<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ----------------

                                   FORM 10-Q

(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

                                       OR

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

  For the transition period from         to

                          Commission File No. 0-19137

                               ----------------

                  AIRFUND II International Limited Partnership
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                Massachusetts                                    04-3057290
       (State or other jurisdiction of                         (IRS Employer
        incorporation or organization)                      Identification No.)

         88 Broad Street, Boston, MA                               02110
   (Address of principal executive offices)                      (Zip Code)
</TABLE>

       Registrant's telephone number, including area code (617) 854-5800

   (Former name, former address and former fiscal year, if changed since last
                                    report.)

                               ----------------

   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

   Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [_] No [_]

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                                   FORM 10-Q

                                     INDEX

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     -----
<S>  <C>     <C>                                                                     <C>
PART I. FINANCIAL INFORMATION:

     Item 1. Financial Statements

             Statement of Financial Position
              at June 30, 2000 and December 31, 1999...............................      3

             Statement of Operations
              for the three and six months ended June 30, 2000 and 1999............      4

             Statement of Cash Flows
              for the six months ended June 30, 2000 and 1999......................      5

             Notes to the Financial Statements.....................................   6-11

     Item 2. Management's Discussion and Analysis of Financial Condition and
              Results of Operations................................................  12-17

PART II. OTHER INFORMATION:

     Items 1-6......................................................................    18
</TABLE>

                                       2
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                        STATEMENT OF FINANCIAL POSITION

                      June 30, 2000 and December 31, 1999
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                        June 30,   December 31,
                                                          2000         1999
                                                       ----------  ------------
<S>                                                    <C>         <C>
ASSETS
Cash and cash equivalents............................. $2,943,962  $ 5,719,642
Accounts receivable--affiliate........................      3,160        1,476
Other assets..........................................         --       31,742
Investment in real estate venture.....................  3,616,663           --
Equipment at cost, net of accumulated depreciation of
 $8,876,835 and $18,449,875, at June 30, 2000 and
 December 31, 1999, respectively......................  3,199,945    3,359,619
                                                       ----------  -----------
    Total assets...................................... $9,763,730  $ 9,112,479
                                                       ==========  ===========

LIABILITIES AND PARTNERS' CAPITAL
Notes payable......................................... $1,052,817  $   981,775
Accrued interest......................................      8,863       13,356
Accrued liabilities...................................    226,180      463,324
Accrued liabilities--affiliate........................     10,021       78,593
Deferred rental income................................     25,605       51,380
                                                       ----------  -----------
    Total liabilities.................................  1,323,486    1,588,428
                                                       ----------  -----------
Partners' capital (deficit):
 General Partner...................................... (2,573,444)  (2,619,254)
 Limited Partnership Interests (2,714,647 Units;
  initial purchase price of $25 each)................. 11,013,688   10,143,305
                                                       ----------  -----------
    Total partners' capital...........................  8,440,244    7,524,051
                                                       ----------  -----------
    Total liabilities and partners' capital........... $9,763,730  $ 9,112,479
                                                       ==========  ===========
</TABLE>


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

                                       3
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                            STATEMENT OF OPERATIONS

           For the three and six months ended June 30, 2000 and 1999
                                  (Unaudited)

<TABLE>
<CAPTION>
                            For the three months ended For the six months ended
                                     June 30,                  June 30,
                            -------------------------- ------------------------
                                2000         1999         2000         1999
                            -------------------------- ------------------------
<S>                         <C>          <C>           <C>         <C>
Income:
 Lease revenue............. $    148,602 $     482,218 $   258,022 $  1,190,347
 Interest income...........       37,238        59,656     104,174       98,074
 Gain on sale of
  equipment................      750,000     3,109,500     750,000    3,109,500
 Other income..............      245,977            --     300,977           --
                            ------------ ------------- ----------- ------------
    Total income...........    1,181,817     3,651,374   1,413,173    4,397,921
                            ------------ ------------- ----------- ------------

Expenses:
 Depreciation..............       79,837       154,375     159,674      415,024
 Interest expense..........       23,388        32,536      54,073       71,333
 Equipment management
  fees--affiliate..........        7,430        24,111      12,901       59,517
 Operating expenses--
  affiliate................      130,718       524,609     246,995    1,048,029
 Partnership's share of
  unconsolidated real
  estate venture's loss....       19,775            --      23,337           --
                            ------------ ------------- ----------- ------------
    Total expenses.........      261,148       735,631     496,980    1,593,903
                            ------------ ------------- ----------- ------------
Net income................. $    920,669 $   2,915,743 $   916,193 $  2,804,018
                            ============ ============= =========== ============

Net income per limited
 partnership unit.......... $        .32 $        1.02 $       .32 $        .98
                            ============ ============= =========== ============
</TABLE>



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

                                       4
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                            STATEMENT OF CASH FLOWS

                For the six months ended June 30, 2000 and 1999
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                        2000         1999
                                                     -----------  -----------
<S>                                                  <C>          <C>
Cash flows provided by (used in) operating
 activities:
Net income ......................................... $   916,193  $ 2,804,018
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation......................................     159,674      415,024
  Gain on sale of equipment.........................    (750,000)  (3,109,500)
  Partnership's share of unconsolidated real estate
   venture's loss...................................      23,337           --
Changes in assets and liabilities
 Decrease (increase) in:
  Rents receivable..................................          --        8,469
  Accounts receivable--affiliate....................      (1,684)         168
  Other assets......................................      31,742       43,734
 Increase (decrease) in:
  Accrued interest..................................      (4,493)      (6,560)
  Accrued liabilities...............................    (237,144)     (22,040)
  Accrued liabilities--affiliate....................     (68,572)      72,143
  Deferred rental income............................     (25,775)       3,383
                                                     -----------  -----------
    Net cash provided by operating activities.......      43,278      208,839
                                                     -----------  -----------

Cash flows provided by (used in) investing
 activities:
 Investment in real estate venture..................  (3,640,000)          --
 Proceeds from equipment sales......................     750,000    3,109,500
                                                     -----------  -----------
    Net cash provided by (used in) investing
     activities.....................................  (2,890,000)   3,109,500
                                                     -----------  -----------

Cash flows provided by (used in) financing
 activities:
 Proceeds from notes payable........................     201,247           --
 Principal payments on notes payable................    (130,205)    (430,327)
                                                     -----------  -----------
    Net cash provided by (used in) financing
     activities.....................................      71,042     (430,327)
                                                     -----------  -----------
Net (decrease) increase in cash and cash
 equivalents........................................  (2,775,680)   2,888,012
Cash and cash equivalents at beginning of period....   5,719,642    3,425,762
                                                     -----------  -----------
Cash and cash equivalents at end of period.......... $ 2,943,962  $ 6,313,774
                                                     ===========  ===========
Supplemental disclosure of cash flow information:
 Cash paid during the period for interest........... $    58,566  $    77,893
                                                     ===========  ===========
</TABLE>

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

                                       5
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                       NOTES TO THE FINANCIAL STATEMENTS

                                  (Unaudited)

Note 1--Basis of Presentation

   The financial statements presented herein are prepared in conformity with
generally accepted accounting principles for interim financial information and
with the instructions for preparing Form 10-Q under Rule 10-01 of Regulation
S-X of the Securities and Exchange Commission and are unaudited. As such, these
financial statements do not include all information and footnote disclosures
required under generally accepted accounting principles for complete financial
statements and, accordingly, the accompanying financial statements should be
read in conjunction with the footnotes presented in the 1999 Annual Report.
Except as disclosed herein, there have been no material changes to the
information presented in the footnotes to the 1999 Annual Report.

   In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at June 30, 2000 and December 31, 1999 and results of operations for
the three and six month periods ended June 30, 2000 and 1999 have been made and
are reflected.

Note 2--Cash

   At June 30, 2000, the Partnership had $2,829,380 invested in federal agency
discount notes, repurchase agreements secured by U.S. Treasury Bills or
interests in U.S. Government securities, or other highly liquid overnight
investments.

Note 3--Revenue Recognition

   Rents are payable to the Partnership monthly, quarterly or semi-annually and
no significant amounts are calculated on factors other than the passage of
time. The leases are accounted for as operating leases and are noncancellable.
Rents received prior to their due dates are deferred. In certain instances, the
Partnership may enter renewal or re-lease agreements which expire beyond the
Partnership's anticipated dissolution date. This circumstance is not expected
to prevent the orderly wind-up of the Partnership's business activities as the
General Partner and Equis Financial Group Limited Partnership ("EFG") would
seek to sell the then-remaining equipment assets either to the lessee or to a
third party, taking into consideration the amount of future noncancellable
rental payments associated with the attendant lease agreements. See also Note 7
to the financial statements presented in the Partnership's 1999 Annual Report
regarding the Class Action Lawsuit. Future minimum rents of $238,391 are due
for the year ending June 30, 2001.

Note 4--Equipment

   The following is a summary of equipment owned by the Partnership at June 30,
2000. Remaining Lease Term (Months), as used below, represents the number of
months remaining from June 30, 2000 under contracted lease terms. A Remaining
Lease Term equal to zero reflects equipment held for sale or re-lease. In the
opinion of EFG, the acquisition cost of the equipment did not exceed its fair
market value.

                                       6
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


<TABLE>
<CAPTION>
                                                   Remaining
                                                   Lease Term        Equipment,
              Equipment Type                        (Months)          at Cost
              --------------                       ----------        ----------
<S>                                         <C>                      <C>
Two Rolls Royce aircraft engines...........            0             $6,000,000
One McDonnell-Douglas MD-82 (Finnair)......            10             2,078,640
One McDonnell-Douglas MD-82................            0              2,078,640
Three Boeing 737-2H4.......................            0              1,919,500
                                                                     ----------
                                            Total equipment cost     12,076,780
                                            Accumulated depreciation  8,876,835
                                                                     ----------
                                            Equipment, net of
                                            accumulated depreciation $3,199,945
                                                                     ==========
</TABLE>

   The costs of the two McDonnell-Douglas MD-82 aircraft and the three Boeing
737-2H4 aircraft represent proportionate ownership interests. The remaining
interests are owned by other affiliated partnerships sponsored by EFG. All
partnerships individually report, in proportion to their respective ownership
interests, their respective shares of assets, liabilities, revenues, and
expenses associated with the aircraft.

   Certain of the aircraft and related lease payment streams were used to
secure term loans with third-party lenders. The preceding summary includes
leveraged equipment having an original cost of approximately $4,157,000 and a
net book value of $2,562,317 at June 30, 2000.

   The summary above includes equipment held for re-lease or sale with an
original cost of approximately $9,998,000 and a net book value of $1,918,788 at
June 30, 2000. Each of the Partnership's interests in the Boeing 737 aircraft,
formerly leased to Southwest Airlines Inc., had an original cost of
approximately $640,000 and a net book value of $212,543 at June 30, 2000. The
Partnership's interest in the McDonnell-Douglas MD-82 aircraft formerly leased
to Finnair OY had an original cost of approximately $2,079,000 and a net book
value of $1,281,159 at June 30, 2000. The Southwest aircraft and the Finnair
aircraft were returned by the lessees in December 1999 and January 2000,
respectively, upon expiration of the underlying lease terms. In addition, the
Partnership's two Rolls Royce aircraft engines previously leased to Classic
Airways Limited, by virtue of its lease of a Lockheed L-1011-100 aircraft, were
also held for sale or re-lease at June 30, 2000. The two Rolls Royce aircraft
engines were fully depreciated at June 30, 2000 and had an original cost of
approximately $6,000,000. In July 2000, one of the Boeing 737 aircraft was
sold, resulting in proceeds to the Partnership of approximately $256,000 and a
net gain, for financial statement purposes, of approximately $43,000. The
General Partner is actively seeking the sale or re-lease of all remaining
equipment not on lease.

Note 5--Investment in Real Estate Venture

   On March 8, 2000, the Partnership and 10 affiliated partnerships (the
"Exchange Partnerships") collectively loaned $32.0 million to Echelon
Residential Holdings LLC ("Echelon Residential Holdings"), a newly formed real
estate development company. Echelon Residential Holdings is owned by several
investors, including James A. Coyne, Executive Vice President of EFG. Mr.
Coyne, in his individual capacity, is the only equity investor in Echelon
Residential Holdings related to EFG.

   The Partnership's participation in the loan is $3,640,000. Echelon
Residential Holdings, through a wholly-owned subsidiary (Echelon Residential
LLC), used the loan proceeds to acquire various real

                                       7
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

estate assets from Echelon International Corporation, a Florida-based real
estate company. The loan has a term of 30 months, maturing on September 8,
2002, and an annual interest rate of 14% for the first 24 months and 18% for
the final six months. Interest accrues and compounds monthly and is payable at
maturity. In connection with the transaction, Echelon Residential Holdings has
pledged a security interest in all of its right, title and interest in and to
its membership interests in Echelon Residential LLC to the Exchange
Partnerships as collateral.

   Using the guidance set forth in the Third Notice to Practitioners by the
AICPA in February 1986 entitled "ADC Arrangements" (the "Third Notice"), the
Partnership has evaluated this investment to determine whether loan, joint
venture or real estate accounting is appropriate. Such determination affects
the Partnership's balance sheet classification of the investment and the
recognition of revenues derived therefrom. The Third Notice was issued to
address those real estate acquisition, development and construction
arrangements where a lender has virtually the same risk and potential awards as
those of owners or joint ventures. EITF 86-21, "Application of the AICPA Notice
to Practitioners regarding Acquisition, Development and Construction
Arrangements to Acquisition of an Operating Property" expanded the
applicability of the Third Notice to entities other than financial
institutions.

   Based on the applicability of the Third Notice, EITF 86-21 and consideration
of the economic substance of the transaction, the loan is considered to be an
investment in a real estate venture for accounting purposes. In accordance with
the provisions of Statement of Position No. 78-9, "Accounting for Investments
in Real Estate Ventures", the Partnership reports its share of income or loss
of Echelon Residential Holdings under the equity method of accounting

   The Partnership's March 31, 2000 Form 10-Q previously reported the
investment in real estate venture as a loan receivable and recorded interest
income and receivable on the Partnership's March 31, 2000 financial statements.
The financial statements below have been adjusted to account for the loan as an
investment in real estate venture as of and for the three months ended March
31, 2000. The adjustments to the March 31, 2000 financial statements previously
filed in the Partnership's March 31, 2000 Form 10-Q represent less than 1% of
the Partnership's capital and include the reversal of $33,973 of interest
income recorded on this loan and a recognition of $3,562 for the Partnership's
share of losses in Echelon Residential Holdings.


                                       8
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)

                 STATEMENT OF FINANCIAL POSITION March 31, 2000
                                  (Unaudited)

ASSETS
<TABLE>
<S>                                                                  <C>
Cash and cash equivalents........................................... $2,010,349
Accounts receivable--affiliate......................................     55,019
Investment in real estate venture...................................  3,636,438
Equipment at cost, net of accumulated depreciation of $18,529,712...  3,279,782
                                                                     ----------
  Total assets...................................................... $8,981,588
                                                                     ==========
</TABLE>

LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<S>                                                                 <C>
Notes payable...................................................... $1,123,592
Accrued interest...................................................      9,257
Accrued liabilities................................................    227,557
Accrued liabilities--affiliate.....................................     76,863
Deferred rental income.............................................     24,744
                                                                    ----------
  Total liabilities................................................  1,462,013
                                                                    ----------
Partners' capital (deficit):
 General Partner................................................... (2,619,478)
 Limited Partnership Interests (2,714,647 Units; initial purchase
  price of $25 each)............................................... 10,139,053
                                                                    ----------
  Total partners' capital..........................................  7,519,575
                                                                    ----------
  Total liabilities and partners' capital.......................... $8,981,588
                                                                    ==========
</TABLE>

                                       9
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


       STATEMENT OF OPERATIONS For the three months ended March 31, 2000
                                  (Unaudited)
<TABLE>
<S>                                                                    <C>
Income:
 Lease revenue........................................................ $109,420
 Interest income......................................................   66,936
 Other income.........................................................   55,000
                                                                       --------
  Total income........................................................  231,356
                                                                       --------
Expenses:
 Depreciation.........................................................   79,837
 Interest expense.....................................................   30,685
 Equipment management fees--affiliate.................................    5,471
 Operating expenses--affiliate........................................  116,277
 Partnership's share of unconsolidated real estate venture's loss.....    3,562
                                                                       --------
  Total expenses......................................................  235,832
                                                                       --------
Net loss.............................................................. $ (4,476)
                                                                       ========
Net loss per limited partnership unit................................. $     --
                                                                       ========
</TABLE>

   The Partnership's accompanying financial statements as of and for the six
months ended June 30, 2000 are presented in accordance with the guidance above.
The investment is net of the Partnership's share of loss in this real estate
venture. For the six months ended June 30, 2000, the Partnership's share of
losses is $23,337 and is reflected on the Statement of Operations as
"Partnership's share of unconsolidated real estate venture's loss".

   The summarized financial information for Echelon Residential Holdings as of
and for the six months ended June 30, 2000 is as follows:

<TABLE>
      <S>                <C>
                         (Unaudited)
      Total assets       $54,704,360
      Total liabilities  $50,914,020
      Total equity       $ 3,790,340
      Total revenues     $   905,751
      Total expenses     $ 2,593,700
      Net loss           $(1,687,949)
</TABLE>

Note 6--Related Party Transactions

   All operating expenses incurred by the Partnership are paid by EFG on behalf
of the Partnership and EFG is reimbursed at its actual cost for such
expenditures. Fees and other costs incurred during the six month periods ended
June 30, 2000 and 1999, which were paid or accrued by the Partnership to EFG or
its Affiliates, are as follows:
<TABLE>
<CAPTION>
                                                      For the six months ended
                                                              June 30,
                                                      ------------------------
                                                         2000         1999
                                                      ------------------------
<S>                                                   <C>         <C>
Equipment management fees............................ $    12,901 $     59,517
Administrative charges...............................      25,213       46,517
Reimbursable operating expenses due to third
 parties.............................................     221,782    1,001,512
                                                      ----------- ------------
    Total............................................ $   259,896 $  1,107,546
                                                      =========== ============
</TABLE>

                                       10
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                 NOTES TO THE FINANCIAL STATEMENTS--(Continued)


   All rents and proceeds from the sale of equipment are paid directly to EFG
or to a lender. EFG temporarily deposits collected funds in a separate
interest-bearing escrow account prior to remittance to the Partnership. At June
30, 2000, the Partnership was owed $3,160 by EFG for such funds and the
interest thereon. These funds were remitted to the Partnership in July 2000.

Note 7--Notes Payable

   Notes payable at June 30, 2000 consisted of installment notes payable to
banks of $1,052,817. The installment notes bear an interest rate of either
8.225% or a fluctuating interest rate based on LIBOR (approximately 6.52% at
June 30, 2000) plus a margin. The Partnership has a balloon payment obligation
at the expiration of the renewal lease term related to the aircraft on lease to
Finnair OY of $130,575, which matures in April 2001. In addition, the
Partnership has a balloon payment obligation of $701,062 which matures in
August 2000. The General Partner is currently negotiating with the existing
lender to extend the term of this indebtedness. This obligation is related to
the Partnership's interest in a McDonnell-Douglas MD-82 aircraft which was
returned in January 2000 upon its lease term expiration. This aircraft is being
stored in a warehouse pending its remarketing. The carrying amount of notes
payable approximates fair value at June 30, 2000.

   All of the Partnership's debt matures during the year ending June 30, 2001.

Note 8--Legal Proceedings

   As described more fully in the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1999, the Partnership is a Nominal Defendant in a
Class Action Lawsuit, the outcome of which could significantly alter the nature
of the Partnership's organization and its future business operations. In
addition, the Partnership's 1999 Annual Report describes certain other pending
litigation that has arisen out of the conduct of the Partnership's business,
principally involving disputes or disagreements with lessees over lease terms
and conditions.

                                       11
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                                   FORM 10-Q

                         PART I. FINANCIAL INFORMATION

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

   Certain statements in this quarterly report of AIRFUND II International
Limited Partnership (the "Partnership") that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to a variety of risks and
uncertainties. There are a number of factors that could cause actual results to
differ materially from those expressed in any forward-looking statements made
herein. These factors include, but are not limited to, the outcome of the Class
Action Lawsuit described in Note 7 to the financial statements presented in the
1999 Annual Report, the remarketing of the Partnership's aircraft, and the
performance of the Partnership's non-aircraft assets.

Three and six months ended June 30, 2000 compared to the three and six months
ended June 30, 1999

   As an equipment leasing partnership, the Partnership was organized to
acquire and lease a portfolio of commercial jet aircraft subject to lease
agreements with third parties. During 1990 and 1991, the Partnership purchased
four commercial jet aircraft and a proportionate interest in two additional
aircraft which were leased by major carriers engaged in passenger
transportation. Initially, each aircraft generated rental revenue pursuant to
primary-term lease agreements. Subsequently, all of the aircraft in the
Partnership's original portfolio have been re-leased, renewed, exchanged for
other aircraft, or sold. In addition, see the Partnership's 1999 Annual Report
for discussion related to the detention and subsequent loss of one of the
Partnership's aircraft in the United Kingdom in 1999. At June 30, 2000, the
Partnership owned two aircraft engines and proportionate interests in five
additional aircraft. The Partnership is a Nominal Defendant in a Class Action
Lawsuit, the outcome of which could significantly alter the nature of the
Partnership's organization and its future business operations. See Note 7 to
the financial statements presented in the Partnership's 1999 Annual Report.
Pursuant to the Amended and Restated Agreement and Certificate of Limited
Partnership (the "Restated Agreement, as amended"), the Partnership is
scheduled to be dissolved by December 31, 2005.

Results of Operations

   For the three and six months ended June 30, 2000, the Partnership recognized
lease revenue of $148,602 and $258,022, respectively, compared to $482,218 and
$1,190,347, respectively for the same periods in 1999. The decrease in lease
revenue from 1999 to 2000 is primarily the result of the expiration of the
lease terms pertaining to the three Boeing 737-2H4 aircraft and one McDonnell-
Douglas MD-82 aircraft, the sale of the Partnership's Boeing 727-208 ADV
aircraft in April 1999, and the sale of the Partnership's Boeing 727-251 ADV
aircraft in May 2000. See below for a detailed discussion of variances in lease
revenue between the respective periods. The amount of future lease revenues in
the near term will be dependent upon the results of ongoing remarketing efforts
related to aircraft currently off lease. Subsequently, the Partnership's lease
revenue is expected to decline due to aircraft sales and lease term
expirations.

   The lease terms related to the three Boeing 737-2H4 aircraft, in which the
Partnership holds proportionate interests, expired on December 31, 1999. Two of
these aircraft are currently being stored in a warehouse while the General
Partner pursues remarketing alternatives. The third Boeing 737-2H4 aircraft was
sold in July 2000. The Partnership's proportionate sales proceeds were
approximately $256,000, resulting in a net gain, for financial statement
purposes, of approximately $43,000. The Partnership recognized lease revenue of
$188,784 related to these three aircraft during the six months ended June 30,
1999.

                                       12
<PAGE>

   One of the McDonnell-Douglas MD-82 aircraft, in which the Partnership holds
a proportionate interest, is currently on lease to Finnair OY. This lease,
which was renewed upon the expiration of the primary lease term in April 1999,
will expire in April 2001. The Partnership recognized lease revenue of $29,095
related to this aircraft during the six months ended June 30, 2000, compared to
$158,203 for the same period of 1999. The lease term associated with the second
McDonnell-Douglas MD-82 aircraft, in which the Partnership holds an ownership
interest, expired in January 2000. That aircraft, which is being stored in a
warehouse pending its remarketing, generated lease revenue to the Partnership
of $158,927 and $157,846 during the six months ended June 30, 2000 and 1999,
respectively.


   The Partnership's Boeing 727-251 ADV aircraft was damaged in an on-ground
accident in October 1998 while being leased on a month-to-month basis by
Transmeridian Airlines, Inc. ("Transmeridian"). In September 1999,
Transmeridian ceased paying rent with respect to this aircraft. See Note 7 to
the financial statements presented in the Partnership's 1999 Annual Report for
details regarding the legal action undertaken by the Partnership related to
this situation. The Partnership recognized lease revenue of $70,000 and
$420,000, respectively, related to this aircraft during the six months ended
June 30, 2000 and 1999.

   In May 2000, the Partnership sold its Boeing 727-251 ADV aircraft to a
third-party for proceeds of $750,000. This aircraft was fully depreciated at
the time of sale, resulting in a net gain, for financial statement purposes, of
$750,000 for the three and six months ended June 30, 2000.

   In April 1999, the Partnership sold its Boeing 727-208 ADV aircraft,
previously leased to American Trans Air, Inc., to the lessee for net proceeds
of $3,109,500. The aircraft was fully depreciated at the time of sale,
resulting in a net gain, for financial statement purposes of $3,109,500. The
Partnership recognized lease revenue of $122,767 and $245,533, respectively,
from this aircraft for the three and six months ended June 30, 1999.

   During the six months ended June 30, 1999, the Partnership recognized
revenue of $19,981 related to the aircraft previously leased to Classic Airways
Limited.

   As of June 30, 2000, the Partnership's ownership interests in the three
Boeing 737-2H4 aircraft and the two McDonnell-Douglas MD-82 aircraft represent
proportionate ownership interests. The remaining interests are owned by other
affiliated partnerships sponsored by EFG. All partnerships individually report,
in proportion to their respective ownership interests, their respective shares
of assets, liabilities, revenues and expenses associated with the aircraft.

   Interest income for the three and six months ended June 30, 2000 was $37,238
and $104,174, respectively, compared to $59,656 and $98,074 for the same
periods in 1999. Interest income is typically generated from temporary
investment of rental receipts and equipment sale proceeds in short-term
instruments. On March 8, 2000, the Partnership utilized $3,640,000 of available
cash for a loan to Echelon Residential Holdings LLC ("Echelon Residential
Holdings"). (See Note 5 to the financial statements herein). The amount of
future interest income is expected to fluctuate as a result of changing
interest rates and the amount of cash available for investment, among other
factors.

   Other income for the three and six months ended June 30, 2000, reflects the
receipt of $245,977 of unused aircraft maintenance reserves related to a sold
aircraft and $55,000 for the sale of certain aircraft records, respectively.

   The ultimate realization of residual value for any aircraft will be
dependent upon many factors, including EFG's ability to sell and re-lease the
aircraft. Changes in market conditions, industry trends, technological
advances, and other events could converge to enhance or detract from asset
values at any given time. EFG attempts to monitor these changes and the airline
industry in general in order to identify opportunities which may be
advantageous to the Partnership and which will maximize total cash returns for
each aircraft.


                                       13
<PAGE>

   The total economic value realized for each aircraft is comprised of all
primary lease term revenue generated from that aircraft, together with its
residual value. The latter consists of cash proceeds realized upon the
aircraft's sale in addition to all other cash receipts obtained from renting
the aircraft on a re-lease, renewal or month-to-month basis. Consequently, the
amount of gain or loss reported in the financial statements is not necessarily
indicative of the total residual value the Partnership achieved from leasing
the aircraft.

   Depreciation expense was $79,837 and $159,674, respectively, for the three
and six months ended June 30, 2000 compared to $154,375 and $415,024 for the
same periods in 1999.

   During the three and six months ended June 30, 2000, the Partnership
incurred interest expense of $23,388 and $54,073, respectively, compared to
$32,536 and $71,333 for the same periods in 1999. Interest expense in future
periods will decline as the principal balance of notes payable is reduced
through the application of rent receipts to outstanding debt.

   Management fees were $7,430 and $12,901, respectively, for the three and six
month periods ended June 30, 2000 compared to $24,111 and $59,517,
respectively, for the same periods in 1999. Management fees are based on 5% of
gross lease revenue.

   Operating expenses were $130,718 and $246,995, respectively, for the three
and six months ended June 30, 2000 and $524,609 and $1,048,029, respectively,
for the same periods in 1999. Operating expenses in 1999 included engine
leasing costs of $492,000 incurred related to the aircraft formerly leased to
Transmeridian. In addition, in 1999, the Partnership incurred legal fees in
connection with the litigation with Transmeridian. Operating expenses consist
principally of administrative charges, professional service costs, such as
audit and other legal fees, as well as insurance, printing, distribution and
remarketing expenses.

   For the three and six months ended June 30, 2000, the Partnership's share of
losses in Echelon Residential Holdings is $19,775 and $23,337, respectively,
and is reflected on the Statement of Operations as "Partnership's share of
unconsolidated real estate venture's loss". See further discussion below.

Liquidity and Capital Resources and Discussion of Cash Flows

   The Partnership by its nature is a limited life entity. As an aircraft
leasing program, the Partnership's principal operating activities derive from
aircraft rental transactions. Accordingly, the Partnership's principal source
of cash from operations is provided by the collection of periodic rents. These
cash inflows are used to satisfy debt service obligations associated with
leveraged leases, and to pay management fees and operating costs. Operating
activities generated a net inflow of $43,278 and $208,839, respectively, for
the six months ended June 30, 2000 and 1999. Future renewal, re-lease and
aircraft sales activities will continue to cause a decline in the Partnership's
lease revenue and corresponding sources of operating cash. Overall, expenses
associated with rental activities, such as management fees, and net cash flow
from operating activities will decline as the Partnership remarkets its
aircraft. Conversely, the Partnership may incur increased costs to insure the
successful remarketing of its aircraft. Ultimately, the Partnership will
dispose of all aircraft under lease. This will occur principally through sale
transactions whereby each aircraft will be sold to the existing lessee or to a
third party. Generally, this will occur upon expiration of each aircraft's
primary or renewal/re-lease term. See additional discussion below regarding the
loan made by the Partnership to Echelon Residential Holdings in March 2000.

   Cash realized for asset disposal transactions is reported under investing
activities on the accompanying Statement of Cash Flows. For the six months
ended June 30, 2000, the Partnership realized $750,000 in equipment sales
proceeds compared to $3,109,500 for the same period in 1999. Future inflows of
cash from aircraft disposals will vary in timing and amount and will be
influenced by

                                       14
<PAGE>

many factors including, but not limited to, the frequency and timing of lease
expirations, the type of aircraft being sold, their condition and age, and
future market conditions.

   At June 30, 2000, the Partnership was due aggregate future minimum lease
payments of $238,391 from contractual lease agreements, a portion of which will
be used to amortize the principal balance of notes payable of $1,052,817. At
the expiration of the individual lease term underlying the
Partnership's future minimum lease payments, the Partnership will sell the
aircraft or enter into a re-lease or renewal agreement. In addition, the
General Partner and EFG are currently attempting to remarket the four aircraft
and the two aircraft engines, which are currently off lease. Such remarketing
activities will result in the realization of additional cash inflows in the
form of sale proceeds or rents from renewals or re-leases, the timing and
extent of which cannot be predicted with certainty.

   The Partnership obtained long-term financing in connection with the
McDonnell Douglas MD-82 and the Boeing 737-2H4 aircraft. The corresponding note
agreements are recourse only to the specific equipment financed and to the
minimum rental payments contracted to be received during the debt amortization
periods. As rental payments are collected, they are used to repay associated
indebtedness. The Partnership has a balloon payment obligation of $130,575
related to the indebtedness associated with the McDonnell Douglas MD-82
aircraft leased to Finnair OY, which matures in April 2001. The debt associated
with the Boeing 737-2H4 aircraft was fully amortized at December 31, 1999.

   In addition, in February 2000, the Partnership and certain affiliated
investment programs (collectively, the "Programs") refinanced the indebtedness
which matured in January 2000 associated with a McDonnell-Douglas MD-82
aircraft formerly leased to Finnair OY. In addition to refinancing the existing
indebtedness of $3,370,000, the Programs received additional debt proceeds of
$1,350,000 required to perform a D-Check on the aircraft. The Partnership
received $201,247 from such proceeds. The note bears a fluctuating interest
rate based on LIBOR plus a margin with interest payments due monthly. The
Partnership's aggregate share of the refinanced and new indebtedness was
$701,062, which matures in August 2000. The General Partner is currently
negotiating with the existing lender to extend the term of this indebtedness.
The aircraft was returned in January 2000 upon its lease term expiration and is
currently being stored in a warehouse pending its remarketing.

   In connection with a preliminary settlement agreement for the Class Action
Lawsuit described in Note 7 to the financial statements presented in the
Partnership's 1999 Annual Report, the Partnership is permitted to invest in new
equipment or other business activities, subject to certain limitations. On
March 8, 2000, the Partnership and 10 affiliated partnerships (the "Exchange
Partnerships) collectively loaned $32.0 million to Echelon Residential Holdings
a newly-formed real estate development company owned by several investors,
including James A. Coyne, Executive Vice President of EFG. Mr. Coyne, in his
individual capacity, is the only equity investor in Echelon Residential
Holdings related to EFG.

   The Partnership's participation in the loan is $3,640,000. Echelon
Residential Holdings, through a wholly-owned subsidiary (Echelon Residential
LLC), used the loan proceeds to acquire various real estate assets from Echelon
International Corporation, a Florida-based real estate company. The loan has a
term of 30 months, maturing on September 8, 2002, and an annual interest rate
of 14% for the first 24 months and 18% for the final six months. Interest
accrues and compounds monthly and is payable at maturity. In connection with
the transaction, Echelon Residential Holdings has pledged a security interest
in all of its right, title and interest in and to its membership interests in
Echelon Residential LLC to the Exchange Partnerships as collateral.

   As discussed in Note 5 in the Partnership's financial statements, the loan
is considered to be an investment in a real estate venture for accounting
purposes. In accordance with the provisions of Statement of Position No. 78-9,
"Accounting for Investments in Real Estate Ventures", the Partnership reports
its share of income or loss in Echelon Residential Holdings under the equity
method of accounting.

                                       15
<PAGE>

   There are no formal restrictions under the Restated Agreement, as amended,
that materially limit the Partnership's ability to pay cash distributions,
except that the General Partner may suspend or limit cash distributions to
ensure that the Partnership maintains sufficient working capital reserves to
cover, among other things, operating costs and potential expenditures, such as
refurbishment costs to remarket aircraft upon lease expiration. Liquidity is
especially important as the Partnership matures and sells aircraft, because the
remaining aircraft portfolio consists of fewer revenue-producing assets that
are available to cover prospective cash disbursements. Insufficient liquidity
could inhibit the Partnership's ability to sustain its operations or maximize
the realization of proceeds from remarketing its remaining aircraft.

   The management and remarketing of aircraft can involve, among other things,
significant costs and lengthy remarketing initiatives. Although the
Partnership's lessees are required to maintain the aircraft during the period
of lease contract, repair, maintenance, and/or refurbishment costs at lease
expiration can be substantial. For example, an aircraft that is returned to the
Partnership meeting minimum airworthiness standards, such as flight hours or
engine cycles, nonetheless may require heavy maintenance in order to bring its
engines, airframe and other hardware up to standards that will permit its
prospective use in commercial air transportation. At June 30, 2000, the
Partnership had ownership interests in five commercial jet aircraft and two
aircraft engines. Three of the aircraft are Boeing 737 aircraft formerly leased
to Southwest Airlines, Inc. ("Southwest"). The lease agreements for each of
these aircraft expired on December 31, 1999 and Southwest elected to return the
aircraft. Each of these aircraft are Stage 2 aircraft, meaning that they are
prohibited from operating in the United States after December 31, 1999 unless
they are retro-fitted with hush-kits to meet Stage 3 noise regulations
promulgated by the Federal Aviation Administration. The cost to hush-kit an
aircraft, such as the Partnership's Boeing 737s, can approach $2.0 million. In
July 2000, one of the Boeing 737 aircraft was sold. At this time, the General
Partner is attempting to remarket the remaining two Boeing 737 aircraft without
further capital investment by either re-leasing the aircraft to a user outside
of the United States or selling the aircraft as they are without retro-fitting
the aircraft to conform to Stage 3 standards. The remaining two aircraft in the
Partnership's portfolio already are Stage 3 compliant. One of these aircraft
had a lease term that expired in January 2000 and is being held in storage
pending the outcome of ongoing remarketing efforts. The other aircraft has a
lease term expiring in April 2001.

   The Partnership's capital account balances for federal income tax and for
financial reporting purposes are different primarily due to differing
treatments of income and expense items for income tax purposes in comparison to
financial reporting purposes, generally referred to as permanent or timing
differences. See Note 6 to the financial statements presented in the 1999
Annual Report. For instance, selling commissions and organization and offering
costs pertaining to syndication of the Partnership's limited partnership units
are not deductible for federal income tax purposes, but are recorded as a
reduction of partners' capital for financial reporting purposes. Therefore,
such differences are permanent differences between capital accounts for
financial reporting and federal income tax purposes. Other differences between
the bases of capital accounts for federal income tax and financial reporting
purposes occur due to timing differences consisting of the cumulative
difference between income or loss for tax purposes and financial statement
income or loss. The principal component of the cumulative difference between
financial statement income or loss and tax income or loss results from
different depreciation policies for book and tax purposes.

   For financial reporting purposes, the General Partner has accumulated a
capital deficit at June 30, 2000. This is the result of aggregate cash
distributions to the General Partner being in excess of its capital
contribution of $1,000 and its allocation of financial statement net income or
loss. Ultimately, the existence of a capital deficit for the General Partner
for financial reporting purposes is not indicative of any further capital
obligations to the Partnership by the General Partner. The


                                       16
<PAGE>

Restated Agreement, as amended, requires that upon the dissolution of the
Partnership, the General Partner will be required to contribute to the
Partnership an amount equal to any negative balance which may exist in the
General Partner's tax capital account. At December 31, 1999, the General
Partner had a positive tax capital account balance.

   The Partnership is a Nominal Defendant in a Class Action Lawsuit described
in Note 7 to the financial statements presented in the Partnership's 1999
Annual Report. The proposed settlement to that lawsuit, if effected, will
materially change the future organizational structure and business interests of
the Partnership, as well as its cash distribution policies. In addition, the
General Partner will continue to suspend the payment of quarterly cash
distributions pending final resolution of the Class Action Lawsuit.
Accordingly, future cash distributions are not expected to be paid until the
Class Action Lawsuit is adjudicated.

                                       17
<PAGE>

                  AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                                   FORM 10-Q

                           PART II. OTHER INFORMATION

<TABLE>
<S>         <C>
Item 1.     Legal Proceedings
            Response:
            Refer to Note 8 to the financial statements herein.

Item 2.     Changes in Securities
            Response: None

Item 3.     Defaults upon Senior Securities
            Response: None

Item 4.     Submission of Matters to a Vote of Security Holders
            Response: None

Item 5.     Other Information
            Response: None

Item 6(a).  Exhibits
            27 Financial Data Schedule

Item 6(b).  Reports on Form 8-K
            Response: None

                                 EXHIBIT INDEX

<CAPTION>
Exhibit     Description
-------     -----------
<S>         <C>
27          Financial Data Schedule
</TABLE>

                                       18
<PAGE>

                                 SIGNATURE PAGE

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity
and on the date indicated.

                             AIRFUND II INTERNATIONAL LIMITED PARTNERSHIP

                             By: AFG Aircraft Management Corporation, a
                                Massachusetts corporation and the General
                                Partner of the Registrant.

                                       /s/ Michael J. Butterfield
                             By: ______________________________________________
                                            Michael J. Butterfield
                                     Treasurer of AFG Aircraft Management
                                                 Corporation
                                         (Duly Authorized Officer and
                                        Principal Accounting Officer)

                             Date: August 14, 2000


                                       19