##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K

(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|- | ---------------------------------------------------------------

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|- | -------------------------------------------------------------------

EXCHANGE ACT OF 1934

For the transition period from
 to

Commission file number 0-17686





DIVALL INSURED
INCOME PROPERTIES 2 LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)



|                                                               |  |  |  |                                     
|-------------------------------------------------------------- |  |  |  | ------------------------------------
|Wisconsin                                                      |  |  |  | 39-1606834                          
|(State or other jurisdiction of
incorporation or organization) |  |  |  | (I.R.S. Employer Identification No.)

1100 Main Street, Suite 1830
Kansas City, Missouri 64105

(Address of principal executive offices, including zip code)

(816) 421-7444

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Limited Partnership Interests

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes   ̈    No  x

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 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   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

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-K or any amendment to this Form 10-K.   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller Reporting Company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

The aggregate market value of the voting securities held by non-affiliates of the Registrant: The aggregate market value of limited
partnership interests held by non-affiliates is not determinable since there is no public trading market for the limited partnership interests.

Index to Exhibits located on page: 49 - 50









---

##### Table of Contents

TABLE OF CONTENTS

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2010



|            |  |                                                                                                              |    |      |    | 
|----------- |  | ------------------------------------------------------------------------------------------------------------ | -- | ---- | -- | 
|            |  |                                                                                                              |    | Page |   
|            |  | PART I                                                                                                       |    |      |    | 
|            |  |                                                                                                             
|Item 1.     |  | Business                                                                                                     |    |      | 3  | 
|            |  |                                                                                                             
|Item 1A.    |  | Risk Factors                                                                                                 |    |      | 5  | 
|            |  |                                                                                                             
|Item 1B.    |  | Unresolved Staff Comments                                                                                    |    |      | 5  | 
|            |  |                                                                                                             
|Item 2.     |  | Properties                                                                                                   |    |      | 5  | 
|            |  |                                                                                                             
|Item 3.     |  | Legal Proceedings                                                                                            |    |      | 11 | 
|            |  |                                                                                                             
|Item 4.     |  | Removed and Reserved                                                                                         |    |      | 11 | 
|            |  |                                                                                                             
|            |  | Part II                                                                                                      |    |      |    | 
|            |  |                                                                                                             
|Item 5.     |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |    |      | 12 | 
|            |  |                                                                                                             
|Item 6.     |  | Selected Financial Data                                                                                      |    |      | 12 | 
|            |  |                                                                                                             
|Item 7.     |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                        |    |      | 13 | 
|            |  |                                                                                                             
|Item 7A.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |    |      | 22 | 
|            |  |                                                                                                             
|Item 8.     |  | Financial Statements and Supplementary Data                                                                  |    |      | 23 | 
|            |  |                                                                                                             
|Item 9.     |  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure                         |    |      | 43 | 
|            |  |                                                                                                             
|Item 9A(T). |  | Controls and Procedures                                                                                      |    |      | 43 | 
|            |  |                                                                                                             
|Item 9B.    |  | Other Information                                                                                            |    |      | 43 | 
|            |  |                                                                                                             
|            |  | Part III                                                                                                     |    |      |    | 
|            |  |                                                                                                             
|Item 10.    |  | Directors, Executive Officers and Corporate Governance                                                       |    |      | 44 | 
|            |  |                                                                                                             
|Item 11.    |  | Executive Compensation                                                                                       |    |      | 45 | 
|            |  |                                                                                                             
|Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters               |    |      | 45 | 
|            |  |                                                                                                             
|Item 13.    |  | Certain Relationships and Related Transactions, and Director Independence                                    |    |      | 46 | 
|            |  |                                                                                                             
|Item 14.    |  | Principal Accounting Fees and Services                                                                       |    |      | 48 | 
|            |  |                                                                                                             
|            |  | Part IV                                                                                                      |    |      |    | 
|            |  |                                                                                                             
|Item 15.    |  | Exhibits, Financial Statement Schedules                                                                      |    |      | 49 | 
|            | 
|Signatures  |  |                                                                                                              | 53 |     



2



---

##### Table of Contents

PART I



|Item 1. | Business
|------- | --------

Background

The Registrant, DiVall Insured Income Properties 2 Limited Partnership (the Partnership), is a limited partnership
organized under the Wisconsin Uniform Limited Partnership Act pursuant to Certificate of Limited Partnership dated as of November 20, 1987, and governed by a Limited Partnership Agreement, as amended from time to time (collectively, the
Partnership Agreement). The Partnership is managed by its general partner, The Provo Group, Inc. (the General Partner, TPG, and Management). As of December 31, 2010, the Partnership had 1,844
Limited Partners owning an aggregate of 46,280.3 Limited Partnership Interests (the Interests) acquired at a public offering price of $1,000 per Interest before volume discounts.

The Partnership is engaged in the business of owning and operating its investment portfolio of commercial real estate properties (the
Properties). The Properties are leased on a triple net basis primarily to, and operated by, primarily franchisees of national, regional and local retail chains under long-term leases. The lessees are predominantly fast food, family
style, and casual/theme restaurants. At December 31, 2010, the Partnership owned fourteen Properties. Nine of the fourteen Properties are leased to two Wendys Franchisees. Six of the Properties are leased to Wendgusta, LLC
(Wendgusta) and three of the Properties are leased to Wendcharles I, LLC (Wendcharles). Operating base rents from these nine leases comprised approximately 70% of the total 2010 operating base rents. During 2010,
additional percentage rents were also generated from these Wendys properties and totaled approximately $382,000. Additionally, the nine properties exceeded 60% of the Partnerships total Properties, both by asset value and number. Eight
of the nine Wendys leases are set to expire in November of 2021, with the remaining lease set to expire in November of 2016. See Properties under Item 2 below for further discussion.

During the process of leasing the Properties, the Partnership may experience competition from owners and managers of other properties. As a result, in
connection with negotiating tenant leases, along with recognizing market conditions, Management may offer rental concessions, or other inducements, which may have an adverse impact on the results of the Partnerships operations. The Partnership
is also in competition with sellers of similar properties to locate suitable purchasers for its Properties.

As a result of the amendment to
the Partnership Agreement following the consent of a majority of the Limited Partners (pursuant to our 2009 Consent solicitation which closed on October 14, 2009) to extend the term of the Partnership, the Partnership will be dissolved on
November 30, 2020 or earlier upon the prior occurrence of any of the following events: (a) the disposition of all the Properties of the Partnership; (b) the written determination by the General Partner that the Partnerships
assets may constitute plan assets for purposes of ERISA; (c) the agreement of Limited Partners owning a majority of the outstanding interests to dissolve the Partnership; or (d) the dissolution, bankruptcy, death, withdrawal,
or incapacity of the last remaining General Partner, unless an additional General Partner is elected previously by a majority of the Limited Partners. Historically, the General Partner has solicited the consent of the Limited Partners. During the
Second Quarters of 2001, 2003, 2005 and 2007, Consent solicitations were circulated (the 2001, 2003, 2005 and 2007 Consents, respectively), which if approved would have authorized the sale of the Partnerships assets and dissolution
of the Partnership. A majority of the Limited Partners did not vote in favor of either the 2001, 2003, 2005 or 2007 Consents. Therefore, the Partnership continued to operate as a going concern. On July 31, 2009, the Partnership mailed a Consent
solicitation (the 2009 Consent) to Limited Partners to determine whether the Limited Partners wished to extend the term of the Partnership for ten (10) years to November 30, 2020 (the Extension Proposition), or
wished the Partnership to sell its assets, liquidate, and dissolve by November 30, 2010.



3



---

##### Table of Contents

In accordance with the provisions of the 2009 Consent, once the General Partner had received Consent Cards from Limited Partners holding a majority of the Partnership Interests voting either
FOR or AGAINST the Extension Proposition, the General Partner could declare the 2009 Consent solicitation process concluded and would be bound by the results of such process. In any event, unless the General Partner elected
to extend the deadline of the Consent solicitation, the 2009 Consent solicitation processes and the opportunity to vote by returning a Consent Card, was to end on October 31, 2009. As of October 14, 2009, a majority of the Partnership
Interests voted FOR the Extension Proposition and the General Partner declared the 2009 Consent solicitation process concluded as of that date. Therefore, the Partnership continues to operate as a going concern. The bi-annual consent
solicitation is scheduled to be mailed in the spring of 2011 (2011 Consent), which if approved would authorize the sale of the Partnerships assets and dissolution of the Partnership.

The Permanent Manager Agreement

The Permanent Management Agreement (PMA) was entered into on February 8, 1993, between the Partnership, DiVall 1 (which was dissolved in December 1998), DiVall 3 (which was dissolved in
December 2003), the now former general partners, Gary J. DiVall and Paul E. Magnuson, their controlled affiliates, and TPG, naming TPG as the Permanent Manager. The PMA contains provisions allowing TPG to submit the PMA, the issue of electing TPG as
General Partner, and the issue of acceptance of the resignations of the former general partners to a vote of the Limited Partners through a solicitation of written consents.

TPG, as the General Partner, has been operating and managing the affairs of the Partnership in accordance with the provisions of the PMA and the Partnership Agreement.

The PMA had an original expiration date of December 31, 2002. At the end of the original term, it was extended three years by TPG to an expiration
date of December 31, 2005, then an additional three years to an expiration date of December 31, 2008, and then an additional two years to an expiration date of December 31, 2010. Effective January 1, 2011, the PMA was renewed by
TPG for the two-year period ending December 31, 2012. The PMA can be terminated earlier (a) by a vote at any time by a majority interest of the Limited Partners, (b) upon the dissolution and winding up of the Partnership,
(c) upon the entry of an order of a court finding that TPG has engaged in fraud or other like misconduct or has shown itself to be incompetent in carrying out its duties under the Partnership Agreement, or (d) upon sixty days written
notice from TPG to the Limited Partners of the Partnership.

Advisory Board

The concept of the Advisory Board was first introduced by TPG during the solicitation of written consents seeking to elect TPG as the General Partner. The
first Advisory Board was appointed in October 1993, and held its first meeting in November 1993. Among other functions, the three person Advisory Board has the following rights: to review operational policies and practices; to review extraordinary
transactions; to review internal financial controls and practices; and to review the performance of the independent auditors of the Partnership. The Advisory Board powers are advisory only and the Advisory Board does not have the authority to direct
management decisions or policies of the Partnership or remove the General Partner. The Advisory Board has full and free access to the Partnerships books and records, and individual Advisory Board members have the right to communicate directly
with the Limited Partners concerning Partnership business. Members of the Advisory Board are compensated $1,500 annually and $500 for each quarterly meeting attended.

The Advisory Board currently consists of a broker dealer representative, William Arnold; and Limited Partners from the Partnership: Jesse Small and Albert Kramer. For a brief description of each Advisory
Board member, refer to Item 10, Directors and Executive Officers of the Registrant.



4



---

##### Table of Contents

The Partnership has no employees.

All of the Partnerships business is conducted in the United States.

Available
Information

The Partnership is required to file with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K, along with any related amendments and supplements to these periodic and current reports. The SEC maintains a website containing these reports and other information regarding our electronic filings at www.sec.gov.
These reports may also be read and copied at the SECs Public Reference Room at 100 F Street, NE Washington, DC 20549. Further information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

We also make these reports and other information available either on or through our Internet Website at www.divallproperties.com as soon as reasonably
practicable after such reports are available. Please note that any internet addresses provided in this Form 10-K are for information purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such
internet addresses is intended or deemed to be incorporated by reference herein.



|Item 1A. | Risk Factors
|-------- | ------------

Not Applicable.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

None.



|Item 2. | Properties
|------- | ----------

All of the Properties
are leased to franchisees of national, regional and local fast food, family style and casual/theme restaurants.

Original lease terms for the
majority of the Properties were generally five to twenty years from their inception. All leases are triple-net which require the tenant to pay all property operating costs including maintenance, repairs, utilities, property taxes, and insurance. A
majority of the leases contain percentage rent provisions, which require the tenant to pay a specified percentage (five percent to eight percent) of gross sales above a threshold amount. None of the Properties are mortgaged. The Partnership owns the
buildings and land and all improvements for all the Properties, except for the property leased to the franchisee of a Kentucky Fried Chicken restaurant (KFC) in Santa Fe, New Mexico. KFC is located on land, where the Partnership has
entered into a long-term ground lease, as lessee, which is set to expire in 2018. The Partnership has the option to extend the lease for two additional ten year periods. The Partnership owns all improvements constructed on the land (including the
building and improvements) until the termination of the ground lease, at which time all constructed improvements will become the land owners property.

The Partnership owned the following Properties as of December 31, 2010:



5



---

##### Table of Contents

|                |  |                                                              |  |                              |  |                   |            |  |                          |   |           |                       |  |                 |  |     
|--------------- |  | ------------------------------------------------------------ |  | ---------------------------- |  | ----------------- | ---------- |  | ------------------------ | - | --------- | --------------------- |  | --------------- |  | ----
|AcquisitionDate |  | Property Name
& Address                                      |  | Lessee                       |  | PurchasePrice (1) |            |  | OperatingRental PerAnnum |   |           | Lease
Expiration
Date |  | Renewal
Options
|06/15/88        |  | Chinese Super Buffet 8801 N
7th St Phoenix, AZ               |  | Jun Cheng Pan & Yhen Yan Guo |  | $                 | 1,087,137  |  |                          | $ | 72,000    |                       |  | 1-20-2013       |  | (2) 
|08/15/88        |  | Dennys (5) 2360 W
Northern Ave Phoenix, AZ                  |  | Dennys #6423, LLC           |  |                   | 1,155,965  |  |                          |   | 0         |                       |  | 04-30-2011      |  | None
|10/10/88        |  | Kentucky Fried Chicken (6)
1014 S St Francis Dr Santa Fe,
NM |  | Palo Alto, Inc,              |  |                   | 451,230    |  |                          |   | 60,000    |                       |  | 06-30-2018      |  | None
|12/22/88        |  | Wendys (8) 1721 Sam
Rittenburg Blvd Charleston, SC          |  | Wendcharles I, LLC           |  |                   | 596,781    |  |                          |   | 76,920    |                       |  | 11-6-2021       |  | (2) 
|12/22/88        |  | Wendys (7) 3013 Peach
Orchard Rd Augusta, GA                |  | Wendgusta, LLC               |  |                   | 649,594    |  |                          |   | 86,160    |                       |  | 11-6-2021       |  | (3) 
|02/21/89        |  | Wendys (7) 1901
Whiskey Rd Aiken, SC                        |  | Wendgusta, LLC               |  |                   | 776,344    |  |                          |   | 96,780    |                       |  | 11-6-2021       |  | (3) 
|02/21/89        |  | Wendys (7) 1730
Walton Way Augusta, GA                      |  | Wendgusta, LLC               |  |                   | 728,813    |  |                          |   | 96,780    |                       |  | 11-6-2021       |  | (3) 
|02/21/89        |  | Wendys (8) 343 Foley
Rd Charleston, SC                      |  | Wendcharles I, LLC           |  |                   | 528,125    |  |                          |   | 70,200    |                       |  | 11-6-2021       |  | (2) 
|02/21/89        |  | Wendys (8) 361 Hwy 17
Bypass Mount Pleasant, SC             |  | Wendcharles I, LLC           |  |                   | 580,938    |  |                          |   | 77,280    |                       |  | 11-6-2021       |  | (2) 
|03/14/89        |  | Wendys (7) 1004
Richland Ave Aiken, SC                      |  | Wendgusta, LLC               |  |                   | 633,750    |  |                          |   | 90,480    |                       |  | 11-6-2021       |  | (3) 
|04/20/89        |  | Daytonas All Sports Café (9) 4875 Merle Hay Des Moines, IA  |  | Karl Shaen
Valderrama        |  |                   | 897,813    |  |                          |   | 30,000    |                       |  | 05-31-11        |  | None
|12/29/89        |  | Wendys (7) 517
Martintown Rd N Augusta, SC                  |  | Wendgusta, LLC               |  |                   | 660,156    |  |                          |   | 87,780    |                       |  | 11-6-2021       |  | (3) 
|12/29/89        |  | Wendys (7) 3869
Washington Rd Martinez, GA                  |  | Wendgusta, LLC               |  |                   | 633,750    |  |                          |   | 84,120    |                       |  | 11-6-2016       |  | None
|05/31/90        |  | Applebees 2770 Brice
Rd Columbus, OH                        |  | Thomas & King, Inc.          |  |                   | 1,434,434  |  |                          |   | 135,996   |                       |  | 10-31-2012      |  | (4) 
|                |  |                                                              |  |                              |  |                   |            |  |                          |   |           |                       |  |                 |  |     
|                |  |                                                              |  |                              |  | $                 | 10,814,830 |  |                          | $ | 1,064,496 |                       |  |                 |  |     
|                |  |                                                              |  |                              |  |                   |            |  |                          |   |           |                       |  |                 |  |     



Footnotes:



|(1) | Purchase price includes all costs incurred by the Partnership to acquire the property.
|--- | --------------------------------------------------------------------------------------



6



---

##### Table of Contents

|(2) | The tenant has the option to extend the lease two additional periods of five years each.
|--- | ----------------------------------------------------------------------------------------

|(3) | The tenant has the option to extend the lease an additional period of five years.
|--- | ---------------------------------------------------------------------------------

|(4) | The tenant has the option to extend the lease five additional periods of two years each.
|--- | ----------------------------------------------------------------------------------------

|(5) | The lease on the property is set to expire on April 30, 2011. Per the third modification to the lease, dated January 1, 2011, a month-to-month lease is to
begin on May 1, 2011. As in 2010, the tenants 2011 rent is anticipated to be strictly percentage rents at eight percent of monthly sales over a defined breakpoint. See Dennys Restaurant- Phoenix, AZ Property paragraphs below for
further information.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Ownership of lessees interest is under a ground lease. The tenant is responsible for payment of all rent obligations under the ground lease.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Six of the fourteen Properties owned as of December 31, 2010 were leased to Wendgusta, Since more than 20% of the Partnerships Properties, both by asset
value and number, are leased to a single tenant, the financial status of the tenant may be considered relevant to investors. At the request of the Partnership, Wendgusta provided it with a copy of its reviewed financial statements for the
fiscal years ended December 26, 2010 and December 27, 2009. Those reviewed financial statements are attached to this Annual Report 10-K as Exhibit 99.0.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Three of the fourteen Properties owned by the Partnership as of December 31, 2010 were leased to Wendcharles. Since more than 20% of the Partnerships
Properties, both by asset value and number, are leased to a single tenant, the financial status of the tenant may be considered relevant to investors. At the request of the Partnership, Wendcharles provided it with a copy of its reviewed
financial statements for the fiscal years ended December 26, 2010 and December 27, 2009. Those reviewed financial statements are attached to this Annual Report 10-K as Exhibit 99.1.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | The lease is set to expire on May 31, 2011. Management and the tenant have agreed in principal to a three month lease extension with an expiration date of
May 31, 2014. See Daytonas All Sports Café- Des Moines, IA Property paragraphs below.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following
summarizes significant developments, by property, for properties with such developments.

Formerly owned and vacant Park Forest, IL
Property

The Partnership had been unsuccessful in finding a new tenant for the vacant Park Forest, IL (Park Forest) property
and, as of December 31, 2009, the carrying value of this property was written down to $0.

In November of 2010, a Purchase Contract was
executed for the sale of the Park Forest property to an unaffiliated party for a selling price of $10,000. The closing date of the sale was December 2, 2010, and a net gain on the sale of approximately $7,000 was recognized in the fourth
quarter of 2010. Closing and other sale related costs amounted to approximately $3,000 and included a $1,000 sales commission paid to an unaffiliated Broker Agent. In addition, the Partnership paid approximately $2,000 at the closing for past due
water bills related to the former tenant of the Park Forest property. Per the terms of the Purchase Contract, the Partnership is responsible for paying the 2010 property tax for the Park Forest property which will be due in 2011 to the Cook Country
taxing authority. At the closing, the buyer paid approximately $2,000 to the Partnership for its one month share of the 2010 property tax. As of December 31, 2010, the amount was held in property tax cash escrow and was included in property tax
payable in the Partnerships balance sheets.

In late August of 2010, an Agency and Marketing Agreement (Agreement) was
executed with an Agent, who was unaffiliated with the Partnership. The Agreement gave the Agent the exclusive right to sell the Park Forest property through auction, sealed bid, hybrid sealed bid, on-line bid or through private negotiations. The
Agreement was to terminate upon the later of 30 days after the Live Outcry Auction held September 27, 2010 or a closing or settlement, if applicable. A marketing fee of approximately



7



---

##### Table of Contents

$2,000 was paid to the Agent for the purpose of advertising, marketing and promoting the property to the buying public. The auction took place on September 27, 2010 and did not result in the
immediate contract sale of the property. Per the Agreement, the Agent had 30 days from the auction date to continue to market the property for sale, at which time the Agreement would expire.A Purchase Contract (Contract) for the
sale of the Park Forest property to an unaffiliated party for a final selling price of $11,000 was executed in early October of 2010. Per the Contract, a ten percent buyers premium was added to the $10,000 buyers offer in determining the
final selling price of $11,000. The $1,000 buyers premium was to be paid as a commission fee to the Agent at the closing which was to occur on or before October 27, 2010. However, the sale fell apart due to a significant Cook County real
estate tax issue related to the purchase contract of the adjacent shopping center property.

Property tax in Cook County, IL is paid in
arrears (2010 tax will be paid in 2011) and is paid in two installments, one in the first quarter and one in the third or fourth quarter (depending upon the timing of tax rate determinations and property tax bill issuance by the County). Beginning
with the property tax related to the 2008 tax year, property tax payments related to the vacant Park Forest property are the responsibility of the Partnership. As of December 31, 2009, the Partnership had accrued twelve months of estimated 2009
property tax totaling approximately $36,000 related to the Park Forest property, which the Partnership was obligated to pay to the Cook County taxing authority in 2010. The first installment of the 2009 property tax, totaling approximately $18,000
was paid in January of 2010. The Partnership was notified of a lower final 2009 assessment value, but higher tax rates during the third and fourth quarters of 2010. Accordingly, the remaining estimated property tax accrual relating to 2009 was
reduced from $18,000 to approximately $3,000. The second installment of the 2009 property tax totaling approximately $3,000 was paid in November of 2010 upon the receipt of the final 2009 property tax bill. As of December 31, 2010, the
Partnership had accrued and expensed eleven months of estimated 2010 property tax totaling approximately $20,000 and held one month property tax cash escrow of approximately $2,000 from the buyer of the property. The total estimated 2010 property
tax payable of approximately $22,000 to be paid in 2011 is based on the 2010 adjusted property appraisal and the 2009 final tax rates and is included in property tax payable in the Partnerships balance sheets.

Due to the vacancy of the Park Forest property, the Partnership had assumed maintenance responsibility. Approximately $1,400 in maintenance expenditures
were incurred by the Partnership during 2009 in relation to lawn and clean-up services. Maintenance expenditures totaling approximately $1,900 were incurred during 2010 in relation to lawn, repair and clean-up services.

Wendys- 361 Highway 17 Bypass, Mt. Pleasant, SC Property

On November 30, 2010, the County of Charleston made a purchase offer of approximately $177,000 to the Partnership in connection with an eminent domain land acquisition of approximately 5,000 square
feet of the approximately 44,000 square feet of the Wendys- Mt. Pleasant, SC (Wendys- Mt. Pleasant) property. The proposed land purchase is for Right of Way for planned road improvements. Unfortunately, the plan
provided for the relocation of ingress and egress that could make the operations of the Wendys restaurant uneconomical. Management is working actively with the lessee, Wendcharles, and legal counsel to facilitate the re-engineering of the
Countys plans to preserve the viability of the site for Wendys operational use. The net book value of the land to be purchased is $33,991 and was reclassified to a property held for sale during the fourth quarter of 2010.

Daytonas All Sports Café- Des Moines, IA Property

The lease for the Daytonas All Sports Café (Daytonas) located in Des Moines, IA is set to expire on May 31, 2011. Management and Daytonas have agreed in principal to a
three year lease amendment and extension which is to begin on June 1, 2011 and expire on May 31, 2014. The lease amendment and extension is anticipated to provide for an annual base rent of $72,000, rent abatement for June for each of



8



---

##### Table of Contents

the three years, and a continued potential $600 rent credit per month for both timely payment and sales reporting. In addition, Daytonas is to pay as percentage rent 8% of its annual sales
over $850,000. Daytonas 2010 reported sales to the Partnership totaled approximately $820,000. A leasing commission of approximately $6,000 is projected to be paid in 2011 to a General Partner affiliate upon the execution of the lease
amendment and extension.

In July of 2009, Management agreed to the terms of a twenty seven month lease extension with Daytonas. The
lease amendment, which was executed in early August of 2009, began, and was effective, as of March 1, 2009, provides for an annual base rent of $72,000 (less a potential $600 rent credit per month for both timely payment and sales reporting),
and annual percentage rents of six percent of sales over the breakpoint of $900,000. The lease is set to expire on May 31, 2011. A commission of approximately $5,000 was paid to a General Partner affiliate in the third quarter of 2009 upon the
execution of the lease amendment. In accordance with the lease amendment, building improvements of approximately $17,000 were made to the property during the fourth quarter of 2009, which included $9,000 paid by the Partnership.

Beginning in December of 2005, Management requested that Daytonas escrow its future property tax liabilities with the Partnership on a monthly
basis. As of December 31, 2010, Daytonas was current on its monthly rent and property tax escrow obligations and escrow payments held by the Partnership totaled approximately $26,000. The property tax escrow balance and the corresponding
property tax payable are included in the Partnerships balance sheets.

Dennys Restaurant- Phoenix, AZ Property

The former lease for the Dennys restaurant located in Phoenix, AZ expired on April 30, 2009 and included an annual base rent of $72,000. The
tenant then paid month-to-month rent of $6,000 for May of 2009. A new twenty three month lease for the Phoenix, AZ property was executed with the tenant, Dennys #6423, LLC (Dennys) in June of 2009. The lease (which was
effective as of June 1, 2009) provides for an annual base rent of $72,000 (less a potential $600 rent credit per month for both timely payment and sales reporting), and is set to expire on April 30, 2011. A commission of approximately
$4,000 was paid to a General Partner affiliate in the second quarter of 2009 in relation to the lease. In December of 2009, due to recent sluggish sales figures, Dennys notified the General Partner of its intent to terminate the lease,
pursuant to its lease rights, as of March 15, 2010. Responsive to the depressed Phoenix market, during January of 2010, Management and Dennys agreed to a six month temporary modification to the lease retroactive to January 1, 2010.
The tenants rent from January of 2010 through June of 2010 was strictly percentage rent at eight percent of monthly sales over $50,000. In June of 2010, an additional temporary lease modification was agreed upon. Dennys rent from July of
2010 to September of 2010 was strictly percentage rent at eight percent of monthly sales over $50,000 and the rent from October 1, 2010 to December 31, 2010 was strictly percentage rent at eight percent of monthly sales over $37,500.
During the fiscal year ended December 31, 2010, percentage rent income totaling approximately $40,000 was recognized in relation to the property. Per the third modification to Dennys lease, which was dated January 1, 2011, the
tenants lease is to be month-to-month beginning on May 1, 2011. In addition, Dennys rent, beginning January 1, 2011 and until the month-to-month lease should be terminated, will be strictly percentage rent at eight percent of
monthly sales over $37,500. In addition, eight percent of monthly sales between $27,500 and $37,500 (up to $800) will be held in a repair fund reserve by the Partnership, from which the tenant can withdrawal for necessary property improvements upon
proper proof of expenditures to the Partnership.

The Dennys property was reclassified to a property held for sale in January of 2008,
due to the execution of a listing agreement with an unaffiliated broker. A sales contract with an unaffiliated party was then executed in February of 2008. The sales contract, dated February 22, 2008, for the sale of the Dennys property
was terminated by the potential buyer in early May of 2008 due to financing difficulties. The



9



---

##### Table of Contents

$25,000 escrow deposit continued to be held with the title company until June of 2009, when both parties agreed to release the escrow deposit and to share the released funds equally between
seller and buyer. Although the listing agreement had expired, Management continued to hold the property for sale at June 30, 2008, as other options for the sale of the property were being pursued. However, the property was reclassified to an
investment property in September of 2008, as Management did not plan to actively pursue options for its sale.

Panda Buffet Restaurant-
Grand Forks, ND Property

A sales contract was executed on September 30, 2009 for the installment sale of the Panda Buffet restaurant
property (Panda Buffet) located in Grand Forks, ND to the owner tenant. The Partnership completed the sale of the Panda Buffet property on November 12, 2009 for $450,000. The buyer paid $150,000 at closing with the remaining balance
of $300,000 being delivered in the form of a Promissory note (Buyers Note) to the Partnership. The Buyers Note reflects a term of three years, an interest rate of 7.25%, and principal and interest payments paid monthly. Principal is
amortized over a period of ten years beginning December 1, 2009 with a balloon payment due on November 1, 2012. Pursuant to the Buyers Note, there will be no penalty for early payment of principal. A net gain on the sale of approximately
$29,000 was recognized in the fourth quarter of 2009. Closing and other sale related costs amounted to approximately $21,000 and included a $13,500 sales commission paid to the General Partner. The Buyers Note also requires the buyer to escrow
property taxes with the Partnership beginning January of 2010 at $1,050 per month. As of December 31, 2010, the buyer was current on its 2010 monthly property tax escrow obligations and escrow payments. The property tax escrow cash balance held
by the Partnership amounted to $12,600 at December 31, 2010, and is included in the property tax payable in the Partnerships balance sheets. In January of 2011, approximately $11,000 of the property tax escrow was relinquished to the
Buyer upon proof of payment of the 2010 property tax to the taxing authority. Beginning February 1, 2011, the monthly property tax escrow obligation was reduced to $900 per month.

Per the Buyers Note amortization schedule, the monthly payments are to total approximately $3,522 per month. The first payment was received by the Partnership on November 30, 2009 and included
$2,374 in principal and $1,148 in interest. Twelve payments were received by the Partnership during the fiscal year ended December 31, 2010 and totaled in the aggregate $21,388 in principal and $20,876 in interest.

Applebees- Columbus, OH Property

An Amendment and Extension of Lease (Amendment) was executed with the Applebees restaurant occupying the property located in Columbus,
OH on November 4, 2009. The Amendment, effective as of November 1, 2009, provides for an annual base rent of $135,996 and is set to expire on October 31, 2012. The Amendment also provides for five options to renew the lease for an
additional two years (base rent will increase by 2% percent for each year of each option). The Amendment also increased the percentage rent sales breakpoint from $1,500,000 to $2,300,000 and decreased the additional percentage rent from 7% to 5%. A
leasing commission of approximately $12,000 was paid to a General Partner affiliate in the fourth quarter of 2009 in relation to the Amendment.

Other Property Information

Property
taxes, general maintenance, insurance and ground rent on the Partnerships investment properties are the responsibility of the tenant. However, when a tenant fails to make the required tax payments or when a property becomes vacant (such as the
formerly owned vacant Park Forest, IL property), the Partnership makes the appropriate property tax payments to avoid possible foreclosure of the property and in a property vacancy the Partnership pays for maintenance related to the vacant property.
Such taxes, insurance and ground rent are accrued in the period in which the liability is incurred. The Partnership



10



---

##### Table of Contents

owns one restaurant, which is located on a parcel of land where it has entered into a long-term ground lease, as lessee, which is set to expire in 2018. The Partnership has the option to extend
the lease for two additional ten year periods. The Partnership owns all improvements constructed on the land (including the building and improvements) until the termination of the ground lease, at which time all constructed improvements will become
the land owners property. The tenant, KFC, is responsible for the $3,400 per month ground lease payment per the terms of its lease with the Partnership.



|Item 3. | Legal Proceedings
|------- | -----------------

None.



|Item 4. | Removed and Reserved
|------- | --------------------



11



---

##### Table of Contents

PART II



|Item 5. | Market Price and Dividends on the Registrants Common Equity and Related Stockholder Matters
|------- | --------------------------------------------------------------------------------------------



|(a) | Although some Interests have been traded, there is no active public market for the Interests, and it is not anticipated that an active public market for the Interests
will develop.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | As of December 31, 2010, there were 1,844 record holders of Interests in the Partnership.
|--- | -----------------------------------------------------------------------------------------



|(c) | The Partnership does not pay dividends. However, the Partnership Agreement provides for net income and loss of the Partnership to be allocated on a quarterly basis, 99%
to the Limited Partners and 1% to the General Partner. The Partnership Agreement provides for the distribution of net cash receipts and net proceeds to the Limited Partners and General Partner on a quarterly basis, subject to the limitations on
distributions to the General Partner described in the Partnership Agreement. See Note 4 to the financial statements for further information. During 2010 and 2009, $1,175,000 and $2,050,000, respectively, were distributed in the aggregate to the
Limited Partners. The General Partner received aggregate distributions of $3,260 and $3,290 in 2010 and 2009, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 6. | Selected Financial Data
|------- | -----------------------

Not
Applicable.



12



---

##### Table of Contents

|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

CAUTIONARY STATEMENT

Item 7
of this Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts,
included in this section and located elsewhere in this Annual Report Form 10-K regarding the prospects of our industry as well as the Partnerships prospects, plans, financial position and business strategy may constitute forward-looking
statements. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on their knowledge and understanding of the business and industry. Words such as may,
anticipates, expects, intends, plans, believes, seeks, estimates, would, could, should and variations of these words and similar
expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been
correct. These statements are not guarantees of the future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements.

Forward-looking statements that were true at the time made may ultimately
prove to be incorrect or false. The Partnership cautions readers not to place undue reliance on forward-looking statements, which reflect Managements view only as of the date of this Form 10-K. All subsequent written and oral
forward-looking statements attributable to the Partnership, or persons acting on the Partnerships behalf, are expressly qualified in their entirety by these cautionary statements. Management undertakes no obligation to update or revise
forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Factors that could cause actual results to differ materially from any forward-looking statements made in
this Form 10-K include, without limitation, changes in general economic conditions, changes in real estate conditions, including without limitation, decreases in valuations of real properties, increases in property taxes and lack of buyers
should the Partnership want to dispose of a property, lease-up risks, ability of tenants to fulfill their obligations to the Partnership under existing leases, sales levels of tenants whose leases include a percentage rent component, adverse changes
to the restaurant market, entrance of competitors to the Partnerships lessees in markets which the Properties are located, inability to obtain new tenants upon the expiration of existing leases, the potential need to fund tenant improvements
or other capital expenditures out of operating cash flows and our inability to realize value for Limited Partners upon disposition of the Partnerships assets.

Critical Accounting Policies and Estimates

Managements discussion and
analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America
(GAAP). The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On a regular basis, we evaluate these estimates, including investment impairment. These estimates are based on Managements historical industry experience and on various other assumptions that are believed to
be reasonable under the circumstances. Actual results may differ from these estimates.

The Partnership believes that its most
significant accounting policies deal with:



13



---

##### Table of Contents

Depreciation methods and lives- Depreciation of the properties is provided on a straight-line basis
over the estimated useful life of the buildings and improvements. While the Partnership believes these are the appropriate lives and methods, use of different lives and methods could result in different impacts on net income. Additionally, the value
of real estate is typically based on market conditions and property performance, so depreciated book value of real estate may not reflect the market value of real estate assets.

Revenue recognition- Rental revenue from investment properties is recognized on the straight-line basis over the life of the respective lease. Percentage rents are accrued only when the tenant has
reached the sales breakpoint stipulated in the lease.

Impairment-The Partnership periodically reviews its long-lived assets,
primarily real estate, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Partnerships review involves comparing current and future operating performance of
the assets, the most significant of which is undiscounted operating cash flows, to the carrying value of the assets. Based on this analysis, if deemed necessary, a provision for possible loss is recognized.

Investment Properties

The
Properties held by the Partnership at December 31, 2010 were originally purchased at a price, including acquisition costs, of $10,814,830 in the aggregate.

The total cost of the Properties includes the original purchase price plus acquisition fees and other capitalized costs paid to an affiliate of the former general partners.

As of December 31, 2010, the Partnership owned fourteen fully constructed fast-food restaurants, one of which is located on a parcel of land which
is subject to a ground lease (see paragraph below). The operating tenants are composed of the following: nine Wendys restaurants, a Dennys restaurant, an Applebees restaurant, a KFC restaurant, a Chinese Super Buffet, and a
Daytonas All Sports Café. The fourteen Properties are located in a total of six states.

Property taxes, general maintenance,
insurance and ground rent on the Partnerships Properties are the responsibility of the tenant. However, when a tenant fails to make the required tax payments or when a property becomes vacant (such as the formerly owned vacant Park Forest
property), the Partnership makes the appropriate property tax payments to avoid possible foreclosure of the property. In a property vacancy the Partnership pays for maintenance related to the vacant property. Such taxes, insurance and ground rent
are accrued in the period in which the liability is incurred. The Partnership owns one restaurant, which is located on a parcel of land where it has entered into a long-term ground lease, as lessee, which is set to expire in 2018. The Partnership
has the option to extend the lease for two additional ten year periods. The Partnership owns all improvements constructed on the land (including the building and improvements) until the termination of the ground lease, at which time all constructed
improvements will become the land owners property. The tenant, KFC, is responsible for the $3,400 per month ground lease payment per the terms of its lease with the Partnership.

There were no building improvements capitalized during 2010. During the Fourth Quarter of 2009, $9,000 in building improvements related to the Daytonas property was capitalized by the Partnership.

In accordance with Financial Accounting Standards Board (FASB) guidance for Accounting for the Impairment or Disposal of
Long-Lived Assets, current and historical results from operations for disposed properties and assets classified as held for sale are reclassified separately as discontinued operations. The



14



---

##### Table of Contents

guidance also requires the adjustment to carrying value of properties due to impairment in an attempt to reflect appropriate market values.

The Partnership had been unsuccessful in finding a new tenant for the vacant Park Forest property and, as of December 31, 2009, the carrying value
of this property had been written down to $0. The property was then sold to an unaffiliated party in December of 2010.

A summary of
significant developments as of December 31, 2010, by property, for properties with such developments, can be found in Item 2, Properties.

Results of Operations

Income from continuing operations for the fiscal years
ended December 31, 2010, 2009 and 2008 were $835,000, $797,000, and $904,000, respectively. See the paragraphs below for further information as to individual operating income and expense items and explanations as to 2010, 2009 and 2008
variances.

Fiscal year ended December 31, 2010 as compared to fiscal years ended December 31, 2009 and 2008:

Operating Rental Income:Rental income for the fiscal years ended December 31, 2010, 2009 and 2008
were approximately $1.53 million, $1.56 million, and $1.59 million, respectively. The 2010 rental income was comprised of monthly lease obligations per the tenant leases, percentage rents obligations related to the Dennys property, and
included adjustments for straight-line rent. The 2009 and 2008 rental income was comprised of monthly lease obligations per the tenant leases and included adjustments for straight-line rent. The decrease in rental income for the fiscal year
ended December 31, 2010 was primarily due to the January of 2010 modification to the Dennys lease (see Item 2, Properties for further discussion).

Management expects total base operating rent revenues to be approximately $1.06 million for the year 2011 based on operating leases currently in place. Total base operating revenue for 2011 may increase
by $36,000 (or $32,400 with potential rent credit reduction) upon Daytonas pending lease extension. In addition, future operating rent revenues may decrease with tenant defaults and/or the reclassification of properties as properties held for
sale. They may also increase with additional rents due from tenants, if those tenants experience increased sales levels, which require the payment of additional rent to the Partnership. Operating percentage rentals included in rental income from
operations in 2010, 2009, and 2008 were approximately $439,000, $399,000, and $427,000, respectively. Management expects the 2011 percentage rents to be slightly higher as compared to 2010, due to Dennys 2011 rent modification.

Insurance Expense:Insurance expense for the fiscal years ended December 31, 2010, 2009 and 2008 were approximately $29,000,
$35,000 and $9,000, respectively. Insurance expense was comprised of property insurance (back-up policies for unexpected vacancy or tenant lapses) and general liability insurance. The Partnership did not purchase additional property insurance in the
fourth quarter of 2010 for the aggregate of the Properties for the 2010/2011 insurance year. However, one month of property insurance for the formerly owned vacant Park Forest property was purchased prior to its December of 2010 sale. Each tenant is
responsible for insurance protection and beginning October 31, 2010 the Partnership will only purchase property insurance for an individual property if the tenant cannot provide proof of insurance protection. If the Partnership is not required
to purchase any additional property insurance during 2011, this new insurance approach will reduce insurance expenditures by approximately $26,000, based on the property insurance premium paid for the 2009/2010 policy year. In prior years, the
Partnership purchased property insurance for the aggregate of the Properties. In addition, in 2008 the reversal of the $12,000 2005/2006 estimated insurance premium adjustment accrual in the first quarter of 2008 and the reversal of the $12,000
2006/2007 estimated insurance premium adjustment accrual in the



15



---

##### Table of Contents

second quarter of 2008 due to insurance endorsements received (accruals were due to the unexpected $12,000 2004/2005 insurance premium adjustment received in the second quarter of 2006) resulted
in lower 2008 insurance expense recorded. For 2011, Management expects insurance expense to be approximately $7,000. This amount could increase upon a property insurance default by a tenant or an increase in the umbrella general liability insurance
premium for the 2011/2012 insurance year that is to be paid in the fourth quarter of 2011.

General and Administrative
Expense:General and administrative expenses for the fiscal years ended December 31, 2010, 2009 and 2008 were approximately $66,000, $104,000 and $156,000, respectively. General and administrative expenses were comprised of management
expense, state/city registration and annual report filing fees, office supplies and printing costs, outside storage expenses, copy/fax costs, postage and shipping expenses, long-distance telephone expenses, website fees, bank fees and state income
tax expenses. The variance in general and administrative expenses is primarily due to the overpayment of 2009 estimated state tax expenditures being applied to 2010 estimated taxes, higher 2008 estimated state tax accruals due to the sale of two
properties in 2008, and lower 2010 printing and postage expenditures due to the 2009 Consent mailing in the Third Quarter of 2009, and the decision not to print and mail the 2009 Annual Report on Form 10-K to investors in May of 2010 (2009 Annual
Report on Form 10-K was posted to the Partnership website in 2010 for viewing and printing). Management expects the total 2011 general and administrative expenses to potentially be ten percent higher than the 2010 expenses, primarily due to higher
printing and postage expenditures in relation to the anticipated 2011 Consent and 2010 Annual Report printing and mailing in May of 2011, and higher 2011 state and local income tax expenditures.

Professional services: Professional services expenses for the fiscal years ended December 31, 2010, 2009 and 2008 were
approximately $178,000, $203,000, and $152,000, respectively. Professional services expenses were primarily comprised of data processing, mail processing, website design, legal, auditor, and tax preparation fees. The variance in professional
services expenses is primarily due to the 2009 Consent mailing and related SEC filings, the design and implementation of the Partnership website in 2009, and the timing of final 2008 audit and tax billings. Management anticipates that the total 2011
professional services expenses will be approximately twenty percent higher than 2010 due primarily to the anticipated May of 2011 Annual Report and Consent mailing, the Consent tabulation processing, and the SEC mandated XBRL conversion and filing
requirements for the Partnership beginning in the Second Quarter of 2011.

Depreciation Expense:Depreciation for the
fiscal years ended December 31, 2010, 2009 and 2008 were approximately $173,000, $173,000 and $161,000, respectively. Management expects future depreciation expense to remain relatively constant. Depreciation is a non-cash item and does not
affect current operating cash flow of the Partnership or distributions to the Limited Partners.

Amortization Expense:
Amortization for the fiscal years ended December 31, 2010, 2009 and 2008 were approximately $36,000, $26,000 and $9,000, respectively, and were comprised of amortization of deferred charges. Deferred charges represent leasing commissions paid
when properties are leased or upon the negotiated extension of a lease. The increase in 2010 is due to the timing of the amortization of the deferred charges related to the Wendys amended leases. Amortization for 2011 is expected to be
comparable to 2010 due to the amortization schedule of the leasing commissions.

Adjustment to carrying value of property
no longer held for sale:The adjustment to carrying value of property no longer held for sale for the fiscal years ended December 31, 2010, 2009 and 2008 were zero, zero and $12,000, respectively. The 2008 amount relates to the
reclassification of the Dennys property from property held for sale to investment property (see Dennys- Phoenix, AZ Property paragraphs above for further information). Management does not anticipate such an expense type in 2011.



16



---

##### Table of Contents

Interest Income:Interest income for the fiscal years ended December 31, 2010,
2009, and 2008 were approximately $3,000, $3,000 and $34,000, respectively. The interest income is associated with funds on deposit with banks, and the interest income from Indemnification Trust funds invested in U.S. Treasury securities. Higher
cash deposits (due to the timing of two property sales) as well as higher yield rates resulted in higher interest earnings in 2008. The downturn in the economy and its downward affect on interest rates also resulted in lower interest earnings in
2010 and 2009. Management expects 2011 interest income to be comparable to 2010.

Note Receivable Interest Income:Note
receivable interest income for the fiscal years ended December 31, 2010, 2009 and 2008 were approximately $21,000, $1,000 and zero, respectively. The 2010 and 2009 interest income was comprised of interest income associated with the
Buyers Note from the Panda Buffet property sale in November of 2009. Management expects 2011 note receivable interest income to be comparable to 2010. See Item 2, Properties for further information.

Other Income:Other Income for the fiscal years ended December 31, 2010, 2009 and 2008 were approximately $4,000, $16,000 and
$16,000, respectively. During 2010, 2009 and 2008, the Partnership received approximately $500, $3,000 and $3,000, respectively, in investor service fees related to the voiding and reissuance of old outstanding limited partner distribution checks.
Management anticipates such small revenue type to continue in the future. During the Second Quarter of 2009, the Partnership collected a $12,500 sales escrow deposit in relation to the termination of the Dennys property sales contract dated
February 22, 2008. Management does not anticipate such a revenue type during 2011.

Recovery of Amounts Previously
Written-off: Recovery of amounts previously written-off for the fiscal years ended December 31, 2010, 2009 and 2008 were approximately $12,000, $11,000, and $13,000, respectively, and were comprised of small recoveries from former general
partners in connection with the misappropriation of assets by the former general partners and their affiliates.

Results of Discontinued
Operations

In accordance with FASB guidance for Accounting for the Impairment or Disposal of Long Lived Assets,
discontinued operations represent the operations of properties disposed of or classified as held for sale as well as any gain or loss recognized in their disposition. During the fiscal years ended December 31, 2010, 2009 and 2008, the
Partnership recognized (loss) income from discontinued operations of approximately $(20,000), $(26,000) and $1.14 million, respectively. The 2010, 2009 and 2008 (loss) income from discontinued operations was attributable to the fourth Quarter of
2010 reclassification of a small strip of the Wendys- Mt. Pleasant land to a property held for sale due to the pending eminent domain acquisition of the land by the County of Charleston for Right of Way for planned road improvements and the
third quarter of 2010 reclassification of the vacant Park Forest property to a property held for sale upon the execution of the Agency and Marketing Agreement in August. The 2010 income from discontinued operations includes the fourth quarter net
gain of approximately $7,000 on the sale of the Park Forest property. The 2009 and 2008 income from discontinued operations was also attributable to the third quarter of 2009 reclassification of the Panda Buffet property to a property held for sale
(executed sales contract dated September 30, 2009). The 2009 income from discontinued operations includes the fourth quarter net gain of approximately $29,000 on the sale of the Panda Buffet property. The 2008 income from discontinued
operations was also attributable to the reclassification of the Wendys- 1515 Savannah Highway, Charleston (Wendys- Charleston) property and the Blockbuster, Ogden, UT (Blockbuster) property to properties held for
sale. The Wendys- Charleston property was sold in May of 2008 under the terms of the Sales Contract dated April 10, 2008 and the Blockbuster property was sold in December of 2008. The 2008 income from discontinued operations includes the
second quarter net gain of approximately $659,000 on the sale of the Wendys- Charleston property and the fourth quarter net gain of approximately $601,000 on the sale of the Blockbuster property. The 2008 income from discontinued operations
also includes the first quarter



17



---

##### Table of Contents

of 2008 collection of $25,000 in earnest money in relation to the termination of the Wendys- Charleston property sales contract dated August 21, 2007.

Cash Flow Analysis

Net cash
flows provided by operating activities for the fiscal years ended December 31, 2010, 2009 and 2008 were approximately $1.01 million, $964,000, and $1.20 million, respectively. The variance in cash provided by operating activities from 2010 to
2009 and 2008 is primarily due to: (i) Dennys 2010 lease modifications resulting in lower operating rental collections in 2010 as compared to 2009 and 2008; (ii) lower monthly rent collections in 2010 and 2009, due to the sale of the
Panda Buffet property in November of 2009, the sale of the Wendys- Charleston property in May of 2008, the sale of the Blockbuster property in December of 2008, and the Park Forest vacancy effective June 30, 2008; (iii) the 2009
percentage rents collected in the first quarter of 2010 being lower than the 2008 percentage rents collected in the first quarter of 2009 due to lower tenant sales reported and recorded for 2009 than 2008; (iv) the timing and the amount of the
audit fee installment billings and the timing of the payments thereof; (v) the timing of the relinquishment of property tax cash escrow to the buyer of the Panda Buffet property upon proof of 2010 property tax paid; (vi) the Park Forest
property vacancy as of June 30, 2008 resulting in the Partnership accruing for related property tax beginning for tax year 2008 and no additional property escrow tax collection from former tenant, Popeyes; (vii) the actual Park
Forest property tax paid in 2010 and 2009 for the 2009 and 2008 tax years, respectively, being lower than the accrued amount at the previous fiscal year-ends; (viii) the December 31, 2010 property tax accrual related to the formerly owned
Park Forest property was lower than the December 31, 2009 and 2008 accruals due to lower expected property tax billings; (ix) the Partnership not purchasing property insurance in 2010 for the aggregate of the Properties for the 2011/2012
insurance year, except for one month of property insurance for the formerly owned vacant Park Forest property; (x) the reversal of the $12,000 2005/2006 estimated insurance premium adjustment accrual in the first quarter of 2008 and the
reversal of the $12,000 2006/2007 estimated insurance premium adjustment accrual in the second quarter of 2008 due to insurance endorsements received (accruals were due to the unexpected $12,000 2004/2005 insurance premium adjustment received in the
second quarter of 2006); (xi) the 2009 Consent resulting in higher investor communication and professional service expenditures in 2009; (xii) the 2009 Annual Report only being posted to the Partnership website and not printed and mailed
to investors in May of 2010; (xii) higher 2008 estimated state and local income taxes being paid and higher year-end accruals resulting from the sale of properties; (xiii) lower 2010 estimated state and local income taxes being paid due to
the overpayment of 2009 tax liabilities; (xiv) the recognition of higher interest yields in 2008; and (xv) the application of December 31, 2007 prepaid monthly lease obligations in 2008.

Cash flows from investing activities for the fiscal years ended December 31, 2010, 2009 and 2008 were approximately $40,000, $112,000, and $2.05
million, respectively. The 2010 amount was comprised of small recoveries from former general partners, the receipt of approximately $21,000 in note receivable principal payments from the Buyers Note, and approximately $7,000 in net sale
proceeds from the December of 2010 sale of the vacant Park Forest property. The 2009 amount was primarily comprised of small recoveries from former general partners, the receipt of approximately $2,000 in note receivable principal payments from the
Buyers Note, and approximately $128,000 in net sale proceeds from the November of 2009 installment sale of the Panda Buffet property. In addition, leasing commissions paid totaled approximately $21,000 and building improvement expenditures
totaled $9,000 during 2009. The 2008 amount was primarily comprised of small recoveries from former general partners and approximately $2.09 million in aggregate net sale proceeds from the May of 2008 sale of the Wendys- Charleston property
and the December of 2008 sale of the Blockbuster property. In addition, leasing commissions totaling approximately $60,000 were paid in 2008.



18



---

##### Table of Contents

During 2011, principal payments to be received by the Partnership under the Buyers Note amortization
schedule total approximately $22,000 (see Note 11 to financial statements.) In addition, it is anticipated that small recoveries from former general partners may continue in the future. Leasing commissions of approximately $6,000 are anticipated to
be paid during 2011 in relation to the anticipated Daytonas three year lease renewal.

For the fiscal year ended December 31, 2010,
cash flows used in financing activities were approximately $1.18 million and consisted of aggregate Limited Partner distributions of $1.18 million (included net sale cash proceeds of approximately $128,000 from the installment sale of the Panda
Buffet property in November of 2009 and $19,000 in Buyers Note principal payments received), and General Partner distributions of $3,260. For the fiscal year ended December 31, 2009, cash flows used in financing activities was
approximately $2.05 million and consisted of aggregate Limited Partner distributions of $2.05 million (included net sale cash proceeds of approximately $1 million from the sale of the Blockbuster property in December of 2008), and General Partner
distributions of $3,290. For the fiscal year ended December 31, 2008, cash used in financing activities was approximately $2.40 million and consisted of aggregate Limited Partner distributions of $2.40 million (including net sale proceeds of
approximately $1.4 million from the May of 2008 sale of the Wendys- Charleston, SC property and the December of 2007 sale of a small portion of the Park Forest property to be used as a right away) and General Partner distributions of $9,245.
Both Limited Partner and General Partner distributions have been and will continue to be made in accordance with the Partnership Agreement.

Liquidity and Capital Resources

The Partnerships cash balance was approximately $428,000 at December 31, 2010. Cash of $280,000, which includes the approximately $7,000 in net
sale proceeds from the December of 2010 sale of the vacant Park Forest property and approximately $5,000 in Buyers Note principal payments received, is anticipated to be used to fund the Fourth Quarter of 2010 aggregate distribution to Limited
Partners in February of 2011, and cash of approximately $46,000 is anticipated to be used for the payment of quarter-end accrued liabilities, net of property tax cash escrow, which are included in the balance sheets. The remainder represents amounts
deemed necessary to allow the Partnership to operate normally.

The Partnerships principal demands for funds will be for the payment of
operating expenses and distributions. Management anticipates that cash generated through the operations of the Partnerships Properties and sales of Properties will primarily provide the sources for future fund liquidity and Limited
Partner distributions. During the process of leasing the Properties, the Partnership may experience competition from owners and managers of other properties. As a result, in connection with negotiating tenant leases, along with recognizing market
conditions, Management may offer rental concessions, or other inducements, which may have an adverse impact on the results of the Partnerships operations. The Partnership is also in competition with sellers of similar properties to locate
suitable purchasers for its Properties. The two primary liquidity risks in the absence of mortgage debt are the Partnerships inability to collect rent receivables and near or chronic property vacancies. The amount of cash to be distributed to
our Limited Partners is determined by the General Partner and is dependent on a number of factors, including funds available for payment of distributions, capital expenditures, and taxable income recognition matching, which is primarily attributable
to percentage rents and property sales.

As of December 31, 2010 and 2009, the Properties were leased 100% and 93%, respectively (vacant
Park Forest property was sold in December of 2010). All of the Partnerships fourteen Properties are currently leased and only the Dennys and Daytonas leases are due to expire within the first six months of 2011. Per a third
modification to the Dennys lease, dated January 1, 2011, a month-to-month lease is to begin on May 1, 2011. In addition, Management has agreed in principal to a three year lease extension with an expiration date of May 31, 2014
for the Daytonas property. See Item 2, Properties for further



19



---

##### Table of Contents

information. In addition, we collected 100% of our base rent from our tenants for the fiscal year ended December 31, 2010, which we believe is a good indication of tenant quality and
stability.

Nine of the fourteen Properties are leased to two Wendys Franchisees. Six of the Properties were leased to Wendgusta,
LLC (Wendgusta) and three of the Properties were leased to Wendcharles I, LLC (Wendcharles). Operating base rents from these nine leases comprised approximately 70% of the 2010 operating base rents as of
December 31, 2010. Operating base rents from these nine leases comprised approximately 65% of the total 2009 operating base rents. As of December 31, 2010, additional 2010 percentage rents totaling approximately $382,000 have been accrued
in relation to the Wendys properties. During 2009, additional percentage rents were generated from these Wendys properties and approximately $350,000 was accrued as of December 31, 2009. Additionally, as of December 31, 2010,
the nine Properties exceeded 60% of the Partnerships total properties, both by asset value and number. Eight of the nine Wendys leases are set to expire in November of 2021, with the remaining one lease set to expire in November of 2016.

Since more than 60% of the Partnerships Properties, both by asset value and number, are leased to two tenants, Wendgusta and
Wendcharles, the financial status of the two tenants may be considered relevant to investors. At the request of the Partnership, Wendgusta and Wendcharles provided it with a copy of their reviewed financial statements for the fiscal years
ended December 26, 2010 and December 27, 2009. Those reviewed financial statements prepared by Wendgustas and Wendcharles accountants are attached as Exhibit 99.0 and 99.1, respectively, to the Partnerships
December 31, 2010 Annual Report on Form 10-K. The Partnership has no rights to audit or review Wendgustas or Wendcharles financial statements and the Partnerships independent registered public accounting firm has not audited
or reviewed the financial statements received from Wendgusta or Wendcharles.

The Partnerships return on its investment will be derived
principally from rental payments received from its lessees. Therefore, the Partnerships return on its investment is largely dependent upon the business success of its lessees. The business success of the Partnerships individual lessees
can be adversely affected on three general levels. First, the tenants rely heavily on the management contributions of a few key entrepreneurial owners. The business operations of such entrepreneurial tenants can be adversely affected by death,
disability or divorce of a key owner, or by such owners poor business decisions such as an undercapitalized business expansion. Second, changes in a local market area can adversely affect a lessees business operation. A local economy can
suffer a downturn with high unemployment. Socioeconomic neighborhood changes can affect retail demand at specific sites and traffic patterns may change, or stronger competitors may enter a market. These and other local market factors can potentially
adversely affect the lessees of the Partnership Properties. Finally, despite an individual lessees solid business plans in a strong local market, the franchise concept itself can suffer reversals or changes in management policy, which in turn
can affect the profitability of operations. An overall economic recession is another factor that could affect the relative success of a lessees business. Therefore, there can be no assurance that any specific lessee will have the ability to
pay its rent over the entire term of its lease with the Partnership.

Since the Partnerships Properties involve restaurant tenants, the
restaurant market is the major market segment with a material impact on Partnership operations. The success of customer marketing and the operating effectiveness of the Partnerships lessees, will impact the Partnerships future
operating success in a very competitive restaurant and food service marketplace.

There is no way to determine, with any certainty, which, if
any, tenants will succeed or fail in their business operations over the term of their respective leases with the Partnership. The nationwide economic downturn may affect a lessees operational activity and its ability to meet lease obligations.
It can be reasonably anticipated that some lessees will default on future lease payments to the Partnership, which will result in the loss of expected lease income for the Partnership. Management will use its best



20



---

##### Table of Contents

efforts to vigorously pursue collection of any defaulted amounts and to protect the Partnerships assets and future rental income potential by trying to re-lease any properties with rental
defaults. External events, which could impact the Partnerships liquidity, are the entrance of other competitors into the market areas of our tenants; the relocation of the market area itself to another traffic area; liquidity and working
capital needs of the lessees; and failure or withdrawal of any of the national franchises held by the Partnerships tenants. Each of these events, alone or in combination, would affect the liquidity level of the lessees resulting in possible
default by a tenant. Since the information regarding plans for future liquidity and expansion of closely held organizations, which are tenants of the Partnership, tend to be of a private and proprietary nature, anticipation of individual liquidity
problems is difficult.

The nationwide economic downturn has created a difficult credit environment. Fortunately, the Partnership has limited
exposure to the credit markets, as the Partnership has no debt. Management monitors the depository institutions that hold the Partnerships cash on a regular basis and believe that funds have been deposited with creditworthy financial
institutions. In addition, the Partnership has no outstanding debt. However, the continued economic downturn and lack of available credit could delay or inhibit Managements ability to dispose of the Partnerships Properties, or
cause Management to have to dispose of the Partnerships Properties for a lower than anticipated return. As a result, Management continues to maintain an objective to preserve capital and sustain property values while selectively disposing
of the Properties as appropriate.

Off-Balance Sheet Arrangements

The Partnership does not have any off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources.

Disposition Policies

Management intends to hold the Partnership Properties until such time as sale or other disposition appears to be advantageous to achieve the investment
objectives or until it appears that such objectives will either currently not be met or not be met in the future. In deciding whether to sell properties, Management considers factors such as potential capital appreciation or depreciation, cash
flow and federal income tax considerations, including possible adverse federal income tax consequences to the Limited Partners. The General Partner may exercise its discretion as to whether and when to sell a property, and there is no
obligation to sell properties at any particular time, except upon Partnership termination on November 30, 2020 or if investors holding a majority of the units vote to liquidate and dissolve the Partnership in response to a formal consent
solicitation to liquidate the Partnership.

Inflation

Inflation has a minimal effect on operating earnings and related cash flows from a portfolio of triple net leases. By their nature, such leases actually fix revenues and are not impacted by rising costs
of maintenance, insurance, or real estate taxes. Although the majority of the Partnerships leases have percentage rental clauses, revenues from operating percentage rentals represented only 29% of operating rental income for the fiscal year
ended December 31, 2010, only 26% of operating rental income for the fiscal year ended December 31, 2009, and only 27% for the fiscal year ended December 31, 2008. If inflation causes operating margins to deteriorate for lessees, or
if expenses grow faster than revenues, then, inflation may well negatively impact the portfolio through tenant defaults.

It would be
misleading to associate inflation with asset appreciation for real estate, in general, and the Partnerships portfolio, specifically. Due to the triple-net nature of the property leases, asset values generally move inversely with
interest rates.



21



---

##### Table of Contents

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

The Partnership is not subject to market risk as defined by Item 305 of Regulation S-K.



22



---

##### Table of Contents

|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

(A Wisconsin
limited partnership)

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE



|                                                                                     |  |      |         | 
|------------------------------------------------------------------------------------ |  | ---- | ------- | 
|                                                                                     |  | Page |        
|Report of Independent Registered Public Accounting Firm                              |  |      | 24      | 
|                                                                                     | 
|Balance Sheets, December 31, 2010 and 2009                                           |  |      | 25 - 26 | 
|                                                                                     | 
|Statements of Income for the Years Ended December 31, 2010, 2009 and 2008            |  |      | 27      | 
|                                                                                     | 
|Statements of Partners Capital for the Years Ended December 31, 2010, 2009 and 2008 |  |      | 28      | 
|                                                                                     | 
|Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008        |  |      | 29      | 
|                                                                                     | 
|Notes to Financial Statements                                                        |  |      | 30 - 42 | 
|                                                                                     | 
|Schedule IIIInvestment Properties and Accumulated Depreciation, December 31,
2010   |  |      | 51 - 52 | 



23



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Partners

DiVall Insured Income
Properties 2 Limited Partnership

We have audited the accompanying balance sheets of DiVall Insured Income Properties 2 Limited Partnership (a
Wisconsin limited partnership) as of December 31, 2010 and 2009 and the related statements of income, partners capital, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the
2010 financial statement schedules listed in the Index at Item 15(a) (2). These financial statements and financial statement schedules are the responsibility of the Partnerships management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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. The Partnership is not required to have,
nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnerships internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, 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 DiVall Insured Income Properties 2 Limited Partnership as of December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information set forth therein.

/s/ McGladrey & Pullen, LLP

Chicago, Illinois

March 24, 2011



24



---

##### Table of Contents

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

BALANCE SHEETS

December 31, 2010 and 2009

ASSETS



|                                            |  |                  |            |   |                  |   |            |  
|------------------------------------------- |  | ---------------- | ---------- | - | ---------------- | - | ---------- | -
|                                            |  | December 31,2010 |            |   | December 31,2009 |  
|INVESTMENT PROPERTIES:(Note 3)              |  |                  |            |   |                  |   |            |  
|Land                                        |  | $                | 3,853,775  |   |                  | $ | 3,887,766  |  
|Buildings                                   |  |                  | 5,879,051  |   |                  |   | 6,134,353  |  
|Accumulated depreciation                    |  |                  | (4,178,495 | ) |                  |   | (4,260,745 | )
|                                            |  |                  |            |   |                  |   |            |  
|Net investment properties                   |  | $                | 5,554,331  |   |                  | $ | 5,761,374  |  
|                                            |  |                  |            |   |                  |   |            |  
|OTHER ASSETS:                               |  |                  |            |   |                  |   |            |  
|Cash                                        |  | $                | 427,973    |   |                  | $ | 551,373    |  
|Cash held in Indemnification Trust (Note 9) |  |                  | 451,387    |   |                  |   | 450,647    |  
|Property tax cash escrow                    |  |                  | 40,417     |   |                  |   | 25,529     |  
|Rents and other receivables                 |  |                  | 403,913    |   |                  |   | 394,910    |  
|Property held for sale (Note 3)             |  |                  | 33,991     |   |                  |   | 0          |  
|Deferred rent receivable                    |  |                  | 12,217     |   |                  |   | 17,977     |  
|Prepaid insurance                           |  |                  | 5,469      |   |                  |   | 28,012     |  
|Deferred charges, net                       |  |                  | 255,844    |   |                  |   | 292,076    |  
|Note receivable (Note 11)                   |  |                  | 276,238    |   |                  |   | 297,626    |  
|                                            |  |                  |            |   |                  |   |            |  
|Total other assets                          |  | $                | 1,907,449  |   |                  | $ | 2,058,150  |  
|                                            |  |                  |            |   |                  |   |            |  
|Total assets                                |  | $                | 7,461,780  |   |                  | $ | 7,819,524  |  
|                                            |  |                  |            |   |                  |   |            |  

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



25



---

##### Table of Contents

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

BALANCE SHEETS

December 31, 2010 and 2009

LIABILITIES AND PARTNERS CAPITAL



|                                                                                |  |                  |             |   |                  |   |             |  
|------------------------------------------------------------------------------- |  | ---------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                |  | December 31,2010 |             |   | December 31,2009 |  
|CURRENT LIABILITIES:                                                            |  |                  |             |   |                  |   |             |  
|Accounts payable and accrued expenses                                           |  | $                | 20,098      |   |                  | $ | 13,146      |  
|Property tax payable                                                            |  |                  | 60,088      |   |                  |   | 61,533      |  
|Due to General Partner                                                          |  |                  | 1,825       |   |                  |   | 1,819       |  
|Security deposits                                                               |  |                  | 88,440      |   |                  |   | 88,440      |  
|Unearned rental income                                                          |  |                  | 5,000       |   |                  |   | 5,000       |  
|                                                                                |  |                  |             |   |                  |   |             |  
|Total current liabilities                                                       |  | $                | 175,451     |   |                  | $ | 169,938     |  
|                                                                                |  |                  |             |   |                  |   |             |  
|CONTINGENCIES AND COMMITMENTS (Notes 8 and 9)                                   |  |                  |             |   |                  |   |             |  
|PARTNERS CAPITAL: (Notes 1, 4 and 10)                                          |  |                  |             |   |                  |   |             |  
|General Partner -                                                               |  |                  |             |   |                  |   |             |  
|Cumulative net income                                                           |  | $                | 312,364     |   |                  | $ | 304,214     |  
|Cumulative cash distributions                                                   |  |                  | (128,871    | ) |                  |   | (125,611    | )
|                                                                                |  |                  |             |   |                  |   |             |  
|                                                                                |  | $                | 183,493     |   |                  | $ | 178,603     |  
|                                                                                |  |                  |             |   |                  |   |             |  
|Limited Partners (46,280.3 interests outstanding
at December 31, 2010 and 2009) |  |                  |             |   |                  |   |             |  
|Capital contributions, net of offering costs                                    |  | $                | 39,358,468  |   |                  | $ | 39,358,468  |  
|Cumulative net income                                                           |  |                  | 37,289,865  |   |                  |   | 36,483,012  |  
|Cumulative cash distributions                                                   |  |                  | (68,705,268 | ) |                  |   | (67,530,268 | )
|Reallocation of former general partners deficit capital                        |  |                  | (840,229    | ) |                  |   | (840,229    | )
|                                                                                |  |                  |             |   |                  |   |             |  
|                                                                                |  | $                | 7,102,836   |   |                  | $ | 7,470,983   |  
|                                                                                |  |                  |             |   |                  |   |             |  
|Total partners capital                                                         |  | $                | 7,286,329   |   |                  | $ | 7,649,586   |  
|                                                                                |  |                  |             |   |                  |   |             |  
|Total liabilities and partners capital                                         |  | $                | 7,461,780   |   |                  | $ | 7,819,524   |  
|                                                                                |  |                  |             |   |                  |   |             |  

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



26



---

##### Table of Contents

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF INCOME

For the Years Ended December 31, 2010, 2009, and 2008



|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|-------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | 
|                                                                           |  | 2010 |           |   | 2009 |   |           | 2008 | 
|OPERATING REVENUES:                                                        |  |      |           |   |      |   |           |      |  |   |           | 
|Rental income (Note 5)                                                     |  | $    | 1,532,127 |   |      | $ | 1,563,165 |      |  | $ | 1,590,805 | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|TOTAL OPERATING REVENUES                                                   |  |      | 1,532,127 |   |      |   | 1,563,165 |      |  |   | 1,590,805 | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|EXPENSES:                                                                  |  |      |           |   |      |   |           |      |  |   |           | 
|Partnership management fees (Note 6)                                       |  |      | 241,579   |   |      |   | 240,841   |      |  |   | 232,205   | 
|Restoration fees (Note 6)                                                  |  |      | 497       |   |      |   | 459       |      |  |   | 535       | 
|Insurance                                                                  |  |      | 29,105    |   |      |   | 34,541    |      |  |   | 9,249     | 
|General and administrative                                                 |  |      | 65,911    |   |      |   | 103,553   |      |  |   | 155,513   | 
|Advisory Board fees and expenses                                           |  |      | 10,500    |   |      |   | 10,000    |      |  |   | 9,500     | 
|Professional services                                                      |  |      | 178,084   |   |      |   | 203,055   |      |  |   | 152,328   | 
|Personal property taxes                                                    |  |      | 820       |   |      |   | 820       |      |  |   | 820       | 
|Write-off of uncollectible receivables                                     |  |      | 0         |   |      |   | 2,013     |      |  |   | 5,445     | 
|Depreciation                                                               |  |      | 173,052   |   |      |   | 172,840   |      |  |   | 161,309   | 
|Amortization                                                               |  |      | 36,232    |   |      |   | 26,195    |      |  |   | 9,114     | 
|Other expenses                                                             |  |      | 1,257     |   |      |   | 3,267     |      |  |   | 2,380     | 
|Adjustment to carrying value of property no longer held for sale           |  |      | 0         |   |      |   | 0         |      |  |   | 11,512    | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|TOTAL OPERATING EXPENSES                                                   |  |      | 737,037   |   |      |   | 797,584   |      |  |   | 749,910   | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|OTHER INCOME                                                               |  |      |           |   |      |   |           |      |  |   |           | 
|Other interest income                                                      |  |      | 2,638     |   |      |   | 3,498     |      |  |   | 34,067    | 
|Note receivable interest income (Note 11)                                  |  |      | 20,876    |   |      |   | 1,148     |      |  |   | 0         | 
|Other income                                                               |  |      | 3,904     |   |      |   | 15,907    |      |  |   | 16,119    | 
|Recovery of amounts previously written off (Note 2)                        |  |      | 12,429    |   |      |   | 11,476    |      |  |   | 13,381    | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|TOTAL OTHER INCOME                                                         |  |      | 39,847    |   |      |   | 32,029    |      |  |   | 63,567    | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|INCOME FROM CONTINUING OPERATIONS                                          |  |      | 834,937   |   |      |   | 797,610   |      |  |   | 904,462   | 
|(LOSS) INCOME FROM DISCONTINUED OPERATIONS (Note 3)                        |  |      | (19,934   | ) |      |   | (25,536   | )    |  |   | 1,139,492 | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|NET INCOME                                                                 |  | $    | 815,003   |   |      | $ | 772,074   |      |  | $ | 2,043,954 | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|NET INCOME- GENERAL PARTNER                                                |  | $    | 8,150     |   |      | $ | 7,721     |      |  | $ | 20,440    | 
|NET INCOME- LIMITED PARTNERS                                               |  |      | 806,853   |   |      |   | 764,353   |      |  |   | 2,023,514 | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|                                                                           |  | $    | 815,003   |   |      | $ | 772,074   |      |  | $ | 2,043,954 | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|PER LIMITED PARTNERSHIP INTEREST, Based on 46,280.3 interests outstanding: |  |      |           |   |      |   |           |      |  |   |           | 
|INCOME FROM CONTINUING OPERATIONS                                          |  | $    | 17.86     |   |      | $ | 17.07     |      |  | $ | 19.35     | 
|(LOSS) INCOME FROM DISCONTINUED OPERATIONS                                 |  |      | (.43      | ) |      |   | (.55      | )    |  |   | 24.37     | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 
|NET INCOME PER LIMITED PARTNERSHIP INTEREST                                |  | $    | 17.43     |   |      | $ | 16.52     |      |  | $ | 43.72     | 
|                                                                           |  |      |           |   |      |   |           |      |  |   |           | 

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



27



---

##### Table of Contents

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF PARTNERS CAPITAL

For the years ended December 31, 2010, 2009 and 2008



|                                                             |  |                     |         |  |                             |   |          |                       |  |   |                                           |   |  |                      |            |  |                            |   |            |              |  |   |             |   |  |   |          |   |  |   |            |   |  |   |            |  
|------------------------------------------------------------ |  | ------------------- | ------- |  | --------------------------- | - | -------- | --------------------- |  | - | ----------------------------------------- | - |  | -------------------- | ---------- |  | -------------------------- | - | ---------- | ------------ |  | - | ----------- | - |  | - | -------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                             |  | General Partner     |         |  | Limited Partners            |   |          | TotalPartnersCapital | 
|                                                             |  | CumulativeNetIncome |         |  | CumulativeCashDistributions |   |          | Total                 |  |   | CapitalContributions,Net ofOffering Costs |   |  | CumulativeNet
Income |            |  | CumulativeCashDistribution |   |            | Reallocation |  |   | Total       |   | 
|BALANCE AT DECEMBER 31, 2007                                 |  | $                   | 276,053 |  |                             | $ | (113,076 | )                     |  | $ | 162,977                                   |   |  | $                    | 39,358,468 |  |                            | $ | 33,695,145 |              |  | $ | (63,090,268 | ) |  | $ | (840,229 | ) |  | $ | 9,123,116  |   |  | $ | 9,286,093  |  
|Cash Distributions ($51.64 per limited partnership interest) |  |                     |         |  |                             |   | (9,245   | )                     |  |   | (9,245                                    | ) |  |                      |            |  |                            |   |            |              |  |   | (2,390,000  | ) |  |   |          |   |  |   | (2,390,000 | ) |  |   | (2,399,245 | )
|Net Income                                                   |  |                     | 20,440  |  |                             |   |          |                       |  |   | 20,440                                    |   |  |                      |            |  |                            |   | 2,023,514  |              |  |   |             |   |  |   |          |   |  |   | 2,023,514  |   |  |   | 2,043,954  |  
|                                                             |  |                     |         |  |                             |   |          |                       |  |   |                                           |   |  |                      |            |  |                            |   |            |              |  |   |             |   |  |   |          |   |  |   |            |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2008                                 |  |                     | 296,493 |  |                             |   | (122,321 | )                     |  |   | 174,172                                   |   |  |                      | 39,358,468 |  |                            |   | 35,718,659 |              |  |   | (65,480,268 | ) |  |   | (840,229 | ) |  |   | 8,756,630  |   |  |   | 8,930,802  |  
|Cash Distributions ($44.30 per limited partnership interest) |  |                     |         |  |                             |   | (3,290   | )                     |  |   | (3,290                                    | ) |  |                      |            |  |                            |   |            |              |  |   | (2,050,000  | ) |  |   |          |   |  |   | (2,050,000 | ) |  |   | (2,053,290 | )
|Net Income                                                   |  |                     | 7,721   |  |                             |   |          |                       |  |   | 7,721                                     |   |  |                      |            |  |                            |   | 764,353    |              |  |   |             |   |  |   |          |   |  |   | 764,353    |   |  |   | 772,074    |  
|                                                             |  |                     |         |  |                             |   |          |                       |  |   |                                           |   |  |                      |            |  |                            |   |            |              |  |   |             |   |  |   |          |   |  |   |            |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2009                                 |  |                     | 304,214 |  |                             |   | (125,611 | )                     |  |   | 178,603                                   |   |  |                      | 39,358,468 |  |                            |   | 36,483,012 |              |  |   | (67,530,268 | ) |  |   | (840,229 | ) |  |   | 7,470,983  |   |  |   | 7,649,586  |  
|Cash Distributions ($25.39 per limited partnership interest) |  |                     |         |  |                             |   | (3,260   | )                     |  |   | (3,260                                    | ) |  |                      |            |  |                            |   |            |              |  |   | (1,175,000  | ) |  |   |          |   |  |   | (1,175,000 | ) |  |   | (1,178,260 | )
|Net Income                                                   |  |                     | 8,150   |  |                             |   |          |                       |  |   | 8,150                                     |   |  |                      |            |  |                            |   | 806,853    |              |  |   |             |   |  |   |          |   |  |   | 806,853    |   |  |   | 815,003    |  
|                                                             |  |                     |         |  |                             |   |          |                       |  |   |                                           |   |  |                      |            |  |                            |   |            |              |  |   |             |   |  |   |          |   |  |   |            |   |  |   |            |  
|BALANCE AT DECEMBER 31, 2010                                 |  | $                   | 312,364 |  |                             | $ | (128,871 | )                     |  | $ | 183,493                                   |   |  | $                    | 39,358,468 |  |                            | $ | 37,289,865 |              |  | $ | (68,705,268 | ) |  | $ | (840,229 | ) |  | $ | 7,102,836  |   |  | $ | 7,286,329  |  
|                                                             |  |                     |         |  |                             |   |          |                       |  |   |                                           |   |  |                      |            |  |                            |   |            |              |  |   |             |   |  |   |          |   |  |   |            |   |  |   |            |  

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



28



---

##### Table of Contents

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2010, 2009, and 2008



|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  
|--------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                            |  | 2010 |            |   | 2009 |   |            | 2008 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Net income                                                                  |  | $    | 815,003    |   |      | $ | 772,074    |      |  | $ | 2,043,954  |  
|Adjustments to reconcile net income to net cash from operating activities - |  |      |            |   |      |   |            |      |  |   |            |  
|Depreciation and amortization                                               |  |      | 209,284    |   |      |   | 213,851    |      |  |   | 203,513    |  
|Adjustment for carrying value of property no longer held for sale           |  |      | 0          |   |      |   | 0          |      |  |   | 11,512     |  
|Recovery of amounts previously written off                                  |  |      | (12,429    | ) |      |   | (11,476    | )    |  |   | (13,381    | )
|Provision for non-collectible rents and other receivables                   |  |      | 0          |   |      |   | 2,013      |      |  |   | 5,445      |  
|Property impairment write-downs                                             |  |      | 0          |   |      |   | 50,000     |      |  |   | 267,186    |  
|Net gain on disposal of assets                                              |  |      | (6,562     | ) |      |   | (28,604    | )    |  |   | (1,260,262 | )
|Interest applied to Indemnification Trust account                           |  |      | (740       | ) |      |   | (1,023     | )    |  |   | (11,569    | )
|(Increase) Decrease in rents and other receivables                          |  |      | (9,003     | ) |      |   | 27,100     |      |  |   | (4,185     | )
|(Increase) Decrease in property tax cash escrow                             |  |      | (14,888    | ) |      |   | (6,509     | )    |  |   | 21,673     |  
|Decrease (Increase) in prepaid insurance                                    |  |      | 22,543     |   |      |   | 927        |      |  |   | (325       | )
|Decrease in deferred rent receivable                                        |  |      | 5,760      |   |      |   | 10,162     |      |  |   | 14,912     |  
|Decrease (Increase) in property tax receivable                              |  |      | 0          |   |      |   | 2,422      |      |  |   | (1,219     | )
|Increase (Decrease) in accounts payable and accrued expenses                |  |      | 6,952      |   |      |   | (48,415    | )    |  |   | (37,042    | )
|(Decrease) Increase in property tax payable                                 |  |      | (1,445     | ) |      |   | (15,658    | )    |  |   | 35,294     |  
|Increase (Decrease) in due to General Partner                               |  |      | 6          |   |      |   | (2,646     | )    |  |   | 2,126      |  
|Decrease in security deposits                                               |  |      | 0          |   |      |   | (5,000     | )    |  |   | (11,200    | )
|Increase (Decrease) in unearned rental income                               |  |      | 0          |   |      |   | 5,000      |      |  |   | (63,240    | )
|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash from operating activities                                          |  |      | 1,014,481  |   |      |   | 964,218    |      |  |   | 1,203,192  |  
|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                       |  |      |            |   |      |   |            |      |  |   |            |  
|Net proceeds from sale of investment properties                             |  |      | 6,562      |   |      |   | 127,720    |      |  |   | 2,094,268  |  
|Note receivable, principal payment received                                 |  |      | 21,388     |   |      |   | 2,374      |      |  |   | 0          |  
|Investment in building improvements                                         |  |      | 0          |   |      |   | (9,000     | )    |  |   | 0          |  
|Payment of leasing commissions                                              |  |      | 0          |   |      |   | (21,060    | )    |  |   | (60,072    | )
|Recoveries from former General Partner affiliates                           |  |      | 12,429     |   |      |   | 11,476     |      |  |   | 13,381     |  
|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash from investing activities                                          |  |      | 40,379     |   |      |   | 111,510    |      |  |   | 2,047,577  |  
|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  
|CASH FLOWS USED IN FINANCING ACTIVITIES:                                    |  |      |            |   |      |   |            |      |  |   |            |  
|Cash distributions to Limited Partners                                      |  |      | (1,175,000 | ) |      |   | (2,050,000 | )    |  |   | (2,390,000 | )
|Cash distributions to General Partner                                       |  |      | (3,260     | ) |      |   | (3,290     | )    |  |   | (9,245     | )
|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  
|Net cash used in financing activities                                       |  |      | (1,178,260 | ) |      |   | (2,053,290 | )    |  |   | (2,399,245 | )
|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  
|NET (DECREASE) INCREASE IN CASH                                             |  |      | (123,400   | ) |      |   | (977,562   | )    |  |   | 851,524    |  
|CASH AT BEGINNING OF YEAR                                                   |  |      | 551,373    |   |      |   | 1,528,935  |      |  |   | 677,411    |  
|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  
|CASH AT END OF YEAR                                                         |  | $    | 427,973    |   |      | $ | 551,373    |      |  | $ | 1,528,935  |  
|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  
|Supplemental Schedule of Noncash Investing Activity                         |  |      |            |   |      |   |            |      |  |   |            |  
|Sale of investment property for note receivable                             |  | $    | 0          |   |      | $ | 300,000    |      |  | $ | 0          |  
|                                                                            |  |      |            |   |      |   |            |      |  |   |            |  

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



29



---

##### Table of Contents

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010, 2009 AND 2008

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES:

DiVall Insured Income Properties 2 Limited Partnership (the Partnership) was formed on November 20, 1987,
pursuant to the Uniform Limited Partnership Act of the State of Wisconsin. The initial capital, contributed during 1987, consisted of $300, representing aggregate capital contributions of $200 by the former general partners and $100 by the Initial
Limited Partner. The minimum offering requirements were met and escrowed subscription funds were released to the Partnership as of April 7, 1988. On January 23, 1989, the former general partners exercised their option to increase the
offering from 25,000 interests to 50,000 interests and to extend the offering period to a date no later than August 22, 1989. On June 30, 1989, the general partners exercised their option to extend the offering period to a date no later
than February 22, 1990. The offering closed on February 22, 1990, at which point 46,280.3 interests had been sold, resulting in total offering proceeds, net of underwriting compensation and other offering costs, of $39,358,468.

The Partnership is currently engaged in the business of owning and operating its investment portfolio of commercial real estate properties (the
Properties.) The Properties are leased on a triple net basis primarily to, and operated by, franchisors or franchisees of national, regional, and local retail chains under long-term leases. The lessees are primarily fast food, family
style, and casual/theme restaurants. As of December 31, 2010, the Partnership owned fourteen Properties, which are located in a total of six states.

The Partnership will be dissolved on November 30, 2020 (extended ten years per the results of the 2009 Consent, as defined below), or earlier upon the prior occurrence of any of the following events:
(a) the disposition of all properties of the Partnership; (b) the written determination by the General Partner that the Partnerships assets may constitute plan assets for purposes of ERISA; (c) the agreement of
Limited Partners owning a majority of the outstanding interests to dissolve the Partnership; or (d) the dissolution, bankruptcy, death, withdrawal, or incapacity of the last remaining General Partner, unless an additional General Partner is
elected previously by a majority of the Limited Partners. During the Second Quarters of 2001, 2003, 2005 and 2007, Consent solicitations were circulated (the 2001, 2003, 2005 and 2007 Consents, respectively), which if approved would have
authorized the sale of the Partnerships assets and dissolution of the Partnership. A majority of the Limited Partners did not vote in favor of either the 2001, 2003, 2005 or 2007 Consents. Therefore, the Partnership continued to operate as a
going concern. On July 31, 2009, the Partnership mailed a Consent solicitation (the 2009 Consent) to Limited Partners to determine whether the Limited Partners wished to extend the term of the Partnership for ten (10) years to
November 30, 2020 (the Extension Proposition), or wished the Partnership to sell its assets, liquidate, and dissolve by November 30, 2010. Per the provisions of the 2009 Consent, once the General Partner had received Consent
Cards from Limited Partners holding a majority of the Partnership Interests voting either FOR or AGAINST the Extension Proposition, the General Partner could declare the 2009 Consent solicitation process concluded and would
be bound by the results of such process. In any event, unless the General Partner elected to extend the deadline of the Consent solicitation, the 2009 Consent solicitation processes and the opportunity to vote by returning a Consent Card, was to end
on October 31, 2009. A majority of the Partnership Interests voted FOR the Extension Proposition and the General Partner declared the 2009 Consent solicitation process concluded on October 14, 2009. Therefore, the Partnership
continues to operate as a going concern. The bi-annual consent solicitation is scheduled to be mailed in the spring of 2011 (2011 Consent), which if approved would authorize the sale of the Partnerships assets and dissolution of
the Partnership.



30



---

##### Table of Contents

Significant Accounting Policies

Rental revenue from the Properties is recognized on the straight-line basis over the term of the respective lease. Percentage rents are only accrued when the tenant has reached the sales breakpoint
stipulated in the lease.

Rents and other receivables are comprised of billed but uncollected amounts due for monthly rents and other charges,
and amounts due for scheduled rent increases for which rentals have been earned and will be collected in the future under the terms of the leases. Receivables are recorded at Managements estimate of the amounts that will be collected.

As of December 31, 2010 and 2009 there were no recorded values for allowance for doubtful accounts based on an analysis of specific
accounts and historical experience.

The Partnership considers its operations to be in only one segment, the operation of a portfolio of
commercial real estate leased on a triple net basis, and therefore no segment disclosure is made.

Depreciation of the Properties are provided
on a straight-line basis over the estimated useful lives of the buildings and improvements.

Deferred charges represent leasing commissions
paid when the Properties are leased and upon the negotiated extension of a lease. Leasing commissions are capitalized and amortized over the term of the lease. As of December 31, 2010 and December 31, 2009, accumulated amortization
amounted to $90,327 and $54,095, respectively.

Property taxes, general maintenance, insurance and ground rent on the Partnerships
Properties are the responsibility of the tenant. However, when a tenant fails to make the required tax payments or when a property becomes vacant (such as the formerly owned vacant Park Forest, IL (Park Forest) property) the Partnership
makes the appropriate property tax payments to avoid possible foreclosure of the property. In a property vacancy the Partnership pays for maintenance related to the vacant property. Such taxes, insurance and ground rent are accrued in the period in
which the liability is incurred. The Partnership owns one restaurant, which is located on a parcel of land where it has entered into a long-term ground lease, as lessee, which is set to expire in 2018. The Partnership has the option to extend the
lease for two additional ten year periods. The Partnership owns all improvements constructed on the land (including the building and improvements) until the termination of the ground lease, at which time all constructed improvements will become the
land owners property. The tenant, a Kentucky Fried Chicken restaurant franchisee (KFC), is responsible for the $3,400 per month ground lease payment per the terms of its lease with the Partnership.

The Partnership generally maintains cash in federally insured accounts in a bank that is participating in the FDICs Transaction Account Guarantee
Program (TAGP). Under TAGP, through December 31, 2010, all non-interest bearing transaction accounts were fully guaranteed by the FDIC for the entire amount in the account. Pursuant to Section 343 of the Wall Street Reform
and Consumer Protection Act (the Dodd-Frank Act), all funds in a non-interest bearing transaction account are insured in full by the FDIC from December 31, 2010 through December 31, 2012. This temporary unlimited coverage is in
addition to and separate from, the coverage of at least $250,000 available to depositors under the FDICs general deposit insurance rules. Cash maintained in these accounts may exceed federally insured limits after the expiration of the period
established by the Dodd- Frank Act. The Partnership has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk.

Financial instruments that potentially subject the Partnership to significant concentrations of credit risk consist primarily of cash investments and leases. Additionally, as of December 31, 2010,
nine of the



31



---

##### Table of Contents

Partnerships fourteen Properties are leased to two significant tenants, Wendgusta, LLC (Wendgusta) and Wendcharles I, LLC (Wendcharles), both of whom are
Wendys restaurant franchisees. The two tenants comprised approximately 49% and 20%, respectively, of the total 2010 operating base rents reflected for the fiscal year ended December 31, 2010.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent 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.

Assets disposed of or deemed to be classified as held
for sale require the reclassification of current and previous years operations to discontinued operations in accordance with GAAP applicable to Accounting for the Impairment or Disposal of Long Lived Assets. As such, prior year
operating results for those properties considered as held for sale or properties no longer considered for sale have been reclassified to conform to the current year presentation without effecting total income. When properties are considered held for
sale, depreciation of the properties is discontinued, and the properties are valued at the lower of the depreciated cost or fair value, less costs to dispose. If circumstances arise that were previously considered unlikely, and, as a result, the
property previously classified as held for sale is no longer to be sold, the property is reclassified as held and used. Such property is measured at the lower of its carrying amount (adjusted for any depreciation and amortization expense that would
have been recognized had the property been continuously classified as held and used) or fair value at the date of the subsequent decision not to sell.

Assets are classified as held for sale, generally, when all criteria within GAAP applicable to Accounting for the Impairment or Disposal of Long Lived Assets have been met.

The Partnership periodically reviews its long-lived assets, primarily real estate, for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. The Partnerships review involves comparing current and future operating performance of the assets, the most significant of which is undiscounted operating cash flows, to the
carrying value of the assets. Based on this analysis, a provision for possible loss is recognized, if any. There were no adjustments to carrying values for the fiscal year ended December 31, 2010. For the fiscal year ended December 31,
2009, a $50,000 adjustment to the land carrying value related to the Park Forest property was recorded.

The Financial Accounting Standards
Board (FASB) guidance on Fair Value Measurements and Disclosure, defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting
pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. The Partnerships adoption of the provisions of the FASB issued Fair Value Measurements and Disclosure on
January 1, 2008, with respect to financial assets and liabilities measured at fair value did not have a material impact on its fair value measurements in its financial statements. The adoption of the provisions of this FASB issuance on
January 1, 2009, with respect to nonrecurring fair value measurements of nonfinancial assets and liabilities, including (but not limited to) the valuation of reporting units for the purpose of assessing goodwill impairment and the valuation of
property and equipment when assessing long-lived asset impairment, did not have a material impact on how the Partnership estimated its fair value measurements but did result in increased disclosures about fair value measurements in the
Partnerships financial statements as of and for the years ended December 31, 2010 and 2009. See Note 12 for further disclosure.

GAAP applicable to Disclosure About Fair Value of Financial Instruments, requires entities to disclose the fair value of all financial assets and
liabilities for which it is practicable to estimate. Fair value is



32



---

##### Table of Contents

defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The General Partner of the
Partnership, The Provo Group, Inc. (TPG, the General Partner or Management), believes that the carrying value of the Partnerships assets (exclusive of the Properties) and liabilities approximate fair value
due to the relatively short maturity of these instruments.

No provision for federal income taxes has been made, as any liability for such
taxes would be that of the individual partners rather than the Partnership. At December 31, 2010 the tax basis of the Partnerships assets exceeded the amounts reported in the December 31, 2010 financial statements by approximately
$6,816,000.

The following represents an unaudited reconciliation of net income as stated on the Partnership statements of income to net
income for tax reporting purposes:



|                                                  |  |                 |          |   |                 |   |         |                 |  |   |           | 
|------------------------------------------------- |  | --------------- | -------- | - | --------------- | - | ------- | --------------- |  | - | --------- | 
|                                                  |  | 2010(Unaudited) |          |   | 2009(Unaudited) |   |         | 2008(Unaudited) | 
|Net income, per statements of income              |  | $               | 815,003  |   |                 | $ | 772,074 |                 |  | $ | 2,043,954 | 
|Book to tax depreciation difference               |  |                 | (31,622  | ) |                 |   | (34,855 | )               |  |   | 41,784    | 
|Tax over (under) Book gain from asset disposition |  |                 | (293,243 | ) |                 |   | (2,840  | )               |  |   | 21,555    | 
|Straight line rent adjustment                     |  |                 | 5,760    |   |                 |   | 26,038  |                 |  |   | 17,067    | 
|Prepaid rent                                      |  |                 | 0        |   |                 |   | 5,000   |                 |  |   | 63,240    | 
|Impairment write-down of assets held              |  |                 | 0        |   |                 |   | 50,000  |                 |  |   | 267,186   | 
|                                                  |  |                 |          |   |                 |   |         |                 |  |   |           | 
|Net income for tax reporting purposes             |  | $               | 495,898  |   |                 | $ | 815,417 |                 |  | $ | 2,244,738 | 
|                                                  |  |                 |          |   |                 |   |         |                 |  |   |           | 

The Partnership is not subject to federal income tax because its income and losses are includable in the tax returns of its
partners, but may be subject to certain state taxes. FASB has provided guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the financial statements. This requires the evaluation of tax positions taken
or expected to be taken in the course of preparing the entitys tax returns to determine whether the tax positions are more-likely-than-not to be sustained when challenged or when examined by the applicable taxing authority. Management has
determined that there were no material uncertain income tax positions. Tax returns filed by the Partnership generally are subject to examination by U.S. and state taxing authorities for the years ended after December 31, 2006.

Recent Accounting Pronouncements

Effective January 1, 2010, the way in which a company determines when an entity that is insufficiently capitalized or is not controlled through
voting (or similar) rights should be consolidated changed. The determination of whether a company is required to consolidate an entity is now based on, among other things, an entitys purpose and design and a companys ability to direct
the activities of the entity that most significantly impact the entitys economic performance. As of December 31, 2010, this change had no effect on the Partnerships results of operations or financial position.

In June of 2009, the FASB issued new guidance which revised and updated previously issued guidance related to variable interest entities. This new
guidance revises the previous guidance by eliminating the exemption for qualifying special purposes entities, by establishing a new approach for determining who should consolidate a variable interest entity and by changing when it is necessary to
reassess who should consolidate a variable-interest entity. The Partnership adopted this new guidance on January 1, 2010, and it did not have an impact on the Partnerships financial position or results of operations for the fiscal year
ended December 31, 2010.



33



---

##### Table of Contents

2. REGULATORY INVESTIGATION:

A preliminary investigation during 1992 by the Office of Commissioner of Securities for the State of Wisconsin and the Securities and Exchange Commission (the Investigation) revealed that
during at least the four years ended December 31, 1992, the former general partners of the Partnership, Gary J. DiVall (DiVall) and Paul E. Magnuson (Magnuson), had transferred substantial cash assets of the Partnership
and two affiliated publicly registered limited partnerships, DiVall Insured Income Fund Limited Partnership (DiVall 1), which was dissolved December of 1998, and DiVall Income Properties 3 Limited Partnership (DiVall 3),
which was dissolved December of 2003, (collectively, the Partnerships) to various other entities previously sponsored by or otherwise affiliated with Gary J. DiVall and Paul E. Magnuson. The unauthorized transfers were in violation of
the respective Partnership Agreements and resulted, in part, from material weaknesses in the internal control system of the Partnerships.

Subsequent to discovery, and in response to the regulatory inquiries, TPG was appointed Permanent Manager (effective February 8, 1993) to assume
responsibility for daily operations and assets of the Partnerships as well as to develop and execute a plan of restoration for the Partnerships. Effective May 26, 1993, the Limited Partners, by written consent of a majority of interests,
elected TPG as General Partner. TPG terminated the former general partners by accepting their tendered resignations.

In 1993, the General
Partner estimated an aggregate recovery of $3 million for the Partnerships. At that time, an allowance was established against amounts due from former general partners and their affiliates reflecting the estimated $3 million receivable. This net
receivable was allocated among the Partnerships based on each Partnerships pro rata share of the total misappropriation, and restoration costs and recoveries have been allocated based on the same percentage. Through December 31, 2010,
approximately $5,911,000 of recoveries have been received which exceeded the original estimate of $3 million. As a result, from January 1, 1996 through December 31, 2010, the Partnership has recognized a total of approximately $1,221,000
as recovery of amounts previously written off in the statements of income, which represents its share of the excess recovery. The General Partner continues to pursue recoveries of the misappropriated funds, however, no further significant recoveries
are anticipated.

3. INVESTMENT PROPERTIES and PROPERTY HELD FOR SALE:

The total cost of the Properties includes the original purchase price plus acquisition fees and other capitalized costs paid to an affiliate of the former general partners.

As of December 31, 2010, the Partnership owned fourteen fully constructed fast-food restaurants, which are located in a total of six states. The
fourteen tenants are composed of the following: nine Wendys restaurants, a Dennys restaurant, an Applebees restaurant, a KFC restaurant, a Chinese Super Buffet, and a Daytonas All Sports Café
(Daytonas).

The Partnership had been unsuccessful in finding a new tenant for the vacant Park Forest property, and on
December 31, 2009, the carrying value of this property had been written down to $0. The property was then sold to an unaffiliated party in December of 2010.

On November 30, 2010, the County of Charleston made a purchase offer of approximately $177,000 to the Partnership in connection with an eminent domain land acquisition of approximately 5,000 square
feet of the approximately 44,000 square feet of the Wendys- Mt. Pleasant, SC (Wendys- Mt. Pleasant) property. The proposed land purchase is for Right of Way for planned road improvements. Unfortunately, the plan
provided for the relocation of ingress and egress that could make the operations of the Wendys restaurant uneconomical. Management is working actively with the lessee, Wendcharles,



34



---

##### Table of Contents

and legal counsel to facilitate the re-engineering of the Countys plans to preserve the viability of the site for Wendys operational use. The net book value of the land to be
purchased is $33,991 and was reclassified to a property held for sale during the fourth quarter of 2010.

During the fiscal years ended
December 31, 2010, 2009 and 2008, the Partnership recognized (loss) income from discontinued operations of approximately $(20,000), $(26,000) and $1.14 million, respectively. The 2010, 2009 and 2008 (loss) income from discontinued operations
was attributable to the fourth quarter of 2010 reclassification of a small strip of the Wendys- Mt. Pleasant property to property held for sale and the third quarter of 2010 reclassification of the vacant Park Forest property to property held
for sale upon the execution of the Agency and Marketing Agreement in August. The 2010 income from discontinued operations includes the fourth quarter net gain of approximately $7,000 on the sale of the Park Forest property. The 2009 and 2008 income
from discontinued operations was also attributable to the third quarter of 2009 reclassification of the Panda Buffet Restaurant- Grand Forks, ND (Panda Buffet) property to property held for sale (executed sales contract dated
September 30, 2009). The 2009 income from discontinued operations includes the fourth quarter net gain of approximately $29,000 on the sale of Panda Buffet property. The 2008 income from discontinued operations was also attributable to the
reclassification of the Wendys- 1515 Savannah Highway, Charleston, SC (Wendys- Charleston) property and the Blockbuster, Ogden, UT (Blockbuster) property to properties held for sale. The Wendys- Charleston
property was sold in May of 2008 under the terms of the Sales Contract dated April 10, 2008 and the Blockbuster property was sold in December of 2008. The 2008 income from discontinued operations includes the second quarter of 2008 net gain of
approximately $659,000 on the sale of the Wendys- Charleston property and the fourth quarter of 2008 net gain of approximately $601,000 on the sale of the Blockbuster property. The 2008 income from discontinued operations also includes the
first quarter of 2008 collection of $25,000 in earnest money in relation to the termination of the Wendys- Charleston property sales contract dated August 21, 2007.

The components of property held for sale in the balance sheets as of December 31, 2010 and 2009 are outlined below:



|                       |  |                  |        |  |                  |   |   | 
|---------------------- |  | ---------------- | ------ |  | ---------------- | - | - | 
|                       |  | December 31,2010 |        |  | December 31,2009 |  
|Balance Sheet:         |  |                  |        |  |                  |   |   | 
|Land                   |  | $                | 33,991 |  |                  | $ | 0 | 
|                       |  |                  |        |  |                  |   |   | 
|Property held for sale |  | $                | 33,991 |  |                  | $ | 0 | 
|                       |  |                  |        |  |                  |   |   | 

The components of discontinued operations included in the statements of income for the years ended December 31, 2010,
2009 and 2008 are outlined below:



|                                |  |                  |        |  |                  |   |        |                  |  |   |         | 
|------------------------------- |  | ---------------- | ------ |  | ---------------- | - | ------ | ---------------- |  | - | ------- | 
|                                |  | December 31,2010 |        |  | December 31,2009 |   |        | December 31,2008 | 
|Revenues                        |  |                  |        |  |                  |   |        |                  |  |   |         | 
|Rental Income                   |  | $                | 0      |  |                  | $ | 31,015 |                  |  | $ | 207,859 | 
|Other Income                    |  |                  | 0      |  |                  |   | 0      |                  |  |   | 36,200  | 
|                                |  |                  |        |  |                  |   |        |                  |  |   |         | 
|Total Revenues                  |  |                  | 0      |  |                  |   | 31,015 |                  |  |   | 244,059 | 
|                                |  |                  |        |  |                  |   |        |                  |  |   |         | 
|Expenses                        |  |                  |        |  |                  |   |        |                  |  |   |         | 
|Insurance                       |  |                  | 505    |  |                  |   | 0      |                  |  |   | 827     | 
|General and Administrative      |  |                  | 628    |  |                  |   | 0      |                  |  |   | 0       | 
|Professional services           |  |                  | 13,916 |  |                  |   | 5,907  |                  |  |   | 4,314   | 
|Property tax expense            |  |                  | 5,035  |  |                  |   | 13,056 |                  |  |   | 57,085  | 
|Maintenance expense             |  |                  | 4,162  |  |                  |   | 1,376  |                  |  |   | 2,327   | 
|Property impairment write-downs |  |                  | 0      |  |                  |   | 50,000 |                  |  |   | 267,186 | 
|Depreciation                    |  |                  | 0      |  |                  |   | 12,966 |                  |  |   | 26,080  | 
|Amortization                    |  |                  | 0      |  |                  |   | 1,850  |                  |  |   | 7,010   | 
|Other expenses                  |  |                  | 2,250  |  |                  |   | 0      |                  |  |   | 0       | 
|                                |  |                  |        |  |                  |   |        |                  |  |   |         | 
|Total Expenses                  |  |                  | 26,496 |  |                  |   | 85,155 |                  |  |   | 364,829 | 
|                                |  |                  |        |  |                  |   |        |                  |  |   |         | 



35



---

##### Table of Contents

|                                               |  |   |         |   |  |   |         |   |  |   |           |  
|---------------------------------------------- |  | - | ------- | - |  | - | ------- | - |  | - | --------- | -
|Net Loss from Rental Operations                |  | $ | (26,496 | ) |  | $ | (54,140 | ) |  | $ | (120,770  | )
|Net gain on sale of properties                 |  |   | 6,562   |   |  |   | 28,604  |   |  |   | 1,260,262 |  
|                                               |  |   |         |   |  |   |         |   |  |   |           |  
|Net (Loss) Income from Discontinued Operations |  | $ | (19,934 | ) |  | $ | (25,536 | ) |  | $ | 1,139,492 |  
|                                               |  |   |         |   |  |   |         |   |  |   |           |  

4. PARTNERSHIP AGREEMENT:

The Amended Agreement of Limited Partnership was amended, effective as of November 9, 2009, to extend the term of the Partnership to November 30, 2020, or until dissolution prior thereto
pursuant to the consent of the majority of the outstanding Units. The Second Amendment to the Partnership Agreement was filed as Exhibit 4.1 to the Partnership Quarterly Report on Form 10-Q filed November 12, 2009.

The Partnership Agreement, prior to an amendment effective May 26, 1993, provided that, for financial reporting and income tax purposes, net profits
or losses from operations were allocated 90% to the Limited Partners and 10% to the general partners. The Partnership Agreement also provided for quarterly cash distributions from Net Cash Receipts, as defined, within 60 days after the last day of
the first full calendar quarter following the date of release of the subscription funds from escrow, and each calendar quarter thereafter, in which such funds were available for distribution with respect to such quarter. Such distributions were to
be made 90% to Limited Partners and 10% to the former general partners, provided, however, that quarterly distributions were to be cumulative and were not to be made to the former general partners unless and until each Limited Partner had received a
distribution from Net Cash Receipts in an amount equal to 10% per annum, cumulative simple return on his or her Adjusted Original Capital, as defined, from the Return Calculation Date, as defined.

Net Proceeds, as originally defined, were to be distributed as follows: (a) to the Limited Partners, an amount equal to 100% of their Adjusted
Original Capital; (b) then, to the Limited Partners, an amount necessary to provide each Limited Partner a Liquidation Preference equal to a 13.5% per annum, cumulative simple return on Adjusted Original Capital from the Return Calculation
date including in the calculation of such return all prior distributions of Net Cash Receipts and any prior distributions of Net Proceeds under this clause; and (c) then, to Limited Partners, 90% and to the General Partners, 10%, of the
remaining Net Proceeds available for distribution.

On May 26, 1993, pursuant to the results of a solicitation of written consents from
the Limited Partners, the Partnership Agreement was amended to replace the former general partners and amend various sections of the agreement. The former general partners were replaced as General Partner by The Provo Group, Inc., an Illinois
corporation. Under the terms of the amendment, net profits or losses from operations are allocated 99% to the Limited Partners and 1% to the current General Partner. The amendment also provided for distributions from Net Cash Receipts to be made 99%
to Limited Partners and 1% to the current General Partner, provided that quarterly distributions are cumulative and are not to be made to the current General Partner unless and until each Limited Partner has received a distribution from Net Cash
Receipts in an amount equal to 10% per annum, cumulative simple return on his or her Adjusted Original Capital, as defined, from the Return Calculation Date, as defined, except to the extent needed by the General Partner to pay its federal and
state income taxes on the income allocated to it attributable to such year.



36



---

##### Table of Contents

The provisions regarding distribution of Net Proceeds, as defined, were also amended to provide that Net
Proceeds are to be distributed as follows: (a) to the Limited Partners, an amount equal to 100% of their Adjusted Original Capital; (b) then, to the Limited Partners, an amount necessary to provide each Limited Partner a Liquidation
Preference equal to a 13.5% per annum, cumulative simple return on Adjusted Original Capital from the Return Calculation Date including in the calculation of such return on all prior distributions of Net Cash Receipts and any prior
distributions of Net Proceeds under this clause, except to the extent needed by the General Partner to pay its federal and state income tax on the income allocated to it attributable to such year; and (c) then, to Limited Partners, 99%, and to
the General Partner, 1%, of remaining Net Proceeds available for distribution.

Additionally, per the amendment of the Partnership Agreement
dated May 26, 1993, the total compensation paid to all persons for the sale of the investment properties is limited to commissions customarily charged by other brokers in arms-length sales transactions involving comparable properties in
the same geographic area, not to exceed six percent of the contract price for the sale of the property. The General Partner may receive up to one-half of the competitive real estate commission, not to exceed three percent, provided that the General
Partner provides a substantial amount of services in the sales effort. It is further provided that a portion of the amount of such fees payable to the General Partner is subordinated to its success in recovering the funds misappropriated by the
former general partners. See Note 6 for further information.

Effective June 1, 1993, the Partnership Agreement was amended to
(i) change the definition of Distribution Quarter to be consistent with calendar quarters, and (ii) change the distribution provisions to subordinate the General Partners share of distributions from Net Cash Receipts and
Net Proceeds, except to the extent necessary for the General Partner to pay its federal and state income taxes on Partnership income allocated to the General Partner. Because these amendments do not adversely affect the rights of the Limited
Partners, pursuant to section 10.2 of the Partnership Agreement, the General Partner made the amendments without a vote of the Limited Partners.

5. LEASES:

Original lease terms for the majority of the Properties were generally
five to twenty years from their inception. The leases generally provide for minimum rents and additional rents based upon percentages of gross sales in excess of specified breakpoints. The lessee is responsible for occupancy costs such as
maintenance, insurance, real estate taxes, and utilities. Accordingly, these amounts are not reflected in the statements of income except in circumstances where, in Managements opinion, the Partnership will be required to pay such costs to
preserve its assets (i.e., payment of past-due real estate taxes). Management has determined that the leases are properly classified as operating leases; therefore, rental income is reported when earned on a straight-line basis and the cost of the
property, excluding the cost of the land, is depreciated over its estimated useful life.

As of December 31, 2010, the aggregate minimum
operating lease payments to be received under the current operating leases for the Partnerships Properties are as follows:



37



---

##### Table of Contents

|                         |  |   |           | 
|------------------------ |  | - | --------- | 
|Year ending December 31, |  |   |          
|2011                     |  | $ | 1,064,496 | 
|2012                     |  |   | 1,011,830 | 
|2013                     |  |   | 830,278   | 
|2014                     |  |   | 826,500   | 
|2015                     |  |   | 826,500   | 
|Thereafter               |  |   | 4,213,425 | 
|                         |  |   |           | 
|                         |  |   | 8,773,029 | 
|                         |  |   |           | 

Operating percentage rents included in operating rental income in 2010, 2009, and 2008 were approximately $439,000,
$399,000, and $427,000, respectively. At December 31, 2010, rents and other receivables included $404,000 of unbilled percentage rents. As of December 31, 2010, $35,000 of the 2010 percentage rents included in operating rental income had
been billed and collected from the Dennys, Phoenix, AZ (Dennys) property. At December 31, 2009, rents and other receivables included $43,000 of billed and $350,000 of unbilled percentage rents. As of December 31, 2010,
all of the 2009 percentage rents had been billed and collected.

On September 4, 2008, three of the Properties were leased to
Wendcharles, and on July 2, 2007, six of the Properties were leased to Wendgusta. As of December 31, 2010, the two tenants operating base rents have accounted for approximately 20% and 49%, respectively, of the total 2010 operating base
rents.

6. TRANSACTIONS WITH GENERAL PARTNER AND ITS AFFILIATES:

Pursuant to the terms of the Permanent Manager Agreement (PMA) executed in 1993 and renewed for an additional two year term as of January 1, 2011, the General Partner receives a Base Fee
for managing the Partnership equal to four percent of gross receipts, subject to an initial annual minimum amount of $159,000. The PMA also provides that the Partnership is responsible for reimbursement of the General Partner for office rent and
related office overhead (Expenses) up to an initial annual maximum of $13,250. Both the Base Fee and Expense reimbursement are subject to annual Consumer Price Index based adjustments. Effective March 1, 2010, the minimum annual
Base Fee and the maximum Expense reimbursement decreased by .356% from the prior year, which represents the allowable annual Consumer Price Index adjustment per the PMA. Therefore, as of March 1, 2010, the minimum monthly Base Fee paid by the
Partnership was lowered to $20,161 and the maximum monthly Expense reimbursement was lowered to $1,626.

For purposes of computing the four
percent overall fee, gross receipts includes amounts recovered in connection with the misappropriation of assets by the former general partners and their affiliates. To date, TPG has received fees from the Partnership totaling $59,390 on the amounts
recovered, which includes restoration fees received for 2010, 2009 and 2008 of $497, $459 and $535, respectively. The fees received from the Partnership on the amounts recovered reduce the four percent minimum fee by that same amount.

Amounts paid and/or accrued to the General Partner and its affiliates for the years ended December 31, 2010, 2009, and 2008, are as follows:



38



---

##### Table of Contents

|                                         |  |                                            |         |  |                                            |   |         |                                            |  |   |         | 
|---------------------------------------- |  | ------------------------------------------ | ------- |  | ------------------------------------------ | - | ------- | ------------------------------------------ |  | - | ------- | 
|General Partner                          |  | Incurred for theYear
endedDecember 31,2010 |         |  | Incurred for theYear
endedDecember 31,2009 |   |         | Incurred for theYear
endedDecember 31,2008 | 
|Management fees                          |  | $                                          | 241,579 |  |                                            | $ | 240,841 |                                            |  | $ | 232,205 | 
|Restoration fees                         |  |                                            | 497     |  |                                            |   | 459     |                                            |  |   | 535     | 
|Overhead allowance                       |  |                                            | 19,524  |  |                                            |   | 19,464  |                                            |  |   | 18,777  | 
|Sales commission                         |  |                                            | 0       |  |                                            |   | 13,500  |                                            |  |   | 56,600  | 
|Leasing commissions                      |  |                                            | 0       |  |                                            |   | 21,060  |                                            |  |   | 55,872  | 
|Reimbursement for out-of-pocket expenses |  |                                            | 5,273   |  |                                            |   | 5,210   |                                            |  |   | 6,848   | 
|Cash distribution                        |  |                                            | 3,260   |  |                                            |   | 3,290   |                                            |  |   | 9,245   | 
|                                         |  |                                            |         |  |                                            |   |         |                                            |  |   |         | 
|                                         |  | $                                          | 270,133 |  |                                            | $ | 303,824 |                                            |  | $ | 380,082 | 
|                                         |  |                                            |         |  |                                            |   |         |                                            |  |   |         | 

At December 31, 2010 and 2009, $1,825 and $1,819, respectively, was payable to the General Partner, which primarily
represented the applicable years fourth quarter distribution.

As of December 31, 2010, TPG Finance Corp. owned 200 limited
partnership units of the Partnership. The President of the General Partner, Bruce A. Provo, is also the President of TPG Finance Corp., but is not a shareholder.

7. TRANSACTIONS WITH OWNERS WITH GREATER THAN TEN PERCENT BENEFICIAL INTERESTS:

As
of December 31, 2010, Advisory Board Member, Jesse Small, is a greater than ten percent beneficial unit holder. Amounts paid to Mr. Small for the fiscal years ended December 31, 2010, 2009, and 2008 are as follows:



|                         |  |                                            |       |  |                                            |   |       |                                            |  |   |       | 
|------------------------ |  | ------------------------------------------ | ----- |  | ------------------------------------------ | - | ----- | ------------------------------------------ |  | - | ----- | 
|                         |  | Incurred for theYear
endedDecember 31,2010 |       |  | Incurred for theYear
endedDecember 31,2009 |   |       | Incurred for theYear
endedDecember 31,2008 | 
|Advisory Board Fees paid |  | $                                          | 3,500 |  |                                            | $ | 3,000 |                                            |  | $ | 3,500 | 
|                         |  |                                            |       |  |                                            |   |       |                                            |  |   |       | 
|                         |  | $                                          | 3,500 |  |                                            | $ | 3,000 |                                            |  | $ | 3,500 | 
|                         |  |                                            |       |  |                                            |   |       |                                            |  |   |       | 

At December 31, 2010 and 2009, $0, respectively, was payable to Jesse Small.

8. CONTINGENT LIABILITIES:

According to the Partnership Agreement, as amended, TPG, as General Partner, may receive a disposition fee not to exceed three percent of the contract
price on the sale of the three original Partnerships properties. In addition, fifty percent of all such disposition fees earned by TPG were to be escrowed until the aggregate amount of recovery of the funds misappropriated from the
Partnerships by the former general partners was greater than $4,500,000. Upon reaching such recovery level, full disposition fees would thereafter be payable and fifty percent of the previously escrowed amounts would be paid to TPG. At
such time as the recovery exceeded $6,000,000 in the aggregate, the remaining escrowed disposition fees were to be paid to TPG. If such levels of recovery were not achieved, TPG would contribute the amounts escrowed toward the recovery until
the Partnerships were made whole. In lieu of a disposition



39



---

##### Table of Contents

fee escrow, the fifty percent of all such disposition fees previously discussed were paid directly to a restoration account and then distributed among the three original Partnerships; whereby the
Partnerships recorded the recoveries as income (Note 2). After the recovery level of $4,500,000 was exceeded, fifty percent of the total disposition fee amount paid to the Partnerships recovery through the restoration account (in lieu of the
disposition fee escrow) was refunded to TPG during March 1996. The remaining fifty percent amount allocated to the Partnership through the restoration account, and which was previously reflected as Partnership recovery income, may be owed to
TPG if the $6,000,000 recovery level is met. As of December 31, 2010, the Partnership may owe TPG $16,296 if the $6,000,000 recovery level is achieved. TPG does not expect any future refund, as it is uncertain that such a $6,000,000
recovery level will be achieved.

9. PMA INDEMNIFICATION TRUST:

The PMA provides that TPG will be indemnified from any claims or expenses arising out of or relating to TPG serving in such capacity or as substitute general partner, so long as such claims do not arise
from fraudulent or criminal misconduct by TPG. The PMA provides that the Partnership fund this indemnification obligation by establishing a reserve of up to $250,000 of Partnership assets which would not be subject to the claims of the
Partnerships creditors. An Indemnification Trust (Trust) serving such purposes has been established at United Missouri Bank, N.A. The corpus of the Trust has been fully funded with Partnership assets. Funds are invested in U.S.
Treasury securities. In addition, $201,387 of earnings has been credited to the Trust as of December 31, 2010. The rights of TPG to the Trust will be terminated upon the earliest to occur of the following events: (i) the written release by
TPG of any and all interest in the Trust; (ii) the expiration of the longest statute of limitations relating to a potential claim which might be brought against TPG and which is subject to indemnification; or (iii) a determination by a
court of competent jurisdiction that TPG shall have no liability to any person with respect to a claim which is subject to indemnification under the PMA. At such time as the indemnity provisions expire or the full indemnity is paid, any funds
remaining in the Trust will revert back to the general funds of the Partnership.

10. FORMER GENERAL PARTNERS CAPITAL ACCOUNTS:

The capital account balance of the former general partners as of May 26, 1993, the date of their removal as general partners
pursuant to the results of a solicitation of written consents from the Limited Partners, was a deficit of $840,229. At December 31, 1993, the former general partners deficit capital account balance in the amount of $840,229 was
reallocated to the Limited Partners.

11. NOTE RECEIVABLE:

A sales contract was executed on September 30, 2009 for the installment sale of the Panda Buffet property to the tenant for $520,000 (sales amount was to be reduced to $450,000 if closing occurred on
or before November 15, 2009). The closing date on the sale of the Property was November 12, 2009 at a sales price of $450,000. The buyer paid $150,000 at closing with the remaining balance of $300,000 being delivered in the form of a
promissory note (Buyers Note) to the Partnership. A net gain on the sale of approximately $29,000 was recognized in the Fourth Quarter of 2009. The Buyers Note reflects a term of three years, an interest rate of 7.25%, and principal and
interest payments paid monthly and principal amortized over a period of ten years beginning December 1, 2009 with a balloon payment due November 1, 2012. Pursuant to the Buyers Note, there will be no penalty for early payment of principal.
Buyers Note also requires the buyer to escrow property taxes with the Partnership beginning January of 2010 at $1,050 per month. The property tax escrow cash balance held by the Partnership amounted to $12,600 at December 31, 2010, and is
included in the property tax payable in the condensed balance sheets. In January of 2011, approximately $11,000 of the property tax escrow was refunded to the Buyer



40



---

##### Table of Contents

upon proof of the approximately $11,000 payment of the 2010 property tax to the taxing authority. Beginning February 1, 2011, the monthly property tax escrow obligation was reduced to $900
per month.

Per the Buyers Note amortization schedule, the monthly payments are to total approximately $3,522 per month. The first
payment was received by the Partnership on November 30, 2009 and included $2,374 in principal and $1,148 in interest. During the fiscal year ended December 31, 2010, twelve note payments were received by the Partnership and totaled $21,388
in principal and $20,876 in interest.

The amortized principal payments yet to be received under the Buyers Note for the next two years are as
follows:



|                         |  |   |         | 
|------------------------ |  | - | ------- | 
|Year ending December 31, |  |   |        
|2011                     |  | $ | 22,991  | 
|2012                     |  |   | 253,247 | 
|                         |  |   |         | 
|                         |  | $ | 276,238 | 
|                         |  |   |         | 

12. FAIR VALUE DISCLOSURES

The Partnership has determined the fair value based on hierarchy that gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority
to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy under the accounting principle are described below:



|         |  |                                                                                                                                                                                                                                                                                                                                      
|-------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1. |  | Quoted prices in active markets for identical assets or liabilities.                                                                                                                                                                                                                                                                 
|         | 
|Level 2. |  | Quoted prices for similar investments in active markets, quoted prices for identical or similar investments in markets that are not active, and inputs other than quoted prices
that are observable for the investment.                                                                                                              
|         | 
|Level 3. |  | Unobservable inputs for which there is little, if any, market activity for the investment. The inputs into the determination of fair value are based upon the best information in
the circumstances and may require significant management judgment or estimation and the use of discounted cash flow models to value the investment.

The fair value hierarchy is based on the lowest level of input that is significant to the fair value measurements. The Partnerships assessment of the significance of a particular input to the fair
value measurement in its entirety requires judgment, and considers factors specific to the investment.

Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value
on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). There were no fair value adjustments in the fiscal year ended December 31, 2010. For the fiscal year
ended December 31, 2009, total losses of $50,000 represent an impairment charge related to the Park Forest property recorded in 2009.



41



---

##### Table of Contents

13. SUBSEQUENT EVENTS

Limited Partner Distributions

On February 15, 2011, the Partnership made
distributions to the Limited Partners of $280,000, which amounted to $6.05 per Interest.

Dennys Restaurant - Phoenix, AZ Property

The lease for the Dennys restaurant (Dennys) located in Phoenix, AZ is set to expire on April 30, 2011. Per the third
modification to Dennys lease, which was dated January 1, 2011, the tenants lease is to be month-to-month beginning May 1, 2011. In addition, Dennys rent, beginning January 1, 2011 and until the month-to-month lease
should be terminated, will be strictly percentage rent at eight percent of sales over $37,500. In addition, eight percent of sales between $27,500 and $37,500 (up to $800) will be held in a repair fund reserve by the Partnership, from which the
tenant can withdrawal for necessary property improvements upon proper proof of expenditures to the Partnership.

Daytonas All Sports
Café- Des Moines, IA Property

The lease for the Daytonas All Sports Café (Daytonas) located in Des Moines,
IA is set to expire on May 31, 2011. In January of 2011, Management and Daytonas have agreed in principal to a three year lease amendment and extension which is to begin on June 1, 2011 and expire on May 31, 2014. The lease
amendment and extension is anticipated to provide for an annual base rent of $72,000, rent abatement for June for each of the three years, and a continued potential $600 rent credit per month for both timely payment and sales reporting. In addition,
Daytonas is to pay as percentage rent 8% of its annual sales over $850,000. During 2010, Daytonas reported sales to the Partnership of approximately $820,000 (percentage rents were to be charged at six percent over a sales breakpoint of
$900,000). A leasing commission of approximately $6,000 is projected to be paid in 2011 to a General Partner affiliate upon the execution of the lease amendment and extension.



42



---

##### Table of Contents

|Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None.



|Item 9A. | Control and Procedures
|-------- | ----------------------

Controls
and Procedures

As of December 31, 2010, the Partnerships Management (the General Partner), and its principal
executive officer and principal financial officer have concluded that the Partnerships disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the
period covered by this report were effective based on the evaluation of these controls and procedures as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934, as amended.

Managements Report on Internal Control over Financial Reporting

The Partnerships Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of
1934, as amended). The Partnerships Management assessed the effectiveness of the internal control over financial reporting as of December 31, 2010. In making this assessment, the Partnerships management used the criteria set forth
by the Securities and Exchange Commission in Release No. 34-55959 and the interpretive guidance issued there under (as permitted in Rules 13a-15(c) and 15d-15(c) under the Securities Exchange Act of 1934, as amended). The Partnerships
management has concluded that, as of December 31, 2010, the internal control over financial reporting is effective based on these criteria. Further, there were no changes in the Partnerships controls over financial reporting during the
year ended December 31, 2010, that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

The Partnerships Management, does not expect that the disclosure controls and procedures of the internal controls will prevent all error and misstatements. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

This Form 10-K does not include an attestation report of the Partnerships registered public accounting firm regarding
internal control over financial reporting. As a non-accelerated filer, Managements report was not subject to attestation by the Partnerships registered public accounting firm pursuant to small company reporting rules in the Dodd Frank
Act that permit the Partnership to provide only managements report in this Annual Report.



|Item 9B. | Other Information
|-------- | -----------------

None.



43



---

##### Table of Contents

PART III



|Item 10. | Directors and Executive Officers of the Registrant
|-------- | --------------------------------------------------

The Partnership does not have any employees, executive officers, or directors and therefore no board committees.

TPG is an Illinois corporation with its principal office at 1100 Main Street, Suite 1830, in Kansas City, Missouri 64105. TPG was elected General Partner by vote of the Limited Partners effective on
May 26, 1993. Prior to such date, TPG had been managing the Partnership since February 8, 1993, under the terms of the Permanent Manager Agreement as amended (PMA), which remains in effect. See Items 1 and 13 hereof for
additional information about the PMA and the election of TPG as General Partner.

The executive officer and director of the General Partner
who controls the affairs of the Partnership is as follows:

Bruce A. Provo, Age 60 - President, Founder and Director,
TPG.

Mr. Provo has been involved in the management of real estate and other asset portfolios since 1979. TPG was
founded by Mr. Provo in 1985 and he has served as its President since its formation. TPGs focus has been to provide professional real estate services to outside clients. Since the founding of TPG in 1985, Mr. Provo has also founded
various entities engaged in unique businesses such as Rescue Services, Owner Representation, Asset Management, Managed Financial and Accounting Systems, Investments, and Virtual Resort Services, with most entities grouped under an informal umbrella
known as The Provo Group of Companies. Since TPG was appointed General Partner to the Partnership in 1993, Mr. Provo has been primarily responsible for making investment decisions on behalf of the Partnership.

From 1982 to 1986, Mr. Provo also served as President and Chief Operating Officer of the North Kansas City Development Company
(NKCDC), North Kansas City, Missouri. NKCDC was founded in 1903 and the assets of the company were sold in December 1985 for $102,500,000. NKCDC owned commercial and industrial properties, including an office park and a retail district,
as well as apartment complexes, motels, recreational facilities, fast food restaurants, and other properties. NKCDCs holdings consisted of over 100 separate properties and constituted approximately 20% of the privately held real property in
North Kansas City, Missouri (a four square mile municipality). Following the sale of the companys real estate, Mr. Provo served as the President, Chief Executive Officer and Liquidating Trustee of NKCDC from 1986 to 1991.

Mr. Provo graduated from Miami University, Oxford, Ohio in 1972 with a B.S. in Accounting. He became a Certified Public Accountant in
1974 and was a manager in the banking and financial services division of Arthur Andersen LLP prior to joining Rubloff Development Corporation in 1979. From 1979 through 1985, Mr. Provo served as Vice President - Finance and then as President of
Rubloff Development Corporation.

The Advisory Board, although its members are not Directors or Executive Officers of
the Partnership, provides advisory guidance to Management of the Partnership and consists of:

William Arnold -
Investment Broker.Mr. Arnold works as a financial planner, real estate broker, and investment advisor at his company, Arnold & Company. Mr. Arnold



44



---

##### Table of Contents

graduated with a Masters Degree from the University of Wisconsin and is a Certified Financial Planner. He serves as a board representative for the brokerage community.

Jesse Small - CPA.Mr. Small has been a tax and business consultant in Hallandale, FL for more than 30 years.
Mr. Small has a Masters Degree in Economics. Mr. Small is a Limited Partner representing the Partnerships Partners. During the past five years after retiring from the accounting profession, Mr. Small has been developing
property on the east and west coast of Florida.

Albert Kramer - Retired. Mr. Kramer is now retired, but
previously worked as Tax Litigation Manager for Phillips Petroleum Company, now known as ConocoPhillips. His education includes undergraduate and MBA degrees from Harvard and a J.D. Degree from South Texas College of Law. Mr. Kramer is a
Limited Partner representing the Partnerships Partners.

Code of Ethics

The Partnership has no executive officers or any employees and, accordingly, has not adopted a formal code of ethics.

Mr. Provo and TPG require that all personnel, including all employees, officers and directors: engage in honest and ethical conduct; ensure full,
fair, accurate, timely and understandable disclosure; comply with all applicable governmental laws, rules and regulations; and report to Mr. Provo any deviation from these principles. Because TPG has two employees (including Mr. Provo),
and because Mr. Provo is the ultimate decision maker in all instances, TPG has not adopted a formal code of ethics. Mr. Provo, as Chief Executive Officer and Chairman of the Board of Directors of TPG, mitigates and resolves all conflicts
to the best of his ability and determines appropriate actions if necessary to deter violations and promote accountability, consistent with his fiduciary obligations to TPG and the fiduciary obligations of TPG to the Partnership.



|Item 11. | Executive Compensation
|-------- | ----------------------

The
Partnership has not paid any executive compensation to the corporate General Partner or to the directors and officers of the General Partner. The General Partners participation in the income of the Partnership is set forth in the
Partnership Agreement, which is filed as Exhibits 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 hereto. The General Partner received management fees and expense reimbursements during the year.

See Item 13, below, and Note 6 to the Financial Statements in Item 8 hereof for further discussion of payments by the Partnership to the General Partner and the former general partners. The
principal executive officer is not directly compensated by the Partnership for controlling the affairs of the Partnership.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management
|-------- | --------------------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934 requires the officers and directors of TPG, and persons who own 10% or more of the Partnership Interests, to report their beneficial ownership of
such Interests in the Partnership to the SEC. Their initial reports are required to be filed using the SECs Form 3, and they are required to report subsequent purchases, sales, and other changes using the SECs Form 4, which
must be filed within two business days of most transactions. Officers, directors, and persons owning more than 10% of the Partnership Interests are required by SEC regulations to furnish the Partnership with copies of all of reports they file
pursuant to Section 16(a).



45



---

##### Table of Contents

(a) The following table sets forth certain information with respect to such beneficial ownership as of
December 31, 2010. Based on information known to the Partnership and filed with the SEC, the following person is known to beneficially own 5% or more of the outstanding Interests as follows:



|                              |  |                                                            |  |                            |       |  |                                       |  |       |  
|----------------------------- |  | ---------------------------------------------------------- |  | -------------------------- | ----- |  | ------------------------------------- |  | ----- | -
|Title of Class                |  | Name and Address of
Beneficial Owner                       |  | InterestsBeneficiallyOwned |       |  | Percentage 
ofInterestsOutstanding(1) | 
|Limited Partnership Interests |  | Jesse Small (2)(3) 401 NW
10thTerrace
Hallandale, FL 33009 |  |                            | 5,648 |  |                                       |  | 12.20 | %



|(1) | Based on 46,280.3 Limited Partnership Interests outstanding as of December 31, 2010.
|--- | ------------------------------------------------------------------------------------

|(2) | An outsider Form 3 with respect to 2010, due in April 2010, was filed late in June 2010.
|--- | ----------------------------------------------------------------------------------------

|(3) | Jesse Small may be deemed to beneficially own with such voting and investment power the Interests listed above.
|--- | ---------------------------------------------------------------------------------------------------------------

(b) As of December 31, 2010, the General Partner did not own any Limited Partnership Interests in the Partnership. The following chart identifies
the security ownership of the Partnerships principal executive officer and principal financial officer as the sole named executive officer:



|                             |  |                             |  |                                        |     |        |                                      |  |      |  
|---------------------------- |  | --------------------------- |  | -------------------------------------- | --- | ------ | ------------------------------------ |  | ---- | -
|Title of Class               |  | Name of
Beneficial Owner(1) |  | Amount andNature ofBeneficialOwnership |     |        | Percentage
ofInterestsOutstanding(4) | 
|Limited Partnership Interest |  | Bruce A. Provo              |  |                                        | 200 | (2)(3) |                                      |  | 0.43 | %



|(1) | A beneficial owner of a security includes a person who, directly or indirectly, has or shares voting or investment power with respect to such security. Voting power is
the power to vote or direct the voting of the security and investment power is the power to dispose or direct the disposition of the security.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Bruce A. Provo is deemed to have beneficial ownership of all of TPG Finance Corp.s Limited Partnership interests in the Partnership due to his control as
President of TPG Finance Corp.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Bruce A. Provo may be deemed to beneficially own with such voting and investment power the Interests listed above.
|--- | ------------------------------------------------------------------------------------------------------------------

|(4) | Based on 46,280.3 Limited Partnership Interests outstanding as of December 31, 2010.
|--- | ------------------------------------------------------------------------------------

(c) Management 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 Permanent
Management Agreement (PMA). See Item 13 below for further information.



|Item 13. | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------

Pursuant to the terms of the PMA, the General Partner receives a Base Fee for managing the Partnership equal to four percent of gross receipts, subject to a $159,000 minimum annually. The PMA also
provides that the Partnership is responsible for reimbursement for office rent and related office overhead (Expenses) up to a maximum of $13,250 annually. Both the Base Fee and Expense reimbursement are subject to annual Consumer Price
Index based adjustments. Effective March 1, 2010, the minimum annual Base Fee and the maximum Expense reimbursement decreased by .356% from the prior year, which represents the allowable annual Consumer Price Index adjustment per the PMA.
Therefore, as of March 1, 2010, the minimum monthly Base Fee paid by the Partnership was lowered to $20,161 and the maximum monthly Expense reimbursement was lowered to $1,626.



46



---

##### Table of Contents

Additionally, TPG, or their affiliates, are allowed up to one-half of the commissions customarily charged by
other brokers in arms-length sales transactions involving comparable properties in the same geographic area, but such TPG commissions are not to exceed three percent of the contract price on the sale of an investment property. The payment of a
portion of such fees is subordinated to TPGs success at recovering the funds misappropriated by the former general partners. See Note 8 to the financial statements for further information.

The PMA had an original expiration date of December 31, 2002. At the end of the original term, it was extended three years by TPG to an expiration
date of December 31, 2005, an additional three years to an expiration date of December 31, 2008, and then an additional two years to an expiration date of December 31, 2010. Effective January 1, 2011, the PMA was renewed by TPG
for the two-year period ending December 31, 2012. The PMA can be terminated earlier (a) by a vote at any time by a majority in interest of the Limited Partners, (b) upon the dissolution and winding up of the Partnership, (c) upon
the entry of an order of a court finding that TPG has engaged in fraud or other like misconduct or has shown itself to be incompetent in carrying out its duties under the Partnership Agreement, or (d) upon sixty (60) days written notice
from TPG to the Limited Partners of the Partnership. Upon termination of the PMA, other than by the voluntary action of TPG, TPG shall be paid a termination fee of one months Base Fee allocable to the Partnership, subject to a minimum of
$13,250. In the event that TPG is terminated by action of a substitute general partner, TPG shall also receive, as part of this termination fee, 4% of any proceeds recovered with respect to the obligations of the former general partners, whenever
such proceeds are collected.

Under the PMA, TPG shall be indemnified by the Partnership, DiVall and Magnuson, and their controlled
affiliates, and shall be held harmless from all claims of any party to the Partnership Agreement and from any third party including, without limitation, the Limited Partners of the Partnership, for any and all liabilities, damages, costs and
expenses, including reasonable attorneys fees, arising from or related to claims relating to or arising from the PMA or its status as Permanent Manager. The indemnification does not extend to claims arising from fraud or criminal misconduct of
TPG as established by court findings. To the extent possible, the Partnership is to provide TPG with appropriate errors and omissions, officers liability or similar insurance coverage, at no cost to TPG. In addition, TPG was granted the right
to establish an Indemnification Trust in an original amount, not to exceed $250,000, solely for the purpose of funding such indemnification obligations. Once a determination has been made that no such claims can or will be made against TPG, the
balance of the Trust will become unrestricted property of the Partnership. The corpus of the Trust has been fully funded with Partnership assets.

The Partnership paid and/or accrued the following to Management and its affiliates in 2010 and 2009:

The Provo Group, Inc.:



|                          |  |                                            |         |  |                                            |   |         | 
|------------------------- |  | ------------------------------------------ | ------- |  | ------------------------------------------ | - | ------- | 
|                          |  | Incurred for theYear
endedDecember 31,2010 |         |  | Incurred for theYear
endedDecember 31,2009 |  
|Management fees           |  | $                                          | 241,579 |  |                                            | $ | 240,841 | 
|Restoration fees          |  |                                            | 497     |  |                                            |   | 459     | 
|Overhead allowance        |  |                                            | 19,524  |  |                                            |   | 19,464  | 
|Sales commission          |  |                                            | 0       |  |                                            |   | 13,500  | 
|Leasing commissions       |  |                                            | 0       |  |                                            |   | 21,060  | 
|Direct Cost Reimbursement |  |                                            | 5,273   |  |                                            |   | 5,210   | 
|Cash Distributions        |  |                                            | 3,290   |  |                                            |   | 3,290   | 
|                          |  |                                            |         |  |                                            |   |         | 
|                          |  | $                                          | 270,133 |  |                                            | $ | 303,824 | 
|                          |  |                                            |         |  |                                            |   |         | 



47



---

##### Table of Contents

|Item 14. | Principal Accounting Firm Fees and Services
|-------- | -------------------------------------------

Audit Fees

Aggregate billings during the years 2010 and 2009 for audit services provided
by the Partnerships principal accounting firm, McGladrey & Pullen, LLP (M&P), to the Partnership, amounted to $47,077 and $51,720, respectively. Aggregate billings for interim review services provided by the
Partnerships principal accounting firm, M&P, to the Partnership during the years 2010 and 2009, amounted to $15,026 and $13,500, respectively.

Audit-Related Fees

For the years ended December 31, 2010 and 2009, M&P did not
perform any assurance and related services that were reasonably related to the performance of the audit or interim reviews.

Tax Fees

Tax compliance services provided by RSM McGladrey, Inc. (RSM) that were billed during 2010 and 2009 were $25,100 and $23,000,
respectively.

All Other Fees

For the years ended December 31, 2010 and 2009, M&P did not perform any management consulting or other services for the Partnership.

For the years December 31, 2010 and 2009, RSM, did not perform any management consulting or other services for the Partnership.



48



---

##### Table of Contents

PART IV



|Item 15. | Exhibits and Financial Statement Schedule
|-------- | -----------------------------------------

(a) 1.    Financial Statements

The
following financial statements of DiVall Insured Income Properties 2 Limited Partnership are included in Part II, Item 8 of this annual report on Form 10-K:

Report of Independent Registered Public Accounting Firm

Independent
Auditors Report

Balance Sheets, December 31, 2010 and 2009

Statements of Income for the Years Ended December 31, 2010, 2009, and 2008

Statements of Partners Capital for the Years Ended December 31, 2010, 2009, and 2008

Statements of Cash Flows for the Years Ended December 31, 2010, 2009, and 2008

Notes to Financial Statements



|2. | Financial Statement Schedule
|-- | ----------------------------

Schedule III  Investment Properties and Accumulated Depreciation, December 31, 2010

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under
the related instruction or are inapplicable and, therefore, have been omitted.



|3. | Listing of Exhibits
|-- | -------------------

|     |  |                                                                                                                                                                                                                                                                                             
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|4.1  |  | Agreement of Limited Partnership dated as of November 20, 1987, amended as of November 25, 1987, and February 20, 1988, filed as Exhibit 3A to Amendment No. 1 to the
Partnerships Registration Statement on Form S-11 as filed on February 22, 1988, and incorporated herein by reference.
|     | 
|4.2  |  | Amendments to Amended Agreement of Limited Partnership dated as of June 21, 1988, included as part of Supplement dated August 15, 1988, filed under Rule 424(b)(3), incorporated
herein by reference.                                                                                       
|     | 
|4.3. |  | Amendment to Amended Agreement of Limited Partnership dated as of February 8, 1993, filed as Exhibit 3.3 to the Partnerships 10-K for the year ended December 31, 1992, and
incorporated herein by reference.                                                                              
|     | 
|4.4  |  | Amendment to Amended Agreement of Limited Partnership dated as of May 26, 1993, filed as Exhibit 3.4 to the Partnerships 10-K for the year ended December 31, 1993, and
incorporated herein by reference.                                                                                  



49



---

##### Table of Contents

|     |  |                                                                                                                                                                                                                         
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|4.5  |  | Amendment to Amended Agreement of Limited Partnership dated as of June 30, 1994, filed as Exhibit 3.5 to the Partnerships 10-K for the year ended December 31, 1994, and
incorporated herein by reference.             
|     | 
|4.6  |  | Amendment to Amended Agreement of Limited Partnership dated as of November 9, 2009, filed as Exhibit 4.1 to the Partnership Quarterly Report on Form 10-Q filed November 12, 2009,
and incorporated herein by reference.
|     | 
|4.7  |  | Certificate of Limited Partnership dated November 20, 1987, and incorporated herein by reference.                                                                                                                       
|     | 
|10.0 |  | Permanent Manager Agreement filed as an exhibit to the Current Report on Form 8-K dated January 22, 1993, and incorporated herein by reference.                                                                         
|     | 
|31.1 |  | 302 Certifications.                                                                                                                                                                                                     
|     | 
|32.1 |  | Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350.                                                                                                                                          
|     | 
|99.0 |  | Reviewed Financial Statements of Wendgusta, LLC for the fiscal years ended December 26, 2010 and December 27, 2009 prepared by Vrona & Van Schuyler, CPAs, PLLC.                                                        
|     | 
|99.1 |  | Reviewed Financial Statements of Wendcharles I, LLC for the fiscal years ended December 26, 2010 and December 27, 2009 prepared by Vrona &Van Schuyler, CPAs,
PLLC.                                                     



50



---

##### Table of Contents

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

SCHEDULE III  INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2010



|                       |  |              |   |  |                             |   |           |                                          |  |   |                                             |      |  |                         |                          |  |                     |       |           |              |  |   |                                                                         |  |  |   |           |  |  |   |           |  |  |  |      |  |  |  |          |  |  |  |      | 
|---------------------- |  | ------------ | - |  | --------------------------- | - | --------- | ---------------------------------------- |  | - | ------------------------------------------- | ---- |  | ----------------------- | ------------------------ |  | ------------------- | ----- | --------- | ------------ |  | - | ----------------------------------------------------------------------- |  |  | - | --------- |  |  | - | --------- |  |  |  | ---- |  |  |  | -------- |  |  |  | ---- | 
|                       |  |              |   |  | Initial Cost to Partnership |   |           | CostsCapitalizedSubsequenttoAcquisitions |  |   | Gross Amount at whichCarried at End of
Year |      |  | AccumulatedDepreciation |                          |  | Date
ofConstruction |       |           | DateAcquired |  |   | Life
onwhichDepreciationinlateststatementofoperationsis computed(years) | 
|Property               |  | Encumbrances |   |  | Land                        |   |           | BuildingandImprovements                  |  |   |                                             | Land |  |                         | Building
andImprovements |  |                     | Total |           |              |  |   |                                                                        
|Phoenix, AZ            |  |              |  |  |                             | $ | 444,224   |                                          |  | $ | 421,676                                     |      |  |                         |                         |  |                     | $     | 444,224   |              |  | $ | 421,676                                                                 |  |  | $ | 865,900   |  |  | $ | 320,085   |  |  |  |     |  |  |  | 6/15/88  |  |  |  | 31.5 | 
|Phoenix, AZ (1)        |  |              |  |  |                             |   | 482,383   |                                          |  |   | 490,343                                     |      |  |                         |                         |  |                     |       | 453,433   |              |  |   | 428,676                                                                 |  |  |   | 882,109   |  |  |   | 323,740   |  |  |  |     |  |  |  | 8/15/88  |  |  |  | 31.5 | 
|Santa Fe, NM           |  |              |  |  |                             |   |          |                                          |  |   | 451,230                                     |      |  |                         |                         |  |                     |       |          |              |  |   | 451,230                                                                 |  |  |   | 451,230   |  |  |   | 318,456   |  |  |  |     |  |  |  | 10/10/88 |  |  |  | 31.5 | 
|Augusta, GA (2)        |  |              |  |  |                             |   | 215,416   |                                          |  |   | 434,178                                     |      |  |                         |                         |  |                     |       | 213,226   |              |  |   | 434,177                                                                 |  |  |   | 647,403   |  |  |   | 311,161   |  |  |  |     |  |  |  | 12/22/88 |  |  |  | 31.5 | 
|Charleston, SC         |  |              |  |  |                             |   | 273,619   |                                          |  |   | 323,162                                     |      |  |                         |                         |  |                     |       | 273,619   |              |  |   | 323,162                                                                 |  |  |   | 596,781   |  |  |   | 231,600   |  |  |  |     |  |  |  | 12/22/88 |  |  |  | 31.5 | 
|Aiken, SC              |  |              |  |  |                             |   | 402,549   |                                          |  |   | 373,795                                     |      |  |                         |                         |  |                     |       | 402,549   |              |  |   | 373,795                                                                 |  |  |   | 776,344   |  |  |   | 266,747   |  |  |  |     |  |  |  | 2/21/89  |  |  |  | 31.5 | 
|Augusta, GA            |  |              |  |  |                             |   | 332,154   |                                          |  |   | 396,659                                     |      |  |                         |                         |  |                     |       | 332,154   |              |  |   | 396,659                                                                 |  |  |   | 728,813   |  |  |   | 283,063   |  |  |  |     |  |  |  | 2/21/89  |  |  |  | 31.5 | 
|Mt. Pleasant, SC (3)   |  |              |  |  |                             |   | 286,060   |                                          |  |   | 294,878                                     |      |  |                         |                         |  |                     |       | 252,069   |              |  |   | 294,878                                                                 |  |  |   | 546,947   |  |  |   | 210,430   |  |  |  |     |  |  |  | 2/21/89  |  |  |  | 31.5 | 
|Charleston, SC         |  |              |  |  |                             |   | 273,625   |                                          |  |   | 254,500                                     |      |  |                         |                         |  |                     |       | 273,625   |              |  |   | 254,500                                                                 |  |  |   | 528,125   |  |  |   | 181,616   |  |  |  |     |  |  |  | 2/21/89  |  |  |  | 31.5 | 
|Aiken, SC              |  |              |  |  |                             |   | 178,521   |                                          |  |   | 455,229                                     |      |  |                         |                         |  |                     |       | 178,521   |              |  |   | 455,229                                                                 |  |  |   | 633,750   |  |  |   | 324,859   |  |  |  |     |  |  |  | 3/14/89  |  |  |  | 31.5 | 
|Des Moines, IA (1) (4) |  |              |  |  |                             |   | 164,096   |                                          |  |   | 448,529                                     |      |  | $                       | 296,991                  |  |                     |       | 161,996   |              |  |   | 560,057                                                                 |  |  |   | 722,053   |  |  |   | 408,534   |  |  |  | 1989 |  |  |  | 8/1/89   |  |  |  | 31.5 | 
|North Augusta, SC      |  |              |  |  |                             |   | 250,859   |                                          |  |   | 409,297                                     |      |  |                         |                         |  |                     |       | 250,859   |              |  |   | 409,297                                                                 |  |  |   | 660,156   |  |  |   | 278,183   |  |  |  |     |  |  |  | 12/29/89 |  |  |  | 31.5 | 
|Martinez, GA           |  |              |  |  |                             |   | 266,175   |                                          |  |   | 367,575                                     |      |  |                         |                         |  |                     |       | 266,175   |              |  |   | 367,575                                                                 |  |  |   | 633,750   |  |  |   | 249,826   |  |  |  |     |  |  |  | 12/29/89 |  |  |  | 31.5 | 
|Columbus, OH           |  |              |  |  |                             |   | 351,325   |                                          |  |   | 708,141                                     |      |  |                         |                         |  |                     |       | 351,325   |              |  |   | 708,140                                                                 |  |  |   | 1,059,465 |  |  |   | 470,195   |  |  |  |     |  |  |  | 6/1/90   |  |  |  | 31.5 | 
|                       |  |              |   |  |                             |   |           |                                          |  |   |                                             |      |  |                         |                          |  |                     |       |           |              |  |   |                                                                         |  |  |   |           |  |  |   |           |  |  |  |      |  |  |  |          |  |  |  |      | 
|                       |  | $            | 0 |  |                             | $ | 3,921,006 |                                          |  | $ | 5,829,192                                   |      |  | $                       | 296,991                  |  |                     | $     | 3,853,775 |              |  | $ | 5,879,051                                                               |  |  | $ | 9,732,826 |  |  | $ | 4,178,495 |  |  |  |      |  |  |  |          |  |  |  |      | 
|                       |  |              |   |  |                             |   |           |                                          |  |   |                                             |      |  |                         |                          |  |                     |       |           |              |  |   |                                                                         |  |  |   |           |  |  |   |           |  |  |  |      |  |  |  |          |  |  |  |      | 



|(1) | This property was written down to its estimated net realizable value at December 31, 1998.
|--- | ------------------------------------------------------------------------------------------

|(2) | In the Fourth Quarter of 2001, a portion of the land was purchased from the Partnership by the County Commission for utility and maintenance easement.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | In the Fourth Quarter of 2010, a portion of the land was reclassified to property held for as the City of Charleston is to purchase the land for right of way purposes.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Building improvements were incurred at the property during the fourth quarter of 2009.
|--- | --------------------------------------------------------------------------------------



51



---

##### Table of Contents

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

SCHEDULE III  INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2010

(B) Reconciliation of Investment Properties and Accumulated Depreciation:



|                                              |  |                            |            |   |                            |   |            |                          |  |                                              |  |   |                            |   |  |   |           |  
|--------------------------------------------- |  | -------------------------- | ---------- | - | -------------------------- | - | ---------- | ------------------------ |  | -------------------------------------------- |  | - | -------------------------- | - |  | - | --------- | -
|Investment Properties                         |  | Year
EndedDecember 31,2010 |            |   | Year
EndedDecember 31,2009 |   |            | Accumulated Depreciation |  | Year
EndedDecember 31,2010                   |  |   | Year
EndedDecember 31,2009 |  
|Balance at beginning of year                  |  | $                          | 10,022,119 |   |                            | $ | 10,802,494 |                          |  | Balance at beginning of year                 |  | $ | 4,260,745                  |   |  | $ | 4,438,474 |  
|Additions:                                    |  |                            |            |   |                            |   |            |                          |  | Additions charged to costs and expenses      |  |   | 173,052                    |   |  |   | 185,806   |  
|Daytonas All Sports Cafe- Des Moines, IA (1) |  |                            | 0          |   |                            |   | 9,000      |                          |  |                                              |  |   |                            |   |  |   |           |  
|Deletions:                                    |  |                            |            |   |                            |   |            |                          |  |                                              |  |   |                            |   |  |   |           |  
|Vacant- Park Forest, IL (2) (3)               |  |                            | (255,302   | ) |                            |   | (50,000    | )                        |  | Vacant- Park Forest, IL (3)                  |  |   | (255,302                   | ) |  |   |           |  
|Wendys- North Augusta, SC (4)                |  |                            | (33,991    | ) |                            |   |            |                          |  |                                              |  |   |                            |   |  |   |           |  
|Panda Buffet restaurant- Grand Forks, ND (5)  |  |                            | 0          |   |                            |   | (739,375   | )                        |  | Panda Buffet restaurant- Grand Forks, ND (5) |  |   |                            |   |  |   | ((363,535 | )
|                                              |  |                            |            |   |                            |   |            |                          |  |                                              |  |   |                            |   |  |   |           |  
|Balance at end of year                        |  | $                          | 9,732,826  |   |                            | $ | 10,022,119 |                          |  | Balance at end of year                       |  | $ | 4,178,495                  |   |  | $ | 4,260,745 |  
|                                              |  |                            |            |   |                            |   |            |                          |  |                                              |  |   |                            |   |  |   |           |  



|(1) | Building improvements were incurred at the property during the fourth quarter of 2009.
|--- | --------------------------------------------------------------------------------------

|(2) | The property was written-down $50,000 to its estimated net realizable value of zero during the fourth quarter of 2009.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(3) | The property was reclassified to property held for sale in the third quarter of 2010 and sold in the fourth quarter of 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------------

|(4) | A portion of the land was reclassified to property held for as the City of Charleston is to purchase the land for right of way purposes.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(5) | This property was reclassified to property held for sale in the third quarter of 2009 and sold in the fourth quarter of 2009.
|--- | -----------------------------------------------------------------------------------------------------------------------------



52



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP



|    |  |                                       
|--- |  | --------------------------------------
|By: |  | The Provo Group, Inc., General Partner
|    | 
|By: |  | /s/ Bruce A. Provo                    
|    |  | Bruce A. Provo, President             

Date: March 24, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.



|                                                                                                                                                     
|-----------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                     
|/s/ Bruce A. Provo                                                                                                                                   
|Bruce A. Provo                                                                                                                                       
|President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Chairman of the Board of Directors of The Provo Group, Inc.
|(principal executive officer, principal financial officer and principal accounting officer)                                                          



|                                 
|---------------------------------
|                                 
|/s/ Caroline E. Provo            
|Caroline E. Provo                
|Director of The Provo Group, Inc.

Date: March 24,
2011



53