Del Taco Restaurant Properties II

(Mark One)


[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

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

Portions of the registrant’s Form S-11 Registration Statement filed July 10, 1984 are incorporated by reference into Part IV of this report.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X

PART I

Item 1. Business

Del Taco Restaurant Properties II, (the Partnership) is a publicly-held limited partnership organized under the California Uniform Limited Partnership Act. The Partnership’s General Partner is Del Taco, Inc., a California corporation (Del Taco or the General Partner). The Partnership sold 27,006 units totaling $6.751 million through an offering of limited partnership units from September 1984 through December 1985. The term of the partnership agreement is until April 30, 2025 unless terminated earlier by means provided in the partnership agreement.

The business of the Partnership is ownership and leasing of restaurants in California to Del Taco. The Partnership acquired land and constructed seven Mexican-American restaurants for long-term lease to Del Taco. Two restaurants were sold in 1994. Each property is leased for 35 years on a triple net basis. Rent is equal to twelve percent of gross sales of the restaurants. As of December 31, 2003, the Partnership had a total of five properties leased to Del Taco.

The Partnership has no full time employees. The Partnership agreement assigns full authority for general management and supervision of the business affairs of the Partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the Partnership. Limited partners have no right to participate in the management or conduct of the Partnership’s business affairs.

Item 2. Properties

The Partnership acquired seven properties with proceeds obtained from the sale of partnership units:


		Date of		Date of Commencement
Address	City, State	Acquisition	Restaurant Constructed	of Operation (1)
Bear Valley Road	Victorville, CA	February 4, 1986	60 seat with drive through service window	June 13, 1986
West Valley Boulevard	Colton, CA	March 11, 1986	60 seat with drive through service window	June 24, 1986
Palmdale Boulevard	Palmdale, CA	December 12, 1986	60 seat with drive through service window	May 7, 1987
South Gate Town Center	South Gate, CA	January 28, 1987	60 seat with drive through service window	May 28, 1987 (2)
Main Avenue	Fallbrook, CA	March 10, 1987	60 seat with drive through service window	August 19, 1987 (3)
De Anza Country Shopping Center	Pedley, CA	April 13, 1987	60 seat with drive through service window	October 28, 1987
Varner Road	Thousand Palms, CA	October 14, 1987	60 seat with drive through service window	April 28, 1988

(1) Commencement of operation is the first date Del Taco, as lessee, operated the facility on the site as a Del Taco restaurant.

(2) In May 1994, the South Gate property was sold yielding net proceeds to the Partnership of $497,202.

(3) In November 1994, the Fallbrook property was sold yielding net proceeds to the Partnership of $357,531.

Item 3. Legal Proceedings

The Partnership is not a party to any material pending legal proceedings.

Item 4. Submissions of Matters to a Vote of Security Holders

None.

PART II

Item 5. Market for the Partnership’s Common Equity and Related Security Holder
Matters

The Partnership sold 27,006 ($6,751,500) limited partnership units during the public offering period ended December 31, 1985 and currently has 1,098 limited partners of record. There is no public market for the trading of the units. Distributions made by the Partnership to the limited partners during the past three fiscal years are described in Note 6 to the Notes to the Financial Statements contained under Item 8.

Item 6. Selected Financial Data

The selected financial data presented as of and for the years ended December 31, 2003, 2002, 2001, 2000 and 1999, has been derived from the audited financial statements and should be read in conjunction with the financial statements and related notes and Item 7.


	For the Year Ended December 31,
	2003		2002		2001		2000		1999
Rental revenues	$	609,969	$	594,685	$	575,728	$	527,732	$	488,519
General and administrative expense		71,175		56,748		53,498		51,511		51,727
Depreciation expense		54,180		54,180		54,180		54,180		54,180
Interest and other income		2,921		3,314		5,797		6,070		5,282
Net income		487,535		487,071		473,847		428,111		387,894
Net income per limited partnership unit		17.87		17.86		17.37		15.69		14.22
Cash distributions per limited partnership unit		19.26		19.77		18.87		17.21		16.35
Total assets		2,367,630		2,398,716		2,452,804		2,491,290		2,526,820
Long-term obligations	None		None		None		None		None

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition, results of operations, liquidity and capital resources, and off balance sheet arrangements and contractual obligations contained within this report on Form 10-K is more clearly understood when read in conjunction with the notes to the financial statements. The notes to the financial statements elaborate on certain terms that are used throughout this discussion and provide information about the Partnership and the basis of presentation used in this report on Form 10-K.

The five restaurants leased to Del Taco make up all of the income producing assets of the Partnership. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco trade name restaurants that lease the properties. The success of the restaurants is dependent on a large variety of factors, including, but not limited to, consumer demand and preference for fast food, in general, and for Mexican-American food in particular.

Liquidity and Capital Resources

The Partnership offered limited partnership units for sale between September 1984 and December 1985. 15% of the $6.751 million raised through sale of limited partnership units was used to pay commissions to brokers and to reimburse the General Partner for offering costs incurred. Approximately $5.6 million of the remaining funds were used to acquire sites and build seven restaurants. Two restaurants were sold in 1994.

The Partnership’s only source of cash flow is rental income from the properties from the triple net leases. Such operating income has historically been and is expected to continue to be sufficient to fund the Partnership’s operating expenses. Net cash provided by operating activities in excess of the Partnership’s ongoing needs is distributed to the partners.

Off Balance Sheet Arrangements and Contractual Obligations

None.

Results of Operations

The Partnership owned seven properties that were under long-term lease to Del Taco for restaurant operations. Two restaurants were sold in 1994 and five are currently operating.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – (Continued)

Results of Operations – (Continued)

The following table sets forth rental revenues earned by restaurant for the year:


	Year Ended December 31,
	2003		2002		2001
Bear Valley Rd., Victorville, CA	$	115,056	$	106,781	$	103,210
West Valley Blvd., Colton, CA		143,655		141,473		136,772
Palmdale Blvd., Palmdale, CA		78,128		80,728		87,539
DeAnza Country Shopping Center, Pedley, CA		114,764		105,911		92,514
Varner Road, Thousand Palms, CA		158,366		159,792		155,693

Total	$	609,969	$	594,685	$	575,728

The Partnership receives rental revenues equal to 12 percent of gross sales from the restaurants. The Partnership earned rental revenues of $609,969 during the year ended December 31, 2003, which represents an increase of $15,284 from 2002. The increase in rental revenues was caused by an increase in sales at the restaurants under lease.

The Partnership earned rental revenues of $594,685 during the year ended December 31, 2002, which represents an increase of $18,957 from 2001. The increase in rental revenues was caused by an increase in sales at the restaurants under lease.

The following table breaks down general and administrative expenses by type of expense:


	Percentage of Total General & Administrative Expense
	Year Ended December 31,
	2003			2002			2001
Accounting fees		52.09	%		55.85	%		54.66	%
Distribution of information to limited partners		46.63			41.06			43.84
Other		1.28			3.09			1.50

		100.00	%		100.00	%		100.00	%

General and administrative costs increased by $14,427 from 2002 to 2003. The increase was caused primarily by increased costs for income tax preparation, annual audit fees, accounting services and printing and mailing costs, as well as additional incremental costs incurred to change auditors and maintain regulatory compliance standards required of public registrants.

General and administrative costs increased by $3,250 from 2001 to 2002. The increase was caused primarily by increased costs for income tax preparation, annual audit fees and costs associated with leasing software.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Results of Operations – (Continued)

Depreciation expense was the same in both 2002 and 2003.

Net income increased by $464 from 2002 to 2003 due to the increase in revenues of $15,284 offset by the $14,427 increase in general and administrative expenses and the decrease in other income of $393.

Net income increased by $13,224 from 2001 to 2002 due to the increase in revenues of $18,957 offset by the $3,250 increase in general and administrative expenses and the decrease in other income of $2,483.

Recent Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“Interpretation 45”), an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34. Interpretation 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. Interpretation 45’s initial recognition and initial measurement provisions are effective on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company adopted the disclosure requirements of Interpretation 45 effective December 31, 2002 and has not entered into any guarantees since December 31, 2002.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“Interpretation 46”), an interpretation of Accounting Research Bulletin (ARB) No. 51. Interpretation 46, as amended, addresses consolidation by business enterprises of variable interest entities. Interpretation 46, as amended, applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first year or interim period beginning after December 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. In December 2003, the FASB issued Interpretation No. 46R which modified certain provisions of Interpretation 46. Interpretation No. 46R also modified the effective date of Interpretation 46. Companies must apply Interpretation No. 46R by the end of the first reporting period after December 15, 2003. The Company believes it has no variable interest entities to which Interpretation 46 nor Interpretation No. 46R would apply.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this report on Form 10-K are based upon the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Partnership believes the critical accounting policies that most impact the financial statements are described below. A summary of the significant accounting policies of the Partnership can be found in Note 1 to the Financial Statements which is included in Item 8 of this Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.

The Partnership accounts for property and equipment in accordance with Statement of Financial Accounting Standards No. (SFAS) 144, “Accounting for the Impairment or Disposal of Long Lived Assets.” SFAS 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset. Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, estimated costs of construction and development, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

None.

(KPMG LETTERHEAD)

INDEPENDENT AUDITORS’ REPORT

To the Partners of
Del Taco Restaurant Properties II:

We have audited the accompanying balance sheet of Del Taco Restaurant Properties II (a California Limited Partnership) as of December 31, 2003, and the related statements of income, partners’ equity and cash flows for the year then ended. In connection with our audit of the financial statements, we have also audited the 2003 information in the accompanying financial statement schedule. These financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2003 financial statements referred to above present fairly, in all material respects, the financial position of Del Taco Restaurant Properties II as of December 31, 2003 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the 2003 information in the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

(-s- KPMG LOGO)

Orange County, California
February 13, 2004

REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Del Taco Restaurant Properties II:

In our opinion, the accompanying balance sheet and the related statements of income, partners’ equity, and cash flows present fairly, in all material respects, the financial position of Del Taco Restaurant Properties II (A California Limited Partnership) at December 31, 2002, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The financial statements of Del Taco Restaurant Properties II for the year ended December 31, 2001 were audited by other independent accountants who have ceased operations. Those independent accountants expressed an unqualified opinion on those financial statements in their report dated February 15, 2002.

(-s- PRICE WATERHOUSE)
PricewaterhouseCoopers LLP
Orange County, California
January 22, 2003

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The following report is a copy of a report previously issued by Arthur Andersen LLP and has not been reissued by Arthur Andersen LLP.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Del Taco Restaurant Properties, II:

We have audited the accompanying balance sheets of Del Taco Restaurant Properties II (a California Limited Partnership) as of December 31, 2001 and 2000, and the related statements of income, partners’ equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements and the schedule referred to below are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Del Taco Restaurant Properties II as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Real Estate and Accumulated Depreciation Schedule III is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

(-s- ARTHUR ANDERSON)
Orange County, California
February 15, 2002

DEL TACO RESTAURANT PROPERTIES II

BALANCE SHEETS


	December 31,
	2003			2002
ASSETS
CURRENT ASSETS:
Cash	$	182,997		$	166,116
Receivable from Del Taco, Inc.		54,854			48,698
Deposits		1,295			1,238

Total current assets		239,146			216,052

PROPERTY AND EQUIPMENT:
Land and improvements		1,806,006			1,806,006
Buildings and improvements		1,238,879			1,238,879
Machinery and equipment		898,950			898,950

		3,943,835			3,943,835
Less—accumulated depreciation		1,815,351			1,761,171

		2,128,484			2,182,664

	$	2,367,630		$	2,398,716

LIABILITIES AND PARTNERS’ EQUITY
CURRENT LIABILITIES:
Payable to limited partners	$	32,612		$	25,977
Accounts payable		4,608			4,551

Total current liabilities		37,220			30,528

PARTNERS’ EQUITY:
Limited partners		2,356,155			2,393,556
General partner-Del Taco, Inc.		(25,745	)		(25,368	)

		2,330,410			2,368,188

	$	2,367,630		$	2,398,716

See accompanying notes to financial statements.

DEL TACO RESTAURANT PROPERTIES II

STATEMENTS OF PARTNERS’ EQUITY

Years ended December 31, 2003, 2002 and 2001


	Limited Partners					General
	Units		Amount			Partner			Total
Balance, December 31, 2000		27,006	$	2,485,629		$	(24,438	)	$	2,461,191
Net income		—		469,109			4,738			473,847
Cash distributions		—		(509,593	)		(5,147	)		(514,740	)

Balance, December 31, 2001		27,006		2,445,145			(24,847	)		2,420,298
Net income		—		482,200			4,871			487,071
Cash distributions		—		(533,789	)		(5,392	)		(539,181	)

Balance, December 31, 2002		27,006		2,393,556			(25,368	)		2,368,188
Net income		—		482,659			4,876			487,535
Cash distributions		—		(520,060	)		(5,253	)		(525,313	)

Balance, December 31, 2003		27,006	$	2,356,155		$	(25,745	)	$	2,330,410

See accompanying notes to financial statements.

DEL TACO RESTAURANT PROPERTIES II

STATEMENTS OF CASH FLOWS


	Year Ended December 31,
	2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	487,535		$	487,071		$	473,847
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		54,180			54,180			54,180
Changes in operating assets and liabilities:
(Increase) decrease in receivable from Del Taco, Inc.		(6,156	)		851			(2,198	)
(Increase) decrease in deposits		(57	)		(238	)		414
Increase in payable to limited partners		6,635			5,039			2,834
Increase (decrease) in accounts payable		57			(7,017	)		(427	)

Net cash provided by operating activities		542,194			539,886			528,650
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to partners		(525,313	)		(539,181	)		(514,740	)

Net increase in cash		16,881			705			13,910
Beginning cash balance		166,116			165,411			151,501

Ending cash balance	$	182,997		$	166,116		$	165,411

See accompanying notes to financial statements.

DEL TACO RESTAURANT PROPERTIES II

NOTES TO FINANCIAL STATEMENTS

December 31, 2003 and 2002

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Partnership: Del Taco Restaurant Properties II, a California limited partnership (the Partnership), was formed on June 20, 1984, for the purpose of acquiring real property in California for construction of seven Mexican-American restaurants to be leased under long-term agreements to Del Taco, Inc. (General Partner or Del Taco), for operation under the Del Taco trade name. As of April 28, 1988, all seven restaurants had commenced operation on acquired properties. The South Gate and Fallbrook properties were sold on May 18, 1994 and November 30, 1994, respectively.

Basis of Accounting: The Partnership utilizes the accrual method of accounting for transactions relating to the business of the Partnership. Distributions are made to the general and limited partners in accordance with the provisions of the Partnership agreement (see Note 2).

Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.

Recent Accounting Pronouncements: In November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“Interpretation 45”), an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34. Interpretation 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. Interpretation 45’s initial recognition and initial measurement provisions are effective on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company adopted the disclosure requirements of Interpretation 45 effective December 31, 2002 and has not entered into any guarantees since December 31, 2002.

DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS — CONTINUED
December 31, 2003 and 2002

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

Companies must apply Interpretation No. 46R by the end of the first reporting period after December 15, 2003. The Company believes it has no variable interest entities to which Interpretation 46 nor Interpretation No. 46R would apply.

Income Taxes: No provision has been made for federal or state income taxes on partnership net income, since the Partnership is not subject to income tax. Partnership income is includable in the taxable income of the individual partners as required under applicable income tax laws. Certain items, primarily related to depreciation methods, are accounted for differently for income tax reporting purposes (see Note 5).

Net Income Per Limited Partnership Unit: Net income per limited partnership unit is based upon the weighted average number of units outstanding during the period which amounted to 27,006 for all years presented.

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

Revenue Recognition: Revenue is recognized based on 12 percent of gross sales of the restaurants which is recorded at the point of sale.

Concentration of Risk: The five restaurants leased to Del Taco make up almost all of the income producing assets of the Partnership and contributed all of the Partnership’s rental revenues for the three years ended December 31, 2003. Therefore, the business of the Partnership is almost entirely dependent on the success of the Del Taco trade name restaurants that lease the properties.

NOTE 2 — PARTNERS’ EQUITY

Pursuant to the partnership agreement, annual partnership net income or loss is allocated one percent to the General Partner and 99 percent to the limited partners. Partnership gains from any sale or refinancing are to be allocated one percent to the General Partner and 99 percent to the limited partners until allocated gains and profits equal losses, distributions and syndication costs previously allocated. Additional gains are to be allocated 15 percent to the General Partner and 85 percent to the limited partners.

NOTE 3 — LEASING ACTIVITIES

The Partnership leases certain properties for operation of restaurants to Del Taco on a triple net basis. The leases are for terms of 35 years commencing with the completion of the restaurant facility located on each property and require monthly rentals equal to 12 percent of the gross sales of the restaurants. There is no minimum rental under any of the leases. The Partnership had a total of five properties leased as of December 31, 2003, 2002 and 2001.

The five restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $5,083,073, $4,955,708 and $4,797,733 and unaudited net income of $418,345, $382,117and $359,228 for the years ended December 31, 2003, 2002 and 2001, respectively. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense.

DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS — CONTINUED
December 31, 2003 and 2002

NOTE 4 — RELATED PARTIES

The receivable from Del Taco consists of rent accrued for the month of December 2003. The rent receivable was collected in January 2004.

The General Partner received $5,253 in distributions during 2003 relating to its one percent interest in the Partnership.

Del Taco serves in the capacity of General Partner in other partnerships which are engaged in the business of operating restaurants, and three other partnerships which were formed for the purpose of acquiring real property in California for construction of Mexican-American restaurants for lease under long-term agreements to Del Taco for operation under the Del Taco trade name.

The General Partner provides certain minimal managerial and accounting services to the Partnership at no cost.

NOTE 5 — INCOME TAXES

The Partnership is not subject to income taxes because its income is taxed directly to the General Partner and limited partners. The reconciling items presented in the table below are the only items that create a difference between the tax basis and reported amounts of the Partnership’s assets and liabilities.

A reconciliation of financial statement net income to taxable income for each of the periods is as follows:


	2003		2002		2001
Net income per financial statements	$	487,535	$	487,071	$	473,847
Excess book depreciation		8,364		8,363		8,509

Taxable income	$	495,899	$	495,434	$	482,356

A reconciliation of partnership equity per the financial statements to partners’ equity for tax purposes as of December 31, 2003, is as follows (unaudited):


Partners’ equity per financial statements	$	2,330,410
Issue costs of limited partnership units capitalized for tax purposes		986,745
Excess book depreciation		60,285
Writedown of real estate previously held for sale		161,963
Other		5,465

Partners’ equity for tax purposes	$	3,544,868

DEL TACO RESTAURANT PROPERTIES II
NOTES TO FINANCIAL STATEMENTS — CONTINUED
December 31, 2003 and 2002

NOTE 6 — CASH DISTRIBUTIONS TO LIMITED PARTNERS

Cash distributions to limited partners were as follows:


	Cash		Weighted		Number of Units
	Distributions per		Average Number		Outstanding at
	Limited Partnership		of Units		the End of
Quarter Ended	Unit		Outstanding		Quarter
December 31, 2000	$	4.71		27,006		27,006
March 31, 2001		4.42		27,006		27,006
June 30, 2001		4.52		27,006		27,006
September 30, 2001		5.22		27,006		27,006

Total paid in 2001	$	18.87

December 31, 2001	$	5.11		27,006		27,006
March 31, 2002		4.43		27,006		27,006
June 30, 2002		4.78		27,006		27,006
September 30, 2002		5.45		27,006		27,006

Total paid in 2002	$	19.77

December 31, 2002	$	4.95		27,006		27,006
March 31, 2003		4.01		27,006		27,006
June 30, 2003		4.87		27,006		27,006
September 30, 2003		5.43		27,006		27,006

Total paid in 2003	$	19.26

Cash distributions per limited partnership unit were calculated based upon the weighted average number of units outstanding for each quarter and were paid from operations. Cash distributions for the quarter ended December 31, 2003 amounted to $5.33 per limited partnership unit and were paid in January 2004.

NOTE 7 — RESULTS BY QUARTER (UNAUDITED)


	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Year ended December 31, 2003:
Rental revenues	$	138,963	$	152,056	$	157,114	$	161,836
Net income		92,284		123,774		134,556		136,921
Net income per limited partnership unit		3.38		4.54		4.93		5.02
Year ended December 31, 2002:
Rental revenues	$	143,247	$	154,605	$	151,958	$	144,875
Net income		105,831		126,000		132,095		123,145
Net income per limited partnership unit		3.88		4.62		4.84		4.52

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Refer to Form’s 8-k filed on April 17, 2003 and May 13, 2003.

Item 9A. Controls and Procedures

(a) Evaluation of disclosure controls and procedures:

As of the end of the period covered by this annual report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its subsidiaries) required to be included in our periodic Securities and Exchange Commission filings.

(b) Changes in internal controls:

There were no significant changes in the Company’s internal controls over financial reporting that occurred during our most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Not applicable.

PART III

Item 10. Directors and Executive Officers of the Partnership’s General Partner

(a) & (b) The executive officers and directors of the General Partner and their ages are set forth below:


Name	Title	Age
Kevin K. Moriarty	Director, Chairman and Chief Executive Officer		57
C. Ronald Petty	President		59
Robert J. Terrano	Executive Vice President and Chief Financial Officer		48
James D. Stoops	Executive Vice President, Operations		51
Janet D. Erickson	Executive Vice President, Purchasing		47
Shirlene Lopez	Executive Vice President, Operations Services		39
Michael L. Annis	Vice President, Secretary and General Counsel		57

The above referenced executive officers and directors of the General Partner will hold office until the annual meeting of its shareholders and directors, which is scheduled for the later part of 2004.

(c) None

(d) No family relationship exists between any such director or executive officer of the General Partner.

(e) The following is an account of the business experience during the past five years of each such director and executive officer:

Kevin K. Moriarty, Director, Chairman and Chief Executive Officer of Del Taco, Inc. Mr. Moriarty began his career with Burger King Corporation in 1974 in Operations Unit Management. In 1983, he was promoted to Area Manager in New York, and was subsequently promoted to the Regional Vice President, Chicago Region in 1985. In 1988, he became Executive Vice President and General Manager of the North Central Division. Mr. Moriarty served in that position until 1990 when he joined Del Taco, Inc. as President and Chief Executive Officer on July 31, 1990. Mr. Moriarty has served as a director of the General Partner since 1990.

C. Ronald Petty, President of Del Taco, Inc. Mr. Petty began his career in the restaurant business in 1973 with McDonald’s Corporation. He was employed by McDonald’s in a real estate capacity until 1978. For the next 12 years, Mr. Petty was in various officer positions with Burger King. These positions included Vice President of Real Estate, Sr. Vice President of Development, Region Vice President, Sr. Vice President European Operations, President of International and President of U.S. Mr. Petty served as President of Miami Subs from 1990-1992; President and CEO of Denny’s 1993-1996; President and CEO of Peter Piper Pizza 1996-1998; President of Del Taco December 1998-present.

Robert J. Terrano, Executive Vice President and Chief Financial Officer of Del Taco, Inc. From May 1994 to April 1995, Mr. Terrano served as Chief Financial Officer for Denny’s, Inc. in Spartanburg, S.C. From August 1983 to May 1994, he served with Burger King Corporation, Miami Florida, in a variety of positions, most recently as Division Controller. Mr. Terrano joined Del Taco, Inc. in April 1995.

James D. Stoops, Executive Vice President, Operations of Del Taco, Inc. From 1968 to 1991, Mr. Stoops served in a wide variety of Operations positions with Burger King Corporation with increasing levels of responsibility. In 1985, Mr. Stoops was appointed Region Vice President/General Manager for the New York region and served in that position until October of 1990. In January of 1991, he joined Del Taco, Inc. in his current post.

Janet D. Erickson, Executive Vice President, Purchasing of Del Taco, Inc. From 1979 to 1986, Ms. Erickson was with Denny’s Incorporated. She served in the Research and Development department in a variety of positions until 1982 when she was promoted to the position of Purchasing Agent. Ms. Erickson was hired in 1986 as Manager of Contract Purchasing with Carl Karcher Enterprises, a post she held until March 1990 when she became Vice President, Purchasing for Del Taco, Inc. Ms. Erickson has a Bachelor of Science degree in Foods and Nutrition from Cal State Polytechnic University in Pomona, California.

Shirlene Lopez, Executive Vice President, Operations Services of Del Taco, Inc. Ms. Lopez began her career with Del Taco in 1978 as an hourly employee and advanced through the ranks to General Manager in 1984. Ms. Lopez was promoted to the corporate office in 1989 as Human Resource Manager. In 1994, she was promoted to Executive Project Manager reporting to the CEO and in 1996, to Director of Corporate Development in charge of all interior image and design and in 1997, to Vice President, Corporate Development & Design. Ms. Lopez has held her current position since February 2002.

Michael L. Annis, Vice President, Secretary and General Counsel of Del Taco, Inc. From 1981 to 1986 Mr. Annis served as Regional Real Estate Manager and Director of Real Estate Services with Taco Bell, Inc. In 1986 he served as Regional General Manager with Quaker State Minit Lube. In January of 1987 Mr. Annis joined Red Robin International, Inc. as General Counsel and was subsequently promoted to Vice President/Secretary and later Vice President Real Estate Development/Secretary and General Counsel, the position he held until joining Del Taco, Inc. in December of 1993. Mr. Annis received his J.D. Degree from Whittier College.

Item 11. Executive Compensation

The Partnership has no executive officers or directors and pays no direct remuneration to any executive officer or director of its General Partner. The Partnership has not issued any options or stock appreciation rights to any executive officer or director of its General Partner, nor does the Partnership propose to pay any annuity, pension or retirement benefits to any executive officer or director of its General Partner. The Partnership has no plan, nor does the Partnership presently propose a plan, which will result in any remuneration being paid to any executive officer or director of the General Partner upon termination of employment.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Security Holder Matters

(a) No person of record currently owns more than five percent of limited partnership units of the Partnership, nor was any person known of by the Partnership to own of record and beneficially, or beneficially only, more than five percent of such securities.

(b) Neither Del Taco, Inc., nor any executive officer or director of Del Taco, Inc. owns any limited partnership units of the Partnership.

(c) The Partnership knows of no contractual arrangements, the operation or the terms of which may at a subsequent date result in a change in control of the Partnership, except for provisions in the Partnership agreement providing for removal of the General Partner by holders of a majority of the limited partnership units and if a material event of default occurs under the financing agreements of the General Partner.

Item 13. Certain Relationships and Related Transactions

(a) No transactions have occurred between the Partnership and any executive officer or director of its General Partner.

During 2003, the following transactions occurred between the Partnership and the General Partner pursuant to the terms of the partnership agreement.

(1) The General Partner earned $4,876 as its one percent share of the net income of the Partnership.

(2) The General Partner received $5,253 in distributions relating to its one percent interest in the Partnership.

(b) During 2003, the Partnership had no business relationships with any entity of a type required to be reported under this item.

(c) Neither the General Partner, any director or officer of the General Partner or any associate of any such person, was indebted to the Partnership at any time during 2003 for any amount in excess of $55,000.

(d) Not applicable.

Item 14. Principal Accountant Fees and Services

The following table presents fees for professional services rendered by KPMG LLP and Pricewaterhouse Coopers LLP for the audit of the Company’s annual financial statements and other services for 2003 and 2002, respectively.


	2003		2002
Audit Fees	$	8,375	$	10,000
Audit-Related Fees		0		0
Tax Fees		13,000		11,000
All Other Fees		0		0

Total	$	21,375	$	21,000

The General Partner has considered whether the independent auditors provision of tax services to the Company is compatible with the auditor’s independence. Additionally, the General Partner approves all the audit and non-audit services, and related fees, provided to the Partnership by the independent auditors prior to the services being rendered.

PART IV

Item 15. Exhibits, Financial Statements Schedules, and Reports on Form 8-K

(a)(1) Financial Statements

Included in Part II of this report:

Independent Auditors’ Report Balance Sheets Statements of Income Statements of Partners’ Equity Statements of Cash Flows Notes to Financial Statements

(a)(2) Financial Statement Schedules

Report of Independent Public Accountants on Financial Statement Schedule Schedule III – Real Estate and Accumulated Depreciation

Financial statement schedules other than those referred to above have been omitted because they are not applicable or not required.

(b) Reports on Form 8K

No reports on Form 8-K were filed during the last quarter of 2003.

(c) Exhibits required by Item 601 of Regulation S-K:


1.		Incorporated herein by reference, Agreement of Limited Partnership of Del Taco Restaurant Properties II filed as Exhibit 3.01 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on July 10, 1984.

2.		Incorporated herein by reference, Amendment to Agreement of Limited Partnership of Del Taco Restaurant Properties II.

3.		Incorporated herein by reference, Form of Standard Lease to be entered into by partnership and Del Taco, Inc., as lessee, filed as Exhibit 10.02 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on July 10, 1984.

31.1		Kevin K. Moriarty’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Robert J. Terrano’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Report of Independent Public Accountants

The following report is a copy of the report previously issued by Arthur Andersen LLP and has not been reissued by Arthur Andersen LLP.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Del Taco Restaurant Properties, II:

(-s- ARTHUR ANDERSON)
Orange County, California
February 15, 2002

DEL TACO RESTAURANT PROPERTIES II — SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2003


							Cost capitalized		Gross amount at
			Initial cost				subsequent to		which carried at
Description	Encumbrances		to company				acquisition		close of period
			Land		Buildings &				Land, Buildings &
(All Restaurants)			& land		Improve-		Carrying		improvements
			improvements		ments		costs		Total

Victorville, CA	$	—	$	327,770	$	224,843	$	—	$	552,613
Colton, CA		—		262,661		180,179		—		442,840
Palmdale, CA		—		404,791		277,677		—		682,468
Pedley, CA		—		364,334		249,925		—		614,259
Thousand Palms, CA		—		446,450		306,255		—		752,705

	$	—	$	1,806,006	$	1,238,879	$	—	$	3,044,885

[Additional columns below]

[Continued from above table, first column(s) repeated]


Description							Life on which
	Accumulated		Date of		Date		depreciation in latest
	depreciation		construction		acquired		income statement
(All Restaurants)							is computed


Victorville, CA	$	166,316		1986		1986	20(LI),35(BI)
Colton, CA		133,280		1986		1986	20(LI),35(BI)
Palmdale, CA		205,400		1986		1986	20(LI),35(BI)
Pedley, CA		184,870		1987		1987	20(LI),35(BI)
Thousand Palms, CA		226,534		1987		1987	20(LI),35(BI)

	$	916,400


			Accumulated
	Restaurants		Depreciation

Balances at December 31, 2000:	$	3,044,885	$	753,860
Additions		—		54,180
Retirements		—		—

Balances at December 31, 2001:		3,044,885		808,040
Additions		—		54,180
Retirements		—		—

Balances at December 31, 2002:		3,044,885		862,220
Additions		—		54,180
Retirements		—		—

Balances at December 31, 2003:	$	3,044,885	$	916,400

The aggregate cost basis of Del Taco Restaurant Properties I real estate assets for Federal income tax purposes was $2,188,770 at December 31, 2003.

See accompanying independent auditors’ report.

EXHIBIT INDEX


Exhibit		Description
1.		Incorporated herein by reference, Agreement of Limited Partnership of Del Taco Restaurant Properties II filed as Exhibit 3.01 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on July 10, 1984.

2.		Incorporated herein by reference, Amendment to Agreement of Limited Partnership of Del Taco Restaurant Properties II.

3.		Incorporated herein by reference, Form of Standard Lease to be entered into by partnership and Del Taco, Inc., as lessee, filed as Exhibit 10.02 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on July 10, 1984
31.1		Kevin K. Moriarty’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Robert J. Terrano’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



California (State or other jurisdiction of incorporation or organization)		33-0064245 (I.R.S. Employer Identification Number)

25521 Commercentre Drive Lake Forest, California (Address of principal executive offices)		92630 (Zip Code)

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[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submissions of Matters to a Vote of Security Holders
PART II
	Item 5. Market for the Partnership’s Common Equity and Related Security Holder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
	Item 8. Financial Statements
PART I. INFORMATION
INDEPENDENT AUDITORS’ REPORT
REPORT OF INDEPENDENT ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
BALANCE SHEETS
STATEMENTS OF INCOME
STATEMENTS OF PARTNERS’ EQUITY
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
	Item 9A. Controls and Procedures
PART III
	Item 10. Directors and Executive Officers of the Partnership’s General Partner
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Security Holder Matters
	Item 13. Certain Relationships and Related Transactions
	Item 14. Principal Accountant Fees and Services
PART IV
	Item 15. Exhibits, Financial Statements Schedules, and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

(1)		Commencement of operation is the first date Del Taco, as lessee, operated the facility on the site as a Del Taco restaurant.

(2)		In May 1994, the South Gate property was sold yielding net proceeds to the Partnership of $497,202.

(3)		In November 1994, the Fallbrook property was sold yielding net proceeds to the Partnership of $357,531.


INDEX	PAGE NUMBER
Independent Auditors’ Report		10
Report of Independent Accountants		11
Report of Independent Public Accountants		12
Balance Sheets at December 31, 2003 and 2002		13
Statements of Income for the years ended December 31, 2003, 2002 and 2001		14
Statements of Partners’ Equity for the years ended December 31, 2003, 2002 and 2001		15
Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001		16
Notes to Financial Statements		17-20

(c)		None

(d)		No family relationship exists between any such director or executive officer of the General Partner.

(e)		The following is an account of the business experience during the past five years of each such director and executive officer:

(a)		No person of record currently owns more than five percent of limited partnership units of the Partnership, nor was any person known of by the Partnership to own of record and beneficially, or beneficially only, more than five percent of such securities.

(b)		Neither Del Taco, Inc., nor any executive officer or director of Del Taco, Inc. owns any limited partnership units of the Partnership.

(c)		The Partnership knows of no contractual arrangements, the operation or the terms of which may at a subsequent date result in a change in control of the Partnership, except for provisions in the Partnership agreement providing for removal of the General Partner by holders of a majority of the limited partnership units and if a material event of default occurs under the financing agreements of the General Partner.

(a)		No transactions have occurred between the Partnership and any executive officer or director of its General Partner.

		During 2003, the following transactions occurred between the Partnership and the General Partner pursuant to the terms of the partnership agreement.

(1)		The General Partner earned $4,876 as its one percent share of the net income of the Partnership.

(2)		The General Partner received $5,253 in distributions relating to its one percent interest in the Partnership.

(b)		During 2003, the Partnership had no business relationships with any entity of a type required to be reported under this item.

(c)		Neither the General Partner, any director or officer of the General Partner or any associate of any such person, was indebted to the Partnership at any time during 2003 for any amount in excess of $55,000.

(d)		Not applicable.

(a)(1)		Financial Statements

		Included in Part II of this report:

		Independent Auditors’ Report Balance Sheets Statements of Income Statements of Partners’ Equity Statements of Cash Flows Notes to Financial Statements

(a)(2)		Financial Statement Schedules

		Report of Independent Public Accountants on Financial Statement Schedule Schedule III – Real Estate and Accumulated Depreciation

		Financial statement schedules other than those referred to above have been omitted because they are not applicable or not required.

(b)		Reports on Form 8K

		No reports on Form 8-K were filed during the last quarter of 2003.

(c)		Exhibits required by Item 601 of Regulation S-K:


		DEL TACO RESTAURANT PROPERTIES II
		a California limited partnership

		Del Taco, Inc.
		General Partner

Date March 30, 2004		Kevin K. Moriarty

		Kevin K. Moriarty
		Director, Chairman and Chief
		Executive Officer

Date March 30, 2004		Michael L. Annis

		Michael L. Annis
		Vice President, Secretary and
		General Counsel

Date March 30, 2004		Robert J. Terrano

		Robert J. Terrano
		Executive Vice President and
		Chief Financial Officer