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

|(Mark One)
|----------
|          
|x         
|          
|          
|OR        
|          
|o         
|          

COMMISSION FILE NUMBER:
0-26468

|AMERICAN RETIREMENT VILLAS                                    
|--------------------------------------------------------------
|PROPERTIES II                                                 
|(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)        
|                                                              
|CALIFORNIA                                                    
|(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
|                                                              
|245 FISCHER AVENUE, D-1 COSTA MESA, CA                        
|(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)                       
|                                                              
|REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE:           

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 o
|----- | ----

Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-Q or any amendment to this Form 10-Q.

|Yes x | No o
|----- | ----

The aggregate
market value of the voting units held by non-affiliates of registrant, computed by reference to the price at which units were sold, was $16,696,569 (for purposes of calculating the preceding amount only, all directors, executive officers and
unitholders holding 5% or greater of the registrants units are assumed to be affiliates). The number of Units outstanding as of April 30, 2003 was 35,020.

Indicate by check mark whether the registrant is accelerated filer (as defined in Rule 12b-2 of the Act).

|Yes o | No x
|----- | ----

The aggregate
market value of the voting and non-voting units held by non-affiliates computed by reference to the price at which the units were last sold was $16,696,569, as of June 30, 2002.

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PART I - FINANCIAL INFORMATION  ITEM 1 - FINANCIAL STATEMENTS

American Retirement Villas Properties
II (a California limited partnership)  Condensed Consolidated Balance Sheets  (Unaudited) (In thousands)



|                                                                                                                                              |  | MARCH 31, 2003 |        | DECEMBER 31, 2002 |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | ----------------- | -
|                                                                                                                                              |  |                |        |                   |  
|ASSETS                                                                                                                                        |  |                |        |                   |  
|Properties, at cost:                                                                                                                          |  |                |        |                   |  
|Land                                                                                                                                          |  | $              | 11,453 |                   | $
|Buildings and improvements, less accumulated depreciation of $10,139 and $9,911 at March 31, 2003 and December 31, 2002,
respectively         |  |                | 19,276 |                   |  
|Leasehold property and improvements, less accumulated depreciation of $1,395 and $1,373 at March 31, 2003 and
December 31, 2002, respectively |  |                | 314    |                   |  
|Furniture, fixtures and equipment, less accumulated depreciation of $1,492 and $1,422 at March 31, 2003 and December 31, 2002,
respectively   |  |                | 1,502  |                   |  
|                                                                                                                                              |  |                |        |                   |  
|Net properties                                                                                                                                |  |                | 32,545 |                   |  
|Cash and cash equivalents                                                                                                                     |  |                | 2,251  |                   |  
|Loan fees, less accumulated amortization of $59 and $52 at March 31, 2003 and December 31, 2002,
respectively                                 |  |                | 921    |                   |  
|Other assets, including impound accounts of $2,926 and $2,696  at March 31, 2003 and December 31, 2002, respectively                          |  |                | 3,553  |                   |  
|                                                                                                                                              |  |                |        |                   |  
|                                                                                                                                              |  | $              | 39,270 |                   | $
|                                                                                                                                              |  |                |        |                   |  
|LIABILITIES AND PARTNERS CAPITAL (DEFICIENCY)                                                                                                |  |                |        |                   |  
|Notes payable                                                                                                                                 |  | $              | 41,711 |                   | $
|Accounts payable                                                                                                                              |  |                | 54     |                   |  
|Accrued expenses                                                                                                                              |  |                | 1,816  |                   |  
|Amounts payable to affiliate                                                                                                                  |  |                | 191    |                   |  
|Tenant prepaid rent and assisted living services                                                                                              |  |                | 203    |                   |  
|Distributions payable                                                                                                                         |  |                | 32     |                   |  
|                                                                                                                                              |  |                |        |                   |  
|Total liabilities                                                                                                                             |  |                | 44,007 |                   |  
|                                                                                                                                              |  |                |        |                   |  
|Commitments and contingencies                                                                                                                 |  |                |        |                   |  
|Partners capital (deficit):                                                                                                                  |  |                |        |                   |  
|General partners capital                                                                                                                     |  |                | 1      |                   |  
|Special limited partners                                                                                                                      |  |                | 100    |                   |  
|Limited partners capital, 35,020 units outstanding                                                                                           |  |                | (4,838 | )                 |  
|                                                                                                                                              |  |                |        |                   |  
|Total partners capital (deficiency)                                                                                                          |  |                | (4,737 | )                 |  
|                                                                                                                                              |  |                |        |                   |  
|                                                                                                                                              |  | $              | 39,270 |                   | $
|                                                                                                                                              |  |                |        |                   |  

See accompanying notes to the unaudited condensed consolidated financial
statements.

2



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American Retirement Villas Properties II (a California limited partnership)  Condensed Consolidated Statements of Operations  (Unaudited) (In
thousands, except unit data)

|                              |  | FOR THE THREE MONTHS ENDED MARCH 31, |      
|----------------------------- |  | ------------------------------------ | -----
|                              |  |                                      |      
|                              |  | 2003                                 |      
|                              |  |                                      |      
|Revenues:                     |  |                                      |      
|Rent                          |  | $                                    | 4,764
|Assisted living               |  |                                      | 1,001
|Interest and other            |  |                                      | 133  
|                              |  |                                      |      
|Total revenues                |  |                                      | 5,898
|                              |  |                                      |      
|Costs and expenses:           |  |                                      |      
|Rental property operations    |  |                                      | 3,029
|Assisted living               |  |                                      | 642  
|General and administrative    |  |                                      | 396  
|Communities rent              |  |                                      | 93   
|Depreciation and amortization |  |                                      | 389  
|Property taxes                |  |                                      | 126  
|Advertising                   |  |                                      | 102  
|Interest                      |  |                                      | 882  
|                              |  |                                      |      
|Total costs and expenses      |  |                                      | 5,659
|                              |  |                                      |      
|Net income                    |  | $                                    | 239  
|                              |  |                                      |      
|Per limited partner unit:     |  |                                      |      
|Net income                    |  | $                                    | 6.76 
|                              |  |                                      |      

See accompanying notes to the unaudited condensed consolidated financial
statements.

3



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American Retirement Villas Properties II (a California limited partnership) Condensed Consolidated Statements of Cash Flows (Unaudited) (In
thousands)

|                                                                                            |  | FOR THE THREE MONTHS ENDED MARCH 31, |      
|------------------------------------------------------------------------------------------- |  | ------------------------------------ | -----
|                                                                                            |  |                                      |      
|                                                                                            |  | 2003                                 |      
|                                                                                            |  |                                      |      
|Cash flows from operating activities:                                                       |  |                                      |      
|Net income                                                                                  |  | $                                    | 239  
|Adjustments to reconcile net income to net cash provided by operating activities:           |  |                                      |      
|Depreciation and amortization                                                               |  |                                      | 389  
|Change in assets and liabilities:                                                           |  |                                      |      
|Other assets                                                                                |  |                                      | (175 
|Accounts payable and accrued expenses                                                       |  |                                      | (96  
|Tenant prepaid rent and assisted living services                                            |  |                                      | 5    
|Amounts payable to affiliates                                                               |  |                                      | (149 
|                                                                                            |  |                                      |      
|Net cash provided by operating activities                                                   |  |                                      | 213  
|                                                                                            |  |                                      |      
|Cash flows used in investing activities:                                                    |  |                                      |      
|Capital expenditures                                                                        |  |                                      | (263 
|Refund of purchase deposit, net                                                             |  |                                      |     
|                                                                                            |  |                                      |      
|Net cash used in investing activities                                                       |  |                                      | (263 
|                                                                                            |  |                                      |      
|Cash flows used in financing activities:                                                    |  |                                      |      
|Principal repayments on notes payable                                                       |  |                                      | (65  
|Loan fees                                                                                   |  |                                      |     
|Distributions paid                                                                          |  |                                      |     
|                                                                                            |  |                                      |      
|Net cash used in financing activities                                                       |  |                                      | (65  
|                                                                                            |  |                                      |      
|Net decrease in cash and cash equivalents                                                   |  |                                      | (115 
|Cash and cash equivalents at beginning of period                                            |  |                                      | 2,366
|                                                                                            |  |                                      |      
|Cash and cash equivalents at end of period                                                  |  | $                                    | 2,251
|                                                                                            |  |                                      |      
|Supplemental disclosure of cash flow information - cash paid during the period for interest |  | $                                    | 828  
|                                                                                            |  |                                      |      

See accompanying notes to the unaudited condensed consolidated financial
statements.

4



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American Retirement Villas Properties II (a California limited partnership)  Notes to Condensed Consolidated Financial Statements 
(Unaudited)

March 31, 2003

(1)  CRITICAL ACCOUNTING POLICIES

BASIS OF PRESENTATION

Basis of Presentation

The accompanying condensed consolidated
financial statements of American Retirement Villas Properties II (the Partnership or ARVPII) are presented pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim
reporting.  As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America can be condensed or omitted.

The consolidated financial statements include all normal and recurring adjustments that the Partnership considers necessary for the fair presentation of our financial position and
operating results.  For further information, refer to the consolidated financial statements and notes in the Partnerships Form 10-K for fiscal year ended December 31, 2002, which is on file with the SEC.

The results of operations can vary during each quarter of the year.  Therefore, the results and trends in these interim consolidated financial statements may not be the same as those for the
full year.

Basis of Accounting

American Retirement Villas Properties II financial statements have been
prepared in conformity with accounting principles generally accepted in the United States of America.

Principles of Consolidation

The consolidated financial statements include the accounts of the Partnership and its subsidiaries. Subsidiaries, which include limited partnerships and limited liability companies in which the
Partnership has controlling interests, have been consolidated into the financial statements. Management believes the Partnership has a controlling interest consistent with the requirements of SOP 78-9 when the Partnership owns more than 50% of an
entity. All intercompany balances and transactions have been eliminated in consolidation.

Carrying Value of Real Estate

Property, furniture and equipment are stated at cost less accumulated depreciation which is charged to expense on a straight-line basis over the estimated useful lives of the assets as
follows:

|Buildings and improvements          |  |  | 27.5 to 35 years                        | 
|----------------------------------- |  |  | --------------------------------------- | 
|Leasehold property and improvements |  |  | Shorter of  lease term or life of lease | 
|Furniture, fixtures and equipment   |  |  | 3 to 7 years                            | 

The Partnership reviews its long-lived assets
for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. In reviewing recoverability, the Partnership estimates the future undiscounted cash flows expected to result from using
the assets and eventually disposing of them. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized based upon the assets fair
value.

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Use of Estimates

In the preparation of the Partnerships consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America, management has made estimates and assumptions that affect the following:

| |  | reported amounts of assets and liabilities at the date of the financial statements;         
| | - | --------------------------------------------------------------------------------------------
| |  | disclosure of contingent assets and liabilities at the date of the financial statements; and
| |  | reported amounts of revenues and expenses during the reporting period.                      

Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of reporting cash balances, the Partnership considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Impound Accounts

The lenders hold certain Partnerships funds in impound accounts for payment of property taxes,
insurance premiums and future property improvements (replacement reserves) on these properties.  The Partnership includes these impound accounts in other assets.At March 31, 2003 and December 31, 2002 the impounds were $2,926,000 and
$2,696,000, respectively.

Loan Fees

The Partnership amortizes loan fees using the effective interest
method over the term of the respective notes payable, and includes them in other assets.

Revenue Recognition

Residency agreements with residents are on a month-to-month basis. The Partnership applies advance deposits to the first months rent.  Revenue is recognized in the period in which
services are provided.  Revenue received in advance of the period the services are performed is recorded in tenant prepaid rents and services.

General Liability Insurance

The Partnership utilizes third-party insurance for losses and liabilities associated with general and professional liability claims subject to established deductible levels on a per
occurrence basis.  Losses up to these deductible levels are accrued based upon the Partnerships estimates of the aggregate liability for claims incurred based on the Partnerships experience and appropriate actuarial
principles.

Net Income Per Limited Partner Unit

The Partnership based net income per limited partner unit
on the weighted-average number of limited partner units outstanding of 35,020 in the quarters ended March 31, 2003 and 2002.  Special Limited Partners and General Partners share of earnings, 1% for both,  is deducted from earnings before
computing earnings per limited partner unit.

Reclassifications

The Partnership has reclassified certain
prior period amounts to conform to the March 31, 2003 presentation.

New Accounting Pronouncements

In
April 2002, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
Technical

6



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Corrections.  SFAS No. 145 eliminates the requirement to classify gains and losses from the extinguishment of indebtedness as extraordinary, requires certain lease
modifications to be treated the same as a sale-leaseback transaction, and makes other technical corrections to existing pronouncements.  SFAS No. 145 is effective for fiscal years beginning after May 15, 2002, with earlier adoption encouraged.
Adoption of this statement did not have a material effect on the Partnerships consolidated financial statements.

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities.  SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal
activity.  SFAS No. 146 is effective prospectively for exit or disposal activities initiated after December 31, 2002, with earlier adoption encouraged. Adoption of this statement did not have a material effect on the Partnerships
consolidated financial statements.

In November 2002, the FASB issued FASB Interpretation (FIN) No. 45, Guarantors Accounting and Disclosure
Requirement for Guarantees, Including Indirect Guarantees and Indebtedness of Others, an interpretation of SFAS Nos. 5, 57 and 107 and rescission of FIN No. 34, Disclosure of Indirect Guarantees of Indebtedness of Others.  FIN
No. 45 elaborates on the disclosure requirements for the annual and interim financial statements of the guarantor.  It also requires that a guarantor recognize a liability at the inception of the guarantee for the fair value of the obligation
undertaken.  The Partnership adopted the recognition and measurement provision of FIN No. 45 beginning January 1, 2003, while the disclosure provisions became effective at December 31, 2002.  Adoption of this interpretation did not have a
material effect on the Partnerships consolidated financial statements.

In January 2003, FIN No. 46 Consolidation of
Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51, was issued. FIN No. 46 requires that a company consolidate variable interest entities if that company is subject to a majority of the risk of loss from the
entitys activities or the company receives a majority of the entitys residual returns. FIN No. 46 also requires certain disclosures about variable interest entities in which a company has a significant interest, regardless of whether
consolidation is required. The Partnership adopted the consolidation provisions of FIN No. 46 beginning January 1, 2003, while certain disclosures required became effective for all financial statements issued after January 31, 2003, regardless of
when the variable interest entities were established. The Partnership currently has no variable interest entities, therefore, the adoption of this interpretation had no effect on the Partnerships condensed consolidated financial
statements.

(2)  TRANSACTIONS WITH AFFILIATES

The Partnership has an agreement with ARV Assisted
Living, Inc. (ARV), our Managing General Partner, providing for a property management fee of five percent of gross revenues amounting to $295,000 and $295,000 for the three-month periods ended March 31, 2003 and 2002, respectively. 
Additionally, the Partnership accrues a partnership management fee of ten percent of cash flow before distributions, as defined in the Partnership Agreement, which amounted to $63,000 and $68,000 for the three-month periods ended March 31, 2003 and
2002, respectively.  The Partnership has significant transactions with affiliates, had the Partnership been operated as an unaffiliated entity the accompanying financial statements could have been materially different.

(3)  NOTES PAYABLE

Notes payable consist of the following at March 31, 2003 and December 31, 2002 (in thousands):

|                                                                                                                                                                                          |  | 2003 |        | 2002
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ----
|                                                                                                                                                                                          |  |      |        |     
|HUD insured notes payable, bearing interest ranging from 7.25% to 8.06%.  Monthly principal and interest
payments of $297; due through January 2037; collateralized by various properties |  | $    | 41,711 |     
|                                                                                                                                                                                          |  |      |        |     

The annual principal payments of the notes payable at March 31, 2003 are as
follows (in thousands):

|2004       |  | $ | 275    | 
|---------- |  | - | ------ | 
|2005       |  |   | 298    | 
|2006       |  |   | 322    | 
|2007       |  |   | 348    | 
|2008       |  |   | 377    | 
|Thereafter |  |   | 40,091 | 
|           |  |   |        | 
|           |  | $ | 41,711 | 
|           |  |   |        | 

(4)  COMMITMENT AND CONTINGENCIES

During 2001, two lawsuits were brought by employees of an ALC owned by ARVP II. In addition, four other employees of the same ALC filed EEOC claims arising out of the same facts. In 2002, the two
lawsuits were submitted to mediation and settled. The four remaining claims will be submitted to binding arbitration in the third quarter of 2003.

Except as described
above, and other than the ordinary routine litigation that is incidental to, and arises in the normal course of, the business of the Partnership, there are no material legal proceeding pending against the Partnership. While the Partnership
cannot

7



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predict the results with certainty, it does not believe that any liability from any such lawsuits or other matters will have a material effect on its financial position,
results of operations, or liquidity.

(5)  SUBSEQUENT EVENT

ARVAL announced that on January 3, 2003,
ARVAL, Prometheus Assisted Living LLC (Prometheus) and Jenny Merger Corp., a wholly-owned subsidiary of Prometheus (Merger Sub), entered into an Agreement and Plan of Merger (the Merger  Agreement). Pursuant
to the Merger Agreement, on the terms and conditions set forth therein, Merger Sub will merge (the Merger) with and into ARVAL, with ARVAL as the surviving entity (the Surviving Corporation).  Upon consummation of the
Merger, Prometheus will be the beneficial owner of 100% of the capital stock of the Surviving Corporation.  The Surviving Corporation will continue to be the managing General partner of ARVPII.  On April 23, 2003, the stockholders of
ARVAL, our Managing General Partner, approved the Merger.

ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ARVAL announced that on January 3, 2003, ARVAL, Prometheus Assisted Living LLC (Prometheus) and Jenny Merger Corp., a wholly-owned subsidiary of Prometheus (Merger Sub),
entered into an Agreement and Plan of Merger (the Merger  Agreement). Pursuant to the Merger Agreement, on the terms and conditions set forth therein, Merger Sub will merge (the Merger) with and into ARVAL, with ARVAL as
the surviving entity (the Surviving Corporation).  Upon consummation of the Merger, Prometheus will be the beneficial owner of 100% of the capital stock of the Surviving Corporation.  The Surviving Corporation will continue to
be the managing General partner of ARVPII.  On April 23, 2003, the stockholders of ARVAL, our Managing General Partner, approved the Merger.

RESULTS OF OPERATIONS

The following table sets forth a comparison of the three months ended March 31, 2003 (the 2003 Quarter) and the three months ended March 31, 2002 (the 2002 Quarter). The
percentage increase (decrease) is based upon our Condensed Consolidated Statements of Operations and will not compute using the rounded amounts below.

Operating Results Before
Extraordinary Item For the Three Months Ended March 31, 2003 and 2002 (Unaudited) (Dollars in millions)

|                                               |  | For the Three Months Ended March 31, |      | Increase/ (decrease) |  
|---------------------------------------------- |  | ------------------------------------ | ---- | -------------------- | -
|                                               |  |                                      |      |                     
|                                               |  | 2003                                 |      | 2002                 |  
|                                               |  |                                      |     
|Revenues:                                      |  |                                      |      |                      |  
|Rent and assisted living                       |  | $                                    | 5.77 |                      | $
|Interest and others                            |  |                                      | 0.13 |                      |  
|                                               |  |                                      |      |                      |  
|Total revenues                                 |  |                                      | 5.90 |                      |  
|                                               |  |                                      |      |                      |  
|Costs and expenses:                            |  |                                      |      |                      |  
|Rental property operations and assisted living |  |                                      | 3.67 |                      |  
|General and administrative                     |  |                                      | 0.40 |                      |  
|Communities rent                               |  |                                      | 0.09 |                      |  
|Depreciation and amortization                  |  |                                      | 0.39 |                      |  
|Property taxes                                 |  |                                      | 0.13 |                      |  
|Advertising                                    |  |                                      | 0.10 |                      |  
|Interest                                       |  |                                      | 0.88 |                      |  
|                                               |  |                                      |      |                      |  
|Total costs and expenses                       |  |                                      | 5.66 |                      |  
|                                               |  |                                      |      |                      |  
|Net income                                     |  | $                                    | 0.24 |                      | $
|                                               |  |                                      |      |                      |  

Rent and assisted living revenues decreased $0.05 million, or
(0.88)%, from $5.82 million for the quarter ended March 31, 2002 to $5.77 million for the quarter ended March 31, 2003 primarily due to the following:

| |  | the decrease in average occupancy to 78.8% for the three months ended March 31, 2003 from 84.5% for the three months ended March 31, 2002; offset by
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------

8



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| |  | the increase in rent and assisted living average rate per occupied unit to $2,639 for the three months ended March 31, 2003 as compared with $2,486 for the three months ended
March 31, 2002; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the increase in assisted living penetration to 58.7% for the three months ended March 31, 2003 as compared with 56.6% for the three months ended March 31, 2002.                                  

Interest and other revenues increased $0.01 million, or (9.02%), from $0.12 million for the quarter ended March 31, 2002 to $0.13 million for the three months
ended March 31, 2003 primarily due to the following:

| |  | increase in processing fees related to a higher number of move-ins, partially offset by;                        
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | decreases in interest income relating to a lower replenishment reserve impound balance and lower interest rates.

Rental property operations and assisted living expenses decreased $0.12 million, or (3.19)%, from $3.79 million for the quarter ended March 31, 2002 to $3.67 million for the quarter ended March
31, 2003 primarily due to the following:

| |  | decreased worker compensation expense, and                                        
| | - | ----------------------------------------------------------------------------------
| |  | decreased other staff payroll costs, partially offset by                          
| |  | increased variable expenses, utilities, rental & lease, and repair & maintenances.

General and administrative expenses increased $0.23 million, or 127.59%, from $0.17 million for the quarter ended March 31, 2002 to $0.40 million for the quarter ended March 31, 2003 primarily due
to increased in general liability insurance cost.

Community rent expense is relatively constant for both periods ended March 31, 2003 and 2002.

Depreciation and amortization expense increased $0.02 million, or 5.71%, from $0.37 million for the quarter ended March 31, 2002 to $0.39 million for the quarter ended March 31, 2003
primarily due to capital improvement additions.

Property tax expense decreased $0.03 million, or (22.22)%, to $0.13 million for the three months ended March 31, 2003
from $0.16 million for the three months ended March 31, 2002 due to reversal of $36,000 supplemental tax expense accrued in a previous period.

LIQUIDITY AND CAPITAL RESOURCES

Our unrestricted cash balances were $2.3 million and $2.4 million at March 31, 2003 and December 31, 2002, respectively.  On a long-term basis, our liquidity is sustained primarily
from cash flow provided by operating activities.

Given the age of the ALCs (ages range from 14 to 26 years with an average age of 22.5 years), our Managing General
Partner has continued our refurbishment program put in place to repair, maintain and physically improve our ALCs.  We expect to fund repairs and improvements primarily from our operating cash flow. As a result of the planned renovations, our
Managing General Partner believes that distributions of cash flow from operations to the Partners will either be reduced or eliminated in the near term. Our General Partners expect that the cash to be generated from operations of our communities
will be adequate to pay operating expenses, make necessary capital improvements and make required principal reductions of loans.

We expect that cash generated from the
operations of our properties will be adequate to pay operating expenses and current capital requirements for the next 12 months.  On a long-term basis, our liquidity is sustained primarily from cash flow provided by operating activities. 
During the quarter ended March 31, 2003 cash provided by operating activities was $0.2 million compared $0.3 million during the quarter ending March 31, 2002.

The
cash provided by operating activities during the quarter ended March 31, 2003 was primarily a result of: net income of $0.2 million, adjusted for non-cash charges of:

| |  | $0.4 million of depreciation and amortization expense; offset by
| | - | ----------------------------------------------------------------
| |  | $0.2 million increase in other assets, and                      
| |  | $0.2 million decrease in net liabilities.                       

9



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During the quarter ended March 31, 2003 cash used in investing activities was $0.3 million compared to of $0.1 million during the quarter ended
March 31, 2002.  The cash used in investing activities during the 2003 quarter was for purchase of furniture and equipment, and building improvement.

During the
quarter ended March 31, 2003 cash used in financing activities was $0.1 million as compared to cash used by financing activities of $2.9 million for the quarter ended March 31, 2002.

The cash used in financing activities during 2003 quarter was a result of principal repayment on loans.

As of
March 31, 2003, of our 10 assisted living communities, 8 are owned directly, one is operated under a long-term operating lease, and one is owned subject to a ground lease.

We contemplate spending approximately $1,077,000 for capital expenditures during 2003 for physical improvements at our communities. As of March 31, 2003 we have made approximately $263,000 in
capital expenditures.  Funds for these improvements are expected to be available from operations.

In order to protect ourself against lawsuits and claims
relating to general and professional liability, we currently maintain third party insurance policies in amounts and covering risks that are consistent with industry practice. Under the terms of such insurance policies, our coverage is provided
subject to varying deductible levels and liability amounts. As the results of poor industry loss experience, a number of insurance carriers have stopped providing insurance coverage to the assisted living industry, and those remaining have
drastically increased premiums and deductible amounts. Consistent with this trend, our general liability coverage is subject to significant deductible levels on a per occurrence basis for the nine months ended December 31, 2001 and the three months
ended March 31, 2002.  For the nine months ended December 31, 2002 and the three months ended March 31, 2003 our general liability deductible per occurrence has again been materially increased.   Losses up to these deductible levels
are accrued based upon our estimates of the aggregate liability for claims incurred based on our experience and appropriate actuarial principles. As the result of these continuing increases in both deductible amounts and premiums, there can be no
assurance that we will be able to obtain all desired insurance coverage in the future on commercially reasonable terms or at all.

Our General Partner is not aware of
any trends, other than national economic conditions, which have had or which may be reasonably expected to have a material favorable or unfavorable impact on revenues or income from our operations or sale of properties. Our General Partner believes
that if the inflation rate increases, they will be able to recover subsequent increases in operating expenses from higher rental and assisted living rates.

IMPACT OF INFLATION, DEFLATION AND
CHANGING PRICES

To date, inflation has not had a significant impact on the Partnership.  Inflation could, however, affect our future revenues and operating
income due to our dependence on the senior resident population, most of who rely on relatively fixed incomes to pay for our services.  The monthly charges for the residents unit and assisted living services are influenced by the location
of the community and local competition.  Our ability to increase revenues in proportion to increased operating expenses may be limited.  We typically do not rely to a significant extent on governmental reimbursement programs.  In
pricing our services, we attempt to anticipate inflation levels, but there can be no assurance that we will be able to respond to inflationary pressures in the future. The Partnership could be effected by deflation since, as noted above, we rely on
seniors with relatively fixed incomes.

FORWARD-LOOKING STATEMENTS

A number of matters and subject areas
discussed in this report, that are not historical or contain current facts, deal with potential future circumstances, operations, and prospects.  The discussion of these matters and subject areas is qualified by the inherent risks and
uncertainties surrounding future expectations generally, and also may materially differ from our actual future experience as a result of such factors as: the effects of competition and economic conditions on the occupancy levels in our communities;
our ability under current market conditions to maintain and increase our resident charge without adversely affecting the occupancy level; our ability to control community operation expenses without adversely affecting the occupancy level and the
level of resident charges; the ability of our operations to generate cash flow sufficient to service our debt, capital expenditures and other fixed payment requirements; and our ability to find sources of financing and capital on satisfactory terms
to meet our cash requirements to the extent that they are not met by operations.  We have attempted to identify, in context, certain of the factors that we currently believe may cause actual future results to differ from our current
expectations regarding the matters or subject areas discussed in this report.  These and other risks and

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uncertainties are detailed in our reports filed with the Securities and Exchange Commission, including our Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q.

ITEM 3. QUANATITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership is exposed to market
risks related to fluctuations in the interest rates on our fixed rate notes payable. With respect to the Partnerships fixed rate notes payable, changes in the interest rates affect the fair value of the notes payable, but not the
Partnerships earnings or cash flows.  The Partnership does not have an obligation to prepay fixed rate debt prior to maturity, and as a result, interest rate risk and changes in fair value should not have a significant impact on the fixed
rate debt until the earlier of maturity and any required refinancing of such debt.  The Partnership does not currently have any variable interest rate debt and, therefore, are not subject to interest rate risk associated with variable interest
rate debt. Currently, the Partnership does not utilize interest rate swaps.

ITEM 4.  CONTROLS AND PROCEDURES

American Retirement Villas Properties IIs Managing General Partner, including the Chief Executive Officer and Chief Financial Officer of ARV Assisted Living, Inc., have conducted an
evaluation of the effectiveness of our design and operation of disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) as of a date within 90 days prior to the filing date of this
quarterly report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this
quarterly report has been made known to them in a timely fashion.  There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer
and Chief Financial Officer completed their evaluation.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During 2001, two lawsuits were brought by employees of an ALC owned by ARVP II. In addition, four other employees of the same ALC filed EEOC claims arising out of the same facts. In 2002,
the two lawsuits were submitted to mediation and settled. The four remaining claims will be submitted to binding arbitration in the third quarter of 2003.

Except as
described above, and other than the ordinary routine litigation that is incidental to, and arises in the normal course of, the business of the Partnership, there are no material legal proceeding pending against the Partnership. While the Partnership
cannot predict the results with certainty, it does not believe that any liability from any such lawsuits or other matters will have a material effect on its financial position, results of operations, or liquidity.

ITEM 2.  CHANGES IN SECURITIES

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTER TO A VOTE OF SECURITY-HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)          The following documents are filed as part of this Report:

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| | 99.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| | ---- | ----------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                       
| | 99.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)          Reports on Form 8-K.

| | The Partnership filed an 8-K report regarding a proposed merger agreement between our General Partner (ARV Assisted Living, Inc.) and Prometheus Assisted Living, LLC on January
17, 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                           
| | The Partnership filed an 8-K report regarding the change in independent accountants on May 9, 2003.                                                                                       

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, we have duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                   | AMERICAN RETIREMENT VILLAS PROPERTIES II, A CALIFORNIA LIMITED PARTNERSHIP, BY THE FOLLOWING PERSONS ON OUR BEHALF.
|------------------ | -------------------------------------------------------------------------------------------------------------------
|                   |                                                                                                                    
|Date: May 14, 2003 |                                                                                                                    
|                   |                                                                                                                    
|                   |                                                                                                                    
|                   |                                                                                                                    
|                   | By:                                                                                                                
|                   |                                                                                                                    
|                   |                                                                                                                    
|                   |                                                                                                                    
|                   | By:                                                                                                                
|                   |                                                                                                                    
|                   |                                                                                                                    
|                   |                                                                                                                    

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CERTIFICATIONS

I, Douglas M. Pasquale, certify that:

1. I have reviewed this annual report on Form 10-Q of American Retirement Villas Properties II;

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

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

4. The registrants other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure
controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;

5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants
auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the
design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal
controls; and

6. The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

| | By: | /s/ DOUGLAS M. PASQUALE                                                                         
| | --- | ------------------------------------------------------------------------------------------------
| |     |                                                                                                 
| |     | Douglas M. PasqualeChief Executive Officer of ARV Assisted Living, Inc. Managing General Partner

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I, Abdo H. Khoury, certify that:

1. I have reviewed this annual report on Form 10-Q of American Retirement Villas
Properties II;

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

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

4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)
evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or
persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the
registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and

6. The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

| | By: | /s/ ABDO H. KHOURY                                                                                        
| | --- | ----------------------------------------------------------------------------------------------------------
| |     |                                                                                                           
| |     | Abdo H. Khoury President and Chief Financial Officer of ARV Assisted Living, Inc.
Managing General Partner
| |    
| |    

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