. On March 23, 1993 D, LTD
obtained a judgment on this note in the amount of $454,299 in Common Pleas Court
for  Philadelphia  County,  Pennsylvania.  The judgment accrued interest at 15%.
Interest  accrued  during 1995 was  $45,430.  Payments on the judgment are to be
made from  available  cash flow and before any  distribution  can be made to the
Registrant's  limited partners.  The balance of the note at December 31, 1995 is
$488,433.

            In  1993,  the  Registrant  recognized  a  loss  of  $2,356,741  and
$2,340,510 in  extraordinary  losses from the  foreclosure of one property.  The
foreclosure was as follows:

            The Registrant  recognized a loss of a loss of $2,356,741 in 1993 at
the  Morrison-Clark Inn . As a result of insufficient cash flow generated by the
property,  Mass & L was unable to make scheduled debt service payments. In 1992,
the lender  notified  Mass & L of the default under both notes and made a demand
for payment.  In May 1992, in order to forestall the  threatened  foreclosure by
the lender,  a  reorganization  petition was filed pursuant to Chapter 11 of the
U.S.  Bankruptcy  Code.  In  addition,  the  lender  filed a claim  against  the
Registrant  on its  guaranty of payment of both notes.  In  February  1993,  the
lender, with permission of the bankruptcy court,  foreclosed on the property. In
November  1993,  the lender  obtained a judgment in the matter of Capital  Bank,
N.A. v. Diversified Historic Investors II in the amount of $1,800,000. In return
for payment of $20,000,  Capital Bank has agreed to forebear  from  executing on
the judgment until July 6, 1996.  Although there have been no  discussions,  the
Registrant  anticipates that it will be able to extend the forbearance agreement
for several years for similar consideration.  Included in operations for 1993 is
an extraordinary loss of $2,340,510 representing the difference between the fair
market value of the assets relinquished and the liabilities satisfied.

           Effective January 1, 1995, the Partnership  adopted the provisions of
Statement of Financial  Accounting  Standards ("SFAS") No. 121,  "Accounting for
the Impairment of Long - Lived Assets and for Long - Lived Assets to be Disposed
Of." There was no cumulative effect of the adoption of SFAS No. 121.

Item 8.     Financial Statements and Supplementary Data

            Registrant  is not required to furnish the  supplementary  financial
information referred to in Item 302 of Regulations S-K.

                                      -13-

<PAGE>


                          Independent Auditor's Report

To the Partners of
Diversified Historic Investors II

We have audited the  accompanying  consolidated  balance  sheets of  Diversified
Historic Investors II (a Pennsylvania  Limited Partnership) and its subsidiaries
as of  December  31, 1995 and 1994 and the related  consolidated  statements  of
operations,  changes in  partners'  equity  and cash  flows for the years  ended
December 31, 1995, 1994 and 1993. These  consolidated  financial  statements are
the  responsibility of the Partnership's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits. We did not audit the financial  statements of Tindeco Wharf Partnership,
which  statements  reflect total assets of  $20,637,093  and  $21,583,406  as of
December 31, 1995 and 1994,  and total  revenues of $3,483,636  and  $3,319,873,
respectively  for the years then ended.  Those  statements were audited by other
auditors whose report has been  furnished to us, and our opinion,  insofar as it
relates to the amounts included for Tindeco Wharf  Partnership,  is based solely
on the report of the other auditors.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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 and the report of
other auditors provides a reasonable basis for our opinion.

In our opinion,  based on our audits and the report of the other  auditors,  the
consolidated  financial  statements  referred to above presents  fairly,  in all
material respects,  the financial position of Diversified  Historic Investors II
and  subsidiaries  as of December  31,  1995 and 1994,  and the results of their
operations and their cash flows for the years ended December 31, 1995,  1994 and
1993 in conformity with generally accepted accounting principles.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken  as a  whole.  The  Schedule  of  Real  Estate  and
Accumulated  Depreciation on page 30 is presented for the 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 audit
of the basic financial  statements and, in our opinion,  is fairly stated in all
material  respects  in  relation to the basic  financial  statements  taken as a
whole.


Gross, Kreger & Passio
Philadelphia, Pennsylvania
February 13, 1996

                                      -14-

<PAGE>

                          Independent Auditor's Report

To the Partners of
Tindeco Wharf Partnership

We have audited the  accompanying  consolidated  balance  sheet of Tindeco Wharf
Partnership  as of December 31, 1995,  and the related  statements of profit and
loss (on HUD Form No. 92410), partners' deficit 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 audits in accordance with generally accepted auditing standards
and Government  Auditing  Standards,  issued by the  Comptroller  General of the
United States.  Those  standards  require that we plan and perform the audits 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 audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements referred to above presents fairly, in
all material respects, the financial position of Tindeco Wharf Partnership as of
December  31,  1995,  and the result of its  operations,  changes  in  partners'
deficit  and cash flows for the year then  ended in  conformity  with  generally
accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic  financial
statements taken as a whole. The supplemental information on pages 24 through 30
is presented for the 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 audit of the basic financial  statements and,
in our opinion,  is fairly  stated in all  material  respects in relation to the
basic financial statements taken as a whole.

In accordance with Government  Auditing  Standards,  we have also issued reports
dated January 18, 1996,  on our  consideration  of Tindeco  Wharf  Partnership's
internal  control  structure and in its  compliance  with specific  requirements
applicable  to  major  HUD  programs,  affirmative  fair  housing,  and laws and
regulations applicable to the financial statements.


Reznick Fedder and Silverman
Baltimore, Maryland
January 18, 1996

                                      -15-

<PAGE>


                         DIVERSIFIED HISTORIC INVESTORS II
                              (a limited partnership)

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                         AND FINANCIAL STATEMENT SCHEDULES


Consolidated financial statements:                                      Page

   Consolidated Balance Sheets at December 31, 1995 and 1994              17

   Consolidated  Statements  of  Operations  for the  Years  Ended
     December 31, 1995, 1994, and 1993                                    18

   Consolidated  Statements of Changes in Partners' Equity for the
     Years Ended December 31, 1995, 1994, and 1993                        19

   Consolidated  Statements  of Cash  Flows  for the  Years  Ended
     December 31, 1995, 1994, and 1993                                    20

   Notes to consolidated financial statements                             21-29

Financial statement schedules:

   Schedule XI - Real Estate and Accumulated Depreciation                 31

   Notes to Schedule XI                                                   32










All other  schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.

                                      -16-

<PAGE>

                        DIVERSIFIED HISTORIC INVESTORS II
                        ---------------------------------
                             (a limited partnership)

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                           December 31, 1995 and 1994

                                     Assets

                                                     1995              1994
                                                ------------       ------------
Rental properties at cost:
   Land                                         $    934,582       $    934,582
   Buildings and improvements                     39,414,132         39,296,842
   Furniture and fixtures                          2,650,472          2,566,749
                                                ------------       ------------

                                                  42,999,186         42,798,173
   Less - accumulated depreciation               (16,210,001)       (14,575,699)
                                                ------------       ------------
                                                  26,789,185         28,222,474

Cash and cash equivalents                            114,922            101,340
Restricted cash                                      692,027            607,039
Accounts receivable                                   50,030             31,298
Other assets (net of accumulated
   amortization of $180,216 and $147,153)          1,772,484          1,780,758
                                                ------------       ------------

            Total                               $ 29,418,648       $ 30,742,909
                                                ============       ============

                        Liabilities and Partners' Equity

Liabilities:
   Debt obligations                             $ 33,161,299       $ 33,527,230
   Accounts payable:
       Trade                                         866,737            717,773
       Related parties                               678,569            816,878
   Interest payable                                6,928,557          5,887,209
   Tenant security deposits                          241,704            247,139
   Other liabilities                               2,381,497          1,959,979
                                                ------------       ------------

            Total liabilities                     44,258,363         43,156,208
                                                ------------       ------------

Partners' equity                                 (14,839,715)       (12,413,299)
                                                ------------       ------------

            Total                               $ 29,418,648       $ 30,742,909
                                                ============       ============

   The accompanying notes are an integral part of these financial statements.

                                      -17-

<PAGE>

                        DIVERSIFIED HISTORIC INVESTORS II
                        ---------------------------------
                             (a limited partnership)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      -------------------------------------

              For the Years Ended December 31, 1995, 1994 and 1993


                                             1995         1994         1993
                                          ----------   ----------  -----------

Revenues:
   Rental income                         $ 4,103,099  $ 3,950,879  $ 3,763,979
   Hotel income                            1,230,057    1,108,942    1,227,925
   Interest income                            28,998        9,219       10,300
                                         -----------  -----------  -----------

       Total revenues                      5,362,154    5,069,040    5,002,204
                                         -----------  -----------  -----------

Costs and expenses:
   Rental operations                       1,654,247    1,590,865    1,556,301
   Hotel operations                        1,037,365    1,018,311    1,333,260
   General and administrative                198,000      198,000      198,000
   Interest                                3,231,126    3,478,235    2,571,868
   Depreciation and amortization           1,667,832    1,652,950    1,621,508
   Loss on disposal of property                  -0-          -0-      206,000
                                         -----------  -----------  -----------

       Total costs and expenses            7,788,570    7,938,361    7,486,937
                                         -----------  -----------  -----------

Loss before extraordinary item            (2,426,416)  (2,869,321)  (2,484,733)

Extraordinary loss                               -0-          -0-   (2,340,510)
                                         -----------  -----------  -----------

Net loss                                 ($2,426,416) ($2,869,321) ($4,825,243)
                                         ===========  ===========  ===========

Net loss per limited partnership unit:
   Loss before extraordinary item            (116.65)     (137.94)     (119.45)
   Extraordinary loss                             -0-          -0-     (112.52)
                                         -----------  -----------  -----------
                                         ($   116.65) ($   137.94) ($   231.97)
                                         ===========  ===========  ===========

   The accompanying notes are an integral part of these financial statements.

                                      -18-

<PAGE>

                         DIVERSIFIED HISTORIC INVESTORS II
                         ---------------------------------
                              (a limited partnership)

               CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
               ------------------------------------------------------

                For the Years Ended December 31, 1995, 1994 and 1993


                                       Dover
                                      Historic      Limited
                                     Advisors(1)    Partners(2)        Total
                                     -----------    -----------        -----

Percentage participation in
  profit or loss                         1%            99%              100%
                                         ==            ===              ====

Balance at December 31, 1992         (218,608)      (4,500,127)      (4,718,735)
Net loss                              (48,252)      (4,776,991)      (4,825,243)
                                 ------------     ------------     ------------


Balance at December 31, 1993         (266,860)      (9,277,118)      (9,543,978)
Net loss                              (23,608)      (2,337,232)      (2,360,840)
                                 ------------     ------------     ------------

Balance at December 31, 1994         (290,468)     (11,614,350)     (11,904,818)
Prior period adjustment                (5,085)        (503,396)        (508,481)
Net loss                              (24,264)      (2,402,152)      (2,426,416)
                                 ------------     ------------     ------------

Balance at December 31, 1995     ($   319,817)    ($14,519,898)    ($14,839,715)
                                 ============     ============     ============




 (1)  General Partner.

 (2)  20,593.3  limited  partnership  units  outstanding at December 31, 1995,
      1994, and 1993.

   The accompanying notes are an integral part of these financial statements.

                                      -19-

<PAGE>

                         DIVERSIFIED HISTORIC INVESTORS II
                         ---------------------------------
                              (a limited partnership)

                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                       -------------------------------------

                For the Years Ended December 31, 1995, 1994 and 1993

                                                1995        1994        1993
                                             ----------  ----------  ----------

Cash flows from operating activities:
   Net loss                                 ($2,426,416)($2,869,321)($4,825,243)
   Adjustments to reconcile net loss to
   net cash used in operating activities:
Depreciation and amortization                 1,667,832   1,652,950   1,621,508
Bad debt expense                                    -0-         -0-     206,000
Extraordinary loss on extinguishment of debt        -0-         -0-   2,340,510
Minority interests' portion of loss                 -0-         -0-         -0-
Changes in assets and liabilities,
  net of disposals due to foreclosure:
   (Increase) decrease in restricted cash       (84,988)     (9,171)     38,628
   (Increase) decrease in accounts              (18,732)        399       5,279
   receivable
   Increase in other assets                     (25,256)    (13,660)     (1,761)
   Increase in accounts payable - trade         148,964     217,168      15,617
   Increase (decrease) in accounts             (138,309)   (824,896)    364,716
     payable - related parties
   Increase in interest payable               1,041,348     778,531     614,852
   (Decrease) increase in tenant security        (5,435)     35,602        (112)
   deposits
   Increase in other liabilities                421,518   1,959,980         -0-
                                            ----------- ----------- -----------
        Net cash provided by operating
          activities:                           580,526     927,582     379,994
                                            ----------- ----------- -----------
Cash flows from investing activities:
   Capital expenditures                        (201,013)   (827,483)   (106,374)
                                            ----------- ----------- -----------
        Net cash used in investing
          activities:                          (201,013)   (827,483)   (106,374)
                                            ----------- ----------- -----------
Cash flows from financing activities:
   Borrowings under debt obligations                -0-      43,423         -0-
   Payments of principal under debt            (365,931)    (63,636)   (288,026)
   obligations
   Other financing activities                        -0-        -0-      (4,752)
                                            ----------- ----------- -----------
        Net cash used in financing
          activities:                          (365,931)    (20,213)   (292,778)
                                            ----------- ----------- -----------
Increase (decrease) in cash and cash             13,582      79,886     (19,158)
  equivalents
Cash and cash equivalents at beginning of       101,340      21,454      40,612
  year                                     ----------- ----------- -----------
Cash and cash equivalents at end of year    $   114,922 $   101,340 $    21,454
                                            =========== =========== ===========

Supplemental Disclosure of Cash Flow
Information:
  Cash paid during the year for interest    $ 1,848,790 $ 2,223,822 $ 1,561,485
Supplemental Schedule of Non-Cash
  Investing and financing activities:
   Net assets transferred for liability
     reduction:
        Net assets transferred                        0           0 $ 5,070,245
        Liability reduction                           0           0 $ 2,729,735

   The accompanying notes are an integral part of these financial statements.

                                      -20-

<PAGE>

                         DIVERSIFIED HISTORIC INVESTORS II
                         ---------------------------------
                              (a limited partnership)


NOTE A - ORGANIZATION

Diversified  Historic  Investors II (the  "Partnership")  was formed in December
1984 to acquire,  rehabilitate,  and manage real properties  which are certified
historic  structures as defined in the Internal  Revenue Code (the  "Code"),  or
which are eligible for designation as such, utilizing mortgage financing and the
net  proceeds  from  the  sale of  limited  partnership  units.  Rehabilitations
undertaken by the Partnership  were done with a view to obtaining  certification
of expenditures therefore as "qualified rehabilitation  expenditures" as defined
in the Code. The General  Partner,  Dover  Historic  Advisors,  whose  corporate
partner is DHP,  Inc.,  (formerly  Dover  Historic  Properties,  Inc.),  has the
exclusive responsibility for all aspects of the Partnership's operations

NOTE B - SIGNIFICANT ACCOUNTING POLICIES

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

1.    Principles of Consolidation

The accompanying  consolidated  financial  statements of the Partnership include
the  accounts of two  subsidiary  partnerships  (the  "Ventures"),  in which the
Partnership  has  controlling   interests,   with  appropriate   elimination  of
inter-partnership  transactions and balances. These financial statements reflect
all adjustments  (consisting only of normal recurring adjustments) which, in the
opinion of the Partnership's General Partner, are necessary for a fair statement
of the results for the years presented.

2.    Depreciation

Depreciation  is computed  using the  straight-line  method  over the  estimated
useful lives of the assets.  Buildings and  improvements are depreciated over 25
years and furniture and fixtures over five years.

3.    Finance Costs

Loan fees have been incurred with respect to certain loans.  Such fees are being
amortized over the terms of the related loans (18 to 40 years) and being charged
to amortization expense.

                                      -21-

<PAGE>

The  Partnership  prepaid all  amounts  due under a ground  lease for one of its
properties.  Such  prepayment is being  amortized over the term of the lease (75
years) and being charged to amortization expense.

Tindeco Wharf  Partnership  incurred  $791,054 of settlement fees in conjunction
with the bond  refinancing.  These  settlement fees are included in other assets
and are being amortized to amortization expense over the term of the bond issue.
Accumulated  amortization was $74,920 and $52,264 at December 31, 1995 and 1994,
respectively.

4.    Cash and Cash Equivalents

The  Partnership  considers  all  highly  liquid  instruments  purchased  with a
maturity of less than three months to be cash equivalents.

5.    Net Income Per Limited Partnership Unit

The net income per limited  partnership  unit is based on the  weighted  average
number of limited  partnership units outstanding  during the period (20,593.3 in
1995, 1994 and 1993).

6.    Reclassifications

Certain  amounts in the 1993  financial  statements  have been  reclassified  to
conform with the format adopted in 1994.

7.    Restricted Cash

Restricted  cash  includes  amounts held for tenant  security  deposits and real
estate tax reserves.

8.    Revenue Recognition

Revenues are recognized when rental  payments are due on a straight-line  basis.
Rental payments received in advance are deferred until earned.

9.    Rental Properties

Rental  properties  are stated at cost. A provision  for  impairment of value is
recorded  when a decline in value of  property  is  determined  to be other than
temporary as a result of one or more of the following: (1) a property is offered
for sale at a price  below  its  current  carrying  value,  (2) a  property  has
significant  balloon  payments due within the  foreseeable  future for which the
Partnership  does not have the  resources to meet,  and  anticipates  it will be
unable to obtain replacement financing or debt modification  sufficient to allow
it to continue to hold the  property  over a  reasonable  period of time,  (3) a
property has been, and is expected to continue, generating significant operating
deficits and the Partnership is unable or unwilling to sustain such deficits and

                                      -22-

<PAGE>

has been unable, or anticipates it will be unable, to obtain debt  modification,
financing or refinancing sufficient to allow it to continue to hold the property
for a reasonable period of time or, (4) a property's value has declined based on
management's  expectations  with respect to projected  future  operational  cash
flows and prevailing economic  conditions.  An impairment loss is indicated when
the  undiscounted  sum of estimated  future cash flows from an asset,  including
estimated sales proceeds,  and assuming a reasonable period of ownership up to 5
years,  is less than the carrying  amount of the asset.  The impairment  loss is
measured as the  difference  between the  estimated  fair value and the carrying
amount of the asset. In the absence of the above  circumstances,  properties and
improvements  are  stated at cost.  An  analysis  is done on an annual  basis at
December of each year.

10.   New Accounting Pronouncement

Effective  January 1, 1995, the Partnership  adopted the provisions of Statement
of  Financial  Accounting  Standards  ("SFAS")  No.  121,  "Accounting  for  the
Impairment  of Long - Lived  Assets and for Long - Lived  Assets to be  Disposed
Of." There was no cumulative effect of the adoption of SFAS No. 121.

NOTE C - PRIOR PERIOD ADJUSTMENT

On January 1, 1994, a judgment was entered against the  Partnership  (See Note F
Commitments  and  Contingencies)  in the  amount  of  $1,069,017  consisting  of
$648,018 in construction  costs and $420,999 in accrued  interest.  The judgment
was not accrued in 1994. In addition,  interest on the judgment in the amount of
$61,562 was not accrued and depreciation on the construction costs in the amount
of $25,921 was not expensed for the year ended  December 31, 1994.  Accordingly,
the financial statements for the year ended December 31, 1994 have been restated
to reflect the above obligations as follows:

Net loss as previously reported                                   ($  2,360,840)
Interest expense                                                       (482,560)
Depreciation expense                                                    (25,921)
                                                                  -------------
Net loss as restated                                              ($  2,869,321)
                                                                  =============

Net loss per limited  partnership  unit, as previously stated         ($ 113.49)
Interest expense                                                         (23.20)
Depreciation expense                                                      (1.25)
                                                                  -------------
Net loss per limited partnership unit, as restated                    ($ 137.94)
                                                                  =============

                                      -23-

<PAGE>

NOTE D - DEBT OBLIGATIONS

Debt obligations were as follows:

                                                             December 31,
                                                          1995           1994
                                                          ----           ----
Mortgage  loan,  interest  only at TENR  plus  1/2%  $ 5,800,000     $ 5,800,000
(5.375%  and 6% at  December  31,  1995  and  1994,
respectively)  (TENR is a rate based upon yields of
high quality,  short-term, tax exempt obligations),
subject  to  certain  adjustments,  to a maximum of
15%;  principal due in 2015,  collateralized by the
related rental property (A)

Mortgage loan,  interest at 12%,  collateralized by     1,800,000      1,800,000
the  related  rental   property  with  maturity  at 
January 1, 1992 (B)

Mortgage  loans,  interest at the  Federal  Reserve     1,155,227      1,223,214
Discount  rate plus 2% with a  minimum  of 7% and a
maximum of 15% (7.25% and 7% at December  31, 1995,
and 1994,  respectively),  principal  and  interest
payable  monthly  based on a  20-year  amortization
schedule at the  foregoing  rates of  interest,  as
applicable;  callable  by the  lender  in 1996,  at
which  time  the  balance  will  be   approximately
$1,081,704;  collateralized  by the related  rental
property (C)

Mortgage    revenue   bonds    comprised   of   the    16,980,349     17,046,806
following:   $1,440,000   Serial  Bonds,   interest
rates   ranging  from  2.75%  to  6.10%,   maturing
semi-annually  from June 20, 1996, to December 20, 
2006;   $1,650,000  Term  Bonds,  interest at 6.5%,
maturing December  20, 2012; $8,260,000 Term Bonds,
interest  at  6.6%,  maturing  December  20,  2024;
$5,605,000  Term Bonds,  interest at 6.7%, maturing
December  20, 2028;  collateralized by the  related
rental property

Notes  payable  to a property  management  company,       172,252        300,000
bearing  interest at 12% per annum;  principal  and
interest  to be repaid from the  earliest  positive
cash flow from operations or capital  transactions,
or within 90 days of  termination of the management
agreement;  unpaid  principal and interest due upon
the earlier of sale or  refinance  of the  property
or December 1, 2007

                                      -24-

<PAGE>

Note payable;  interest  accrues at 12%;  principal           -0-        103,739
and   interest  to  be  repaid  from  the  earliest
positive cash flow from  operations;  unsecured and
due on demand

Second  mortgage  loan,  principal  and interest at     4,953,471      4,953,471
7.5%,  payable in monthly  installments  of $36,606
to  August  2004,  at  which  time the  balance  of
approximately  $3,948,784 is due; collateralized by
the related rental property (D)

Note payable to the developer, interest accrues at
12%, of which 6%  interest  is  payable  annually;
deferred  interest is  payable  out of  cash  flow
after a preference return to the Partnership  with
interest  accruing on the unpaid amount; principal
and unpaid interest  due at the earlier of sale or
refinancing of the property or 2005; unsecured          2,300,000      2,300,000
                                                      -----------    -----------
                                                      $33,161,299    $33,527,230
                                                      ===========    ===========

(A) The  partnership has the right to convert the interest rate to a fixed rate,
    based upon market conditions at the time of conversion.

    A  private  corporation  provides  an interest guarantee on these bonds. The
    guarantor  charges an  annual fee of  approximately  2% of  the  outstanding
    balance of the bonds.

(B) Interest  payments  were  not  made  after  August,  1991.  Lender  declared
    default  and  accelerated   payment  of  the  note  in  February  1992.  The
    partnership  which owns the property filed a petition of  reorganization  in
    May 1992. In November  1992,  the automatic stay was lifted and the property
    which  collateralizes  this loan was  foreclosed  by the lender in  February
    1993. However,  the partnership  guaranteed  $1,800,000 of the original note
    balance, which is included in debt obligations.

(C) Although  the   loan   is  callable  on   May  1,  1996,   the   Partnership
    anticipates that upon providing  additional  information to the lender,  the
    loan will be reinstated and the principal balance due in October 2005.

(D) Interest  and   principal  after  August 1, 1990,  is due only to the extent
    of  available  cash flow.  Any unpaid  principal  and  interest is deferred.
    Additional  interest  equal  to 20% of net cash  flow  from  operations,  as
    defined,  in excess of  $1,075,000 is payable  annually.  The lender is also
    entitled to receive 10% of the net proceeds from the sale of the property as
    defined. No additional interest was paid during 1995, 1994 or 1993.

                                      -25-

<PAGE>

Approximate  maturities of mortgage loan  obligations  at December 31, 1995, for
each of the succeeding five years are as follows:

Year Ending December 31,

                           1996          $ 1,949,204
                           1997              162,166
                           1998              176,286
                           1999              191,671
                           2000              208,436
                           Thereafter     30,473,536
                                         -----------
                                         $33,161,299
                                         ===========

NOTE E - ACQUISITIONS

The Partnership  acquired one property and three general or limited  partnership
interests  in  Ventures  during  the period  August  1985 to  October  1985,  as
discussed below.

In August  1985,  the  Partnership  was  admitted,  with a 99%  general  partner
interest,  to a Pennsylvania general partnership,  which owns a building located
in Savannah,  Georgia, consisting of 21,500 commercial square feet and a 44 room
hotel, for a cash capital contribution of $3,600,409.

In October  1985,  the  Partnership  was admitted,  with an 85% general  partner
interest,  to a  Pennsylvania  general  partnership,  which owns a 54-room hotel
located in Washington,  D.C., for a cash capital contribution of $1,820,100. The
Partnership's  interest was subsequently reduced to 69% when an affiliate of the
Partnership acquired a 19% interest. The lender foreclosed in 1993.

In October 1985, the Partnership purchased a three-story building, consisting of
29 residential  apartments and 9,500 square feet of commercial space, for a cash
contribution of $1,320,883.

In October  1985,  the  Partnership  was admitted,  with an 85% general  partner
interest,  to a Maryland general  partnership,  which owns a building located in
Baltimore,  Maryland, consisting of 240 residential units and 39,000 square feet
of  commercial  space,  for a  cash  capital  contribution  of  $7,271,300.  The
Partnership subsequently purchased an additional 5% interest for $262,500.

                                      -26-

<PAGE>

NOTE F- COMMITMENTS AND CONTINGENCIES

Pursuant to certain agreements,  the developers of and lenders to the properties
are entitled to share in the following:

1.  15% of net cash  flow  from  operations  (one  property),  and 15% to 50% of
    net  cash  flow  from  operations  above  certain   specified  amounts  (two
    properties);

2.  10% to 45% of  the  net proceeds, as  defined, of the sale of the respective
    properties (three properties).  Generally,  the Partnership is entitled to a
    priority  distribution  of the net proceeds of sale prior to any payments to
    developers.

J.  A.  Jones  Construction  Company  ("Jones")  contracted  with  FWP  for  the
renovation  of  what  was   originally  a  warehouse,   into  the  River  Street
Inn/Factor's  Walk.  During  construction,  numerous  disputes arose between the
parties.  As a result of those  disputes,  Jones  abandoned the project prior to
completion and filed suit. In the matter of J.A. Jones  Construction  Company v.
Factor's  Walk  Partners in the United  States  District  Court for the Northern
District of Georgia.  On January 1, 1994,  the court entered a judgment in favor
of Jones and  against  FWP in the amount of  $1,069,017.  The  judgment  accrues
interest at 9.5% and $62,562 of interest was accrued in both 1995 and 1994.  FWP
filed an appeal and this  appeal is  currently  held in  abeyance  while FWP and
Jones  participate  in a court  sponsored  settlement  program.  Because  of the
complexity of the factual and legal issues involved, it is impossible to predict
with any  reasonable  degree of  certainty  the outcome of the  appeal.  A final
outcome adverse to FWP is a reasonable  probability.  However,  FWP continues to
participate in negotiations with Jones, which the Registrant  believes will lead
to a settlement that will allow FWP to retain  ownership of the property.  If no
settlement  occurs and an adverse  appellate ruling is handed down, the property
could be foreclosed.

In October  1992,  FWP  terminated  its contract  with the  existing  management
company,  Great Inns of America ("GIA"),  and hired a new management company. In
February  1993,  GIA filed  suit in the  United  States  District  Court for the
Southern  District  of Georgia in the matter of Great Inns of  America,  Inc. v.
Factor's  Walk  Partners for breach of contract and  tortious  interference.  On
September  10, 1993 the lawsuit was settled for  $102,670,  of which $25,000 was
paid at the time of  settlement  and equal  monthly  installments  of $6,472 are
payable  commencing October 10, 1993 and continuing until September 10, 1994. As
of December 31, 1995, this obligation has been repaid.

NOTE G - RELATED PARTY TRANSACTIONS

On June 30,  1992,  DHP,  Inc.  assigned  to D, LTD a note  receivable  from the
Registrant in the amount of $404,046 which bears interest at 10% with the entire
principal and interest due on June 30, 1997. On March 23, 1993 D, LTD obtained a
judgment  on this note in the  amount of  $454,299  in  Common  Pleas  Court for
Philadelphia  County,  Pennsylvania.  The  judgment  accrues  interest  at  15%.
Interest  accrued  during 1995 was  $45,430.  Payments on the judgment are to be

                                      -27-

<PAGE>

made from  available  cash flow and before any  distribution  can be made to the
Registrant's  limited partners.  The balance of the note at December 31, 1995 is
$488,433.

On June 30, 1992, DHP, Inc.  assigned to D, LTD a note  receivable,  from TWP to
the  Registrant,  that had been assigned to it, in the amount of $261,600  which
bears  interest at 10% with the entire  principal  and  interest due on June 30,
1997.  On March 23, 1993 D, LTD obtained a judgment on this note in Common Pleas
Court for  Philadelphia  County,  Pennsylvania.  The judgment  provides that all
future  distributions,  in any form,  due to the  Registrant  on  account of its
ownership  interest in TWP, be  immediately  delivered to it.  Interest  accrued
during 1995 was $2,864. This note was repaid in 1995.

On June 30, 1992, DHP, Inc.  assigned to D, LTD a note  receivable,  from FWP to
the  Registrant,  that had been  assigned to it, in the amount of $55,951  which
bears  interest at 10% with the entire  principal  and  interest due on June 30,
1997.  On January 13, 1994 D, LTD obtained a judgment on this note in the amount
of $73,184 in Common  Pleas Court for  Philadelphia  County,  Pennsylvania.  The
judgment  provides  that  all  future  distributions,  in any  form,  due to the
Registrant on account of its ownership interest in FWP, be immediately delivered
to it. Interest accrued during 1995 was $2,226. This note was repaid in 1995.

The seller of Washington Square agreed to lend funds to the Partnership to cover
cash flow  deficits for a five-year  period  expiring in 1990.  The  Partnership
borrowed  $97,008  through  December  1988. The loan bears interest at 12%, with
principal and interest  payments out of cash flow.  Interest accrued during 1995
was $11,641. The balance of the note at December 31, 1995 was $190,136.

NOTE H - EXTRAORDINARY GAINS/ LOSSES

During  1993,  the  mortgagee  of the property  located at the  intersection  of
Massachusetts  Avenue and L Street ("Mass and L") in Washington,  D.C. (54 hotel
rooms and a 120 seat restaurant) foreclosed on the property. Due to insufficient
cash flow generated by the property,  Mass & L was unable to make scheduled debt
service  payments.  In 1992,  the lender  notified Mass & L of the default under
both notes and made a demand for payment. In May 1992, in order to forestall the
threatened  foreclosure  by the  lender,  a  reorganization  petition  was filed
pursuant to Chapter 11 of the U.S.  Bankruptcy  Code.  In  addition,  the lender
filed a claim against the  Partnership on its guaranty of payment of both notes.
In  February  1993,  the  lender,  with  permission  of  the  bankruptcy  court,
foreclosed on the property.  In November 1993, the lender obtained a judgment in
the matter of Capital Bank,  N.A. v.  Diversified  Historic  Investors II in the
amount of $1,800,000.  In return for payment of $20,000, Capital Bank has agreed
to forebear from  executing on the judgment  until July 6, 1996.  Although there
have been no  discussions,  the Registrant  anticipates  that it will be able to
extend the  forbearance  agreement for several years for similar  consideration.
The Partnership has recognized an  extraordinary  loss of $2,340,510 in 1993 for
the difference  between the book value of the property (which  approximated fair
value) and the extinguished debt.

                                      -28-

<PAGE>

NOTE I - INCOME TAX BASIS RECONCILIATION

Certain  items  enter into the  determination  of the results of  operations  in
different time periods for financial  reporting ("book") purposes and for income
tax ("tax") purposes. Reconciliations of net loss and partners' equity follows:

                                            For the Years Ended December 31,
                                            --------------------------------
                                             1995         1994          1993
                                             ----         ----          ----
Net loss - book                        ($ 2,338,933) ($ 2,360,840) ($ 4,825,243)
   Depreciation                             (83,317)     (156,840)     (253,587)
   Interest                                 867,170       964,427       794,644
   Guarantor fees                           121,800        76,018        71,108
   Investor service fee                      10,000        10,000        10,000
   Bad debt expense                             -0-      (196,000)      833,270
   Note payable                                 -0-    (1,800,000)          -0-
   Gain on foreclosure                          -0-           -0-       791,059
Minority interest - tax only                120,702       115,381       210,473
                                       ------------  ------------  ------------
Net loss - tax                         ($ 1,302,578) ($ 3,347,854) ($ 2,368,276)
                                       ------------  ============  ============

Partners' equity - book                ($14,243,751) ($11,904,818) ($ 9,543,978)
Costs of issuance                         2,471,196     2,471,196     2,471,196
Cumulative tax over (under) book loss     4,590,280     3,997,356     5,336,595
Facade easement donation (tax only)         203,778       203,778       203,778
Prior period adjustment                      48,071        48,071        48,071
Capital adjustments (tax only)             (422,016)     (443,431)     (352,225)
                                       ------------  ------------  ------------
Partners' equity - tax                 ($ 7,352,442) ($ 5,627,848) ($ 1,836,563)
                                       ============  ============  ============

                                      -29-

<PAGE>





















                            SUPPLEMENTAL INFORMATION














                                      -30-

<PAGE>



             DIVERSIFIED HISTORIC INVESTORS II
             ---------------------------------
                  (a limited partnership)
   SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
                     DECEMBER 31, 1995
                                                                       Costs
                                                                    Capitalized
                                                                     Subsequent
                                                  Initial Cost to        to
                                                  Partnership (b)    Acquisition
                                                  ---------------    -----------

                                                        Buildings
                                                           and
Description (a)                  Encumbrances    Land  Improvements Improvements
---------------                  ------------    ----  ------------ ------------
                                     (f)
                                     ---

44 room hotel with 21,500 square
feet commercial space in
Savannah, GA                     $ 5,800,000 $   200,000 $ 9,178,160 $   136,412

29 apartment units and 9,500
square feet of commercial space
in West Chester, PA                1,155,227      87,500   2,833,383       1,500


262 apartment units and 39,000
square feet of commercial space
in Baltimore, MD                  24,406,072     647,082   2,000,000  26,886,653


54 room hotel with restaurant
in Washington, DC                  1,800,000           0           0           0
                                 ----------- ----------- ----------- -----------

                                 $33,161,299 $   934,582 $14,011,543 $27,024,565
                                 =========== =========== =========== ===========

                Gross Amount at which Carried at December 31, 1995
                --------------------------------------------------

               Buildings and              Accumulated   Date of      Date
      Land     Improvements  Total(c)(d)  Depr.(d)(e)   Constr.(a)  Acquired
      ----     ------------  -----------  -----------   ----------  --------



      $200,000  $ 9,341,513  $ 9,541,513  $ 3,859,097   1985-1986    8/9/85


        87,500    2,849,730    2,937,230    1,193,640     1985      10/1/85


       647,082   29,225,343   29,872,425   11,105,422   1985-1988   10/15/85


             0            0            0            0   1985-1988   10/1/85
   ------------ ------------ ------------ ------------

      $934,582  $41,416,586  $42,351,168  $16,158,159
   ============ ============ ============ ============

                                      -31-

<PAGE>


                         DIVERSIFIED HISTORIC INVESTORS
                         ------------------------------
                             (a limited partnership)

                              NOTES TO SCHEDULE XI
                              --------------------

                                 December 31, 1995

(A)   All  properties  are  certified  historic  structures  as  defined  in the
      Internal  Revenue Code, or are eligible for designation as such. The "date
      of  construction"  refers  to the  period  in which  such  properties  are
      rehabilitated.

(B)   Includes development/rehabilitation costs incurred pursuant to development
      agreements entered into when the properties are acquired.

(C)   The aggregate  cost of real estate owned at December 31, 1995, for Federal
      income tax purposes is approximately $40,011,031. However, the depreciable
      basis of  buildings  and  improvements  is reduced for Federal  income tax
      purposes  by the  investment  tax credit and the  historic  rehabilitation
      credit obtained.

(D)   Reconciliation of real estate:

                                          1995          1994           1993
                                      ------------  ------------   ------------
Balance at beginning of year          $ 42,150,155  $ 41,970,690   $ 48,496,834
Additions during the year:
   Improvements                            201,013       179,465        106,374
Deductions during the year:
   Retirements                                               -0-     (6,632,518)
                                                    ------------   ------------
Balance at end of year                $ 42,351,168  $ 42,150,155   $ 41,970,690
                                      ============  ============   ============

Reconciliation of accumulated
  depreciation:
                                           1995         1994           1993
                                      ------------  ------------   ------------
Balance at beginning of year          $ 14,549,778  $ 12,958,664   $ 12,976,944
Depreciation expense for the year        1,608,381     1,591,114      1,584,151
Retirements                                    -0-           -0-     (1,602,431)
                                      ------------  ------------   ------------
Balance at end of year                $ 16,158,159  $ 14,549,778   $ 12,958,664
                                      ============  ============   ============

(E) See Note B to the financial statements for depreciation method and lives.

(F) See Note F to the financial statements for further information.

                                      -32-

<PAGE>


Item 9.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure

            None.

                                    PART III

Item 10.    Directors and Executive Officers of Registrant

            a.   Identification of Directors - Registrant has no directors.

            b.   Identification of Executive Officers

                 The  General  Partner  of  the  Registrant  is  Dover  Historic
Advisors (DoHA), a Pennsylvania  general  partnership.  The corporate partner of
DoHA is DHP, Inc. (formerly Dover Historic Properties, Inc.)

            For further description of DHP, Inc., see paragraph e. of this Item

            c.   Identification  of  Certain  Significant Employees.  Registrant
has no employees.  Its administrative and operational  functions are carried out
by a property  management  and  partnership  administration  firm engaged by the
Registrant.

            d.   Family  Relationships.   There  is   no   family   relationship
between or among the executive officers and/or any person nominated or chosen by
Registrant to become an executive officer.

            e.   Business Experience. DoHA is a general  partnership  formed  in
August, 1985.

             The General  Partner is responsible  for the management and control
of the  Registrant's  affairs and has general  responsibility  and  authority in
conducting its operations.

            Dover Historic Properties,  Inc. was incorporated in Pennsylvania in
December  1984 for the purpose of  sponsoring  investments  in,  rehabilitating,
developing and managing historic (and other) properties. In February 1992, Dover
Historic  Properties,  Inc.'s  name was  changed to DHP,  Inc.  DHP,  Inc.  is a
subsidiary  of The Dover  Group,  Ltd.,  an entity  formed in 1985 to act as the
holding company for DHP and certain other companies  involved in the development
and operation of both historic  properties and conventional  real estate as well
as in financial (non-banking) services. In February 1992, Dover Group's name was
changed to D, LTD.

                                      -33-
<PAGE>


            The executive  officers,  directors,  and key employees of Dover are
described below.

            Michael J. Tuszka (age 49) was  appointed  Chairman  and Director of
both D, LTD and DHP, Inc. on January 27, 1993.  Mr.  Tuszka has been  associated
with DHP, Inc. and its affiliates since 1984.

            Donna M. Zanghi (age 39) is Secretary/Treasurer of DHP, Inc.. She is
also a Director and  Secretary/Treasurer of D, LTD. She has been associated with
DHP,  Inc. and its  affiliates  since 1984,  except for the period from December
1986 to June 1989 and the period from November 1, 1992 to June 14, 1993.

            Michele F.  Rudoi (age 31) was  appointed  on  January  27,  1993 as
Assistant Secretary of both D. LTD and DHP, Inc.

Item 11.    Executive Compensation

            a. Cash  Compensation  - During  1995,  Registrant  has paid no cash
compensation to DoHA, any partner therein or any person named in paragraph c. of
Item 10. Certain fees have been paid to DHP, Inc. by Registrant.

            b. Compensation  Pursuant to Plans - Registrant has no plan pursuant
to which  compensation was paid or distributed during 1995, or is proposed to be
paid or distributed in the future,  to DoHA, any partner therein,  or any person
named in paragraph c. of Item 10 of this report.

            c. Other Compensation - No compensation not referred to in paragraph
a. or paragraph b. of this Item was paid or distributed during 1995 to DoHA, any
partner therein, or any person named in paragraph c. of Item 10.

            d. Compensation of Directors - Registrant has no directors.

            e.  Termination  of  Employment  and Change of Control Arrangement -
Registrant  has  no  compensatory  plan  or  arrangement,  with  respect  to any
individual,  which results or will result from the  resignation or retirement of
any  individual,  or  any  termination  of  such  individual's  employment  with
Registrant  or from a change  in  control  of  Registrant  or a  change  in such
individual's responsibilities following such a change in control.

Item 12.    Security Ownership of Certain Beneficial Owners and Management

            a. Security  Ownership of Certain  Beneficial  Owners - No person is
known to Registrant to be the beneficial  owner of more than five percent of the
issued and outstanding Units.

                                      -34-

<PAGE>

            b.  Security  Ownership  of  Management  -  No  equity  security  of
Registrant  are  beneficially  owned by any person named in paragraph c. of Item
10.

            c. Changes in Control - Registrant does not know of any arrangement,
the operation of which may at a subsequent date result in a change in control of
Registrant.

Item 13.    Certain Relationships and Related Transactions

            Pursuant to Registrant's  Amended and Restated  Agreement of Limited
Partnership,  DoHA is entitled to 10% of  Registrant's  distributable  cash from
operations  in each year.  There was no such share  allocable to DoHA for fiscal
years 1993 through 1995.

            a.  Certain Business Relationships - Registrant has no directors.

            b.  Indebtedness of Management - No executive officer or significant
employee of Registrant,  Registrant's general partner (or any employee thereof),
or any  affiliate  of any such  person,  is or has at any time been  indebted to
Registrant.


                                      -35-

<PAGE>


                                      PART IV

Item 14.(A)     Exhibits, Financial Statement Schedules and Reports on Form 8-K.

            1.  Financial Statements:

                a.  Consolidated Balance Sheets at December 31, 1995 and 1994.

                b.  Consolidated  Statements of  Operations  for the Years Ended
                    December 31, 1995, 1994 and 1993.

                c.  Consolidated  Statements of Changes in Partners'  Equity for
                    the Years Ended December 31, 1995, 1994 and 1993.

                d.  Consolidated  Statements  of Cash Flows for the Years  Ended
                    December 31, 1995, 1994 and 1993.

                e.  Notes to consolidated financial statements.

            2.  Financial statement schedules:

                a.  Schedule XI- Real Estate and Accumulated Depreciation.

                b.  Notes to Schedule XI.

            3.  Exhibits:

                (a) Exhibit Number                Document

                           3                 Registrant's      Amended     and
                                             Restated  Certificate  of Limited
                                             Partnership   and   Agreement  of
                                             Limited  Partnership,  previously
                                             filed as part of Amendment  No. 2
                                             of   Registrant's    Registration
                                             Statement   on  Form  S-11,   are
                                             incorporated herein by reference.

                         21                  Subsidiaries  of  the  Registrant
                                             are listed in Item 2.  Properties
                                             of this Form 10-K.

                (b) Reports on Form 8-K:

                    No reports were filed on Form 8-K during the quarter  ended
                    December 31, 1995.

                (c) Exhibits:

                    See Item 14(A)(3) above.

                                      -36-

<PAGE>


                                   SIGNATURES

           Pursuant to the  requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                    DIVERSIFIED HISTORIC INVESTORS II

Date: May 24, 1996                  BY: Dover Historic Advisors, General Partner
     -------------

                                        By: DHP, Inc., Partner

                                            By:       /s/ Michael J. Tuszka
                                                ---------------------------
                                                MICHAEL J. TUSZKA,
                                                Chairman

                                            By:       /s/ Donna M. Zanghi
                                                ---------------------------
                                                DONNA M. ZANGHI,
                                                Secretary and Treasurer

                                            By:       /s/ Michele F. Rudoi
                                                ---------------------------
                                                MICHELE F. RUDOI,
                                                Assistant Secretary

           Pursuant to the requirements of the Securities  Exchange Act of 1934,
this  report  has been  signed  below by the  following  persons  on  behalf  of
Registrant and in the capacities and on the dates indicated.

           Signature                   Capacity                  Date
           ---------                   --------                  ----

DOVER HISTORIC ADVISORS             General Partner

By: DHP, Inc.,
    Partner

    By:       /s/ Michael J. Tuszka                          May 27, 1996
        ----------------------------                         ------------
        MICHAEL J. TUSZKA,
        Chairman

    By:       /s/ Donna M. Zanghi                            May 24, 1996
        ----------------------------                         ------------
        DONNA M. ZANGHI,
        Secretary and Treasurer

    By:       /s/ Michele F. Rudoi                           May 24, 1996
        ----------------------------                         ------------
        MICHELE F. RUDOI,
        Assistant Secretary

                                      -37-