--------------------------------------------------------------------------------


                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ------------------



                                   FORM 10-KSB


                               ------------------



                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2005


                               ------------------



                         Commission file number 0-11973

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
             Organized pursuant to the Laws of the State of Maryland


                               ------------------



        Internal Revenue Service - Employer Identification No. 52-1321492

                 11200 Rockville Pike, Rockville, Maryland 20852

                                 (301) 468-9200


                               ------------------



         Securities registered under Section 12(g) of the Exchange Act:

                        UNITS OF LIMITED PARTNER INTEREST


                               ------------------



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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 [X] No [ ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X]

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will 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-KSB or any  amendment to
this Form 10-KSB [X]

State issuer's revenues for its most recent fiscal year $744,738.

The units of limited  partner  interest of the  registrant are not traded in any
market.  Therefore,  the units of limited partner  interest had neither a market
selling  price nor an average bid or asked price within the 60 days prior to the
date of this filing.

--------------------------------------------------------------------------------

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                        2005 ANNUAL REPORT ON FORM 10-KSB

                                TABLE OF CONTENTS



                                                                          Page

                                     PART I

Item 1.  Business......................................................... I-1
Item 2.  Properties....................................................... I-4
Item 3.  Legal Proceedings................................................ I-4
Item 4.  Submission of Matters to a Vote of Security Holders.............. I-4


                                     PART II

Item 5.  Market for the Registrant's Partnership Interests
           and Related Partnership Matters ............................... II-1
Item 6.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................... II-2
Item 7.  Financial Statements............................................. II-7
Item 8.  Changes In and Disagreements With Accountants
           on Accounting and Financial Disclosure......................... II-7
Item 8A. Controls and Procedures.......................................... II-7
Item 8B. Other Information................................................ II-8


                                    PART III

Item 9.  Directors and Executive Officers of the Registrant............... III-1
Item 10. Executive Compensation........................................... III-2
Item 11. Security Ownership of Certain Beneficial Owners and Management... III-2
Item 12. Certain Relationships and Related Transactions................... III-3
Item 13. Exhibits......................................................... III-3
Item 14. Principal Accountant Fees and Services........................... III-4

Signatures................................................................ III-6

Report of Independent Registered Public Accounting Firm................... III-7

Financial Statements...................................................... III-8


<PAGE>
                                     PART I
                                     ------

ITEM 1. BUSINESS
        --------

     Capital Realty  Investors-II  Limited  Partnership  (the  Partnership) is a
limited  partnership which was formed under the Maryland Revised Uniform Limited
Partnership  Act on March 23, 1983. On May 6, 1983,  the  Partnership  commenced
offering 50,000 units of additional  limited partner  interest  through a public
offering  which  was  managed  by  Merrill  Lynch,  Pierce,  Fenner  and  Smith,
Incorporated.  The  Partnership  closed the offering on June 20,  1983,  when it
became fully  subscribed.  As of December 31, 2005, 90 units of limited  partner
interest had been abandoned.

     The General  Partners of the Partnership are C.R.I.,  Inc. (CRI),  which is
the  Managing  General  Partner,  and  current and former  shareholders  of CRI.
Services for the  Partnership  are performed by CRI, as the  Partnership  has no
employees of its own.

     The  Partnership  was  formed  to  invest  in  real  estate,  which  is the
Partnership's  principal  business  activity,  by acquiring and holding  limited
partner interests in limited partnerships (Local Partnerships).  The Partnership
originally made investments in 22 Local  Partnerships.  As of December 31, 2005,
the Partnership retained  investments in five Local Partnerships.  Each of these
Local Partnerships owns either a federal or state government-assisted  apartment
complex, which provides housing principally to the elderly and/or to individuals
and families of low or moderate income, or a conventionally  financed  apartment
complex. The original objectives of these investments,  not necessarily in order
of importance, were to:

     (i)  preserve and protect the Partnership's capital;
     (ii) provide,  during  the  early  years of the  Partnership's  operations,
          current tax  benefits to the  partners in the form of tax losses which
          the partners could use to offset income from other sources;
     (iii) provide capital  appreciation  through  increases in the value of the
          Partnership's   investments  and  increased  equity  through  periodic
          payments on the indebtedness on the apartment complexes; and
     (iv) provide  cash   distributions   from  sale  or   refinancing   of  the
          Partnership's  investments  and,  on  a  limited  basis,  from  rental
          operations.

See Part II, Item 6, Management's Discussion and Analysis of Financial Condition
and Results of  Operations,  for a discussion of factors  affecting the original
investment objectives.

     The Local Partnerships in which the Partnership  invested were organized by
private  developers  who acquired  the sites,  or options  thereon,  applied for
mortgage  financing and applicable  mortgage  insurance and/or subsidies and who
generally  remain as the local general  partners in the Local  Partnerships.  In
most  cases,  the  local  general  partners  of the  Local  Partnerships  retain
responsibility  for maintaining,  operating and managing the projects.  However,
under certain  circumstances,  the Local  Partnerships'  partnership  agreements
permit removal of the local general partner and  replacement  with another local
general  partner or with an  affiliate  of the  Partnership's  Managing  General
Partner.

     See Part I, Item 4, hereof,  for a discussion of the Partnership's  Plan of
Liquidation  and  Dissolution,  which was approved by a majority of the units of
limited partner interest on March 22, 2004.


                                      I-1
<PAGE>

                                     PART I
                                     ------

ITEM 1. BUSINESS - Continued
        --------

     As a result of its investment in the Local  Partnerships,  the  Partnership
became the principal  limited  partner in 22 (five  remaining as of December 31,
2005)  Local  Partnerships.  As  a  limited  partner,  the  Partnership's  legal
liability  for  obligations  of  the  Local   Partnerships  is  limited  to  its
investment.  In most cases, an affiliate of the Managing  General Partner of the
Partnership  is also a  general  partner  of the Local  Partnerships.  The local
general  partners and  affiliates  of the Managing  General  Partner may operate
other apartment  complexes which may be in competition for eligible tenants with
the Local Partnerships' apartment complexes.

     Although each of the Local  Partnerships in which the Partnership  invested
owns an  apartment  complex that must  compete in the  marketplace  for tenants,
interest subsidies and/or rent supplements from governmental  agencies generally
make it possible to offer certain of the dwelling units to eligible tenants at a
cost significantly below the market rate for comparable  conventionally financed
dwelling units.  Based on available data, the Managing  General Partner believes
there to be no material  risk of market  competition  in the  operations  of the
apartment   complexes   described  below  which  would   adversely   impact  the
Partnership.

     A schedule of the apartment  complexes owned by Local Partnerships in which
the Partnership has an investment as of December 31, 2005, follows.

<TABLE>
<CAPTION>

                            SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS
                             IN WHICH CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
                                               HAS AN INVESTMENT(1)

                                                                                                   Units
                             Mortgage                                                         Authorized for     Expiration
 Name and Location          Payable at        Financed and/or Insured           Number of       Low Income           of
of Apartment Complex       12/31/05 (2)       and/or Subsidized Under          Rental Units     Subsidies       HAP Contract
--------------------       ------------    --------------------------------    ------------    -------------    -------------
<S>                        <C>             <C>                                 <C>             <C>              <C>
Four Winds West            $   761,536     GMAC HUD Insured through                  62             62           10/14/09 (3)
 Birmingham, AL                             Section 221 (d)(4) of the
                                            National Housing Act (NHA)/
                                            Section 8

Golden Acres                 1,073,979     California Housing Finance Agency         46             45           09/30/13
 Chowchilla, CA                             (CHFA)/Section 8

Orangewood Plaza             1,826,500     CHFA                                      40             33           07/01/14
 Orange Cove, CA

Troy Manor Apts.               800,109     Rural Housing & Community                 50             50           10/28/10 (3)
 Troy, AL                                   Development Services/Section 8

Westgate Tower Apts.         1,416,941     Michigan Sate Housing Develop-           148              0                 --
 Westland, MI                               ment Authority/236
                           -----------                                              ---            ---
Totals (5 Properties)      $ 5,879,065                                              346            190
                           ===========                                              ===            ===

</TABLE>
                                   (Continued)

                                       I-2
<PAGE>

                                     PART I
                                     ------

ITEM 1. BUSINESS - Continued
        --------

<TABLE>
<CAPTION>
                                    SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS
                                     IN WHICH CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
                                                 HAS AN INVESTMENT(1) - Continued


                                                                                          Average Effective Annual
                                          Units Occupied As                                    Rental Per Unit
                                      Percentage of Total Units                             for the Years Ended
                                          As of December 31,                                    December 31,
 Name and Location              ------------------------------------      ------------------------------------------------------
of Apartment Complex            2005    2004     2003   2002    2001        2005        2004        2003        2002       2001
--------------------            ----    ----     ----   ----    ----      -------     -------     -------     -------    -------
<S>                             <C>     <C>      <C>    <C>     <C>       <C>         <C>         <C>         <C>        <C>
Four Winds West                  92%     92%     100%    98%    100%      $ 5,402     $ 5,449     $ 5,505     $ 5,433    $ 5,152
 Birmingham, AL

Golden Acres                     98%     99%     100%    96%     99%        6,458       6,391       6,527       6,364      6,498
 Chowchilla, CA

Orangewood Plaza                100%    100%     100%   100%    100%        5,944       2,612       2,523       2,559      2,503
 Orange Cove, CA

Troy Manor Apts.                100%    100%     100%   100%    100%        5,285       5,074       4,997       4,881      4,758
 Troy, AL

Westgate Tower Apts.             95%     96%      91%    93%     96%        4,498       4,412       4,033       4,136      4,018
 Westland, MI                  ----    ----     ----   ----    ----       -------     -------     -------     -------    -------

Totals (5 Properties) (4)        97%     97%      98%    97%     99%      $ 5,517     $ 4,788     $ 4,717     $ 4,675    $ 4,586
                               ====    ====     ====   ====    ====       ========    =======     =======     =======    =======

</TABLE>

     (1)  All properties are  multifamily  housing  complexes.  No single tenant
          rents 10% or more of the rentable square footage.  Residential  leases
          are  typically  one year or less in length,  with  varying  expiration
          dates,  and  substantially  all  rentable  space  is  for  residential
          purposes.
     (2)  The amounts  provided are the balances of first mortgage loans payable
          by the Local Partnerships as of December 31, 2005.
     (3)  The Section 8 HAP contract  expiration date reflects an extension from
          the original expiration date, in accordance with Federal legislation.
     (4)  The  totals  for the  percentage  of units  occupied  and the  average
          effective annual rental per unit are based on a simple average.


     On November 17, 2004, the Partnership's interest in Arrowhead was sold. See
the notes to financial  statements  for  additional  information  concerning the
sale.

     On November 17, 2004, the Partnership's  interest in Moorings was sold. See
the notes to financial  statements  for  additional  information  concerning the
sale.

     On December 29, 2004,  the  Partnership's  interest in Country  Place I was
sold.  See  the  notes  to  financial  statements  for  additional   information
concerning the sale.

     On December 29, 2004,  the  Partnership's  interest in Country Place II was
sold.  See  the  notes  to  financial  statements  for  additional   information
concerning the sale.

     On June 6, 2005, the Partnership's  interest in Mercy Terrace was sold. See
the notes to financial  statements  for  additional  information  concerning the
sale.

     On November 22, 2005, the property related to Chevy Chase was sold. See the
notes to the financial  statements  for  additional  information  concerning the
sale.

     On December 12, 2005, the property related to Posada Vallarta was sold. See
the notes to the financial statements for additional  information concerning the
sale.

                                       I-3
<PAGE>
                                     PART I
                                     ------

ITEM 2. PROPERTIES
        ----------

     Through its ownership of limited partner  interests in Local  Partnerships,
Capital Realty Investors-II Limited Partnership  indirectly holds an interest in
the  real  estate  owned by the  Local  Partnerships.  See  Part I,  Item 1, for
information concerning these properties.


ITEM 3. LEGAL PROCEEDINGS
        -----------------

     There are no material pending legal proceedings to which the Partnership is
a party.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        ---------------------------------------------------

     On February 4, 2004, the  Partnership  filed a Definitive  Proxy  Statement
pursuant to Section 14(a) of the Securities  Exchange Act of 1934, and mailed it
to limited partners to solicit consents for approval of the following:

     (1)  the sale of all of the Partnership's assets and the dissolution of the
          Partnership pursuant to a Plan of Liquidation and Dissolution, and the
          amendment of the Partnership's Limited Partnership Agreement to permit
          the Managing General Partner, CRI, to be eligible to receive increased
          property  disposition  fees from the  Partnership on the same basis as
          such fees may currently be paid to Local General Partners, real estate
          brokers  or  other  third  party   intermediaries   employed  to  sell
          Partnership  properties,  to the extent that CRI markets and sells the
          Partnership's  properties  instead  of such  persons  (a  "Disposition
          Fee");

     (2)  the amendment of the Partnership's  Limited  Partnership  Agreement to
          permit CRI to be eligible to receive a partnership  liquidation fee in
          the amount of $500,000,  payable only if the Managing  General Partner
          is  successful in  liquidating  all of the  Partnership's  investments
          within 36 months from the date the liquidation was approved [March 22,
          2004], in recognition  that one or more of the properties in which the
          Partnership  holds an  interest  might not be  saleable to parties not
          affiliated  with the respective  Local  Partnership  due to the amount
          and/or  terms  of  their  current   indebtedness   (the   "Partnership
          Liquidation Fee"); and

     (3)  to authorize the Managing General Partner, in its sole discretion,  to
          elect to extend the period during which  Consents of Limited  Partners
          may be  solicited  and voted,  but not beyond sixty (60) days from the
          date that the Consent  Solicitation  Statement was sent to the Limited
          Partners.

     The matters for which consent was solicited are collectively referred to as
     the "Liquidation."


                                       I-4
<PAGE>
                                     PART I
                                     ------

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Continued
        ---------------------------------------------------

     The record date for voting was  December  31,  2003,  and the final  voting
deadline  was March 22,  2004.  A  tabulation  of votes  received  by the voting
deadline follows.

<TABLE>
<CAPTION>
                                     FOR                  AGAINST                ABSTAIN                 TOTAL
                             ------------------     ------------------     -------------------     -------------------
                             Units of               Units of               Units of                Units of
                             limited                limited                limited                 limited
                             partner                partner                partner                 partner
Description                  interest   Percent     interest   Percent     interest    Percent     Interest    Percent
-----------                  --------   -------     --------   -------     --------    -------     --------    -------
<S>                          <C>        <C>         <C>        <C>         <C>         <C>         <C>         <C>
Sale, dissolution and
  five percent
  Disposition Fee             28,699     57.6%       1,264       2.5%         268        0.5%       30,231      60.6%

$500,000 Partnership
  Liquidation Fee             25,841     51.8%       3,546       7.1%         844        1.7%       30,231      60.6%

Extension of
  solicitation period         27,975     56.1%       1,767       3.5%         489        1.0%       30,231      60.6%

</TABLE>


     There can be no assurance that the Liquidation  will be completed  pursuant
to the Plan of Liquidation and Dissolution.

                                       I-5
<PAGE>
                                     PART II
                                     -------

ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS
        -------------------------------------------------
          AND RELATED PARTNERSHIP MATTERS
          -------------------------------

     (a)  There is no  established  market for the purchase and sale of units of
          additional  limited  partner  interest  (Units)  in  the  Partnership,
          although various informal  secondary market services exist. Due to the
          limited markets, however, investors may be unable to sell or otherwise
          dispose of their Units.

                             Registered Tender Offer
                             -----------------------

          On January 23, 2004,  Equity  Resource Fund XXII (Equity)  initiated a
          registered  tender  offer to purchase  up to 5,000 of the  outstanding
          Units in the  Partnership at a price of $175 per Unit.  The offer,  as
          extended,  expired  March 23,  2004.  Aside from its  Limited  Partner
          interests  in  the  Partnership,   Equity  is  unaffiliated  with  the
          Partnership  or the Managing  General  Partner.  The price offered was
          determined solely at the discretion of Equity and does not necessarily
          represent the fair market value of each Unit.

          In response to the registered  tender offer,  on February 4, 2004, the
          Managing  General Partner filed Schedule  14D-9.  In that filing,  the
          Managing General Partner  recommended that Limited Partners reject the
          offer because it viewed the offer price as inadequate.

                           Unregistered Tender Offers
                           --------------------------

          On January 26,  2004,  Peachtree  Partners  (Peachtree)  initiated  an
          unregistered  tender  offer to  purchase up to 4.9%  (including  1,525
          Units or 3.1%,  already owned by affiliates) of the outstanding  Units
          in the  Partnership at a price of $175 per Unit less a transfer fee of
          $100 per investor.  The offer  expired March 23, 2004.  Aside from its
          Limited   Partner   interests   in  the   Partnership,   Peachtree  is
          unaffiliated with the Partnership or the Managing General Partner. The
          price offered was determined solely at the discretion of Peachtree and
          does not necessary represent the fair market value of each Unit.

          In its  Definitive  Proxy  Statement,  dated  February  4,  2004,  the
          Managing General Partner  recommended that Limited Partners reject the
          unregistered  tender  offer  because  it  viewed  the  offer  price as
          inadequate.

     (b)  As of March  29,  2006,  there  were  approximately  3,011  registered
          holders of Units in the Partnership.

     (c)  On January 31,  2005,  the  Partnership  made a cash  distribution  of
          $9,582,720  ($192 per Unit) to  Additional  Limited  Partners who were
          holders of record as of December 31, 2004. The distribution  consisted
          of proceeds received from the sales of the Partnership's  interests in
          Arrowhead, Moorings, Country Place I and Country Place II. On April 7,
          2005,   the   Partnership   made  a  tax   distribution   of  $603,970
          (approximately  $17.50  per  Unit) on  behalf  of  Additional  Limited
          Partners  who are not  residents of  Maryland.  On July 12, 2005,  the
          Partnership made a cash  distribution of $285,128 ($17.50 per Unit) to
          Additional  Limited  Partners  who were holders of record and Maryland
          residents  as of December  31, 2004.  The  distributions  consisted of
          proceeds  from the 2004 sales of Country Place I and Country Place II.
          On December 22, 2005,  the  partnership  made a cash  distribution  of
          $8,734,250  ($175 per unit) to  Additional  Limited  Partners who were
          holders of record as of December 1, 2005. The  distribution  consisted
          of proceeds from the 2005 sale of the Partnership's  interest in Mercy
          Terrace, and the 2005 sales of the properties owned by Chevy Chase and
          Posada Vallarta.

                                      II-1
<PAGE>
                                     PART II
                                     -------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        -------------------------------------------------
          CONDITION AND RESULTS OF OPERATIONS
          -----------------------------------

     Capital  Realty  Investors-II   Limited   Partnership's  (the  Partnership)
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  section  is  based  on  the  financial   statements,   and  contains
information  that  may  be  considered  forward  looking,  including  statements
regarding  the effect of  governmental  regulations.  Actual  results may differ
materially from those  described in the forward  looking  statements and will be
affected  by  a  variety  of  factors  including  national  and  local  economic
conditions,  the  general  level of  interest  rates,  governmental  regulations
affecting  the  Partnership  and  interpretations  of  those  regulations,   the
competitive  environment in which the Partnership operates, and the availability
of working capital.

                          Critical Accounting Policies
                          ----------------------------

     The  Partnership has disclosed its selection and application of significant
accounting  policies in Note 1 of the notes to financial  statements included in
this annual report on Form 10-KSB at December 31, 2005. The Partnership accounts
for its investments in partnerships (Local Partnerships) using the equity method
because the Partnership is a limited partner in the Local Partnerships. As such,
the  Partnership has no control over the selection and application of accounting
policies, or the use of estimates, by the Local Partnerships.  Environmental and
operational  trends,  events and uncertainties  that might affect the properties
owned by the Local  Partnerships would not necessarily have a significant impact
on the Partnership's  application of the equity method of accounting,  since the
equity  method  has been  suspended  for three  Local  Partnerships  which  have
cumulative  losses in excess of the amount of the  Partnership's  investments in
those Local Partnerships.

                          New Accounting Pronouncement
                          ----------------------------

     In December  2003,  the Financial  Accounting  Standards  Board issued FASB
Interpretation  No. 46  (revised  December  2003) (FIN 46-R),  Consolidation  of
Variable  Interest  Entities.  FIN 46-R clarifies the  application of Accounting
Research Bulletin 51, Consolidated  Financial  Statements,  for certain entities
that do not  have  sufficient  equity  at risk for the  entity  to  finance  its
activities without additional  subordinated financial support from other parties
or in which equity  investors do not have the  characteristics  of a controlling
financial interest  ("variable interest  entities").  Variable interest entities
within  the  scope of FIN 46-R  will be  required  to be  consolidated  by their
primary  beneficiary.  The primary  beneficiary of a variable interest entity is
determined  to be the party that  absorbs a majority  of the  entity's  expected
losses,  receives  a  majority  of its  expected  returns,  or both.  The  Local
Partnerships  in which the  Partnership  invested were formed by  individuals or
entities  unrelated  to the  Partnership  or  its  affiliates.  The  Partnership
purchased  limited partner  interests in existing,  operating  partnerships with
unaffiliated  managing  general  partners.  An affiliate of the Managing General
Partner also purchased a general  partner  interest in the majority of the Local
Partnerships.  Neither the Partnership nor the affiliate of the Managing General
Partner  received  development  fees at or near  the  time  of  investment.  The
Managing  General  Partner has  evaluated  the Local  Partnerships  in which the
Partnership  is invested and has  determined  that the equity holders as a group
held  sufficient  equity at risk in the  operating  Local  Partnerships  and the
equity investors have the  characteristics of controlling  financial interest in
accordance  with the  provisions of FIN 46-R. The Managing  General  Partner has
therefore determined that the investments in Local Partnerships are not variable
interest  entities  subject  to  consolidation  by  the  Partnership  under  the
provisions of FIN 46-R.

                                      II-2
<PAGE>
                                     PART II
                                     -------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        -------------------------------------------------
          CONDITION AND RESULTS OF OPERATIONS - Continued
          -----------------------------------

                                     General
                                     -------


     The  Partnership  has invested,  through Local  Partnerships,  primarily in
federal or state  government-assisted  apartment  complexes  intended to provide
housing  to  low  and  moderate  income  tenants.   In  conjunction   with  such
governmental  assistance,  which  includes  federal  and/or  state  financing at
below-market  interest  rates  and  rental  subsidies,   certain  of  the  Local
Partnerships agreed to regulatory  limitations on (i) cash  distributions,  (ii)
use  of the  properties,  and  (iii)  sale  or  refinancing.  These  limitations
typically were designed to remain in place for the life of the mortgage.

     The original  investment  objectives of the  Partnership  primarily were to
deliver  tax  benefits,  as  well  as  cash  proceeds  upon  disposition  of the
properties,   through  the  Partnership's   investment  in  Local  Partnerships.
Regulatory  restrictions on cash  distributions  from the properties limited the
original projections of annual cash distributions from property operations.

     The original investment objectives of the Partnership have been affected by
the Tax Reform Act of 1986,  which  virtually  eliminated many of the incentives
for the new  construction or the sale of existing low income housing  properties
by limiting the use of passive loss  deductions.  Therefore,  C.R.I.,  Inc. (the
Managing General Partner) continues to concentrate on transferring the source of
investment  yield from tax  benefits  to cash flow  wherever  possible,  thereby
potentially enhancing the ability of the Partnership to share in the appreciated
value of the properties.

     The Managing  General  Partner has  received  consent from the holders of a
majority of the units of limited  partner  interest for the  liquidation  of the
Partnership.  (See  Part  I,  Item  4.)  There  can  be no  assurance  that  the
Liquidation  will  be  completed   pursuant  to  the  Plan  of  Liquidation  and
Dissolution.  The following paragraphs discuss the operations of the Partnership
and the properties in which it is invested during this period of liquidation.

     The Managing  General Partner has sold, and will continue to sell,  certain
properties by utilizing  opportunities  presented by federal  affordable housing
legislation,  favorable financing terms and preservation incentives available to
tax credit and not-for-profit purchasers. Some of the rental properties owned by
the Local  Partnerships  are financed by state  housing  agencies.  The Managing
General  Partner has sold or  refinanced,  and will  continue  to sell,  certain
properties pursuant to programs developed by these agencies.  These programs may
include  opportunities  to sell a property to a qualifying  purchaser  who would
agree to maintain the property as low to moderate income  housing.  The Managing
General  Partner  continues to monitor  certain state housing agency programs to
ascertain  whether the properties would qualify within the parameters of a given
program and whether these programs would provide an appropriate economic benefit
to the limited partners of the Partnership.

     Some of the rental properties owned by the Local Partnerships are dependent
on the receipt of  project-based  Section 8 Rental Housing  Assistance  Payments
(HAP)  provided by the U.S.  Department of Housing and Urban  Development  (HUD)
pursuant  to Section 8 HAP  contracts.  Current  legislation  allows all expired
Section 8 HAP contracts  with rents at less than 100% of fair market rents to be
renewed for up to one year.  Expiring  Section 8 HAP  contracts  with rents that
exceed  100% of fair market  rents  could be renewed for up to one year,  but at
rents  reduced  to 100% of fair  market  rents  (Mark-to-Market).  All  expiring
Section 8 HAP  contracts  with rents  exceeding  comparable  market  rents,  and
properties  with mortgage  loans insured by the Federal  Housing  Administration
(FHA), became subject to the Mark-to-Market legislation.

                                      II-3
<PAGE>
                                     PART II
                                     -------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        -------------------------------------------------
          CONDITION AND RESULTS OF OPERATIONS - Continued
          -----------------------------------

     Mark-to-Market  implementation will reduce rental income at properties that
are currently subsidized at higher-than-market  rental rates, and will therefore
lower cash flow available to meet mortgage payments and operating  expenses.  In
some  instances,  a  property  will be able to meet its  existing  debt  service
payments  after the reduction in rental  income.  In this case, the property may
enter  the  Mark-to-Market  "Lite"  program  which  would  not  require  a  debt
restructuring.  In the remaining  instances,  the affected  property may undergo
debt restructuring  according to terms determined by an individual  property and
operations  evaluation.  This would  involve  reducing the first  mortgage  loan
balance to an amount  supportable  by the  property's  operations,  taking  into
account the property's operating expenses and reduced income. The balance of the
amount  written  down from the  first  mortgage  loan  would be  converted  to a
non-performing but accruing (soft) second mortgage loan. When the existing first
mortgage loan is bifurcated  into a first and second  mortgage  loan,  the newly
created second  mortgage loan will accrue  interest at a  below-market  rate. In
July 1998, the Internal  Revenue Service issued a ruling that concluded that the
below-market  rate of interest would not generate  additional  ordinary  income.
Each property subject to Mark-to-Market  will be affected in a different manner,
and it is difficult to predict the exact form of restructuring, or potential tax
liabilities to the Limited Partners, at this time. All properties, upon entering
the Mark- to-Market  program  (excluding  Mark-to-Market  Lite), are required to
enter into an agreement restricting the property's use to affordable housing for
30 years.

     Finally, under HUD's "Mark-up-to-Market"  program, properties with expiring
Section 8 HAP  contracts  that are located in high-rent  areas as defined by HUD
are eligible for rent increases  which would be necessary to bring Section 8 HAP
contract rents into line with market rate rents.  For properties  that enter the
program and have interest rate  subsidized FHA loans,  the rents are adjusted to
take into  account  the  benefits  the  property is already  receiving  from the
below-market  interest rate by means of a HUD-determined  adjustment factor. The
purpose of this program is to provide  incentives to owners of  properties  with
expiring  Section 8 HAP contracts not to convert these properties to market rate
housing. In return for receiving market rate rents under Mark-up-to- Market, the
property  owner must enter into a five year  conditional  Section 8 HAP contract
with HUD,  subject  to the  annual  availability  of  funding  by  Congress.  In
addition,  property  owners who enter into the  Mark-up-to-Market  program  will
receive  increased  cash flow as the limited  dividend  will be  increased in an
amount equal to the increase in gross rental revenues.

     There were no major changes in federal housing policy in 2005.

     The Managing  General  Partner  continues to seek  strategies  to deal with
affordable  housing  requirements.  While the Managing  General  Partner  cannot
predict the  outcome for any  particular  property  at this time,  the  Managing
General  Partner will  continue to work with the Local  Partnerships  to develop
strategies that maximize the benefits to investors.

                                      II-4
<PAGE>
                                     PART II
                                     -------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        -------------------------------------------------
          CONDITION AND RESULTS OF OPERATIONS - Continued
          -----------------------------------

                          Financial Condition/Liquidity
                          -----------------------------

     As of December 31, 2005, the Partnership had approximately  3,000 investors
who held a total of 49,910 units of additional  limited  partner  interest which
were  originally sold for the aggregate  amount of $49,910,000.  The Partnership
originally made  investments in 22 Local  Partnerships,  of which five remain at
December 31, 2005. The Partnership's liquidity, with unrestricted cash resources
of  $4,647,720  as of December  31,  2005,  along with  proceeds  receivable  of
$797,693 at December  31, 2005  relating to the sales of Chevy Chase Park,  Ltd.
(Chevy Chase) and Posada  Associates  Limited  Partnership  (Posada Vallarta) in
2005  and  Arrowhead  Apartments  Associates  (Arrowhead),  Moorings  Apartments
Associates  (Moorings),  Blackburn  Limited  Partnership  (Country  Place I) and
Second Blackburn Limited Partnership  (Country Place II) in 2004, is expected to
be  adequate to meet its current and  anticipated  operating  cash needs.  As of
March 29, 2006, there were no material commitments for capital expenditures.

     During  2005 and 2004,  the  Partnership  received  cash  distributions  of
$350,393 and $1,165,200, respectively, from the Local Partnerships.

     The Partnership's  remaining  obligation with respect to its investments in
Local  Partnerships,  in the form of a  nonrecourse  purchase  money  note which
matured  September 1, 2003, has a principal  balance of $1,400,000  plus accrued
interest of $2,878,262 as of December 31, 2005,  and is payable in full upon the
earliest  of: (i) sale or  refinancing  of the  respective  Local  Partnership's
rental  property;  (ii) payment in full of the  respective  Local  Partnership's
permanent loan; or (iii) maturity.

     The  purchase  money note,  which is  nonrecourse  to the  Partnership,  is
secured by the Partnership's  interest in the Westgate Local Partnership,  which
owns Westgate Tower Apartments (Westgate). The underlying property does not have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money note's  principal and accrued  interest.  In conjunction with the approved
Plan of Liquidation and  Dissolution of the  Partnership,  the Managing  General
Partner is currently negotiating the sale of the property owned by Westgate. The
noteholders  have  agreed to accept the  proceeds  of such sale as a  discounted
payoff  of the  purchase  money  note's  principal  and  accrued  interest.  The
discounted  payoff would result in cancellation  of  indebtedness  income to the
Limited  Partners,  which  would  be  taxed  at a  federal  tax rate of up to 35
percent. There can be no assurance that a sale of Westgate and discounted payoff
of the purchase money note will occur.

     The Managing  General Partner has received  consent from a majority of Unit
Holders  for the  liquidation  of the  Partnership.  (See Part I, Item 4.) It is
anticipated that the Partnership's obligation, discussed above, would be retired
in  conjunction  with  such  Liquidation.  There  can be no  assurance  that the
Liquidation  will  be  completed   pursuant  to  the  Plan  of  Liquidation  and
Dissolution.

     The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient  cash is available for operating  requirements.
For the year ended  December  31, 2005,  existing  cash  resources  and net cash
provided  by  investing  activities  were  adequate  to support net cash used in
operating  activities.  Cash and cash equivalents  decreased  $10,663,846 during
2005,  primarily  due to  distributions  paid  and net  cash  used in  operating
activities,  partially  offset by sales proceeds  received from the sales of the
Partnership's interests in Mercy Terrace Associates (Mercy Terrace), Chevy Chase
and Posada Vallarta in 2005,  additional sale proceeds received in 2005 relating
to the 2004 sales of the Partnership's interests in Arrowhead, Moorings, Country
Place  I  and  Country   Place  II,  and   distributions   received  from  Local
Partnerships.  For the years ended  December  31, 2005 and  December  31,  2004,
distributions of $350,393 and $1,165,200, respectively, were received from Local
Partnerships.  The  Partnership  expects to receive a similar or lower amount of
distributions  from these Local  Partnerships  in future years as more Section 8
HAP  contracts  approach  expiration,  should the related  properties  enter the
Mark-to-Market program, with the resulting reduction in rental revenues.

                                      II-5
<PAGE>
                                     PART II
                                     -------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        -------------------------------------------------
          CONDITION AND RESULTS OF OPERATIONS - Continued
          -----------------------------------

     On January 31, 2005, the Partnership made a cash distribution of $9,582,720
($192 per Unit) to Additional  Limited Partners who were holders of record as of
December 31, 2004.  The  distribution  consisted of proceeds  received  from the
sales of the Partnership's interests in Arrowhead, Moorings, Country Place I and
Country Place II. On April 7, 2005, the Partnership  made a tax  distribution of
$603,970  (approximately  $17.50  per  Unit) on  behalf  of  Additional  Limited
Partners who are not residents of Maryland.  On July 12, 2005,  the  Partnership
made a cash  distribution  of $285,128  ($17.50 per Unit) to Additional  Limited
Partners who were  holders of record and  Maryland  residents as of December 31,
2004.  The  distributions  consisted of proceeds  from the 2004 sales of Country
Place I and Country Place II. On December 22, 2005, the partnership  made a cash
distribution of $8,734,250  ($175 per unit) to Additional  Limited  Partners who
were  holders of record as of December 1, 2005.  The  distribution  consisted of
proceeds from the 2005 sale of the Partnership's  interest in Mercy Terrace, and
the 2005 sales of the properties owned by Chevy Chase and Posada Vallarta.

                              Results of Operations
                              ---------------------

2005 Versus 2004
----------------

     The  Partnership's  net  income  for the  year  ended  December  31,  2005,
decreased  from  2004,  primarily  due to  decreases  in  share of  income  from
partnerships  and gain on  disposition  of  investment  in  partnerships  and an
increase  in  professional  fee,  partially  offset by an  increase  in interest
revenue and decreases in general and administrative expenses and amortization of
deferred costs.  Share of income from  partnerships  decreased in 2005 primarily
due to the sales of the  Partnership's  interest in four Local  Partnerships  in
2004.  Interest revenue increased due to higher interest rates in 2005.  General
and administrative  expenses decreased primarily due to lower reimbursed payroll
costs and lower printing costs.  Professional fees increased due to higher audit
costs, partially offset by lower legal expenses relating to proxy costs incurred
in 2004, but not 2005.  Amortization  of deferred costs  decreased to zero since
all of the Partnership's investments in Local Partnerships had been reclassified
to investment in partnerships held for sale by the end of 2004.

     For financial reporting purposes, the Partnership,  as a limited partner in
the Local  Partnerships,  does not record losses from the Local  Partnerships in
excess of its  investment  to the  extent  that the  Partnership  has no further
obligation to advance funds or provide financing to the Local Partnerships. As a
result, the Partnership's  share of income from partnerships for the years ended
December 31, 2005 and 2004,  did not include  losses of $77,474 and  $1,328,409,
respectively.  Distributions  of $77,065 and  $242,754,  received from three and
seven Local Partnerships during 2005 and 2004,  respectively,  and for which the
Partnership's carrying value is zero (equity method suspended), were recorded as
increases in the  Partnership's  share of income from  partnerships  in the year
received.

                                    Inflation
                                    ---------

     Inflation  allows for increases in rental  rates,  usually  offsetting  any
higher operating and replacement costs.  Furthermore,  inflation  generally does
not impact the fixed rate long-term financing under which the Partnership's real
property investments were purchased.


                                      II-6
<PAGE>
                                     PART II
                                     -------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        -------------------------------------------------
          CONDITION AND RESULTS OF OPERATIONS - Continued
          -----------------------------------

     The combined rental revenues of the Partnership's remaining five properties
for the five years ended  December 31, 2005,  follow.  Combined  rental  revenue
amounts have been adjusted to reflect  property sales and interests  transferred
in 2005 and in prior years.

<TABLE>
<CAPTION>

                                                       For the years ended December 31,
                           --------------------------------------------------------------------------------------------------
                              2005                  2004                  2003                  2002                  2001
                           ----------            ----------            ----------            ----------            ----------
<S>                        <C>           <C>     <C>           <C>     <C>            <C>    <C>           <C>     <C>
Combined Rental
  Revenue                  $1,799,691            $1,642,958            $1,589,170            $1,588,171            $1,551,043

Annual Percentage
  Increase (decrease)                    9.5%                  3.4%                   0.1%                  2.4%

</TABLE>


ITEM 7. FINANCIAL STATEMENTS
        --------------------

     The information required by this item is contained in Part III.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
        ---------------------------------------------
          ON ACCOUNTING AND FINANCIAL DISCLOSURE
          --------------------------------------

     None.


ITEM 8A. CONTROLS AND PROCEDURES
         -----------------------

     In February 2006,  representatives  of the Managing  General Partner of the
Partnership  carried out an  evaluation of the  effectiveness  of the design and
operation of the Partnership's  disclosure controls and procedures,  pursuant to
Exchange Act Rules  13a-15 and 15d-15.  The  Managing  General  Partner does not
expect that the  Partnership's  disclosure  controls and procedures will prevent
all error and all fraud.  A control  system,  no matter how well  conceived  and
operated,  can provide only  reasonable  assurance  that the  objectives  of the
control system are met. Further, the design of a control system must reflect the
fact that there are resource  constraints,  and the benefits of controls must be
considered relative to their costs.  Because of the inherent  limitations in all
control systems,  no evaluation of controls can provide absolute  assurance that
all control issues have been detected.  These inherent  limitations  include the
realities that judgments in  decision-making  can be faulty, and that breakdowns
can occur  because  of simple  error or  mistake.  The  design of any  system of
controls also is based in part upon certain  assumptions about the likelihood of
future  events,  and there can be no  assurance  that any design will succeed in
achieving its stated goals under all  potential  future  conditions.  Over time,
controls may become inadequate  because of changes in conditions,  or the degree
of compliance  with the policies or procedures may  deteriorate.  Because of the
inherent  limitations in a cost-effective  control system,  misstatements due to
error or fraud  may  occur  and not be  detected.  Based  on the  February  2006
evaluation,  and subject to the foregoing,  the Principal  Executive Officer and
Principal Financial Officer concluded that the Partnership's disclosure controls
and  procedures are effective as of the end of the period covered by this report
to alert them in a timely  manner to any  material  information  relating to the
Partnership that must be included in the Partnership's periodic SEC filings, and
particularly  during  the  period in which  this  report is being  prepared.  In
addition,  there have been no significant changes in the Partnership's  internal
control over financial  reporting that occurred  during the  Partnership's  most
recent fiscal quarter that has materially  affected,  or is reasonably likely to
materially affect, the Partnership's internal control over financial reporting.

                                      II-7
<PAGE>
                                     PART II
                                     -------

ITEM 8B. OTHER INFORMATION
         -----------------

     Effective May 7, 2005,  the duties of the Principal  Financial  Officer and
Principal  Accounting  Officer  were assumed by the  President  of C.R.I.,  Inc.
("CRI"), the Managing General Partner of the Registrant,  H. William Willoughby.
Mr.  Willoughby has held the office of President since January 1990 and has also
served as a Director of CRI. He has no employment contract.

     There has not been any information  required to be disclosed in a report on
Form 8-K during the quarter ended December 31, 2005,  but not reported,  whether
or not otherwise required by this Form 10-KSB at December 31, 2005.

                                      II-8
<PAGE>
                                    PART III
                                    --------

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
        --------------------------------------------------

     (a)  and (b)

          The  Partnership has no directors,  executive  officers or significant
          employees of its own.

     (a) and (b)

          The names, ages and business experience of the directors and executive
          officers of C.R.I.,  Inc. (CRI),  the Managing  General Partner of the
          Partnership, follow.

William B. Dockser, 69, has been the Chairman of the Board and a Director of CRI
since 1974.  Prior to forming  CRI, he served as  President of Kaufman and Broad
Asset Management,  Inc., an affiliate of Kaufman and Broad,  Inc., which managed
publicly held limited  partnerships created to invest in low and moderate income
multifamily apartment properties.  Prior to joining Kaufman and Broad, he served
in various positions at HUD,  culminating in the post of Deputy FHA Commissioner
and Deputy Assistant Secretary for Housing Production and Mortgage Credit, where
he was responsible for all federally insured housing production programs. Before
coming to the Washington,  D.C., area, Mr. Dockser was a practicing  attorney in
Boston and served as a special  Assistant  Attorney General for the Commonwealth
of  Massachusetts.  He holds a Bachelor of Laws degree from Yale  University Law
School and a Bachelor of Arts degree, cum laude, from Harvard University.

H. William Willoughby,  59, has been President,  Secretary and a Director of CRI
since January 1990,  and was Senior  Executive Vice  President,  Secretary and a
Director of CRI from 1974 to 1989.  Effective May 7, 2005, he assumed the duties
of Principal  Financial Officer and Principal  Accounting  Officer of CRI. He is
principally  responsible for the financial  management of CRI and its associated
partnerships.  Prior to joining CRI in 1974,  he was Vice  President  of Shelter
Corporation of America and a number of its subsidiaries dealing principally with
real  estate   development   and  equity   financing.   Before  joining  Shelter
Corporation,  he was a senior tax accountant with Arthur Andersen & Co. He holds
a Juris Doctor degree, a Master of Business Administration degree and a Bachelor
of  Science  degree in  Business  Administration  from the  University  of South
Dakota.

     (c)  There is no family relationship between any of the foregoing directors
          and executive officers.

     (d)  Involvement in certain legal proceedings.

          None.

                                      III-1
<PAGE>

                                    PART III
                                    --------

ITEM 10. EXECUTIVE COMPENSATION
         ----------------------

     (a), (b), (c), (d), (e), (f), (g), and (h)

          The Partnership has no officers or directors.  However,  in accordance
          with  the  Partnership  Agreement,  and as  disclosed  in  the  public
          offering,  various  kinds of  compensation  and fees  were paid or are
          payable  to the  General  Partners  and their  affiliates.  Additional
          information  required  by  this  Item  10 is  incorporated  herein  by
          reference  to  Notes  3 and 4 of the  notes  to  financial  statements
          contained in Part III.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------

     (a)  Security ownership of certain beneficial owners.

          The following  table sets forth  certain  information  concerning  any
          person  (including any "group") who is known by the  Partnership to be
          the  beneficial  owner of more than five  percent  of the  issued  and
          outstanding units of additional  limited partner interest (Units),  at
          March 29, 2006.

                                                                 % of Total
             Name and Address         Amount and Nature         Units Issued
           of Beneficial Owner     of Beneficial Ownership     and Outstanding
          --------------------     -----------------------     ---------------

          Equity Resource,               10,421 Units                20.9%
            Investment, LLC
          44 Brattle Street
          Cambridge, MA 02138

     (b)  Security ownership of management.

          The following  table sets forth  certain  information  concerning  all
          Units  beneficially  owned, as of March 29, 2006, by each director and
          by all  directors  and  officers  as a group of the  Managing  General
          Partner of the Partnership.

                                                                   % of Total
              Name of                    Amount and Nature        Units Issued
          Beneficial Owner            of Beneficial Ownership    and Outstanding
          ----------------            -----------------------    ---------------

          William B. Dockser                    None                   0.0%
          H. William Willoughby                 None                   0.0%
          All Directors and Officers
            as a Group (2 persons)              None                   0.0%

     (c)  Changes in control.

          There exists no arrangement known to the Partnership, the operation of
          which may, at a subsequent date,  result in a change in control of the
          Partnership. There is a provision in the Limited Partnership Agreement
          which  allows,  under  certain  circumstances,  the  ability to change
          control.

                                      III-2
<PAGE>

                                    PART III
                                    --------

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

     (a) and (b)

          Transactions with management and others.

          The  Partnership  has no  directors  or  officers.  In  addition,  the
          Partnership  has  had no  transactions  with  individual  officers  or
          directors of the Managing  General  Partner of the  Partnership  other
          than any indirect interest such officers and directors may have in the
          amounts  paid to the Managing  General  Partner or its  affiliates  by
          virtue of their stock ownership in CRI. Item 10 of this report,  which
          contains  a  discussion  of the fees and  other  compensation  paid or
          accrued  by  the   Partnership  to  the  General   Partners  or  their
          affiliates,  is incorporated herein by reference.  Note 3 of the notes
          to  financial   statements  contained  in  Part  III,  which  contains
          disclosure of related party transactions,  is also incorporated herein
          by reference.

     (c)  Certain business relationships.

          The  Partnership's  response to Item 12(a) is  incorporated  herein by
          reference.  In addition,  the Partnership has no business relationship
          with  entities of which the  officers  and  directors  of the Managing
          General Partner of the  Partnership are officers,  directors or equity
          owners other than as set forth in the  Partnership's  response to Item
          12(a).

     (d)  Transactions with promoters.

          Not applicable.


ITEM 13. EXHIBITS
         ---------

          Index of  Exhibits  (Listed  according  to the number  assigned in the
          table in Item 601 of Regulation S-B.)

          Exhibit  No.  2 - Plan of  acquisition,  reorganization,  arrangement,
          liquidation, or succession.

          a.   Definitive  Proxy   Statement.   (Incorporated  by  reference  to
               Registrant's Definitive Proxy Statement dated February 4, 2004.)

          Exhibit No. 3 - Articles of Incorporation and bylaws.

          a.   Certificate of Limited Partnership of Capital Realty Investors-II
               Limited Partnership.  (Incorporated by reference to Exhibit No. 4
               to Registrant's  Registration Statement on Form S-11, as amended,
               dated April 28, 1983.)

          Exhibit No. 4 - Instruments  defining the rights of security  holders,
          including indentures.

          a.   Limited  Partnership  Agreement  of Capital  Realty  Investors-II
               Limited Partnership.  (Incorporated by reference to Exhibit No. 4
               to Registrant's  Registration Statement on Form S-11, as amended,
               dated April 28, 1983.)


                                      III-3
<PAGE>
                                    PART III
                                    --------

ITEM 13. EXHIBITS - Continued
         --------

          Exhibit No. 10 - Material Contracts.

          a.   Management  Services  Agreement  between CRI and  Capital  Realty
               Investors- II Limited Partnership.  (Incorporated by reference to
               Exhibit No. 10(b) to Registrant's  Registration Statement on Form
               S-11, as amended, dated April 28, 1983.)

               Exhibit No.  31.1 - Certification of Principal Executive Officer,
                                   pursuant to 18 U.S.C. Section 1350, as
                                   adopted pursuant to Section 302 of
                                   the Sarbanes-Oxley Act of 2002.

               Exhibit No. 31.2 -  Certification of Principal Financial Officer,
                                   pursuant to 18 U.S.C. Section 1350, as
                                   adopted pursuant to Section 302 of
                                   the Sarbanes-Oxley Act of 2002.

               Exhibit No. 32 -    Certification of Principal Executive Officer
                                   and Principal Financial Officer, pursuant to
                                   18 U.S.C. Section 1350, as adopted pursuant
                                   to Section 906 of the Sarbanes-Oxley Act of
                                   2002.

               Exhibit No. 99 - Additional Exhibits.

               a.   Prospectus   of  the   Partnership,   dated  May  6,   1983.
                    (Incorporated  by  reference  to  Registrant's  Registration
                    Statement on Form S-11, as amended, dated April 28, 1983.)

               b.   Reports  of other  auditors  relating  to the  audits of the
                    financial  statements of Local Partnerships in which Capital
                    Realty Investors-II Limited Partnership has invested.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
         --------------------------------------

     During the years ended December 31, 2005 and 2004, the Partnership retained
Grant Thornton LLP to provide services as follows.


                                        Year Ended December 31,
                                      --------------------------
                                        2005              2004
                                      --------          --------

     Audit fees                       $ 89,950          $ 81,000
     Audit-related fees                     --               528
     Tax fees (1)                       22,500            20,500
     All other fees                         --                --
                                      --------          --------
         Total                        $112,450          $102,028
                                      ========          ========

     (1)  Preparation of Partnership federal and state tax returns.


                                      III-4
<PAGE>
                                    PART III
                                    --------

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES - Continued
         --------------------------------------

     The Partnership has no directors or officers. The Board of Directors of the
Managing General Partner of the Partnership, serving as the audit committee, has
approved in advance  100% of the fees paid to, and  services  provided by, Grant
Thornton LLP. Prior to approving  Grant  Thornton LLP's  providing any non-audit
services,  the  Board  of  Directors  of the  Managing  General  Partner  of the
Partnership   would  assess  whether  the  provision  of  those  services  would
compromise  Grant  Thornton  LLP's  independence.  Grant  Thornton  LLP provided
partnership tax return preparation  services during the years ended December 31,
2005 and  2004,  which  services  it was  determined  did not  compromise  Grant
Thornton LLP's independence.




                                      III-5
<PAGE>

                                   SIGNATURES
                                   ----------

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                              CAPITAL REALTY INVESTORS-II
                                  LIMITED PARTNERSHIP
                              --------------------------------------------------
                              (Registrant)

                              by:  C.R.I., Inc.
                                   ---------------------------------------------
                                   Managing General Partner



March 29, 2006                     by:  /s/ William B. Dockser
--------------                          ----------------------------------------
DATE                                    William B. Dockser,
                                        Director, Chairman of the Board,
                                          and Treasurer
                                          (Principal Executive Officer)


     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.


March 29, 2006                     by:  /s/ H. William Willoughby
--------------                          ----------------------------------------
DATE                                    H. William Willoughby,
                                        Director, President, Secretary,
                                          Principal Financial Officer and
                                          Principal Account Officer

                                      III-6
<PAGE>

Report of Independent Registered Public Accounting Firm


Partners
Capital Realty Investors-II Limited Partnership.

We have audited the accompanying  balance sheets of Capital Realty  Investors-II
Limited  Partnership (a Maryland limited  partnership)  (the  Partnership) as of
December 31, 2005 and 2004, and the related statements of operations, changes in
partners'  (deficit)  capital,  and cash flows for the years then  ended.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits. We did not audit the financial statements of the Local Partnerships.
The  Partnership's  share of income  from these Local  Partnerships  constitutes
$444,860 and $988,833 of income in 2005 and 2004, respectively,  included in the
Partnership's 2005 and 2004 net income. The financial  statements of these Local
Partnerships  were audited by other  auditors,  whose reports  thereon have been
furnished to us, and our opinion expressed herein,  insofar as it relates to the
amount included for these Local  Partnerships,  is based solely upon the reports
of the other auditors.

We conducted our audits in accordance  with the Standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial statements are free from material misstatement. The Partnership is not
required  to have,  nor were we  engaged  to  perform  an audit of its  internal
control over financial reporting.  Our audit included  consideration of internal
control over financial  reporting as a basis for designing audit procedures that
are appropriate in the  circumstances,  but not for the purpose of expressing an
opinion  on  the  effectiveness  of  the  Partnership's  internal  control  over
financial  reporting.  Accordingly,  we express no such  opinion.  An audit also
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  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
reports of other auditors, provide a reasonable basis for our opinion.

In our  opinion,  based upon our audits and the reports of other  auditors,  the
financial statements referred to above present fairly, in all material respects,
the financial position of Capital Realty Investors-II  Limited Partnership as of
December  31,  2005 and 2004,  and the  results  of its  operations,  changes in
partners'  (deficit)  capital  and its cash flows for the years then  ended,  in
conformity with accounting principles generally accepted in the United States of
America.

As described in Note 1 to the financial statements, the Partnership has received
limited  partner  approval  of  the  Partnership's  plan  to  sell  all  of  the
Partnership's  assets  and  dissolve  the  Partnership  pursuant  to a  Plan  of
Liquidation and Dissolution. There can be no assurance that the liquidation will
be completed pursuant to the Plan of Liquidation and Dissolution.


                                                    Grant Thornton LLP

Vienna, Virginia
March 27, 2006





                                      III-7
<PAGE>

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                                 BALANCE SHEETS


                                     ASSETS


<TABLE>
<CAPTION>
                                                                    December 31,
                                                            ----------------------------
                                                                2005            2004
                                                            ------------    ------------
<S>                                                         <C>             <C>
Investment in partnerships held for sale ................   $    559,613    $  1,491,380
Cash and cash equivalents ...............................      4,647,720      15,311,566
Sales proceeds receivable ...............................        797,693         832,879
Other assets ............................................          1,891             572
                                                            ------------    ------------
   Total assets .........................................   $  6,006,917    $ 17,636,397
                                                            ============    ============



                        LIABILITIES AND PARTNERS' CAPITAL



Due on investments in partnerships ......................   $  1,400,000    $  1,400,000
Accrued interest payable ................................      2,878,262       2,752,262
Accounts payable and accrued expenses ...................        140,423         138,537
Disposition fees payable to related party ...............           --         1,210,408
                                                            ------------    ------------
   Total liabilities ....................................      4,418,685       5,501,207
                                                            ------------    ------------
Commitments and contingencies

Partners' capital:

  Capital paid in:
    General Partners ....................................          2,000           2,000
    Limited Partners ....................................     50,015,000      50,015,000
                                                            ------------    ------------
                                                              50,017,000      50,017,000

  Less:
    Accumulated distributions to partners ...............    (34,500,041)    (15,293,973)
    Offering costs ......................................     (5,278,980)     (5,278,980)
    Accumulated losses ..................................     (8,649,747)    (17,308,857)
                                                            ------------    ------------
      Total partners' capital ...........................      1,588,232      12,135,190
                                                            ------------    ------------
      Total liabilities and partners' capital ...........   $  6,006,917    $ 17,636,397
                                                            ============    ============
</TABLE>

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

                                      III-8
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                  For the years ended
                                                                                      December 31,
                                                                             -----------------------------
                                                                                 2005            2004
                                                                             ------------    -------------
<S>                                                                          <C>             <C>
Share of income from partnerships ........................................   $    581,286    $  1,220,530
                                                                             ------------    -------------
Other revenue and expenses:

  Revenue:
    Interest and other ...................................................        163,452          34,607
                                                                             ------------    -------------
                                                                                  163,452          34,607
                                                                             ------------    -------------
  Expenses:
    General and administrative ...........................................        267,121         357,199
    Management fee .......................................................        249,996         249,996
    Professional fees ....................................................        178,131         117,280
    Interest .............................................................        126,000         126,000
    Amortization of deferred costs .......................................           --            11,891
                                                                             ------------    -------------
                                                                                  821,248         862,366
                                                                             ------------    -------------
      Total other revenue and expenses ...................................       (657,796)       (827,759)
                                                                             ------------    -------------

(Loss) income before gain on disposition of investment in partnerships ...        (76,510)        392,771

Gain on disposition of investment in partnerships, net of disposition fees      8,735,620      11,432,061
                                                                             ------------    -------------

Net income ...............................................................   $  8,659,110    $ 11,824,832
                                                                             ============    ============

Net income allocated to General Partners (1.51%) .........................   $    130,752    $    178,555
                                                                             ============    ============

Net income allocated to Initial and Special Limited Partners (1.49%) .....   $    129,021    $    176,190
                                                                             ============    ============

Net income allocated to Additional Limited Partners (97%) ................   $  8,399,337    $ 11,470,087
                                                                             ============    ============

Net income per unit of Additional Limited Partner Interest,
  based on 49,910 units outstanding ......................................   $     168.29    $     229.82
                                                                             ============    ============

</TABLE>



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

                                      III-9
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

              STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL

<TABLE>
<CAPTION>

                                                                              Initial and
                                                                                Special         Additional
                                                              General           Limited          Limited
                                                              Partners          Partners         Partners              Total
                                                             ----------       -----------      ------------        ------------
<S>                                                          <C>              <C>              <C>                 <C>
Partners' (deficit) capital, January 1, 2004                 $(619,344)       $ (556,436)      $  1,486,138        $    310,358

  Net income                                                   178,555           176,190         11,470,087          11,824,832
                                                             ----------       -----------      ------------        ------------

Partners' (deficit) capital, December 31, 2004                (440,789)         (380,246)        12,956,225          12,135,190

  Net income                                                   130,752           129,021          8,399,337           8,659,110

  Distribution of $384.50 per unit
    of Additional Limited Partner Interest                          --                --        (18,602,098)        (18,602,098)

  Tax distribution on behalf of
    Additional Limited Partners                                     --                --           (603,970)           (603,970)
                                                             ----------       -----------      ------------        ------------
Partners' (deficit) capital, December 31, 2005               $(310,037)        $(251,225)      $  2,149,494        $  1,588,232
                                                             =========        ===========      ============        ============

</TABLE>


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

                                     III-10

<PAGE>

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>



                                                                                      For the years ended
                                                                                          December 31,
                                                                                 ----------------------------
                                                                                     2005            2004
                                                                                 ------------    ------------
<S>                                                                              <C>             <C>
Cash flows from operating activities:
  Net income .................................................................   $  8,659,110    $ 11,824,832

  Adjustments to reconcile net income to net cash
    used in operating activities:
    Share of income from partnerships ........................................       (581,286)     (1,220,530)
    Amortization of deferred costs ...........................................           --            11,891
    Gain on disposition of investment in partnerships, net of disposition fees     (8,605,048)    (11,432,061)
    Additional gain on disposition of investment in partnerships .............       (130,572)           --
    Loss on sale proceeds receivable .........................................         14,087            --

    Changes in assets and liabilities:
      Increase in other assets ...............................................         (1,319)           (532)
      Increase in accrued interest payable ...................................        126,000         126,000
      Increase (decrease) in accounts payable and accrued expenses ...........          1,886          (7,150)
      Increase in accrued interest receivable on advances ....................         (1,500)           (333)
                                                                                 ------------    ------------

        Net cash used in operating activities ................................       (518,642)       (697,883)
                                                                                 ------------    ------------

Cash flows from investing activities:
  Receipt of distributions from partnerships .................................        350,393       1,165,200
  Proceeds from disposition of investment in partnerships ....................     11,775,267      12,784,121
  Collection of sale proceeds receivable .....................................        456,879            --
  Payment of disposition fees to related party ...............................     (3,521,675)       (895,241)
  Additional proceeds from disposition of investment in partnership ..........           --               591
  Advance to Local Partnership ...............................................           --           (25,000)
                                                                                 ------------    ------------

        Net cash provided by investing activities ............................      9,060,864      13,029,671
                                                                                 ------------    ------------

Cash flows from financing activities:
  Distribution to Additional Limited Partners ................................    (18,602,098)           --
  Tax distribution on behalf of Additional Limited Partners ..................       (603,970)           --
                                                                                 ------------    ------------

        Net cash used in financing activities ................................    (19,206,068)           --
                                                                                 ------------    ------------

Net (decrease) increase in cash and cash equivalents .........................    (10,663,846)     12,331,788

Cash and cash equivalents, beginning of year .................................     15,311,566       2,979,778
                                                                                 ------------    ------------

Cash and cash equivalents, end of year .......................................   $  4,647,720    $ 15,311,566
                                                                                 ============    ============


Supplemental disclosure of cash flow information:
  Non-cash investing activity:
    Proceeds from disposition of investment
    in partnership, accrued in 2004, collected in 2005 or
    to be collected in 2006 ..................................................                   $    832,879
                                                                                                 ============

    Disposition fees due to related party,
    accrued in 2004, paid in 2005 ............................................                   $  1,210,408
                                                                                                 ============
    Proceeds from disposition of investment
    in partnership, accrued in 2005, collected in 2006 or
    to be collected in 2006 ..................................................   $    323,208
                                                                                 ============

</TABLE>


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

                                     III-11
<PAGE>

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a.   Organization
          ------------

          Capital Realty Investors-II  Limited Partnership (the Partnership) was
     formed under the Maryland Revised Uniform Limited  Partnership Act on March
     23,  1983,  and shall  continue  until  December 31,  2037,  unless  sooner
     dissolved in accordance with the terms of the Partnership  Agreement.  (See
     Note 1.k., below, for a discussion on the Partnership's Plan of Liquidation
     and  Dissolution.)  The  Partnership was formed to invest in real estate by
     acquiring and holding  limited  partner  interests in limited  partnerships
     (Local   Partnerships)   which   own   and   operate   federal   or   state
     government-assisted  apartment properties which provide housing principally
     to the elderly or to individuals and families of low or moderate income, or
     conventionally financed apartment properties, located throughout the United
     States.

          The General Partners of the Partnership are C.R.I.,  Inc. (CRI), which
     is the Managing  General  Partner,  and current and former  shareholders of
     CRI. The Initial  Limited  Partner is  Rockville  Pike  Associates  Limited
     Partnership-II,  a  limited  partnership  which  includes  certain  current
     officers and former employees of CRI or its affiliates. The Special Limited
     Partner  had  been  Two  Broadway  Associates  II,  a  limited  partnership
     comprised of an affiliate and employees of Merrill Lynch, Pierce,  Fenner &
     Smith, Incorporated.  Effective January 1, 2002, Two Broadway Associates II
     transferred its interest to MLH Merger Corporation and three individuals.

          The  Partnership  sold 50,000  units at $1,000 per unit of  additional
     limited partner interest through a public offering. The offering period was
     terminated  on June  20,  1983.  As of  December  31,  2005,  90  units  of
     additional limited partner interest had been abandoned.

     b.   Method of accounting
          --------------------

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

     c.   Investments in and advances to partnerships
          -------------------------------------------

          The investments in and advances to Local Partnerships (see Note 2) are
     accounted for by the equity  method  because the  Partnership  is a limited
     partner in the Local  Partnerships.  Under this method, the carrying amount
     of the investments in and advances to Local  Partnerships is (i) reduced by
     distributions  received and (ii) increased or reduced by the  Partnership's
     share of earnings or losses, respectively, of the Local Partnerships. As of
     December 31, 2005 and 2004, the Partnership's share of cumulative losses of
     three  and  six  of the  Local  Partnerships  exceeded  the  amount  of the
     Partnership's  investments in and advances to those Local  Partnerships  by
     $974,305  and  $19,686,964,  respectively.  Since  the  Partnership  has no
     further  obligation  to advance  funds or provide  financing to these Local
     Partnerships, the excess losses have not been reflected in the accompanying
     financial statements.  Distributions of $77,065 and $242,754, received from
     three and seven Local Partnerships during 2005 and 2004, respectively,  and
     for  which  the  Partnership's   carrying  value  is  zero  (equity  method
     suspended), were recorded as increases in the Partnership's share of income
     from partnerships in the year received.


                                     III-12
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

          Costs incurred in connection  with acquiring  these  investments  have
     been  capitalized and are being amortized  using the  straight-line  method
     over the  estimated  useful  lives  of the  properties  owned by the  Local
     Partnerships.

     d.   Investment in partnerships held for sale or transfer
          ----------------------------------------------------

          Due to the  possible  sale  of the  Westgate  Tower  Limited  Dividend
     Housing Associates  (Westgate) property, as further discussed in Note 2.a.,
     the Partnership's  investment in Westgate was reclassified to investment in
     partnerships  held for sale in the accompanying  balance sheets at December
     31, 2005 and 2004.

          In accordance with its approved Plan of Liquidation  and  Dissolution,
     the Partnership is actively marketing its remaining four investments:

          1)   Four Winds West Company, Ltd. (Four Winds West)
          2)   Chowchilla Elderly Associates, Ltd. (Golden Acres)
          3)   Orangewood Plaza Limited Partnership (Orangewood Plaza)
          4)   Troy Apartments Ltd. (Troy Manor)

     Therefore,   as  further  discussed  in  Note  2.e.,  the  Partnership  has
     reclassified  these four investments to investment in partnerships held for
     sale in the accompanying balance sheets at December 31, 2005 and 2004.

          Assets held for sale are not recorded in excess of their estimated net
     realizable value.

     e.   Cash and cash equivalents
          -------------------------

          Cash and cash equivalents  consist of all money market funds, time and
     demand  deposits,  and repurchase  agreements  with original  maturities of
     three months or less.

     f.   Offering costs
          --------------

          The Partnership incurred certain costs in connection with the offering
     and selling of units of additional  limited  partner  interest.  Such costs
     were recorded as a reduction of partners' capital when incurred.

     g.   Income taxes
          ------------

          For federal and state income tax purposes, each partner reports on his
     or her  personal  income tax  return his or her share of the  Partnership's
     income or loss as determined  for tax purposes.  Accordingly,  no provision
     has been made for income taxes in these financial statements.

                                     III-13
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     h.   Use of estimates
          ----------------

          In  preparing  financial  statements  in  conformity  with  accounting
     principles  generally  accepted  in  the  United  States  of  America,  the
     Partnership is required to make estimates and  assumptions  that affect the
     reported amounts of assets and liabilities and the disclosure of contingent
     assets and  liabilities  at the date of the  financial  statements,  and of
     revenues and expenses  during the reporting  periods.  Actual results could
     differ from those estimates.

     i.   Fair value of financial instruments
          -----------------------------------

          The financial  statements  include estimated fair value information as
     of December  31, 2005,  as required by  Statement  of Financial  Accounting
     Standards No. 107 (SFAS No. 107),  Disclosure About Fair Value of Financial
     Instruments.   Such  information,   which  pertains  to  the  Partnership's
     financial instruments (primarily cash and cash equivalents and the purchase
     money  note),  is based on the  requirements  set forth in SFAS No. 107 and
     does  not  purport  to  represent  the  aggregate  net  fair  value  of the
     Partnership.

          The  balance  sheet  carrying  amounts  for cash and cash  equivalents
     approximate estimated fair values of such assets.

          The  Partnership has determined that it is not practicable to estimate
     the fair value of the purchase money note due to: (i) the lack of an active
     market for this type of financial  instrument,  (ii) the variable nature of
     purchase money note interest  payments as a result of fluctuating cash flow
     distributions  received from the related Local  Partnership,  and (iii) the
     excessive costs  associated  with an independent  appraisal of the purchase
     money note.

     j.   New accounting pronouncement
          ----------------------------

          In December 2003, the Financial Accounting Standards Board issued FASB
     Interpretation No. 46 (revised December 2003) (FIN 46-R),  Consolidation of
     Variable  Interest   Entities.   FIN  46-R  clarifies  the  application  of
     Accounting Research Bulletin 51,  Consolidated  Financial  Statements,  for
     certain entities that do not have sufficient  equity at risk for the entity
     to finance its activities without additional subordinated financial support
     from  other  parties  or  in  which  equity   investors  do  not  have  the
     characteristics  of a controlling  financial interest  ("variable  interest
     entities"). Variable interest entities within the scope of FIN 46-R will be
     required  to be  consolidated  by their  primary  beneficiary.  The primary
     beneficiary  of a variable  interest  entity is  determined to be the party
     that  absorbs a  majority  of the  entity's  expected  losses,  receives  a
     majority of its expected returns,  or both. The Local Partnerships in which
     the Partnership  invested were formed by individuals or entities  unrelated
     to the Partnership or its affiliates.  The  Partnership  purchased  limited
     partner  interests in existing,  operating  partnerships  with unaffiliated
     managing  general  partners.  An affiliate of the Managing  General Partner
     also  purchased a general  partner  interest  in the  majority of the Local
     Partnerships.  Neither the  Partnership  nor the  affiliate of the Managing
     General  Partner  received   development  fees  at  or  near  the  time  of
     investment.   The  Managing   General   Partner  has  evaluated  the  Local
     Partnerships  in which the  Partnership is invested and has determined that
     the  equity  holders  as a  group  held  sufficient  equity  at risk in the
     operating   Local   Partnerships   and  the  equity   investors   have  the
     characteristics  of controlling  financial  interest in accordance with the
     provisions  of  FIN  46-R.  The  Managing  General  Partner  has  therefore
     determined  that the  investments  in Local  Partnerships  are not variable
     interest  entities subject to  consolidation  by the Partnership  under the
     provisions of FIN 46-R.


                                     III-14
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     k.   Definitive Proxy Statement
          --------------------------

          On  February  4,  2004,  the  Partnership  filed  a  Definitive  Proxy
     Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934,
     and mailed it to limited  partners to solicit  consents for approval of the
     following:

     (1)  The sale of all of the Partnership's assets and the dissolution of the
          Partnership pursuant to a Plan of Liquidation and Dissolution, and the
          amendment of the Partnership's Limited Partnership Agreement to permit
          the Managing General Partner, CRI, to be eligible to receive increased
          property  disposition  fees from the  Partnership on the same basis as
          such fees may currently be paid to Local General Partners, real estate
          brokers  or  other  third  party   intermediaries   employed  to  sell
          Partnership  properties,  to the extent that CRI markets and sells the
          Partnership's  properties  instead  of such  persons  (a  "Disposition
          Fee");

     (2)  The amendment of the Partnership's  Limited  Partnership  Agreement to
          permit CRI to be eligible to receive a partnership  liquidation fee in
          the amount of $500,000,  payable only if the Managing  General Partner
          is  successful in  liquidating  all of the  Partnership's  investments
          within 36 months from the date the liquidation was approved [March 22,
          2004], in recognition  that one or more of the properties in which the
          Partnership  holds an  interest  might not be  saleable to parties not
          affiliated  with the respective  Local  Partnership  due to the amount
          and/or  terms  of  their  current   indebtedness   (the   "Partnership
          Liquidation Fee"); and

     (3)  To authorize the Managing General Partner, in its sole discretion,  to
          elect to extend the period during which  Consents of Limited  Partners
          may be  solicited  and voted,  but not beyond sixty (60) days from the
          date that the Consent  Solicitation  Statement was sent to the Limited
          Partners.

     The matters for which consent was solicited are collectively referred to as
     the "Liquidation."

          The record date for voting was December 31, 2003, and the final voting
     deadline was March 22, 2004. A tabulation  of votes  received by the voting
     deadline follows.

<TABLE>
<CAPTION>

                                          FOR                  AGAINST                ABSTAIN                 TOTAL
                                  -------------------    ------------------     -------------------     -------------------
                                  Units of               Units of               Units of                Units of
                                  limited                limited                limited                 limited
                                  partner                partner                partner                 partner
     Description                  interest   Percent     interest   Percent     interest    Percent     Interest    Percent
     -----------                  --------   --------    --------   -------     --------    -------     --------    -------
     <S>                          <C>        <C>         <C>        <C>         <C>         <C>         <C>         <C>
     Sale, dissolution and
       five percent
       Disposition Fee             28,699     57.6%       1,264       2.5%         268        0.5%       30,231      60.6%

     $500,000 Partnership
       Liquidation Fee             25,841     51.8%       3,546       7.1%         844        1.7%       30,231      60.6%

     Extension of
       solicitation period         27,975     56.1%       1,767       3.5%         489        1.0%       30,231      60.6%

</TABLE>

          There  can be no  assurance  that the  Liquidation  will be  completed
     pursuant to the Plan of Liquidation and Dissolution.

                                     III-15
<PAGE>

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

     a.   Due on investments in partnerships and accrued interest payable
          ---------------------------------------------------------------

          As of December 31, 2005 and 2004, the Partnership held limited partner
     interests in five and eight Local  Partnerships,  respectively,  which were
     organized to develop, construct, own, maintain and operate rental apartment
     properties.  The remaining amounts due on the  Partnership's  investment in
     one Local Partnership follow.


                                                      December 31,
                                             -----------------------------
                                                2005                2004
                                             ----------          ----------

          Purchase money note due in 2003    $1,400,000          $1,400,000

          Accrued interest payable            2,878,262           2,752,262
                                             ----------          ----------
                Total                        $4,278,262          $4,152,262
                                             ==========          ==========

          The remaining  purchase  money note,  which matured  September 1, 2003
     (see below),  has a stated  interest rate of 9%. The purchase money note is
     nonrecourse,  but its terms  provide for payment in full upon the  earliest
     of: (i) sale or refinancing  of the Local  Partnership's  rental  property;
     (ii) payment in full of the Local  Partnership's  permanent  loan; or (iii)
     maturity.

          The purchase money note, which is nonrecourse to the  Partnership,  is
     secured by the  Partnership's  interest in the Westgate Local  Partnership,
     which owns Westgate Tower Apartments  (Westgate).  The underlying  property
     does not have sufficient  appreciation and equity to enable the Partnership
     to pay the  purchase  money  note's  principal  and  accrued  interest.  In
     conjunction  with the approved Plan of Liquidation  and  Dissolution of the
     Partnership, the Managing General Partner is currently negotiating the sale
     of the property owned by Westgate.  The  noteholders  have agreed to accept
     the proceeds  from such sale as a discounted  payoff of the purchase  money
     note's principal and accrued  interest.  The discounted payoff would result
     in cancellation of indebtedness income to the Limited Partners, which would
     be  taxed  at a  federal  tax  rate of up to 35  percent.  There  can be no
     assurance  that a sale of Westgate  and  discounted  payoff of the purchase
     money note will occur.

          Interest expense on the Partnership's Westgate purchase money note for
     the years ended  December 31, 2005 and 2004,  was  $126,000  and  $126,000,
     respectively.  The accrued  interest  payable on the purchase money note of
     $2,878,262 and  $2,752,262 as of December 31, 2005 and 2004,  respectively,
     is in default.

                                    Westgate
                                    --------

          The  Partnership  defaulted on its one remaining  purchase money note,
     related to Westgate  Limited Dividend Housing  Association  (Westgate),  on
     September 1, 2003,  when the note (as  extended)  matured and was not paid.
     The default amount  included  principal and accrued  interest of $1,400,000
     and $2,584,492,  respectively.  As of March 29, 2006, principal and accrued
     interest of $1,400,000 and $2,908,640, respectively, were due.


                                     III-16
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

          Due to the  possible  sale of the property  related to  Westgate,  the
     Partnership's   basis  in  the  Local  Partnership,   along  with  the  net
     unamortized  amount of acquisition fees and property purchase costs,  which
     totaled  $423,113  and  $486,187 as of December  31, 2005 and  December 31,
     2004,  respectively,  has been  reclassified  to investment in partnerships
     held for sale in the accompanying balance sheets.

     b.   Interests  in  profits,  losses and cash  distributions  made by Local
          ----------------------------------------------------------------------
            Partnerships
            ------------

          The Partnership has a 97.99% to 98.99% interest in profits, losses and
     cash  distributions  (as  restricted  by various  federal and state housing
     agencies)   (collectively,   the  Agencies)  of  each  Local   Partnership.
     Affiliates of the Managing  General  Partner of the  Partnership are also a
     general  partner  of each Local  Partnership.  As  stipulated  by the Local
     Partnerships'  partnership agreements,  the Local Partnerships are required
     to make annual cash  distributions  from surplus cash flow, if any.  During
     2005 and 2004,  the  Partnership  received cash  distributions  from rental
     operations  of  the  Local   Partnerships   of  $350,393  and   $1,165,200,
     respectively.   As  of  December  31,  2005  and  2004,   three  and  five,
     respectively,  of the Local  Partnerships  had  aggregate  surplus cash, as
     defined by their respective  regulatory Agencies, in the amounts of $45,337
     and  $680,641,  respectively,  which may be available for  distribution  in
     accordance with their respective regulatory Agencies' regulations.

          The cash  distributions  to the Partnership from the operations of the
     Local  Partnerships  may be  limited  by the  Agencies'  regulations.  Such
     regulations limit annual cash  distributions to a percentage of the owner's
     equity investment in a rental property.  Funds in excess of those which may
     be distributed to owners are generally  required to be placed in a residual
     receipts  account  held by the  governing  state or federal  agency for the
     benefit of the  property.  In addition,  local  general  partners  have the
     authority to withhold funds if needed for property  repairs,  improvements,
     or other property needs.

          Upon sale or refinancing  of a property owned by a Local  Partnership,
     or upon the  liquidation  of a Local  Partnership,  the proceeds  from such
     sale,  refinancing or liquidation  shall be distributed in accordance  with
     the  respective   provisions  of  each  Local   Partnership's   partnership
     agreement.  In  accordance  with such  provisions,  the  Partnership  would
     receive  from such  proceeds  its  respective  percentage  interest  of any
     remaining  proceeds,  after payment of (i) all debts and liabilities of the
     Local Partnership and certain other items,  (ii) the Partnership's  capital
     contributions   plus  certain   specified   amounts  as  outlined  in  each
     partnership  agreement,  and (iii) certain special distributions to general
     partners and related entities of the Local Partnership.

     c.   Advance to Local Partnership
          -----------------------------

                                 Four Winds West
                                 ---------------

          In October 2004, the Partnership  advanced  $25,000 to Four Winds West
     Company,  Ltd., (Four Winds West) to assist with current cash requirements.
     For financial reporting purposes,  this advance has been reduced to zero by
     the  Partnership  as a  result  of  current  losses  at the  related  Local
     Partnership level.

                                     III-17
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     d.   Completed sales
          ---------------

                                    Arrowhead
                                    ---------

          On  November  17,  2004,  the  Partnership's   interest  in  Arrowhead
     Apartments Associates (Arrowhead) was sold. Gross cash proceeds received in
     2004 by the Partnership totaled  $1,156,495.  The sale resulted in net gain
     on  disposition  of  investment in  partnerships  of $698,210 for financial
     statement purposes and in total gain of $6,082,297 for federal tax purposes
     in 2004.  In accordance  with the terms of the  Partnership  Agreement,  in
     December 2004 the Managing  General  Partner was paid a disposition  fee of
     $432,824  related to the sale.  The fee was netted against the related gain
     on disposition  of investment in  partnerships.  In 2005,  the  Partnership
     accrued $85,470 for additional  cash proceeds  expected to be received upon
     the release of escrow  reserves,  of which  $42,649 was  received in August
     2005 and $42,821 was received in January 2006.

                                   Chevy Chase
                                   -----------

          On November 22, 2005,  the  property  owned by Chevy Chase Park,  Ltd.
     (Chevy  Chase)  was  sold.  Gross  cash  proceeds  received  in 2005 by the
     Partnership  totaled   $6,814,125.   The  sale  resulted  in  net  gain  on
     disposition  of investment  in  partnerships  of  $5,238,173  for financial
     statement purposes and in total gain of $7,115,800 for federal tax purposes
     in 2005.  The  Partnership  accrued  $23,208,  which is included in gain on
     disposition of investment in  partnerships  in 2005,  for  additional  sale
     proceeds  receivable  related  to the  sale  to be  received  in  2006.  In
     accordance  with the terms of the Partnership  Agreement,  in November 2005
     the Managing General Partner was paid a disposition fee of $435,000 related
     to the sale.  The fee was netted against the related gain on disposition of
     investment in partnerships.

          The  Partnership's  basis in the  Local  Partnership,  along  with net
     unamortized  acquisition  fees and property  purchase costs,  which totaled
     $992,626 as of December 31, 2004 had been  reclassified  to  investments in
     partnerships held for sale in the accompanying balance sheet at that date.

                                 Country Place I
                                 ---------------

          On December 29, 2004, the Partnership's  interest in Blackburn Limited
     Partnership (Country Place I) was sold. Gross cash proceeds received by the
     Partnership in 2004 totaled $6,821,935.  In addition, at December 31, 2004,
     the Partnership  accrued  $504,604 for cash proceeds to be received in 2005
     upon the release of escrow reserves,  which were posted as security for the
     purchaser  to claim any  monetary  damages as a result of any breach of the
     representations  and  warranties  made by the seller  within one year after
     closing.  The sale  resulted in net gain on  disposition  of  investment in
     partnerships  of $6,565,858 for financial  statement  purposes and in total
     gain of  $11,060,421  for federal tax purposes in 2004. In accordance  with
     the  terms of the  Partnership  agreement,  in  January  2005 the  Managing
     General Partner was paid a disposition fee of $743,366 related to the sale.
     The fee was accrued and netted  against the related gain on  disposition of
     investment  in   partnerships   at  December  31,  2004.  In  August  2005,
     approximately  fifty  percent of the escrowed  reserves was  received.  The
     remaining  amount of $253,358 was received in January  2006. In April 2005,
     an  additional  $9,000 that was  received  from the Local  Partnership  was
     recorded as gain on disposition of investments in  partnerships at December
     31, 2005.

                                     III-18
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                                Country Place II
                                ----------------

          On December 29, 2004, the  Partnership's  interest in Second Blackburn
     Limited  Partnership  (Country  Place II) was  sold.  Gross  cash  proceeds
     received  in  2004  by the  Partnership  in  2004  totaled  $4,438,748.  In
     addition,  at December 31, 2004, the Partnership  accrued $328,275 for cash
     proceeds to be received in 2005 upon the release of escrow reserves,  which
     were posted as security for the purchaser to claim any monetary  damages as
     a result of any breach of representations and warranties made by the seller
     within one year after closing. The sale resulted in net gain on disposition
     of  investment  in  partnerships  of  $4,288,096  for  financial  statement
     purposes and in total gain of $6,846,454  for federal tax purposes in 2004.
     In accordance with the terms of the Partnership agreement,  in January 2005
     the Managing General Partner was paid a disposition fee of $467,042 related
     to the sale.  The fee was  accrued and netted  against the related  gain on
     disposition of investment in  partnerships  at December 31, 2004. In August
     2005,  approximately  fifty percent of the escrowed  reserves was received.
     The  remaining  amount of $164,728 was received in January  2006.  In April
     2005, an additional $9,000 that was received from the Local Partnership was
     recorded as gain on disposition of investments in  partnerships at December
     31, 2005.

                                  Mercy Terrace
                                  -------------

          On  June  6,  2005,  the  Partnership's   interest  in  Mercy  Terrace
     Associates (Mercy Terrace) was sold. Gross proceeds received in 2005 by the
     Partnership  totaled   $1,012,685.   The  sale  resulted  in  net  gain  on
     disposition  of  investment  in  partnerships  of  $255,043  for  financial
     statement purposes and in total gain of $7,320,022 for federal tax purposes
     in 2005. In accordance with the terms of the Partnership Agreement, in June
     2005 the Managing  General  Partner was paid a disposition  fee of $757,642
     related  to the  sale.  The fee was  netted  against  the  related  gain on
     disposition of investment in partnerships.

                                    Moorings
                                    --------

          On  November  17,  2004,  the   Partnership's   interest  in  Moorings
     Apartments  Associates (Moorings) was sold. Gross cash proceeds received in
     2004 by the Partnership totaled $366,943.  The sale resulted in net loss on
     disposition  of  investment  in  partnerships  of  $120,694  for  financial
     statement purposes and in total gain of $6,216,291 for federal tax purposes
     in 2004.  In accordance  with the terms of the  Partnership  Agreement,  in
     December 2004 the Managing  General  Partner was paid a disposition  fee of
     $462,417  related to the sale. In 2005 the Partnership  accrued $27,101 for
     additional cash proceeds expected to be received upon the release of escrow
     reserves,  of which  $13,523  was  received  in August 2005 and $13,578 was
     received in January 2006.

                                 Posada Vallarta
                                 ---------------

          On December 12, 2005, the property owned by Posada Associates  Limited
     Partnership  (Posada  Vallarta) was sold.  Gross cash proceeds  received in
     2005 by the Partnership totaled  $3,930,457.  The sale resulted in net gain
     on  disposition of investment in  partnerships  of $3,111,832 for financial
     statement  purposes  and in  total  gain of  $13,057,662  for  federal  tax
     purposes  in  2005.  In  accordance  with  the  terms  of  the  Partnership
     Agreement,  in  December  2005  the  Managing  General  Partner  was paid a
     disposition  fee of  $1,118,625  related  to the sale.  The fee was  netted
     against the related gain on disposition of investment in partnerships.  The
     Partnership  accrued $300,000,  which is included in gain on disposition of
     investment in partnerships in 2005, for additional sale proceeds receivable
     to be received in 2006.

                                     III-19
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     e.   Assets held for sale
          --------------------

                                    Westgate
                                    --------

          The  Partnership's  basis in Westgate,  along with the net unamortized
     amount of  acquisition  fees and property  purchase  costs are disclosed in
     Note 2.a., above.

                Four Winds West, Golden Acres, Orangewood Plaza,
                ------------------------------------------------
                                 and Troy Manor
                                 --------------

          In accordance with its approved Plan of Liquidation  and  Dissolution,
     the Partnership is actively marketing its remaining four investments in the
     following Local Partnerships:

          1)  Four Winds West Company, Ltd. (Four Winds West)
          2)  Chowchilla Elderly Associates, Ltd. (Golden Acres)
          3)  Orangewood Plaza Limited Partnership (Orangewood Plaza)
          4)  Troy Apartments Ltd. (Troy Manor)

          The  Partnership's  net  unamortized  amount of  acquisition  fees and
     property  purchase costs relating to Four Winds West, which totaled $12,567
     at both December 31, 2005 and December 31, 2004, has been  reclassified  to
     investment  in  partnerships  held  for  sale in the  accompanying  balance
     sheets. The Partnership's basis in Golden Acres, which totaled $123,933 and
     $0 as of December 31, 2005 and December  31, 2004,  respectively,  has been
     reclassified   to  investment  in   partnerships   held  for  sale  in  the
     accompanying  balance sheets. There is no assurance that the sale of any or
     all of these four investments will occur.

     f.   Summarized financial information
          --------------------------------

          Combined balance sheets and combined  statements of operations for the
     five Local Partnerships in which the Partnership is invested as of December
     31, 2005,  follow.  The  information is presented  separately for two Local
     Partnerships  which have investment  basis (equity  method),  and for three
     Local  Partnerships  for which  the  Partnership's  carrying  value is zero
     (equity method suspended).

                                     III-20
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION>
                                              COMBINED BALANCE SHEETS
                                                 December 31, 2005

                                                               Equity
                                                               Method            Suspended            Total
                                                            -----------         -----------       ------------
          <S>                                               <C>                 <C>               <C>
          Number of Local Partnerships                           2                  3                   5
                                                                 =                  =                   =
          Rental property, at cost, net of
            accumulated depreciation of
            $3,974,173, $3,459,741, and
            $7,433,914, respectively                        $ 2,054,975         $ 1,773,538        $ 3,828,513
          Land                                                  217,533             204,665            422,198
          Other assets                                          813,551             387,558          1,201,109
                                                            -----------         -----------       ------------
              Total assets                                  $ 3,086,059         $ 2,365,761        $ 5,451,820
                                                            ===========         ===========        ===========

          Mortgage notes payable                            $ 2,490,920         $ 3,388,145        $ 5,879,065
          Other liabilities                                     407,608             217,543            625,151
          Due to general partners                                 1,385                  --              1,385
                                                            -----------         -----------       ------------
              Total liabilities                               2,899,913           3,605,688          6,505,601

          Partners' capital (deficit)                           186,146          (1,239,927)        (1,053,781)
                                                            -----------         -----------       ------------
              Total liabilities
                and partners' capital (deficit)             $ 3,086,059         $ 2,365,761        $ 5,451,820
                                                            ===========         ===========        ===========
</TABLE>


<TABLE>
<CAPTION>

                                         COMBINED STATEMENTS OF OPERATIONS
                                       For the year ended December 31, 2005

                                                                                   Equity
                                                               Method            Suspended            Total
                                                            -----------         -----------       ------------
          <S>                                               <C>                 <C>               <C>
          Number of Local Partnerships                           2                  3                  5
                                                                 =                  =                  =
          Revenue:
            Rental                                          $   962,807         $   836,884        $ 1,799,691
            Other                                               425,890               7,278            433,168
                                                            -----------         -----------       ------------
              Total revenue                                   1,388,697             844,162          2,232,859
                                                            -----------         -----------       ------------
          Expenses:
            Operating                                           889,602             633,197          1,522,799
            Interest                                             20,313             126,726            147,039
            Depreciation and  amortization                      207,661             162,604            370,265
                                                            -----------         -----------       ------------
              Total expenses                                  1,117,576             922,527          2,040,103
                                                            -----------         -----------       ------------
          Net income (loss)                                 $   271,121         $   (78,365)       $   192,756
                                                            ===========         ===========        ===========

          Cash distributions                                $   273,328 (1)     $    77,065 (2)    $   350,393
                                                            ===========         ===========        ===========

          Cash distributions recorded as reduction
            of investments in partnerships                  $        --         $        --        $        --
                                                            ===========         ===========        ===========

          Cash distributions recorded as income             $        --         $    77,065 (2)    $    77,065

          Partnership's share of
            Local Partnership net income                        505,721 (1)              --            505,721

          Miscellaneous                                              --              (1,500)            (1,500)
                                                            -----------         -----------       ------------
          Share of income from partnerships                 $   505,721         $    75,565        $   581,286
                                                            ===========         ===========        ===========
</TABLE>
          (1)  Includes Chevy Chase sold in November 2005.
          (2)  Includes Mercy Terrace sold in June 2005.

                                     III-21
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

          Combined balance sheets and combined  statements of operations for the
     five  Local  Partnerships  in which  the  Partnership  was  invested  as of
     December 31, 2004, follow. The information is presented  separately for two
     Local Partnerships which have investment basis (equity method), and for six
     Local  Partnerships  for which  the  Partnership's  carrying  value is zero
     (equity method suspended).

<TABLE>
<CAPTION>
                                              COMBINED BALANCE SHEETS
                                                 December 31, 2004

                                                              Equity
                                                              Method           Suspended            Total
                                                            -----------       -----------       ------------
          <S>                                               <C>               <C>               <C>

          Number of Local Partnerships                           2                6                   8
                                                                 =                =                   =
          Rental property, at cost, net of
            accumulated depreciation of
            $7,365,876, $23,336,263, and
            $30,702,139, respectively                       $3,898,447        $ 16,049,002       $ 19,947,449
          Land                                                 740,251           1,177,183          1,917,434
          Other assets                                       1,191,834           4,629,560          5,821,394
                                                            ----------        ------------       ------------
              Total assets                                  $5,830,532        $ 21,855,745       $ 27,686,277
                                                            ==========        ============       ============

          Mortgage notes payable                            $4,202,198        $ 26,586,095       $ 30,788,293
          Other liabilities                                    368,247          11,954,623         12,322,870
          Due to general partners                                   --           4,442,399          4,442,399
                                                            ----------        ------------       ------------
              Total liabilities                              4,570,445          42,983,117         47,553,562

          Partners' deficit                                  1,260,087         (21,127,372)       (19,867,285)
                                                            ----------        ------------       ------------
              Total liabilities
                and partners' deficit                       $5,830,532        $ 21,855,745       $ 27,686,277
                                                            ==========        ============       ============

</TABLE>

                                     III-22
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION>

                                         COMBINED STATEMENTS OF OPERATIONS
                                       For the year ended December 31, 2004

                                                               Equity
                                                               Method          Suspended            Total
                                                            -----------       -----------        -----------
          <S>                                               <C>               <C>                <C>
          Number of Local Partnerships                           2                10 (1)              12
                                                                 =                ==                  ==
          Revenue:
            Rental                                          $ 2,214,325       $13,390,545        $15,604,870
            Other                                                49,800           451,875            501,675
                                                            -----------       -----------        -----------
              Total revenue                                   2,264,125        13,842,420         16,106,545
                                                            -----------       -----------        -----------
          Expenses:
            Operating                                         1,609,767         8,388,053          9,997,820
            Interest                                            (41,783)        3,899,907          3,858,124
            Depreciation and  amortization                      356,929         2,235,698          2,592,627
                                                            -----------       -----------        -----------
              Total expenses                                  1,924,913        14,523,658         16,448,571
                                                            -----------       -----------        -----------
          Net income (loss)                                 $   339,212       $  (681,238)       $  (342,026)
                                                            ===========       ===========        ===========

          Cash distributions                                $   240,559       $   924,641        $ 1,165,200
                                                            ===========       ===========        ===========

          Cash distributions recorded as reduction
            of investments in partnerships                  $   240,559       $        --        $   240,559
                                                            ===========       ===========        ===========

          Cash distributions recorded as income             $        --       $   906,005        $   906,005
                                                            ===========       ===========        ===========

          Partnership's share of
            Local Partnership net income                        339,858                --            339,858
                                                            ===========       ===========        ===========

          Miscellaneous                                                           (25,333)           (25,333)
                                                            ===========       ===========        ===========

          Share of income from partnerships                 $   339,858       $   880,672        $ 1,220,530
                                                            ===========       ===========        ===========
</TABLE>

          (1)  Includes information for Arrowhead and Moorings,  which were sold
               in November  2004,  and for Country Place I and Country Place II,
               which were sold in December 2004.

          All of the cash distributions recorded as income are included in share
     of  income  from  partnerships  on the  statements  of  operations  for the
     respective  years,  and are  recorded as cash  receipts  on the  respective
     balance sheets.  Cash distributions  recorded as a reduction of the related
     investment are recorded as cash receipts on the respective  balance sheets,
     and  are  recorded  as a  reduction  of  investments  in  and  advances  to
     partnerships, also on the respective balance sheets.

     g.   Reconciliation of the Local Partnerships' financial statement net loss
          ----------------------------------------------------------------------
            to taxable income
            -----------------

          For federal income tax purposes,  the Local  Partnerships  report on a
     basis whereby: (i) certain revenue and the related assets are recorded when
     received rather than when earned; (ii) certain costs are expensed when paid
     or  incurred  rather  than  capitalized  and  amortized  over the period of
     benefit;  and (iii) a shorter life is used to compute  depreciation  on the
     property as permitted by Internal Revenue Service (IRS) Regulations.  These
     returns are subject to examination and,  therefore,  possible adjustment by
     the IRS.

                                     III-23
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

          A reconciliation of the Local  Partnerships'  financial  statement net
     income (loss) reflected above to taxable income follows.

                                                       For the years ended
                                                           December 31,
                                                    --------------------------
                                                       2005           2004
                                                    ----------     -----------

          Financial statement net income (loss)     $  192,756     $ (342,026)

          Differences between financial statement
            and tax depreciation, amortization,
            and miscellaneous differences              300,448      2,174,895
                                                    ----------     ----------
          Taxable income                            $  493,204     $1,832,869
                                                      ==========     ==========


3.   RELATED PARTY TRANSACTIONS

     In accordance with the terms of the Partnership Agreement,  the Partnership
paid the  Managing  General  Partner a fee for services in  connection  with the
review, selection,  evaluation,  negotiation and acquisition of the interests in
the Local  Partnerships.  The fee amounted to $1,000,000,  which is equal to two
percent  of  the  Additional  Limited  Partners'  capital  contributions  to the
Partnership.  The acquisition fee was capitalized and was being amortized over a
30-year period using the straight-line method. At December 31, 2004, each of the
Partnership's  investments in Local  Partnerships was reclassified to investment
in partnerships held for sale and amortization of this fee ceased.

     In accordance with the terms of the Partnership Agreement,  the Partnership
is obligated to reimburse the Managing  General  Partner for its direct expenses
in connection  with managing the  Partnership.  For the years ended December 31,
2005 and 2004, the Partnership paid $229,855 and $280,971,  respectively, to the
Managing General partner as direct  reimbursement of expenses incurred on behalf
of the  Partnership.  Such  expenses are included in general and  administrative
expenses in the accompanying statements of operations.

     In accordance with the terms of the Partnership Agreement,  the Partnership
is obligated to pay the Managing General Partner an annual incentive  management
fee  (Management  Fee) after all other expenses of the Partnership are paid. The
amount of the  Management  Fee shall not exceed  0.25% of  invested  assets,  as
defined  in  the   Partnership   Agreement,   and  shall  be  payable  from  the
Partnership's  cash available for  distribution,  as defined in the  Partnership
Agreement, as of the end of each calendar year, as follows:

     (i)  First,  on  a  monthly  basis  as  an  operating  expense  before  any
          distributions  to limited partners in the amount computed as described
          in the Partnership  Agreement,  provided that such annual amount shall
          not be greater than $250,000; and

     (ii) Second,  after  distributions to the limited partners in the amount of
          one percent of the gross proceeds of the offering, the balance of such
          0.25% of invested assets.

For each of the years ended December 31, 2005 and 2004, the Partnership paid the
Managing General Partner a Management Fee of $249,996.

     Pursuant to approval of the Partnership's Consent Solicitation Statement on
March 22, 2004, the Managing General Partner is eligible to receive a fee of not
more than five percent of the sale price of an investment in a Local Partnership


                                     III-24
<PAGE>

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


3.   RELATED PARTY TRANSACTIONS - Continued
     --------------------------

or the  property  it owns,  payable  upon the sale of an  investment  in a Local
Partnership or the property it owns, to the extent the Managing  General Partner
markets and sells a property  instead of a real estate broker or unrelated Local
General  Partner.  The  disposition  fee on sales of  partnership  interests (as
opposed to sales of real  property) is  calculated  as up to five percent of the
imputed sale price, which is the amount the Local  Partnership's  property would
have to be sold for to produce the same  distribution  to the  investors  as the
sale of the partnership  interests.  In accordance with the terms of the amended
Partnership  Agreement,  in December 2004 the Managing  General Partner was paid
disposition  fees of $895,241,  related to the sales of Arrowhead  and Moorings,
which were netted  against the related  gain on  disposition  of  investment  in
partnerships at December 31, 2004. In January 2005, the Managing General Partner
was paid disposition  fees in the amount of $1,210,408,  related to the sales of
Country Place I and II in December  2004,  which were accrued and netted against
the related gain on  disposition of investment in  partnerships  at December 31,
2004. In June 2005, the Managing  General  Partner was paid a disposition fee of
$757,642,  related to the sale of Mercy  Terrace,  which was netted  against the
related gain on disposition of investment in partnerships. On November 28, 2005,
the Managing General Partner was paid a disposition fee of $435,000,  related to
the sale of the  property  owned by Chevy  Chase,  which was netted  against the
related gain on disposition of investment in  partnerships  in 2005. On December
14, 2005, the Managing General Partner was paid a disposition fee of $1,118,625,
related to the sale of the property owned by Posada  Vallarta,  which was netted
against the related gain on disposition of investment in  partnerships  in 2005.
The Liquidation  Plan provides for a Partnership  Liquidation Fee in addition to
the one discussed above, as explained in Note 4 below.


4.   PARTNERSHIP PROFITS AND LOSSES, AND DISTRIBUTIONS

     All profits and losses prior to the first date on which Additional  Limited
Partners were admitted were allocated  98.49% to the Initial Limited Partner and
1.51% to the General Partners. Upon admission of the Special Limited Partner and
the Additional Limited Partners, the interest of the Initial Limited Partner was
reduced to 0.49%. Pursuant to the Consent Solicitation  Statement approved March
22, 2004, the net proceeds  resulting from the liquidation of the Partnership or
the Partnership's  share of the net proceeds from any sale or refinancing of the
Local  Partnerships or their rental properties which are not reinvested shall be
distributed and applied as follows:

     (i)  to the payment of debts and liabilities of the Partnership  (including
          all expenses of the  Partnership  incident to the sale or refinancing)
          other than loans or other debts and  liabilities of the Partnership to
          any partner or any affiliate; such debts and liabilities,  in the case
          of a  non-liquidating  distribution,  to be only those  which are then
          required  to be paid  or,  in the  judgment  of the  Managing  General
          Partner, required to be provided for;
     (ii) to the  establishment  of any  reserves  which  the  Managing  General
          Partner  deems  reasonably  necessary  for  contingent,  unmatured  or
          unforeseen  liabilities or obligations of the  Partnership  (including
          the Partnership Liquidation Fee);
    (iii) to each  partner in an amount  equal to the  positive  balance in his
          capital  account as of the date of the sale or  refinancing,  adjusted
          for operations and  distributions to that date, but before  allocation
          of any profits for tax purposes realized from such sale or refinancing
          and  allocated   pursuant  to  Section   4.03(d)  of  the  Partnership
          Agreement;
     (iv) to the Limited  Partners (A) an aggregate amount of proceeds from sale
          or  refinancing  and all prior  sales or  refinancings  equal to their
          capital contributions,  without reduction for prior cash distributions
          other than prior distributions of sale and refinancing proceeds,  plus


                                     III-25
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


4.   PARTNERSHIP PROFITS AND LOSSES, AND DISTRIBUTIONS - Continued

          (B) an  additional  amount  equal to a cumulative  non-compounded  six
          percent return on each limited partner's capital contribution, reduced
          by (1) an amount equal to 50% of the losses for tax purposes allocated
          to such limited partner and (2) distributions of net cash flow to each
          limited  partner,  such  return,  losses for tax purposes and net cash
          flow  distributions  commencing on the first day of the month in which
          the capital contribution was made;
     (v)  to the repayment of any unrepaid loans theretofore made by any partner
          or any affiliate to the Partnership for Partnership obligations and to
          the  payment  of any  unpaid  amounts  owing to the  General  Partners
          pursuant to the Partnership Agreement;
     (vi) to the General Partners in the amount of their capital contributions;
    (vii) thereafter,  for  services  to the  Partnership,  to General  Partner
          Martin C. Schwartzberg (or his designee),  whether or not he is then a
          General Partner,  0.333% of the gross proceeds resulting from (A) such
          sale (if the proceeds are from a sale rather than a  refinancing)  and
          (B) any prior  sales from  which such fee was not paid to the  General
          Partner or his designee; and
    viii) the  remainder,  12% to the General  Partners (or their  assignees),
          three  percent to the Special  Limited  Partner and 85% to the Initial
          and Additional Limited Partners (or their assignees).

     Notwithstanding  and in addition to the  foregoing,  the  Managing  General
Partner  may  receive a fee (not to exceed  five  percent of the sales  price of
Apartment  Complexes) from the Partnership or the Local Partnership for services
provided by the Managing  General  Partner  and/or its  Affiliates in connection
with the marketing  and sale of Apartment  Complexes.  Such fee (a  "Disposition
Fee"),  which  shall be payable  pursuant to Section  4.02(a)(i),  shall only be
payable  upon the sale of an  Apartment  Complex or a sale of the  Partnership's
interest in the Local  Partnership (a sale in either of such formats is referred
to in this Section  4.02(a) as a "sale of an Apartment  Complex"),  and shall be
subject to the following restrictions: (i) all property disposition fees and any
other commissions  payable upon the sale of any Apartment Complex,  inclusive of
any fees to the General Partners and/or their  Affiliates,  shall not exceed the
lesser of the competitive rate paid to third parties for similar services or six
percent  of the  sales  price  of the  applicable  Apartment  Complex,  (ii) the
Managing General Partner and/or its Affiliates must provide substantial services
in connection  with the marketing and sales effort (as determined by the General
Partners),  and (iii) Dockser and Willoughby shall waive their respective shares
of the one percent fee payable under Section 4.02(a)(vii) above.

     Notwithstanding  any other  provision of this Agreement to the contrary and
in  addition  to the  foregoing,  the  Managing  General  Partner  may receive a
Partnership  Liquidation  Fee of  $500,000  from the  Partnership  for  services
provided by the Managing  General  Partner  and/or its  Affiliates in connection
with the sales of the Apartment Complexes or the Partnership's  interests in the
Local  Partnerships.  Such fee,  which  shall be  payable  pursuant  to  Section
4.02(a)(i),  shall  only be  payable if all of the  Apartment  Complexes  or the
Partnership's  interest in the applicable  Local  Partnership  have been sold or
otherwise disposed of or the Partnership's  interest therein has been terminated
on or before March 22, 2007.

     Fees payable to certain general  partners (or their  designees) under (vii)
above,  together  with  all  other  property  disposition  fees  and  any  other
commissions or fees payable upon the sale of apartment properties,  shall not in
the aggregate  exceed the lesser of the  competitive  rate or six percent of the
sale price of the apartment properties.

     There can be no assurance that the Liquidation  will be completed  pursuant
to the Plan of Liquidation and Dissolution.

                                     III-26
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


4.   PARTNERSHIP PROFITS AND LOSSES, AND DISTRIBUTIONS - Continued

     In accordance with the terms of the Partnership Agreement as amended by the
approved  Plan of  Liquidation  and  Dissolution,  in December 2004 the Managing
General Partner was paid disposition  fees of $895,241,  related to the sales of
Arrowhead  and  Moorings,   which  were  netted  against  the  related  gain  on
disposition of investment in partnerships at December 31, 2004. In January 2005,
the  Managing  General  Partner  was  paid  disposition  fees in the  amount  of
$1,210,408,  related to the sales of Country  Place I and II in  December  2004,
which were  accrued  and netted  against  the  related  gain on  disposition  of
investment  in  partnerships  at December 31, 2004.  In June 2005,  the Managing
General Partner was paid a disposition  fee of $757,642,  related to the sale of
Mercy  Terrace,  which was netted  against the related  gain on  disposition  of
investment in  partnerships.  On November 28, 2005, the Managing General Partner
was paid a  disposition  fee of  $435,000,  related to the sale of the  property
owned by Chevy Chase,  which was netted  against the related gain on disposition
of  investment  in  partnerships  in 2005.  On December 14,  2005,  the Managing
General Partner was paid a disposition fee of $1,118,625, related to the sale of
the property owned by Posada Vallarta, which was netted against the related gain
on disposition of investment in partnerships in 2005.

     Pursuant to the Partnership Agreement, all cash available for distribution,
as defined, shall be distributed,  not less frequently than annually, 97% to the
Additional  Limited  Partners,  1% to the Special Limited Partner,  0.49% to the
Initial Limited  Partner and 1.51% to the General  Partners after payment of the
Management  Fee (see Note 3), as  specified  in the  Partnership  Agreement.  On
January 31, 2005, the Partnership  made a cash  distribution of $9,582,720 ($192
per  Unit) to  Additional  Limited  Partners  who were  holders  of record as of
December 31, 2004.  The  distribution  consisted of proceeds  received  from the
sales of the Partnership's interests in Arrowhead, Moorings, Country Place I and
Country Place II. On April 7, 2005, the Partnership  made a tax  distribution of
$603,970  (approximately  $17.50  per  Unit) on  behalf  of  Additional  Limited
Partners who are not residents of Maryland.  On July 12, 2005,  the  Partnership
made a cash  distribution  of $285,128  ($17.50 per Unit) to Additional  Limited
Partners who were  holders of record and  Maryland  residents as of December 31,
2004.  The  distributions  consisted of proceeds  from the 2004 sales of Country
Place I and Country Place II. On December 22, 2005, the partnership  made a cash
distribution of $8,734,250  ($175 per unit) to Additional  Limited  Partners who
were  holders of record as of December 1, 2005.  The  distribution  consisted of
proceeds from the 2005 sale of the Partnership's  interest in Mercy Terrace, and
the 2005 sales of the properties owned by Chevy Chase and Posada Vallarta.

     As defined in the Partnership Agreement, after the payment of distributions
described in the previous  paragraph,  after the  establishment  of any reserves
deemed  necessary  by the  Managing  General  Partner  and after  payment of the
Management Fee, the Partnership had no remaining cash available for distribution
for the years ended  December 31, 2005 and 2004.  The Managing  General  Partner
currently  intends to retain all of the  Partnership's  remaining  undistributed
cash for operating cash reserves pending further distributions under its Plan of
Liquidation and Dissolution.

                                     III-27
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


5.   RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT
       NET INCOME TO TAXABLE INCOME


     For  federal  income  tax  purposes,  the  Partnership  reports  on a basis
whereby:  (i) certain expenses are amortized rather than expensed when incurred;
(ii) certain costs are  amortized  over a shorter  period for tax  purposes,  as
permitted by IRS  Regulations,  and (iii)  certain  costs are  amortized  over a
longer period for tax purposes.  The Partnership  records its share of income or
losses from its  investments  in limited  partnerships  for  federal  income tax
purposes as reported on the Local Partnerships'  federal income tax returns (see
Note 2.g.),  including  losses in excess of related  investment  amounts.  These
returns are subject to examination and,  therefore,  possible  adjustment by the
IRS.

     A reconciliation  of the  Partnership's  financial  statement net income to
taxable income follows.

<TABLE>
<CAPTION>
                                                                           For the years ended
                                                                               December 31,
                                                                       -----------------------------
                                                                          2005              2004
                                                                       -----------       -----------
<S>                                                                    <C>               <C>
Financial statement net income                                         $ 8,659,110       $11,824,832

Adjustments:
  Differences between financial statement net income
    and taxable income related to the Partnership's equity
    in the Local Partnerships' income or losses                            691,299         1,342,418

  Costs amortized over a shorter period for income tax purposes                 --            11,891

  Differences between financial statement gain (loss)
    and tax gain (loss) from the sale or transfer of properties         18,868,188        18,778,675
                                                                       -----------       -----------
Taxable income                                                         $28,218,597       $31,957,816
                                                                       ===========       ===========
</TABLE>

                                      # # #

                                     III-28
<PAGE>

                                EXHIBIT No. 99 b.

Reports of other auditors relating to the audits of the financial  statements of
Local Partnerships in which Capital Realty Investors-II  Limited Partnership has
invested.