<PAGE>

                                   FORM 10-QSB
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended June 30, 2000
                                 --------------


                         Commission file number 0-11973
                                 --------------


                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
   --------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)




                               Maryland 52-1321492
       ----------------------------------------- ------------------------
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)



11200 Rockville Pike, Rockville, Maryland                    20852
-----------------------------------------         ------------------------
(Address of principal executive offices)                  (Zip Code)



                                (301) 468-9200
--------------------------------------------------------------------------
                (Issuer's telephone number, including area code)


         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the Exchange  Act during the past 12 months,  and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X]   No [ ]

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.


     Not applicable                                  Not applicable
--------------------------            ---------------------------------------
        (Class)                              (Outstanding at June 30, 2000)



<PAGE>


                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                              INDEX TO FORM 10-QSB

                       FOR THE QUARTER ENDED JUNE 30, 2000



                                                                         PAGE
                                                                         ----

PART I.           Financial Information

Item 1.           Financial Statements

                       Balance Sheets - June 30, 2000 and
                    December 31, 1999....................................    1

                  Statements of Operations and Accumulated Losses
                    - for the three and six months ended
                    June 30, 2000 and 1999...............................    2

                  Statements of Cash Flows - for the six
                    months ended June 30, 2000 and 1999..................    3

                  Notes to Financial Statements - June 30, 2000
                    and 1999.............................................    4

Item 2.           Management's Discussion and Analysis of Financial
                    Condition and Results of Operations..................   20


PART II.          Other Information

Item 3.           Defaults Upon Senior Securities........................   25

Item 5.           Other Information......................................   25

Item 6.           Exhibits and Reports on Form 8-K.......................   26

Signature         .......................................................   27

Exhibit Index............................................................   28



<PAGE>
PART I.           FINANCIAL INFORMATION
                  ---------------------
ITEM 1.           FINANCIAL STATEMENTS
                  ---------------------

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                                 BALANCE SHEETS

                                     ASSETS


<TABLE>
<CAPTION>


                                                                     June 30,      December 31,
                                                                       2000           1999
                                                                    ------------  ------------
                                                                    (Unaudited)
<S>                                                                 <C>           <C>
Investments in and advances to partnerships .....................   $   838,211   $   966,378
Investment in partnership held for sale .........................        23,362          --
Cash and cash equivalents .......................................     7,775,980     8,936,520
Acquisition fees, principally paid to related parties, net of
  accumulated amortization of $295,233 and $408,934, respectively       234,503       348,795
Property purchase costs, net of accumulated amortization of
  $240,715 and $280,099, respectively ...........................       202,538       252,283
Other assets ....................................................         1,385          --
                                                                    -----------   -----------

     Total assets ...............................................   $ 9,075,979   $10,503,976
                                                                    ===========   ===========



                        LIABILITIES AND PARTNERS' DEFICIT



Due on investments in partnerships                                  $  4,920,000   $  7,348,747
Accrued interest payable                                               9,008,708     22,374,877
Distribution payable                                                          -       1,622,237
Accounts payable and accrued expenses                                     84,138        127,692
                                                                    ------------   ------------
     Total liabilities                                                14,012,846     31,473,553
                                                                    ------------   ------------

Commitments and contingencies

Partners' capital (deficit):

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

  Less:
    Accumulated distributions to partners                             (6,072,409)    (6,072,409)
    Offering costs                                                    (5,278,980)    (5,278,980)
    Accumulated losses                                               (43,602,478)   (59,635,188)
                                                                    ------------   ------------
      Total partners' deficit                                         (4,936,867)   (20,969,577)
                                                                    ------------   ------------

      Total liabilities and partners' deficit                       $  9,075,979   $ 10,503,976
                                                                    ============   ============
</TABLE>


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

                                       -1-

<PAGE>
PART I.           FINANCIAL INFORMATION
                  ---------------------
ITEM 1.           FINANCIAL STATEMENTS
                  ---------------------

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                            STATEMENTS OF OPERATIONS

                             AND ACCUMULATED LOSSES

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            For the three months ended            For the six months ended
                                                                      June 30                              June 30,
                                                           -----------------------------        -----------------------------
                                                               2000              1999               2000              1999
                                                           ------------      ------------       ------------      ------------
<S>                                                        <C>               <C>
Share of income from partnerships                          $     17,401      $    624,779       $    669,661      $  2,170,430
                                                           ------------      ------------       ------------      ------------

Other revenue and expenses:

  Revenue:
    Interest and other income                                   116,312           112,055            223,845           189,237
                                                           ------------      ------------       ------------      ------------

  Expenses:
    Interest                                                    231,649           422,357            506,715           852,660
    Management fee                                               62,499            62,499            124,998           124,998
    General and administrative                                   58,414            54,234            111,575           116,855
    Professional fees                                            28,182            11,877             53,463            31,225
    Amortization of deferred costs                                7,832            11,444             18,582            22,888
                                                           ------------      ------------       ------------      ------------
                                                                388,576           562,411            815,333         1,148,626
                                                           ------------      ------------       ------------      ------------
       Total other revenue and expenses                        (272,264)         (450,356)          (591,488)         (959,389)
                                                           ------------      ------------       ------------      ------------

Income before gain on disposition of investments
  in partnerships                                              (254,863)          174,423             78,173         1,211,041

Gain on disposition of investments in partnerships            5,879,778                -           5,879,778                -
                                                           ------------      ------------       ------------      ------------

Income before extraordinary gain
  from extinguishment of debt                                 5,624,915           174,423          5,957,951         1,211,041

Extraordinary gain from extinguishment of debt               10,074,759                --         10,074,759           524,994
                                                           ------------      ------------       ------------      ------------

Net income                                                   15,699,674           174,423         16,032,710         1,736,035

Accumulated losses, beginning of period                     (59,302,152)      (71,152,075)       (59,635,188)      (72,713,687)
                                                           ------------      ------------       ------------      ------------

Accumulated losses, end of period                          $(43,602,478)     $(70,977,652)      $(43,602,478)     $(70,977,652)
                                                           ============      ============       ============      ============

Net income allocated to General Partners (1.51%)           $    237,065      $      2,634       $    242,094      $     26,214
                                                           ============      ============       ============      ============

Net income allocated to Initial and Special
  Limited Partners (1.49%)                                 $    233,925      $      2,599       $    238,887      $     25,867
                                                           ============      ============       ============      ============

Net income allocated to Additional Limited
  Partners (97%)                                           $ 15,228,684      $    169,190       $ 15,551,729      $  1,683,954
                                                           ============      ============       ============      ============

Net income per unit of Additional Limited
  Partner Interest based on 50,000 units
  outstanding                                              $     304.57      $       3.38       $     311.03      $      33.68
                                                           ============      ============       ============      ============
</TABLE>

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

                                       -2-

<PAGE>
PART I.           FINANCIAL INFORMATION
                  ---------------------
ITEM 1.           FINANCIAL STATEMENTS
                  ---------------------

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)


<TABLE>
<CAPTION>


                                                                                                   For the six months ended
                                                                                                           June 30,
                                                                                                 -----------------------------
                                                                                                     2000               1999
                                                                                                 ------------       ------------
<S>                                                                                              <C>                <C>
Cash flows from operating activities:
  Net income                                                                                     $ 16,032,710       $  1,736,035

  Adjustments to reconcile net income to net cash used in operating activities:
    Share of income from partnerships                                                                (669,661)        (2,170,430)
    Amortization of deferred costs                                                                     18,582             22,888
    Gain on disposition of investment in partnerships                                              (5,879,778)                --
    Extraordinary gain from extinguishment of debt                                                (10,074,759)          (524,994)

    Changes in assets and liabilities:
      Increase in other assets                                                                         (1,385)           (12,219)
      Increase in accrued interest payable                                                            506,715            852,660
      Payment of purchase money note interest                                                        (175,000)           (25,322)
      Decrease in accounts payable and accrued expenses                                               (43,554)           (23,816)
                                                                                                 ------------       ------------
         Net cash used in operating activities                                                       (286,130)          (145,198)
                                                                                                 ------------       ------------

Cash flows from investing activities:
  Receipt of distributions from partnerships                                                          797,827          4,047,041
  Proceeds from disposition of investments in partnerships                                          5,993,661                 --
  Advances made to local partnerships                                                                      --           (120,642)
  Collection of advances made to local partnerships                                                        --            120,642
                                                                                                 ------------       ------------
         Net cash provided by investing activities                                                  6,791,488          4,047,041
                                                                                                 ------------       ------------

Cash flows from financing activities:
  Payoff of purchase money notes and related interest                                              (5,993,661)        (1,085,000)
  Payment of purchase money note principal and capitalized interest                                   (50,000)        (2,708,983)
  Distribution to Additional Limited Partners                                                      (1,622,237)                -
                                                                                                 ------------       ------------
         Net cash used in financing activities                                                     (7,665,898)        (3,793,983)
                                                                                                 ------------       ------------

Net (decrease) increase in cash and cash equivalents                                               (1,160,540)           107,860

Cash and cash equivalents, beginning of period                                                      8,936,520          7,596,031
                                                                                                 ------------       ------------

Cash and cash equivalents, end of period                                                         $  7,775,980       $  7,703,891
                                                                                                 ============       ============


Supplemental disclosure of cash flow information:
  Cash paid during the period for interest                                                       $  3,919,914       $  2,737,814
                                                                                                 ============       ============
</TABLE>



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

                                       -3-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)




1.       BASIS OF PRESENTATION

         In the opinion of C.R.I., Inc. (CRI), the Managing General Partner, the
accompanying unaudited financial statements reflect all adjustments,  consisting
of normal recurring accruals, necessary for a fair presentation of the financial
position of Capital Realty Investors-II Limited Partnership (the Partnership) as
of June 30, 2000, and the results of its operations for the three and six months
ended June 30, 2000 and 1999,  and its cash flows for the six months  ended June
30, 2000 and 1999. The results of operations for the interim  periods ended June
30, 2000, are not  necessarily  indicative of the results to be expected for the
full year.

         The accompanying  unaudited financial  statements have been prepared in
conformity with accounting  principles  generally  accepted in the United States
and with the  instructions  to Form 10-QSB.  Certain  information and accounting
policies  and footnote  disclosures  normally  included in financial  statements
prepared in conformity  with  accounting  principles  generally  accepted in the
United  States have been  condensed  or omitted  pursuant to such  instructions.
These  condensed  financial  statements  should be read in conjunction  with the
financial  statements  and notes thereto  included in the  Partnership's  annual
report on Form 10-KSB at December 31, 1999.


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

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

         The Partnership's  obligations with respect to its investments in Local
Partnerships,  in the form of purchase money notes having an aggregate principal
balance of $4,920,000 plus aggregate  accrued  interest of $9,008,708 as of June
30, 2000,  are payable in full upon the earliest of: (1) sale or  refinancing of
the respective Local Partnership's  rental property;  (2) payment in full of the
respective Local Partnership's  permanent loan; or (3) maturity.  Purchase money
notes in the principal  amounts of $1,050,000  and $950,000  matured on December
31, 1996 and 1997, respectively,  and were extended to January 5, 2001, but were
paid off, at a discount,  on  September  30, 1999.  Purchase  money notes in the
aggregate  principal  amount of $2,380,000  matured on January 1, 1998, and were
written off on October 5, 1999 when the  related  local  partnership  interests,
held  by  the   Partnership,   were  transferred  to  the  noteholders  in  full
satisfaction  of the purchase  money notes'  principal and accrued  interest.  A
purchase  money note in the principal  amount of  $3,150,000  matured on June 1,
1998,  and has not been paid or extended.  Purchase  money notes in the original
principal  amounts of $4,600,000 and  $1,927,500,  with  maturities  extended to
August 31, 2003 were paid off, at a discount,  on May 31, 2000. A purchase money
note in the  original  principal  amount of  $1,450,000  matured on September 1,
1998, was partially

                                       -4-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

paid,  and has been extended to September 1, 2003.  Purchase  money notes in the
aggregate  principal amount of $840,178 matured on January 1, 1999 and were paid
off, at a discount,  on February 5, 1999. A purchase  money note in the original
principal  amount of  $500,000  matured on January  1, 1999,  and was  partially
transferred to the noteholder,  with the balance extended to January 1, 2004, as
discussed below.

         The purchase money notes, which are nonrecourse to the Partnership, are
generally  secured  by  the  Partnership's  interest  in  the  respective  Local
Partnerships.  There is no assurance  that the underlying  properties  will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money notes'  principal and accrued  interest when due. If a purchase money note
is not paid in accordance with its terms,  the  Partnership  will either have to
renegotiate  the terms of repayment or risk losing its  partnership  interest in
the respective Local Partnership.  The Partnership's inability to pay certain of
the purchase  money note principal and accrued  interest  balances when due, and
the  resulting  uncertainty  regarding  the  Partnership's  continued  ownership
interest  in the  related  Local  Partnerships,  does not  adversely  impact the
Partnership's   financial   condition  because  the  purchase  money  notes  are
nonrecourse  and  secured  solely by the  Partnership's  interest in the related
Local  Partnerships.  Therefore,  should  the  investment  in any  of the  Local
Partnerships with maturing purchase money notes not produce  sufficient value to
satisfy the related purchase money notes, the Partnership's  exposure to loss is
limited  because  the  amount  of the  nonrecourse  indebtedness  of each of the
maturing  purchase money notes exceeds the carrying amount of the investment in,
and advances to, each of the related Local  Partnerships.  Thus, even a complete
loss of the Partnership's  interest in one of these Local Partnerships would not
have a material  adverse impact on the financial  condition of the  Partnership.
See further discussion of certain purchase money notes, below.

         The following  chart presents  information  related to a purchase money
note which has matured and which  remains  unpaid or  unextended as of August 9,
2000.  Excluded from the following  chart are purchase money notes which matured
through June 30, 2000, and which have been paid off,  cancelled,  or extended on
or before August 9, 2000.

                                       -5-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION>


                                                                                                 Carrying Amount
                                                                        Aggregate                of Partnership's
                                             Aggregate                  Accrued                   Investments in
                   Number of                 Principal                  Interest                 and Advances to
    Purchase       Underlying                 Balance                   Balance                  Underlying Local
   Money Note        Local       Percentage  as of June   Percentage   as of June    Percentage  Partnerships as    Percentage
 (PMN) Maturity   Partnerships    of Total    30, 2000     of Total     30, 2000      of Total   of June 30, 2000    of Total
----------------  ------------   ----------  ----------   ----------   -----------   ----------  ----------------   ----------
<S>               <C>            <C>         <C>          <C>          <C>           <C>         <C>                <C>
2nd Quarter 1998       1               7%    $3,150,000         64%     $5,792,737        64%       $       --           --%
                     ----          -----     ----------      -----      ----------     -----        ----------        -----
                       1               7%    $3,150,000         64%     $5,792,737        64%       $       -            --%
                     ====          =====     ==========      =====      ==========     =====        ==========        =====

Total, Local
  Partnerships         15            100%    $4,920,000        100%     $9,008,708       100%       $  838,211          100%
                     ====          =====     ==========      =====      ==========     =====        ==========        =====

</TABLE>

         The Managing  General  Partner is  continuing to  investigate  possible
alternatives to reduce the Partnership's  debt obligations.  These  alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note  requirements,  paying off certain purchase money notes at a
discounted  price,  extending  the due dates of certain  purchase  money  notes,
refinancing the respective properties' underlying debt or selling the underlying
real estate and using the Partnership's share of the proceeds to pay or buy down
certain purchase money note  obligations.  Although the Managing General Partner
has had some success applying these strategies in the past, the Managing General
Partner cannot assure that these strategies will be successful in the future. If
the Managing  General  Partner is unable to negotiate an extension or discounted
payoff,  upon  maturity  of the  purchase  money  notes,  in the event  that the
purchase  money  notes  remain  unpaid,  the  noteholders  may have the right to
foreclose on the Partnership's  interest in the related Local  Partnerships.  In
the event of a foreclosure,  the excess of the nonrecourse indebtedness over the
carrying amount of the Partnership's investment in the related Local Partnership
would be deemed  cancellation of  indebtedness  income which would be taxable to
Limited  Partners  at a federal  tax rate of up to 39.6%.  Additionally,  in the
event of a foreclosure,  the Partnership  would lose its investment in the Local
Partnership and, likewise,  its share of any future cash flow distributed by the
Local Partnership from rental  operations,  mortgage debt  refinancings,  or the
sale of the real estate.  Of the 15 Local  Partnerships in which the Partnership
is invested as of June 30, 2000,  the one Local  Partnership  with an associated
purchase  money note which has matured and which remains unpaid or unextended as
of August 9, 2000,  represented the following  percentages of the  Partnership's
total  distributions  received from Local  Partnerships and share of income from
Local Partnerships for the immediately preceding two calendar years.


                                       -6-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION>

                                            Percentage of Total         Partnership's Share of
                                           Distributions Received            Income from
             For the Year Ending           from Local Partnerships        Local Partnerships
             -------------------           -----------------------      ----------------------
             <S>                           <C>                          <C>
             December 31, 1999                       0%                        $0
             December 31, 1998                       0%                        $0


</TABLE>

         The  Managing  General  Partner  continues  to address the maturity and
impending  maturity of its debt  obligations and to seek  strategies  which will
provide the most favorable outcome to the limited partners.  However,  there can
be no assurance that these strategies will be successful.

         Interest expense on the Partnership's purchase money notes was $231,649
and  $506,715  for  the  three  and six  month  periods  ended  June  30,  2000,
respectively,  and $422,357  and  $852,660  for the three and six month  periods
ended June 30, 1999, respectively.  The accrued interest payable on the purchase
money notes of $9,008,708  and  $22,374,877 as of June 30, 2000 and December 31,
1999,  respectively,  is due on the  respective  maturity  dates of the purchase
money notes or earlier,  in some  instances,  if (and to the extent of a portion
thereof) the related  Local  Partnership  has  distributable  net cash flow,  as
defined in the relevant Local Partnership agreements.

                               Beech Hill I and II
                               -------------------

         The  Partnership  defaulted  on its  purchase  money notes  aggregating
$2,380,000  related to Beech Hill  Development Co. (Beech Hill I) and Beech Hill
Development  Co. II (Beech Hill II) on August 1, 1995 when the notes matured and
were not paid. On March 29, 1996, the noteholders  agreed to extend the purchase
money note due dates to January 1, 1998.  Under the agreement,  the  Partnership
paid the  noteholders  of Beech Hill I and Beech  Hill II all  annual  cash flow
distributions  received from the related Local  Partnerships in excess of $5,000
and  $2,500,   respectively,   to  be  applied  against  the  notes.  Cash  flow
distributions  of $0 and  $30,694  were  paid  directly  by Beech  Hill I to the
purchase  money  noteholders  during the years ended December 31, 1999 and 1998,
respectively.  Cash flow  distributions  of $0 and $29,687 were paid directly by
Beech Hill II to the purchase money noteholders  during the years ended December
31, 1999 and 1998, respectively. Annual cash flow distributions of $0 and $5,000
from Beech Hill I, and $0 and $2,500  from Beech Hill II, were  received  during
the years ended December 31, 1999 and 1998, respectively.

         Under the extension agreement, documents transferring the Partnership's
interests in Beech Hill I and Beech Hill II to the

                                       -7-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

noteholders  were  placed in escrow to be  released  to the  noteholders  upon a
future default by the  Partnership on the  respective  purchase money notes.  On
January 1, 1998, the  Partnership  defaulted on its purchase money notes related
to Beech Hill I and Beech Hill II when the notes, as extended,  matured and were
not paid.  The  default  amount  included  principal  and  accrued  interest  of
$1,480,000  and  $1,687,578,  respectively,  for Beech Hill I and  $900,000  and
$1,072,113,  respectively,  for  Beech  Hill II.  On  September  30,  1999,  the
noteholders  instructed  the  escrow  agent  to  release  to them  the  transfer
documents  on  October  5,  1999,  and the  escrow  agent  complied  with  those
instructions. Accordingly, the Partnership's interests in Beech Hill I and Beech
Hill II were transferred to the noteholders on October 5, 1999. As of that date,
principal and accrued interest totaling $1,480,000 and $1,891,535, respectively,
related to Beech Hill I and $900,000 and  $1,185,119,  respectively,  related to
Beech Hill II were due.

         The purchase money notes related to Beech Hill I and Beech Hill II were
nonrecourse  and secured  solely by the  Partnership's  interests in the related
Local  Partnerships.  The  release  of the  Partnership's  purchase  money  note
obligations  as a  result  of the  loss  of  ownership  interest  in  the  Local
Partnerships  resulted  in  extraordinary  gain from  extinguishment  of debt of
approximately  $2.4 million and $1.5 million for Beech Hill I and Beech Hill II,
respectively,  during 1999. The release of the Partnership's purchase money note
obligations  resulted in cancellation of  indebtedness  income of  approximately
$3.4 million and $2.1 million for Beech Hill I and Beech Hill II,  respectively,
for federal tax purposes in 1999.

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

         The  Partnership  defaulted on its two purchase  money notes related to
Chevy  Chase Park,  Limited  (Chevy  Chase) on December  31, 1996 when the notes
matured and were not paid. The aggregate  default amount included  principal and
accrued  interest of  $2,100,000  and  $3,553,912,  respectively.  The  Managing
General  Partner  successfully  negotiated  an  extension of one of the purchase
money notes (First Chase Note) in the principal  amount of $1,050,000  effective
December 1, 1997. In connection  with the extension  agreement,  the Partnership
made an interest payment to the noteholder. The terms of the extension agreement
extended  the  maturity  date to January 2, 2000.  On  December  17,  1998,  the
Partnership exercised its right, pursuant to the extension agreement, to further
extend the  maturity  date to January 5, 2001 by making an  additional  payment,
applied to accrued interest, to the noteholder.

         On February 10, 1998,  the  Partnership  was served with a complaint by
the two holders of the second  purchase  money note  (Second  Chase Note) filing
suit  against the  Partnership,  the  Managing  General  Partner  and  C.R.H.C.,
Incorporated (CRHC), an affiliate of the Managing General

                                       -8-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Partner,  for damages and seeking  foreclosure on the Partnership's  interest in
the Local  Partnership.  On July 29,  1998,  the parties  agreed to a settlement
which  involved a  discounted  payoff to the  holders of the Second  Chase Note,
subject to the Partnership's satisfaction with the results of its due diligence.
On October 5, 1998, pursuant to such settlement agreement,  the Partnership paid
the holders of the Second Chase Note a discounted  amount in full  settlement of
the Second Chase Note and the lawsuit.  In connection with this settlement,  the
local general  partners  withdrew from the Local  Partnership,  assigning  their
combined  one percent  interests  (which  were  converted  to a limited  partner
interest)  in  the  Local  Partnership  to the  Partnership,  and  the  property
management  agent,  which is an affiliate  of the local  general  partners,  was
terminated  effective April 1, 1999. CRHC is the sole remaining  general partner
of the Local Partnership. Further, the Partnership received the interests of the
local  general  partners,  the  holders  of the  Second  Chase  Note,  and their
respective  affiliates  in  the  First  Chase  Note,  which  interest  total  is
approximately  10.808%.  On May 28, 1999, the Partnership filed suit against the
holder of the First Chase Note,  seeking  payment of the  Partnership's  10.808%
share of  payments  made on the First  Chase  Note since  October  1,  1997.  On
September 30, 1999, as part of the settlement of the litigation, the Partnership
paid off, at a discount, the First Chase Note. The discounted payoff resulted in
extraordinary gain from  extinguishment of debt of approximately $2.4 million in
1999. The discounted payoff also resulted in cancellation of indebtedness income
of approximately $2.4 million for federal tax purposes in 1999.

         On December 30, 1999,  the  Partnership  was served with a complaint by
certain alleged  beneficiaries  of the First Chase Note for, among other relief,
their  portion of payments made to First March Realty  Corporation  on the First
Chase Note. The Managing  General  Partner is vigorously  defending its position
that all such  payments  were  made to the  proper  parties,  and that it has no
further  responsibility  or liability for payments made on the First Chase Note.
As of August 9, 2000, all parties are pursuing settlement. However, there can be
no assurance that any agreement will be reached.

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

         The  Partnership  defaulted on its purchase  money note related to Four
Winds West  Company  Limited  (Four Winds West) on January 1, 1999 when the note
matured and was not paid.  The default  amount  included  principal  and accrued
interest of  $462,178  and  $532,673,  respectively.  On  February 5, 1999,  the
Partnership  paid off, at a discount,  the  purchase  money note related to Four
Winds  West.  The  discounted   payoff  resulted  in  extraordinary   gain  from
extinguishment of debt of approximately  $305,000 in 1999. The discounted payoff
also resulted in cancellation of indebtedness  income of approximately  $305,000
for federal tax purposes in 1999.

                                       -9-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)



2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                              Frenchman's Wharf II
                              --------------------

         The  Partnership  defaulted  on its  purchase  money  notes  related to
Frenchman's Wharf Associates II Limited  Partnership  (Frenchman's  Wharf II) on
June 1, 1998 when the  notes  matured  and were not  paid.  The  default  amount
included   principal  and  accrued   interest  of  $3,150,000  and   $5,071,731,
respectively.  As of August 9, 2000,  principal  and accrued  interest  totaling
$3,150,000 and $5,830,606, respectively, were due. The purchase money notes were
initially due to mature on June 1, 1988,  but were extended to mature on June 1,
1998. The  Partnership had requested  another  extension of the maturity date of
the purchase money notes until May 2000, to be  coterminous  with the expiration
of the Local Partnership's  provisional workout agreement (PWA) with HUD related
to its  mortgage  loan.  In 1996,  HUD sold the  mortgage  loan to a third party
lender. The local managing general partner has obtained a forbearance of the PWA
from the lender  until  January  31,  2001,  with two 30-day  extension  periods
available.  The forbearance  agreement  allows for the discounted  payoff of the
mortgage loan. The purchase money noteholders initiated two separate foreclosure
proceedings.  One group of plaintiffs  has indicated it would be willing to stay
its action until the end of the forbearance period with the Local  Partnership's
lender, so long as the plaintiff in the other lawsuit does the same, but to date
there has been no agreement with that  noteholder.  The  Partnership  intends to
defend  vigorously  against the foreclosure  proceedings.  However,  there is no
assurance  that  the  Partnership  will  be  able  to  retain  its  interest  in
Frenchman's Wharf II. In the event of a foreclosure,  the Partnership would also
lose its share of any future cash flow distributed by the Local Partnership from
rental operations,  mortgage debt refinancings,  or the sale of the real estate.
The uncertainty regarding the continued ownership of the Partnership's  interest
in Frenchman's  Wharf II does not adversely impact the  Partnership's  financial
condition, as discussed above.

                                    Princeton
                                    ---------

         The  Partnership  defaulted  on its  purchase  money  note  related  to
Princeton  Community Village Associates  (Princeton) on January 1, 1999 when the
note matured and was not paid. The default amount included principal and accrued
interest  of  $500,000  and  $1,422,064,  respectively.  On August 9, 1999,  the
noteholder filed a complaint seeking  declaratory  judgment that the Partnership
has forfeited its interest in Princeton to the  noteholders.  The litigation was
settled  effective  January 1, 2000,  when the Managing  General Partner entered
into an agreement with the noteholder  which granted the noteholder four options
to purchase the Partnership's  98.99% limited partnership  interest in Princeton
over a three and one-half  year  period,  in exchange  for the  cancellation  of
pro-rata  portions of the then outstanding  balance of the purchase money notes.
As part of the  agreement,  the  noteholder  extended the  maturity  date of the
purchase money

                                      -10-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

note to January 1, 2004, and the Partnership made a payment to the noteholder on
April 21,  2000,  which was  applied  against  accrued  interest  payable on the
purchase money note.

         On May 31,  2000,  pursuant  to the option  agreement,  the  noteholder
purchased a 26% interest in Princeton from the  Partnership,  the  consideration
for which was a like percentage of the outstanding purchase money note principal
and accrued  interest of $130,000 and $363,072,  respectively,  resulting in net
extraordinary  gain  from  extinguishment  of debt  of  $484,862  for  financial
statement  purposes  in 2000  and in  cancellation  of  indebtedness  income  of
$1,960,030 for federal tax purposes in 2000.

         Due to the  impending  and likely  transfer of the remaining 74% of the
Partnership's  investment in Princeton over the next three years, the investment
in and advances to partnerships plus net unamortized amounts of acquisition fees
and property  purchase costs related to Princeton,  which totaled $23,362,  have
been   reclassified  to  investment  in  partnerships   held  for  sale  in  the
accompanying balance sheet at June 30, 2000.

            Rolling Green at Fall River and Rolling Green at Amherst
            --------------------------------------------------------

         The  Partnership  defaulted  on its  purchase  money  notes  related to
Roberts Fall River Associates  (Rolling Green at Fall River) and Roberts Amherst
Associates  (Rolling Green at Amherst) on August 31, 1998 when the notes matured
and were not paid. The default amounts  included  principal and accrued interest
of $4,600,000 and $8,750,764,  respectively, for Rolling Green at Fall River and
$1,927,500  and  $3,661,147,  respectively,  for Rolling  Green at Amherst.  The
Managing General Partner and the trustees representing the noteholders agreed to
extend the  maturity  dates of the  purchase  money notes to February  28, 2001,
subject  to a further  extension  to August 31,  2003 if the Local  Partnerships
complete  a  refinancing  of  their  mortgage  loans,  which  refinancings  have
occurred.  However,  the noteholders had the right to accelerate the maturity of
the notes upon not less than one year's prior notice.  As part of the agreement,
the Partnership  agreed that all refinancing  mortgage loan proceeds  payable to
the Partnership by the respective  Local  Partnerships,  as well as all net cash
flow payable to the Partnership from the respective Local Partnerships in excess
of $10,000 per year, shall be applied to the balance of the respective  purchase
money  notes,  and  further  agreed  to  waive  certain  rights  granted  in the
respective Local Partnerships' limited partnership agreements. The mortgage loan
on  Rolling  Green at Fall  River  was  refinanced  in March  1999;  refinancing
proceeds of $2,725,257  were used to pay down purchase  money note principal and
capitalized  interest  in March  1999.  The  mortgage  loan on Rolling  Green at
Amherst was refinanced in August 1998;  refinancing  proceeds of $1,503,496 were
used to pay down purchase money note principal and capitalized interest in 1998.

                                      -11-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

         On May 31, 2000,  Rolling  Green at Fall River sold its  property.  The
entire sale proceeds to the Partnership were used to pay off, at a discount, the
Partnership's  purchase money note obligation  related to its investment in this
local  partnership.  The sale resulted in gain on  disposition  of investment in
partnership of $3,542,933, and in extraordinary gain from extinguishment of debt
of $7,746,946,  for financial statement purposes. The total federal tax gain for
the year  2000  related  to  Rolling  Green at Fall  River  is  estimated  to be
approximately  $16.8 million.  The Managing  General  Partner of the Partnership
and/or its affiliates will not receive any fees relating to the sale.

         On May 31, 2000, Rolling Green at Amherst sold its property. The entire
sale  proceeds  to the  Partnership  were used to pay off,  at a  discount,  the
Partnership's  purchase money note obligation  related to its investment in this
local  partnership.  The sale resulted in gain on  disposition  of investment in
partnership of $2,336,845, and in extraordinary gain from extinguishment of debt
of $1,842,951,  for financial statement purposes. The total federal tax gain for
the  year  2000  related  to  Rolling  Green  at  Amherst  is  estimated  to  be
approximately  $6.3 million.  The Managing  General  Partner of the  Partnership
and/or its affiliate will not receive any fees relating to the sale.

                                   Troy Manor
                                   ----------

         The  Partnership  defaulted on its purchase  money note related to Troy
Apartments Limited (Troy Manor) on January 1, 1999 when the note matured and was
not paid. The default amount included principal and accrued interest of $378,000
and $227,420,  respectively. On February 5, 1999, the Partnership paid off, at a
discount,  the purchase money note related to Troy Manor. The discounted  payoff
resulted in  extraordinary  gain from  extinguishment  of debt of  approximately
$220,000 in 1999.  The  discounted  payoff  also  resulted  in  cancellation  of
indebtedness income of approximately $220,000 for federal tax purposes in 1999.

                                    Westgate
                                    --------

         In June,  1998,  the  holder of the  purchase  money  note  related  to
Westgate  Tower Limited  Dividend  Housing  Associates  (Westgate)  accepted the
Managing  General  Partner's  offer to extend the maturity  date of the purchase
money note for five years from its scheduled maturity date of September 1, 1998.
In May 2000, the Partnership and the noteholder  signed documents  extending the
maturity date of the purchase money note to September 1, 2003, in exchange for a
payment applied against the outstanding  principal balance of the purchase money
note.

                                      -12-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                                  Wexford Ridge
                                  -------------

         The Partnership defaulted on its three purchase money notes relating to
Wexford  Ridge  Associates  (Wexford  Ridge) on December 31, 1997 when the notes
matured and were not paid. The aggregate  default amount included  principal and
accrued  interest of  $1,900,000  and  $3,478,549,  respectively.  The  Managing
General  Partner  successfully  negotiated  an  extension on one of the purchase
money notes (First Wexford Note) in the principal  amount of $950,000  effective
April 9, 1998; the First Wexford Note was paid off, at a discount,  on September
30,  1999.  The  discounted   payoff   resulted  in   extraordinary   gain  from
extinguishment  of debt of  approximately  $2.4 million for financial  statement
purposes in 1999.  The  discounted  payoff  also  resulted  in  cancellation  of
indebtedness  income of  approximately  $2.4 million for federal tax purposes in
1999.

         On April 7, 1998,  the  Partnership  was served with a complaint by the
holder of the second and third  purchase money notes  (collectively,  Second and
Third Wexford Notes) filing suit against the  Partnership,  the Managing General
Partner and C.R.H.C.,  Incorporated (CRHC), an affiliate of the Managing General
Partner,  for damages and seeking  foreclosure on the Partnership's  interest in
the Local  Partnership.  On July 29,  1998,  the parties  agreed to a settlement
which involved a discounted payoff to the holder of the Second and Third Wexford
Notes,  subject to the  Partnership's  satisfaction  with the results of its due
diligence.  On October 5,  1998,  pursuant  to such  settlement  agreement,  the
Partnership  paid the holder of the Second and Third  Wexford Notes a discounted
amount in full settlement of the Second and Third Wexford Notes and the lawsuit.
In connection with this settlement,  the local general partner withdrew from the
Local Partnership,  assigning his one percent interest (which was converted to a
limited partner interest) in the Local  Partnership to the Partnership,  and the
property  management agent,  which is an affiliate of the local general partner,
agreed to a termination of the property management  agreement effective April 1,
1999.  CRHC is the sole  remaining  general  partner  of the Local  Partnership.
Further,  the Partnership  received the interests of the local general  partner,
the  holder  of the  Second  and  Third  Wexford  Notes,  and  their  respective
affiliates in the First Wexford Note, which is  approximately  4.85%. On May 28,
1999, the  Partnership  filed suit against the holder of the First Wexford Note,
seeking payment of the  Partnership's  4.85% share of payments made on the First
Wexford  Note since  October 1, 1997.  On  September  30,  1999,  as part of the
settlement of the litigation, the Partnership paid off, at a discount, the First
Wexford Note (see above).

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

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

b.       Advances to Local Partnerships
         ------------------------------

         As of both June 30, 2000 and  December 31, 1999,  the  Partnership  had
advanced funds to Local  Partnerships  totaling  $474,410.  Interest  accrued on
these  advances was $187,372 as of both June 30, 2000 and December 31, 1999. For
financial  reporting  purposes,  these  loans  have been  reduced to zero by the
Partnership as a result of losses from the related Local Partnerships.

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

         On January 7, 1999, the Partnership advanced $120,642 to Chevy Chase to
cover required  repairs and maintenance  expenses pending  reimbursement  from a
capital  improvement  escrow. The advance was repaid to the Partnership on April
8, 1999.

                              Frenchman's Wharf II
                              --------------------

         To cover  operating  deficits  incurred in prior years for  Frenchman's
Wharf II, the Partnership  advanced funds totaling  $324,410 as of both June 30,
2000 and December 31, 1999. No advances have been made to  Frenchman's  Wharf II
since March 1987, and the Partnership  does not expect to advance any additional
funds to the Local Partnership.  These loans,  together with accrued interest of
$187,372 as of both June 30, 2000 and December  31, 1999,  are payable from cash
flow of  Frenchman's  Wharf II after payment of first  mortgage debt service and
after  satisfaction by the Partnership of certain other interest  obligations on
the purchase money notes relating to the Local Partnership. No interest has been
accrued since 1992 due to the uncertainty of future collection.  The forbearance
agreement entered into with the Local  Partnership's  lender after expiration of
the workout of its mortgage loan prohibits any  distributions  to partners until
the mortgage is repaid. For financial reporting purposes,  these loans have been
reduced  to  zero  by the  Partnership  as a  result  of  losses  at  the  Local
Partnership level during prior years.

                           Posada Vallarta Apartments
                           --------------------------

         The Managing  General Partner and the local managing general partner of
Posada Associates Limited  Partnership (Posada Vallarta  Apartments)  refinanced
the  property's  mortgage  loan  on  May  26,  1998.  In  connection  with  such
refinancing,  the  Partnership  advanced  the  Local  Partnership  $450,000  for
application and rate lock fees. As of both June 30, 2000 and

                                      -14-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

December 31, 1999,  $300,000 of the advances had been repaid to the Partnership.
For financial reporting purposes, the remaining advance has been reduced to zero
by the Partnership as a result of losses at the Local Partnership level.

c.       Property matters
         ----------------

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

         The Managing  General  Partner and the local managing  general  partner
(CRHC, an affiliate of the Managing General Partner,  see Note 2.b.,  above) are
both exploring  various options to refinance the U. S. Department of Housing and
Urban  Development  (HUD)  Section 236 interest  rate  subsidized  mortgage loan
related to Chevy Chase,  or to enter the  Mark-up-to-Market  program.  The local
managing  general  partner agreed to HUD's analysis of the property and proposal
for Mark-up-to-Market,  and is awaiting signature documents which will formalize
the property's entry into the Mark-up-to-Market program. If signed, and upon the
property's entry into the  Mark-up-to-Market  program,  HUD's analysis indicates
that gross rents should  increase by $475,000 per year.  The Mark-up-  to-Market
proposal is for a five year term.

                              Frenchman's Wharf II
                              --------------------

         The report of the auditors on the financial  statements of  Frenchman's
Wharf II for the year ended December 31, 1999 indicated that  substantial  doubt
exists about the ability of the Local Partnership to continue as a going concern
due to the Local  Partnership's  default on its mortgage loan and the expiration
of its Section 8 Rental Housing Assistance Payments (HAP) contract with HUD. The
HAP contract  subsequently was extended for another year. The uncertainty  about
the Local  Partnership's  continued ownership of the property does not adversely
impact the Partnership's financial condition, as discussed above.

                                Orangewood Plaza
                                ----------------

         The 1983  construction  loan  related to  Orangewood  Plaza,  a 40-unit
apartment building in Orange Cove, California, was never formally converted to a
permanent loan. It is anticipated that this loan will be restructured,  and that
the  restructuring  may result in  cancellation  of  indebtedness  income to the
Partnership in the amount of approximately  $163,000 during 2000.  Additionally,
the Partnership had pledged its interest in the Local Partnership as security on
a promissory note, in the amount of $170,000, made by the Local Partnership. The
note, which matured on August 5, 1998, is currently in default.  The parties are
currently  negotiating a restructuring  of this loan, which is anticipated to be
formalized  concurrent with the restructuring of the construction loan. There is
no assurance that either restructuring will be

                                      -15-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

consummated.  Accordingly,  there is no assurance that the  Partnership  will be
able to retain its  interest in  Orangewood  Plaza.  This  uncertainty  does not
adversely impact the Partnership's financial condition, as discussed above.

                                    Princeton
                                    ---------

         Princeton  Community Village  Associates  (Princeton)  defaulted on its
project  subsidy  loan.  The maturity date was extended five years to January 1,
2004, as part of litigation settled effective January 1, 2000, when the Managing
General  Partner and the  noteholder  entered  into an agreement  extending  the
maturity date of the purchase money note, as discussed above.

            Rolling Green at Fall River and Rolling Green at Amherst
            --------------------------------------------------------

         On May 31, 2000, Rolling Green at Fall River and Rolling Green at
Amherst were sold.  See Note 2.a. of the notes to financial statements for
further information concerning these sales.

d.       Summarized financial information
         --------------------------------

         Combined  statements of operations for the 15 and 20 Local Partnerships
in  which  the   Partnership  was  invested  as  of  June  30,  2000  and  1999,
respectively,   follow.   The  combined   statements  have  been  compiled  from
information supplied by the management agents of the projects and are unaudited.
The combined  statements of  operations  for the three and six months ended June
30, 2000 include  information  for Rolling Green at Fall River and Rolling Green
at Amherst through the date of sale.

                                      -16-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                        COMBINED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>


                                                              For the three months ended           For the six months ended
                                                                        June 30           June 30,
                                                             -----------------------------       -----------------------------
                                                                 2000              1999              2000              1999
                                                             ------------      ------------      ------------      ------------
<S>                                                          <C>               <C>               <C>               <C>
Revenue:
  Rental                                                     $  5,343,986      $  6,751,778      $ 11,275,440      $ 13,302,612
  Other                                                           208,332           330,397           421,842           667,924
                                                             ------------      ------------      ------------      ------------
     Total revenue                                              5,552,318         7,082,175        11,697,282        13,970,536
                                                             ------------      ------------      ------------      ------------
Expenses:
  Operating                                                     2,944,474         4,189,631         6,653,546         8,533,596
  Interest                                                      1,680,011         1,624,341         3,360,022         3,248,677
  Depreciation and amortization                                 1,112,015         1,213,660         2,224,031         2,427,326
                                                             ------------      ------------      ------------      ------------
     Total expenses                                             5,736,500         7,027,632        12,237,599        14,209,599
                                                             ------------      ------------      ------------      ------------
Net (loss) income                                            $   (184,182)     $     54,543      $   (540,317)     $   (239,063)
                                                             ============      ============      ============      ============

</TABLE>

         As of June 30, 2000 and 1999,  the  Partnership's  share of  cumulative
losses to date for 9 and 12, respectively,  of the 15 and 20 Local Partnerships,
respectively,  exceeded  the  amount  of the  Partnership's  investments  in and
advances  to  those  Local   Partnerships   by  $25,127,919   and   $24,289,656,
respectively.  As the Partnership has no further  obligation to advance funds or
provide financing to these Local  Partnerships,  the excess losses have not been
reflected in the accompanying financial statements.


3.       AFFORDABLE HOUSING LEGISLATION

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

         Mark-to-Market  implementation  will reduce rental income at properties
that are currently  subsidized  at  higher-than-market  rental  rates,  and will
therefore

                                      -17-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)

3.       AFFORDABLE HOUSING LEGISLATION - Continued

lower cash flow available to meet mortgage payments and operating expenses. Each
affected property may undergo debt  restructuring  according to terms determined
by an individual property and operations  evaluation.  This may involve reducing
the first mortgage loan balance to an amount supportable by the property, taking
into account the property's  operating  expenses and reduced income. The balance
of the amount  written down from the first  mortgage loan will be converted to a
non-performing but accruing (soft) second mortgage loan.

         The Section 8 HAP  contracts  for the  following  properties  initially
expired during the  government's  fiscal year 1998 or 1999 or will expire during
2000, and have been renewed as indicated.

<TABLE>
<CAPTION>

                                                Units Authorized for            Original                    Renewed
                                Number of      Rental Assistance Under    Expiration of Section 8     Expiration of Section 8
Property                       Rental Units          Section 8                 HAP Contract                HAP Contract
--------                       ------------    -----------------------    -----------------------     -----------------------
<S>                            <C>             <C>                        <C>                         <C>
Chevy Chase                        232                   228                    03/23/98                   09/22/00 (1)
Country Place II                   120                    24                    08/29/00                     (1)
Four Winds West                     62                    62                    04/14/98                   10/14/00 (1)
Frenchman's Wharf II               324                    31                    11/30/98                   11/30/00 (1)
Princeton Community Village        239                    26                    07/01/98                   10/01/24
Troy Manor                          50                    50                    10/29/99                   10/29/00 (1)
                                 -----                   ---
     Total                       1,027                   421
                                 =====                   ===

</TABLE>

(1)      The Managing General Partner expects that these Section 8 HAP Contracts
         will be renewed for one year upon expiration.

         With the uncertainty of continued project-based Section 8 subsidies for
properties with expiring HAP contracts,  there is no assurance that these rental
properties  will be able to  maintain  the rental  income and  occupancy  levels
necessary  to pay  operating  costs and debt  service.  As a  result,  it is not
possible to predict  the impact on the Local  Partnerships'  operations  and the
resulting impact on the Partnership's  investments in the Local  Partnerships at
this  time.  As of June 30,  2000,  the  carrying  amount  of the  Partnership's
investments in and advances to Local  Partnerships  with Section 8 HAP contracts
expiring in 2000 was $137,177.

         There  is  a  new  HUD-sponsored   program  generally  referred  to  as
"Mark-up-to-  Market." Under this program,  properties  with expiring  Section 8
contracts that are located in high-rent areas as defined by HUD are eligible for
rent  increases  which would be necessary to bring  Section 8 rents in line with
market rate rents. For properties that enter the program and have subsidized FHA
loans,  the rents are adjusted to take into account the benefits the property is
already  receiving  from  the  below-market  interest  rate  by  means  of a HUD
determined Interest Subsidy Adjustment Factor. The purpose of this program is to
incentivize  owners of  properties  with  expiring  Section 8  contracts  not to
convert these properties to market rate housing.

                                      -18-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             June 30, 2000 and 1999

                                   (Unaudited)


3.       AFFORDABLE HOUSING LEGISLATION - Continued

         In return for receiving market rate rents under Mark-up-to-Market,  the
property owner must enter into a five year  conditional  Section 8 contract with
HUD,  subject to the annual  availability  of funding by Congress.  In addition,
property  owners who enter into the  Mark-up-to-Market  program  will  receive a
waiver  from the cash flow  restriction  imposed on the  property by the limited
dividend limitation.


4.       RELATED PARTY TRANSACTIONS

         In  accordance  with  the  terms  of  the  Partnership  Agreement,  the
Partnership  is  obligated to reimburse  the  Managing  General  Partner for its
direct expenses in managing the  Partnership.  The Partnership  paid $44,016 and
$93,873 for the three and six month periods  ended June 30, 2000,  respectively,
and $38,761 and $83,117 for the three and six month periods ended June 30, 1999,
respectively,  as direct  reimbursement  of  expenses  incurred on behalf of the
Partnership.  Such  expenses  are  included in the  accompanying  statements  of
operations as general and administrative expenses.

         In  accordance  with  the  terms  of  the  Partnership  Agreement,  the
Partnership is obligated to pay the Managing General Partner an annual incentive
management fee (the Management Fee), after all other expenses of the Partnership
are paid. The Partnership  paid the Managing General Partner a Management Fee of
$62,499 and $124,998 for each of the three and six month  periods ended June 30,
2000 and 1999, respectively.

         The Managing General Partner and/or its affiliates may receive a fee of
not more than 2% of the sales price of an investment in a Local  Partnership  or
the  property it owns,  payable  under  certain  conditions  upon the sale of an
investment in a Local  Partnership  or the property it owns.  The payment of the
fee is subject to certain  restrictions,  including the achievement of a certain
level of sales  proceeds and making  certain  minimum  distributions  to limited
partners.  No such  fees were  earned by the  Managing  General  Partner  or its
affiliates for the three and six month periods ended June 30, 2000 or 1999.


                                      -19-
<PAGE>
PART I.           FINANCIAL INFORMATION
                  ---------------------
ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  -------------------------------------------------
                           CONDITION AND RESULTS OF OPERATIONS
                           -----------------------------------

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

                                     General
                                     -------

         Some of the  rental  properties  owned by the  Local  Partnerships  are
financed by state housing  agencies.  The Managing  General  Partner has sold or
refinanced, and will continue to sell or refinance,  certain properties pursuant
to  programs   developed  by  these   agencies.   These   programs  may  include
opportunities  to sell a property to a qualifying  purchaser  who would agree to
maintain the property as low to moderate  income  housing in  perpetuity,  or to
refinance a property, or to obtain supplemental financing.  The Managing General
Partner  continues to monitor  certain state  housing  agency  programs,  and/or
programs provided by certain lenders,  to ascertain whether the properties would
qualify  within the  parameters of a given  program and whether  these  programs
would provide an  appropriate  economic  benefit to the limited  partners of the
Partnership.

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

         Mark-to-Market  implementation  will reduce rental income at properties
that are currently  subsidized  at  higher-than-market  rental  rates,  and will
therefore  lower cash flow  available to meet  mortgage  payments and  operating
expenses.  Each affected  property may undergo debt  restructuring  according to
terms determined by an individual property and operations  evaluation.  This may
involve reducing the first mortgage loan balance to an amount supportable by the
property,  taking into  account the  property's  operating  expenses and reduced
income. The balance of the amount written down from the first mortgage loan will
be converted to a non-performing but accruing (soft) second mortgage loan.

                                      -20-
<PAGE>
PART I.           FINANCIAL INFORMATION
                  ---------------------
ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  -------------------------------------------------
                           CONDITION AND RESULTS OF OPERATIONS - Continued
                           -----------------------------------

         In many instances,  the  Mark-to-Market  rental rate  restructuring may
require the write down of an  FHA-insured  mortgage  loan,  which would  trigger
cancellation  of  indebtedness  income to the partners,  a taxable  event,  even
though no actual cash is received.  Additionally, if the existing first mortgage
loan is  bifurcated  into a first and second  mortgage  loan,  the newly created
second mortgage loan will accrue interest at a below-market rate;  however,  the
Internal  Revenue  Service  issued a ruling in July 1998 that concluded that the
below-market rate of interest will not generate additional ordinary income. Each
property subject to Mark-to-Market  will be affected in a different manner,  and
it is very  difficult to predict the exact form of  restructuring,  or potential
tax liabilities to the limited partners, at this time.

         There  is  a  new  HUD-sponsored   program  generally  referred  to  as
"Mark-up-to-  Market".  Under this program,  properties with expiring  Section 8
contracts that are located in high-rent areas as defined by HUD are eligible for
rent  increases  which would be necessary to bring  Section 8 rents in line with
market rate rents. For properties that enter the program and have subsidized FHA
loans,  the rents are adjusted to take into account the benefits the property is
already  receiving  from  the  below-market  interest  rate  by  means  of a HUD
determined Interest Subsidy Adjustment Factor. The purpose of this program is to
incentivize  owners of  properties  with  expiring  Section 8  contracts  not to
convert these properties to market rate housing.

         In return for receiving market rate rents under Mark-up-to-Market,  the
property owner must enter into a five year  conditional  Section 8 contract with
HUD,  subject to the annual  availability  of funding by Congress.  In addition,
property  owners who enter into the  Mark-up-to-Market  program  will  receive a
waiver  from the cash flow  restriction  imposed on the  property by the limited
dividend limitation.

         The Managing General Partner is considering new strategies to deal with
the ever changing  environment of affordable housing policy. The Section 236 and
Section  221(d)(3)  mortgage loans may be eligible for pre-payment in their 18th
year or later.  Properties  with  expiring  Section 8 HAP  contracts  may become
convertible  to  market  rate  apartment  properties.  Currently,  there are few
lenders that will provide  financing either to prepay existing mortgage loans of
these types or provide additional funds to allow a property to convert to market
rate units.  Where  opportunities  exist,  the  Managing  General  Partner  will
continue to work with the Local  Partnerships  to develop  strategies  that make
economic sense for all parties involved.

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

         The  Partnership's  liquidity,  with  unrestricted  cash  resources  of
$7,775,980 as of June 30, 2000, along with anticipated future cash distributions
from the Local Partnerships,  is expected to be adequate to meet its current and
anticipated  operating cash needs. As of August 9, 2000,  there were no material
commitments for capital expenditures.

         The Partnership's  obligations with respect to its investments in Local
Partnerships, in the form of purchase money notes having an aggregate principal

                                      -21-
<PAGE>
PART I.           FINANCIAL INFORMATION
                  ---------------------
ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  -------------------------------------------------
                           CONDITION AND RESULTS OF OPERATIONS - Continued
                           -----------------------------------

balance of $4,920,000 plus aggregate  accrued  interest of $9,008,708 as of June
30, 2000,  are payable in full upon the earliest of: (1) sale or  refinancing of
the respective Local Partnership's  rental property;  (2) payment in full of the
respective Local Partnership's  permanent loan; or (3) maturity.  Purchase money
notes in the principal  amounts of $1,050,000  and $950,000  matured on December
31, 1996 and 1997, respectively,  and were extended to January 5, 2001, but were
paid off, at a discount,  on  September  30, 1999.  Purchase  money notes in the
aggregate  principal  amount of $2,380,000  matured on January 1, 1998, and were
written off on October 5, 1999 when the  related  local  partnership  interests,
held  by  the   Partnership,   were  transferred  to  the  noteholders  in  full
satisfaction  of the purchase  money notes'  principal and accrued  interest.  A
purchase  money note in the principal  amount of  $3,150,000  matured on June 1,
1998,  and has not been paid or extended.  Purchase  money notes in the original
principal  amounts of $4,600,000 and  $1,927,500,  with  maturities  extended to
August 31, 2003 were paid off, at a discount,  on May 31, 2000. A purchase money
note in the  original  principal  amount of  $1,450,000  matured on September 1,
1998,  was partially  paid and has been extended to September 1, 2003.  Purchase
money notes in the aggregate  principal amount of $840,178 matured on January 1,
1999 and were paid off, at a discount,  on  February 5, 1999.  A purchase  money
note in the original  principal  amount of $500,000  matured on January 1, 1999,
and was partially  transferred to the noteholder,  with the balance  extended to
January  1,  2004.  See the notes to the  financial  statements  for  additional
information concerning these purchase money notes.

         The purchase money notes, which are nonrecourse to the Partnership, are
generally  secured  by  the  Partnership's  interest  in  the  respective  Local
Partnerships.  There is no assurance  that the underlying  properties  will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money notes'  principal and accrued  interest when due. If a purchase money note
is not paid in accordance with its terms,  the  Partnership  will either have to
renegotiate  the terms of repayment or risk losing its  partnership  interest in
the respective Local Partnership.  The Partnership's inability to pay certain of
the purchase  money note principal and accrued  interest  balances when due, and
the  resulting  uncertainty  regarding  the  Partnership's  continued  ownership
interest  in the  related  Local  Partnerships,  does not  adversely  impact the
Partnership's   financial   condition  because  the  purchase  money  notes  are
nonrecourse  and  secured  solely by the  Partnership's  interest in the related
Local  Partnerships.  Therefore,  should  the  investment  in any  of the  Local
Partnerships with maturing purchase money notes not produce  sufficient value to
satisfy the related purchase money notes, the Partnership's  exposure to loss is
limited  because  the  amount  of the  nonrecourse  indebtedness  of each of the
maturing  purchase money notes exceeds the carrying amount of the investment in,
and advances to, each of the related Local  Partnerships.  Thus, even a complete
loss of the Partnership's  interest in one of these Local Partnerships would not
have a material adverse impact on the financial condition of the Partnership.

                                      -22-
<PAGE>
PART I.           FINANCIAL INFORMATION
                  ---------------------
ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  -------------------------------------------------
                           CONDITION AND RESULTS OF OPERATIONS - Continued
                           -----------------------------------

         The following  chart presents  information  related to a purchase money
note which has matured and which  remains  unpaid or  unextended as of August 9,
2000.  Excluded from the following  chart are purchase money notes which matured
through June 30, 2000, and which have been paid off,  cancelled,  or extended on
or before August 9, 2000.

<TABLE>
<CAPTION>


                                                                                                 Carrying Amount
                                                                        Aggregate                of Partnership's
                                             Aggregate                  Accrued                   Investments in
                   Number of                 Principal                  Interest                 and Advances to
    Purchase       Underlying                 Balance                   Balance                  Underlying Local
   Money Note        Local       Percentage  as of June   Percentage   as of June    Percentage  Partnerships as    Percentage
 (PMN) Maturity   Partnerships    of Total    30, 2000     of Total     30, 2000      of Total   of June 30, 2000    of Total
----------------  ------------   ----------  ----------   ----------   -----------   ----------  ----------------   ----------
<S>               <C>            <C>         <C>          <C>          <C>           <C>         <C>                <C>
2nd Quarter 1998       1               7%    $3,150,000         64%     $5,792,737        64%       $       --           --%
                     ----          -----     ----------      -----      ----------     -----        ----------        -----
                       1               7%    $3,150,000         64%     $5,792,737        64%       $       --           --%
                     ====          =====     ==========      =====      ==========     =====        ==========        =====

Total, Local
  Partnerships         15            100%    $4,920,000        100%     $9,008,708       100%       $  838,211          100%
                     ====          =====     ==========      =====      ==========     =====        ==========        =====

</TABLE>

         The Managing  General  Partner is  continuing to  investigate  possible
alternatives to reduce the Partnership's  debt obligations.  These  alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note  requirements,  paying off certain purchase money notes at a
discounted  price,  extending  the due dates of certain  purchase  money  notes,
refinancing the respective properties' underlying debt or selling the underlying
real estate and using the Partnership's share of the proceeds to pay or buy down
certain purchase money note  obligations.  Although the Managing General Partner
has had some success applying these strategies in the past, the Managing General
Partner cannot assure that these strategies will be successful in the future. If
the Managing  General  Partner is unable to negotiate an extension or discounted
payoff,  upon  maturity  of the  purchase  money  notes,  in the event  that the
purchase  money  notes  remain  unpaid,  the  noteholders  may have the right to
foreclose on the Partnership's  interest in the related Local  Partnerships.  In
the event of a foreclosure,  the excess of the nonrecourse indebtedness over the
carrying amount of the Partnership's investment in the related Local Partnership
would be deemed  cancellation of  indebtedness  income which would be taxable to
Limited  Partners  at a federal  tax rate of up to 39.6%.  Additionally,  in the
event of a foreclosure,  the Partnership  would lose its investment in the Local
Partnership and, likewise,  its share of any future cash flow distributed by the
Local Partnership from rental  operations,  mortgage debt  refinancings,  or the
sale of the real estate.  Of the 15 Local  Partnerships in which the Partnership
is invested as of June 30, 2000,  the one Local  Partnership  with an associated
purchase  money note which has matured and which remains unpaid or unextended as
of August 9, 2000,

                                      -23-
<PAGE>
PART I.           FINANCIAL INFORMATION
                  ---------------------
ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  -------------------------------------------------
                           CONDITION AND RESULTS OF OPERATIONS - Continued
                           -----------------------------------

represented the following  percentages of the Partnership's  total distributions
received from Local Partnerships and share of income from Local Partnerships for
the immediately preceding two calendar years.

<TABLE>
<CAPTION>

                                            Percentage of Total         Partnership's Share of
                                           Distributions Received            Income from
             For the Year Ending           from Local Partnerships        Local Partnerships
             -------------------           -----------------------      ----------------------
             <S>                           <C>                          <C>
             December 31, 1999                       0%                        $0
             December 31, 1998                       0%                        $0


</TABLE>

         The Partnership  closely monitors its cash flow and liquidity  position
in an  effort  to  ensure  that  sufficient  cash  is  available  for  operating
requirements.  For the six month  periods  ended  June 30,  2000 and  1999,  the
receipt  of  distributions  from  Local  Partnerships  was  adequate  to support
operating cash requirements.  Cash and cash equivalents decreased during the six
month period ended June 30, 2000,  as the  distribution  to  Additional  Limited
Partners,  made in January  2000 out of the proceeds of the 1999 sale of Wexford
Ridge,  exceeded cash flow distributions  received from partnerships  during the
period.

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

         The  Partnership's net income for the three month period ended June 30,
2000 increased as compared to the corresponding  period in 1999 primarily due to
gain on disposition of investments in partnerships and  extraordinary  gain from
extinguishment  of debt  related to the sales of Roberts  Fall River  Associates
(Rolling  Green at Fall River),  Roberts  Amherst  Associates  (Rolling Green at
Amherst)  and the partial  transfer of the  Partnership's  interest in Princeton
Community  Village  Associates  (Princeton),  as  discussed  in the notes to the
financial statements. Contributing to the increase in net income were a decrease
in interest  expense due to lower  purchase  money note  balances as a result of
payments  and the  extinguishment  of debt and a  decrease  in  amortization  of
deferred costs associated with the sales of properties. Partially offsetting the
increase in the Partnership's net income were a decrease in share of income from
partnerships as a result of the sales of properties and higher professional fees
related to the Princeton litigation.

         The  Partnership's  net income for the six month  period ended June 30,
2000 increased as compared to the corresponding  period in 1999 primarily due to
gain on  disposition of investments  in  partnerships,  extraordinary  gain from
extinguishment  of debt, a decrease in interest  expense on purchase money notes
and a decrease in amortization of deferred costs,  all as discussed above and in
the notes to the  financial  statements.  Contributing  to the  increase  in net
income  were an  increase  in  interest  income  due to  higher  cash  and  cash
equivalents  balances  and higher  interest  rates during 2000 and a decrease in
general and administrative expenses primarily due to lower reimbursed payroll

                                      -24-
<PAGE>
PART I.           FINANCIAL INFORMATION
                  ---------------------
ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  -------------------------------------------------
                           CONDITION AND RESULTS OF OPERATIONS - Continued
                           -----------------------------------

costs.  Offsetting  the increase in net income were decreases in share of income
from partnerships and higher professional fees, both as discussed above.

         For financial reporting purposes, the Partnership, as a limited partner
in the Local Partnerships, does not record losses from the Local Partnerships in
excess of its  investment  to the  extent  that the  Partnership  has no further
obligation to advance funds or provide financing to the Local Partnerships. As a
result,  the  Partnership's  share of income from partnerships for the three and
six month  periods  ended June 30, 2000 did not include  losses of $272,321  and
$743,301, respectively, compared to excluded losses of $337,089 and $760,311 for
the three and six month periods ended June 30, 1999, respectively.

         No other significant changes in the Partnership's operations have taken
place during this period.


PART II.          OTHER INFORMATION
                  -----------------
ITEM 3.           DEFAULTS UPON SENIOR SECURITIES
                  -------------------------------

         See Note 2.a. of the notes to financial statements contained in Part I,
Item 1, hereof, for information concerning the Partnership's defaults on
purchase money notes.


ITEM 5.           OTHER INFORMATION
                  -----------------

         On  April  2,  2000,  Peachtree  Partners   (Peachtree)   initiated  an
unregistered  tender offer to purchase  approximately  2,450 of the  outstanding
units of additional limited partnership interest (Units) in the Partnership at a
price of $50 per Unit; the offer expired May 19, 2000. Peachtree is unaffiliated
with the Managing  General Partner.  The price offered was determined  solely at
the discretion of Peachtree and does not  necessarily  represent the fair market
value of each Unit. There is no established  market for the purchase and sale of
Units in the Partnership,  although  various informal  secondary market services
exist. Due to the limited markets,  however,  investors may be unable to sell or
otherwise dispose of their Units in the Partnership.

                                      -25-
<PAGE>
PART II.          OTHER INFORMATION
                  -----------------
ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K
                  --------------------------------

         a.       None

         b.       No Reports on Form 8-K were filed with the Commission during
                  the quarter ended June 30, 2000.

         All other items are not applicable.

                                      -26-
<PAGE>

                                    SIGNATURE


         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

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

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



August 9, 2000                by: /s/ Michael J. Tuszka
-----------------                 ---------------------------------------
DATE                              Michael J. Tuszka
                                    Vice President
                                    and Chief Accounting Officer
                                    (Principal Financial Officer
                                    and Principal Accounting Officer)

                                      -27-
<PAGE>


                                  EXHIBIT INDEX
                                  -------------


Exhibit                                             Method of Filing
-------                                       -----------------------------

27               Financial Data Schedule      Filed herewith electronically

                                      -28-