FORM 10-K

                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549

(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, 1998

                               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:  0-16862

                           CAPITAL SOURCE II L.P.-A                 
(Exact name of registrant as specified in its Agreement of Limited Partnership)

Delaware                                             38-2684691                
(State or other jurisdiction                         (IRS Employer 
 of incorporation or organization)                    Identification No.)

Suite 400, 1004 Farnam Street, Omaha, Nebraska       68102  
(Address of principal executive offices)             (Zip Code)

                                (402) 444-1630                      
             (Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

                                      None

Securities Registered Pursuant to Section 12(g) of the Act:

     Beneficial Assignment Certificates ("BACs") representing the beneficial 
assignment of limited partnership interests.

     Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by the 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 (229.405 of the chapter) is not contained herein, 
and will not be contained, to the best of the 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]

     BACs are not currently traded in any market.  Therefore, there is no 
market price or average bid and asked price for BACs within the 60 days prior 
to the date of this filing.

                     DOCUMENTS INCORPORATED BY REFERENCE
                                     None















<PAGE>                               -i-
                              TABLE OF CONTENTS
                                                                               
                                                                           Page
                                                                               
                                                                               
                                    PART I                                     
Item  1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
Item  2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
Item  3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . .  2
Item  4. Submission of Matters to a Vote of Security Holders . . . . . . . .  3
                                                                               
                                   PART II                                     
                                                                               
Item  5. Market for Registrant's Common Equity and                             
         Related Stockholder Matters . . . . . . . . . . . . . . . . . . . .  3
Item  6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . .  3
Item  7. Management's Discussion and Analysis of Financial Condition and       
         Results of Operations . . . . . . . . . . . . . . . . . . . . . . .  5
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. . . . . 11
Item  8. Financial Statements and Supplementary Data . . . . . . . . . . . . 11
Item  9. Changes in and Disagreements With Accountants on Accounting and       
         Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 11
                                                                               
                                   PART III                                    
                                                                               
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . 	12
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . .  14
Item 12. Security Ownership of Certain Beneficial Owners and Management . .  14
Item 13. Certain Relationships and Related Transactions . . . . . . . . . .  14
                                                                               
                                   PART IV                                     
                                                                               
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K. . 15
                                                                               
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32









































<PAGE>                               -ii-
                                    PART I

     Item 1.  Business. Capital Source II L.P.-A (the "Registrant" or the 
"Partnership") was formed in August 1986 under the Delaware Revised Uniform 
Limited Partnership Act to invest principally in federally-insured mortgages 
on multifamily housing properties and to acquire, hold, sell, dispose of and 
otherwise deal with limited partnership interests (the "Partnership Equity 
Investments") in the limited partnerships (the "Operating Partnerships") which 
construct and operate these properties.  The Registrant's investment 
objectives generally are to (i) preserve and protect the Registrant's capital; 
(ii) provide quarterly cash distributions to investors; and (iii) achieve 
increasing current income and long-term capital appreciation through increases 
in income from the Partnership Equity Investments.  Originally, there was a 
fourth investment objective which was to make the BACs freely transferable 24 
to 36 months after the Partnership commenced operations by qualifying the BACs 
for quotation on NASDAQ.  However, at a Special Meeting of BAC Holders on 
December 17, 1990, amendments to the Partnership Agreement were approved to 
only allow limited transferability of BACs to preserve the tax status of the 
Partnership and avoid being designated as a "publicly traded partnership".

     A total of 4,011,101 beneficial assignment certificates representing 
beneficial assignment of limited partnership interests in the Registrant 
("BACs") were sold at $20 per BAC for total capital contributions of 
$80,222,020 prior to the payment of certain organization and offering costs.

On May 7, 1998, a registration statement on Form S-4 was filed with the 
Securities and Exchange Commission by America First Real Estate Investment 
Company, Inc. (AFRIC) relating to a proposed merger of the Registrant and 
Capital Source, L.P. into AFRIC which was formed for the purpose of making 
opportunistic, growth-oriented real estate investments.  Due to significant 
changes in the United States equity and real estate markets in the Fall of 
1998, the general partners of the Registrant have reevaluated the terms of the 
proposed merger and have decided to restructure it so that the resulting 
entity is a publicly-traded limited partnership that will primarily invest in 
residential apartment complexes and other commercial real estate.  Therefore, 
the investment objectives of the new limited partnership will be substantially 
similar to those of the Registrant.  The proposed merger will be subject to 
the consent of the BAC holders of the Registrant and Capital Source, L.P.

     The Registrant originally acquired (i) four mortgage-backed securities 
(the "GNMA Certificates") guaranteed as to principal and interest by the 
Government National Mortgage Association ("GNMA") collateralized by first 
mortgage loans on multifamily housing properties located in three states, (ii) 
a first mortgage loan insured by the Federal Housing Administration (the "FHA 
Loan") on a multifamily housing property located in Charlotte, North Carolina, 
and (iii) Partnership Equity Investments in five limited partnerships which 
own the multifamily housing properties financed by the GNMA Certificates and 
the FHA Loan.  The Partnership has been repaid by GNMA on one of the GNMA 
Certificates and the related property has been deeded to GNMA in lieu of 
foreclosure, thus eliminating the Partnership Equity Investment in this 
property.  Collectively, the remaining GNMA Certificates, the FHA Loan and the 
Partnership Equity Investments are referred to as the "Permanent 
Investments."  A description of the properties financed by the Registrant 
through December 31, 1998, appears in Item 7 hereof.  The Partnership had also 
invested amounts held in its reserve account in certain GNMA securities backed 
by pools of single-family mortgages ("Reserve Investments"); however, at 
December 31, 1998, the Partnership no longer held any GNMA securities in its 
reserve account.

     While principal of and interest on the GNMA Certificates and the FHA Loan 
are ultimately guaranteed by the United States government, the amount of cash 
distributions received by the Registrant from the Partnership Equity 
Investments is a function of the net rental revenues generated by the 
properties owned by the Operating Partnerships.  Net rental revenues from a 
multifamily apartment complex depend on the rental and occupancy rates of the 
property and on the level of operating expenses.  Occupancy rates and rents 
are directly affected by the supply of, and demand for, apartments in the 
market area in which a property is located.  This, in turn, is affected by 
several factors such as local or national economic conditions, the amount of 
new apartment construction and interest rates on single-family mortgage 
loans.  In addition, factors such as government regulation (such as zoning 
laws), inflation, real estate and other taxes, labor problems and natural 
disasters can affect the economic operations of a property.



<PAGE>                               - 1 -

     In each city in which the Registrant's properties are located, such 
properties compete with a substantial number of other apartment complexes.  
Apartment complexes also compete with single-family housing that is either 
owned or leased by potential tenants.  The principal method of competition is 
to offer competitive rental rates.  The Registrant's properties also compete by 
emphasizing property location, condition and amenities.

     The Registrant believes that each of its properties is in compliance in 
all material respects with federal, state and local regulations regarding 
hazardous waste and other environmental matters and the Registrant is not 
aware of any environmental contamination at any of such properties that would 
require any material capital expenditure by the Registrant for the remediation 
thereof.  

     The Registrant is engaged solely in the business of owning mortgages and 
holding equity interests in real estate limited partnerships.  Accordingly, 
the presentation of information about industry segments is not applicable and 
would not be material to an understanding of the Registrant's business taken 
as a whole.

     At December 31, 1998 the Registrant had one employee.  In addition, 
certain services are provided to the Registrant by employees of America First 
Companies L.L.C. which is an affiliate of the general partners of the 
Registrant, and the Registrant reimburses America First Companies L.L.C. for 
such services at cost.  The Registrant is not charged and does not reimburse 
for the services performed by managers and officers of America First 
Companies L.L.C.

     Item 2.  Properties.  The Registrant does not directly own or lease any 
physical properties.  However, by virtue of its interest in the  Partnership 
Equity Investments in the Operating Partnerships, the Registrant indirectly 
owns up to a 99% interest in three multifamily apartment projects.  In 
addition, the Registrant owns a 68.70% interest in another multifamily 
apartment project known as The Ponds at Georgetown.  The multifamily 
apartment projects are described in the following table:

<TABLE>
<CAPTION>
                                                                        Average                    
                                                         Number     Square Feet             Federal
Property Name                  Location                of Units        Per Unit           Tax Basis
--------------------------     -------------------     --------     -----------     ---------------
<S>                            <C>                     <C>          <C>             <C>
Crane's Landing                Winter Park, FL              252            751      $     8,466,230
Delta Crossing                 Charlotte, NC                178            880            4,777,733
Monticello Apartments          Southfield, MI               106          1,027            3,968,783
The Ponds at Georgetown        Ann Arbor, MI                134          1,002            5,406,133 
                                                       --------                     ---------------
                                                            670                     $    22,618,879
                                                       ========                     ===============
</TABLE>

     Depreciation is taken by the Operating Partnerships on each property on a 
straight-line basis over the estimated useful lives of the various components 
of the properties ranging from five to 40 years. 

     The average annual occupancy rate and average effective rental rate per 
unit for each of the properties for each of the last five years are listed in 
the following table:
















<PAGE>                              - 2 -

<TABLE>
<CAPTION>
                                                1998         1997         1996         1995         1994
                                           ----------   ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>          <C>        
CRANE'S LANDING                                                                                           
Average Occupancy Rate                             96%          96%          94%          89%          90% 
Average Effective Annual Rental Per Unit       $7,577       $7,366       $6,954       $6,327       $6,322 
                                                                                                          
DELTA CROSSING                                                                                            
Average Occupancy Rate                             94%          93%          92%          94%          95%  
Average Effective Annual Rental Per Unit       $7,457       $7,260       $7,097       $6,866       $6,380  
                                                                                                          
MONTICELLO APARTMENTS                                                                                     
Average Occupancy Rate                             98%          97%          96%          99%          97%    
Average Effective Annual Rental Per Unit       $9,627       $8,873       $8,804       $8,630       $8,287    
                                                                                                          
THE PONDS AT GEORGETOWN                                                                                   
Average Occupancy Rate                             99%          97%          95%          95%          95%   
Average Effective Annual Rental Per Unit      $10,362       $9,883       $9,515       $9,174       $8,955      
</TABLE>

     In the opinion of the Partnership's management, each of the properties is 
adequately covered by insurance.  For additional information concerning the 
properties, see "Management's Discussion and Analysis of Financial Condition 
and Results of Operations".  A discussion of general competitive conditions to 
which these properties are subject is included in Item 1 hereof.

     Item 3.  Legal Proceedings.  The Registrant has been named as a defendant 
in a purported class action lawsuit filed in the Delaware Court of Chancery on 
February 3, 1999 by two BAC holders, Alvin M. Panzer and Sandra G. Panzer, 
against the Registrant, its general partners, America First and various of 
their affiliates (including Capital Source, L.P., a similar partnership with 
general partners that are affiliates of America First) and Lehman Brothers, 
Inc.  The plaintiffs seek to have the lawsuit certified as a class action on 
behalf of all BAC holders of the Registrant and Capital Source, L.P.  The 
lawsuit alleges, among other things, that a proposed merger transaction 
involving the Registrant and Capital Source, L.P. is deficient and coercive, 
that the defendants have breached the terms of the Registrant's partnership 
agreement and that the defendants have acted in manners which violate their 
fiduciary duties to the BAC holders.  The plaintiffs seek to enjoin the 
proposed merger transaction and to appoint an independent BAC holder 
representative to investigate alternative transactions.  The lawsuit also 
requests a judicial dissolution of the Registrant, an accounting, and 
unspecified damages and costs. 

     There are no other material pending legal proceedings to which the 
Registrant is a party or to which any of its property is subject.

     Item 4.  Submission of Matters to a Vote of Security Holders.  No matter 
was submitted during the fourth quarter of 1998 to a vote of the Registrant's 
security holders.

                                    PART II

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

     (a)	Market Information.  The BACs are subject to various transfer 
restrictions imposed to prevent the Registrant from being treated as a 
publicly traded partnership for federal income tax purposes and, accordingly, 
there is no public trading market for the BACs.

     In the event the General Partners have reason to believe that a requested 
sale, transfer or assignment of BACs would cause the Partnership to be 
characterized as a publicly traded partnership for federal income tax 
purposes, the General Partners will, pursuant to their powers under Section 
5.09 of the Partnership Agreement, refuse to process such requested sale, 
transfer or assignment unless the General Partners receive an unqualified 
opinion of Counsel to the effect that such sale, transfer or assignment of 
BACs, would not cause the Partnership to be characterized as a publicly 
traded partnership for federal income tax purposes.  Neither the General 



PAGE>                               - 3 -

Partners nor the Partnership may be held liable for any losses resulting to a 
holder of BACs or a purchaser of BACs as a result of a requested sale, 
transfer or assignment of BACs not being processed due to these limitations.

     The foregoing restrictions are intended to prevent the trading volume of 
BACs from reaching a level that would cause the Partnership to be 
characterized as a publicly traded partnership under Section 7704 of the Code.  
In the event the Partnership were characterized as a publicly traded 
partnership, the Partnership could be subject to entity level taxation.  In 
such event, amounts otherwise distributable to holders of BACs would be used 
to satisfy federal income tax liabilities of the Partnership and, thus, 
amounts received by holders of BACs would be less than anticipated.

     (b)	Investors.  The approximate number of BAC Holders on December 31, 
1998, was 5,309.

     (c)	Distributions.  Cash distributions are being distributed on a monthly
basis to the record holders of BACs as of the last day of each month.  Total 
cash distributions paid or accrued to BAC Holders during the fiscal years 
ended December 31, 1998, and December 31, 1997, equaled $2,647,327 and 
$3,248,992 respectively.  The cash distributions paid per BAC during the 
fiscal years ended December 31, 1998, and December 31, 1997, were as follows:

<TABLE>
<CAPTION>
                                    Per BAC                
                      Year Ended              Year Ended
                   December 31, 1998       December 31, 1997
                   -----------------       -----------------
<S>                <C>                     <C>              
Income             $     .2175             $     .4082                  
Return of Capital        .4425                   .4018                 
                   -----------------       -----------------
Total              $     .6600             $     .8100               
                   =================       =================
</TABLE>

     Effective with the August 1998 distribution payable in October 1998, the 
Partnership reduced the level of distributions from $.0675 to $.0375 per 
month. See Item 7, Management's Discussion and Analysis of Financial Condition 
and Results of Operations, for information regarding the sources of funds used 
for cash distributions and for a discussion of factors, if any, which may 
adversely affect the Registrant's ability to make cash distributions in 1999 
and thereafter.

     Item 6.  Selected Financial Data.  Set forth below is selected financial 
data for the Registrant.  The information set forth below should be read in 
conjunction with the Financial Statements and Notes thereto filed in response 
to Item 8 hereof.


























<PAGE>                               - 4 -

<TABLE>
<CAPTION>
                                       	            							For the        For the	       For the	       For the        For the
		                                      												  	 Year Ended     Year Ended     Year Ended     Year Ended     Year Ended
		                                    													  Dec. 31, 1998  Dec. 31, 1997  Dec. 31, 1996  Dec. 31, 1995  Dec. 31, 1994
                                                      -------------  -------------  -------------  -------------  -------------
<S>                                                   <C>            <C>            <C>            <C>            <C>
Mortgage-backed securities income	   						           $  2,426,356   $  2,499,844   $  2,520,727   $  2,561,901   $  2,526,266
Interest income on temporary cash investments
  and U.S. government securities                            42,339         91,327      	 147,530        200,678        181,315
Equity in losses of Operating Partnerships	      					    (407,218)      (121,450)          -          (109,900)      (209,805)   
Other income                                                 4,750          3,800          6,950          4,650          2,900    
Gain on sale of mortgage-backed securities                  35,101           -              -            15,670           -       
Operating and administrative expenses                   (1,220,213)      (819,516)      (552,170)      (499,903)      (479,388)
						                                                -------------  -------------  -------------  -------------  -------------
Net income	                                    					  $    881,115   $  1,654,005   $ 	2,123,037   $  2,173,096   $  2,021,288
                                                      =============  =============  =============  =============  =============
Net income, basic and diluted, per 
 Beneficial Assignment Certificate (BAC)              $        .22   $   		   .41   $        .52   $  	     .54  	$        .50
                                                      =============  =============  =============  =============  =============
Cash distributions paid or accrued per BAC            $      .6600   $      .8100   $      .8100   $      .8100   $      .8100
                                                      =============  =============  =============  =============  =============
Investment in FHA Loans                	              $  6,505,857   $  6,538,424   $  6,568,139   $  6,595,251   $  6,619,989
                                                      =============  =============  =============  =============  =============
Investment in GNMA Certificates     	   			           $ 20,497,706   $ 21,674,940   $ 21,895,675   $ 22,142,421   $ 22,799,369
                                                      =============  =============  =============  =============  =============
Total assets	                              			        $ 27,771,206   $ 29,829,534   $ 31,340,155   $ 32,541,767   $ 33,589,321 
                                                      =============  =============  =============  =============  =============
</TABLE>

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

Liquidity and Capital Resources

The Partnership originally acquired: (i) four GNMA Certificates which are 
guaranteed as to principal and interest by the Government National Mortgage 
Association (GNMA) collateralized by first mortgage loans on multifamily 
housing properties located in three states; (ii) an FHA Loan which is insured 
as to principal and interest by the Federal Housing Administration (FHA) on a 
multifamily housing property; and (iii) Partnership Equity Investments in five 
Operating Partnerships which own the multifamily properties financed by the 
GNMA Certificates and the FHA Loan.  The Partnership has been repaid by GNMA 
on one of the GNMA Certificates and the related property has been deeded to 
GNMA in lieu of foreclosure, thus eliminating the Partnership Equity 
Investment in this property.  Collectively, the remaining GNMA 
Certificates, the FHA Loan, and the Partnership Equity Investments are 
referred to as the "Permanent Investments".  The Partnership had also invested 
amounts held in its reserve account in certain GNMA securities backed by pools 
of single-family mortgages (Reserve Investments); however, at December 31, 
1998 the Partnership no longer had any GNMA securities in its reserve account.
The obligations of GNMA and FHA are backed by the full faith and credit of the
United States government.






















<PAGE>                               - 5 -

Distributions

Cash distributions paid or accrued per BAC were as follows:
<TABLE>
<CAPTION>
                                                                               For the             For the             For the 
                                                                            Year Ended          Year Ended          Year Ended
                                                                         Dec. 31, 1998       Dec. 31, 1997       Dec. 31, 1996
                                                                        --------------      --------------      --------------
<S>                                                                     <C>                 <C>                 <C>           
Regular monthly distributions                                                                                                  
  
Income                                                                  $        .2175      $        .4082      $        .5240 
  Return of capital                                                              .4425               .4018               .2860
                                                                        --------------      --------------      --------------
                                                                        $        .6600      $        .8100      $        .8100 
                                                                        ==============      ==============      ==============
Distributions                                                                                                                 
  Paid out of cash flow                                                          .4005      $        .5172      $        .6019 
  Paid out of reserves                                                           .2595               .2928               .2081   
                                                                        --------------      --------------      --------------
                                                                        $        .6600      $        .8100      $        .8100  
                                                                        ==============      ==============      ==============
</TABLE>

Regular monthly distributions to BAC Holders consist primarily of interest 
received on the FHA Loan, GNMA Certificates and the Reserve Investments.  
Additional cash for distributions is received from other temporary 
investments.  The Partnership may draw on reserves to pay operating expenses 
or to supplement cash distributions to BAC Holders.  The Partnership is 
permitted to replenish reserves with cash flows in excess of distributions 
paid.  During 1998, the Partnership depleted its reserves.

As previously reported, the Partnership reduced the level of distributions 
from $.0675 per month to $.0375 per month effective with the August 1998 
distribution payable in October 1998.  A reduction in the distribution was 
required so that cash provided by operating activities and, if necessary, 
withdrawals from the Partnership's reserves, to the extent available, will be 
adequate to meet its short-term liquidity requirements, including the payments 
of distributions to BAC Holders.  The Partnership has no other internal or 
external sources of liquidity.  Under the terms of its Partnership Agreement, 
the Partnership has the authority to enter into short- and long-term debt 
financing arrangements; however, the Partnership currently does not anticipate 
entering into such arrangements.  The Partnership is not authorized to issue 
additional BACs to meet short-term and long-term liquidity requirements.

Asset Quality

The FHA Loan and GNMA Certificates owned by the Partnership are guaranteed as 
to principal and interest by FHA and GNMA, respectively.  The obligations of 
FHA and GNMA are backed by the full faith and credit of the United States 
government.  The Partnership Equity Investments, however, are not insured or 
guaranteed.  The value of these investments is a function of the value of 
the real estate underlying the Operating Partnerships.  

The fair value of the properties underlying the Operating Partnerships is 
based on management's best estimate of the net realizable value of such 
properties, however; the ultimate realized values may vary from these 
estimates.  The net realizable value of the properties is determined based on 
the discounted estimated future cash flows from the properties, including 
estimated sales proceeds.  The calculation of discounted estimated future cash 
flows includes certain variables such as the assumed inflation rates for rents 
and expenses, capitalization rates and discount rates.  These variables are 
supplied to management by an independent real estate firm and are based on 
local market conditions for each property.  In certain cases, additional 
factors such as the replacement value of the property or comparable sales of 
similar properties are also taken into consideration.  








<PAGE>                               - 6 -


The following table shows the occupancy levels of the properties financed by 
the Partnership as of December 31, 1998:

<TABLE>
<CAPTION>
                                                                                                    Number          Percentage
                                                                                Number            of Units            of Units
 Property Name                               Location                         of Units            Occupied            Occupied
 ------------------------------------        ------------------              ---------          ----------         -----------
 <S>                                         <C>                             <C>                <C>                <C>       
 Crane's Landing                             Winter Park, FL                       252                 242                  96%
 Delta Crossing                              Charlotte, NC                         178                 168                  94%
 Monticello Apartments                       Southfield, MI                        106                 104                  98%
 The Ponds at Georgetown                     Ann Arbor, MI                         134                 132                  99%
                                                                             ---------          ----------         -----------
                                                                                   670                 646                  96%
                                                                             =========          ==========         ===========
</TABLE>

The following sets forth certain information regarding the properties financed 
by the Partnership.

Crane's Landing     

Crane's Landing, located in Winter Park, Florida, is a 252-unit complex with 
one-, two- and three-bedroom apartments on fourteen acres of land.  Average 
occupancy was 96% during 1998 and 1997.  Rental revenue remained constant from 
1997 to 1998; however, real estate operating expenses increased approximately 
17% in 1998, compared to 1997.  Real estate operating expenses increased 
primarily due to a 41% increase in repairs and maintenance expenses.  As a 
result, net operating income before depreciation, interest and amortization 
decreased approximately 12% from 1997 to 1998.  The property remained current 
on its mortgage obligations during 1998.

Delta Crossing     

Delta Crossing is a 178-unit apartment complex located in Charlotte, North 
Carolina.  Average occupancy was 94% in 1998, compared to 93% in 1997.  As a 
result of the increase in occupancy and rental rate increases, rental income 
increased approximately 3% in 1998, compared to 1997.  The increase in rental 
income, combined with a decrease of approximately 7% in repairs and 
maintenance expenses and property improvements, was more than offset by an 
increase of 10% in labor expenses and slight increases in other expenses.  As 
a result, net operating income before depreciation, interest and amortization 
decreased approximately 2% from 1997 to 1998.  The property was current on its 
mortgage obligations during 1998.

Monticello Apartments     

Monticello Apartments, located in Southfield, Michigan, contains 106 rental 
units.  Average occupancy was 98% in 1998, compared to 97% in 1997.  Due to 
the slight increase in average occupancy and rental rate increases, rental 
income increased approximately 5% in 1998, compared to 1997.  The increase in 
rental income, was partially offset by an increase of approximately 27% in 
repairs and maintenance expenses.  As a result, net operating income before 
depreciation, interest and amortization increased approximately 6% from 1997 
to 1998.  The property was current on its mortgage obligations during 1998.

The Ponds at Georgetown     

The Ponds at Georgetown consists of 134 apartments located in Ann Arbor, 
Michigan.  Average occupancy was 99% in 1998, compared to 97% in 1997.  Rental 
revenue increased approximately 3.5% in 1998, compared to 1997, primarily due 
to the increase in average occupancy, while real estate operating expenses 
increased approximately 8%.  The increase in real estate operating expenses 
was primarily due to an 8% increase in repairs and maintenance expenses which 
was partially offset by a 17% decrease in real estate taxes.  As previously 
disclosed, the mortgage loan for the Ponds at Georgetown was restructured in 
September 1998, which lowered the interest rate from 9.25% to 7.85%.  In 
connection with the restructuring, shortfalls of $407,218 were funded by the 
Partnership's reserves.  As a result of restructuring the mortgage loan, cash 
flow from the property is now anticipated to be sufficient to cover all the 
operating partnership's cash needs, including mortgage payments and taxes.  
The property was current on its mortgage obligations as of December 31, 1998. 
<PAGE>                               - 7 -

Results of Operations

The tables below compare the results of operations for each year shown.
<TABLE>
<CAPTION>
                                                                               For the	            For the		          For the
                                                                       	    Year Ended     		   Year Ended		       Year Ended
                                                                         Dec. 31, 1998 		    Dec. 31, 1997       Dec. 31, 1996
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>
Mortgage-backed securities income                                       $    2,426,356      $    2,499,844	     $    2,520,727	
Interest income on temporary cash investments	
  and U.S. government securities                                                42,339              91,327		           147,530
Equity in losses of Operating Partnerships 		                                 (407,218)           (121,450)               -    
Other income                                                                     4,750               3,800               6,950
Gain on sale of mortgage-backed securities                                      35,101                -   		              -   
                                                                         --------------     ---------------     ---------------
				                                                                         2,101,328           2,473,521           2,675,207	
Operating and administrative expenses                                        1,220,213             819,516 		          552,170 
                                                                         --------------     ---------------     ---------------
Net income	                                                              $     881,115      $    1,654,005	     $    2,123,037	
                                                                         ==============     ===============     ===============
</TABLE>
<TABLE>
<CAPTION>

                                                                         	    Increase	           Increase
                                                                       		    (Decrease)     		   (Decrease)
                                                                             From 1997 		        From 1996
                                                                        ---------------     ---------------
<S>                                                                     <C>                 <C>
Mortgage-backed securities income                                       $      (73,488)     $      (20,883)
Interest income on temporary cash investments 
  and U.S. government securities                                               (48,988)            (56,203)
Equity in losses of Operating Partnerships                                    (285,768)           (121,450) 
Other income                                                                       950              (3,150)
Gain on sale of mortgage-backed securities   	                                  35,101                -    	
                                                                         --------------     ---------------
				                                                                          (372,193)           (201,686) 
Operating and administrative expenses                                          400,697             267,346 	
                                                                         --------------     ---------------
Net income	                                                              $    (772,890)     $     (469,032)
                                                                         ==============     ===============
</TABLE>

Mortgage-backed securities income decreased $73,488 from 1997 to 1998 and 
$20,883 from 1996 to 1997.   Approximately $31,000 of such decrease from 1997 
to 1998 was attributable to the payoff of the GNMA Certificate on the Ponds at 
Georgetown which had an interest rate of 9% and the issuance of a new GNMA 
Certificate at 7.25%.  The remaining decrease from 1997 to 1998 and from 1996 
to 1997 was attributable to the continued amortization of the principal 
balances of the Partnership's mortgage-backed securities.

Interest income on temporary cash investments and U.S. government securities 
decreased $48,988 from 1997 to 1998 and $56,203 from 1996 to 1997.  These 
decreases were due to withdrawals made from the Partnership's reserves to 
supplement distributions to BAC Holders.

The Partnership's suspended recognizing losses in the Operating Partnerships 
when its entire initial investment had been consumed by such losses.  
Subsequently, losses have been recognized only to the extent of additional 
contributions, net of distributions received, to the Operating Partnership by 
the Partnership.

The Partnership made additional investments in certain Operating Partnerships 
during 1998 and 1997.  As such, equity in losses of Operating Partnerships was 
recorded in 1998 and 1997 to the extent of the additional investments in the 
amount of $407,218 and $121,450, respectively.  No such investments were made 
and therefore no equity in losses was recorded in 1996.
During 1998, the Partnership sold the mortgage-backed securities held in its 
reserves and realized a gain of $35,101 on the sale.  There were no such sales 
or gains during either 1996 or 1997.



<PAGE>                               - 8 -

Operating and administrative expenses increased $400,697 from 1997 to 1998.  
The increase was due to: (i) an increase of approximately $341,000 in 
transaction costs incurred in conjunction with the proposed merger described 
in Note 8 to the financial statements;  (ii) an increase of approximately 
$152,000 in salaries and related expenses primarily due to additional 
management time incurred in conjunction with the aforementioned merger; (iii) 
and increase of approximately $31,000 in consulting fees incurred in 
connection with a review of various options for restructuring to improve total 
investment returns and provide liquidity to the Partnership's investors; (iv) 
a decrease of $116,000 in asset management and partnership administration fees 
payable to the General Partners and (v) decreases of approximately $7,000 in 
other operating and administrative expenses.

Operating and administrative expenses increased $267,346 from 1996 to 1997.  
Approximately $126,000 of such increase was due to costs incurred in 
connection with a review of various options available to the Partnership to 
improve total investment returns and provide liquidity to the Partnership's 
investors.  The remaining increase of $141,346 from 1996 to 1997 was due 
primarily to increases in salaries and related expenses.

Year 2000

The Partnership does not own or operate its own computer system and owns no 
business or other equipment.  However, the operation of the Partnership's 
business relies on the computer system and other equipment maintained by 
America First Companies L.L.C., the parent company of its general partners 
("America First").  In addition, the Partnership has business relationships 
with a number of third parties whose ability to perform their obligations to 
the Partnership depend on such systems and equipment.  Some or all of these 
systems and equipment may be affected by the inability of certain computer 
programs and embedded circuitry to correctly recognize dates occurring after 
December 31, 1999.  America First has adopted a plan to deal with this 
so-called "Year 2000 problem" with respect to its information technology 
("IT") systems, non-IT systems and third party business relationships.

State of Readiness

The IT system maintained by America First consists primarily of personal 
computers, most of which are connected by a local area network.  All 
accounting and other record keeping functions relating to the Partnership that 
are conducted in house by America First are performed on this PC-LAN system.  
America First does not own or operate any "mainframe" computer systems.  The 
PC-LAN system runs software programs that America First believes are 
compatible with dates after December 31, 1999.  America First has engaged a 
third party computer consulting firm to review and test its PC-LAN system to 
ensure that it will function correctly after that date and expects that this 
process, along with any necessary remediation, will be completed by mid-1999.  
America First believes any Year 2000 problems relating to its IT systems will 
be resolved without significant operational difficulties.  However, there can 
be no assurance that testing will discover all potential Year 2000 problems or 
that it will not reveal unanticipated material problems with the America First 
IT systems that will need to be resolved.

Non-IT systems include embedded circuitry such as microcontrollers found in 
telephone equipment, security and alarm systems, copiers, fax machines, mail 
room equipment, heating and air conditioning systems and other infrastructure 
systems that are used by America First in connection with the operation of the 
Partnership's business.  America First is reviewing its non-IT systems along 
with the providers that service and maintain these systems, with initial 
emphasis being placed on those, such as telephone systems, which have been 
identified as necessary to America First's ability to conduct the operation of 
the Partnership's business activities.  America First expects that any 
necessary modification or replacement of such "mission critical" systems will 
be accomplished by mid-1999.

The Partnership has no control over the remediation efforts of third parties 
with which it has material business relationships and the failure of certain 
of these third parties to successfully remediate their Year 2000 issues could 
have a material adverse effect on the Partnership.  Accordingly, America First 
has undertaken the process of contacting each such third party to determine 
the state of their readiness for Year 2000.  Such parties include, but are not 
limited to, the obligors on the Partnership's GNMA Certificates and FHA Loan, 
the Partnership's transfer and paying agent and the financial institutions 
with which the Partnership maintains accounts.  America First has received 

<PAGE>                               - 9 -

initial assurances from certain of these third parties that their ability to 
perform their obligations to the Partnership are not expected to be materially 
adversely affected by the Year 2000 problem.  America First will continue to 
request updated information from these material third parties in order to 
access their Year 2000 readiness.  If a material third party vendor is unable 
to provide assurance to America First that it is, or will be, ready for Year 
2000, America First intends to seek an alternative vendor to the extent 
practical.

Costs

All of the IT systems and non-IT systems used to conduct the Partnership's 
business operations are owned or leased by America First.  Under the terms of 
its partnership agreement, neither America First nor the Partnership's general 
partners may be reimbursed by the Partnership for expenses associated with 
their computer systems or other business equipment.  Therefore, the costs 
associated with the identification, remediation and testing of America First's 
IT and non-IT systems will be paid by America First rather than the 
Partnership.  The Partnership will bear its proportionate share of the costs 
associated with surveying the Year 2000 readiness of third parties.  However, 
the Partnership's share of the costs associated with these activities are 
expected to be insignificant.  Accordingly, the costs associated with 
addressing the Partnership's Year 2000 issues are not expected to have a 
material effect on the Partnership's results of operations, financial position 
or cash flow.

Year 2000 Risks

The Partnership's general partners believe that the most reasonably likely 
worst-case scenario will be that one or more of the third parties with which 
it has a material business relationship will not have successfully dealt with 
its Year 2000 issues and, as a result, is unable to provide services or 
otherwise perform its obligations to the Partnership.  For example, if an 
obligor on the Partnership's GNMA Certificates or FHA Loan encounters a 
serious and unexpected Year 2000 issue, it may be unable to make a timely 
payment of principal and interest to the Partnership.  This, in turn, could 
cause a delay or temporary reduction in cash distributions to BAC holders.  In 
addition, if the Partnership's transfer and paying agent experiences Year 
2000-related difficulties, it may cause delays in making distributions to BAC 
holders or in the processing of transfers of BACs.  It is also possible that 
one or more of the IT and non-IT systems of America First will not function 
correctly, and that such problems may make it difficult to conduct necessary 
accounting and other record keeping functions for the Partnership.  However, 
based on currently available information, the general partners do not believe 
that there will be any protracted systemic failures of the IT or non-IT 
systems utilized by America First in connection with the operation of the 
Partnership's business.

Contingency Plans

Because of the progress which America First has made toward achieving Year 
2000 readiness, the Partnership has not made any specific contingency plans 
with respect to the IT and non-IT systems of America First.  In the event of a 
Year 2000 problem with its IT system, America First may be required to 
manually perform certain accounting and other record-keeping functions.  
America First plans to terminate the Partnership's relationships with material 
third party service providers that are not able to represent to America First 
that they will be able to successfully resolve their material Year 2000 issues 
in a timely manner.  However, the Partnership will not be able to terminate 
its relationships with certain third parties, such as the obligors on its GNMA 
Certificates and FHA Loan, who may experience Year 2000 problems.  The 
Partnership has no specific contingency plans for dealing with Year 2000 
problems experienced with these third parties.

All forecasts, estimates or other statements in this report relating to the 
Year 2000 readiness of the Partnership and its affiliates are based on 
information and assumptions about future events.  Such "forward-looking 
statements" are subject to various known and unknown risks and uncertainties 
that may cause actual events to differ from such statements.  Important 
factors upon which the Partnership's Year 2000 forward-looking statements are 
based include, but are not limited to, (a) the belief of America First that 
the software used in IT systems is already able to correctly read and 
interpret dates after December 31, 1999 and will require little or any 
remediation; (b) the ability to identify, repair or replace mission critical 

<PAGE>                              	- 10 - 

non-IT equipment in a timely manner, (c) third parties' remediation of their 
internal systems to be Year 2000 ready and their willingness to test their 
systems interfaces with those of America First, (d) no third party system 
failures causing material disruption of telecommunications, data transmission, 
payment networks, government services, utilities or other infrastructure, (e) 
no unexpected failures by third parties with which the Partnership has a 
material business relationship and (f) no material undiscovered flaws in 
America First's Year 2000 testing process.

Forward Looking Statements

This report contains forward looking statements that reflect management's 
current beliefs and estimates of future economic circumstances, industry 
conditions, the Partnership's performance and financial results.  All 
statements, trend analysis and other information concerning possible or 
assumed future results of operations of the Partnership and the real estate 
investments it has made (including, but not limited to, the information 
contained in "Management's Discussion and Analysis of Financial Condition and 
Results of Operations"), constitute forward-looking statements.  BAC holders 
and others should understand that these forward looking statements are subject 
to numerous risks and uncertainties and a number of factors could affect the 
future results of the Partnership and could cause those results to differ 
materially from those expressed in the forward looking statements contained 
herein.

     Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.  
The Partnership's primary market risk exposure is interest rate risk.  The 
Partnership's exposure to market risk for changes in interest rates relates 
primarily to its investment securities which is comprised of investments in 
debt securities with fixed interest rates.  The Partnership does not use 
derivative financial instruments to hedge its investment portfolio.

The table below presents principal amounts and weighted average interest rates 
by year of maturity for the Partnership's investment portfolio:

<TABLE>
<CAPTION>                
                    Principal            Weighted Average
   Maturity           Amount               Interest Rate
 ------------    -----------------       -----------------
<C>                <C>                     <C>              
       1999      $        168,912                    8.6%                  
       2000               184,103                    8.6%
       2001               200,668                    8.6%
       2002               218,402                    8.6%
       2003               238,427                    8.6%
 Thereafter            26,033,070                    8.6%

</TABLE>

The aggregate fair value of the Partnership's investment securities at 
December 31, 1998 was $27,248,970.

	    Item 8.  Financial Statements and Supplementary Data.  The Financial 
Statements and supporting schedules of the Registrant are set forth in Item 14 
hereof and are incorporated herein by reference.

	    Item 9.  Changes in and Disagreements With Accountants on Accounting and 
Financial Disclosure.  There were no disagreements with the Registrant's 
independent accountants on accounting principles and practices or financial 
disclosure during the fiscal years ended December 31, 1998 and 1997.

The information required by this Item 9 relating to a change in accountants 
has been previously reported (as that term is defined by Rule 12a-2 of the 
Exchange Act) with the Commission by the Partnership on its Current Report on 
Form 8-K dated October 2, 1998, as amended, and is hereby incorporated by 
reference.








<PAGE>                               - 11 -

                                   PART III

     Item 10.  Directors and Executive Officers of Registrant.  The Registrant 
has no directors or officers.  The general partners of the Registrant are 
America First Capital Source II, L.L.C., (the "America First General Partner") 
and Insured Mortgage Equities II L.P., (the "IME II General Partner"), each of 
which is controlled by America First Companies L.L.C. ("America First").  
Collectively, the America First General Partner and the IME II General Partner 
are referred to as the "General Partners".

	    The following individuals are the officers, directors and managers of the 
America First General Partner, the general partner of the IME II General 
Partner and America First, and each serves for a term of one year.

<TABLE>
<CAPTION>
Name                      Position Held                                    Position Held Since
-----------------------   ----------------------------------            -----------------------
<S>                       <C>                                           <C>
Michael B. Yanney	        Chairman of the Board, President,                       1984
                          Chief Executive Officer and 
                          Manager of America First

                          Chairman and Chief Executive                            1991
                          Officer of the America First
                          General Partner

                          Director of the general partner of the IME II 
                          General Partner                                         1997

Michael Thesing	          Vice President, Secretary, Treasurer and                1984
                          Manager of America First

                          Vice President, Secretary and                           1991
                          Treasurer of the America First
                          General Partner

                          Vice President, Secretary and                           1997
                          Treasurer of the IME II
                          General Partner

William S. Carter, M.D.   Manager of America First                                1994

Martin A. Massengale      Manager of America First                                1994

Alan Baer                 Manager of America First                                1994

Gail Walling Yanney       Manager of America First                                1996

Mariann Byerwalter        Manager of America First                                1997
</TABLE>

	    Michael B. Yanney, 65, has served as the Chairman, President and Chief 
Executive Officer of America First Companies L.L.C. and its predecessors since 
1984.  From 1977 until the organization of the first such fund in 1984, Mr. 
Yanney was principally engaged in the ownership and management of commercial 
banks.  Mr. Yanney also has investments in private corporations engaged in a 
variety of businesses.  From 1961 to 1977, Mr. Yanney was employed by Omaha 
National Bank and Omaha National Corporation (now part of U.S. Bank), where he 
held various positions, including the position of Executive Vice President and 
Treasurer of the holding company.  Mr. Yanney also serves as a member of the 
boards of directors of Burlington Northern Santa Fe Corporation, Forest Oil 
Corporation, Level 3 Communications, Inc., Freedom Communications, Inc., 
Magnum Resources, RCN Corporation, Rio Grande Medical Technologies, Inc., and 
PKS Information Services, Inc.

	    Michael Thesing, 44, has been Vice President and Chief Financial Officer 
of affiliates of America First Companies L.L.C. since July 1984.  He serves as 
President of America First Investment Advisors, L.L.C. and is a member of the 
Board of Managers of America First Companies L.L.C.  From January 1984 until 
July 1984 he was employed by various companies controlled by Mr. Yanney.  He 
was a certified public accountant with Coopers & Lybrand from 1977 through 
1983.


<PAGE>                               - 12 -

	    William S. Carter, M.D., 72, is a retired physician.  Dr. Carter 
practiced medicine for 30 years in Omaha, Nebraska, specializing in 
otolaryngology (disorders of the ears, nose and throat).

	    Martin A. Massengale, 65, is President Emeritus of the University of 
Nebraska, Director of the Center for Grassland Studies and Foundation 
Distinguished Professor.  Prior to becoming President in 1991, he served as 
Interim President from 1989, as Chancellor of the University of Nebraska 
Lincoln from 1981 until 1990 and as Vice Chancellor for Agriculture and 
Natural Resources from 1976 to 1981.  Prior to that time, he was a professor 
and associate dean of the College of Agriculture at the University of 
Arizona.  Dr. Massengale currently serves on the board of directors of Woodmen 
Accident & Life Insurance Company and IBP, Inc. and is a member of the Board 
of Trustees of the Great Plains Funds, Inc.

	    Alan Baer, 76, is presently Chairman of Alan Baer & Associates, Inc., a 
management company located in Omaha, Nebraska.  He is also Chairman of Lancer 
Hockey, Inc., Baer Travel Services, Wessan Telemarketing, Total Security 
Systems, Inc. and several other businesses.  Mr. Baer is the former Chairman 
and Chief Executive Officer of the Brandeis Department Store chain which, 
before its acquisition, was one of the larger retailers in the Midwest.  Mr. 
Baer has also owned and served on the board of directors of several banks in 
Nebraska and Illinois.

	    Gail Walling Yanney, 62, is a retired physician.  Dr. Walling practiced 
anesthesia and was most recently the Executive Director of the Clarkson 
Foundation until October of 1995.  In addition, she was a director of FirsTier 
Bank, N.A., Omaha prior to its merger with First Bank, N.A..  Ms. Yanney is 
the wife of Michael B. Yanney.

	    Mariann Byerwalter, 38, is Vice President of Business Affairs and Chief 
Financial Officer of Stanford University.  Ms. Byerwalter was Executive Vice 
President of America First Eureka Holdings, Inc. ("AFEH") and EurekaBank from 
1988 to January 1996.  Ms. Byerwalter was Chief Financial Officer and Chief 
Operating Officer of AFEH, and Chief Financial Officer of EurekaBank from 1993 
to January 1996.  She was an officer of BankAmerica Corporation and its 
venture capital subsidiary from 1984 to 1987.  She served as Vice President 
and Executive Assistant to the President of Bank of America and was a Vice 
President in the bank's Corporate Planning and Development Department.  Ms. 
Byerwalter currently serves on the board of directors of Redwood Trust, Inc. 

  

































<PAGE>                               - 13 -

   Item 11.  Executive Compensation.  The Registrant does not have any 
directors or officers.  Certain services are provided to the Registrant by 
managers and officers of America First.  None of the directors or officers of 
the General Partners or the managers or officers of America First receive 
compensation from the Registrant and neither General Partner receives 
reimbursement from the Registrant for any portion of their salaries.  
Remuneration paid by the Registrant to the General Partners pursuant to the 
terms of its agreement of limited partnership during the period ending 
December 31, 1998, is described in Note 6 to the Notes to the Financial 
Statements filed in response to Item 8 hereof.

     Item 12.  Security Ownership of Certain Beneficial Owners and Management. 

     (a) No person is known by Registrant to own beneficially more than 5% of 
the BACs.

     (b)	No director or officers of the General Partners or managers or 
officers of America First own any BACs.

     (c) There are no arrangements known to the Registrant the operation of 
which may at any subsequent date result in a change in control of the 
Registrant.

     Item 13.  Certain Relationships and Related Transactions.  The members of 
the America First General Partner are America First Companies L.L.C and Mr. 
Yanney.  The general partner of the IME II General Partner is CS Housing II, 
Inc. ("CSII"), which is owned by America First.  Except as described herein, 
the Registrant is not a party to any transaction or proposed transaction with 
either General Partner or with any person who is (i) a member, director or 
executive officer of the America First General Partner or manager or officer 
of America First or a director or officer of CSII, (ii) a nominee for election 
as a director or manager of the America First General Partner, or a manager of 
America First or CSII, (iii) an owner of more than 5% of the BACs or (iv) a 
member of the immediate family of any of the foregoing persons.
     
     The General Partners are entitled to receive an asset management and 
partnership administrative fee equal to 0.5% of invested assets per annum, the 
first $50,000 of which shall be paid each year with the balance payable only 
during such years that a 6.5% annual return has been paid to investors on a 
noncumulative basis.  An additional fee of 0.5% of invested assets will be 
paid in those years that an 11.5% annual return has been paid to investors on 
a cumulative basis.  Any unpaid amounts will accrue and be payable only after 
a 11.5% annual return to investors has been paid on a cumulative basis and the 
investors have received the return of their capital contributions.  During 
1998, the General Partners earned, and the Registrant incurred $50,000 in 
such asset management and partnership administration fees.  

     During 1998, the Registrant paid or reimbursed the General Partners 
$842,272 for certain costs and expenses incurred in connection with the 
operation of the Registrant, including legal and accounting fees and investor 
communication costs, such as printing and mailing charges.  See Note 6 to 
Notes to Financial Statements filed in response to Item 8 hereof for a 
description of these costs and expenses.

    America First Properties Management, L.L.C. (the "Manager") has been 
retained to provide property management services with respect to the 
day-to-day operation of The Ponds at Georgetown.  The property management 
agreement provides that the Manager is entitled to receive a management fee 
equal to a stated percentage of the gross revenues generated by the property 
under management.  Management fees payable to the Manager are 4% of gross 
revenues.  Because the Manager is an affiliate of the General Partner the 
management fees payable by the Registrant to the Manager may not exceed the 
lesser of (i) the rates that the Registrant would pay an unaffiliated manager 
for similar services in the same geographic location or (ii) the Manager's 
actual cost for providing such services.  During the year ended December 31, 
1998, the Manager was paid property management fees of $41,167.









<PAGE>                               - 14 -

	                                   PART IV

     Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8 K.
(a) The following documents are filed as part of this report:

     1.	Financial Statements.  The following financial statements are included 
in response to Item 8 of this report:

   		Independent Auditors' Report 

     Balance Sheets of the Registrant as of December 31, 1998, 
     and December 31, 1997.

     Statements of Income and Comprehensive Income of the Registrant for the 
     years ended December 31, 1998, December 31, 1997, and December 31, 1996.

     Statements of Partners' Capital (Deficit) of the Registrant for the 
     years ended December 31, 1998, December 31, 1997, and December 31, 1996.

     Statements of Cash Flows of the Registrant for the years 
     ended December 31, 1998, December 31, 1997, and December 31, 1996.

     Notes to Financial Statements of the Registrant.

     2.	Financial Statement Schedules.  The information required to be set 
forth in the financial statement schedules is included in the Financial 
Statements filed in response to Item 8 hereof.

     3.	Exhibits.  The following exhibits were filed as required by Item 14(c) 
of this report.  Exhibit numbers refer to the paragraph numbers under Item 601 
of Regulation S-K:

          4(a).	Agreement of Limited Partnership of Capital Source II L.P.-A 
     (incorporated herein by reference from Exhibit A of the Prospectus 
     contained in the Registrant's Post Effective Amendment No. 4 dated 
     February 5, 1987, to the Registration Statement on Form S-11 (Commission 
     File No. 0-16862)).

          4(b).	Beneficial Assignment Certificate (incorporated by reference 
     from Exhibit 10(a) to the Registrant's Amendment No. 2 dated January 27, 
     1987, to the Registration Statement on Form S-11 (Commission File No. 0-
     16862)).

          24.	Power of Attorney 

          27.	Financial Data Schedule

(b) The Registrant filed the following reports on Form 8-K during the last 
quarter of the period covered by this report:

        Date of Report       Item Reported         Financial Statements Filed
       ---------------    --------------------     --------------------------

       October 2, 1998    Item 4. Change in           No 
                                  Registrant's
                                  Certifying 
                                  Accountant

                          Item 5. Other Events

                          Item 7. Financial
                                  Statements 
                                  and Exhibits












<PAGE>                               - 15 -

Independent Auditors' Report

To the Partners
Capital Source II L.P.-A:

We have audited the accompanying balance sheets of Capital Source II L.P.-A as 
of December 31, 1998 and 1997, and the related statements of income and 
comprehensive income, partners' capital (deficit) and cash flows for the three 
years in the period ended December 31, 1998.  These financial statements are 
the responsibility of the Partnership's management.  Our responsibility is to 
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  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 Capital Source II L.P.-A as 
of December 31, 1998 and 1997, and the results of its operations and its cash 
flows for each of the three years in the period ended December 31, 1998, in 
conformity with generally accepted accounting principles.


Omaha, Nebraska	       						
March 19, 1999				               					 /s/KPMG Peat Marwick LLP












































<PAGE>                               - 16 -

CAPITAL SOURCE II L.P.-A
Balance Sheets
<TABLE>
<CAPTION>

                                                                                             Dec. 31, 1998       Dec. 31, 1997
                                                                                            ---------------     ---------------
<S>                                                                                         <C>                 <C>
Assets
 Cash and temporary cash investments, at cost which
  approximates market value                                                                 $      432,999      $    1,240,992
 Investment in FHA Loan (Note 4)                                                                 6,505,857           6,538,424
 Investment in GNMA Certificates (Note 4)                                                       20,497,706          21,674,940
 Investment in Operating Partnerships (Note 5)                                                        -                   -   
 Interest receivable                                                                               195,440             213,024
 Other assets                                                                                      139,204             162,154
                                                                                            ---------------     ---------------
                                                                                            $   27,771,206      $   29,829,534
                                                                                            ===============     ===============
Liabilities and Partners' Capital (Deficit)
	Liabilities
		Accounts payable (Note 6)	                                                                $      347,446      $      327,513
		Distribution payable (Note 3)		                                                                  303,871             546,968
                                                                                            ---------------     ---------------
                                                                                             		    651,317             874,481
                                                                                            ---------------     ---------------
 Partners' Capital (Deficit)
	 General Partner	                                                                                (295,259)           (276,907)
 	Beneficial Assignment Certificate Holders
			($6.83 per BAC in 1998 and $7.29 in 1997)	                                                   27,415,148          29,231,960
                                                                                            ---------------     ---------------
                                                                                          		    27,119,889          28,955,053
                                                                                            ---------------     ---------------
                                                                                      				  $   27,771,206      $   29,829,534
                                                                                            ===============     ===============
</TABLE>

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





































<PAGE>                               - 17 -

CAPITAL SOURCE II L.P.-A
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
                                                      			                      For the             For the             For the
                                               			                          Year Ended          Year Ended          Year Ended
                                               				                      Dec. 31, 1998       Dec. 31, 1997	      Dec. 31, 1996
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>
Income
	Mortgage-backed securities income (Note 4)                             $    2,426,356      $    2,499,844      $    2,520,727
	Interest income on temporary cash investments	
  and U.S. government securities                                                42,339              91,327             147,530
 Equity in losses of Operating Partnerships (Note 5)   		                     (407,218)           (121,450)               -    
 Other income                                                                    4,750               3,800               6,950 
 Gain on sale of mortgage-backed securities                                     35,101                -                   -   
     	                                                                  ---------------     ---------------     ---------------
                                                                             2,101,328           2,473,521           2,675,207
Expenses
	Operating and administrative expenses (Note 6)		                            1,220,213             819,516             552,170
                                                                        ---------------     ---------------     ---------------
Net income	                                                                    881,115           1,654,005           2,123,037
Other comprehensive income:
 Unrealized gains on securities        
   Net unrealized holding gains (losses) arising during the year                (7,110)              5,969             (42,500)
   Plus: reclassification adjustment for losses included in net income         (35,101)               -                   - 
                                                                        --------------      --------------      --------------
   Change in net unrealized holding gains                                      (42,211)              5,969             (42,500)
                                                                        --------------      --------------      --------------
Net comprehensive income                                                $      838,904      $    1,659,974      $    2,080,537     
                                                                        ==============      ==============      ==============
Net income allocated to:
	General Partner	                                                       $        8,811      $       16,540      $       21,230
	BAC Holders		                                                                 872,304           1,637,465           2,101,807	
                                                                        ---------------     ---------------     ---------------
			                                                                     $      881,115      $    1,654,005      $    2,123,037
                                                                        ===============     ===============     ===============
Net income, basic and diluted, per BAC	                                 $          .22      $          .41      $          .52
                                                                        ===============     ===============     ===============
Weighted average number of BACs outstanding	                                 4,011,101           4,011,101           4,011,101
                                                                        ===============     ===============     ===============

The accompanying notes are an integral part of the financial statements.
</TABLE>































<PAGE>                               - 18 -
CAPITAL SOURCE II L.P.-A
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FROM DECEMBER 31, 1995 TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
                                                                                

                                                           General             BAC
                                                          Partners            Holders               Total
                                                    ---------------     ---------------     ---------------
<S>                                                 <C>                 <C>                 <C>          
Partners' Capital (Deficit) (excluding 
 accumulated other comprehensive income)
  Balance at December 31, 1995,																					$					(249,463)					$			31,948,883						$			31,699,420	
  Net income                                                21,230           2,101,807           2,123,037
  Cash distributions paid or accrued (Note 3)              (32,818)         (3,248,992)         (3,281,810) 
                                                     ---------------     ---------------     ---------------
  Balance at December 31, 1996                            (261,051)         30,801,698   	      30,540,647
  Net income				                                            16,540		         1,637,465  	        1,654,005
  Cash distributions paid or accrued (Note 3)		            (32,818)		       (3,248,992)         (3,281,810)
                                                      ---------------     ---------------     ---------------
  Balance at December 31, 1997                            (277,329)         29,190,171          28,912,842
  Net income                                                 8,811             872,304             881,115
  Cash distributions paid or accrued (Note 3)              (26,741)         (2,647,327)         (2,674,068)
                                                    ---------------     ---------------     ---------------
                                                   	      (295,259)         27,415,148          27,119,889
                                                    ---------------     ---------------     ---------------
Accumulated Other Comprehensive Income
 Balance at December 31, 1995                                  787              77,955              78,742
  Other comprehensive income                                  (425)            (42,075)            (42,500)
                                                    ---------------     ---------------     ---------------
 Balance at December 31, 1996                                  362              35,880              36,242
  Other comprehensive income                                    60               5,909               5,969 
                                                    ---------------     ---------------     ---------------
 Balance at December 31, 1997                                  422              41,789              42,211
  Other comprehensive income                                  (422)            (41,789)            (42,211)
                                                    ---------------     ---------------     ---------------
                                                              -                   -                   -   
                                                    ---------------     ---------------     ---------------
Balance at December 31, 1998                        $     (295,259)     $   27,415,148      $   27,119,889
                                                    ===============     ===============     ===============

The accompanying notes are an integral part of the financial statements.
</TABLE>
































<PAGE>                               - 19 -
CAPITAL SOURCE II L.P.-A
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                               For the             For the             For the
                                                                            Year Ended          Year Ended	         Year Ended
                                                                         Dec. 31, 1998       Dec. 31, 1997	      Dec. 31, 1996
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>
Cash flows from operating activities			
 Net income			                                                          $      881,115      $    1,654,005      $   2,123,037
  Adjustments to reconcile net income to
    net cash provided by operating activities
   Equity in losses of Operating Partnerships	 			                             407,218             121,450               -   
   Amortization of discount on mortgage-backed securities																							(1,471)													(1,397)											 (9,400)
   Gain on sale of mortgage-backed securities				                              (35,101)               -                  -    
   Decrease in interest receivable         																																				 17,584               6,637        	    26,654 
   Decrease in other assets																																																				 22,950            	 63,589           		62,156 
   Increase (decrease) in accounts payable																																					 19,933             111,215               (339)
																																																																								---------------     ---------------     ---------------
   Net cash provided by operating activities                                 1,312,228           1,955,499           2,202,108
                                                                        ---------------     ---------------     ---------------
Cash flows from investing activities
 FHA Loan and GNMA principal payments received                                 271,807             257,816             253,258
 Disposition of mortgage-backed securities                                   5,046,437                -                   -   
 Proceeds from sale of available-for-sale securities                           915,012                -                   -   
 Acquisition of GNMA Certificate                                            (5,029,094)               -                   -    
 Investments in Operating Partnerships                                        (407,218)           (121,450)               -    
 Maturity of U.S. government securities                                           -                   -              2,500,000
                                                                        ---------------     ---------------     ---------------
  Net cash provided by investing activities                                    796,944             136,366           2,753,258 
                                                                        ---------------     ---------------     ---------------
Cash flows from financing activities
 Distributions paid				                                                     (2,917,165)         (3,281,810)         (3,281,810)
                                                                        ---------------     ---------------     ---------------
Net increase (decrease) in cash and temporary cash investments	               (807,993)         (1,189,945)          1,673,556 
Cash and temporary cash investments at beginning of year  				               1,240,992           2,430,937             757,381
                                                                        ---------------     ---------------     ---------------
Cash and temporary cash investments at end of year  			                 $      432,999      $    1,240,992      $    2,430,937
                                                                        ===============     ===============     ===============
</TABLE>

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

































<PAGE>                               - 20 -

CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998

1. Organization

Capital Source II L.P.-A (the Partnership) was formed on August 22, 1986, 
under the Delaware Revised Uniform Limited Partnership Act.  The General 
Partners of the Partnership are Insured Mortgage Equities II L.P. and America 
First Capital Source II, L.L.C. (the General Partners).  

The Partnership was formed to invest principally in federally-insured 
mortgages on multifamily housing properties and limited partnership interests 
in the Operating Partnerships which construct and operate these properties.  
Each federally insured loan is guaranteed in amounts equal to the face amount 
of the mortgage, by the Federal Housing Administration (FHA) or the Government 
National Mortgage Association (GNMA).  Hereinafter, the Partnership's 
investments in such mortgages are referred to as investments in 
mortgage-backed securities.  The Operating Partnerships are geographically 
located as follows: (i) two in Michigan; and, (ii) one each in Florida and 
North Carolina.

CS Properties II, Inc. which is owned by the General Partners, serves as the 
Special Limited Partner for the Operating Partnerships.  The Special Limited 
Partner has the power, among other things, to remove the general partners of 
the Operating Partnerships under certain circumstances and to consent to the 
sale of the Operating Partnerships' assets.  CS Properties II, Inc. also 
serves as a co-general partner of The Ponds at Georgetown.

The Partnership will terminate subsequent to the sale of all properties but in 
no event will the Partnership continue beyond December 31, 2035.

2. Summary of Significant Accounting Policies

 A)Method of Accounting
   The financial statements of the Partnership are prepared on the accrual 
   basis of accounting in accordance with generally accepted accounting 
   principles.

   The preparation of financial statements in conformity with generally 
   accepted accounting principles requires management to make estimates and 
   assumptions that affect the reported amounts of assets and liabilities and 
   disclosure of contingent assets and liabilities at the date of the 
   financial statements and the reported amounts of revenues and expenses 
   during the reporting period.  Actual results could differ from those 
   estimates.
 
 	B)Investment in Mortgage-Backed Securities
    Investment securities are classified as held-to-maturity, 
				available-for-sale, or trading.  Investments classified as 
    held-to-maturity are carried at amortized cost.  Investments classified as 
    available-for-sale are reported at fair value, as determined by reference 
				to published sources.  Any unrealized gains or losses are excluded from 
				earnings and reflected in other comprehensive income.  Subsequent 
    increases and decreases in the net unrealized gain/loss on the 
    available-for-sale securities are reflected as adjustments to the carrying
    value of the portfolio and in other comprehensive income.  The Partnership 
    does not have investment securities classified as trading.

















<PAGE>                               - 21 -

CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998

	C)	Investment in Operating Partnerships    
    The investment in Operating Partnerships consists of interests in limited
    partnerships which own properties underlying the mortgage-backed securities
    and are accounted for using the equity method. The investments 
				by the Partnership in the Operating Partnership were recorded at the cost 
				to acquire such interests.  Subsequently losses were recorded by the 
				Partnership as they were realized by the Operating Partnerships.  The 
				Partnerships suspended recognizing losses in the Operating Partnerships 
				when its entire initial investment had been consumed by such losses.  
				Subsequently, losses have been recognized only to the extent of additional 
				contributions, net of distributions received, to the Operating Partnerships
			 by the Partnership.  The Operating Partnerships are not insured or 
				guaranteed.  The	value of these investments is a function of the value of
			 the real estate owned by the Operating Partnerships.  With regard to the
			 Operating	Partnerships, the Partnership is not the general partner and it 
    has no legal obligation to provide additional cash support nor has it
			 indicated any commitment to provide this support, accordingly it has not
				reduced its investment in these Operating Partnerships below zero.

  D)Income Taxes
   No provision has been made for income taxes since BAC Holders are required 
   to report their share of the Partnership's income for federal and state 
   income tax purposes.  The tax basis of the Partnership's assets and 
   liabilities exceeded the reported amounts by $1,236,222 and $1,817,163 at 
   December 31, 1998, and December 31, 1997, respectively.

 E)Temporary Cash Investments
   Temporary cash investments are invested in short-term debt securities 
   purchased with original maturities of three months or less.

 F)Net Income per Beneficial Assignment Certificate (BAC)
   Net income per BAC was calculated based on the number of BACs outstanding 	
   (4,011,101) during each year presented.

 G)Comprehensive Income
   In 1998, the Partnership adopted Statement of Financial Accounting 
   Standards No. 130, "Reporting Comprehensive Income" (SFAS 130).  SFAS 130 
   requires the display and reporting of comprehensive income, which includes 
   all changes in Partners' Capital with the exception of additional 
   investments by partners or distributions to partners.  Comprehensive income 
   for the Partnership includes net income and the change in net unrealized 
   holding gains (losses) on investments.  The adopotion of SFAS 130 had no 
   impact on total Partners' Capital.

 H)Segment Reporting   
   In 1998, the Partnership adopted Statement of Financial Accounting 
   Standards No. 131, "Disclosures about Segments of an Enterprise and    
   Related Information" (SFAS 131).  SFAS 131 requires that a public business
   enterprise report financial and descriptive information about its          
   reportable operating segments.  The adoption of SFAS 131 did not have an
   impact on the financial reporting of the Partnership as it is engaged 
   solely in the business of owning mortgages and holding equity interests
   in real estate limited partnerships.

 I)New Accounting Pronouncements   
   In June 1998, the Financial Accounting Standards Board issued Statement of
   Financial Accounting Standards No 133, "Accounting for Derivative  
   Instruments and Hedging Activities" (SFAS 133).  This statement provides new
   accounting and reporting standards for the use of derivative instruments.  
   Adoption of this statement is required by the Partnership effective 
   January 1, 2000.  Management believes that the impact of such adoption will 
   not be material to the financial statements.                     
 
   In April 1998, the Accounting Standards Executive Committee issued 
   Statement of Position 98-5, "Reporting on the Costs of 
   Start-Up Activities" (SOP 98-5).  This statement requires costs of start-up
   activities and organization costs to be expensed as incurred.  Adoption of 
   this statement is required by the Partnership effective January 1, 1999.
   Management intends to adopt the statement as required in fiscal 1999.
   Management believes that the impact of such adoption will not have an 
   impact to the financial statements.
<PAGE>                               - 22 -

CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998

3. Partnership Income, Expenses and Cash Distributions

Profits and losses from continuing operations and cash available for 
distribution will be allocated 99% to the investors and 1% to the General 
Partners.  Certain fees payable to the General Partners will not become due 
until investors have received certain priority returns.  Cash distributions 
included in the financial statements represent the actual cash distributions 
made during each year and the change in cash distributions accrued at the end 
of each year.

The General Partners will receive 1% of the net proceeds from any sale of 
Partnership assets.  The General Partners will receive a termination fee equal 
to 3% of all sales proceeds less actual costs incurred in connection with all 
sales transactions, payable only after the investors have received a return of 
their capital contributions and an 11.5% annual return on a cumulative basis.  
The General Partners will also receive a fee equal to 9.1% of all cash 
available for distribution and sales proceeds (after deducting from cash 
available or sales proceeds any termination fee paid therefrom) after 
investors have received a return of their capital contributions and an 11.5% 
annual return on a cumulative basis.

4.	Investment in Mortgage-Backed Securities

The mortgage-backed securities held by the Partnership represent Government 
National Mortgage Association (GNMA) Certificates and Federal Housing 
Administration (FHA) loans.  The GNMA Certificates are backed by 
first mortgage loans on multifamily housing properties and pools of 
single-family properties.  The GNMA Certificates are debt securities issued by 
a private mortgage lender and are guaranteed by GNMA as to the full and timely 
payment of principal and interest on the underlying loans.  The FHA loan is 
guaranteed as to the full and timely payment of principal and interest on the 
underlying loans.

At December 31, 1998, there were no available-for-sale securities.  At 
December 31, 1998, the total amortized cost, gross unrealized holding gains 
and aggregate fair value of held-to-maturity securities were $27,003,563, 
$245,407, and $27,248,970, respectively.

At December 31, 1997, the total amortized cost, gross unrealized holding 
gains and aggregate fair value of available-for-sale securities were 
$1,008,507, $42,211 and $1,050,718, respectively.  At December 31, 1997, the 
total amortized cost, gross unrealized holding gains and aggregate fair value 
of held-to-maturity securities were $27,162,646, $331,442, and $27,494,088, 
respectively.

During May and August of 1998, the Partnership sold available-for-sale 
mortgage-backed securities with an amortized cost of $879,911 for $915,012 
thereby recognizing a gain of $35,101 on the sales.























<PAGE>                               - 23 -

CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998



Descriptions of the Partnership's mortgage-backed securities held during the 
year ended December 31, 1998, are as follows:
<TABLE>
<CAPTION>                                                                                                                      
																																																																																																																									Income
                                                           	  Number    Interest       Maturity    	 	  Carrying         Earned
Type of Security and Name	          	Location               of Units    	   Rate      	    Date		         Amount        in 1998
-------------------------------     	-------------------   ----------  ----------   ------------   --------------   ------------
<S>                                 	<C>                   <C>         <C>          <C>            <C>              <C>
Held-to-Maturity
	FHA Loan:
 	Delta Crossing                      Charlotte, NC              178      9.10%          10/01/30  $   6,505,857     $   593,414
	GNMA Certificates:
	 Crane's Landing                     Winter Park, FL            252      8.75%          12/15/30     10,176,802         892,610
 	Monticello Apartments               Southfield, MI             106      8.75%          11/15/29      5,298,123         464,821
 	The Ponds at Georgetown             Ann Arbor, MI              134      7.50% (1)      12/15/29      5,022,781         436,281
																																																																																																			--------------    ------------
																																																																																																						20,497,706							1,793,712	
																																																																																																			--------------    ------------
																																																																																																						27,003,563							2,387,126
Availible-for-sale:
	GNMA Certificates:
	 Pools of single-family properties                                       7.58% (2)   2008 to 2009 	  	     -    (3)      39,230
                                                                                                 	 --------------    ------------
Balance at December 31, 1998                                                                  				 $ 	27,003,563     $ 2,426,356
                                                                                                  	==============    ============
(1) During the fourth quarter of 1998, this GNMA Certificate was repaid and
    a new GNMA Certificate was issued.  The interest rate on the reissued GNMA
    Certificate is 7.5% compared to 9% on the repaid GNMA Certificate.
(2) Represents effective yield to the Partnership.
(3) Reserve account asset.



Reconciliation of the carrying amount of the mortgage-backed securities is as 
follows:

</TABLE>
<TABLE>
<CAPTION>
                                                                               For the             For the             For the
                                                                            Year Ended          Year Ended          Year Ended
                                                                         Dec. 31, 1998       Dec. 31, 1997       Dec. 31, 1996
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>
Balance at beginning of year                                            $  	28,213,364      $   28,463,814      $   28,737,672
	Additions
		Acquisition of GNMA Certificate                                            5,029,094 											    -            	 	    -    
		Amortization of discount on mortgage-backed securities 																								1,471        			    1,397       				    1,470
	Deductions
		FHA Loan and GNMA principal payments received                               (271,807)           (257,816)           (253,258)
		Disposition of mortgage-backed securities                                 (5,046,437)								       -            	 	    -    
		Proceeds from sale of available-for-sale securities                         (915,012)								       -            	 	    -    
		Change in net unrealized holding gains on
   available-for-sale mortgage-backed securities                               (42,211) 											  5,969             (22,070)
                                                                        ---------------     ---------------     ---------------
Balance at end of year                      					                       $ 		27,003,563      $   28,213,364      $   28,463,814
                                                                        ===============     ===============     ===============
</TABLE>












<PAGE>                               - 24 -

CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998

                                          		
5.	Investment in Operating Partnerships

The Partnership's Operating Partnerships consist of interests in limited 
partnerships which own multifamily properties financed by the GNMA 
Certificates and FHA Loan held by the Partnership.  The limited partnership 
agreements originally provided for the payment of a base return on the equity 
provided to the limited partnerships and for the payment of additional amounts 
out of a portion of the net cash flow or net sale or refinancing proceeds of 
the properties, subject to various priority payments.  

Descriptions of the Operating Partnerships held at December 31, 1998 are as
follows:

<TABLE>
<CAPTION>
                                                                                                                          1998
                                                                                                                  			Equity in
                                                                                                                     Losses of
                                                                                                       Carrying      Operating
Name                         	Location                 Partnership Name			                               Amount   Partnerships
------------------------      ---------------------    -----------------------------------------    ------------  -------------
<S>                           <C>                      <C>                                          <C>           <C>
Delta Crossing                Charlotte, NC            Delta Crossing Limited Partnership            $     -      $       -
Crane's Landing               Winter Park, FL          Crane's Landing Partner, Ltd.               				    -              -
Monticello Apartments         Southfield, MI           Centrum Monticello Limited Partnership              -              -
The Ponds at Georgetown       Ann Arbor, MI            Ponds at Georgetown Limited Partnership             -          (407,218)
                                                                                                    ------------   ------------
Balance at December 31, 1998                                                            					       $      -       $  (407,218)
                                                                                                    ============   ============
</TABLE>

Reconciliation of the carrying amount of the Operating Partnerships is as 
follows:

<TABLE>
<CAPTION>
                                                                              For the             For the             For the
                                                                           Year Ended          Year Ended          Year Ended
                                                                        Dec. 31, 1998       Dec. 31, 1997       Dec. 31, 1996
                                                                       ---------------     ---------------     ---------------
<S>                                                                    <C>                 <C>                 <C>
Balance at beginning of year                  								                 $         -         $          -        $          -    
	Addition
  Investment in Operating Partnerships                                        407,218              121,450                -   
 Deduction
		Equity in losses of Operating Partnerships                          							(407,218)            (121,450)               -    
	                                                                       ---------------      ---------------     ---------------
Balance at end of year                   					                         $         -          $ 	       -         $         -  
                                                                       ===============      ===============     ===============
</TABLE>




















<PAGE>                               - 25 -

CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998

Combined Financial Statements of the Operating Partnerships are as follows:

CAPITAL SOURCE II L.P.
OPERATING PARTNERSHIPS BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                            
                                                                                             Dec. 31, 1998       Dec. 31, 1997
                                                                                            ---------------     ---------------
<S>                                                                                         <C>                 <C>
Assets
 Investment in real estate:
		Land																						                                                              	$  		2,800,750      $    2,800,750
		Buildings																				                                                               	24,406,463          24,396,923
 	Personal Property																																																																													1,757,049											1,666,485		
																					                                                   																				  --------------     ---------------
																																																																																															28,964,262										28,864,158			
Less accumulated depreciation															                                                 		(7,290,932)									(6,598,576)
																																																																																														--------------     ---------------	

 	Net investment in real estate                                                             	  21,673,330          22,265,582

		Cash and temporary cash investments, at cost
			which approximates market value	                                                             	 632,149           	 491,562
		Escrow deposits and property reserves                                                      			  606,575			 									613,261	
		Interest and other receivables																																																																			19,437															7,442	
		Deferred mortgage issuance cost, net of
			accumulated amortization																																																																					1,394,161											1,428,684
  Other assets																																																																																				193,964													234,560
																																																																																														--------------     ---------------
																																																																																											$			24,519,616						$			25,041,091
																																																																																														==============					===============

Liabilities and Partners' Capital (Deficit)
	Liabilities
		Accounts payable and accrued expenses                                                    $      307,981      $      850,743
		Mortgage loan payable										                                                           		 27,186,893          27,164,788
		Intercompany interest payable																																																																			294,222         			 247,487
		Due to general partners and their affiliates                                                	   920,347     							 961,563
	                                                                                            	---------------     ---------------
																																																																																															28,709,443          29,224,581
																																																																																														---------------     ---------------
																																			
 Partners' Capital (Deficit)
	 General Partners                                                                             (4,189,827)         (4,183,490)
 	Limited Partners																																																																																					-              				 -		
                                                                                           	 ---------------     ---------------
																																																																																															(4,189,827)         (4,183,490)
																																																																																																																															
                                                                                          	$  	24,519,616     $ 	 	25,041,091
                                                                                           	 ===============   	 ===============
</TABLE>


















<PAGE>                               - 26 -

CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998

<TABLE>
CAPITAL SOURCE II L.P.
OPERATING PARTNERSHIPS INCOME STATEMENTS                                               
                                                                         Dec. 31, 1998        Dec. 31, 1997      	Dec. 31, 1996
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>
Income
 Rental income																																																										$				5,220,888      $  	 5,105,108      $		  4,854,898
	Interest on temporary cash investments 																																							 19,993         				 13,084   				       20,781
 Other income		                                                              		351,218      			    198,870    			      154,855
                                                                        ---------------     ---------------     ---------------
			                                                                     	   	5,592,099      	    5,317,062         	 5,030,534
                                                                        ---------------     ---------------     ---------------
Expenses
	Real estate operating expenses																																													2,779,741	          2,504,026     	     2,325,848
 Depreciation expense			                                              							 692,357													700,297          		 725,922			
 Property development and management fees                                     			 -   				           -          				      314
	Interest expense											                                              	 2,493,145       		  2,476,272      		   2,487,587
 Amortization																																																																		46,008        				  48,768   					      48,819	
                                                                        ---------------     ---------------    	---------------
			                                                                     	   6,011,251      	  	 5,729,363      	 	  5,588,490
                                                                        ---------------     ---------------    	---------------
Net Loss					                                                          	$    (419,152)      $	   (412,301)      $   	(557,956)
    		                                                                  ===============     ===============     ===============
Net Loss allocated to:
 General Partners																																																												 (11,934)     		    (290,851)     	 	   (557,956)
	Limited Partners																																																												(407,218)											(121,450)											    -    
																																																																								---------------     ---------------    	---------------
																														                                        	 $	   (419,152)    		$    (412,301)     	$ 	  (557,956)	
	                                                                       ===============     ===============     ===============
</TABLE>








































<PAGE>                               - 27 -

<TABLE>
Financial Statements
CAPITAL SOURCE II L.P.
OPERATING PARTNERSHIPS STATEMENTS OF CASH FLOWS                                        
																																																																															For the														For the													For the	
																																																																												Year Ended											Year Ended										Year Ended
                                                                         Dec. 31, 1998        Dec. 31, 1997      	Dec. 31, 1996
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>
Cash flows from operating activities
Net loss																																																																$				(419,152)      $  		 (412,301)     $		  	(557,956)
		Adjustments to reconcile net loss to net cash
		provided by operating activities
			Depreciation and amortization																																														738,365      	 			 	 749,065      					  774,741
			Property development and management fees																																								-         				 				-      				          314
			Decrease (increase) in interest and other receivables                     	(11,995)      				    (1,992)												 10,467 
			Decrease (increase) in escrow deposits and property reserves        	   		   6,686       	 			 (125,385)      				 	 63,524
			Decrease in other assets																																																			 13,654 													(22,669)												(21,816)
			Increase (decrease) in accounts payable and accrued expenses														(542,762)													110,274													 22,040
			Decrease in intercompany interest payable																																		 46,735 																(794)															(728)
			Increase (decrease) in due to general partners and their affiliates								(41,216)														(9,646)											  15,090 
                                                                        ---------------     ---------------     ---------------
  Net cash provided by operating activities																																		(209,685)													286,552													305,676
																																																																								---------------     ---------------     ---------------
Cash flows from investing activities
			Acquisition of real estate																																																		(9,540)												   -    												(60,663)
			Acquisition of personal property																																											(90,564)	           (68,819)     	 	   (102,292)
                                                                        ---------------     ---------------    	---------------
			Net cash used in investing activities 	 				                       							(100,104)											 (68,819)        		 (162,955)	
                                                                        ---------------     ---------------    	---------------
Cash flows from financing activities
 		Principal payments on mortgage loan payable  		                           (141,789)  				     (129,902)    					  (118,650)
			Capital contributions																																																					 407,218        					121,450 					    	     -   
			Other, net															                                              			 184,947        				    (904)      		 		 (17,956)
                                                                        ---------------     ---------------    	---------------
  	Net cash provided by (used in) financing activities	                  	   	450,376       	  	   (9,356)     	 				(136,606)
                                                                        ---------------     ---------------    	---------------
Net increase in cash and temporary cash investments                     	    	140,587      	  				208,377      			   	  6,115
Cash and temporary cash investments at beginning of year																						491,562													283,185													277,070
                                                                        ---------------     ---------------    	---------------
Cash and temporary cash investments at end of year																						$					632,149							$					491,562							$					283,185
																																																																								===============     ===============     ===============
</TABLE>
































<PAGE>                               - 28 -	

6. Transactions with Related Parties

The General Partners, certain of their affiliates and the Operating 
Partnerships' general partners have received or may receive fees, 
compensation, income, distributions and payments from the Partnership in 
connection with the offering and the investment, management and sale of the 
Partnership's assets (other than disclosed elsewhere) as follows.

The General Partners are entitled to receive an asset management and 
partnership administrative fee equal to 0.5% of invested assets per annum, the 
first $50,000 of which will be paid each year with the balance payable only 
during such years that a 6.5% annual return has been paid to investors on a 
noncumulative basis.  An additional fee equal to 0.5% of invested assets per 
annum will be payable only during those years that an 11.5% annual return has 
been paid to investors on a noncumulative basis.  Any unpaid amounts will 
accrue and be payable only after an 11.5% annual return to investors has been 
paid on a cumulative basis and the investors have received the return of their 
capital contributions.  Asset management and partnership administration fees  
amounted to $50,000, $166,000 and $166,000 for the years ended December 31, 
1998, 1997 and 1996 respectively.

Substantially all of the Partnership's general and administrative expenses are 
paid by a General Partner or an affiliate and reimbursed by the Partnership.  
The amount of such expenses reimbursed to the General Partner for the years 
ended December 31, 1998, 1997 and 1996 amounted to $842,272, $494,165 and 
$313,049, respectively.  These reimbursed amounts are presented on a cash 
basis and do not reflect accruals made at each year end.

An affiliate of the General Partners has been retained to provide property 
management services for The Ponds at Georgetown beginning in November 1996.  
The fees for services provided were $41,167, $31,924 and $4,933 for 1998, 1997 
and 1996, respectively, and represented the lower of costs incurred in 
providing management of the property or customary fees for such services 
determined on a competitive basis.

7. Fair Value of Financial Instruments

The following methods and assumptions were used by the Partnership in 
estimating the fair value of its financial instruments:

		Cash and temporary cash investments, interest receivable, other assets, 
		accounts payable, distribution payable:  Fair value approximates the carrying 
		value of such assets.

  Investment in FHA Loan and GNMA Certificates:  Fair values are based on
	 prices obtained from an independent pricing source, adjusted for estimated 
		prepayments.

<TABLE>
<CAPTION>
                                                        At December 31, 1998                    At December 31, 1997
                                                -----------------------------------     -----------------------------------
                                                      Carrying           Estimated            Carrying           Estimated
                                                        Amount          Fair Value              Amount          Fair Value
                                                ---------------     ---------------     ---------------     ---------------
<S>                                             <C>                 <C>                 <C>                 <C>
Cash and temporary cash investments             $      432,999      $      432,999      $    1,240,992      $    1,240,992     
Investment in FHA Loan                          $    6,505,857      $  		6,531,230      $    6,538,424      $    6,645,393
Investment in GNMA Certificates                 $   20,497,706 					$			20,717,740      $	  21,674,940   		 $   21,899,413
                                               
</TABLE>














<PAGE>                               - 29 -

8. Proposed Merger

Due to significant changes in the United States equity and real estate markets 
in the Fall of 1998, the general partners of the Partnership have reevaluated 
the terms of the proposed merger of the Partnership and Capital Source, L.P. 
into a newly formed corporation that would have made opportunistic, 
growth-oriented real estate investments that had the potential for higher than 
average returns with correspondingly greater risks.  The general partners have 
decided to restructure the proposed transaction so that the resulting entity 
is a publicly-traded limited partnership that will primarily invest in 
residential apartment complexes and other commercial real estate.  Therefore, 
the investment objectives of the new limited partnership will be substantially 
different than those of the originally proposed merger but similar to those of 
the Partnership. 

9. Legal Proceedings             

Legal Proceedings.  The Partnership has been named as a defendant in a 
purported class action lawsuit filed in the Delaware Court of Chancery on 
February 3, 1999 by two BAC holders, Alvin M. Panzer and Sandra G. Panzer, 
against the Partnership, its general partners, America First and various of 
their affiliates (including Capital Source, L.P., a similar partnership with 
general partners that are affiliates of America First) and Lehman Brothers, 
Inc.  The plaintiffs seek to have the lawsuit certified as a class action on 
behalf of all BAC holders of the Partnership and Capital Source, L.P.  The 
lawsuit alleges, among other things, that a proposed merger transaction 
involving the Partnership and Capital Source, L.P. is deficient and coercive, 
that the defendants have breached the terms of the Partnership's partnership 
agreement and that the defendants have acted in manners which violate their 
fiduciary duties to the BAC holders.  The plaintiffs seek to enjoin the 
proposed merger transaction and to appoint an independent BAC holder 
representative to investigate alternative transactions.  The lawsuit also 
requests a judicial dissolution of the Partnership, an accounting, and 
unspecified damages and costs.  At this time, the general partners are unable 
to estimate the effect of the litigation on the financial statements of the 
Partnership.

10.	Summary of Unaudited Quarterly Results of Operations 
<TABLE>
<CAPTION>                                               First		            Second	               Third		            Fourth
From January 1, 1998, to December 31, 1998	           Quarter		           Quarter	             Quarter		           Quarter
                                          						---------------     ---------------     ---------------     ---------------
<S>						                                       <C>                 <C>                 <C>                 <C>
Total income					                               $      634,350 	    $      639,955      $      296,136 (1)  $      530,887  (2)
Total expenses					                                   (417,488) (3)       (273,959) (3)       (158,660)           (370,106) (3)
														                                  ---------------     ---------------     ---------------     ---------------
Net income				                                  $      216,862 	    $      365,996 	    $      137,476      $      160,781 
														                                  ===============     ===============     ===============     ===============
Net income, basic and diluted, per BAC		        $          .06 	    $          .09 	    $          .03      $          .04 
														                                  ===============     ===============     ===============     ===============
</TABLE>

<TABLE>
<CAPTION>
								                                                 First		            Second		             Third		            Fourth
From January 1, 1997, to December 31, 1997		           Quarter		           Quarter		           Quarter		           Quarter
														                                  ---------------     ---------------     ---------------     ---------------
<S>														                               <C>                 <C>                 <C>                 <C>
Total income						                              $      655,945 	    $      529,318 (1)  $     	646,693 	    $      641,565
Total expenses							                                 (151,630)		         (148,583)		         (164,872)		         (354,431) (4)
														                                  ---------------     ---------------     ---------------     ---------------
Net income						                                $      504,315 	    $      380,735 	    $     	481,821 	    $      287,134
														                                  ===============     ===============     ===============     ===============
Net income, basic and diluted, per BAC	         $          .12 	    $          .10 	    $          .12    	 $          .07
														                                  ===============     ===============     ===============     ===============
</TABLE>

(1) The Partnership had equity in losses of Operating Partnerships of $359,113 
    for the third quarter of 1998 and $121,450 for the second quarter of 1997.






<PAGE>                               - 30 -

(2) The Partnership earned less interest income during the quarter due 
    primarily to withdrawals from reserves to supplement monthly distributions
    to BAC Holders, a reduction in the interest rate on The Ponds at 
    Georgetown GNMA Certificate (See Note 4), and an additional equity 
    contribution made to The Ponds at Georgetown Operating Partnership.  In 
    addition, the Partnership had equity in losses of Operating Partnerships 
    of $48,105 for the quarter.

(3) The Partnership incurred expenses of approximately $186,000, $66,000, 
    $38,000 and $177,000 during the first, second, third and fourth quarters, 
    respectively, in conjunction with the proposed merger described in Note 8.

(4) The Partnership incurred additional expenses in connection with a review 
    of various options for restructuring to improve total investment returns
    and provide liquidity to the Partnership's investors.




























































<PAGE>                               - 31 -

	                                 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.


		                                 CAPITAL SOURCE II L.P.-A

		                                 By	America First Capital
			                                   Source II, L.L.C., General
			                                   Partner of the Registrant


	                                 	By	/s/ Michael Thesing
			                                   Michael Thesing,
			                                   Vice President and 
                                      Principal Financial Officer

Date:  March 29, 1999























































<PAGE>                              - 32 -

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


Date:  March  29 1999         		   By	/s/ Michael B. Yanney*
			                                Michael B. Yanney,
			                                Chairman and Chief Executive Officer of 
                                   the America First General Partner
                                   (Principal Executive Officer)

                                   Chairman of the Board, President,
                                   Chief Executive Officer and Manager of
                                   America First Companies L.L.C.


Date:  March 29, 1999	        		   By	/s/ Michael Thesing
			                                Michael Thesing, Vice
			                                President, Secretary and
			                                Treasurer (Principal Financial Officer) 
                                   of the America First General Partner

                                   Vice President, Secretary, Treasurer
                                   and Manager of America First Companies L.L.C.


Date:  March 29, 1999	      		     By	/s/ William S. Carter, M.D.*
                   			             William S. Carter, M.D.
                                   Manager of America First Companies L.L.C.


Date:  March 29, 1999  	 		        By	/s/ Martin A. Massengale*
                   			             Martin A. Massengale
                                   Manager of America First Companies L.L.C.


Date:  March 29, 1999         		   By	/s/ Alan Baer*
                   			             Alan Baer
                                   Manager of America First Companies L.L.C.


Date:  March 29, 1999	    		       By	/s/ Gail Walling Yanney*
                   			             Gail Walling Yanney
                                   Manager of America First Companies L.L.C.

Date:  March 29, 1999  	    		     By	/s/ Mariann Byerwalter*
                   			             Mariann Byerwalter
                                   Manager of America First Companies L.L.C.



*By Michael Thesing,
    Attorney in Fact


/s/ Michael Thesing                           
Michael Thesing


















<PAGE>                              - 33 -













                                  EXHIBIT 24


                               POWER OF ATTORNEY



























































<PAGE>                               - 34 -
                               POWER OF ATTORNEY


     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1998, and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

       		America First Tax Exempt Investors, L.P. 
       		America First Tax Exempt Mortgage Fund Limited Partnership 
       		America First Apartment Investors, L.P.
       		Capital Source L.P.
       		Capital Source II L.P.-A

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 1st day of February, 1999.


                                    							  /s/ Michael B. Yanney
                                      							Michael B. Yanney























































<PAGE>                               - 35 -
                               POWER OF ATTORNEY

     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1998 and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

       		America First Tax Exempt Investors, L.P. 
       		America First Tax Exempt Mortgage Fund Limited Partnership 
       		America First Apartment Investors, L.P.
       		Capital Source L.P.
       		Capital Source II L.P.-A

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 1st day of February, 1999.


                              /s/ William S. Carter, M.D.
                                  William S. Carter, M.D.
























































<PAGE>                               - 36 -
                               POWER OF ATTORNEY

     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1998, and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

       		America First Tax Exempt Investors, L.P. 
       		America First Tax Exempt Mortgage Fund Limited Partnership 
       		America First Apartment Investors, L.P.
       		Capital Source L.P.
       		Capital Source II L.P.-A

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 1st day of February, 1999.


                               /s/  Martin A. Massengale
                               Martin A. Massengale
























































<PAGE>                               - 37 -
                               POWER OF ATTORNEY

     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1998, and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

       		America First Tax Exempt Investors, L.P. 
       		America First Tax Exempt Mortgage Fund Limited Partnership 
       		America First Apartment Investors, L.P.
       		Capital Source L.P.
       		Capital Source II L.P.-A

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 1st day of February, 1999.


                                /s/ Alan Baer
                                Alan Baer
























































<PAGE>                               - 38 -
                               POWER OF ATTORNEY

     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1998 and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

       		America First Tax Exempt Investors, L.P. 
       		America First Tax Exempt Mortgage Fund Limited Partnership 
       		America First Apartment Investors, L.P.
       		Capital Source L.P.
       		Capital Source II L.P.-A

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 1st day of February, 1999.


                                					  /s/ Gail Walling Yanney
                                							Gail Walling Yanney
























































<PAGE>                               - 39 -
                               POWER OF ATTORNEY

     The undersigned hereby appoints Michael Thesing as his agent and 
attorney-in-fact for the purpose of executing and filing all reports on Form 
10-K relating to the year ending December 31, 1998 and any amendments 
thereto, required to be filed with the Securities and Exchange Commission by 
the following persons:

       		America First Tax Exempt Investors, L.P. 
       		America First Tax Exempt Mortgage Fund Limited Partnership 
       		America First Apartment Investors, L.P.
       		Capital Source L.P.
       		Capital Source II L.P.-A

     IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney 
on the 1st day of February, 1999.


                              /s/ Mariann Byerwalter
                                  Mariann Byerwalter
























































<PAGE>                              - 40 -