<PAGE>

                                   FORM 10-Q/A
                                 AMENDMENT NO. 1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2002

                                       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                 (I.R.S. Employer
      incorporation or organization)                Identification No.)

           101 W. 11th Street, Suite 1110, 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 (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 [ ]

EXPLANATORY NOTE

Note: This amendment is filed to restate the accounting for the operations of
assets held for sale as discontinued operations as required by Statement of
Financial Accounting Standards No. 144, " Accounting for the Impairment or
Disposal of Long-Lived Assets." During the three months and six months ended
June 30, 2002, the Partnership recognized income from discontinued operations of
$13,000 and $25,000, respectively, which reduced income from continuing
operations by these same amounts.

In Note 5 to the Notes to the condensed financial statements, the aggregate
minimum lease payments to be received under the leases for the Partnership's
properties as of June 30, 2002 decreased by approximately $12,000 to correct for
an error in the amounts previously disclosed.

<PAGE>

                         PART I - FINANCIAL INFORMATION
                          Item 1. Financial Statements

             DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
                            CONDENSED BALANCE SHEETS

                       June 30, 2002 and December 31, 2001

                                     ASSETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    June 30,
                                                                      2002
                                                                 (As Restated,    December 31,
                                                                  see Note 12)        2001
                                                                 -------------    ------------
<S>                                                              <C>              <C>
INVESTMENT PROPERTIES AND EQUIPMENT: (Note 3)

     Land                                                        $   7,264,553    $  7,296,406
     Buildings                                                      10,906,597      11,561,307
     Equipment                                                         669,778         669,778
     Accumulated depreciation                                       (5,805,691)     (5,854,938)
                                                                 -------------    ------------

               Net investment properties and equipment              13,035,237      13,672,553

OTHER ASSETS:

     Property held for sale                                            470,060               0
     Cash and cash equivalents                                         903,596         818,606
     Cash held in Indemnification Trust (Note 8)                       375,447         372,167
     Property tax escrow                                                     0           7,875
     Rents and other receivables (Net of allowance of
      $102,001 and  $39,636, respectively)                             116,283         546,771
     Property tax receivable                                             8,293          30,977
     Deferred rent receivable                                          107,751         105,633
     Prepaid insurance                                                   8,814          22,035
     Deferred charges                                                  279,459         286,067
     Note receivable  (Note 3)                                               0          39,250
                                                                 -------------    ------------
               Total other assets                                    2,269,703       2,229,381
                                                                 -------------    ------------
               Total assets                                      $  15,304,940    $ 15,901,934
                                                                 =============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        2

<PAGE>

             DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
                            CONDENSED BALANCE SHEETS

                       June 30, 2002 and December 31, 2001

                        LIABILITIES AND PARTNERS' CAPITAL
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   June 30,
                                                                     2002
                                                                 (As Restated,    December 31,
                                                                  see Note 12)       2001
                                                                 -------------    ------------
<S>                                                              <C>              <C>
LIABILITIES:

     Accounts payable and accrued expenses                       $     130,167    $     92,802
     Property taxes payable                                                  0          25,105
     Due to General Partner                                              1,297           1,795
     Security deposits                                                 109,017         109,017
     Unearned rental income                                             41,988         172,723
                                                                 -------------    ------------
          Total liabilities                                            282,469         401,442
                                                                 =============    ============

CONTINGENT LIABILITIES: (Note 7)

PARTNERS' CAPITAL: (Notes 1, 4 and 9)
     Current General Partner -
          Cumulative net income                                        177,266         172,176

          Cumulative cash distributions                                (72,977)        (70,941)
                                                                 -------------    ------------
                                                                       104,289         101,235
     Limited Partners (46,280.3 interests outstanding)
          Capital contributions, net of offering costs              39,358,468      39,358,468
          Cumulative net income                                     23,915,211      23,411,286
          Cumulative cash distributions                            (47,515,268)    (46,530,268)
          Reallocation of former general partners'
           deficit capital                                            (840,229)       (840,229)
                                                                 -------------    ------------
                                                                    14,918,182      15,399,257
                                                                 -------------    ------------
               Total partners' capital                              15,022,471      15,500,492
                                                                 -------------    ------------
               Total liabilities and partners' capital           $  15,304,940    $ 15,901,934
                                                                 =============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        3

<PAGE>

             DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
                         CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        Three Months Ended               Six Months Ended
                                                                  ----------------------------     ----------------------------
                                                                             June 30,                        June 30,
                                                                  ----------------------------     ----------------------------
                                                                      2002           2001              2002            2001
                                                                  (As Restated,   (As Restated,    (As Restated,   (As Restated,
                                                                  see Note 12)    see Note 12)     see Note 12)    see Note 12)
                                                                  ------------    ------------     ------------    ------------
<S>                                                               <C>             <C>              <C>             <C>
CONTINUING OPERATIONS:
REVENUES:

     Rental income (Note 5)                                       $    511,523    $    561,644     $  1,001,908    $  1,135,126
     Interest income                                                     4,659          11,584            8,672          25,757
     Lease termination fee (Note 3)                                          0         157,000                0         157,000
     Recovery of amount previously written off (Note 2)                    232           1,391              232           4,172
     Other income                                                            0             134            8,059             318
                                                                  ------------    ------------     ------------    ------------
                                                                       516,414         731,753        1,018,871       1,322,373
                                                                  ============    ============     ============    ============

EXPENSES:
     Partnership management fees   (Note 6)                             49,911          48,505           98,925          95,891
     Insurance                                                           6,611           6,827           13,221           9,655
     General and administrative                                         26,716          25,408           47,562          46,743
     Advisory Board fees and expenses                                    2,188           2,188            5,924           6,462
     Write-off non-collectible receivables                              56,352           7,561           58,369          15,561
     Ground lease payments  (Note 3)                                         0          18,951                0          35,803
     Maintenance                                                         1,084           1,205            1,084           1,205
     Expenses incurred due to default by lessee                          4,155               0            4,860               0
     Professional services                                              42,914          38,476           92,910         130,086
     Restoration fees   (Note 6)                                             9              56                9             167
     Judgment expense  (Note 10)                                        45,128               0           45,128               0
     Depreciation                                                       80,592          82,456          161,182         164,912
     Amortization                                                        3,026          11,669            6,053          14,527
                                                                  ------------    ------------     ------------    ------------
                                                                       318,686         243,302          535,227         521,012
                                                                  ------------    ------------     ------------    ------------
INCOME FROM CONTINUING OPERATIONS                                      197,728         488,451          483,644         801,361
INCOME FROM DISCONTINUED OPERATIONS                                     13,293          12,078           25,371          24,157
                                                                  ------------    ------------     ------------    ------------
NET INCOME                                                        $    211,021    $    500,529     $    509,015    $    825,518
                                                                  ============    ============     ============    ============
NET INCOME - CURRENT GENERAL PARTNERS                             $      2,110    $      5,005     $      5,090    $      8,255
NET INCOME - LIMITED PARTNERS                                          208,911         495,524          503,925         817,263
                                                                  ------------    ------------     ------------    ------------
NET INCOME                                                        $    211,021    $    500,529     $    509,015    $    825,518
                                                                  ============    ============     ============    ============
PER LIMITED PARTNERSHIP INTEREST, based on 46,280.3
 Interests outstanding:
INCOME FROM CONTINUING OPERATIONS                                 $       4.23    $      10.45     $      10.35    $      17.14
INCOME FROM DISCONTINUED OPERATIONS                                        .28             .26              .54             .52
                                                                  ------------    ------------     ------------    ------------
INCOME PER LIMITED PARTNERSHIP INTEREST                           $       4.51    $      10.71     $      10.89    $      17.66
                                                                  ============    ============     ============    ============
</TABLE>

         The accompanying notes are an integral part of these statements

                                        4

<PAGE>

             DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP
                       CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   Six Months Ended June 30,
                                                                  ----------------------------
                                                                      2002            2001
                                                                  (As Restated,   (As Restated,
                                                                  see Note 12)    see Note 12)
                                                                  ------------    ------------
<S>                                                               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

     Net income                                                   $    509,015    $    825,518

     Adjustments to reconcile net income to net
      cash  from operating activities -
          Depreciation and amortization                                173,864         187,282
          Recovery of amounts previously written off                      (232)         (4,172)
          Provision from non-collectible rents and receivables          58,369          15,561
          Interest applied to Indemnification Trust account             (3,280)         (9,622)
          Lease termination fee                                              0        (117,750)
          Decrease/(Increase) in property tax escrow                     7,875          (7,875)
          Payment of deferred leasing commissions                            0         (69,509)
          Decrease in rents and other receivables                      394,803         434,071
          Decrease in prepaid assets                                    13,221           9,655
          (Increase) in deferred rent receivable                        (2,118)         (3,780)
          (Decrease) in due to current General Partner                    (498)           (665)
          Increase in accounts payable and other accrued
           expenses                                                     12,260          52,821
          Increase in security deposits                                      0           7,000
          Increase in security deposit
          (Decrease) in unearned rental income                        (130,735)        (43,342)
                                                                  ------------    ------------
               Net cash from operating activities                    1,032,544       1,275,193
                                                                  ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Collection of Note receivable                                      39,250               0
     Recoveries from former affiliates                                     232           4,172
                                                                  ------------    ------------
               Net cash from investing activities                       39,482           4,172
                                                                  ------------    ------------

CASH FLOWS (USED IN) FINANCING ACTIVITIES:

     Cash distributions to Limited Partners                           (985,000)    (1,115,000)
     Cash distributions to current General Partner                      (2,036)        (3,302)
                                                                  ------------    ------------
     Net cash (used in) financing activities                          (987,036)     (1,118,302)
                                                                  ------------    ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                               84,990         161,063

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                       818,606         752,060
                                                                  ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                        $    903,596    $    913,123
                                                                  ============    ============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        5

<PAGE>

             DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

These unaudited interim financial statements should be read in conjunction with
DiVall Insured Income Properties 2 Limited Partnership' (the "Partnership") 2001
annual audited financial statements within Form 10-K.

These unaudited financial statements include all adjustments, which are, in the
opinion of management, necessary to present a fair statement of financial
position as of June 30, 2002, and the results of operations for the three and
six-month periods ended June 30, 2002 and 2001, and cash flows for the six-month
periods ended June 30, 2002 and 2001. Results of operations for the periods are
not necessarily indicative of the results to be expected for the full year.

1.   ORGANIZATION AND BASIS OF ACCOUNTING:

The Partnership was formed on November 18, 1987, pursuant to the Uniform Limited
Partnership Act of the State of Wisconsin. The initial capital, which was
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 escrow
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 (the "Properties") of commercial real estate. The
Properties are leased on a triple net basis to, and operated by, franchisers or
franchisees of national, regional, and local retail chains under long-term
leases. The lessees consist primarily of fast-food, family style, and
casual/theme restaurants, but also include a video rental store and a child care
center. At June 30, 2002, the Partnership owned 26 properties with specialty
leasehold improvements in 10 of these properties.

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

The Partnership considers its operations to be in only one segment and therefore
no segment disclosure is made.

                                        6

<PAGE>

Depreciation of the properties and improvements is provided on a straight-line
basis over 31.5 years, which is the estimated useful life of the buildings and
improvements. Equipment is depreciated on a straight-line basis over the
estimated useful lives of 5 to 7 years.

Deferred charges consist of leasing commissions paid when properties are leased
to tenants and the negotiated extension of a lease. Leasing commissions are
capitalized and amortized over the life of the lease.

Real estate taxes 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, the Partnership makes the
appropriate payment to avoid possible foreclosure of the property. Taxes are
accrued in the period in which the liability is incurred.

Cash and cash equivalents include cash on deposit with financial institutions
and highly liquid temporary investments with initial maturities of 90 days or
less.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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.

The Partnership previously followed Statement of Financial Accounting Standards
No.121 ("FAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", which required that all long-lived assets
be reviewed for impairment in value whenever changes in circumstances indicated
that the carrying amount of an asset may not be recoverable. In October 2001,
Statement of Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("FAS 144") was issued. FAS 144
supercedes FAS 121. FAS 144 primarily addresses issues relating to the
implementation of FAS 121 and develops a single accounting model for long-lived
assets to be disposed of, whether previously held and used or newly acquired.
The provisions of FAS 144 became effective for fiscal years beginning after
December 15, 2001. The Company adopted FAS 144 on January 1, 2002. See Note 3
for a discussion of the effect of adopting FAS 144.

The Partnership will be dissolved on November 30, 2010, 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 Quarter of 1998, the General
Partner received the consent of the Limited Partners to liquidate the
Partnership's assets and dissolve the Partnership. No buyer was identified for
the Partnership's assets, and Management continued normal operations. During the
Second Quarter of 2001, another consent letter was sent to Limited Partners. The
General Partner did not receive majority approval to sell the assets of the
Partnership for purposes of liquidation. The Partnership, therefore, continued
to operate as a going concern.

No provision for Federal income taxes has been made, as any liability for such
taxes would be that of the

                                        7

<PAGE>

individual partners rather than the Partnership. At December 31, 2001, the tax
basis of the Partnership's assets exceeded the amounts reported in the
accompanying financial statements by approximately $7,859,000.

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
partnerships, DiVall Insured Income Fund Limited Partnership ("DiVall 1")
(dissolved effective December 31, 1998) and DiVall Income Properties 3 Limited
Partnership ("DiVall 3") (collectively the "Partnerships") to various other
entities previously sponsored by or otherwise affiliated with DiVall and
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, a
third-party Permanent Manager, The Provo Group, Inc. ("TPG"), was appointed
(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 the Permanent Manager,
TPG, as General Partner. TPG terminated the former general partners by accepting
their tendered resignations.

In 1993, the current 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. Through June 30, 2002, $5,804,000 of recoveries has been
received which exceeded the original estimate of $3 million. As a result, since
1996, the Partnership has recognized $1,125,000 as income as recovery of amounts
previously written off in the statements of income, which represents its share
of the excess recovery. No further significant recoveries are anticipated.

3.   INVESTMENT PROPERTIES:

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

As of June 30, 2002, the Partnership owned 24 fully constructed fast-food
restaurants, a video store, and a preschool. The properties are composed of the
following: ten (10) Wendy's restaurants, one (1) Denny's restaurant, one (1)
Applebee's restaurant, one (1) Popeye's Famous Fried Chicken restaurant, one (1)
Hooter's restaurant, one (1) Kentucky Fried Chicken restaurant, one (1)
Daytona's Bar and Grill restaurant, one (1) Hardee's restaurant, one (1) Miami
Subs restaurant, one (1) Omega restaurant, one (1) Blockbuster Video store, one
(1) Sunrise Preschool, one (1) Chinese restaurant, one (1) Village Inn
restaurant, and three (3) vacant properties, (which were previously operated as
a Fiesta Time restaurant, and two (2) Hardee's restaurants.) The 26 properties
are located in a total of thirteen (13) states.

                                        8

<PAGE>

Income from discontinued operations was $13,000 and $12,000, respectively, for
the quarters ended June 30, 2002 and 2001. For the six-months ended June 30,
2002 and 2001 income from discontinued operations totaled $25,000 and $24,000,
respectively. In accordance with SFAS 144, discontinued operations represent the
operations of properties disposed of or classified as held for sale subsequent
to January 1, 2002 as well as any gain or loss recognized in their disposition.
One property, Hardee's- Hartford, was classified as held for sale as of June 30,
2002, therefore, the operating results of this property are reflected as income
from discontinued operations for the three and six month periods ended June 30,
2002 and 2001.

The components of discontinued operations for the three-months and six-months
ended June 30, 2002 and 2001 are outlined below and include the results of
operations for the Hardee's- Hartford property, as it was classified as property
held for sale as of June 30, 2002.

<TABLE>
<CAPTION>
                           Three months ended      Three months ended      Six months ended      Six months ended
                             June 30, 2002           June 30, 2001           June 30, 2002         June 30, 2001
                           ------------------      ------------------      ----------------      ----------------
<S>                        <C>                     <C>                     <C>                   <C>
Revenues
     Rental Income         $           16,000      $           16,000      $         32,000      $         32,000

Expenses
     Depreciation                       2,429                   3,644                 6,074                 7,288
     Amortization                         278                     278                   555                   555
                           ------------------      ------------------      ----------------      ----------------
Income from Discontinued
 Operations                $           13,293      $           12,078      $         25,371      $         24,157
                           ==================      ==================      ================      ================
</TABLE>

During the Second Quarter of 2002, Management entered a contract to sell the
vacant Hardee's restaurant in Hartford, Wisconsin in the Third Quarter of 2002
at a sales price of $618,000. During December 2001, Hardee's Food Systems, Inc.
had notified Management that it had vacated its restaurant in Hartford,
Wisconsin. Hardee's lease on the Hartford property was set to expire on April
30, 2009 and they will be required to continue making rent payments until the
sale date. The net asset value of the property at June 30, 2002 was
approximately $470,000, which includes $202,000 related to land and $268,000
related to buildings and equipment, and is included in property held for sale on
the balance sheet. The Partnership intends to pay TPG a sales commission upon
the sale amounting to $18,500, in the Third Quarter of 2002. No commissions are
to be paid to unaffiliated brokers by the Partnership.

During the Second Quarter of 2002, Mountain Range Restaurants, the sub-lessee of
the Denny's- N. 7th Street property in Phoenix, Arizona, notified Management
that it would vacate the property at the end of May 2002. During the Fourth
Quarter of 2001, the Bankruptcy court granted the motion of Lessee, Phoenix
Restaurant Group, Inc. ("Phoenix"), to reject the lease with the Partnership at
the Phoenix, Arizona location. Following the rejection of this lease by Phoenix,
the Mountain Range Restaurants declined the Partnership's offer to lease the
property directly to them. Therefore, the property was vacated and rent ceased
as of May 31, 2002. Management intends to market the property for lease or sale.

                                        9

<PAGE>

During March 2002, Hardee's Food Systems, Inc. notified Management of its intent
to close its restaurant in Fond du Lac, Wisconsin in April 2002. Hardee's lease
on the Fond du Lac property is set to expire on September 30, 2009 and they will
be required to continue making rent payments until the lease expiration date or
until a lease termination agreement is entered into.

During March 2001, Hardee's Food Systems, Inc. notified Management of its intent
to close its restaurant in South Milwaukee, Wisconsin. Hardee's lease on the
South Milwaukee property expired on November 30, 2001 and they continued making
rent payments until the lease expiration date. This lease was not renewed, and
therefore, Management continues to market the property for sale or lease to a
new operator.

During March 2001, Hardee's Food Systems, Inc. notified Management of its intent
to close its restaurant in Milwaukee, Wisconsin. The Hardee's lease on the
Milwaukee property was not set to expire until 2009. In the Second Quarter of
2001, a lease termination agreement was executed and the tenant ceased the
payment of rent as of April 30, 2001. Hardee's Food Systems agreed to pay a
lease termination fee of approximately two (2) years rent or $157,000. The
payment schedule included four (4) equal installments of $39,250. The first
payment was received in May 2001 upon the execution of the agreement. The second
and third Note receivable installments were received in August and October 2001.
The final installment, which is reflected as a Note receivable on the balance
sheet at December 31, 2001, was received in January 2002.

During May 2001, Management negotiated the re-lease of the vacant Milwaukee,
Wisconsin property to Omega Restaurant in June 2001 and rent income commenced in
October 2001. Commissions of $50,000 and $9,000 were paid to an unaffiliated
leasing agent and to an affiliate of the General Partner, respectively, upon the
execution of the new lease in the Second Quarter of 2001.

The Blockbuster Video Store lease expired on January 31, 2001. However, in the
First Quarter of 2001, Management negotiated a five (5) year lease extension to
January 31, 2006. A commission of $10,000 was paid to an unaffiliated leasing
agent upon the negotiated extension of the lease.

During the Fourth Quarter of 2001, the Bankruptcy court granted the motion of
Phoenix Restaurant Group, Inc. ("Phoenix") to reject the lease with the
Partnership at the Twin Falls, Idaho location. Although Phoenix's lease on the
Twin Falls property expires on April 30, 2012, due to bankruptcy proceedings of
Phoenix, the lease was rejected and rent income ceased in the Fourth Quarter of
2001. The remaining balance due the Partnership of approximately $29,000 from
the former tenant has been reserved. This amount is included in the
Partnership's filing for damages in Bankruptcy court of approximately $85,000,
or one year's rent, although it is uncertain whether the amount will be
collectible. In addition, in Management's opinion, since Phoenix rejected the
lease, its subtenant, Fiesta Time, is not entitled to possession of the
property. Therefore, Management is in the process of evicting and obtaining
possession of the property from Fiesta Time, after which Management intends to
market the property for lease or sale.

During April 2001, the sub-tenant AMF Corporation ("AMF) notified Management of
its intent to close and vacate its Mulberry Street Grill restaurant in Phoenix,
Arizona. Although the lease on the property was not set to expire until 2007,
monthly rental and Common Area Maintenance (CAM) income ceased as of June 1,
2001. The past due rent amount of $10,000 has been reserved. Management has
moved forward with all legal remedies to collect the balances due from AMF. Due
to Management's return of possession of the property to

                                       10

<PAGE>

the Ground Lease landlord, the net asset value of the property was written-off
in the Fourth Quarter of 2001, resulting in a loss of $157,000. As of December
31, 2001 the Partnership had withheld the May through December 2001 accrued
ground lease obligations totaling approximately $50,000 related to the property.
In the Second Quarter of 2001, the Ground Lease landlord filed suit against the
Partnership and TPG (as General Partner) seeking possession of the property and
damages for breach of the Ground Lease. In April 2002, an additional $43,000 was
accrued as payable to the Ground Lease landlord, due to the Court's granting a
summary judgment of $93,000 against the Partnership. (See Legal Proceedings in
Part II. - Item 1 and Note 10.)

During October 2001, the Village Inn Restaurant notified Management of its
intent to close and vacate its restaurant in Grand Forks, North Dakota. The
lease on the property expires in 2009. In February 2002, Management was notified
Village Inn had closed and vacated the restaurant. Rent income was collected
from the tenant through December 2001; however, rent income has not been
collected for January through June of 2002. In addition, in March 2002, the
Partnership paid the properties' first installment of 2001 real estate taxes.
Management will pursue all legal remedies in relation to the former tenant's
past due balance of approximately $58,000, as well as future lease and other
obligations. Management is also seeking a new tenant for the vacated property.
Management anticipated that the Partnership would incur approximately $27,000 to
replace the roof on the property in the Third Quarter of 2002. Other repairs may
also be needed, however, specifics and amounts are not known as of the end of
the Second Quarter.

As of June 30, 2002 the Partnership owns one (1) restaurant, Kentucky Fried
Chicken, which is located on a parcel of land where it has entered into a
long-term ground lease. Tenant, Kentucky Fried Chicken pays the lease
obligations under the ground lease.

According to the Partnership Agreement, the former general partners were to
commit 80% of the original offering proceeds to investment in properties. Upon
full investment of the net proceeds of the offering, approximately 75% of the
original proceeds were invested in the Partnership's properties.

The current General Partner receives a fee for managing the Partnership equal to
4% of gross receipts, with a maximum annual reimbursement for office rent and
related office overhead of $25,000 between the three original affiliated
Partnerships as provided in the Permanent Manager Agreement ("PMA"). Effective
March 1, 2002, the minimum management fee and the maximum annual reimbursement
for office rent and overhead increased by 2.8%, representing the allowable
annual Consumer Price Index adjustment per the PMA. Therefore, as of March 1,
2002 the current minimum monthly management fee is $16,640. For purposes of
computing the 4% overall fee, gross receipts includes amounts recovered in
connection with the misappropriation of assets by the former general partners
and their affiliates. TPG has received fees from the Partnership totaling
$55,481 to date on the amounts recovered, which includes 2002 fees of $9. The
fees received from the Partnership on the amounts recovered reduce the 4%
minimum fee by that same amount.

Two of the Partnership's property leases contain purchase option provisions with
stated purchase prices in excess of the original cost of the properties. The
current General Partner is not aware of any unfavorable purchase options in
relation to original cost.

                                       11

<PAGE>

4.   PARTNERSHIP AGREEMENT:

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 will be cumulative and will not
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. Distributions paid to the
General Partner are based on the estimated tax liability resulting from
allocated income. Subsequent to the filing of the General Partner's income tax
returns, a true up with actual distributions is made.

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 its attributable to such year; and (c)
then, to Limited Partners, 99%, and to the General Partner, 1%, of remaining Net
Proceeds available for distribution.

                                       12

<PAGE>

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 shall be limited to a competitive real estate commission, not to
exceed 6% 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 3%, 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 7.)

5.   LEASES:

Lease terms for the majority of the investment properties are 20 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 and the cost of the property, excluding the cost
of the land, is depreciated over its estimated useful life.

As of June 30, 2002 aggregate minimum lease payments to be received under the
leases for the Partnership's properties are as follows:

     Year ending December 31,
     2002                                           $        1,986,098
     2003                                                    1,911,092
     2004                                                    1,940,311
     2005                                                    1,950,603
     2006                                                    1,874,133
     Thereafter                                             12,452,076
                                                    ------------------
                                                    $       22,114,313
                                                    ==================

The above aggregate minimum lease payments include rent applicable to the
Village Inn property. The tenant is currently in default in relation to its
January through June 2002 lease payments. Management has begun legal action to
collect these past due payments, however, due to the uncertainty of collection
these past due rents totaling approximately $48,000 have been 100% reserved.
Village Inn is responsible for lease payments until the lease expiration date of
2009, however, due to the uncertainty of collection future lease charges will
continue to be reserved until a lease termination agreement is consummated.

Ten (10) of the properties are leased to Wensouth Orlando, a franchisee of
Wendy's restaurants. Wensouth base rents accounted for 40% of total base rents
for 2001.

                                       13

<PAGE>

6.   TRANSACTIONS WITH CURRENT GENERAL PARTNER AND ITS AFFILIATES:

Amounts paid and or accrued to the current General Partner and its affiliates
for the three and six-month periods ended June 30, 2002 and 2001 are as follows.

<TABLE>
<CAPTION>
                                                Incurred for      Incurred for    Incurred for    Incurred for
                                              the three-month   the three-month   the six-month   the six-month
                                                period ended      period ended    period ended    period ended
Current General Partner                         June 30, 2002    June 30, 2001    June 30, 2002   June 30, 2001
-----------------------                       ---------------    --------------   ------------    -------------
<S>                                           <C>               <C>               <C>             <C>
Management fees                               $        49,911   $        48,505   $      98,925   $      95,891
Restoration fees                                            9                56               9             167
Overhead allowance                                      4,028             3,918           7,982           7,750
Reimbursement for out-of-pocket expenses                2,077               659           3,702           4,796
Leasing Commissions                                         0             8,644               0           8,644
Cash distribution                                         844             2,002           2,036           3,302
                                              ---------------   ---------------   -------------   -------------
                                              $        56,869   $        63,784   $     112,654   $     120,550
                                              ===============   ===============   =============   =============
</TABLE>

7.   CONTINGENT LIABILITIES:

According to the Partnership Agreement, as amended, the current General Partner
may receive a disposition fee not to exceed 3% of the contract price of the sale
of investment properties. Fifty percent (50%) of all such disposition fees
earned by the current General Partner are to be in escrow until the aggregate
amount of recovery of the funds misappropriated from the Partnerships by the
former general partners is greater than $4,500,000. Upon reaching such recovery
level, full disposition fees will thereafter be payable and fifty percent (50%)
of the previously escrow amounts will be paid to the current General Partner. At
such time as the recovery exceeds $6,000,000 in the aggregate, the remaining
escrow disposition fees shall be paid to the current General Partner. If such
levels of recovery are not achieved, the current General Partner will contribute
the amounts in escrow towards the recovery. In lieu of an escrow, 50% of all
such disposition fees have been paid directly to the restoration account and
then distributed among the three Partnerships. Fifty percent (50%) of the total
amount paid to the recovery was refunded to the current General Partner during
March 1996 after surpassing the recovery level of $4,500,000. The General
Partner does not expect any future refunds, as achieving the $6,000,000 recovery
threshold appears remote.

8.   PMA INDEMNIFICATION TRUST:

The PMA provides that the Permanent Manager will be indemnified from any claims
or expenses arising out of or relating to the Permanent Manager serving in such
capacity or as substitute general partner, so long as such claims do not arise
from fraudulent or criminal misconduct by the Permanent Manager. The PMA
provides that the Partnership fund this indemnification obligation by
establishing a reserve of up to $250,000 of

                                       14

<PAGE>

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 Trust has been fully funded with
Partnership assets as of June 30, 2002. Funds are invested in U.S. Treasury
securities. In addition, $125,447 of earnings has been credited to the Trust as
of June 30, 2002. The rights of the Permanent Manager to the Trust shall be
terminated upon the earliest to occur of the following events: (i) the written
release by the Permanent Manager 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 the Permanent Manager and which is subject to
indemnification; or (iii) a determination by a court of competent jurisdiction
that the Permanent Manager 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.

9.   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.

10.  LEGAL PROCEEDINGS:

The Partnership owned the building in Phoenix, Arizona occupied by the Mulberry
Street Grill restaurant, which was located on a parcel of land, leased to the
Partnership pursuant to a long-term ground lease (the "Ground Lease.") The
Ground Lease was considered an operating lease and the lease payments were paid
by the Partnership and expensed in the periods to which they applied. During the
Second Quarter of 2001, sub-tenant AMF Corporation ("AMF") notified Management
of its intent to close its Mulberry Street Grill restaurant. Although the
sub-lease had not expired, since such notification the Partnership has received
no rent from the former tenant and has returned possession of the Phoenix,
Arizona property to the Ground Lease Landlord, Centre at 38th Street, L.L.C,
("Centre".) Beginning in May and through December 2001 the Partnership accrued
but withheld payment of the ground lease obligations, and on March 31, 2002 and
December 31, 2001 the total ground lease accrual approximated $50,000. On June
12, 2001 Centre leased the property to a new tenant.

On June 18, 2001, Centre filed a lawsuit (the "Complaint") in the Maricopa
County Superior Court, against the Partnership and TPG. The Complaint alleges
that the Partnership is a tenant under a Ground Lease with Centre and that the
Partnership has defaulted on its obligations under that lease. The suit names
TPG as a defendant because TPG is the Partnership's general partner. The
Complaint sought damages for unpaid rent, commissions, improvements, and
unspecified other damages exceeding $120,000.

The Partnership and TPG filed an answer denying any liability to Centre. In
addition, the Partnership has filed a third-party complaint against the National
Restaurant Group, ("National Restaurant"), L.L.C., and its sub-tenant AMF. In
the third-party complaint, the Partnership alleges that National Restaurant and
AMF are liable to the Partnership for breach of the subleases and any damages
for which the Partnership may be held liable pursuant to the Ground Lease.
Currently AMF has filed for bankruptcy and the Partnership has not been
successful in locating National Restaurant.

                                       15

<PAGE>

On April 10, 2002 the Maricopa County Superior Court granted the motion for
summary judgment against the Partnership and TPG. The Court entered a final
judgment (the "Judgment") on May 22, 2002, awarding approximately $93,000 in
damages to Centre. As of December 31, 2001 the Partnership had accrued $50,000
in ground lease obligations payable to Centre and the remaining Judgment balance
of $43,000 was accrued in April 2002.

On June 20, 2002 the Partnership and TPG filed a Notice of Appeal with respect
to such judgment and are waiting for the Court of Appeals to set a schedule for
filing briefs in support of the appeal. In order to prevent Centre from
enforcing the judgment, an approximately $140,000 bond application was filed in
July 2002. The bond premium is anticipated to be approximately $1,600. By law,
the amount of the bond must be sufficient to cover the amount of the judgment,
plus interest, and any additional costs that may be incurred during the appeal.

11.  SUBSEQUENT EVENTS:

On August 15, 2002, the Partnership intends to make distributions to the Limited
Partners for the Second Quarter of 2002 of $360,000 amounting to approximately
$7.78 per limited partnership interest.

12.  RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the filing of the Partnership's condensed financial statements on
Form 10-Q for the three and six-month periods ended June 30, 2002, the
Partnership's management determined that the financial statements did not
properly present discontinued operations under Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" (FAS 144). As a result, the Partnership's condensed financial statements
for the three and six month periods ending June 30, 2002 and 2001 have been
restated from amounts previously reported to properly reflect discontinued
operations as required by FAS 144. The following is a summary of the significant
impact of the restatement to the condensed financial statements.

                                  As Previously
                                  Reported at            Restated at
                                  June 30, 2002         June 30, 2002
                                  -------------         -------------
Net Investment Properties and
 Equipment                        $  13,505,297         $  13,035,237
Property Held for Sale            $           0         $     470,060
Total Assets                      $  15,304,940         $  15,304,940
Total Partners' Capital           $  15,022,471         $  15,022,471

                                       16

<PAGE>

<TABLE>
<CAPTION>
                                  As Previously                               As Previously
                                Reported For the     As Restated For the     Reported For the     As Restated For
                                   Three Month           Three Month            Six-month          the Six Month
                                  Period Ended           Period Ended          Period Ended        Period Ended
                                  June 30, 2002         June 30, 2002         June 30, 2002        June 30, 2002
                                ----------------     -------------------     ----------------     ---------------
<S>                             <C>                  <C>                     <C>                  <C>
Rental Income                   $        527,523     $           511,523     $      1,033,908     $     1,001,908
Depreciation                    $         83,021     $            80,592     $        167,256     $       161,182
Amortization                    $          3,304     $             3,026     $          6,608     $         6,053
Expenses incurred due to
 default by lessee              $          5,239     $             4,155     $          5,944     $         4,860
Maintenance                     $              0     $             1,084     $              0     $         1,084
Income from Continuing
 Operations                     $        211,021     $           197,728     $        509,015     $       483,644
Income from Discontinued
 Operations                     $              0     $            13,293     $              0     $        25,371
Net Income                      $        211,021     $           211,021     $        509,015     $       509,015
Net Income per Limited
Partnership Interest            $           4.51     $              4.51     $          10.89     $         10.89
</TABLE>

<TABLE>
<CAPTION>
                                  As Previously                               As Previously
                                Reported For the     As Restated For the     Reported For the     As Restated For
                                   Three Month           Three Month            Six-month          the Six Month
                                  Period Ended           Period Ended          Period Ended        Period Ended
                                  June 30, 2001         June 30, 2001         June 30, 2001        June 30, 2001
                                ----------------     -------------------     ----------------     ---------------
<S>                             <C>                  <C>                     <C>                  <C>
Rental Income                   $        577,644     $           561,644     $      1,167,126     $     1,135,126
Depreciation                    $         86,100     $            82,456     $        172,200     $       164,912
Amortization                    $         11,947     $            11,669     $         15,082     $        14,527
Expenses incurred due to
 default by lessee              $          1,205     $                 0     $          1,205     $             0
Maintenance                     $              0     $             1,205     $              0     $         1,205
Income from Continuing
 Operations                     $        500,529     $           488,451     $        825,518     $       801,361
Income from Discontinued
 Operations                     $              0     $            12,078     $              0     $        24,157
Net Income                      $        500,529     $           500,529     $        825,518     $       825,518
Net Income per Limited
 Partnership Interest           $          10.71     $             10.71     $          17.66     $         17.66
</TABLE>

The Partnership also determined that it had incorrectly reported the aggregate
minimum lease payments to be received under the leases. The aggregate lease
amounts were originally reported as $22,126,313 and have been restated to
$22,114,313.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

As discussed in Note 12, the Partnership has restated its condensed financial
statements for the three and six- month periods ended June 30, 2002 and 2001.
This management's discussion and analysis gives effect to this restatement.

                                       17

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES:

INVESTMENT PROPERTIES

The investment properties, including equipment held by the Partnership at June
30, 2002, were originally purchased at a price, including acquisition costs, of
approximately $22,261,000.

On January 1, 2002, the Partnership adopted Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." This statement requires current and historical results from operations
for disposed properties and assets classified as held for sale that occur
subsequent to January 1, 2002 to be reclassified separately as discontinued
operations. During the three and six months ended June 30, 2002, the Partnership
recognized income from discontinued operations of $13,000 and $25,000,
respectively. Results of discontinued operations for the three and six months
ended June 30, 2002, relate to the classification of the Hardee's- Hartford
property as held for sale.

During the Second Quarter of 2002, Management entered a contract to sell the
vacant Hardee's restaurant in Hartford, Wisconsin in the Third Quarter of 2002
at a sales price of $618,000. During December 2001, Hardee's Food Systems, Inc.
had notified Management that it had vacated its restaurant in Hartford,
Wisconsin. Hardee's lease on the Hartford property was set to expire on April
30, 2009 and they were required to continue making rent payments until the sale
date. The net asset value of the property at June 30, 2002 was approximately
$470,000, and is included as property held for sale on the balance sheet. The
Partnership intends to pay TPG a sales commission upon the sale amounting to
$18,500 in the Third Quarter of 2002. No commissions are to be paid to
unaffiliated brokers by the Partnership.

During the Second Quarter of 2002, Mountain Range Restaurants, the sub-lessee of
the Denny's- N. 7th Street property in Phoenix, Arizona, notified Management
that it would vacate the property at the end of May 2002. During the Fourth
Quarter of 2001, the Bankruptcy court granted the motion of Lessee, Phoenix
Restaurant Group, Inc. ("Phoenix"), to reject the lease with the Partnership at
the Phoenix, Arizona location. Following the rejection of this lease by Phoenix,
Mountain Range Restaurants declined the Partnership's offer to lease the
property directly to them. Therefore, the property was vacated and rent ceased
as of May 31, 2002. Management will market the property for lease or sale.

During March 2002, Hardee's Food Systems, Inc. notified Management of its intent
to close its restaurant in Fond du Lac, Wisconsin in April 2002. Hardee's lease
on the Fond du Lac property is set to expire on September 30, 2009 and they will
be required to continue making rent payments until the lease expiration date or
until a lease termination agreement is entered into.

During March 2001, Hardee's Food Systems, Inc. had notified Management of its
intent to close its restaurant in South Milwaukee, Wisconsin. Hardee's lease on
the South Milwaukee property expired on November 30, 2001 and they continued
making rent payments until the lease expiration date. This lease was not
renewed, and therefore, Management continues to market the property for sale or
lease to a new operator.

                                       18

<PAGE>

During March 2001, Hardee's Food Systems, Inc. notified Management of its intent
to close its restaurant in Milwaukee, Wisconsin. The Hardee's lease on the
Milwaukee property was not set to expire until 2009. In the Second Quarter of
2001, Hardee's Food Systems agreed to pay a lease termination fee of
approximately two (2) years rent or $157,000. The payment schedule included four
(4) equal installments of $39,250. The first payment was received in May 2001
upon the execution of the agreement, and the subsequent installments were
reflected as a Note receivable on the balance sheet. The second and third Note
receivable installments were received in August and October 2001. The final
installment, which is reflected as a Note receivable on the balance sheet at
December 31, 2001, was received in January 2002.

During May 2001, Management negotiated the re-lease of the vacant Milwaukee,
Wisconsin property to Omega Restaurant in June 2001 and rent income commenced in
October 2001. Commissions of $50,000 and $9,000 were paid to an unaffiliated
leasing agent and to an affiliate of the General Partner, respectively, upon the
execution of the new lease in the Second Quarter of 2001.

The Blockbuster Video Store lease expired on January 31, 2001. However, in the
First Quarter of 2001, Management negotiated a five (5) year lease extension to
January 31, 2006. A commission of $10,000 was paid to an unaffiliated leasing
agent upon the negotiated extension of the lease.

During the Fourth Quarter of 2001, the Bankruptcy court granted the motion of
Phoenix Restaurant Group, Inc. ("Phoenix") to reject the lease with the
Partnership at the Twin Falls, Idaho location. Although Phoenix's lease on the
Twin Falls property expires on April 30, 2012, due to bankruptcy proceedings of
Phoenix, the lease was rejected and rent income ceased in the Fourth Quarter of
2001. The remaining balance due the Partnership of approximately $29,000 from
the former tenant has been reserved. This amount is included in the
Partnership's filing for damages in Bankruptcy court of approximately $85,000,
or one year's rent, although it is uncertain whether the amount will be
collectible. In addition, in Management's opinion, since Phoenix rejected the
lease, its subtenant, Fiesta Time, is not entitled to possession of the
property. Therefore, Management is in the process of evicting and obtaining
possession of the property from Fiesta Time, after which Management intends to
market the property for lease or sale.

During April 2001, the sub-tenant AMF Corporation notified Management of its
intent to close and vacate its Mulberry Street Grill restaurant in Phoenix,
Arizona. Although the lease on the property was not set to expire until 2007,
monthly rental and Common Area Maintenance (CAM) income ceased as of June 1,
2001. The past due rent amount of $10,000 has been reserved. Management is
moving forward with legal remedies to collect the balances due from AMF. Due to
Management's return of possession of the property to the Ground Lease landlord,
the net asset value of the property was written-off in the Fourth Quarter of
2001, resulting in a loss of $157,000. As of December 31, 2001 the Partnership
has withheld the May through December 2001 accrued ground lease obligations
totaling approximately $50,000 related to the property. In April 2002, an
additional $43,000 was accrued as payable to the Ground Lease landlord due to
the Court's granting of a summary judgment against the Partnership. (See Legal
Proceedings in Part II- Item 1 and Note 10.)

During October 2001, the Village Inn Restaurant notified Management of its
intent to close and vacate its restaurant in Grand Forks, North Dakota within
the next few months. The lease on the property expires in 2009. In February
2002, Management was notified Village Inn had closed and vacated its restaurant
in Grand Forks. Rent income was collected from the tenant through December of
2001; however, rent income has not

                                       19

<PAGE>

been collected for January through June of 2002. In addition, in March 2002, the
Partnership paid the properties' first installment of 2001 real estate taxes.
Management will pursue all legal remedies in relation to the former tenant's
past due balance of approximately $58,000, as well as future lease and other
obligations. Management is also seeking a new tenant for the vacated property.
Management anticipated that the Partnership would incur approximately $27,000 to
replace the roof on the property in the Third Quarter of 2002. Other repairs may
also be needed, however, specifics and amounts are not known as of the end of
the Second Quarter.

OTHER ASSETS

Cash and cash equivalents were approximately $904,000 at June 30, 2002, compared
to $818,606 at December 31, 2001. Cash of $360,000 is anticipated to be used to
fund the Second Quarter 2002 distributions to Limited Partners, $491,000 for the
payment of accounts payable, accrued expenses, and future distributions. The
remainder represents amounts deemed necessary to allow the Partnership to
operate normally.

Cash generated through the operations of the Partnership's investment properties
and sales of investment properties will provide the sources for future fund
liquidity and Limited Partner distributions.

The Partnership established an Indemnification Trust (the "Trust") during the
Fourth Quarter of 1993, deposited $100,000 in the Trust during 1993 and
completed funding of the Trust with $150,000 during 1994. The provision to
establish the Trust was included in the PMA for the indemnification of TPG, in
the absence of fraud or gross negligence, from any claims or liabilities that
may arise from TPG acting as Permanent Manager. The Trust is owned by the
Partnership. For additional information regarding the Trust refer to Note 8 to
the condensed financial statements.

Rents and other receivables amounted to $116,000 (net of allowance of $102,000)
as of June 30, 2002. Village Inn is currently in default in relation to its
January through March 2002 lease payments. Management has begun legal action to
collect these past due payments, however, due to the uncertainty of collection
these past due rents totaling approximately $48,000 have been 100% reserved.
Village Inn is responsible for lease payments until the lease expiration date of
2009, however, due to the uncertainty of collection future lease charges will
continue to be reserved until a lease termination agreement is consummated. In
addition, Management has charged Village Inn late fees totaling $2,000 in
relation to the past balance due. The late fee charges have been 100% reserved
as Management is uncertain of collection. The tenant Popeye's- Park Forest is
delinquent on its January 2002 percentage rent billing for 2001. Management
intends to pursue legal remedies in relation to the collection of the tenant's
percentage rent past due balance of approximately $72,000. In addition,
Management has charged Popeye's late fees totaling $4,000 in relation to the
percentage rent balance due. The late fee charges have been 100% reserved as
Management is uncertain of collection of these fees.

Property tax escrow at December 31, 2001, in the amount of $7,875, represented
four (4) months of 2001 real estate taxes for the former Hardee's- Milwaukee
tenant paid by Hardee's Food Systems, Inc. upon the lease termination agreement
with Management. The property taxes were paid by the Partnership in January
2002.

                                       20

<PAGE>

Property tax receivable at June 30, 2002, in the amount of $8,300 represented
2001 property taxes paid by the Partnership, which are due from the tenant of
the vacant Village Inn property. Property tax receivable at December 31, 2001,
in the amount of $31,000 represented 2001 real estate taxes due from the tenant
of the Hardee's- S. Milwaukee property and new tenant, Omega Restaurants and
2000 property taxes due from the tenant of the Village Inn property.

The Note receivable balance at December 31, 2001 was $39,250. In the Second
Quarter of 2001, a lease termination agreement was executed with Hardee's Food
Systems upon the closing of its restaurant in Milwaukee, Wisconsin. Hardee's
Food Systems agreed to pay a lease termination fee of approximately two (2)
years rent or $157,000. The payment schedule included four (4) equal
installments of $39,250. The first payment was received in May 2001 upon the
execution of the agreement, and the subsequent installments were reflected as a
Note receivable on the balance sheet. The second and third Note receivable
installments were received in August and October 2001. The final installment,
which is reflected as a Note receivable on the balance sheet at December 31,
2001, was received in January 2002.

Deferred charges totaled approximately $279,000 and $286,000, net of
amortization, at June 30, 2002 and December 31, 2001, respectively. Deferred
charges represent leasing commissions paid when properties are leased or upon
the negotiated extension of a lease. Leasing commissions are capitalized and
amortized over the life of the lease. During the Second Quarter of 2001,
commissions of $50,000 and $9,000 were paid to an unaffiliated leasing agent and
to an affiliate of the General Partner, respectively, upon the execution of the
new Omega Restaurant lease. During the First Quarter of 2001, a commission of
$10,000 was paid to an unaffiliated leasing agent upon the negotiated extension
of the lease with Blockbuster Video. Also, during the Second Quarter and Fourth
Quarters of 2001 deferred charges relating to the former Hardee's- Milwaukee and
Mulberry Street Grill properties, respectively, were written-off.

LIABILITIES

Accounts payable and accrued expenses at June 30, 2002, in the amount of
$130,000, primarily represent the accrual of auditing, tax, legal and data
processing fees, and the summary judgment related to the former Mulberry Street
Grill property.

Due to the Current General Partner amounted to $1,297 at June 30, 2002, of which
$844 represents the General Partner's Second Quarter 2002 distribution.

PARTNERS' CAPITAL

Net income for the quarter was allocated between the General Partner and the
Limited Partners, 1% and 99%, respectively, as provided in the Partnership
Agreement and the Amendment to the Partnership Agreement, as discussed more
fully in Note 4 of the financial statements. The former general partners'
deficit capital account balance was reallocated to the Limited Partners at
December 31, 1993. Refer to Note 9 to the condensed financial statements for
additional information regarding the reallocation.

Cash distributions paid to the Limited Partners and to the General Partner
during 2002 of $985,000 and

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$2,036, respectively, have also been in accordance with the amended Partnership
Agreement. The Second Quarter 2002 distribution of $360,000 will be paid to the
Limited Partners on August 15, 2002.

RESULTS OF OPERATIONS:

The Partnership reported income from continuing operations for the quarter ended
June 30, 2002, in the amount of $198,000 compared to income from continuing
operations for the quarter ended June 30, 2001, of $489,000. For the six months
ended June 30, 2002 and 2001, income from continuing operations totaled $484,000
and $801,000, respectively. The decrease in income from continuing operations in
2002 is due primarily to decreased rental income, relating to the expired lease
of the Hardee's- S. Milwaukee property in the Fourth Quarter of 2001, the
bankruptcy rejection of the Denny's- Twin Falls lease and the non-cash disposal
of the former Mulberry Street Grill Restaurant in the Fourth Quarter of 2001.
The decrease in income from continuing operations income in 2002 is also due to
the summary judgment related to the former Mulberry Street Grill property, the
write-off of non-collectible receivables, and increased legal expenditures due
to tenant defaults, eviction proceedings at the Twin Falls property, and court
proceedings related to the former Mulberry Street Grill property. In addition,
the Partnership received a lease termination fee of $157,000 in the Second
Quarter of 2001 due to the termination of the Hardee's- Milwaukee lease, which
is a non-recurring item.

DISCONTINUED OPERATIONS:

Income from discontinued operations was $13,000 and $12,000, respectively, for
the quarters ended June 30, 2002 and 2001. For the six-months ended June 30,
2002 and 2001 income from discontinued operations totaled $25,000 and $24,000,
respectively. In accordance with SFAS 144, discontinued operations represent the
operations of properties disposed of or classified as held for sale subsequent
to January 1, 2002 as well as any gain or loss recognized in their disposition.
One property, Hardee's- Hartford, was classified as held for sale as of June 30,
2002, therefore, the operating results of this property are reflected as income
from discontinued operations for the three and six month periods ended June 30,
2002 and 2001.

REVENUES

Total operating revenues were $516,000 and $732,000, for the quarters ended June
30, 2002 and 2001, respectively, and were $1,019,000 and $1,322,000, for the six
months ended June 30, 2002 and 2001, respectively The decrease in operating
revenues in 2002 is due primarily to decreased rental income, upon the expired
lease of the Hardee's- S. Milwaukee property in the Fourth Quarter of 2001, the
bankruptcy rejection of the Denny's- Twin Falls lease and the non-cash disposal
of the former Mulberry Street Grill Restaurant in the Fourth Quarter of 2001. In
addition, the Partnership received a lease termination fee of $157,000 in the
Second Quarter of 2001 due to the termination of the Hardee's- Milwaukee lease,
which is a non-recurring item.

As of June 1, 2002 total revenues should approximate $1,911,000 annually, based
on leases currently in place. Future revenues may decrease with tenant defaults
and/or sales of Partnership properties. They may also increase with additional
rents due from tenants, if those tenants experience sales levels, which require
the payment of additional rent to the Partnership.

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Village Inn is currently in default in relation to its January through June 2002
lease payments. Management has begun legal action to collect these past due
payments, however, due to the uncertainty of collection these past due rents
totaling approximately $48,000 have been 100% reserved. Village Inn is
responsible for lease payments until the lease expiration date of 2009, however,
due to the uncertainty of collection future lease charges will continue to be
reserved until a lease termination agreement is consummated.

EXPENSES
For the quarters ended June 30, 2002 and 2001, operating cash expenses (which do
not include non-cash items such as depreciation, amortization, property
write-downs, and write-off of non-collectible receivables) amounted to
approximately 35% and 19%, of total revenues, respectively. For the six months
ended June 30, 2002 and 2001, operating cash expenses totaled 30% and 25%,
respectively. Total operating expenses, including non-cash items, amounted to
approximately 62% and 33%, of total revenues for the quarters ended June 30,
2002 and 2001, respectively, and totaled 53% and 39% for the six months ended
June 30, 2002 and 2001, respectively.

The increase in expenditures in 2002 is due to the Second Quarter 2001 summary
judgment accrual related to the former Mulberry Street Grill property, the
write-off of non-collectible receivables, and increased legal expenditures due
to tenant defaults, eviction proceedings at the Twin Falls property, and court
proceedings related to the former Mulberry Street Grill property. Total
expenditures in 2001 included non-recurring appraisals, which were performed in
the First Quarter of 2001 on all the Partnership properties, and ground lease
obligations relating to the former Mulberry Street Grill Restaurant.

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. If inflation causes operating margins to deteriorate for lessees
and 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.

NEW ACCOUNTING PRONOUNCEMENT:

In October 2001, Statement of Financial Accounting Standards No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets" (FAS 144) was issued. The
FAS 144 supercedes Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be disposed of" (FAS 121). FAS 144 primarily addresses issues relating to the
implementation of FAS 121 and develops a single accounting model for long-lived
assets to be disposed of, whether previously held and used or newly acquired.
The provisions of FAS 144 are effective for fiscal years beginning after
December 15, 2001. The Company adopted FAS 144 on January 1, 2002 and the result
was that assets disposed of or deemed to be classified as held for sale required
the reclassification of current and previous years' operations to be
discontinued operations.

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CRITICAL ACCOUNTING POLICIES:

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

Depreciation methods and lives- Depreciation of the properties is provided on a
straight-line basis over 31.5 years, which is 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 breakpoint stipulated in the
lease.

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 to write down the asset to its fair value is recognized, if any.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Partnership is not subject to market risk.

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                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Partnership owned the building in Phoenix, Arizona occupied by the Mulberry
Street Grill restaurant, which was located on a parcel of land, leased to the
Partnership pursuant to a long-term ground lease (the "Ground Lease.") The
Ground Lease was considered an operating lease and the lease payments were paid
by the Partnership and expensed in the periods to which they applied. During the
Second Quarter of 2001, sub-tenant AMF Corporation ("AMF") notified Management
of its intent to close its Mulberry Street Grill restaurant. Although the
sub-lease had not expired, since such notification the Partnership has received
no rent from the former tenant and has returned possession of the Phoenix,
Arizona property to the Ground Lease Landlord, Centre at 38th Street, L.L.C,
("Centre".) Beginning in May and through December 2001 the Partnership accrued
but withheld payment of the ground lease obligations, and on March 31, 2002 and
December 31, 2001 the total ground lease accrual approximated $50,000. On June
12, 2001 Centre leased the property to a new tenant.

On June 18, 2001, Centre filed a lawsuit (the "Complaint") in the Maricopa
County Superior Court, against the Partnership and TPG. The Complaint alleges
that the Partnership is a tenant under a Ground Lease with Centre and that the
Partnership has defaulted on its obligations under that lease. The suit names
TPG as a defendant because TPG is the Partnership's general partner. The
Complaint sought damages for unpaid rent, commissions, improvements, and
unspecified other damages exceeding $120,000.

The Partnership and TPG filed an answer denying any liability to Centre. In
addition, the Partnership has filed a third-party complaint against the National
Restaurant Group, ("National Restaurant"), L.L.C., and its sub-tenant AMF. In
the third-party complaint, the Partnership alleges that National Restaurant and
AMF are liable to the Partnership for breach of the subleases and any damages
for which the Partnership may be held liable pursuant to the Ground Lease.
Currently AMF has filed for bankruptcy and the Partnership has not been
successful in locating National Restaurant.

On April 10, 2002 the Maricopa County Superior Court granted the motion for
summary judgment against the Partnership and TPG. The Court entered a final
judgment (the "Judgment") on May 22, 2002, awarding approximately $93,000 in
damages to Centre. As of December 31, 2001 the Partnership had accrued $50,000
in ground lease obligations payable to Centre and the remaining Judgment balance
of $43,000 was accrued in April 2002.

On June 20, 2002 the Partnership and TPG filed a Notice of Appeal with respect
to such judgment and are waiting for the Court of Appeals to set a schedule for
filing briefs in support of the appeal. In order to prevent Centre from
enforcing the judgment, an approximately $140,000 bond application was filed in
July 2002. The bond premium is anticipated to be approximately $1,600. By law,
the amount of the bond must be sufficient to cover the amount of the judgment,
plus interest, and any additional costs that may be incurred during the appeal.

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ITEMS 2 - 4.

Not Applicable.

ITEM 5.  OTHER INFORMATION

Registrant's interim financial statements in this Form 10-Q/A have been revised
from the Form 10-Q filed for the quarterly period ended June 30, 2002 on August
14, 2002. The Partnership adopted FAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement requires current and historical
results from operations for disposed properties and assets classified as held
for sale that occur subsequent to January 1, 2002 to be reclassified separately
as discontinued operations. Therefore, during the three months and six months
ended June 30, 2002, the Partnership recognized income from discontinued
operations of $13,293 and $25,371, respectively, which reduced income from
continuing operations by these same amounts. Results of discontinued operations
for the three months and six month periods ended June 30, 2002, relate to the
classification of the vacant Hardee's- Hartford property as held for sale at its
net value.

In Note 5 to the Notes to the condensed financial statements, the aggregate
minimum lease payments to be received under the leases for the Partnership's
properties as of June 30, 2002 decreased by approximately $12,000 to correct for
an error in the amounts previously disclosed.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Listing of Exhibits:

     99.0 Correspondence to the Limited Partners dated August 15, 2002,
          regarding the Second Quarter 2002 distribution.

     99.1 Certification of Periodic Financial Report Pursuant to 18 U.S.C.
          Section 1350

     99.2 302 Certifications

(b)  Reports on Form 8-K:

     The Registrant filed no reports on Form 8-K during the second quarter
     of fiscal year 2002.

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                                   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, there unto 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: May 15, 2003

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 dates indicated.

By: The Provo Group, Inc., General Partner


By: /s/ Bruce A. Provo
    ------------------
    Bruce A. Provo, President

Date: May 15, 2003


By: /s/ Bruce A. Provo
    ------------------
    Bruce A. Provo, Chief Executive Officer and Chief Financial Officer

Date: May 15, 2003

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