American Affordable Housing Ii Limited Partnership 10-K 2006 FY Annual report

FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS’ REPORT

AMERICAN AFFORDABLE HOUSING II
LIMITED PARTNERSHIP

MARCH 31, 2006 AND 2005

American Affordable Housing II Limited Partnership

TABLE OF CONTENTS

	PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		F-3
FINANCIAL STATEMENTS
BALANCE SHEETS		F-5
STATEMENTS OF OPERATIONS		F-6
STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT		F-7
STATEMENTS OF CASH FLOWS		F-8
NOTES TO FINANCIAL STATEMENTS		F-9
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION		F-21

Schedules not listed are omitted because of the absence of the conditions under which they are required or because the information is included in the financial statements or the notes thereto.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners
American Affordable Housing II
 Limited Partnership

     We have audited the accompanying balance sheets of American Affordable Housing II Limited Partnership as of March 31, 2006 and 2005, and the related statements of operations, changes in partners’ deficit and cash flows for each of the three years in the period ended March 31, 2006. These financial statements are the responsibility of the partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain operating limited partnerships which investments represent $0 and $0, respectively, of the total assets as of March 31, 2006 and 2005, and $0, $0 and $56,418, respectively, of the total loss for each of the three years in the period ended March 31, 2006. Those financial statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to those operating limited partnerships, is based solely on the reports of the other auditors.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal controls 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.

     In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of American Affordable Housing II Limited Partnership as of March 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

F-3

     Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed under Item 15 (a) in the index are presented for the purpose of complying with the Securities and Exchange Commission’s rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, based on our audit and the reports of other auditors, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

/s/ Reznick Group, P.C.

REZNICK GROUP, P.C.

Bethesda, Maryland
November 30, 2006

F-4

American Affordable Housing II Limited Partnership

BALANCE SHEETS

March 31,

	2006			2005
ASSETS
INVESTMENTS IN OPERATING LIMITED PARTNERSHIPS	$	—		$	—
OTHER ASSETS
Cash and cash equivalents		197,409			79,567
Other assets		—			368,821
	$	197,409		$	448,388
LIABILITY AND PARTNERS’ DEFICIT
LIABILITY
Due to affiliates	$	6,816,453		$	6,854,825
PARTNERS’ DEFICIT
Limited partners
Units of limited partnership interest, consisting of 50,000 authorized units, $1,000 stated value per unit; issued and outstanding - 26,501 units		(6,330,832	)		(6,119,287	)
General partners		(288,212	)		(287,150	)
		(6,619,044	)		(6,406,437	)
	$	197,409		$	448,388

See notes to financial statements

F-5

American Affordable Housing II Limited Partnership

STATEMENTS OF OPERATIONS

Year ended March 31,

	2006			2005			2004
Income
Interest income	$	988		$	2,353		$	5,200
Miscellaneous income		1,958			14,846			27,151
		2,946			17,199			32,351
Share of gains (losses) from operating limited partnerships		90,566			(287,257	)		(31,312	)
Expenses
Professional fees		26,759			71,831			72,095
General and administrative expense		14,962			16,643			11,587
Asset management fee		158,024			203,540			370,138
		(199,745	)		(292,014	)		(453,820	)
NET LOSS	$	(106,233	)	$	(562,072	)	$	(452,781	)
Net loss allocated to general partners	$	(1,062	)	$	(5,621	)	$	(4,528	)
Net loss allocated to limited partners	$	(105,171	)	$	(556,451	)	$	(448,253	)
Net loss per unit of limited partnership interest	$	(3.97	)	$	(21.00	)	$	(16.91	)

See notes to financial statements

F-6

American Affordable Housing II Limited Partnership

STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT

Years ended March 31, 2006, 2005 and 2004

	Limited			General
	partners			partners			Total
Partners’ deficit, March 31, 2003	$	(4,432,573	)	$	(277,001	)	$	(4,709,574	)
Net loss		(448,253	)		(4,528	)		(452,781	)
Partners’ deficit, March 31, 2004		(4,880,826	)		(281,529	)		(5,162,355	)
Distributions		(682,010	)		—			(682,010	)
Net loss		(556,451	)		(5,621	)		(562,072	)
Partners’ deficit, March 31, 2005		(6,119,287	)		(287,150	)		(6,406,437	)
Distributions		(106,374	)		—			(106,374	)
Net loss		(105,171	)		(1,062	)		(106,233	)
Partners’ deficit, March 31, 2006	$	(6,330,832	)	$	(288,212	)	$	(6,619,044	)

See notes to financial statements

F-7

American Affordable Housing II Limited Partnership

STATEMENTS OF CASH FLOWS

Year ended March 31,

	2006			2005			2004
Cash flows from operating activities
Net loss	$	(106,233	)	$	(562,072	)	$	(452,781	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Share of (gains) losses from operating limited partnerships		(90,566	)		287,257			31,312
(Increase)/decrease in other assets		126,494			(102,535	)		—
Increase/(decrease) in due to affiliates		(38,372	)		121,974			452,925
Net cash provided by (used in) operating activities		(108,677	)		(255,376	)		31,456
Cash flows from investing activities
Advance to operating limited partnership		—			(5,493	)		—
Proceeds from disposition of operating limited partnerships		332,893			22,747			42,955
Net cash provided by investing activities		332,893			17,254			42,955
Cash flows from financing activities
Distributions		(106,374	)		(682,010	)		—
Net cash used in financing activities		(106,374	)		(682,010	)		—
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		117,842			(920,132	)		74,411
Cash and cash equivalents, beginning		79,567			999,699			925,288
Cash and cash equivalents, end	$	197,409		$	79,567		$	999,699

See notes to financial statements

F-8

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS

March 31, 2006, 2005 and 2004

NOTE A — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

American Affordable Housing II Limited Partnership (the “partnership”) was formed under the laws of the Commonwealth of Massachusetts on May 13, 1987, for the purpose of acquiring, holding, and disposing of limited partnership interests in operating limited partnerships which were established to acquire, develop, rehabilitate, operate and own newly constructed, existing or rehabilitated apartment complexes which qualify for the Low-Income Housing Tax Credit established by the Tax Reform Act of 1986. Accordingly, the apartment complexes are restricted as to rent charges and operating methods. Certain of the apartment complexes may also qualify for the Historic Rehabilitation Tax Credit for their rehabilitation of certified historic structures and are subject to the provisions of the Internal Revenue Code relating to the rehabilitation investment credit. The general partners of the partnership are Boston Capital Associates Limited Partnership and Boston Capital Associates.

In accordance with the limited partnership agreement, profits, losses and cash flow (subject to certain priority allocations and distributions) and tax credits are allocated 99% to the limited partners and 1% to the general partners.

Pursuant to the Securities Act of 1933, the partnership filed a Form S-11 Registration Statement with the Securities and Exchange Commission, effective September 21, 1987, which covered the offering (the “Public Offering”) of the partnership’s units of limited partnership interest, as well as the units of limited partnership interest offered by American Affordable Housing I, III, IV and V Limited Partnerships. The partnership registered 50,000 units of limited partnership interest at $1,000 each unit for sale to the public. During 1988, the partnership sold 26,501 units of limited partnership interest, representing $26,501,000 of capital contributions.

Income Taxes

No provision or benefit for income taxes has been included in these financial statements since taxable income or loss passes through to, and is reportable by, the partners individually.

F-9

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE A — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investments in Operating Limited Partnerships

The partnership accounts for its investments in operating limited partnerships using the equity method of accounting. Under the equity method of accounting, the partnership adjusts its investment cost for its share of each operating limited partnership’s results of operations and for any distributions received or accrued. However, the partnership recognizes an individual operating limited partnership’s losses only to the extent that the partnership’s share of losses of the operating limited partnership does not exceed the carrying amount of its investment. Unrecognized losses will be suspended and offset against future individual operating limited partnership income.

A loss in value of an investment in an operating limited partnership other than a temporary decline is recorded as an impairment loss. Impairment is measured by comparing the investment carrying amount to the sum of the total amount of the remaining tax credits allocated to the partnership, the realizable income tax benefit of net operating losses and the estimated residual value of the investment.

Capital contributions to operating limited partnerships are adjusted by tax credit adjusters. Tax credit adjusters are defined as adjustments to operating limited partnership capital contributions due to reductions in actual tax credits from those originally projected. The partnership records tax credit adjusters as a reduction in investments in operating limited partnerships and capital contributions payable.

The operating limited partnerships maintain their financial statements based on a calendar year and the partnership utilizes a March 31 year-end. The partnership records losses and income from the operating limited partnerships on a calendar year basis which is not materially different from losses and income generated if the operating limited partnerships utilized a March 31 year-end.

The partnership records capital contributions payable to the operating limited partnerships once there is a binding obligation to fund a specified amount. The operating limited partnerships record capital contributions from the partnership when received.

The partnership records acquisition costs as an increase in its investments in operating limited partnerships. Certain operating limited partnerships have not recorded the acquisition costs as a capital contribution from the partnership. These differences are shown as reconciling items in note C.

F-10

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE A — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

As of March 31, 2004, the partnership adopted FASB Interpretation No. 46 — Revised (“FIN 46R”), “Consolidation of Variable Interest Entities.” FIN 46R provides guidance on when a company should include the assets, liabilities, and activities of a variable interest entity (“VIE”) in its financial statements and when it should disclose information about its relationship with a VIE. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it absorbs the majority of the entity’s expected losses, the majority of the expected residual returns, or both.

Based on the guidance of FIN 46R, the operating limited partnerships in which the partnership invests in meet the definition of a VIE. However, management does not consolidate the partnership’s interests in these VIEs under FIN 46R, as it is not considered to be the primary beneficiary. The partnership currently records the amount of its investment in these partnerships as an asset in the balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in the financial statements.

The partnership’s balance in investment in operating limited partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss. The partnership’s exposure to loss on these partnerships is mitigated by the condition and financial performance of the underlying properties as well as the strength of the local general partners and their guarantee against credit recapture.

Fiscal Year

For financial reporting purposes, the partnership uses a March 31 year-end, whereas for income tax reporting purposes, the partnership uses a calendar year. The operating limited partnerships use a calendar year for both financial and income tax reporting.

Cash Equivalents

Cash equivalents include money market accounts having original maturities at their acquisition dates of three months or less. During the normal course of business, amounts on deposit may exceed the FDIC insured amounts.

F-11

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE A — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Net Loss per Unit of Limited Partnership Interest

Net loss per unit of limited partnership interest is calculated based upon the number of units outstanding. For each of the three years in the period ended March 31, 2006, 26,501 units were outstanding.

Use of Estimates

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

NOTE B — RELATED PARTY TRANSACTIONS

During the years ended March 31, 2006, 2005 and 2004, the partnership entered into several transactions with various affiliates of the general partners, including Boston Capital Partners, Inc., Boston Capital Holdings Limited Partnership and Boston Capital Asset Management Limited Partnership, as follows:

Advances to operating limited partnerships, to pay third-party expenses and accruals of related party general and administrative expenses in the amounts of $4,105, $4,066 and $1,961, incurred by Boston Capital Asset Management Limited Partnership, Boston Capital Holdings Limited Partnership, and Boston Capital Partners, Inc., were charged to operations during the years ended March 31, 2006, 2005 and 2004, respectively. At March 31, 2006 and 2005, the unpaid advances and general and administrative expenses totaled $298,704 and $370,787, respectively.

An annual asset management fee based on 0.5% of the aggregate cost of all apartment complexes acquired by the operating limited partnerships has been accrued as payable to Boston Capital Asset Management Limited Partnership. The aggregate cost is comprised of the capital contributions made by the partnership to the operating limited partnership and

F-12

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE B — RELATED PARTY TRANSACTIONS (Continued)

99% of the permanent financing at the operating limited partnership level. At March 31, 2006 and 2005, the unpaid asset management fees totaled $6,517,749 and $6,484,038, respectively. The fee is payable without interest as sufficient funds become available from sales or refinancing proceeds from operating limited partnerships. The asset management fees accrued during the years ended March 31, 2006, 2005 and 2004 were $203,701, $325,663 and $407,522, respectively. These amounts are presented in the statements of operations net of reporting fees paid by the operating limited partnerships during the years ended March 31, 2006, 2005 and 2004, of $45,677, $122,123 and $37,384, respectively.

The Partnership had previously recorded and paid BCAMLP in connection with the disposition of certain Operating Partnerships certain amounts which were incorrectly referred to as sales preparation fees. The payments were actually for reimbursement of overhead and salary expenses incurred by Boston Capital and its Affiliates in connection with the disposition of the related Operating Partnerships.

During the current period, management of Boston Capital decided to discontinue requesting reimbursement for overheard and salary expenses related to the disposition of assets. Additionally, Boston Capital’s management has decided to reimburse all previous reimbursements for such items by reducing other liabilities due to Boston Capital and its Affiliates from the Partnership. During the year ended March 31, 2006, the amount reimbursed was $23,959.

During the year ended March 31, 2005, the partnership reimbursed Boston Capital Asset Management Limited Partnership for overhead and salary expenses in connection with the sale of certain operating limited partnerships. During the year ended March 31, 2005, the amount incurred was $23,450.

During the year ended March 31, 2004, the partnership reimbursed Boston Capital Asset Management Limited Partnership for overhead and salary expenses in connection with the sale of certain operating limited partnerships. During the year ended March 31, 2004, the amount incurred was $509.

F-13

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE C — INVESTMENTS IN OPERATING LIMITED PARTNERSHIPS

At March 31, 2006 and 2005, the partnership has limited partnership equity interests in 26 and 27 operating limited partnerships, respectively, which own apartment complexes. During the fiscal years ended March 31, 2006 and 2005, 1 and 17, respectively, of the operating limited partnerships were sold. The operating limited partnership interest disposed of during the fiscal year ended March 31, 2006 was the result of a transfer of the partnership’s limited partner interest in the operating limited partnership. The disposition resulted in cash proceeds to the partnership of $66,607, all of which had been received at March 31, 2006, and a gain on the disposal of the assets of $66,607 for the year ended March 31, 2006.

The operating limited partnership interests disposed of during the fiscal year ended March 31, 2005 were the result of a transfer of the partnership’s limited partner interests in the operating limited partnerships. The dispositions resulted in cash proceeds to the partnership of $289,033, of which $266,286 was receivable at March 31, 2005, and a loss on the disposal of the assets of $292,749 for the year ended March 31, 2005.

All of the operating limited partnership interests disposed of during the fiscal year ended March 31, 2004 were the result of a transfer of the partnership’s limited partner interest in the operating limited partnerships. The dispositions resulted in cash proceeds to the partnership of $42,955, all of which had been received at March 31, 2004, and a gain on the disposal of the assets of $42,955 for the year ended March 31, 2004.

Under the terms of the partnership’s investment in each operating limited partnership, the partnership was required to make capital contributions to the operating limited partnerships. These contributions were payable in installments over several years based upon each operating limited partnership achieving specified levels of construction and/or operations. All contributions have been made to the operating limited partnerships as of March 31, 2006 and 2005. The partnership has no further obligation to make any additional contributions.

F-14

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE C — INVESTMENTS IN OPERATING LIMITED PARTNERSHIPS (Continued)

The partnership’s investments in operating limited partnerships at March 31, 2006 and 2005 are summarized as follows:

	2006			2005
Capital contributions paid to operating limited partnerships, net of tax credit adjusters of $119,977	$	7,614,114		$	8,086,450
Acquisition costs of operating limited partnerships		898,857			951,628
Cumulative losses from operating limited partnerships		(8,479,505	)		(9,004,333	)
Cumulative distributions from operating limited partnerships		(33,466	)		(33,745	)
Investment per balance sheet		—			—
Acquisition costs not included in net assets of operating limited partnerships (see note 1)		17,156			58,157
Loss from operating limited partnerships of $253,315 and $875,460 for the three months ended March 31, 1990 and 1989 which the operating limited partnerships have not included in partners’ capital (see note 1)		474,085			474,085
Tax credit adjusters not accounted for in net assets of operating limited partnerships (see note 1)		84,118			84,118
Loss of operating limited partnerships not recognized under the equity method of accounting (see note 1)		(9,368,214	)		(8,995,539	)
Other adjustments		(172,042	)		(253,252	)
Capital (deficit) per operating limited partnerships’ combined financial statements	$	(8,964,897	)	$	(8,632,431	)

F-15

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE C — INVESTMENTS IN OPERATING LIMITED PARTNERSHIPS (Continued)

The combined summarized balance sheets of the operating limited partnerships at December 31, 2005 and 2004 are as follows:

COMBINED SUMMARIZED BALANCE SHEETS

	2005			2004
ASSETS
Buildings and improvements, net of accumulated depreciation of $21,331,744 and $21,691,147	$	20,644,193		$	22,887,632
Land		2,341,760			2,922,621
Other assets		2,423,319			2,588,100
	$	25,409,272		$	28,398,353
LIABILITIES AND PARTNERS’ CAPITAL (DEFICIT)
Mortgages payable	$	31,411,647		$	33,780,084
Accounts payable and accrued expenses		1,298,902			1,726,576
Other liabilities		1,216,835			1,212,201
		33,927,384			36,718,861
PARTNERS’ CAPITAL (DEFICIT)
American Affordable Housing II Limited Partnership		(8,964,897	)		(8,632,431	)
Other partners		446,785			311,923
		(8,518,112	)		(8,320,508	)
	$	25,409,272		$	28,398,353

F-16

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE C — INVESTMENTS IN OPERATING LIMITED PARTNERSHIPS (Continued)

The combined summarized statements of operations of the operating limited partnerships for the years ended December 31, 2005, 2004 and 2003 are as follows:

COMBINED SUMMARIZED STATEMENTS OF OPERATIONS

	2005			2004			2003
Revenue
Rental	$	4,734,775		$	4,824,677		$	9,865,162
Interest and other		162,534			204,756			382,856
		4,897,309			5,029,433			10,248,018
Expenses
Interest		897,127			918,282			2,423,236
Depreciation and amortization		1,260,496			1,354,370			2,733,300
Taxes and insurance		766,231			755,915			1,499,545
Repairs and maintenance		982,306			1,095,692			2,084,710
Operating expenses		1,855,068			1,926,720			4,172,735
		5,761,228			6,050,979			12,913,526
NET LOSS	$	(863,919	)	$	(1,021,546	)	$	(2,665,508	)
Net loss allocated to American Affordable Housing II Limited Partnership *	$	(875,197	)	$	(1,003,114	)	$	(2,600,758	)
Net loss allocated to other partners	$	11,278		$	(18,432	)	$	(64,750	)

* Amount includes $875,197, $1,003,114, and $2,526,491 for the years ended December 31, 2005, 2004 and 2003, respectively, of loss not recognized under the equity method of accounting as described in note A.

F-17

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE D — RECONCILIATION OF FINANCIAL STATEMENT NET LOSS TO TAX RETURN

For income tax purposes, the partnership reports using a December 31 year-end. The partnership’s net loss for financial reporting and tax return purposes for the years ended March 31 is reconciled as follows:

	2006			2005			2004
Net loss for financial reporting purposes	$	(106,233	)	$	(562,072	)	$	(452,781	)
Operating limited partnership rents received in advance		104			(1,788	)		(32,865	)
Related party expenditures		8,870			(4,131	)		41,015
Asset management fee not deductible for tax purposes until paid		57,670			102,731			407,523
Excess of tax depreciation over book depreciation on operating limited partnership assets		(219,787	)		(252,109	)		(232,259	)
Difference due to fiscal year for book purposes and calendar year for tax purposes		3,691,935			7,579,517			1,347,152
Operating limited partnership net loss not allowed for financial reporting under equity method		(875,197	)		(1,003,114	)		(2,526,491	)
Other		30,013			204,177			(52,273	)
Net income (loss) for income tax purposes	$	2,587,375		$	6,063,211		$	(1,500,979	)

F-18

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE D — RECONCILIATION OF FINANCIAL STATEMENT NET LOSS TO TAX RETURN (Continued)

The differences between the investments in operating limited partnerships for tax purposes and financial statement purposes are primarily due to the differences in the losses not recognized under the equity method of accounting, the three month period due to fiscal year reporting and the historic tax credits taken for income tax purposes. At March 31, 2006 and 2005, the differences are as follows:

	2006			2005
Investments in operating limited partnerships — tax basis	$	(13,036,344	)	$	(15,230,229	)
Add back losses not recognized under the equity method		9,368,214			8,995,539
Estimated share of loss of $253,315 and $875,460 for the three months ended March 31, 1990 and 1989 due to fiscal year reporting		(474,085	)		(474,085	)
Historic tax credits		651,016			651,016
Other		3,491,199			6,057,759
Investments in operating limited partnerships — as reported	$	—		$	—

F-19

American Affordable Housing II Limited Partnership

NOTES TO FINANCIAL STATEMENTS — CONTINUED

March 31, 2006, 2005 and 2004

NOTE E — QUARTERLY FINANCIAL INFORMATION — UNAUDITED

     The following is a summary of the results of operations for each of the four quarters for the years indicated:

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
2006
Total revenue	$	325		$	371		$	293		$	1,957
Loss from operations		(47,263	)		(65,694	)		(35,317	)		(48,525	)
Share of gains (losses) from operating limited partnerships		—			—			66,607			23,959
Net loss		(47,263	)		(65,694	)		31,290			(24,566	)
Net loss per unit of limited partnership interest		(1.77	)		(2.45	)		1.17			(0.92	)
2005
Total revenue	$	5,499		$	3,069		$	8,294		$	337
Income (loss) from operations		(96,927	)		(144,835	)		(54,312	)		8,998
Share of gains (losses) from operating limited partnerships		17,114			(574,401	)		25,485			244,545
Net income (loss)		(79,813	)		(719,236	)		(28,827	)		265,804
Net income (loss) per unit of limited partnership interest		(2.98	)		(26.87	)		(1.08	)		10.00
2004
Total revenue	$	4,470		$	1,046		$	19,706		$	7,129
Loss from operations		(119,317	)		(121,287	)		(88,503	)		(92,362	)
Share of gains (losses) from operating limited partnerships		(69,535	)		3,868			(2,873	)		37,228
Net loss		(188,852	)		(117,419	)		(91,376	)		(55,134	)
Net loss per unit of limited partnership interest		(7.05	)		(4.39	)		(3.41	)		(2.06	)

F-20

American Affordable Housing II Limited Partnership

Schedule III — Real Estate and Accumulated Depreciation
March 31, 2006

							Cost
							Capitalized
							Subsequent to		Gross Amount at Which Carried
			Initial Cost to Company				Acquisition		at Close of Period										Life on Which
					Buildings and						Buildings and				Accumulated		Date of	Date	Depreciation
Description	Encumbrances		Land		Improvements		Improvements		Land		Improvements		Total		Depreciation		Construction	Acquired	is Computed
ANTHONY GARDEN APARTMENTS		3,769,449		501,332		2,632,779		1,727,786		501,322		4,360,565		4,861,887		1,720,162	Mar-89	Oct-88		5-50
BELEN APARTMENTS		1,456,759		54,000		1,468,653		767,444		96,921		2,236,097		2,333,018		1,414,285	Dec-88	Dec-88		5-27.5
BOARDMAN LAKE II APARTMENTS		956,005		60,200		590,096		711,384		60,200		1,301,480		1,361,680		834,292	May-89	Oct-88		5-27.5
BOWDOINHAM ASSOCIATES		1,245,077		95,132		966,112		779,274		65,632		1,745,386		1,811,018		859,825	May-89	Nov-88		5-27.5
BRIDGEVIEW II		750,320		12,000		1,012,110		16,059		12,000		1,028,169		1,040,169		709,982	May-88	Aug-88		5-27.5
BROOKHOLLOW MANOR, LTD		1,329,110		25,080		1,003,839		709,888		25,080		1,713,727		1,738,807		864,707	Aug-88	Oct-88		5-27.5
DEER CROSSING ASSOCIATES		1,151,270		73,102		1,565,336		209,210		74,101		1,774,546		1,848,647		805,306	Apr-89	Apr-89		5-27.5
EAST CHINA TOWNSHIP		876,466		52,039		1,140,464		23,444		52,039		1,163,908		1,215,947		783,620	Nov-88	Aug-88		5-27.5
HARBOR HILL ASSOCIATES		1,187,674		65,132		1,443,798		224,947		65,132		1,668,745		1,733,877		847,043	Feb-89	Nov-88		5-27.5

F-21

American Affordable Housing II Limited Partnership

Schedule III — Real Estate and Accumulated Depreciation
March 31, 2006

							Cost
							Capitalized
							Subsequent to		Gross Amount at Which Carried
			Initial Cost to Company				Acquisition		at Close of Period										Life on Which
					Buildings and						Buildings and				Accumulated		Date of	Date	Depreciation
Description	Encumbrances		Land		Improvements		Improvements		Land		Improvements		Total		Depreciation		Construction	Acquired	is Computed
IMMOKALEE RRH, LTD.		1,285,395		107,000		1,573,636		93,789		107,000		1,667,425		1,774,425		773,769	Mar-88	May-88		5-27.5
KERSEY APARTMENTS		1,183,061		90,000		1,270,768		336,545		155,089		1,607,313		1,762,402		994,338	Oct-88	Oct-88		5-27.5
LAKE HAVASU INVESTMENT GRP		1,696,584		176,845		1,595,306		21,464		176,845		1,616,770		1,793,615		690,247	Apr-88	Mar-88		5-50
LOVINGTON HOUSING ASSOC.		1,030,456		30,000		1,464,954		128,727		30,000		1,593,681		1,623,681		709,795	Feb-89	Feb-89		5-27.5
MAPLE TREE ASSOCIATES		1,204,912		65,132		1,464,954		301,753		65,132		1,766,707		1,831,839		854,865	Apr-89	May-89		5-27.5
MICHELLE MANOR APARTMENTS		882,583		131,945		1,009,687		1,305		131,945		1,010,992		1,142,937		410,696	Sep-88	Oct-88		5-50
MIDDLEBURG ASSOCIATES, LTD.		1,380,811		104,000		1,155,947		359,476		104,000		1,515,423		1,619,423		914,886	Mar-89	Oct-88		5-27.5
NICOLLET ISLAND HISTORIC HMS		956,000		0		1,875,059		202,795		0		2,077,854		2,077,854		1,089,218	Dec-88	Nov-88		7-27.5
PERRAMOND ASSOCIATES		1,151,162		88,813		1,487,597		201,875		28,000		1,689,472		1,717,472		840,764	Apr-89	Apr-89		7-27.5

F-22

American Affordable Housing II Limited Partnership

Schedule III — Real Estate and Accumulated Depreciation
March 31, 2006

							Cost
							Capitalized
							Subsequent to		Gross Amount at Which Carried
			Initial Cost to Company				Acquisition		at Close of Period										Life on Which
					Buildings and						Buildings and				Accumulated		Date of	Date	Depreciation
Description	Encumbrances		Land		Improvements		Improvements		Land		Improvements		Total		Depreciation		Construction	Acquired	is Computed
PINE KNOLL DEVELOPMENT CO		1,329,322		45,000		803,220		786,323		215,801		1,589,543		1,805,344		862,454	May-89	Oct-88		5-27.5
PLATTEVILLE APARTMENTS		541,986		45,000		659,035		88,432		51,609		747,467		799,076		483,612	Oct-88	Oct-88		5-27.5
SARA PEPPER ASSOCIATES		616,176		67,200		740,378		99,366		22,000		839,744		861,744		427,018	Mar-88	May-88		5-27.5
SHELBYVILLE FH, LTD.		596,032		13,000		736,830		0		13,000		736,830		749,830		341,557	Jul-88	Oct-88		5-27.5
SILVER PINES ASSOCIATES		1,345,989		170,050		1,684,846		228,697		98,500		1,913,543		2,012,043		904,284	Aug-88	Aug-88		5-27.5
SUNCREST, LTD.		942,293		50,000		1,141,518		4,176		50,000		1,145,694		1,195,694		527,853	May-88	Oct-88		5-27.5
WARREN PROPERTIES, LTD.		1,365,371		70,000		1,648,427		9,720		70,000		1,658,147		1,728,147		775,297	Oct-88	Oct-88		5-27.5
WILDER ASSOCIATES		1,181,384		62,947		1,519,472		287,237		70,412		1,806,709		1,877,121		891,869	Jan-89	Nov-88		5-27.5
		31,411,647		2,254,949		33,654,821		8,321,116		2,341,760		41,975,937		44,317,697		21,331,744

     Since the Operating Partnerships maintain a calendar year end the information reported on this schedule is as of December 31, 2005.

     There we no carrying costs as of December 31, 2005. The Column has been omitted for presentation purposes.

F-23

Notes to Schedule III

American Affordable Housing II Limited Partnership

Reconciliation of Land, Building & Improvements current year changes

Balance at beginning of period — 4/1/92			$	100,538,670
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		37,387
Other		0
			$	37,387
Deductions during period:
Cost of real estate sold	$	0
Other*		0
				0
Balance at close of period — 3/31/93			$	100,576,057
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		230,965
Other		0
			$	230,965
Deductions during period:
Cost of real estate sold	$	0
Other		0
			$	0
Balance at close of period — 3/31/94			$	100,807,022
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		237,425
Other		0
			$	237,425
Deductions during period:
Cost of real estate sold	$	0
Other		0
			$	0
Balance at close of period — 3/31/95			$	101,044,447

F-24

Notes to Schedule III

American Affordable Housing II Limited Partnership

Balance at close of period — 3/31/95				$	101,044,447
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		367,972
Other		0
				$	367,972
Deductions during period:
Cost of real estate sold	$	(6,044,508	)
Debt Forgiveness (Washington Mews)		(426,517	)
Other (Middleburg)		(392,252	)
					(6,863,277	)
Balance at close of period — 3/31/96				$	94,549,142
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		246,897
Other		0
				$	246,897
Deductions during period:
Cost of real estate sold	$	0
Other		(383,000	)
					(383,000	)
Balance at close of period — 3/31/97				$	94,413,039
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		821,235
Other		0
				$	821,235
Deductions during period:
Cost of real estate sold	$	0
Other		0
					0
Balance at close of period — 3/31/98				$	95,234,274

F-25

Notes to Schedule III

American Affordable Housing II Limited Partnership

Balance at close of period — 3/31/98				$	95,234,274
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		571,607
Other		0
				$	571,607
Deductions during period:
Cost of real estate sold	$	0
Other		(883,522	)
					(883,522	)
Balance at close of period — 3/31/99				$	94,922,359
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		399,702
Other		0
				$	399,702
Deductions during period:
Cost of real estate sold	$	0
Other		0
					0
Balance at close of period — 3/31/00				$	95,322,061
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		895,151
Other		0
				$	895,151
Deductions during period:
Cost of real estate sold	$	0
Other		0
					0
Balance at close of period — 3/31/01				$	96,217,212

F-26

Notes to Schedule III

American Affordable Housing II Limited Partnership

Balance at close of period — 3/31/01				$	96,217,212
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		483,686
Other		0
				$	483,686
Deductions during period:
Cost of real estate sold	$	0
Other		0
					0
Balance at close of period — 3/31/02				$	96,700,898
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		484,176
Other		0
				$	484,176
Deductions during period:
Cost of real estate sold	$	(4,661,821	)
Other		0
					(4,661,821	)
Balance at close of period — 3/31/03				$	92,523,253
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		371,818
Other		0
				$	371,818
Deductions during period:
Cost of real estate sold	$	(5,506,258	)
Other		0
					(5,506,258	)
Balance at close of period — 3/31/04				$	87,388,813

F-27

Notes to Schedule III

American Affordable Housing II Limited Partnership

Balance at close of period — 3/31/04				$	87,388,813
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		347,366
Other		0
				$	347,366
Deductions during period:
Cost of real estate sold	$	(40,234,779	)
Other		0
					(40,234,779	)
Balance at close of period — 3/31/05				$	47,501,400
Additions during period:
Acquisitions through foreclosure	$	0
Other acquisitions		0
Improvements, etc		337,840
Other		0
				$	337,840
Deductions during period:
Cost of real estate sold	$	(3,521,543	)
Other		0
					(3,521,543	)
Balance at close of period — 3/31/06				$	44,317,697

F-28

Notes to Schedule III

American Affordable Housing II Limited Partnership

Reconciliation of Accumulated Depreciation current year changes

Balance at beginning of period — 4/1/92				$	11,032,545
Current year expense	$	3,313,285
Balance at close of period — 3/31/93				$	14,345,830
Current year expense	$	3,266,272
Balance at close of period — 3/31/94				$	17,612,102
Current year expense	$	3,206,264
Balance at close of period — 3/31/95				$	20,818,366
Current year expense	$	1,831,578
Balance at close of period — 3/31/96				$	22,649,944
Current year expense	$	2,951,028
Balance at close of period — 3/31/97				$	25,600,972
Current year expense	$	2,826,160
Balance at close of period — 3/31/98				$	28,427,132
Current year expense	$	2,572,341
Balance at close of period — 3/31/99				$	30,999,473
Current year expense	$	2,899,088
Balance at close of period — 3/31/00				$	33,898,561
Current year expense	$	2,850,503
Balance at close of period — 3/31/01				$	36,749,064
Current year expense	$	2,922,591
Balance at close of period — 3/31/02				$	39,671,655
Current year expense	$	1,074,864
Balance at close of period — 3/31/03				$	40,746,519
Current year expense	$	2,630,807
Reduction for real-estate sold		(2,659,316	)
Balance at close of period — 3/31/04				$	40,717,965
Current year expense	$	1,307,501
Reduction for real-estate sold		(20,334,319	)
Balance at close of period — 3/31/05				$	21,691,147
Current year expense	$	1,209,145
Reduction for real-estate sold		(1,568,548	)
Balance at close of period — 3/31/06				$	21,331,744

F-29