<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

(Mark one)

[ X ] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2004 or

[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________ to _______________

Commission File Number 33-30312
                       --------

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
             (Exact name of Registrant as specified in its charter)

     North Carolina                                     56-1669199
-----------------------                     ------------------------------------
(State of Organization)                     (I.R.S. Employer Identification No.)

ISC Realty Corporation
1329 East Morehead Street, Suite 201
Charlotte, NC                                                           28204
-------------                                                           -----
(Address of principal executive offices)                              (Zip Code)

        Registrant's telephone number, including area code (704) 383-7918
                                                           --------------

        Securities Registered Pursuant to Section 12(b) of the Act: NONE
                                                                    ----

           Securities Registered Pursuant to Section 12(g) of the Act:
                  Units of Class A limited partnership interest
                  ---------------------------------------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes  X    No
    ---      ---


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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes       No  X
    ---      ---

Upon the sale of the remaining property, the estimated aggregate market value of
the units of Class A limited partnership interest ("Units") held by
non-affiliates of the registrant would be approximately $1,498,000 based on a
price of approximately $200 per Unit.

On March 25, 2005, there were 7,650 Units outstanding.




<PAGE>

                           FORWARD-LOOKING STATEMENTS

         Statements in this Annual Report on Form 10-K include "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Forward-looking statements include
statements concerning our plans, objectives, goals, strategies, future events,
future revenues or performance, capital expenditures, financing needs, plans or
intentions relating to acquisitions, our competitive strengths and weaknesses,
our business strategy and the trends we anticipate in the industry and economies
in which we operate and other information that is not historical information.
You can identify a forward-looking statement by our use of the words
"anticipate," "estimate," "expect," "intend," "plan," "may," "will," "continue,"
"believe," "objective," "projection," "forecast," "goal," and similar
expressions. No assurance can be given that actual results or events will not
differ materially from those projected, estimated, assumed or anticipated in any
such forward-looking statements.


                                     PART I
ITEM 1 - BUSINESS

         Interstate Land Investors II Limited Partnership (the "Registrant" or
the "Partnership") is a North Carolina limited partnership organized as of July
26, 1989 to acquire for investment and dispose of three tracts of undeveloped
land located in York County, South Carolina (the "Property"). The Property
originally consisted of "Tract 1" (which was subdivided as discussed below), an
approximately 91.64 acre tract fronting on Interstate 77 and Gold Hill Road;
"Tract 2", an adjoining (but non-contiguous) approximately 76.74 acre tract with
frontage entirely on Interstate 77; and "Tract 3", an approximately 20 acre
tract located on U.S. Highway 21 and contiguous to Tract 2. The General Partners
of the Registrant were Performance Investments, Inc., a North Carolina
corporation ("PII"), William Garith Allen ("Allen") and ISC Realty Corporation,
a North Carolina corporation ("ISCR"). Allen is the President, a director and a
50% shareholder of PII. ISCR is a North Carolina corporation wholly owned by
Wachovia Corporation. Effective January 1, 1992, ISCR and Allen assumed the role
of co-managing general partner and PII was converted to a Class A limited
partner. In 1997, Allen executed an assignment of his partnership interests and
forfeited his right to subordinated returns by transferring his interest and
PII's interest to ISCR.

         Effective August 13, 2004, ISC Realty Corporation ("ISCR"), which is
the general partner of Interstate Land Investors II, Limited Partnership, was
sold to Vineyard Capital Advisors, LLC, which is a wholly-owned
limited-liability company of J. Christopher Boone, who was a former President of
ISCR.

         The Registrant offered (the "Offering") a minimum of 5,406 units of
Class A limited partnership interests and a maximum of 9,588 units (the "Maximum
Offering Amount") of Class A limited partnership interests (the "Units") at
$1,000 per Unit pursuant to a registration statement (the "Registration
Statement") effective September 29, 1989, filed under the Securities Act of
1933, as amended. As of November 3, 1989, the Registrant had received aggregate
subscriptions for 5,406 Units. Accordingly, on November 3, 1989, subscriptions
for 5,406 Units were accepted and the initial closing occurred under the
Offering, and 527 investors were


                                       1
<PAGE>

admitted to the Partnership as limited partners. Of the $5,402,640 in gross
proceeds received in connection with the initial closing (which amount equals
subscription payments for 5,406 Units at $1,000 each less discounts on the
purchase of certain Units as described in the Registration Statement), $668,458
had been applied to sales commissions and to organization and offering expenses.
The balance of the gross proceeds, $4,734,182, was used to purchase Tracts 2 and
3 and to provide working capital.

         Tract 2 was acquired by the Registrant pursuant to an Option Agreement
that was originally obtained by Performance Service and Finance, Inc. ("PSF")
from unaffiliated individuals. This Option Agreement was subsequently assigned
by PSF to PII and then assigned by PII to the Registrant. Tract 2 was acquired
from unrelated individuals for a purchase price of $2,855,223. In addition, the
Partnership reimbursed PII $116,000 for its carrying costs associated with the
Option Agreement and paid PII $181,363 in additional consideration as an
assignment fee. The total amount paid by the Registrant for Tract 2 was
$3,152,586, not including certain miscellaneous closing costs.

         The Registrant acquired Tract 3 pursuant to an Option Agreement that
was originally obtained by Gold Hill Investment Associates ("Gold Hill"). The
Option Agreement was subsequently assigned by Gold Hill to the Registrant. The
Registrant acquired Tract 3 from an unaffiliated unrelated entity for a purchase
price of $1,400,000. In addition, the Registrant reimbursed Gold Hill $10,750
for its carrying costs associated with the Option Agreement and an additional
$14,094 in consideration as an assignment fee. The total amount paid by the
Registrant for Tract 3 was $1,424,844, not including certain miscellaneous
closing costs.

         Gold Hill is a North Carolina partnership of which Gold Hill Limited
Partnership, an affiliate of Allen, is a partner. Tract 1 was purchased by Gold
Hill from an unrelated entity in December 1986 for a purchase price of
$1,800,000. Gold Hill Limited Partnership had an option, until June 30, 1990, to
acquire the partnership interests of the remaining unrelated entities in Gold
Hill, and thus become the sole owner of Tract 1. The Registrant had secured an
option (see discussion below) to purchase Tract 1 from Gold Hill at a purchase
price of $3,622,500.

         During July 1990, the Registrant requested and received approval from
the limited partners to extend the Offering from July 31, 1990 until December
31, 1990. During July and August 1990, the Registrant requested and received
limited partner approval to subdivide Tract 1 into four separate parcels and to
allow the Registrant to acquire a portion of the property in the event proceeds
from investor subscriptions were not sufficient to acquire all of Tract 1. In
addition, the seller of Tract 1 had agreed to extend the option to purchase
Tract 1 from September 30, 1990 until December 31, 1990 (the "Option").

         Under the terms of the Option, in the event the Registrant was unable
to sell the Maximum Offering Amount by December 31, 1990, but the Registrant had
sold a minimum of 7,620 Units (the "Secondary Offering Amount"), then the
Registrant could purchase Tracts 1A and 1D (Tracts 1A and 1D are required to be
purchased simultaneously). Additionally, if the Registrant had achieved the
Secondary Offering Amount, purchased Tracts 1A and 1D pursuant to the terms of
the Option and had sold a minimum of 8,721 Units (the "Tertiary Offering
Amount") prior to December 31, 1990, then the Registrant could purchase Tract
1B. Finally, if


                                       2
<PAGE>

the Registrant achieved the Tertiary Offering Amount, and purchased Tracts 1A,
1B and 1D as herein above provided, and had sold a minimum of 9,588 Units prior
to December 31, 1990, then the Registrant could purchase Tract 1C.

         The Registrant filed a post-effective amendment in August, 1990 to the
original prospectus contained in the Registration Statement, outlining to the
SEC these modifications to the Offering and the amendment to the Registrant's
partnership agreement (the "Partnership Agreement").

         On November 14, 1990, the Partnership received formal approval from the
SEC on the post-effective amendment filed in August, 1990. Therefore, ISCR took
additional subscriptions and was able to close on Tracts 1A and 1D on November
30, 1990. The total cost of the November 30, 1990 acquisition of Tracts 1A and
1D was $1,908,605 which included a purchase price of $1,906,517, plus closing
costs of $2,088. At that time, the Partnership determined that no further Units
would be offered, sold and issued pursuant to the prospectus. The Partnership
filed post-effective amendment No. 4 to the Registration Statement for the
purpose of deregistering 1,938 unsold Units.

         The Registrant's principal investment objectives are to: (1) preserve
and protect capital invested in the Registrant, (2) provide a relatively
low-risk real estate investment through debt-free ownership of the Property, (3)
provide long-term appreciation in the value of the Property, and (4) provide
protection for investors against inflation.

         The disposition of the Property by the Registrant may result in a
substantial sales commission to the general partner ("General Partner") or their
affiliates. The General Partner or their affiliates may receive a sales
commission up to 3% of the sales price of the Property. In the event an outside
sales broker is engaged by the Partnership, the total amount paid to the General
Partner or their affiliates and such outside broker shall not exceed 6% of the
sales price. However, the payment of this 3% will be subordinate to the
investors receiving a return of their invested capital plus the preferred
return. The disposition of the Property will not result in the payment of a
cumulative management fee, as this has been waived by the General Partner.

         No mortgage indebtedness was incurred in connection with the
acquisition of the Property. It is not contemplated that the Registrant will
undertake construction or substantial improvements on the Property.

         Upon the sale of all or a portion purchased (i.e., Tracts 2, 3, 1A, and
1D) of the Property by the Registrant, the proceeds of the sale will be
distributed to the investors. The investors had a one-time right to direct the
Registrant to dispose of the Property upon the fifth anniversary of the Closing
of the Offering (November 1994) for a price not less than $11,104,839, reduced
by the net proceeds to the Registrant from the sale of other parcels within the
Property by the Registrant. If the Registrant was unable to sell the Property by
such date at such price, Allen was obligated to either (i) purchase the Property
at such price or (ii) forfeit his entire subordinated Limited Partner interest
and transfer the remaining General Partner interest to the Limited Partners. In
1997, Mr. Allen executed an assignment transferring his partnership interest to
ISCR. (See Note 1 of the audited financial statements.)


                                       3
<PAGE>

         The Registrant is seeking to secure purchasers for its Property and
will be competing with many other real estate investment partnerships as well as
individuals, insurance companies, banks and other entities engaged in real
estate investment activities including, perhaps, certain affiliates of the
General Partner.

         The General Partner and affiliates of the general partner currently
serve as general partner or managing member in several private partnerships or
limited liability companies, which currently own various types of real property.
None of the prior partnerships sponsored by the General Partner or its
affiliates now contemplate the acquisition of any additional properties of the
type purchased by the Registrant. However, the General Partner or its affiliates
may invest in or acquire ownership in additional private partnerships or limited
liability companies in the future. In addition, the General Partner and its
affiliates are and will continue to be engaged in the business of real estate
investment, development and management apart from their involvement in the
Registrant.

         Located immediately adjacent to the Property is an approximately 96.74
acre tract which was owned by Interstate Land Investors I Limited Partnership
("Interstate I"), a North Carolina limited partnership having the same general
partner as the Registrant. Interstate I acquired the adjacent property on
September 30, 1988, for a purchase price of $4,200,000. Interstate I sold the
adjacent property in May 2001 to Greenfield Development Company, LLC
("Greenfield") and Interstate I was liquidated in 2001.

         The General Partner will devote only so much of its time to the
business of the Registrant as in their judgment and experience is reasonably
required. The General Partner is engaged in other activities that also require
its time and attention.

         As of December 31, 2004, the Registrant did not directly employ any
persons in a full-time position.

ITEM 2 - PROPERTY

         The Property is located approximately 12 miles south of the Central
Business District of Charlotte, North Carolina along the I-77 corridor and
approximately 8 miles north of Rock Hill, South Carolina. While the Property is
located in northeastern York County, South Carolina, the Property is considered
a part of the Charlotte Metropolitan Service Area (MSA). The Property originally
consisted of three separate tracts, all of which are zoned for agricultural use,
more particularly described as follows:

         Tract 1 (which was subdivided - See Item 1) is an approximately 91.64
acre tract located in the northeast quadrant of I-77 and Gold Hill Road in York
County, South Carolina (the "County"). 16.1 acres of Tract 1 lie in a floodplain
and the remaining 76.03 acres are usable and free of rights-of-way. Tract 1 has
approximately 2,200 feet of frontage along Gold Hill Road and 3,600 feet of
frontage along I-77. Electricity and telephones are available to Tract 1.
Municipal water and sewer has been brought to the edge of the Property and would
be made available if the Property were developed. Upon the sale of the Tract,
Tract 1 zoning was to revert to BD-2 and


                                       4
<PAGE>

BD-3 under the York County Zoning Ordinance. The BD-2 classification is designed
to provide for the development of office and institutional parks in areas free
of general commercial activity. The BD-3 classification is designed to provide
for retail establishments, such as department stores and variety stores. Tract 1
was subdivided into four Tracts. Tract 1A is approximately 17.0 acres; Tract 1B,
approximately 24.33 acres; Tract 1C, approximately 19.08 acres; and Tract 1D,
approximately 31.23 acres. After the sale of a portion of the Property as
described below, Tracts 1A and 1D are currently owned by the Registrant.

         Tract 2 consists of approximately 76.74 acres. Tract 2 has 2,819 feet
of frontage on I-77 and is located north of Tract 1. Tract 2 is not contiguous
to Tract 1. Access to Tract 2 is through Tract 3 to U.S. Highway 21. Electricity
and telephones are available to Tract 2. Water is currently available to Tract 2
by extension through Tract 3. Water and sewer will be provided by a private
utility company with facilities located west of Tract 2 on the west side of
I-77. In addition, Tract 2 can be serviced by the water and sewer facilities
serving the Charlotte Knights baseball stadium. Upon the sale of the Tract,
Tract 2 zoning was to revert to UDD, urban development district, by the York
County, South Carolina County Council. The purpose of this district is to permit
maximum flexibility in response to market demands in specific areas of the
County. Permitted uses range from residential to business development and
industrial.

         Tract 3 consists of approximately 20 acres of land fronting
approximately 400 feet on U.S. Highway 21 and being contiguous to Tract 2.
Additionally, a portion of Tract 3 is contiguous to the tract that was owned by
Interstate I. Electricity, telephone, water and sewer are all available to Tract
3. Upon the sale of the Tract, Tract 3 zoning was to revert to UDD, urban
development district, by the York County, South Carolina County Council.

         In June 2000, the Partnership entered into a contract with Greenfield
to sell 97 acres of the 145 acres of unimproved Property currently held by the
Registrant for $45,000 per acre, subject to adjustments for wetlands acreage.
The actual proceeds from the sale totaled $4,353,360. The purchaser deposited
$50,000 earnest money with a title agency. Under the terms of the contract, the
purchaser had until November 6, 2000, to complete their due diligence. However,
Greenfield requested two 90-day extensions of the closing date to provide them
time to obtain a wetlands permit from the U.S. Army Corps of Engineers which
permit was necessary to allow the proposed development. An additional $25,000
earnest money was deposited with the title agency for the first extension and
$50,000 was deposited for the second extension. The first extension expired on
March 6, 2001, and the sale was consummated on May 11, 2001 and included Tract 2
and Tract 3.

         The remaining approximate 48 acres of the Property consisting of Tract
1A and Tract 1D is listed and being marketed for sale by Grubb & Ellis/Bissell
Patrick, LLC ("Bissell Patrick"). On February 16, 2005, the Partnership entered
into a contract to sell all remaining assets, approximately 48 acres of
unimproved land. The total proposed sales price is $2,080,000, including earnest
money of $20,000 which the purchaser deposited with a title agency on the
contract date. Under the terms of the contract, the purchaser has up to 90 days
from the contract date to conduct its due diligence, at which time it is
required to deposit an additional $50,000 of earnest money to proceed with the
purchase. The Partnership's sale of the property will be contingent upon the
approval of a majority of its limited partners, subsequent to the inspection


                                       5
<PAGE>

period and receipt of final earnest money. Should the sale of the unimproved
land held for appreciation be consummated, the Partnership will be liquidated
during the year ended December 31, 2005.

ITEM 3 - LEGAL PROCEEDINGS

         The Partnership is not a party to any legal proceedings.

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

         There were no matters submitted to a vote of security holders during
the fourth quarter of 2004.

                                     PART II

ITEM 5 - MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS

         Transfer of the Units is subject to certain restrictions contained in
the Partnership Agreement. There is no established market for the Units and it
is not anticipated that any will occur in the future. The Registrant is not
aware of any significant resale of Units since the initial closing on November
3, 1989. As of March 25, 2005, 776 persons were record owners of 7,650 Units.

         The Registrant in each year allocates to the investors and the General
Partner any net profit prior to a sale of the Property. Such allocations to the
investors are credited against the preferred return due to them on their
invested capital. Net losses for each year are also allocated to the investors
and the General Partner in accordance with their respective capital accounts.
The Registrant does not intend to make any distributions of available cash prior
to the sale of all or a portion of the Property. Allocations to the investors
are subject to the limitations of the Partnership Agreement.

ITEM 6 - SELECTED FINANCIAL DATA (AUDITED)

SELECTED STATEMENTS OF OPERATIONS DATA

         The following selected financial data for the five years ended December
31, 2004, have been derived from audited financial statements. The audited
financial statements for each of the three years ended December 31, 2004, and
the accompanying notes and independent auditors' report, are contained elsewhere
in this report. All of the data set forth below are qualified by this reference
to, and should be read in conjunction with, the Partnership's audited financial
statements (including the notes thereto), and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this report.


                                       6
<PAGE>

<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,
                              ---------------------------------------------------------------
                                2004           2003        2002          2001           2000
                                ----           ----        ----          ----           ----
<S>                           <C>           <C>          <C>          <C>            <C>
Revenue from Sale
   of Property                $       0     $      0     $      0     $4,353,360     $      0
Interest and Other
   Income                           374          252        1,313         17,424        3,056
Property write-
   down                         211,500            0            0              0            0

Cost of Real Estate
  Sold                                0            0            0      4,986,109            0

Expenses                        104,929       42,966       33,446         36,985       57,177
                              ---------     --------     --------     ----------     --------

Extraordinary Gain
  on Extinguishment
  of Liability                        0            0            0        131,561            0



Net Loss                      $(316,055)    $(42,714)    $(32,133)    $ (520,749)    $(54,121)
                              ---------     --------     --------     ----------     --------
Distributions to
   limited partners           $       0     $      0     $    439     $3,467,974     $      0
                              ---------     --------     --------     ----------     --------
Net Loss Allocated
   to Class A limited
   partners                   $(316,015)    $(42,709)    $(32,129)    $ (520,684)    $(54,115)
                              ---------     --------     --------     ----------     --------
Net Loss Per Class
   A limited
   partnership unit           $  (41.31)    $  (5.58)    $  (4.20)    $   (68.06)   $   (7.07)
                              ---------     --------     --------     ----------    ---------
</TABLE>



SELECTED BALANCE SHEET DATA

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                          -----------------------------------------------------------------------------------
                              2004               2003            2002               2001               2000
                              ----               ----            ----               ----               ----
<S>                       <C>               <C>               <C>                <C>               <C>
Total Assets              $1,711,327        $1,971,761        $2,008,978         $2,041,174        $6,494,010
Total Liabilities           $ 61,494          $  5,873           $   376             $    0         $ 464,113
                            --------          --------           -------             ------         ---------
Partner's Capital         $1,649,833        $1,965,888        $2,008,602         $2,041,174        $6,029,897
                          ----------        ----------        ----------         ----------        ----------
</TABLE>


                                       7
<PAGE>

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         We prepare our financial statements in accordance with GAAP, which
requires us to make estimates and assumptions. We believe that the following
critical accounting policies involve our more significant judgments and
estimates used in the preparation of our financial statements.

         Impairment of Long-Lived Assets Unimproved land held for appreciation
is recorded at cost unless considered impaired. If events or circumstances
indicate that the carrying amount of a property may be impaired, we make an
assessment of its recoverability by estimating the undiscounted future cash
flows of the property. If the carrying amount exceeds the aggregate undiscounted
future cash flows, we recognize an impairment loss to the extent the carrying
amount exceeds the estimated fair value of the property. Management has
determined that there has been no impairment in the carrying value of unimproved
land held by the Partnership at December 31, 2002 and 2003. However, at December
31, 2004, management determined the estimated cash to be derived from its
remaining asset will be less than its recorded value. So, accordingly, a
non-cash charge of $211,500 was recorded to write-down its unimproved land.

         Unimproved land is subject to varying degrees of risk. Several factors
may adversely affect the economic performance and value of our unimproved land.
These factors include:

         -        the general economic climate;

         -        competition from other unimproved land;

         -        changes in governmental regulations and the related cost of
                  compliance; and

         -        the relative illiquidity of such investments.

Any adverse changes in these factors could cause an impairment in our long-lived
assets.

OFF-BALANCE SHEET ARRANGEMENTS

         We do not have any off-balance sheet arrangements at this time.

CONTRACTUAL OBLIGATIONS

         At this time, we do not have any material contractual obligations of
the nature required to be disclosed pursuant to Item 303(a)(5) of Regulation
S-K.


                                       8
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         As of December 31, 2004, the Registrant had $11,327 in cash and cash
equivalents on hand which will be retained to pay ongoing partnership expenses.
Until the Registrant disposes of the remaining approximately 48 acres of the
Property, its only sources of additional capital are from General Partner
advances or other borrowings. The General Partner anticipates that any future
additional funds necessary for the operations of the Partnership will be
provided by ISCR.

         In 2004, a line of credit for $200,000 was established by ISCR. ISCR is
entitled to accrue interest at prime plus two percent.

TRANSACTIONS WITH RELATED PARTIES

         A line of credit has been established by the general partner for the
purpose of making advances to the Registrant to cover future operating expenses
of the Registrant. Interest is accrued at prime plus two percent. At December
31, 2004, a balance of $53,489 was due to the general partner from this line of
credit arrangement, as well as $562 of accrued interest.

RESULTS OF OPERATIONS

Comparison of the year ended December 31, 2004 to the year ended December 31,
2003

         The registrant's net loss increased from $42,714 for the year ended
December 31, 2003 to $316,055 for the year ended December 31, 2004. The loss in
2004 is the result of regular and ongoing partnership expenses that were higher
for 2004 when compared to the loss incurred in 2003 as well as a write-down to
the carrying value of the unimproved land.

         Professional and legal fees increased from $39,514 in 2003 to $101,015
in 2004 reflecting extra charges incurred by auditors and also due to higher
database management fees. General and administrative expenses decreased from
$3,246 in 2003 to $3,240 in 2004.

         During the fourth quarter of 2004, the Partnership recorded a non-cash
charge of approximately $211,500 to write-down its remaining unimproved land to
its net realizable value.

         The Registrant's net loss increased from $32,133 for the year ended
December 31, 2002, to $42,714 for the year ended December 31, 2003. The loss in
2003 is the result of regular and ongoing partnership expenses that were higher
for 2003 when compared to the loss incurred in 2002.

         Professional and legal fees increased from $28,034 in 2002 to $39,514
in 2003 reflecting extra charges incurred by auditors and tax preparers for new
electronic filing requirements mandated by the Internal Revenue Service ("IRS").
General and administrative expenses decreased from $5,392 in 2002 to $3,246 in
2003. The difference is due primarily to an approximate $3,800 one-time fee paid
in 2002 for a real estate broker's opinion of value and database management fees
incurred also for the new IRS electronic filing requirements.


                                       9
<PAGE>

SELECTED QUARTERLY FINANCIAL DATA

         The table below shows excerpted results from our quarterly Reports on
Form 10-Q filed in the years ended December 31, 2004 and 2003.

<TABLE>
<CAPTION>
                                                     2004                                      2003
                                                 (UNAUDITED)                                (UNAUDITED)
                        1ST         2ND         3RD        4TH                  1ST        2ND        3RD        4TH
                       QUARTER    QUARTER     QUARTER    QUARTER     TOTAL    QUARTER    QUARTER    QUARTER    QUARTER     TOTAL
                      ---------   --------   ---------  ---------  ---------  --------  ---------  ---------  ---------  --------
<S>                   <C>         <C>        <C>        <C>        <C>        <C>       <C>        <C>        <C>        <C>
TOTAL REVENUES            $ 128        127          82         37        374       120        53         13         66        252
TOTAL EXPENSES          $43,064     15,926      19,936    237,503    316,429    14,399    10,637     12,346      5,584     42,966
                        -------     ------      ------    -------    -------    ------    ------     ------      -----     ------

NET INCOME (LOSS)     ($42,936)   (15,799)    (19,854)  (237,466)  (316,055)  (14,279)  (10,584)   (12,334)    (5,517)   (42,714)
                      =========   ========    ========  =========  =========  ========  ========   ========    =======   ========

NET INCOME (LOSS)
   ALLOCATED TO:
GENERAL PARTNERS      ($     4)        (2)         (2)       (24)       (32)     (143)       (1)        (1)        140        (5)
CLASS A LIMITED\
   PARTNERS           ($42,931)   (15,796)    (19,852)  (237,436)  (316,015)  (14,136)  (10,583)   (12,332)    (5,658)   (42,709)
NET INCOME (LOSS)
   PER CLASS A
   LIMITED
   PARTNERSHIP UNIT   ($  5.61      (2.07)      (2.60)    (31.03)    (41.31)    (1.85)    (1.38)     (1.61)     (0.74)     (5.58)
</TABLE>

SUBSEQUENT EVENT

         On February 16, 2005, the Partnership entered into a contract to sell
all remaining assets, approximately 48 acres of unimproved land. The total
proposed sales price is $2,080,000, including earnest money of $20,000 which the
purchaser deposited with a title agency on the contract date. Under the terms of
the contract, the purchaser has up to 90 days from the contract date to conduct
its due diligence, at which time it is required to deposit an additional $50,000
of earnest money to proceed with the purchase.

         The transaction is currently subject to a due diligence period of 90
days, during which the purchaser has the right to terminate the agreement.
Accordingly, there are no assurances this transaction will close.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Partnership does not hold any financial instruments with market
risk exposure.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Reference is made to the Financial Statements Index beginning on Page
F-1 below to this Annual Report on Form 10-K.


                                       10
<PAGE>

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

         There were no disagreements concerning either the December 31, 2004,
financial statements or the December 31, 2003, financial statements.

         On November 7, 2003, Faulkner & Thompson, P.A. resigned as the
Registrant's independent auditors (See Item 15). On March 11, 2004, KPMG LLP was
engaged as Registrant's new independent auditors. Forms 8-K were filed on both
of the above-referenced dates reporting these changes.

ITEM 9A - CONTROLS AND PROCEDURES

         Evaluation of disclosure controls and procedures. The General Partner
(our principal executive officer and principal financial officer), acting
through its President, has concluded, based on its evaluation as of December 31,
2004, that the Partnership's disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in the reports filed or
submitted by us under the Securities Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and include controls and procedures designed to
ensure that information required to be disclosed by us in such reports is
accumulated and communicated to the Partnership's management, including the
General Partner's President, as appropriate to allow timely decisions regarding
required disclosure.

         Changes in internal controls. There were no changes in the
Partnership's internal controls over financial reporting or in other factors in
the fourth quarter of 2004 that have materially affected, or are reasonably
likely to materially affect, these controls.


                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         General Partner. The Registrant has no directors or executive officers.
PII, the former managing general partner, filed for relief from creditors under
Chapter 11 of the Bankruptcy Code during 1991. Effective January 1, 1992, the
general partner interest of PII was converted to that of a Class A limited
partner retaining the same interest in the Partnership's net profit, losses and
distributions as it had as a general partner subject to the same priority of the
other Class A limited partners. In 1997, Allen executed an assignment of his
partnership interests and forfeited his right to subordinated returns by
transferring his interest and PII's interest to ISCR. Because the Registrant has
no directors or executive officers and because, to the Registrant's knowledge no
person owns more than 10% of the Units, there is no disclosure pursuant to Item
405 of Regulation S-K contained in this report.

         Because we are a limited partnership, ISCR, as our General Partner,
functions as our board of directors. Because we do not have a board of
directors, we do not have an audit committee or a "financial expert," as defined
in Item 401(h) of the SEC's Regulation S-K. ISCR


                                       11
<PAGE>

serves as the General Partner, Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer of the Partnership. James Christopher
Boone is President of ISCR

ITEM 11 - EXECUTIVE COMPENSATION

         No remuneration from the Partnership was paid or accrued for the
account of any partner, officer or director of the General Partner during the
Partnership's fiscal year ended December 31, 2004.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
            RELATED MATTERS

         As of March 25, 2005, Begley-Hall, P.O. Box 1027, Mount Airy, NC 27030,
an investment partnership, beneficially owned 6.87% of the limited partnership
interests or 525.6 Units.

         As of March 25, 2005, none of the individual directors and officers of
the General Partner beneficially owned any Units. ISCR has sole investment and
voting power with respect to the securities indicated in the table below. The
address of ISCR is 1329 East Morehead Street, Suite 201, Charlotte, NC 28204.

                                                          Amount and
                                                           Nature of
                                                          Beneficial  Percent of
Partner Type                       Name & Address          Ownership     Class
------------                       --------------         ----------  ----------

Subordinated limited partner   ISC Realty Corporation        0 Units      100%
General Partner                ISC Realty Corporation        0 Units      100%
Class A limited partner        ISC Realty Corporation   160.65 Units      2.1%

         The Partnership does not have any equity compensation plans.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         There are no items to report regarding certain relationships and
related transactions.

ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES

         The following table shows the amount of audit, audit-related, tax, and
other service fees paid by the Registrant to its independent auditors, Faulkner
& Thompson, P.A, and KPMG LLP, for calendar years ended December 31, 2003 and
2004, respectively:


                                       12
<PAGE>

                                             2003                  2004
                                             ----                  ----

            AUDIT FEES (1)                 $14,112               $45,000
            AUDIT-RELATED FEES (2)           -0-                   -0-
            TAX FEES (3)                     -0-                 $16,150
            ALL OTHER FEES                   -0-                   -0-


         (1) AUDIT FEES: This category consists of fees for the audit of our
annual financial statements, review of the financial statements included in our
quarterly reports on Form 10-Q, and services that are normally provided by the
independent auditors in connection with statutory and regulatory filings or
engagements for those fiscal years. This category also includes: services
associated with SEC registration statements, other documents filed with the SEC,
and documents issued in connection with securities offerings (e.g., comfort
letter and consents); and advice on audit and accounting matters that arose
during, or as a result of, the audit or the review of financial statements.

         (2) AUDIT-RELATED FEES: This category consists of assurance and related
services by our independent auditor that are reasonably related to the
performance of the audit or review of our financial statements and are not
reported above under "Audit Fees." The services for the fees disclosed under
this category include other accounting consulting related to acquisitions and
dispositions, internal control reviews, and general assistance with
implementation of SEC rules and regulations promulgated under the Sarbanes-Oxley
Act of 2002.

         (3) TAX FEES: This category consists of professional services rendered
by our independent auditor for tax compliance and tax planning. The services for
the fees disclosed under this category include tax compliance.

         Generally, before an independent auditor is engaged by us to render
audit or non-audit services, the engagement is approved early each calendar year
by ISCR, as our General Partner. Any subsequent changes in audit, audit-related,
tax, or other services to be provided by our independent auditor due to changes
in scope of work, terms, conditions, or fees of the engagement must be
pre-approved by ISCR. ISCR may delegate its pre-approval authority to its
executive officers. This delegation of pre-approval authority extends to audit
and non-audit services not proscribed by applicable laws and regulations to be
rendered by our independent auditor. Non-audit services can only be approved
under this delegation of authority for services of a scope and for fees
comparable to those described above with respect to 2004. Such officers shall
promptly inform ISCR of any pre-approval decisions. For calendar years 2003 and
2004, through August 13, 2004, ISCR delegated this authority to Jeffrey K.
Harpel, its Senior Vice President. Subsequent to August 13, 2004, Chris Boone,
President, ISCR was responsible for pre-approval decisions. Requests or
applications to provide services that require specific approval by the General
Partner will be submitted to ISCR by the independent auditor and must be
consistent with applicable SEC regulations regarding auditor independence.


                                       13
<PAGE>

                                     PART IV

ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a)      Financial Statements and Schedules.

                  See the Financial Statements Index beginning on Page F-1 below
                  to this Annual Report on Form 10-K. Some schedules are omitted
                  because they are not applicable, not required or because the
                  requested information is included in the Financial Statements
                  or notes thereto.

         (b)      Reports on Form 8-K.

                  A current report on Form 8-K was filed on November 7, 2003,
                  reporting that Faulkner & Thompson, P.A., the Registrant's
                  independent auditors, had resigned and a replacement firm was
                  being sought.

         (c)      Exhibits.

                  See the Exhibit Index attached below to this Annual Report on
                  Form 10-K.


                                       14
<PAGE>


                                   SIGNATURES

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

                               INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP


                                       By:     ISC Realty Corporation
                                               As Principal Executive Officer,
                                               Principal Financial Officer,
                                               Principal Accounting Officer and
                                               General Partner
                                               Of the Registrant


                                               By: /s/ James Christopher Boone
                                                   -----------------------------
                                                   Name: James Christopher Boone
                                                   Title: President

Date:  April 15, 2005


                                       15
<PAGE>


                Interstate Land Investors II Limited Partnership
                          Index to Financial Statements
<TABLE>
<CAPTION>
                                                                                                             Pages
                                                                                                             -----

<S>                                                                                                    <C>
Report of Independent Registered Public Accounting Firm (KPMG LLP).............................................F-1
Report of Independent Certified Public Accountants (Faulkner & Thompson, P.A.).................................F-2
Financial Statements:
    Balance Sheets.............................................................................................F-3
    Statements of Operations...................................................................................F-4
    Statements of Partners' Capital............................................................................F-5
    Statements of Cash Flows...................................................................................F-6
    Notes to Financial Statements .................................................................... F-7 to F-10
</TABLE>


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners of
Interstate Land Investors II Limited Partnership:

We have audited the accompanying balance sheets of Interstate Land Investors II
Limited Partnership (the Company) as of December 31, 2004 and 2003, and the
related statements of operations, partners' capital, and cash flows for each of
the years in the two-year period ended December 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Interstate Land Investors II
Limited Partnership as of December 31, 2004 and 2003, and the results of its
operations and its cash flows for each of the years in the two-year period ended
December 31, 2004, in conformity with U.S. generally accepted accounting
principles.

                                             /s/ KPMG LLP

Charlotte, North Carolina
April 14, 2005




                                      F-1

<PAGE>


                           FAULKNER AND THOMPSON, P.A.
                          CERTIFIED PUBLIC ACCOUNTANTS
                              POST OFFICE BOX 2456
                      ROCK HILL, SOUTH CAROLINA 29732-4456



                          INDEPENDENT AUDITORS' REPORT


To the Partners of
Interstate Land Investors II, Limited Partnership
Charlotte, North Carolina

         We have audited the accompanying statements of operations, partners'
capital and cash flows of Interstate Land Investors II, Limited Partnership (a
North Carolina partnership), for the year ended December 31, 2002. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

         We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
statements of operations, partners' capital and cash flows are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements of operations, partners' capital
and cash flows. An audit also includes assessing the accounting principles used
and significant estimates made by the managing general partner, as well as
evaluating the overall presentation of the statements of operations, partners'
capital and cash flows. We believe that our audit of the statements of
operations, partners' capital and cash flows provides a reasonable basis for our
opinion.

         In our opinion, the statements of operations, partners' capital and
cash flows referred to above present fairly, in all material respects, the
results of the operations of Interstate Land Investors II, Limited Partnership,
for the year ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America.

/s/ Faulkner and Thompson, P.A.

Charlotte, North Carolina
February 6, 2003


                                      F-2

<PAGE>



                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
                     (A NORTH CAROLINA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                           DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                          --------------------------------
                                                                              2004                 2003
                                                                          ----------            ----------
<S>                                                                       <C>                   <C>
                          ASSETS

Unimproved land held for investment purposes                              $1,700,000            $1,911,500
Cash and cash equivalents                                                     11,327                60,261
                                                                          ----------            ----------
         Total assets                                                     $1,711,327            $1,971,761
                                                                          ==========            ==========

              LIABILITIES AND PARTNERS' CAPITAL
Liabilities
     Accrued expenses                                                         $7,443                $5,873
     Interest payable - related party                                            562                     0
     Line of credit - related party                                           53,489                     0
                                                                          ----------            ----------
         Total liabilities                                                    61,494                 5,873
                                                                          ----------            ----------
Partners' Capital
     Class A limited partners' interest                                    1,650,023             1,966,038
         (authorized, 9,588 units; issued and outstanding,
         7,650 units in 2004 and 2003)
     Subordinated limited partner interest                                        61                    69
     General partners' capital deficiency                                      (251)                 (219)
                                                                          ----------            ----------
         Total partners' capital                                           1,649,833             1,965,888
                                                                          ----------            ----------
         Total liabilities and partners' capital                          $1,711,327            $1,971,761
                                                                          ==========            ==========
</TABLE>

See accompanying notes to financial statements.

                                      F-3

<PAGE>

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
                     (A NORTH CAROLINA LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31
                                                              ---------------------------------------------------
                                                                    2004               2003              2002
                                                              --------------     --------------     -------------
<S>                                                           <C>                <C>                <C>

OPERATING INCOME

Interest                                                                $374               $252            $1,313
                                                              --------------     --------------     -------------
         Total operating income                                          374                252             1,313

OPERATING EXPENSES
     Professional fees                                               101,015             39,514            28,034
     Property tax                                                        112                206                20
     Interest expense - related party                                    562                 --                --
     General and administrative                                        3,240              3,246             5,392
     Write-down of land held for investment purposes                 211,500                 --                --
                                                              --------------     --------------     -------------
         Total operating expenses                                    316,429             42,966            33,446
                                                              --------------     --------------     -------------

Net loss                                                           $(316,055)         $ (42,714)         $(32,133)
                                                              ==============     ==============     =============

NET LOSS ALLOCATED TO
Class A limited partners                                           $(316,015)         $ (42,709)          (32,129)
Subordinated limited partner                                              (8)                (1)               (1)
General partners                                                         (32)                (4)               (3)
                                                              --------------     --------------     -------------
         Net loss                                                  $(316,055)         $ (42,714)          (32,133)
                                                              ==============     ==============     =============

Weighted average Class A limited partnership units
     outstanding                                                       7,650              7,650             7,650
                                                              ==============     ==============     =============
Net loss per weighted average Class A limited partnership
     unit                                                            $(41.31)         $   (5.58)          $(4.20)
                                                              ==============     ==============     =============
</TABLE>

See accompanying notes to financial statements.

                                      F-4


<PAGE>

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
                     (A NORTH CAROLINA LIMITED PARTNERSHIP)

                         STATEMENTS OF PARTNERS' CAPITAL

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
<TABLE>
<CAPTION>
                                          CLASS A LIMITED PARTNERS           SUBORDINATED
                                          ------------------------       ---------------------
                                                                         LIMITED      GENERAL
                                          UNITS           CAPITAL        PARTNER      PARTNERS          TOTAL
                                          -----         ----------       -------      --------        ----------
<S>                                     <C>             <C>              <C>          <C>             <C>
Partners' capital (deficiency)
     December 31, 2001                    7,650         $2,041,315         $71         $(212)         $2,041,174
     Net loss                                --            (32,129)         (1)           (3)            (32,133)
     Distribution to partners                --               (439)         --            --                (439)
Partners' capital (deficiency)
     December 31, 2002                    7,650          2,008,747          70          (215)          2,008,602
     Net loss                                --            (42,709)         (1)           (4)            (42,714)
Partners' capital (deficiency)
     December 31, 2003                    7,650          1,966,038          69          (219)          1,965,888
     Net loss                                --           (316,015)         (8)          (32)           (316,055)

Partners' capital (deficiency)
     December 31, 2004                    7,650         $1,650,023         $61         $(251)         $1,649,833
</TABLE>

See accompanying notes to financial statements.


                                      F-5

<PAGE>

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
                     (A NORTH CAROLINA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                    -----------------------------------------------------
                                                                        2004                   2003                2002
                                                                    ---------                --------            --------
<S>                                                                 <C>                     <C>                   <C>
OPERATING ACTIVITIES
Net loss                                                            $(316,055)               $(42,714)           $(32,133)
Adjustments to reconcile net loss to net cash
  used in operating activities
    Write-down of land held for investment purposes                   211,500                      --                  --
    Increase in accrued expenses                                        1,570                   5,497                 376
    Increase in accrued expenses - related party                          562                      --                  --
                                                                    ---------                --------            --------
        Net cash used in operating activities                        (102,423)                (37,217)            (31,757)
                                                                    ---------                --------            --------

FINANCING ACTIVITIES
Increase (decrease) in cash realized from
  line of credit - related party                                       53,489                      --                  --
    Distributions to partners                                              --                      --                (439)
                                                                    ---------                --------            --------
        Net cash provided (used) by financing activities               53,489                      --                (439)
                                                                    ---------                --------            --------

(Decrease) in cash and cash equivalents                               (48,934)                (37,217)            (32,196)
Cash and cash equivalents, beginning of year                           60,261                  97,478             129,674
                                                                    ---------                --------            --------
Cash and cash equivalents, end of year                                $11,327                 $60,261             $97,478
                                                                    =========                ========            ========
</TABLE>

See accompanying notes to financial statements.


                                      F-6

<PAGE>

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
                     (a North Carolina limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 2004 and 2003
--------------------------------------------------------------------------------

NOTE 1:  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

         Interstate Land Investors II Limited Partnership (the "Partnership") is
a North Carolina limited partnership formed on July 26, 1989 to acquire for
investment, hold for appreciation and ultimately dispose of, without substantial
improvements, undeveloped land in York County, South Carolina. The Partnership
acquired 97 acres of such land in November 1989 and an additional 48 acres in
November 1990. The Partnership shall continue its existence without interruption
subject to the terms and conditions set forth in the partnership agreement and
the provisions of the Revised Uniform Limited Partnership Act of the State of
North Carolina.

         Generally, the liability for Partnership debts, liabilities and
obligations will be limited to the amounts contributed and agreed to contribute
to the capital of the Partnership, together with the share of undistributed
profits, if any.

         Until January 1, 1992, the managing general partner was Performance
Investments, Inc. ("PII"), which is 100% owned by Mr. William Garith Allen and a
family member. Mr. Allen and ISC Realty Corporation ("ISCR") are also general
partners in the Partnership and effective January 1, 1992, assumed the role of
co-managing partners. In November 1991, PII consented to the conversion of its
interest to that of a Class A limited partner, to become effective January 1,
1992. PII, however, retains the same interest in the Partnership's net profit,
losses and distributions as it had as a general partner subject to the same
priority of the other Class A limited partners. In December 1993, upon the
approval of 67% of the Class A limited partners' interest and upon meeting
certain conditions in the partnership agreement, the partners exercised their
one-time right to direct the general partners to sell the property at a price no
less than $11,104,839, reduced by the proceeds from any previous sales. The
property was to be sold by November 1994, or at that time Mr. Allen would agree
to either (i) purchase the property from the Partnership on such date at the
purchase price or, (ii) elect not to purchase the property at the purchase price
but instead forfeit his right to receive subordinated returns, withdraw as a
general partner and transfer his general partnership interest to ISCR. In 1997,
Mr. Allen executed an assignment of his partnership interests and forfeited his
right to subordinated returns by the transfer of his interest and PII's interest
to ISCR.

         The general partners are solely responsible for the day-to-day
management and operation of the property. ISCR is responsible for certain
administrative functions of the Partnership and beginning in November 1989, is
entitled to an annual administrative fee equal to .25% of the cost of the
property acquired. Payment of such administrative fee is deferred until the sale
of the property and the return of the Class A limited partners' invested capital
plus their preferred return, as defined. Any such deferred fee will accrue
interest at the prime rate plus 1%. In 2001, management of ISCR determined that
this fee would never be paid. Accordingly, the accrued liability for the fee was
reversed and reported as an extraordinary gain on extinguishment of liability.

CASH EQUIVALENTS

         For the purposes of the statements of cash flows, the Partnership
considers all highly liquid investments having maturities of three months or
less to be cash equivalents. At December 31, 2004 and 2003, the Partnership's
cash consisted of monies deposited through Wachovia Securities, LLC (an
affiliate of ISCR through August 13, 2004) in a money market fund.


                                       F-7
<PAGE>

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
                     (a North Carolina limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 2004 and 2003
--------------------------------------------------------------------------------

UNIMPROVED LAND HELD FOR INVESTMENT PURPOSES

         The costs of acquiring land, including related closing and
predevelopment costs, are capitalized and will be allocated to cost of sales as
sales of the property occur. Market value is evaluated based on independent
appraisals and comparable market offers. Land is recorded at the lower of cost
or market less costs to sell.

ACCRUED EXPENSES

         Accrued expenses consist primarily of accrued legal and accounting
expenses, amounts due to the general partner and other payables. Accrued legal
and accounting expenses were $5,000 and $2,496 at December 31, 2004 and 2003,
respectively.

INCOME TAXES

         The Company is treated as a partnership subject to the provisions of
Chapter 1, Subchapter K of the Internal Revenue Code of 1986, as amended.
Generally partnerships are not subject to entity-level federal or state income
taxation and, as such, the Company is not required to provide for income taxes
under Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. The Company's taxable income is reported in the tax returns of it
partners.

NET LOSS PER CLASS A LIMITED PARTNERSHIP UNIT

         Net loss per weighted average Class A limited partnership unit is
calculated based on the loss allocated to such partners.

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amount of cash, cash equivalents, receivables, accounts
payable and accrued expenses approximates fair value because of the short-term
nature of these instruments.

ESTIMATES

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

NOTE 2:  ALLOCATIONS AND DISTRIBUTIONS OF NET PROFITS AND LOSSES

         Under the terms of the partnership agreement, net profit and
distributions of available cash in each year prior to a sale of the property
will be allocated 99% to the Class A limited partners and 1% to the general
partners. Net losses shall be allocated among all partners in accordance with
their respective capital accounts. Special allocations are provided for any
gains or losses arising from the sale of the property and for the related cash
distributions.

                                      F-8

<PAGE>

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
                     (a North Carolina limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 2004 and 2003
--------------------------------------------------------------------------------

NOTE 3:   RELATED PARTIES AND RELATED PARTY TRANSACTIONS

         In connection with the initial acquisition of the property in 1989, the
Partnership paid PII and Gold Hill Investment Associates ("Gold Hill") (a
partnership of Gold Hill Limited Partnership and an affiliate of Mr. Allen) a
total of $322,207 for the assignment of options to acquire the two tracts of
land which comprise the property and for reimbursement of Gold Hill and PII's
holding costs in the options (which totaled approximately $126,750). The total
cost, along with legal and other acquisition expenses, is included in the land
on the accompanying balance sheets.

         In connection with the consent entered into in November 1991 (see Note
1), certain receivables due from PII were offset against amounts due PII or Mr.
Allen in connection with the sale of the property. The receivable was
written-off as uncollectible in 2001 and is netted against the liabilities of
ISCR, which were forgiven in 2001 and reported as an extraordinary gain on
extinguishment of liability.

         In November 1990, the Partnership acquired approximately 48 acres of
property from Gold Hill at a purchase price of $1,906,517. The partners of Gold
Hill agreed to accept, as part of the purchase price, 533 units of Class A
limited partner interests and granted a credit on the purchase price of
$495,690, which represents the cost of 533 units at $1,000 per unit less selling
commissions.

         In 1989, ISCR purchased 106 units of Class A limited partner interests
at the full offering price ($1,000 a unit). In 1990, ISCR contributed two-thirds
of its fee received for additional organizational costs to purchase 44 Class A
limited partner interests at $1,000 per unit. These units are included in Class
A limited partners' interest on the balance sheets. Also, the general partners,
their affiliates and their employees purchased units of Class A limited partner
interests at 3.5% discount. The total discounts amounted to $385 in 1990 and
$3,360 in 1989, representing 11 and 66 units, respectively.

         ISCR pays expenses on behalf of the Partnership and is subsequently
reimbursed. At December 31, 2004 and 2003, the Partnership had payables due to
ISCR of $53,489 and $1,991, respectively. As noted, ISCR has not charged the
Partnership administrative fees for providing services since 2000.

         During 2004, ISCR advanced funds to the Partnership for operating
expenses. The balance of the advances at December 31, 2004 was $53,489. Interest
was accrued at the then current prime-lending rate plus two percent and total
accrued interest was $562 at December 31, 2004.

NOTE 4:  LINE-OF-CREDIT FROM RELATED PARTY

         The Partnership has obtained a $200,000 line of credit from ISCR to
utilize as needed. The line of credit had a balance of $53,489 and $0 at
December 31, 2004 and 2003, respectively. Interest is charged on any funded
portion of this line of credit at 2% above the then current prime-lending rate.
ISCR received a mortgage and assignment of rents and leases on the property as
security. Interest accrued on this line of credit which would be paid along with
the outstanding principal balance on the earlier of:

         o        sale or disposition of all or any portion or part of the
                  property securing the mortgage instrument;

         o        the date ISCR is removed as managing general partner of the
                  Partnership; or

         o        the date the Partnership terminates its legal existence.


                                       F-9
<PAGE>

                INTERSTATE LAND INVESTORS II LIMITED PARTNERSHIP
                     (a North Carolina limited partnership)

                          NOTES TO FINANCIAL STATEMENTS

                           December 31, 2004 and 2003
--------------------------------------------------------------------------------

NOTE 5:  UNIMPROVED LAND HELD FOR INVESTMENT PURPOSES

         The general partner periodically reviews the recorded value of its
long-lived assets to determine if the future cash flows to be derived from these
assets will be sufficient to recover the recorded asset values. During the
fourth quarter of 2004, the Partnership estimated cash to be derived from its
remaining asset will be less than its recorded value. Accordingly, the general
partner has recorded a non-cash charge of $211,500, or approximately $27.65 per
partnership unit to write-down its unimproved land to reflect its estimated
value based on the contract reflected in note 7. This adjustment reflects
selling costs of $380,000 consisting of sales commissions, rollback property
taxes and other selling costs.

NOTE 6:  RECONCILIATION OF FINANCIAL STATEMENT NET LOSS TO TAXABLE LOSS

         A reconciliation of financial statement net loss and taxable loss is as
follows:
<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                            ----------------------------------------
                                                               2004            2003           2002
                                                            ---------        --------       --------

<S>                                                         <C>              <C>            <C>
FINANCIAL STATEMENT NET LOSS                                ($316,055)       ($42,714)      ($32,133)
Less:  Book Loss from Write Down of Land                     $211,500              --             --
                                                            ---------        --------       --------
     Taxable loss                                           ($104,555)       ($42,714)      ($32,133)
</TABLE>

NOTE 7:  SUBSEQUENT EVENT

         On February 16, 2005, the Partnership entered into a contract to sell
all remaining assets, approximately 48 acres of unimproved land. The total
proposed sales price is $2,080,000, including earnest money of $20,000 which the
purchaser deposited with a title agency on the contract date. Under the terms of
the contract, the purchaser has up to 90 days from the contract date to conduct
its due diligence, at which time it is required to deposit an additional $50,000
of earnest money to proceed with the purchase. The Partnership's sale of the
property will be contingent upon the approval of a majority of its limited
partners, subsequent to the inspection period and receipt of final earnest
money. Should the sale of the unimproved land held for investment purposes be
consummated, the Partnership will be liquidated during the year ended December
31, 2005.




                                      F-10

<PAGE>

                                INDEX TO EXHIBITS
EXHIBIT NO.
-----------

3.1*         PARTNERSHIP AGREEMENT DATED JULY 27, 1989 (INCORPORATED BY
             REFERENCE TO EXHIBIT A TO AMENDMENT NUMBER 3 TO THE PARTNERSHIP'S
             REGISTRATION STATEMENT ON FORM S-11 FILED ON SEPTEMBER 28, 1989
             (FILE 33-30312 )).

31.1         CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF
             THE SARBANES-OXLEY ACT OF 2002

31.2         CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF
             THE SARBANES-OXLEY ACT OF 2002

32.1         CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF
             THE SARBANES-OXLEY ACT OF 2002

32.2         CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF
             THE SARBANES-OXLEY ACT OF 2002

---------------
* Previously filed