<PAGE>
 
                    DiVall Insured Income Properties 2, L.P.
                                 QUARTERLY NEWS

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

A publication of The Provo Group, Inc.                       FOURTH QUARTER 1998

To Sell or Not to Sell, That is the Question ...

While  the  idea  of  management  continuing  to  operate  this  Partnership  is
attractive to most investors (See Note1), others are asking, "Why not keep it on
the market and see if we get the right offer?"

First,  let's review why we marketed the portfolio  during 1998. The real estate
market was hot and if the  "supply  and demand"  imbalances  could have  created
attractive values, then we wanted to seize the opportunity. The aggressive money
faded away after the  Russian  financial  meltdown  in August,  because of major
disruptions  in the  securitized  mortgage  markets.  Our window of  opportunity
closed for the time being ... but we still have a strong  portfolio  with stable
earnings.

Second,  the  continuous  marketing  of any  asset  tends  to  leave  a  "stale"
impression in the marketplace. We don't have stale assets, so we won't promote a
misperception  of  desperation  or  pressure to sell by keeping  this  portfolio
"available" on the market.

Third, this Partnership has a good opportunity to have its asset values enhanced
in the  near  term.  There  are  currently  four  Hardee's  restaurants  in this
portfolio.  These  particular  restaurants  have been  experiencing a decline in
sales since 1992. In fact,  nationwide the Hardee's  restaurants are viewed as a
weak and  struggling  concept.  Good  news  though,  change  is on its way.  CKE
Restaurants,  ("CKE") has been selected as the top restaurant  stock for 1999 by
several  stock  analysts.  Why does that affect you?  CKE  purchased  all of the
Hardee's stock and is now the parent company of Hardee's Food Systems (Thus, CKE
now  owns all of your  Hardee's).  CKE now has a  viable  plan to turn  Hardee's
business  around  via  an  extensive   remodeling  plan,  menu  revisions,   and
improvements in national  advertising.  Many Hardee's restaurants are being dual
branded with the popular  Carl's Jr.  restaurant  chain also owned by CKE. A new
owner  with  a  strong  balance  sheet  could  significantly   improve  Hardee's
operations.  In the restaurant  industry (like many industries)  there are "hot"
concepts  and  there  are  those  that are  known to be  struggling.  When  this
portfolio is put on the market again and if Hardee's is known as a "hot" concept
again, or if there are any Carl's Jr.'s in this portfolio, potential buyers will
certainly take these factors into consideration when valuing your assets. In the
meantime,  increased sales would improve  percentage rents with the potential to
impact distributions favorably.

In closing, the Partnership distributed $99.07 per unit (approximately) in 1998.
Since the portfolio is stable and  generating  consistent  revenue,  we have the
luxury  of  timing  any  future  portfolio  sale to the  most  attractive  value
environment. 

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


Note1 Based on the Expression of Interest Forms received by our offices, only 7%
of investors showed any interest in selling their units.
<PAGE>
 
PAGE 2                         DIVALL 2                                   4 Q 98


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


                             DISTRIBUTION HIGHLIGHTS

               o   6.2% (approx.)  annualized  return from  operations
                   and  1%  (approx.)  non-  annualized   return  from
                   investing   and  financing   activities   based  on
                   $32,000,000 ("net" remaining initial investment).

               o   $825,000  total amount  distributed  for the Fourth
                   Quarter   1998   which  was   $315,000   more  than
                   projected.

                  The higher than budgeted distributions are primarily
                  due to the sale of Cash- A-Check in Hallandale, FL.


               o   $17.83 per unit  (approx.)  for the Fourth  Quarter
                   1998 from both cash flow from  operations and "net"
                   cash   activity   from   financing   and  investing
                   activities.

               o   $961.00 to $763.00 range of distributions  per unit
                   from the  first  unit  sold to the last  unit  sold
                   before  the  offering   closed   (February   1990),
                   respectively.  (NOTE:  Distributions  are from both
                   cash flow from  operations  and "net" cash activity
                   from financing and investing activities.)

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

             (NOTE: Original units were purchased for $1,000/unit.)


                  STATEMENTS OF INCOME AND CASH FLOW HIGHLIGHTS


               o   58% increase in "total" operating revenues from projections.


               o   An increase of $800,000 in "total" expenses from projections.


               o   A $425,000 decrease in net income from projections.


               o   Revenues  were higher than  anticipated  due to the  non-cash
                   accrual  of 1998  percentage  rents  which  will be billed to
                   tenants in 1999. In addition, a gain was recorded on the sale
                   of the Partnership's Hallandale,  Florida property during the
                   quarter.


               o   Expenses  were  higher  than  expected  due to  the  non-cash
                   write-down of various  properties to their appraised value as
                   well as the non-cash  write-off of uncollectible  receivables
                   from defaulted tenants.
<PAGE>
 
PAGE 3                              DIVALL 2                              4 Q 98

                               PROPERTY HIGHLIGHTS

                                    VACANCIES

o        Red Apple  Restaurant  (Cedar  Rapids,  IA)  unexpectedly  vacated  the
         premises on May 30, 1998.  Management  has written off the  outstanding
         balance as uncollectable  and will continue to pursue other tenants for
         this location.

o        Denny's  (Phoenix,  AZ) was vacant at December 31, 1998. The tenant did
         not renew their  lease which  expired on May 31,  1998.  Management  is
         pursuing other  possible  tenants for this  property,  including  other
         Denny's operators.

o        Hostetler's  BBQ (Des  Moines,  IA) was vacant at  December  31,  1998.
         Management  has consented to a sublease  agreement  between this tenant
         and Daytona's  Inc.  Hostetler's  will continue to pay rent directly to
         the Partnership.

                                RENTS RECEIVABLE

o        Denny's (Phoenix,  AZ) was delinquent at December 31, 1998 in an amount
         of $51,800.


                                 PROPERTY ISSUES

O        Cash-A-Check  (Hallandale,  FL) exercised  their Option to Purchase for
         $325,000.  The closing  occurred in December 1998, and the proceeds are
         included in this distribution.

O        Denny's  (Twin  Falls,  ID)  Management  has  consented  to a  sublease
         agreement  between  this  tenant and Fiesta Time  effective  October 1,
         1998. Denny's remains liable for all rent charges.



                                RETURN OF CAPITAL

The following  table has been updated to present the breakdown of  distributions
since the Partnership's first quarterly distribution,  for the period ended June
30, 1988 through December 31, 1998.

<TABLE>
<CAPTION>


                                               Distribution     Capital
                                               Analysis         Balance

<S>                                          <C>               <C>         
Original Capital Balance                               --     $ 46,280,300
Cash Flow From Operations Since Inception    $ 25,792,529               --
Total Distributions Since Inception           (39,965,268)              --
                                                              ------------

(Return) of Capital                          ($14,172,739)     (14,172,739)
                                             ============     ------------ 

"Net" Remaining Initial Investment
         by Original Partners                          --     $ 32,107,561
                                                               =========== 
</TABLE>

                     

        (NOTE: For a more individualized discussion of return of capital
                          contact Investor Relations.)
<PAGE>
 
PAGE 4                              DIVALL 2                              4 Q 98

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

                               QUESTIONS & ANSWERS

1.       What is the value of my units?

         Management is currently calculating an estimated Net Unit Value for the
         Partnership,  as of December 31, 1998. We plan to have this information
         available February 26, 1999.

2.       When will I receive my K-1?

         The 1998 K-1 will be mailed on or before February 26, 1999.

3.       When can I expect my next distribution mailing?

         Your  distribution  correspondence  for the  First  Quarter  of 1999 is
         scheduled to be mailed on May 14, 1999.

                              OTHER NEWS INSIDE

O        CASH-A-CHECK OPTION TO PURCHASE...................PROPERTY ISSUES, PG 4

O        DISCUSSION OF LIQUIDATION COSTS.................QUESTION & ANSWER, PG 5



<PAGE>

<TABLE> 
<CAPTION> 
----------------------------------------------------------------------------------------------------------------
                    DIVALL INSURED INCOME PROPERTIES 2 L.P.
                  STATEMENTS OF INCOME AND CASH FLOW CHANGES
              FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998
----------------------------------------------------------------------------------------------------------------
                                                                      PROJECTED          ACTUAL       VARIANCE
                                                                    --------------------------------------------
                                                                         4TH              4TH
                                                                       QUARTER           QUARTER       BETTER
OPERATING REVENUES                                                     12/31/98         12/31/98       (WORSE)
                                                                    -----------      -----------     -----------
<S>                                                                 <C>              <C>             <C> 
  Rental income                                                     $   639,945      $   929,891     $   289,946     
  Interest income                                                        16,773           15,941            (832)
  Gain on sale of assets                                                      0           82,660          82,660
  Other income                                                           12,740           26,474          13,734
                                                                    -----------      -----------     -----------
TOTAL OPERATING REVENUES                                            $   669,458      $ 1,054,966     $   385,508    
                                                                    -----------      -----------     -----------
OPERATING EXPENSES                                  
  Insurance                                                         $     6,628      $     5,939     $       689
  Management fees                                                        45,855           45,231             624
  Overhead allowance                                                      3,700            3,648              52
  Advisory Board                                                          3,600            3,743            (143)
  Administrative                                                         17,967           11,256           6,711
  Professional services                                                   5,930            6,235            (305)
  Disposition fee                                                             0            9,750          (9,750)
  Property writedowns                                                         0          685,343        (685,343) 
  Auditing                                                               12,000           16,901          (4,901)
  Legal                                                                   7,500            4,837           2,663
  Real estate taxes                                                       7,929            5,573           2,356
  Write-off of uncollectible receivables                                      0          122,861        (122,861)
  Defaulted tenants                                                       2,100            2,144             (44)
                                                                    -----------      -----------     -----------
TOTAL OPERATING EXPENSES                                            $   113,209      $   923,461     $  (810,252) 
                                                                    -----------      -----------     -----------
GROUND RENT                                                         $    31,200      $    31,372     $      (172)
                                                                    -----------      -----------     -----------
INVESTIGATION AND RESTORATION EXPENSES                              $       474      $         0     $       474
                                                                    -----------      -----------     -----------
NON-OPERATING EXPENSES            
  Depreciation                                                      $   102,380      $   102,384     $        (4)
  Amortization                                                            2,313            2,313               0
                                                                    -----------      -----------     -----------
TOTAL NON-OPERATING EXPENSES                                        $   104,693      $   104,697     $        (4)
                                                                    -----------      -----------     -----------
TOTAL EXPENSES                                                      $   249,576      $ 1,059,530     $  (809,954)
                                                                    -----------      -----------     -----------
NET INCOME (LOSS)                                                   $   419,882      $    (4,564)    $  (424,446)
                                                                    -----------      -----------     -----------
OPERATING CASH RECONCILIATION:                                                                         VARIANCE
                                                                                                     -----------
  Depreciation and amortization                                         104,693          104,697               4
  Gain on sale of assets                                                      0          (82,660)        (82,660)
  Property writedowns                                                         0          685,343         685,343
  Write-off of uncollectible receivables                                      0          122,861         122,861
  (Increase) Decrease in current assets                                 (91,572)        (393,622)       (302,050)
  Increase (Decrease) in current liabilities                             21,919          (23,389)        (45,308)
  (Increase) Decrease in cash reserved for payables                      (9,055)          29,000          38,055
  Advance from current cash flows for future distributions               64,300           64,300               0
                                                                    -----------      -----------     -----------
  Net Cash Provided From Operating Activities                       $   510,167      $   501,966     $    (8,201)
                                                                    -----------      -----------     -----------
CASH FLOWS FROM (USED IN) INVESTING 
  AND FINANCING ACTIVITIES
  Proceeds from repayment of notes receivable                                 0                0               0
  Proceeds from property sales                                                0          325,000         325,000
                                                                    -----------      -----------     -----------
Net Cash Provided From Investing And Financing 
  Activities                                                        $         0      $   325,000     $   325,000
                                                                    -----------      -----------     -----------
Total Cash Flow For Quarter                                         $   510,167      $   826,966     $   316,799
Cash Balance Beginning of Period                                      1,545,677        1,536,904          (8,773)
Less 3rd quarter distributions paid 11/98                            (1,060,000)      (1,010,000)         50,000
Change in cash reserved for payables or future distributions            (55,245)         (93,300)        (38,055)
                                                                    -----------      -----------     -----------
Cash Balance End of Period                                          $   940,599      $ 1,260,570     $   319,971
Cash reserved for 4th quarter L.P. distributions                       (510,000)        (825,000)       (315,000)
Cash reserved for payment of payables                                  (149,197)        (182,000)        (32,803)
                                                                    -----------      -----------     -----------
Unrestricted Cash Balance End of Period                             $   281,402      $   253,570     $   (27,832)
                                                                    ===========      ===========     ===========
----------------------------------------------------------------------------------------------------------------
                                                                     PROJECTED          ACTUAL         VARIANCE
                                                                    --------------------------------------------
* Quarterly Distribution                                            $   510,000      $   825,000     $   315,000
  Mailing Date                                                        2/15/99         (enclosed)             --
----------------------------------------------------------------------------------------------------------------
</TABLE> 
* Refer to distribution letter for detail of quarterly distribution.

                                       5
<PAGE>
<TABLE>
<CAPTION>

PROJECTIONS FOR
DISCUSSION PURPOSES                DIVALL INSURED INCOME PROPERTIES 2 LP                -------------------------------------------
                                        1998 PROPERTY SUMMARY                           ORIGINAL EQUITY                 $46,280,300
                                     AND RELATED ESTIMATED RECEIPTS                     NET DISTRIBUTION OF
                                                                                          CAPITAL SINCE INCEPTION       $14,172,739
                                                                                                                      -------------
                                                                                        CURRENT EQUITY                  $32,107,561
                                                                                        -------------------------------============
PORTFOLIO      (Note 1)               ------------------------------   ---------------------------------------------
                                               REAL ESTATE                               EQUIPMENT
                                      ------------------------------   ---------------------------------------------
                                                   ANNUAL                LEASE                 ANNUAL
-------------------------------                     BASE         %     EXPIRATION              LEASE          % *
CONCEPT            LOCATION              COST       RENT       YIELD     DATE       COST      RECEIPTS       RETURN
-------------------------------       ------------------------------   ---------------------------------------------
<S>                <C>                 <C>         <C>         <C>     <C>        <C>         <C>            <C> 

APPLEBEE'S         COLUMBUS, OH        1,059,465   135,780     12.82%               84,500          0         0.00%

BLOCKBUSTER        OGDEN, UT             646,425   100,554     15.56%

RED APPLE REST.    CEDAR RAPIDS, IA      660,156                0.00%

DENNY'S   (2) (3)  PHOENIX, AZ           295,750    39,000     13.19%              224,376          0         0.00%
DENNY'S            PHOENIX, AZ           972,726    65,000      6.68%              183,239          0         0.00%
DENNY'S   (2)      PHOENIX, AZ           865,900    86,000      9.93%              221,237          0         0.00%
DENNY'S            TWIN FALLS, ID        699,032    83,200     11.90%   04/30/99   190,000     37,860        19.93%
DENNY'S   (2) (3)  PHOENIX, AZ           500,000    37,000      7.40%               14,259          0         0.00%

HARDEE'S  (5)      S. MILWAUKEE, WI      808,032    64,000      7.92%
HARDEE'S  (5)      HARTFORD, WI          686,563    64,000      9.32%
HARDEE'S  (5)      MILWAUKEE, WI       1,010,045    76,000      7.52%          (4) 260,000          0         0.00%
   "                    "                                                          151,938          0         0.00%
HARDEE'S  (5)      FOND DU LAC, WI       849,767    88,000     10.36%          (4) 290,469          0         0.00%
HARDEE'S  (5)      MILWAUKEE, WI               0         0      0.00%              780,000          0         0.00%

HOOTER'S           R. HILLS, TX        1,246,719    95,000      7.62%

HOSTETTLER'S       DES MOINES, IA        845,000    66,000      7.81%               52,813          0         0.00%

KFC                SANTA FE, NM          451,230    60,000     13.30%

MIAMI SUBS         PALM BEACH, FL        743,625    39,000      5.24%

</TABLE>

<TABLE>
<CAPTION>
                                       ---------------------------------------------------------  -------------------
                                                                     TOTALS                              TOTAL % ON
                                       ---------------------------------------------------------      $32,107,561
----------------------------------                                    ANNUAL                               EQUITY
CONCEPT            LOCATION                       COST               RECEIPTS             RETURN            RAISE
----------------------------------     ---------------------------------------------------------  -------------------
<S>                <C>                         <C>                 <C>                 <C>            <C>

APPLEBEE'S         COLUMBUS, OH                 1,143,965             135,780              11.87%

BLOCKBUSTER        OGDEN, UT                      646,425             100,554              15.56%

RED APPLE REST.    CEDAR RAPIDS, IA               600,156                   0               0.00%

DENNY'S   (2) (3)  PHOENIX, AZ                    520,126              39,000               7.50%
DENNY'S            PHOENIX, AZ                  1,155,965              65,000               5.62%
DENNY'S   (2)      PHOENIX, AZ                  1,087,137              86,000               7.91%
DENNY'S            TWIN FALLS, ID                 889,032             121,060              13.62%
DENNY'S   (2) (3)  PHOENIX, AZ                    514,259              37,000               7.19%

HARDEE'S  (5)      S. MILWAUKEE, WI               808,032              64,000               7.92%
HARDEE'S  (5)      HARTFORD, WI                   686,563              64,000               9.32%
HARDEE'S  (5)      MILWAUKEE, WI                1,421,983              76,000               5.34%
   "                    "
HARDEE'S  (5)      FOND DU LAC, WI              1,140,236              88,000               7.72%
HARDEE'S  (5)      MILWAUKEE, WI                  780,000                   0               0.00%

HOOTER'S           R. HILLS, TX                 1,246,719              95,000               7.62%

HOSTETTLER'S       DES MOINES, IA                 897,813              66,000               7.35%

KFC                SANTA FE, NM                   451,230              60,000              13.30%

MIAMI SUBS         PALM BEACH, FL                 743,625              39,000               5.24%
</TABLE>


Note 1:  This property summary includes only current property and equipment held
         by the Partnership.  Equipment lease receipts shown include a return of
         capital.
     2:  Rent is based on 12.5% of monthly sales.  Rent projected for 1998 is
         based on 1997 sales levels.
     3:  The Partnership entered into a long-term ground lease in which the
         Partnership is responsible for payment of rent.  The annual base rent
         shown is net of the underlying ground lease rent.
     4:  The lease was terminated and the equipment sold to Hardee's Food
         Systems in conjunction with their assumption of the Terratron leases in
         November 1996.
     5:  These leases were assumed by Hardee's Food Systems at a reduced rental
         rate from that stated in the original leases.

                                  Page 1 of 2



<PAGE>
[Logo for TheProvo Group goes here]
<TABLE>
<CAPTION>

<S>                                                    <C>                      <C>
                                                       -------------------------------------
                                                       ORIGINAL EQUITY           $46,280,300
PROJECTIONS FOR                                        NET DISTRIBUTION OF
DISCUSSION  PURPOSES                                    CAPITAL SINCE INCEPTION  $14,172,739
                                                                                 -----------
                                                       CURRENT EQUITY            $32,107,561
                                                       --------------------------===========

                    DIVALL INSURED INCOME PROPERTIES 2 LP
                             1997 PROPERTY SUMMARY
                        AND RELATED ESTIMATED RECEIPTS

</TABLE>

<TABLE>
<CAPTION>
PORTFOLIO      (Note 1)
                                    ----------------------------------  --------------------------------------------------
                                               REAL ESTATE                                  EQUIPMENT
                                    ----------------------------------  --------------------------------------------------
                                                   ANNUAL                  LEASE                    ANNUAL
                                                    BASE          %      EXPIRATION                 LEASE             %
CONCEPT              LOCATION          COST         RENT        YIELD       DATE        COST       RECEIPTS         RETURN
---------------------------------   ----------------------------------   -------------------------------------------------
<S>              <C>                <C>            <C>          <C>      <C>          <C>          <C>             <C>
POPEYE'S         PARK FOREST, IL       580,938      77,280      13.30%

SUNRISE PS       PHOENIX, AZ         1,084,503     127,920      11.80%                   79,219          0           0.00%
                                                                                         19,013          0           0.00%
VILLAGE INN      GRAND FORKS, ND       739,375      84,000      11.36%
WENDY'S          AIKEN, SC             633,750      90,480      14.28%
WENDY'S          CHARLESTON, SC        580,938      76,920      13.24%
WENDY'S          N. AUGUSTA, SC        660,156      87,780      13.30%
WENDY'S          AUGUSTA, GA           728,813      96,780      13.28%
WENDY'S          CHARLESTON, SC        596,781      76,920      12.89%
WENDY'S          AIKEN, SC             776,344      96,780      12.47%
WENDY'S          AUGUSTA, GA           649,594      86,160      13.26%
WENDY'S          CHARLESTON, SC        528,125      70,200      13.29%
WENDY'S          MT. PLEASANT, SC      580,938      77,280      13.30%
WENDY'S          MARTINEZ, GA          633,750      84,120      13.27%
---------------------------------   ----------------------------------    ------------------------------------------------
PORTFOLIO TOTALS (29 Properties)    21,114,440   2,231,154      10.57%                2,551,063     37,860           1.48%
---------------------------------   -----------------------------------   ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
                                     --------------------------------------------------          ---------------
                                                          TOTALS                                   TOTAL % ON
                                     --------------------------------------------------            $32,107,561
                                                         TOTAL                                       EQUITY
CONCEPT              LOCATION           COST            RECEIPTS                RETURN                RAISE
---------------------------------    --------------------------------------------------          ---------------
<S>              <C>                 <C>               <C>                     <C>               <C>
POPEYE'S         PARK FOREST, IL        580,938           77,280                 13.30%

SUNRISE PS       PHOENIX, AZ          1,182,735          127,920                 10.82%

VILLAGE INN      GRAND FORKS, ND        739,375           84,000                 11.36%

WENDY'S          AIKEN, SC              633,750           90,480                 14.28%
WENDY'S          CHARLESTON, SC         580,938           76,920                 13.24%
WENDY'S          N. AUGUSTA, SC         660,156           87,780                 13.30%
WENDY'S          AUGUSTA, GA            728,813           96,780                 13.28%
WENDY'S          CHARLESTON, SC         596,781           76,920                 12.89%
WENDY'S          AIKEN, SC              776,344           96,780                 12.47%
WENDY'S          AUGUSTA, GA            649,594           86,160                 13.26%
WENDY'S          CHARLESTON, SC         528,125           70,200                 13.29%
WENDY'S          MT. PLEASANT, SC       580,938           77,280                 13.30%
WENDY'S          MARTINEZ, GA           633,750           84,120                 13.27%
---------------------------------    --------------------------------------------------

---------------------------------    --------------------------------------------------          ---------------
PORTFOLIO TOTALS (29 Properties)     23,665,503        2,269,015                  9.59%                    7.07%
---------------------------------    --------------------------------------------------          ---------------
</TABLE>