-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vwq9Ezq/RqIrpizpLNcTNX4YGq/mQ8NOfTpfvV5tRMvL/UBg0E8OZsoBLp/0BjP9 vcsP8R8c6o2vOfwXYO8ELg== 0000354521-08-000014.txt : 20080401 0000354521-08-000014.hdr.sgml : 20080401 20080401163728 ACCESSION NUMBER: 0000354521-08-000014 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20071231 FILED AS OF DATE: 20080401 DATE AS OF CHANGE: 20080401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL REALTY INVESTORS II LTD PARTNERSHIP CENTRAL INDEX KEY: 0000713571 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 521321492 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-11973 FILM NUMBER: 08729851 BUSINESS ADDRESS: STREET 1: 11200 ROCKVILLE PIKE STREET 2: 5TH CITY: ROCKVILLE STATE: MD ZIP: 20852 BUSINESS PHONE: 3014689200 MAIL ADDRESS: STREET 1: 11200 ROCKVILLE PIKE STREET 2: 5TH FLOOR CITY: ROCKVILLE STATE: MD ZIP: 20852 10KSB/A 1 f10ksba_123107-cri2.txt ANNUAL REPORT - -------------------------------------------------------------------------------- U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-KSB/A ---------------- ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2007 ---------------- Commission file number 0-11973 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP Organized pursuant to the Laws of the State of Maryland ---------------- Internal Revenue Service - Employer Identification No. 52-1321492 11200 Rockville Pike, Rockville, Maryland 20852 (301) 468-9200 ---------------- Securities registered under Section 12(g) of the Exchange Act: UNITS OF LIMITED PARTNER INTEREST ---------------- Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X] Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB/A or any amendment to this Form 10-KSB/A [X] State issuer's revenues for its most recent fiscal year $249,666. The units of limited partner interest of the registrant are not traded in any market. Therefore, the units of limited partner interest had neither a market selling price nor an average bid or asked price within the 60 days prior to the date of this filing. - -------------------------------------------------------------------------------- CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP 2007ANNUAL REPORT ON FORM 10-KSB/A TABLE OF CONTENTS Page ---- PART I Item 1. Business........................................................ I-1 Item 2. Properties...................................................... I-3 Item 3. Legal Proceedings............................................... I-3 Item 4. Submission of Matters to a Vote of Security Holders............. I-3 PART II Item 5. Market for the Registrant's Partnership Interests and Related Partnership Matters ............................. II-1 Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... II-2 Item 7. Financial Statements............................................ II-5 Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure....................... II-5 Item 8A. Controls and Procedures......................................... II-5 Item 8B. Other Information............................................... II-6 PART III Item 9. Directors and Executive Officers of the Registrant.............. III-1 Item 10. Executive Compensation.......................................... III-2 Item 11. Security Ownership of Certain Beneficial Owners and Management.. III-2 Item 12. Certain Relationships and Related Transactions.................. III-3 Item 13. Exhibits........................................................ III-3 Item 14. Principal Accountant Fees and Services.......................... III-4 Signatures............................................................... III-5 Report of Independent Registered Public Accounting Firm.................. III-7 Financial Statements..................................................... III-8 PART I ------ ITEM 1. BUSINESS -------- Capital Realty Investors-II Limited Partnership (the Partnership) is a limited partnership which was formed under the Maryland Revised Uniform Limited Partnership Act on March 23, 1983. On May 6, 1983, the Partnership commenced offering 50,000 units of additional limited partner interest through a public offering managed by Merrill Lynch, Pierce, Fenner and Smith, Incorporated. The Partnership closed the offering on June 20, 1983, when it became fully subscribed. As of December 31, 2007, 85 units of limited partner interest had been abandoned. The General Partners of the Partnership are C.R.I., Inc. (CRI), which is the Managing General Partner, and current and former shareholders of CRI. Services for the Partnership are performed by CRI, as the Partnership has no employees of its own. The Partnership was formed to invest in real estate, which is the Partnership's principal business activity, by acquiring and holding limited partner interests in limited partnerships (Local Partnerships). The Partnership originally made investments in 22 Local Partnerships. As of December 31, 2007, the Partnership retains its investment in one Local Partnership. The Local Partnership owns a state government-assisted apartment complex, which provides housing principally to the elderly and/or to individuals and families of low or moderate income. The original objectives of these investments, not necessarily in order of importance, were to: (i) preserve and protect the Partnership's capital; (ii) provide, during the early years of the Partnership's operations, current tax benefits to the partners in the form of tax losses which the partners could use to offset income from other sources; (iii) provide capital appreciation through increases in the value of the Partnership's investments and increased equity through periodic payments on the indebtedness on the apartment complexes; and (iv) provide cash distributions from sale or refinancing of the Partnership's investments and, on a limited basis, from rental operations. See Part II, Item 6, Management's Discussion and Analysis of Financial Condition and Results of Operations, for a discussion of factors affecting the original investment objectives. The Local Partnerships in which the Partnership invested were organized by private developers who acquired the sites, or options thereon, applied for mortgage financing and applicable mortgage insurance and/or subsidies and who generally remained as the local general partners in the Local Partnerships. In most cases, the local general partners of the Local Partnerships retained responsibility for maintaining, operating and managing the projects. However, under certain circumstances, the Local Partnerships' partnership agreements permit removal of the local general partner and replacement with another local general partner or with an affiliate of the Partnership's Managing General Partner. See Part I, Item 4, hereof, for a discussion of the Partnership's Plan of Liquidation and Dissolution, which was approved by a majority of the units of limited partner interest on March 22, 2004. I-1 PART I ------ ITEM 1. BUSINESS - Continued -------- As a result of its investment in the Local Partnerships, the Partnership became the principal limited partner in 22 (one remaining as of December 31, 2007) Local Partnerships. As a limited partner, the Partnership's legal liability for obligations of the Local Partnerships is limited to its investment. An affiliate of the Managing General Partner of the Partnership is a general partner in the one remaining Local Partnership. Affiliates of the Managing General Partner may operate other apartment complexes which may be in competition for eligible tenants with the Local Partnership's apartment complex. Although the Local Partnerships in which the Partnership remains invested owns an apartment complex that must compete in the marketplace for tenants, interest subsidies and/or rent supplements from governmental agencies generally make it possible to offer certain of the dwelling units to eligible tenants at a cost significantly below the market rate for comparable conventionally financed dwelling units. Based on available data, the Managing General Partner believes there to be no material risk of market competition in the operations of the apartment complex described below which would adversely impact the Partnership. A schedule of the apartment complex owned by the Local Partnership in which the Partnership has an investment as of December 31, 2007, follows. SCHEDULE OF THE APARTMENT COMPLEX OWNED BY THE LOCAL PARTNERSHIP IN WHICH CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP HAS AN INVESTMENT(1)

(1) The property is a multifamily housing complex. No single tenant rents 10% or more of the rentable square footage. Residential leases are typically one year or less in length, with varying expiration dates, and substantially all rentable space is for residential purposes. (2) The amount provided is the balance of the first mortgage loan payable by the Local Partnership as of December 31, 2007. On December 31, 2007, the Partnership's interest in Golden Acres was sold. See the notes to financial statements for additional information concerning the sale. On December 31, 2007, the Partnership's interest in Orangewood Plaza was sold. See the notes to financial statements for additional information concerning the sale. I-2 PART I ------ ITEM 1. BUSINESS - Continued -------- On October 31, 2006, the partnership's interest in Four Winds West was transferred to an affiliate of the local managing general partner. See the notes to the financial statements for additional information concerning the transfer. On December 31, 2006, the Partnership's interest in Troy Manor was transferred to an affiliate of the local managing general partner. See the notes to financial statements for additional information concerning the transfer. ITEM 2. PROPERTIES ---------- Through its ownership of a limited partner interest in one Local Partnership, Capital Realty Investors-II Limited Partnership indirectly holds an interest in the real estate owned by the Local Partnership. See Part I, Item 1, for information concerning these properties. ITEM 3. LEGAL PROCEEDINGS ----------------- There are no material pending legal proceedings to which the Partnership is a party. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- No matters were submitted to a vote of security holders during the fourth quarter of 2007. On February 4, 2004, the Partnership filed a Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934, and mailed it to limited partners to solicit consents for approval of the following: (1) The sale of all of the Partnership's assets and the dissolution of the Partnership pursuant to a Plan of Liquidation and Dissolution, and the amendment of the Partnership's Limited Partnership Agreement to permit the Managing General Partner, CRI, to be eligible to receive increased property disposition fees from the Partnership on the same basis as such fees may currently be paid to Local General Partners, real estate brokers or other third party intermediaries employed to sell Partnership properties, to the extent that CRI markets and sells the Partnership's properties instead of such persons (a "Disposition Fee"); (2) The amendment of the Partnership's Limited Partnership Agreement to permit CRI to be eligible to receive a partnership liquidation fee in the amount of $500,000, payable only if the Managing General Partner is successful in liquidating all of the Partnership's investments within 36 months from the date the liquidation was approved [March 22, 2004], in recognition that one or more of the properties in which the Partnership holds an interest might not be saleable to parties not affiliated with the respective Local Partnership due to the amount and/or terms of their current indebtedness (the "Partnership Liquidation Fee"); and (3) To authorize the Managing General Partner, in its sole discretion, to elect to extend the period during which Consents of Limited Partners may be solicited and voted, but not beyond sixty (60) days from the date that the Consent Solicitation Statement was sent to the Limited Partners. The matters for which consent was solicited are collectively referred to as the "Liquidation." I-3 PART I ------ ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Continued --------------------------------------------------- The record date for voting was December 31, 2003, and the final voting deadline was March 22, 2004. A tabulation of votes received by the voting deadline follows.

The Partnership was not liquidated within 36 months from the approved liquidation date of March 22, 2004, therefore no liquidation fee was taken by the Managing General Partner. The Managing General Partner is continuing towards liquidation of all the Partnership's investments. There can be no assurance that the Liquidation will be completed pursuant to the Plan of Liquidation and Dissolution. I-4 PART II ------- ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS ------------------------------------------------- AND RELATED PARTNERSHIP MATTERS ------------------------------- (a) There is no established market for the purchase and sale of units of additional limited partner interest (Units) in the Partnership, although various informal secondary market services exist. Due to the limited markets, however, investors may be unable to sell or otherwise dispose of their Units. (b) As of March 31, 2008, there were approximately 2,965 registered holders of Units in the Partnership. (c) On April 4, 2006, the Partnership made a tax distribution of $252,862 (approximately $7.20 per Unit) on behalf of Additional Limited Partners who were not residents of Ohio. II-1 PART II ------- ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- Capital Realty Investors-II Limited Partnership's (the Partnership) Management's Discussion and Analysis of Financial Condition and Results of Operations section is based on the financial statements, and contains information that may be considered forward looking, including statements regarding the effect of governmental regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of factors including national and local economic conditions, the general level of interest rates, governmental regulations affecting the Partnership and interpretations of those regulations, the competitive environment in which the Partnership operates, and the availability of working capital. Critical Accounting Policies ---------------------------- The Partnership has disclosed its selection and application of significant accounting policies in Note 1 of the notes to financial statements included in this annual report on Form 10-KSB/A at December 31, 2007. The Partnership accounts for its remaining investment in partnership (Local Partnership) using the equity method because the Partnership is a limited partner in the Local Partnership. As such, the Partnership has no control over the selection and application of accounting policies, or the use of estimates, by the Local Partnership. Environmental and operational trends, events and uncertainties that might affect the property owned by the Local Partnership would not necessarily have a significant impact on the Partnership's application of the equity method of accounting. New Accounting Pronouncement ---------------------------- In September 2006, the Financial Accounts Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements ("SFAS No. 157"). SFAS No. 157 establishes a formal framework for measuring fair value under generally accepted accounting principles. Although SFAS No. 157 applies (amends) the provisions of existing FASB and AICPA pronouncements, it does not require any new fair value measurements, nor does it establish valuation standards. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management has determined that SFAS No. 157 will have no material impact to the Partnership. General ------- The Partnership has invested, through Local Partnerships, primarily in federal or state government-assisted apartment complexes intended to provide housing to low and moderate income tenants. In conjunction with such governmental assistance, which includes federal and/or state financing at below-market interest rates and rental subsidies, certain of the Local Partnerships agreed to regulatory limitations on (i) cash distributions, (ii) use of the properties, and (iii) sale or refinancing. These limitations typically were designed to remain in place for the life of the mortgage. The original investment objectives of the Partnership primarily were to deliver tax benefits, as well as cash proceeds upon disposition of the properties, through the Partnership's investment in Local Partnerships. Regulatory restrictions on cash distributions from the properties limited the original projections of annual cash distributions from property operations. The original investment objectives of the Partnership have been affected by the Tax Reform Act of 1986, which virtually eliminated many of the incentives for the new construction or the sale of existing low income housing properties by limiting the use of passive loss deductions. Therefore, C.R.I., Inc. (the Managing General Partner) concentrated on transferring the source of investment yield from tax benefits to cash flow wherever possible, thereby potentially enhancing the ability of the Partnership to share in the appreciated value of the properties. II-2 PART II ------- ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS - Continued ----------------------------------- The Managing General Partner has received consent from the holders of a majority of the units of limited partner interest for the liquidation of the Partnership. (See Part I, Item 4.) There can be no assurance that the Liquidation will be completed pursuant to the Plan of Liquidation and Dissolution. The following paragraphs discuss the operations of the Partnership and the property in which it is invested during this period of liquidation. The Managing General Partner has sold certain properties by utilizing opportunities presented by federal affordable housing legislation, favorable financing terms and preservation incentives available to tax credit and not-for-profit purchasers. The remaining rental property owned by the Local Partnership is financed by a state housing agency. Programs developed by the agency may include opportunities to sell a property to a qualifying purchaser who would agree to maintain the property as low to moderate income housing. The Managing General Partner continues to monitor certain state housing agency programs, and/or programs provided by certain lenders, to ascertain whether the property 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. However, it appears unlikely that a sale under any of the agency's current programs would produce sufficient cash to pay off the Partnership's purchase money note secured by its interest in the Local Partnership. Moreover, the Managing General Partner has been unable to locate a number of the holders of the note to obtain their consent to sell the property for a lesser amount. It is exploring judicial means of obtaining declaratory relief to proceed with disposition of the property. The Managing General Partner continues to seek strategies to deal with affordable housing requirements. While the Managing General Partner cannot predict the outcome for any particular property at this time, the Managing General Partner will continue to work with the Local Partnership to develop strategies that maximize the benefits to investors. Financial Condition/Liquidity ----------------------------- As of December 31, 2007, the Partnership had approximately 2,969 investors who held a total of 49,910 units of additional limited partner interest which were originally sold for the aggregate amount of $49,910,000. The Partnership originally made investments in 22 Local Partnerships, of which one remains at December 31, 2007. The Partnership's liquidity, with unrestricted cash resources of $4,588,111 as of December 31, 2007, is expected to be adequate to meet its current and anticipated operating cash needs. As of March 31, 2008, there were no material commitments for capital expenditures. During 2007 and 2006, the Partnership received cash distributions of $0 and $37,636, respectively, from the Local Partnerships. The Partnership's remaining obligation with respect to its investment in Westgate Tower Limited Dividend Housing Associates (Westgate), in the form of a nonrecourse purchase money note which matured September 1, 2003, has a principal balance of $1,400,000 plus accrued interest of $3,130,262 as of December 31, 2007, and is payable in full upon the earliest of: (i) sale or refinancing of the respective Local Partnership's rental property; (ii) payment in full of the respective Local Partnership's permanent loan; or (iii) maturity. II-3 PART II ------- ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS - Continued ----------------------------------- The purchase money note, which is nonrecourse to the Partnership, is secured by the Partnership's interest in the Westgate Local Partnership, which owns Westgate Tower Apartments. The underlying property does not have sufficient appreciation and equity to enable the Partnership to pay the purchase money note's principal and accrued interest. In conjunction with the approved Plan of Liquidation and Dissolution of the Partnership, the Managing General Partner is currently holding the property owned by Westgate for sale and seeking consent of the noteholders to accept the proceeds from such sale as a discounted payoff of the purchase money note's principal and accrued interest. The Managing General Partner has been unable to locate a number of the holders of the note to obtain their consent to sell the property for a lesser amount. It is exploring judicial means of obtaining declaratory relief to proceed with disposition of the property. The discounted payoff would result in cancellation of indebtedness income to the Limited Partners, which would be taxed at a federal tax rate of up to 35 percent. There can be no assurance that a sale of Westgate and discounted payoff of the purchase money note will occur. The Managing General Partner has received consent from a majority of Unit Holders for the liquidation of the Partnership. (See Part I, Item 4.) It is anticipated that the Partnership's obligation, discussed above, would be retired in conjunction with such Liquidation. There can be no assurance that the Liquidation will be completed pursuant to the Plan of Liquidation and Dissolution. The Partnership closely monitors its cash flow and liquidity position in an effort to ensure that sufficient cash is available for operating requirements. For the year ended December 31, 2007, existing cash resources were adequate to support net cash used in operating activities. Cash and cash equivalents decreased $257,746 during 2007, primarily due to net cash used in operating activities. The Partnership does not expect to receive distributions from the remaining Local Partnership in future years. On April 4, 2006, the Partnership made a tax distribution of $252,862 (approximately $7.20 per Unit) on behalf of Additional Limited Partners who were not residents of Ohio. Results of Operations --------------------- 2007 Versus 2006 - ---------------- The Partnership's net loss for the year ended December 31, 2007, decreased compared to 2006, primarily due to lower share of loss from partnerships, lower general and administrative expenses and lower professional fees, partially offset by decreases in other income and gain on disposition of investment in partnerships. Share of loss from partnerships decreased primarily due to the cessation of loss from one property which was sold in 2007 and increased rental income at one property. Other income decreased due to the cessation of cash flow from properties transferred in 2006. General and administrative expenses decreased primarily due to lower reimbursed payroll costs. Professional fees decreased due to lower legal cost, partially offset by higher audit costs. For financial reporting purposes, the Partnership, as a limited partner in the Local Partnerships, does not record losses from the Local Partnerships in excess of its investment to the extent that the Partnership has no further obligation to advance funds or provide financing to the Local Partnerships. As a result, the Partnership's share of income from partnerships for the years ended December 31, 2007 and 2006, did not include losses of $0 and $147,675, respectively. Distributions of $0 and $37,636, received from zero and two Local Partnerships during 2007 and 2006, respectively, and for which the Partnership's carrying value is zero (equity method suspended), were recorded as increases in the Partnership's share of income from partnerships in the year received. Inflation --------- Inflation allows for increases in rental rates, usually offsetting any higher operating and replacement costs. Furthermore, inflation generally does not impact the fixed rate long-term financing under which the Partnership's real property investments were purchased. II-4 PART II ------- ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS - Continued ----------------------------------- The rental revenues of the Partnership's remaining property for the five years ended December 31, 2007, follow. Rental revenue amounts have been adjusted to reflect property and interests sales and interests transferred in 2007 and in prior years.

ITEM 7. FINANCIAL STATEMENTS -------------------- The information required by this item is contained in Part III. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS --------------------------------------------- ON ACCOUNTING AND FINANCIAL DISCLOSURE -------------------------------------- None. ITEM 8A. CONTROLS AND PROCEDURES ----------------------- In January 2008, representatives of the Managing General Partner of the Partnership carried out an evaluation of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures, pursuant to Exchange Act Rules 13a-15 and 15d-15. The Managing General Partner does not expect that the Partnership's disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2007, our disclosure controls and procedures were effective to ensure that (i) the information required to be disclosed by us in the reports filed or submitted by us under the Securities Exchange Act of 1934, as amended, was recorded, processed, summarized or reported within the time periods specified in the SEC's rules and forms and (ii) such information was accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. In addition, there have been no significant changes in the Partnership's internal control over financial reporting that occurred during the Partnership's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership's internal control over financial reporting. II-5 PART II ------- ITEM 8B. OTHER INFORMATION ----------------- There has not been any information required to be disclosed in a report on Form 8-K during the quarter ended December 31, 2007, but not reported, whether or not otherwise required by this Form 10-KSB/A at December 31, 2007. II-6 PART III -------- ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- (a) and (b) The Partnership has no directors, executive officers or significant employees of its own. (a) and (b) The names, ages and business experience of the directors and executive officers of C.R.I., Inc. (CRI), the Managing General Partner of the Partnership, follow. William B. Dockser, 71, has been the Chairman of the Board and a Director of CRI since 1974. Prior to forming CRI, he served as President of Kaufman and Broad Asset Management, Inc., an affiliate of Kaufman and Broad, Inc., which managed publicly held limited partnerships created to invest in low and moderate income multifamily apartment properties. Prior to joining Kaufman and Broad, he served in various positions at HUD, culminating in the post of Deputy FHA Commissioner and Deputy Assistant Secretary for Housing Production and Mortgage Credit, where he was responsible for all federally insured housing production programs. Before coming to the Washington, D.C., area, Mr. Dockser was a practicing attorney in Boston and served as a special Assistant Attorney General for the Commonwealth of Massachusetts. He holds a Bachelor of Laws degree from Yale University Law School and a Bachelor of Arts degree, cum laude, from Harvard University. H. William Willoughby, 61, has been President, Secretary and a Director of CRI since January 1990, and was Senior Executive Vice President, Secretary and a Director of CRI from 1974 to 1989. Effective May 7, 2005, he assumed the duties of Principal Financial Officer and Principal Accounting Officer of CRI. He is principally responsible for the financial management of CRI and its associated partnerships. Prior to joining CRI in 1974, he was Vice President of Shelter Corporation of America and a number of its subsidiaries dealing principally with real estate development and equity financing. Before joining Shelter Corporation, he was a senior tax accountant with Arthur Andersen & Co. He holds a Juris Doctor degree, a Master of Business Administration degree and a Bachelor of Science degree in Business Administration from the University of South Dakota. (c) There is no family relationship between any of the foregoing directors and executive officers. (d) Involvement in certain legal proceedings. None. III-1 PART III -------- ITEM 10. EXECUTIVE COMPENSATION ---------------------- (a), (b), (c), (d), (e), (f), (g), and (h) The Partnership has no officers or directors. However, in accordance with the Partnership Agreement, and as disclosed in the public offering, various kinds of compensation and fees were paid or are payable to the General Partners and their affiliates. Additional information required by this Item 10 is incorporated herein by reference to Notes 3 and 4 of the notes to financial statements contained in Part III. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ----------------------------------------------- AND MANAGEMENT -------------- (a) Security ownership of certain beneficial owners. The following table sets forth certain information concerning any person (including any "group") who is known by the Partnership to be the beneficial owner of more than five percent of the issued and outstanding units of additional limited partner interest (Units), at March 31, 2008.

(b) Security ownership of management. The following table sets forth certain information concerning all Units beneficially owned, as of March 31, 2008, by each director and by all directors and officers as a group of the Managing General Partner of the Partnership.

(c) Changes in control. There exists no arrangement known to the Partnership, the operation of which may, at a subsequent date, result in a change in control of the Partnership. There is a provision in the Limited Partnership Agreement which allows, under certain circumstances, the ability to change control. III-2 PART III -------- ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- (a) and (b) Transactions with management and others. The Partnership has no directors or officers. In addition, the Partnership has had no transactions with individual officers or directors of the Managing General Partner of the Partnership other than any indirect interest such officers and directors may have in the amounts paid to the Managing General Partner or its affiliates by virtue of their stock ownership in CRI. Item 10 of this report, which contains a discussion of the fees and other compensation paid or accrued by the Partnership to the General Partners or their affiliates, is incorporated herein by reference. Note 3 of the notes to financial statements contained in Part III, which contains disclosure of related party transactions, is also incorporated herein by reference. (c) Certain business relationships. The Partnership's response to Item 12(a) is incorporated herein by reference. In addition, the Partnership has no business relationship with entities of which the officers and directors of the Managing General Partner of the Partnership are officers, directors or equity owners other than as set forth in the Partnership's response to Item 12(a). (d) Transactions with promoters. Not applicable. ITEM 13. EXHIBITS -------- Index of Exhibits (Listed according to the number assigned in the table in Item 601 of Regulation S-B.) Exhibit No. 2 - Plan of acquisition, reorganization, arrangement, liquidation, or succession. a. Definitive Proxy Statement. (Incorporated by reference to Registrant's Definitive Proxy Statement dated February 4, 2004.) Exhibit No. 3 - Articles of Incorporation and bylaws. a. Certificate of Limited Partnership of Capital Realty Investors-II Limited Partnership. (Incorporated by reference to Exhibit No. 4 to Registrant's Registration Statement on Form S-11, as amended, dated April 28, 1983.) Exhibit No. 4 - Instruments defining the rights of security holders, including indentures. a. Limited Partnership Agreement of Capital Realty Investors-II Limited Partnership. (Incorporated by reference to Exhibit No. 4 to Registrant's Registration Statement on Form S-11, as amended, dated April 28, 1983.) III-3 PART III -------- ITEM 13. EXHIBITS - Continued -------- Exhibit No. 10 - Material Contracts. a. Management Services Agreement between CRI and Capital Realty Investors-II Limited Partnership. (Incorporated by reference to Exhibit No. 10(b) to Registrant's Registration Statement on Form S-11, as amended, dated April 28, 1983.) Exhibit No. 31.1 - Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit No. 31.2 - Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit No. 32 - Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit No. 99 - Additional Exhibits. a. Prospectus of the Partnership, dated May 6, 1983. (Incorporated by reference to Registrant's Registration Statement on Form S-11, as amended, dated April 28, 1983.) ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES -------------------------------------- During the years ended December 31, 2007 and 2006, the Partnership retained Grant Thornton LLP to provide services as follows. Year Ended December 31, ---------------------------- 2007 2006 -------- -------- Audit fees $107,500 $101,444 Audit-related fees -- -- Tax fees (1) 29,020 26,250 All other fees -- -- -- -- -------- -------- Total $136,520 $127,694 ======== ======== (1) Preparation of Partnership federal and state tax returns. The Partnership has no directors or officers. The Board of Directors of the Managing General Partner of the Partnership, serving as the audit committee, has approved in advance 100% of the fees paid to, and services provided by, Grant Thornton LLP. Prior to approving Grant Thornton LLP's providing any non-audit services, the Board of Directors of the Managing General Partner of the Partnership would assess whether the provision of those services would compromise Grant Thornton LLP's independence. Grant Thornton LLP provided partnership tax return preparation services during the years ended December 31, 2007 and 2006, which services it was determined did not compromise Grant Thornton LLP's independence. III-4 SIGNATURES ---------- In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP ----------------------------------------------- (Registrant) by: C.R.I., Inc. ------------------------------------------ Managing General Partner March 31, 2008 by: /s/ William B. Dockser - -------------- ------------------------------------- DATE William B. Dockser, Director, Chairman of the Board, and Treasurer (Principal Executive Officer) In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. March 31, 2008 by: /s/ H. William Willoughby - -------------- ------------------------------------- DATE H. William Willoughby, Director, President, Secretary, Principal Financial Officer and Principal Account Officer III-5 Management's Report on Internal Control Over Financial Reporting Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles, and includes those policies and procedures that: (1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Partnership. (2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management and directors of the Partnership; and (3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of the Partnership's assets that could have a material effect on the financial statements. Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgement and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Partnership. Management has used the framework set forth in the report entitled "Internal Control -- Integrated Framework" published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the Partnership's internal control over financial reporting. Management has concluded that the Partnership's internal control over financial reporting was effective as of December 31, 2007. This annual report does not include an attestation report of the Partnership's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Partnership's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management's report in this annual report. III-6 Report of Independent Registered Public Accounting Firm The Partners Capital Realty Investors-II Limited Partnership. We have audited the accompanying balance sheets of Capital Realty Investors-II Limited Partnership (a Maryland limited partnership) (the Partnership) as of December 31, 2007 and 2006 and the related statements of operations, changes in partners' (deficit) capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capital Realty Investors-II Limited Partnership as of December 31, 2007 and 2006, and the results of its operations, changes in partners' (deficit) capital and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. As described in Note A to the financial statements, the Partnership has received limited partner approval of the Partnership's plan to sell all of the Partnership's assets and dissolve the Partnership pursuant to a Plan of Liquidation and Dissolution. There can be no assurance that the Liquidation will be completed pursuant to the Plan of Liquidation and Dissolution. /s/ Grant Thornton LLP McLean, Virginia March 31, 2008 III-7 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP BALANCE SHEETS ASSETS

The accompanying notes are an integral part of these financial statements. III-8 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements. III-9 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL

The accompanying notes are an integral part of these financial statements. III-10 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements. III-11 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Organization ------------ Capital Realty Investors-II Limited Partnership (the Partnership) was formed under the Maryland Revised Uniform Limited Partnership Act on March 23, 1983, and shall continue until December 31, 2037, unless sooner dissolved in accordance with the terms of the Partnership Agreement. (See Note 1.k., below, for a discussion on the Partnership's Plan of Liquidation and Dissolution.) The Partnership was formed to invest in real estate by acquiring and holding limited partner interests in limited partnerships (Local Partnerships) that own and operate federal or state government-assisted apartment properties which provide housing principally to the elderly or to individuals and families of low or moderate income, located throughout the United States. The General Partners of the Partnership are C.R.I., Inc. (CRI), which is the Managing General Partner, and current and former shareholders of CRI. The Initial Limited Partner is Rockville Pike Associates Limited Partnership-II, a limited partnership which includes certain current officers and former employees of CRI or its affiliates. The Special Limited Partner had been Two Broadway Associates II, a limited partnership comprised of an affiliate and employees of Merrill Lynch, Pierce, Fenner & Smith, Incorporated. Effective January 1, 2002, Two Broadway Associates II transferred its interest to MLH Merger Corporation and three individuals. The Partnership sold 50,000 units at $1,000 per unit of additional limited partner interest through a public offering. The offering period was terminated on June 20, 1983. As of December 31, 2007, 85 units of additional limited partner interest had been abandoned. b. Method of accounting -------------------- The financial statements of the Partnership are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. c. Investments in and advances to partnerships ------------------------------------------- The investments in and advances to Local Partnerships (see Note 2) are accounted for by the equity method because the Partnership is a limited partner in the Local Partnerships. Under this method, the carrying amount of the investments in and advances to Local Partnerships is (i) reduced by distributions received and (ii) increased or reduced by the Partnership's share of earnings or losses, respectively, of the Local Partnerships. As of December 31, 2007 and 2006, the Partnership's share of cumulative losses of zero and two of the Local Partnerships exceeded the amount of the Partnership's investments in and advances to those Local Partnerships by $0 and $1,008,958, respectively. Since the Partnership has no further obligation to advance funds or provide financing to these Local Partnerships, the excess losses have not been reflected in the accompanying financial statements. Distributions of $0 and $37,636, received from zero and two Local Partnerships during 2007 and 2006, respectively, and for which the Partnership's carrying value is zero (equity method suspended), were recorded as increases in the Partnership's share of income from partnerships in the year received. III-12 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Costs incurred in connection with acquiring these investments have been capitalized and are being amortized using the straight-line method over the estimated useful lives of the properties owned by the Local Partnerships. d. Investment in partnerships held for sale ---------------------------------------- Chowchilla Elderly Associates, Ltd. (Golden Acres) had been reclassified to investment in partnerships held for sale in the accompanying balance sheet at December 31, 2006. The Partnership's interest in Golden Acres was sold in December 2007. Orangewood Plaza Limited Partnership (Orangewood Plaza) had been reclassified to investment in partnerships held for sale in the accompanying balance sheets at December 31, 2006. The Partnership's interest in Orangewood Plaza was sold in December 2007. Due to the possible sale of the Westgate Tower Limited Dividend Housing Associates (Westgate) property, the Partnership's investment in Westgate has been reclassified to investment in partnerships held for sale in the accompanying balance sheets at December 31, 2007 and 2006. When investments are reclassified to investment in partnerships held for sale, amortization of acquisition fees and property purchase costs are discontinued. Assets held for sale are not recorded in excess of their estimated net realizable value. e. Cash and cash equivalents ------------------------- Cash and cash equivalents consist of money market funds, time and demand deposits, and repurchase agreements with original maturities of three months or less. Interest income is recognized as earned. f. Income taxes ------------ For federal and state income tax purposes, each partner reports on his or her personal income tax return his or her share of the Partnership's income or loss as determined for tax purposes. Accordingly, no provision has been made for income taxes in these financial statements. g. Use of estimates ---------------- In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, the Partnership is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and of revenues and expenses during the reporting periods. Actual results could differ from those estimates. h. Fair value of financial instruments ----------------------------------- The financial statements include estimated fair value information as of December 31, 2007 and 2006, as required by Statement of Financial Accounting Standards No. 107 (SFAS No. 107), Disclosure About Fair Value of Financial Instruments. Such information, which pertains to the Partnership's financial instruments (primarily cash and cash equivalents and the purchase money note), is based on the requirements set forth in SFAS No. 107 and does not purport to represent the aggregate net fair value of the Partnership. III-13 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued The balance sheet carrying amounts for cash and cash equivalents approximate estimated fair values of such assets. The Partnership has determined that it is not practicable to estimate the fair value of the purchase money note due to: (i) the lack of an active market for this type of financial instrument, (ii) the variable nature of purchase money note interest payments as a result of fluctuating cash flow distributions received from the related Local Partnership, and (iii) the excessive costs associated with an independent appraisal of the purchase money note. i. Definitive Proxy Statement -------------------------- On February 4, 2004, the Partnership filed a Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934, and mailed it to limited partners to solicit consents for approval of the following: (1) The sale of all of the Partnership's assets and the dissolution of the Partnership pursuant to a Plan of Liquidation and Dissolution, and the amendment of the Partnership's Limited Partnership Agreement to permit the Managing General Partner, CRI, to be eligible to receive increased property disposition fees from the Partnership on the same basis as such fees may currently be paid to Local General Partners, real estate brokers or other third party intermediaries employed to sell Partnership properties, to the extent that CRI markets and sells the Partnership's properties instead of such persons (a "Disposition Fee"); (2) The amendment of the Partnership's Limited Partnership Agreement to permit CRI to be eligible to receive a partnership liquidation fee in the amount of $500,000, payable only if the Managing General Partner is successful in liquidating all of the Partnership's investments within 36 months from the date the liquidation was approved [March 22, 2004], in recognition that one or more of the properties in which the Partnership holds an interest might not be saleable to parties not affiliated with the respective Local Partnership due to the amount and/or terms of their current indebtedness (the "Partnership Liquidation Fee"); and (3) To authorize the Managing General Partner, in its sole discretion, to elect to extend the period during which Consents of Limited Partners may be solicited and voted, but not beyond sixty (60) days from the date that the Consent Solicitation Statement was sent to the Limited Partners. The matters for which consent was solicited are collectively referred to as the "Liquidation." The record date for voting was December 31, 2003, and the final voting deadline was March 22, 2004. A tabulation of votes received by the voting deadline follows. III-14 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

The Partnership was not liquidated within 36 months from the approved liquidation date of March 22, 2004, therefore no liquidation fee was taken by the Managing General Partner. The Managing General Partner is continuing towards liquidation of all the Partnership's investments. There can be no assurance that the Liquidation will be completed pursuant to the Plan of Liquidation and Dissolution. j. Allocation of net income (loss) ------------------------------- Net income (loss) is allocated based on respective partnership interest or units outstanding. The Partnership has no dilutive interests. k. New accounting pronouncement ---------------------------- In September 2006, the Financial Accounts Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements ("SFAS No. 157"). SFAS No. 157 establishes a formal framework for measuring fair value under generally accepted accounting principles. Although SFAS No. 157 applies (amends) the provisions of existing FASB and AICPA pronouncements, it does not require any new fair value measurements, nor does it establish valuation standards. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management has determined that SFAS No. 157 will have no material impact to the Partnership. 2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS a. Due on investment in partnerships and accrued interest payable -------------------------------------------------------------- As of December 31, 2007 and 2006, the Partnership held limited partner interests in one and three Local Partnerships, respectively, which were organized to develop, construct, own, maintain and operate rental apartment properties. The remaining amounts due on the Partnership's investment in one Local Partnership follow. III-15 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued December 31, --------------------------- 2007 2006 ---------- ---------- Purchase money note due in 2003 $1,400,000 $1,400,000 Accrued interest payable 3,130,262 3,004,262 ---------- ---------- Total $4,530,262 $4,404,262 ========== ========== The remaining purchase money note, which matured September 1, 2003 (see below), has a stated interest rate of 9%. The purchase money note is nonrecourse, but its terms provide for payment in full upon the earliest of: (i) sale or refinancing of the Local Partnership's rental property; (ii) payment in full of the Local Partnership's permanent loan; or (iii) maturity. The purchase money note outstanding at December 31, 2007, which is nonrecourse to the Partnership, is secured by the Partnership's interest in the Westgate Local Partnership, which owns Westgate Tower Apartments (Westgate). The underlying property does not have sufficient appreciation and equity to enable the Partnership to pay the purchase money note's principal and accrued interest. In conjunction with the approved Plan of Liquidation and Dissolution of the Partnership, the Managing General Partner is currently holding the property owned by Westgate for sale and seeking consent of the noteholders to accept the proceeds from such sale as a discounted payoff of the purchase money note's principal and accrued interest. The Managing General Partner has been unable to locate a number of the holders of the note to obtain their consent to sell the property for a lesser amount. It is exploring judicial means of obtaining declaratory relief to proceed with disposition of the property. The discounted payoff would result in cancellation of indebtedness income to the Limited Partners, which would be taxed at a federal tax rate of up to 35 percent. There can be no assurance that a sale of Westgate and discounted payoff of the purchase money note will occur. Interest expense on the Partnership's Westgate purchase money note for the years ended December 31, 2007 and 2006, was $126,000 and $126,000, respectively. The accrued interest payable on the purchase money note of $3,130,262 and $3,004,262 as of December 31, 2007 and 2006, respectively, is in default. Westgate -------- The Partnership defaulted on its one remaining purchase money note, related to Westgate, on September 1, 2003, when the note (as extended) matured and was not paid. The default amount included principal and accrued interest of $1,400,000 and $2,584,492, respectively. As of March 31, 2008, principal and accrued interest of $1,400,000 and $3,161,590, respectively, were due. Due to the possible sale of the property related to Westgate, the Partnership's basis in the Local Partnership, along with the net unamortized amount of acquisition fees and property purchase costs, which totaled $392,458 and $392,643 as of December 31, 2007 and December 31, 2006, respectively, has been reclassified to investment in partnerships held for sale in the accompanying balance sheets. III-16 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued b. Interests in profits, losses and cash distributions made by the Local ---------------------------------------------------------------------- Partnerships ------------ The Partnership has a 97.99% interest in profits, losses and cash distributions (as restricted by state housing agencies) (collectively, the Agencies) in the remaining Local Partnership. An affiliate of the Managing General Partner of the Partnership is also a general partner of the Local Partnership. As stipulated by the Local Partnership's partnership agreement, the Local Partnership is required to make annual cash distributions from surplus cash flow, if any. During 2007 and 2006, the Partnership received cash distributions from rental operations of the Local Partnerships of $0 and $37,636, respectively. As of both December 31, 2007 and 2006, none of the Local Partnerships had aggregate surplus cash, as defined by their respective regulatory Agencies. The cash distributions to the Partnership from the operations of the Local Partnerships may be limited by the Agencies' regulations. Such regulations limit annual cash distributions to a percentage of the owner's equity investment in a rental property. Funds in excess of those which may be distributed to owners are generally required to be placed in a residual receipts account held by the governing state or federal agency for the benefit of the property. In addition, local general partners have the authority to withhold funds if needed for property repairs, improvements, or other property needs. Upon sale or refinancing of a property owned by a Local Partnership, or upon the liquidation of a Local Partnership, the proceeds from such sale, refinancing or liquidation shall be distributed in accordance with the respective provisions of each Local Partnership's partnership agreement. In accordance with such provisions, the Partnership would receive from such proceeds its respective percentage interest of any remaining proceeds, after payment of (i) all debts and liabilities of the Local Partnership and certain other items, (ii) the Partnership's capital contributions plus certain specified amounts as outlined in each partnership agreement, and (iii) certain special distributions to general partners and related entities of the Local Partnership. Due to the amount payable with respect to the Westgate purchase money note, it is unlikely that there will be any sales proceeds distributable to the Partnership when the Westgate property is sold. c. Advance to Local Partnership ---------------------------- Four Winds West --------------- On October 12, 2004, the Partnership advanced $25,000 to Four Winds West to assist with current cash requirements. As of October 31, 2006, the note was canceled. For financial reporting purposes, the advance was reduced to zero by the Partnership as a result of losses at the related Local Partnership level in 2004. d. Completed sales and transfer ---------------------------- Chevy Chase ----------- On November 22, 2005, the property owned by Chevy Chase Park, Ltd. (Chevy Chase) was sold. Gross cash proceeds received in 2005 by the Partnership totaled $6,814,125. The sale resulted in net gain on disposition of investment in partnerships of $5,238,173 for financial statement purposes and in total gain of $7,115,800 for federal tax purposes in 2005. The Partnership accrued $23,208, which is included in gain on disposition of investment in partnerships in 2005, for additional sale proceeds receivable related to the sale of which $18,909 was received in March 2006 and the remaining $4,299 was received in April 2006. In 2006, net gain on disposition of investment in partnerships was reduced by $11,602 relating to additional expenses incurred. In accordance with the terms of the Partnership Agreement, in November 2005 the Managing General Partner was paid a disposition fee of $435,000 related to the sale. The fee was netted against the related gain on disposition of investment in partnerships. III-17 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued Four Winds West --------------- As of October 31, 2006, the Partnership's interest in Four Winds West was transferred to an affiliate of the local managing general partner. The transfer resulted in loss on disposition of investment in partnerships of $12,567 for financial statement purposes and in total gain of $587,569 for federal income tax purposes in 2006. In March 2007, the Partnership received a cash distribution of $12,305 which is accrued and included in other income in the accompanying financial statements at December 31, 2006. Golden Acres ------------ On December 31, 2007, the Partnership's interest in Golden Acres was sold. The sale resulted in gain on disposition of investment in partnerships of $2,476 for financial statement purposes and in gain of $922,645 for federal tax purposes. The Partnership's basis in Golden Acres, which totaled $0 at December 31, 2006, was reclassified to investment in partnerships held for sale in the accompanying balance sheets at that date. Orangewood Plaza ---------------- On December 31, 2007, the Partnership's interest in Orangewood Plaza was sold. The sale resulted in gain on disposition of investment in partnerships of $10,000 for financial statement purposes and in gain of $1,330,147 for federal tax purposes. The Partnership's basis in Orangewood Plaza, which totaled $0 at December 31, 2006, was reclassified to investment in partnerships held for sale in the accompanying balance sheets at that date. Posada Vallarta --------------- On December 12, 2005, the property owned by Posada Associates Limited Partnership (Posada Vallarta) was sold. Gross cash proceeds received in 2005 by the Partnership totaled $3,930,457. The sale resulted in net gain on disposition of investment in partnerships of $3,111,832 for financial statement purposes and in total gain of $13,057,662 for federal tax purposes in 2005. In accordance with the terms of the Partnership Agreement, in December 2005 the Managing General Partner was paid a disposition fee of $1,118,625 related to the sale. The fee was netted against the related gain on disposition of investment in partnerships. The Partnership accrued $300,000, which is included in gain on disposition of investment in partnerships in 2005, for additional sale proceeds received in March 2006. During the first quarter of 2006, the Partnership recorded gain on disposition of investment in partnerships of $113,617, of which $54,035 was received in March 2006 and $59,582 was received in April 2006. During the second quarter of 2006, gain on disposition of investment in partnerships was reduced by $3,861 relating to additional expenses incurred. During the third quarter of 2006, the Partnership recorded gain in disposition of investment in partnerships of $5,819, of which $4,989 was received in July 2006 and $830 was received in September 2006. During the fourth quarter of 2006, gain on disposition of investment in partnerships was reduced by $474. III-18 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued Troy Manor ---------- On December 31, 2006, the Partnership's interest in Troy Manor was transferred to an affiliate of the local managing general partner. The transfer resulted in no gain or loss for financial statement purposes and in total gain of $633,155 for federal income tax purposes in 2006. The Partnership's basis in Troy Manor totaled $0 at December 31, 2005. In March 2007, the Partnership received a cash distribution of $7,425 which is accrued and included in other income in the accompanying financial statements at December 31, 2006. e. Asset held for sale ------------------- Westgate -------- See Note 2.a., above. f. Summarized financial information -------------------------------- The balance sheet and statement of operations for the remaining Local Partnership in which the Partnership is invested as of December 31, 2007, follow. The information for the remaining Local Partnership has investment basis (equity method). BALANCE SHEET December 31, 2007 Equity Method ---------- Number of Local Partnerships 1 = Rental property, at cost, net of accumulated depreciation of $3,293,518 $1,204,071 Land 153,473 Other assets 363,975 ---------- Total assets $1,721,519 ========== Mortgage notes payable $1,176,655 Other liabilities 196,357 ---------- Total liabilities 1,373,012 Partners' capital 348,507 ---------- Total liabilities and partners' capital $1,721,519 ========== III-19 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued STATEMENT OF OPERATIONS For the year ended December 31, 2007 Equity Method ---------- Number of Local Partnerships 1 = Revenue: Rental $ 701,989 Other 28,381 ---------- Total revenue 730,370 ---------- Expenses: Operating 606,371 Interest (39,011) Depreciation and amortization 163,199 ---------- Total expenses 730,559 ---------- Net loss $ (189) ========== Cash distributions $ -- ========== Partnership's share of Local Partnership net loss (185) ---------- Share of loss from partnership $ (185) ========== Combined balance sheets and combined statements of operations for the three Local Partnerships in which the Partnership was invested as of December 31, 2006, follow. The information is presented separately for one Local Partnership which has investment basis (equity method), and for two Local Partnerships for which the Partnership's carrying value is zero (equity method suspended). III-20 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued COMBINED BALANCE SHEETS December 31, 2006

COMBINED STATEMENTS OF OPERATIONS For the year ended December 31, 2006

(1) Includes Troy Manor transferred in December 2006. III-21 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued All of the cash distributions recorded as income are included in share of income from partnerships on the statements of operations for the respective years, and are recorded as cash receipts on the respective balance sheets. Cash distributions recorded as a reduction of the related investment are recorded as cash receipts on the respective balance sheets, and are recorded as a reduction of investments in and advances to partnerships, also on the respective balance sheets. g. Reconciliation of the Local Partnerships' financial statement net ----------------------------------------------------------------- loss to taxable income ---------------------- For federal income tax purposes, the Local Partnerships report on a basis whereby: (i) certain revenue and the related assets are recorded when received rather than when earned; (ii) certain costs are expensed when paid or incurred rather than capitalized and amortized over the period of benefit; and (iii) a shorter life is used to compute depreciation on the property as permitted by the Internal Revenue Code and underlying regulations. These returns are subject to examination and, therefore, possible adjustment by the IRS. A reconciliation of the Local Partnerships' financial statement net loss reflected above to taxable loss follows. For the years ended December 31, -------------------------- 2007 2006 ---------- ---------- Financial statement net loss $ (189) $ (305,475) Differences between financial statement and tax depreciation, amortization, and miscellaneous differences 214,453 161,464 ---------- ---------- Taxable income (loss) $ 214,264 $ (144,011) ========== ========== 3. RELATED PARTY TRANSACTIONS In accordance with the terms of the Partnership Agreement, the Partnership paid the Managing General Partner a fee for services in connection with the review, selection, evaluation, negotiation and acquisition of the interests in the Local Partnerships. The fee amounted to $1,000,000, which is equal to two percent of the Additional Limited Partners' capital contributions to the Partnership. The acquisition fee was capitalized and was being amortized over a 30-year period using the straight-line method. At December 31, 2004, each of the Partnership's investments in Local Partnerships was reclassified to investment in partnerships held for sale and amortization of this fee ceased. In accordance with the terms of the Partnership Agreement, the Partnership is obligated to reimburse the Managing General Partner for its direct expenses in connection with managing the Partnership. For the years ended December 31, 2007 and 2006, the Partnership paid $175,260 and $174,952, respectively, to the Managing General partner as direct reimbursement of expenses incurred on behalf of the Partnership. Such expenses are included in general and administrative expenses in the accompanying statements of operations. In accordance with the terms of the Partnership Agreement, the Partnership is obligated to pay the Managing General Partner an annual incentive management fee (Management Fee) after all other expenses of the Partnership are paid. The III-22 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 3. RELATED PARTY TRANSACTIONS - Continued amount of the Management Fee shall not exceed 0.25% of invested assets, as defined in the Partnership Agreement, and shall be payable from the Partnership's cash available for distribution, as defined in the Partnership Agreement, as of the end of each calendar year, as follows: (i) First, on a monthly basis as an operating expense before any distributions to limited partners in the amount computed as described in the Partnership Agreement, provided that such annual amount shall not be greater than $250,000; and (ii) Second, after distributions to the limited partners in the amount of one percent of the gross proceeds of the offering, the balance of such 0.25% of invested assets. For each of the years ended December 31, 2007 and 2006, the Partnership paid the Managing General Partner a Management Fee of $249,996. Pursuant to approval of the Partnership's Consent Solicitation Statement on March 22, 2004, the Managing General Partner is eligible to receive a fee of not more than five percent of the sale price of an investment in a Local Partnership or the property it owns, payable upon the sale of an investment in a Local Partnership or the property it owns, to the extent the Managing General Partner markets and sells a property instead of a real estate broker or unrelated Local General Partner. The disposition fee on sales of partnership interests (as opposed to sales of real property) is calculated as up to five percent of the imputed sale price, which is the amount the Local Partnership's property would have to be sold for to produce the same distribution to the investors as the sale of the partnership interests. 4. PARTNERSHIP PROFITS AND LOSSES, AND DISTRIBUTIONS All profits and losses prior to the first date on which Additional Limited Partners were admitted were allocated 98.49% to the Initial Limited Partner and 1.51% to the General Partners. Upon admission of the Special Limited Partner and the Additional Limited Partners, the interest of the Initial Limited Partner was reduced to 0.49%. Pursuant to the Consent Solicitation Statement approved March 22, 2004, the net proceeds resulting from the liquidation of the Partnership or the Partnership's share of the net proceeds from any sale or refinancing of the Local Partnerships or their rental properties which are not reinvested shall be distributed and applied as follows: (i) to the payment of debts and liabilities of the Partnership (including all expenses of the Partnership incident to the sale or refinancing) other than loans or other debts and liabilities of the Partnership to any partner or any affiliate; such debts and liabilities, in the case of a non-liquidating distribution, to be only those which are then required to be paid or, in the judgment of the Managing General Partner, required to be provided for; (ii) to the establishment of any reserves which the Managing General Partner deems reasonably necessary for contingent, unmatured or unforeseen liabilities or obligations of the Partnership (including the Partnership Liquidation Fee); (iii) to each partner in an amount equal to the positive balance in his capital account as of the date of the sale or refinancing, adjusted for operations and distributions to that date, but before allocation of any profits for tax purposes realized from such sale or refinancing and allocated pursuant to Section 4.03(d) of the Partnership Agreement; (iv) to the Limited Partners (A) an aggregate amount of proceeds from sale or refinancing and all prior sales or refinancings equal to their capital contributions, without reduction for prior cash III-24 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 4. PARTNERSHIP PROFITS AND LOSSES, AND DISTRIBUTIONS - Continued distributions other than prior distributions of sale and refinancing proceeds, plus (B) an additional amount equal to a cumulative non-compounded six percent return on each limited partner's capital contribution, reduced by (1) an amount equal to 50% of the losses for tax purposes allocated to such limited partner and (2) distributions of net cash flow to each limited partner, such return, losses for tax purposes and net cash flow distributions commencing on the first day of the month in which the capital contribution was made; (v) to the repayment of any unrepaid loans theretofore made by any partner or any affiliate to the Partnership for Partnership obligations and to the payment of any unpaid amounts owing to the General Partners pursuant to the Partnership Agreement; (vi) to the General Partners in the amount of their capital contributions; (vii) thereafter, for services to the Partnership, to General Partner Martin C. Schwartzberg (or his designee), whether or not he is then a General Partner, 0.333% of the gross proceeds resulting from (A) such sale (if the proceeds are from a sale rather than a refinancing) and (B) any prior sales from which such fee was not paid to the General Partner or his designee; and (viii) the remainder, 12% to the General Partners (or their assignees), three percent to the Special Limited Partner and 85% to the Initial and Additional Limited Partners (or their assignees). Notwithstanding and in addition to the foregoing, the Managing General Partner may receive a fee (not to exceed five percent of the sales price of Apartment Complexes) from the Partnership or the Local Partnership for services provided by the Managing General Partner and/or its Affiliates in connection with the marketing and sale of Apartment Complexes. Such fee (a "Disposition Fee"), which shall be payable pursuant to Section 4.02(a)(i), shall only be payable upon the sale of an Apartment Complex or a sale of the Partnership's interest in the Local Partnership (a sale in either of such formats is referred to in this Section 4.02(a) as a "sale of an Apartment Complex"), and shall be subject to the following restrictions: (i) all property disposition fees and any other commissions payable upon the sale of any Apartment Complex, inclusive of any fees to the General Partners and/or their Affiliates, shall not exceed the lesser of the competitive rate paid to third parties for similar services or six percent of the sales price of the applicable Apartment Complex, (ii) the Managing General Partner and/or its Affiliates must provide substantial services in connection with the marketing and sales effort (as determined by the General Partners), and (iii) Dockser and Willoughby shall waive their respective shares of the one percent fee payable under Section 4.02(a)(vii) above. Notwithstanding any other provision of this Agreement to the contrary and in addition to the foregoing, the Managing General Partner was authorized pursuant to the approved proxy statement to receive a partnership liquidation fee of $500,000, payable only if the Managing General Partner is successful in liquidating all of the Partnership's investments within 36 months from the date the liquidation was approved. As the liquidation was not completed by March 22, 2007, the Managing General Partner did not earn the liquidation fee. Fees payable to certain general partners (or their designees) under (vii) above, together with all other property disposition fees and any other commissions or fees payable upon the sale of apartment properties, shall not in the aggregate exceed the lesser of the competitive rate or six percent of the sale price of the apartment properties. There can be no assurance that the Liquidation will be completed pursuant to the Plan of Liquidation and Dissolution. III-25 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 4. PARTNERSHIP PROFITS AND LOSSES, AND DISTRIBUTIONS - Continued Pursuant to the Partnership Agreement, all cash available for distribution, as defined, shall be distributed, not less frequently than annually, 97% to the Additional Limited Partners, 1% to the Special Limited Partner, 0.49% to the Initial Limited Partner and 1.51% to the General Partners after payment of the Management Fee (see Note 3), as specified in the Partnership Agreement. On April 4, 2006, the Partnership made a tax distribution of $252,862 (approximately $7.20 per Unit) on behalf of Additional Limited Partners who were not residents of Ohio. As defined in the Partnership Agreement, after the payment of the distribution described in the previous paragraph, after the establishment of any reserves deemed necessary by the Managing General Partner and after payment of the Management Fee, the Partnership had no remaining cash available for distribution for the years ended December 31, 2007 and 2006. The Managing General Partner currently intends to retain all of the Partnership's remaining undistributed cash for operating cash reserves pending further distributions under its Plan of Liquidation and Dissolution. 5. RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET INCOME TO TAXABLE INCOME For federal income tax purposes, the Partnership reports on a basis whereby: (i) certain expenses are amortized rather than expensed when incurred; (ii) certain costs are amortized over a shorter period for tax purposes, as permitted by the Internal Revenue Code and underlying regulations, and (iii) certain costs are amortized over a longer period for tax purposes. The Partnership records its share of income or losses from its investments in limited partnerships for federal income tax purposes as reported on the Local Partnerships' federal income tax returns (see Note 2.g.), including losses in excess of related investment amounts. These returns are subject to examination and, therefore, possible adjustment by the IRS. A reconciliation of the Partnership's financial statement net loss to taxable income follows.

Cash concentration risk - ----------------------- Financial instruments that potentially subject the Partnership to concentrations of risk consist primarily of cash. The Partnership maintains two cash accounts with the same bank. The balances are insured by the Federal Deposit Insurance Corporation up to $100,000. As of December 31, 2007, the uninsured portion of the cash balances was $4,711,195. # # # III-25 EXHIBIT No. 99 b. None. 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EX-31 4 exhibit31a_123107-cri2.htm CERTIFICATION REQUIRED UNDER SECTION 302. EXHIBIT 31

EXHIBIT 31.1

CERTIFICATION
Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, William B. Dockser, certify that:

I have reviewed this annual report on Form 10-KSB/A for the year ended December 31, 2007, of CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal controls over financial reporting.

		CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
		(Small Business Issuer)

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

March 31, 2008		by: /s/ William B. Dockser
DATE		William B. Dockser, Director, Chairman of the Board, and Treasurer (Principal Executive Officer)

This certification is made solely for purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

EXHIBIT 31.2

CERTIFICATION
Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, H. William Willoughby, certify that:

I have reviewed this annual report on Form 10-KSB/A for the year ended December 31, 2007, of CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP;

c)	Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal controls over financial reporting.

		CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
		(Small Business Issuer)

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

March 31, 2008		by: /s/ H. William Willoughby
DATE		H. William Willoughby, Director, President, Secretary, Principal Financial Officer and Principal Accounting Officer

This certification is made solely for purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

EX-31 5 exhibit32a_123107-cri2.htm CERTIFICATION REQUIRED UNDER SECTION 906. Exhibit 32

EXHIBIT 32

CERTIFICATION
Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

We, the undersigned, certify that, to the best of our knowledge, this annual report on Form 10-KSB/A for the year ended December 31, 2007, of CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP, and containing the financial statements, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information contained in this annual report fairly presents, in all material respects, the financial condition and results of operations of the small business issuer.

		CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
		(Small Business Issuer)
		by: C.R.I., Inc.
		Managing General Partner
March 31, 2008		by: /s/ William B. Dockser
DATE		William B. Dockser, Director, Chairman of the Board, and Treasurer (Principal Executive Officer)
March 31, 2008		by: /s/ H. William Willoughby
DATE		H. William Willoughby, Director, President, Secretary, Principal Financial Officer and Principal Accounting Officer

This certification accompanies this annual report and is made solely for purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose, and shall not be deemed filed by the small business issuer for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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