FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                        Quarterly or Transitional Report

                      U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                    For the quarterly period ended June 30, 2000


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


                For the transition period from _________to _________

                         Commission file number 0-14483

                     Davidson Diversified Real Estate II, L.P.
         (Exact name of small business issuer as specified in its charter)


           Delaware                                              62-1207077
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                          55 Beattie Place, P.O. Box 1089
                        Greenville, South Carolina 29602

                      (Address of principal executive offices)

                                 (864) 239-1000

                           (Issuer's telephone number)

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___

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

a)

                    Davidson Diversified Real Estate II, L.P.

                           CONSOLIDATED BALANCE SHEET

                                   (Unaudited)

                          (in thousands, except unit data)

                                  June 30, 2000
<TABLE>
<CAPTION>

Assets
<S>                                                                         <C>
   Cash and cash equivalents                                                $  1,095
   Receivables and deposits, net of $182
       for doubtful accounts                                                     328
   Restricted escrows                                                            431
   Other assets                                                                  372
   Investment properties:
      Land                                                    $ 2,603
      Buildings and related personal property                   38,471
                                                                41,074

      Less accumulated depreciation                            (22,386)       18,688
                                                                            $ 20,914

Liabilities and Partners' Deficit

Liabilities

   Accounts payable                                                          $   394
   Tenant security deposit liabilities                                           136
   Accrued property taxes                                                        477
   Other liabilities                                                             604
   Due to Managing General Partner                                               953
   Mortgage notes payable                                                     23,799

Partners' Deficit

   General partners                                            $  (544)
   Limited partners (1,224.25 units issued and
      outstanding)                                              (4,905)       (5,449)
                                                                            $ 20,914
</TABLE>

            See Accompanying Notes to Consolidated Financial Statements

<PAGE>

b)


                    Davidson Diversified Real Estate II, L.P.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

                          (in thousands, except unit data)


<TABLE>
<CAPTION>

                                          Three Months Ended        Six Months Ended
                                               June 30,                 June 30,
                                           2000        1999         2000         1999
Revenues:                                           (Restated)                (Restated)
<S>                                      <C>          <C>          <C>          <C>
  Rental income                          $  1,672     $ 1,895      $ 3,451      $ 3,828
  Other income                                139         149          251          285
       Total revenues                       1,811       2,044        3,702        4,113

Expenses:
  Operating                                   916         953        1,959        1,843
  General and administrative                   74          75          136          163
  Depreciation                                486         438          960          864
  Interest                                    545         502        1,080        1,024
  Property taxes                               67         159          204          315
       Total expenses                       2,088       2,127        4,339        4,209

Loss from continuing operations              (277)        (83)        (637)         (96)
Loss from discontinued operation               --         (17)          --          (66)

Net loss                                  $  (277)     $ (100)      $ (637)      $ (162)

Net loss allocated to general
  partners (2%)                            $   (6)       $ (2)       $ (13)        $ (3)
Net loss allocated to limited
  partners (98%)                             (271)        (98)        (624)        (159)

                                          $  (277)     $ (100)      $ (637)      $ (162)
Per limited partnership unit:

  Loss from continuing operations        $(221.36)   $ (66.16)    $(509.70)    $ (76.79)
  Loss from discontinued operation             --      (13.89)          --       (53.09)

Net loss                                 $(221.36)   $ (80.05)    $(509.70)    $(129.88)
</TABLE>

            See Accompanying Notes to Consolidated Financial Statements

<PAGE>

c)

                    Davidson Diversified Real Estate II, L.P.

               CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
                                   (Unaudited)

                          (in thousands, except unit data)


<TABLE>
<CAPTION>

                                     Limited
                                     Partnership     General      Limited
                                        Units        Partners    Partners     Total

<S>                                   <C>              <C>         <C>        <C>
Original capital contributions        1,224.25         $   1       $24,485    $24,486

Partners' deficit at

   December 31, 1999                  1,224.25        $ (531)     $(4,281)   $(4,812)

Net loss for the six months
   ended June 30, 2000                      --           (13)        (624)      (637)

Partners' deficit at
   June 30, 2000                      1,224.25        $ (544)     $(4,905)   $(5,449)
</TABLE>

            See Accompanying Notes to Consolidated Financial Statements

<PAGE>

d)

                    Davidson Diversified Real Estate II, L.P.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)

                                   (in thousands)

<TABLE>
<CAPTION>

                                                                   Six Months Ended
                                                                        June 30,

                                                                   2000        1999
Cash flows from operating activities:
<S>                                                               <C>         <C>
  Net loss                                                        $ (637)     $ (162)
  Adjustments to reconcile net loss to net cash
   provided by operating activities:
     Depreciation                                                     960      1,033
     Amortization of discounts, loan costs and leasing
      commissions                                                     110        121
     Loss on disposal of property                                      19         --
     Change in accounts:
      Receivables and deposits                                        252        169
      Other assets                                                    (45)       (54)
      Accounts payable                                                 --          2
      Tenant security deposit liabilities                             (31)        (1)
      Accrued property taxes                                         (122)      (192)
      Other liabilities                                               (63)        94

         Net cash provided by operating activities                    443      1,010

Cash flows used in investing activities:

  Property improvements and replacements                             (910)      (473)
  Net withdrawals from restricted escrows                              81         70

         Net cash used in investing activities                       (829)      (403)

Cash flows from financing activities:

  Advances from Managing General Partner                              451         --
  Payments on mortgage notes payable                                 (368)      (392)

         Net cash provided by (used in) financing activities           83       (392)

Net (decrease) increase in cash and cash equivalents                 (303)       215
Cash and cash equivalents at beginning of period                    1,398        971

Cash and cash equivalents at end of period                        $ 1,095    $ 1,186

Supplemental disclosure of cash flow information:
  Cash paid for interest                                           $ 925      $ 992

Supplemental disclosures of non-cash activity:

  At  December  31,  1999,   there  were   approximately   $91,000  of  property
  improvements and replacements in accounts payable.
</TABLE>

            See Accompanying Notes to Consolidated Financial Statements

<PAGE>

e)

                    Davidson Diversified Real Estate II, L.P.

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note A - Basis of Presentation

The  accompanying   unaudited  consolidated  financial  statements  of  Davidson
Diversified Real Estate II, L.P. (the  "Partnership" or "Registrant")  have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-QSB and Item 310(b)
of Regulation S-B.  Accordingly,  they do not include all of the information and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  In the opinion of Davidson Diversified  Properties,  Inc.
(the  "Managing  General  Partner"),   all  adjustments  (consisting  of  normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating  results for the three and six month periods ended June 30,
2000 are not necessarily  indicative of the results that may be expected for the
year  ending  December  31,  2000.  For  further   information,   refer  to  the
consolidated   financial  statements  and  footnotes  thereto  included  in  the
Partnership's  Annual  Report on Form 10-KSB for the fiscal year ended  December
31, 1999.

Principles of Consolidation:

The  Registrant's   financial   statements  include  all  the  accounts  of  the
Partnership and its four 99.9% owned partnerships.  The managing general partner
of the  consolidated  partnerships  is  Davidson  Diversified  Properties,  Inc.
Davidson Diversified  Properties,  Inc. may be removed as the general partner of
the  consolidated  partnerships by the Registrant;  therefore,  the consolidated
partnerships are controlled and consolidated by the Registrant.  All significant
interpartnership balances have been eliminated.

Reclassifications:

Certain  reclassifications have been made to the 1999 balances to conform to the
2000 presentation.

Note B - Transfer of Control

Pursuant  to a series  of  transactions  which  closed  on  October  1, 1998 and
February 26, 1999,  Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment  Investment and Management Company  ("AIMCO"),  a publicly
traded real estate investment trust, with AIMCO being the surviving  corporation
(the "Insignia Merger").  As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe that
this  transaction  has had or will have a  material  effect on the  affairs  and
operations of the Partnership.

Note C - Transactions with Affiliated Parties

The  Partnership  has no employees  and is  dependent  on the  Managing  General
Partner  and  its  affiliates  for  the  management  and  administration  of all
Partnership  activities.  The  Partnership  Agreement  provides  for (i) certain
payments to affiliates for services and (ii)  reimbursement  of certain expenses
incurred by affiliates on behalf of the Partnership.  The following amounts were
paid or accrued to the Managing  General  Partner and its affiliates  during the
six months ended June 30, 2000 and 1999:

                                                         2000       1999
                                                          (in thousands)
         Property management fees (included in
           operating expenses)                           $189       $207
         Reimbursement for services of affiliates
           (included in general and administrative
           expenses and investment properties)             91        114
         Due to affiliates (included in other
           liabilities)                                   243        226
         Due to Managing General Partner                  953         --
         Interest on General Partner loan                  42         --

During the six months ended June 30, 2000 and 1999,  affiliates  of the Managing
General  Partner were  entitled to receive 5% of gross  receipts from all of the
Registrant's  residential properties for providing property management services.
The Registrant paid to such affiliates  approximately  $189,000 and $207,000 for
the six months ended June 30, 2000 and 1999, respectively.

An  affiliate  of  the  Managing   General   Partner  was  entitled  to  receive
reimbursement of accountable  administrative expenses amounting to approximately
$91,000  and  $114,000  for the  six  months  ended  June  30,  2000  and  1999,
respectively.  A portion of both the  current  fees and the prior year fees were
not able to be paid due to the Partnership's cash flow. Accordingly,  as of June
30, 2000, a liability of approximately $243,000 exists and is reflected in other
liabilities.

As of June 30, 2000 the  Managing  General  Partner  has loaned the  Partnership
approximately  $953,000 to cover  operational  expenses required at Greensprings
Manor  Apartments.  This  loan was  made in  accordance  with  the  terms of the
Partnership  Agreement.  Interest is charged at the prime rate plus 1%. Interest
expense was approximately  $42,000 for the six months ended June 30, 2000 and is
included in interest expense.

AIMCO and its affiliates  currently own 469.75 limited  partnership units in the
Partnership  representing  38.370% of the  outstanding  units. A number of these
units were acquired  pursuant to tender offers made by AIMCO or its  affiliates.
It is possible  that AIMCO or its  affiliates  will make one or more  additional
offers to acquire  additional limited  partnership  interests in the Partnership
for cash or in exchange for units in the operating  partnership of AIMCO.  Under
the  Partnership  Agreement,  unitholders  holding a  majority  of the Units are
entitled  to take action  with  respect to a variety of matters.  When voting on
matters,  AIMCO would in all  likelihood  vote the Units it acquired in a manner
favorable  to the  interest of the  Managing  General  Partner  because of their
affiliation with the Managing General Partner.

<PAGE>

Note D - Discontinued Operations

Shoppes at River Rock was the only commercial  property owned by the Partnership
and represented one segment of the Partnership's operations.  Due to the sale of
the property on December 30, 1999,  the results of the  commercial  segment have
been  shown as loss  from  discontinued  operation  for the  three and six month
periods  ended  June  30,  2000  and 1999 and  accordingly,  the  statements  of
operations  have been  restated to reflect this  presentation.  Revenues of this
property were  approximately  $166,000 and $429,000 for the three and six months
ended June 30,  1999 and loss from  operations  was  approximately  $17,000  and
$66,000 for the three and six months ended June 30, 1999.

Note E - Segment Reporting

Description  of the types of products  and  services  from which the  reportable
segment derives its revenues:

The  Partnership  had  two  reportable  segments:   residential  properties  and
commercial properties.  The Partnership's  residential property segment consists
of four apartment complexes, one each located in Ohio, Kentucky,  Tennessee, and
Indiana.  The  Partnership  rents  apartment units to tenants for terms that are
typically twelve months or less. The commercial  property segment consisted of a
shopping center located in Tennessee,  which was sold on December 30, 1999. As a
result  of the sale of the  commercial  property  during  1999,  the  commercial
segment is shown as discontinued operation.

Measurement of segment profit and loss:

The  Partnership  evaluates  performance  based on segment  profit (loss) before
depreciation.  The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies.

Factors management used to identify the enterprise's reportable segment:

The  Partnership's  reportable  segment  consists of investment  properties that
offer different products and services.  The reportable segments are each managed
separately  because they  provide  distinct  services  with  different  types of
products and customers.

Segment  information for the three and six month periods ended June 30, 2000 and
1999 is shown in the tables  below.  The  "Other"  column  includes  Partnership
administration  related  items and  income  and  expense  not  allocated  to the
reportable segment (in thousands).

 Three months ended June 30, 2000  Residential      Other      Totals

Rental income                        $ 1,672        $   --      $ 1,672
Other income                             125            14         139
Interest expense                         540             5         545
Depreciation                             486            --         486
General and administrative expense        --            74          74
Segment loss                            (212)          (65)       (277)

<PAGE>

<TABLE>
<CAPTION>

 Three months ended June 30,1999   Residential     Commercial      Other      Totals
                                                 (discontinued)
<S>                                  <C>              <C>            <C>     <C>
Rental income                        $ 1,895          $  --          $ --    $ 1,895
Other income                             145             --             4        149
Interest expense (income)                511             --            (9)       502
Depreciation                             438             --            --        438
General and administrative
  expense                                 --             --            75         75
Loss from discontinued
  operations                              --            (17)           --        (17)
Segment loss                             (21)           (17)          (62)      (100)
</TABLE>

<TABLE>
<CAPTION>

        Six months ended June 30, 2000           Residential      Other       Totals

<S>                                                <C>             <C>       <C>
Rental income                                      $ 3,451         $  --     $ 3,451
Other income                                           231            20         251
Interest expense                                     1,070            10       1,080
Depreciation                                           960            --         960
General and administrative expense                      --           136         136
Segment loss                                          (511)         (126)       (637)
Total assets                                        20,467           447      20,914
Capital expenditures for investment
  properties                                           819            --         819
</TABLE>

<TABLE>
<CAPTION>

  Six months ended June 30,1999    Residential     Commercial      Other      Totals
                                                 (discontinued)
<S>                                  <C>              <C>            <C>     <C>
Rental income                        $ 3,828          $  --          $ --    $ 3,828
Other income                             277             --             8        285
Interest expense                       1,024             --            --      1,024
Depreciation                             864             --            --        864
General and administrative
  expense                                 --             --           163        163
Loss from discontinued
  operations                              --            (66)           --        (66)
Segment profit (loss)                     59            (66)         (155)      (162)
Total assets                          20,858          3,381           576     24,815
Capital expenditures for
  investment properties                  462             11            --        473
</TABLE>

<PAGE>

Note F - Legal Proceedings

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial  Group,  Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs  named as defendants,  among others,
the  Partnership,  its Managing  General Partner and several of their affiliated
partnerships  and corporate  entities.  The action  purports to assert claims on
behalf of a class of limited  partners and derivatively on behalf of a number of
limited  partnerships  (including  the  Partnership)  which are named as nominal
defendants,  challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited  partnership units; the management of partnerships
by the  Insignia  affiliates;  and the  Insignia  Merger.  The  plaintiffs  seek
monetary damages and equitable  relief,  including  judicial  dissolution of the
Partnership.  On June 25, 1998,  the  Managing  General  Partner  filed a motion
seeking  dismissal  of the action.  In lieu of  responding  to the  motion,  the
plaintiffs have filed an amended  complaint.  The Managing General Partner filed
demurrers to the amended complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims,  subject to final court approval,  on behalf of the Partnership
and all limited  partners  who owned  units as of November 3, 1999.  Preliminary
approval of the settlement  was obtained on November 3, 1999 from the Court,  at
which time the Court set a final approval  hearing for December 10, 1999.  Prior
to the December 10, 1999 hearing,  the Court received various  objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Managing  General  Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.

<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION

The  matters  discussed  in this Form  10-QSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions,   competitive  and  regulatory   matters,   etc.)  detailed  in  the
disclosures  contained in this Form 10-QSB and other filings with the Securities
and Exchange Commission made by the Registrant from time to time. The discussion
of  the   Registrant's   business   and   results   of   operations,   including
forward-looking  statements  pertaining  to such  matters,  does not  take  into
account the effects of any changes to the  Registrant's  business and results of
operation.  Accordingly,  actual  results  could  differ  materially  from those
projected in the forward-looking  statements as a result of a number of factors,
including those identified herein.

The Partnership's investment properties consist of four apartment complexes. The
following  table sets forth the average  occupancy of the properties for the six
months ended June 30, 2000 and 1999:

                                                 Average Occupancy
                                                 2000        1999
         Big Walnut Apartments
            Columbus,  Ohio                       91%         91%
         LaFontenay I & II Apartments
            Louisville, Kentucky (1)              94%         91%
         The Trails Apartments
            Nashville, Tennessee                  96%         94%
         Greensprings Manor Apartments
            Indianapolis, Indiana (2)             56%         94%

(1)   The  Managing  General  Partner  attributes  the  increase in occupancy at
      LaFontenay I & II Apartments to management's intensified marketing efforts
      as well as capital improvements to enhance the exterior of the property.

(2)   The  Managing  General  Partner  attributes  the  decrease in occupancy at
      Greensprings  Manor  Apartments  to  construction  at  the  property.  The
      property is currently undergoing a major renovation project to enhance the
      appearance of the property to attract additional tenants.

Results of Operations

The  Registrant's  net loss for the three and six months ended June 30, 2000 was
approximately $277,000 and $637,000, respectively, as compared to a net loss for
the three and six  months  ended June 30,  1999 of  approximately  $100,000  and
$162,000,  respectively.  The  increase in net loss for the three and six months
ended June 30,  2000 was due to a decrease  in total  revenues,  and for the six
months ended June 30, 2000 an increase in total expenses  partially  offset by a
decrease in loss from discontinued operation. Shoppes at River Rock was the only
commercial  property owned by the Partnership and represented one segment of the
Partnership's operations.  Due to the sale of the property on December 30, 1999,
the results of the commercial  segment have been shown as loss from discontinued
operation  for the three and six month  periods ended June 30, 2000 and 1999 and
accordingly,  the  statements of  operations  have been restated to reflect this
presentation.

Total revenues decreased primarily due to a decrease in rental and other income.
Rental income decreased primarily due to a decrease in occupancy at Greensprings
Manor  Apartments  as  discussed  above.  This  decrease  in rental  income  was
partially  offset  by an  increase  in  occupancy  at two  of the  Partnership's
investment  properties,  and an increase in average  rental rates at all four of
the  properties.  Other income  decreased  due to a decrease in utility and late
charges at Greensprings Manor Apartments.

Total expenses  decreased for the three months ended June 30, 2000 and increased
for the six months  ended June 30,  2000.  The decrease for the three months was
primarily  due to a decrease in property tax  expense.  The increase for the six
month periods was due to an increase in operating,  interest,  and  depreciation
expenses  which was  partially  offset by a decrease in property tax and general
and administrative expenses.  Operating expenses increased due to an increase in
security patrol expense at Greensprings  Manor Apartments,  primarily during the
first  quarter of 2000.  Depreciation  expense  increased  due to an increase in
capital  improvements  during  the  previous  twelve  months.  Interest  expense
increased  as a result of interest  being  accrued on the General  Partner  loan
during the six month period ended June 30, 2000.  Property tax expense decreased
due to a decrease in the assessment value of Greensprings Manor Apartments and a
tax refund at LaFontenay I & II Apartments.  General and administrative  expense
decreased as a result of a decrease in legal fees  resulting from the settlement
of outstanding litigation in 1999.

As part of the ongoing  business plan of the  Partnership,  the Managing General
Partner monitors the rental market  environment of the investment  properties to
assess the feasibility of increasing rents,  maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of this
plan, the Managing  General Partner attempts to protect the Partnership from the
burden of  inflation-related  increases  in  expenses  by  increasing  rents and
maintaining a high overall  occupancy  level.  However,  due to changing  market
conditions,  which  can  result  in the use of  rental  concessions  and  rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At June 30, 2000, the Partnership had cash and cash equivalents of approximately
$1,095,000 as compared to  approximately  $1,186,000 at June 30, 1999.  Cash and
cash equivalents decreased  approximately $303,000 for the six months ended June
30,  2000  from the  Partnership's  year  end,  primarily  due to  approximately
$829,000 of cash used in  investing  activities  which was  partially  offset by
approximately   $443,000  of  cash   provided  by   operating   activities   and
approximately  $83,000 of cash  provided by financing  activities.  Cash used in
investing  activities  consisted  of  property  improvements  and  replacements,
partially  offset by net  withdrawals  from escrow  accounts  maintained  by the
mortgage  lender.  Cash provided by financing  activities  consisted of advances
from the Managing  General  Partner,  which was partially  offset by payments of
principal made on the mortgages  encumbering the Partnership's  properties.  The
Partnership invests its working capital reserves in money market accounts.

The sufficiency of existing  liquid assets to meet future  liquidity and capital
expenditure   requirements   is  directly   related  to  the  level  of  capital
expenditures  required at the various  properties  to  adequately  maintain  the
physical  assets and other operating needs of the Partnership and to comply with
Federal,   state,   and  local  legal  and  regulatory   requirements.   Capital
improvements planned for each of the Registrant's properties are detailed below.

Big Walnut Apartments: The property has budgeted, but is not limited to, capital
improvements of approximately $662,000 during the current year which consists of
floor  covering and appliance  replacements,  roof  replacements,  swimming pool
improvements  and other property  enhancements.  The  Partnership  has completed
approximately  $588,000 in budgeted and unbudgeted  capital  expenditures at Big
Walnut Apartments as of June 30, 2000 consisting primarily of roof replacements,
parking  lot and  swimming  pool  improvements,  electrical  upgrades,  building
improvements,  and floor covering  replacements.  These improvements were funded
primarily from property operations.

LaFontenay I & II Apartments:  The property has budgeted, but is not limited to,
capital  improvements  of  approximately  $117,000 during the current year which
consists of floor  covering and  appliance  replacement,  air  conditioning  and
heating replacements.  The Partnership has completed  approximately  $115,000 in
budgeted and unbudgeted capital  expenditures at LaFontenay I & II Apartments as
of June 30, 2000, consisting primarily of plumbing  improvements,  appliance and
floor covering replacements, and heating and air conditioning unit replacements.
These improvements were funded primarily from property operations.

The  Trails:  The  property  has  budgeted,  but  is  not  limited  to,  capital
improvements of approximately  $86,000 during the current year which consists of
floor covering and appliance  replacements,  and air conditioning  upgrades. The
Partnership has completed  approximately  $63,000 in capital expenditures at The
Trails  Apartments  as of June 30, 2000,  consisting  primarily of swimming pool
improvements,  major landscaping, and appliance and floor covering replacements.
These improvements were funded primarily from property operations.

Greensprings  Manor:  The property has budgeted,  but is not limited to, capital
improvements of approximately $190,000 during the current year which consists of
floor covering and appliance replacements, cabinet replacements, and heating and
air  conditioning  improvements.  The  Partnership  has completed  approximately
$53,000 in capital  expenditures at Greensprings Manor Apartments as of June 30,
2000, consisting primarily of floor covering replacements and appliances.  These
improvements were funded primarily from property operations. .

The additional  capital  expenditures will be incurred only if cash is available
from operations or from Partnership  reserves.  To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.

The  Registrant's  current assets are thought to be sufficient for any near-term
needs  (exclusive  of capital  improvements)  of the  Registrant.  The  mortgage
indebtedness of approximately  $23,799,000,  net of discount,  is amortized over
periods  with  required  balloon  payments  ranging  from  November  15, 2002 to
December 1, 2009.  The Managing  General  Partner will attempt to refinance such
indebtedness  and/or sell the properties  prior to such maturity  dates.  If the
property  cannot be refinanced or sold for a sufficient  amount,  the Registrant
will risk losing such property through foreclosure.

No cash  distributions  were made  during the six months  ended June 30, 2000 or
1999. The Registrant's  distribution  policy is reviewed on a semi-annual basis.
Future cash  distributions  will depend on the levels of net cash generated from
operations,   the  availability  of  cash  reserves,  and  the  timing  of  debt
maturities,  refinancing  and/or  property  sales.  There  can be no  assurance,
however,  that the Registrant  will generate  sufficient  funds from  operations
after planned capital  expenditures to permit  distributions  to its partners in
2000 or subsequent periods. In addition,  the Partnership may be restricted from
making  distributions  if the amount in the reserve  accounts for Big Walnut and
Greensprings Manor Apartments is below $400 per unit or $333,000 in total. As of
June 30, 2000, the account balances were  approximately  $130,000 for Big Walnut
Apartments and $254,000 for Greensprings Manor Apartments.

<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial  Group,  Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs  named as defendants,  among others,
the  Partnership,  its Managing  General Partner and several of their affiliated
partnerships  and corporate  entities.  The action  purports to assert claims on
behalf of a class of limited  partners and derivatively on behalf of a number of
limited  partnerships  (including  the  Partnership)  which are named as nominal
defendants,  challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited  partnership units; the management of partnerships
by the  Insignia  affiliates;  and the  Insignia  Merger.  The  plaintiffs  seek
monetary damages and equitable  relief,  including  judicial  dissolution of the
Partnership.  On June 25, 1998,  the  Managing  General  Partner  filed a motion
seeking  dismissal  of the action.  In lieu of  responding  to the  motion,  the
plaintiffs have filed an amended  complaint.  The Managing General Partner filed
demurrers to the amended complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims,  subject to final court approval,  on behalf of the Partnership
and all limited  partners  who owned  units as of November 3, 1999.  Preliminary
approval of the settlement  was obtained on November 3, 1999 from the Court,  at
which time the Court set a final approval  hearing for December 10, 1999.  Prior
to the December 10, 1999 hearing,  the Court received various  objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Managing  General  Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying them from the case. The Court will entertain applications for lead
counsel which must be filed by August 4, 2000. The Court has scheduled a hearing
on August 21, 2000 to address the issue of appointing lead counsel. The Managing
General Partner does not anticipate that costs associated with this case will be
material to the Partnership's overall operations.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits

                  Exhibit 27, Financial Data Schedule, is filed as an exhibit to
                  this report.

            b)    Reports on Form 8-K:

                  None filed during the quarter ended June 30, 2000.

<PAGE>

                                   SIGNATURES

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

                                    DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.

                                    By:   Davidson Diversified Properties, Inc.
                                          Its Managing General Partner

                                    By:   /s/Patrick J. Foye
                                          Patrick J. Foye
                                          Executive Vice President

                                    By:   /s/Martha L. Long
                                          Martha L. Long
                                          Senior Vice President and
                                          Controller

                                    Date: