<PAGE>
                    DiVall Insured Income Properties 2, L.P.
                                 QUARTERLY NEWS
================================================================================
A publication of The Provo Group, Inc.                       SECOND QUARTER 2002
--------------------------------------------------------------------------------
                                                                   July 25, 2002

Dear Limited Partner:

I'm sure all of you have been watching the carnage on Wall Street. Fortunately,
your long-term returns and values have not been similarly impacted in the DiVall
2 portfolio. Unfortunately, the portfolio has recently reflected the impact of
the weak economy in the short-run.

We have four troublesome properties (out of 27), which I would like to address
personally. After resolving issues with these properties, we will hopefully have
cleansed the portfolio of chronic weak properties.

Mulberry Street Grill (Phoenix, AZ) was a horrible economic deal involving a
ground lease. Our exposure to loss long-term far exceeded our opportunities for
any significant return. Accordingly, we chose to eliminate our long-term
exposure to significant liabilities (the lease structure, negotiated by the
former general partners, provided no opportunity for profitability or residual
value), by proactively ceasing ground rent payments which triggered legal
activities we hope will quantify and eliminate future liabilities. We have,
to-date, received an unfavorable "Summary Judgment", which we are appealing
because there are disputed facts. I remind you all that we had an unfavorable
"Summary Judgment" handed to us in the Boatmen's Bank dispute which was reversed
on appeal. We then went to trial and won - saving the Partnership $1,400,000 in
principal, interest and costs, so our persistence with Boatman's paid off. We
intend to pursue this litigation with equal vigor, although we realize that
there is no assurance that we will prevail.

Village Inn (Grand Forks, ND) is another case of distressed tenants being either
unable or unwilling to accept their lease obligations. They effectively
abandoned this property eight years before lease expiration and in horrid
condition. We are going after the principals, but first we have to "pierce" the
corporate veil that is protecting the individual owners. We will fix up this
property and either lease or sell it.

                                        Bruce Provo's Letter Continued on Page 2
--------------------------------------------------------------------------------


SEE INSIDE

Additional Return of Capital Distribution Expected in 3rd Qtr .................2
Distribution Highlights .......................................................3
Reconciliation of "Budgeted" Distribution to "Actual" .........................3
More Property Highlights ......................................................3

<PAGE>
Questions & Answers ...........................................................4

Page 2                           DiVall 2                                 2 Q 02

                                                                    July 25,2002
--------------------------------------------------------------------------------
Denny's/Fiesta Time (Twin Falls, Idaho) is a situation that should make an
"Outrage Hall of Fame (or Shame)". Our tenant, a Denny's franchisee known as
Phoenix Foods ("Phoenix"), sub-let to a restaurant called Fiesta Time. Fiesta
Time reportedly stopped paying rent to Phoenix months before Phoenix declared
bankruptcy. Phoenix rejected the lease in Bankruptcy Court, so DiVall 2 cannot
recover subsequent rent payments from Phoenix, but as owner of the property
Divall 2 is entitled to possession of the property. Lo and behold, Fiesta Time
has continued to occupy the property for more than 9 months after the lease was
rejected by Phoenix. Fiesta Time has paid DiVall 2 no rent, nor have they
reimbursed DiVall 2 for any damage to the property. Unfortunately, courts tend
to favor the party in possession of a property, so it took eight months in court
to get approval to evict Fiesta Time even though they have no lease and Phoenix
rejected the lease in Bankruptcy Court. We were finally successful in evicting
this tenant in July, only to have the courts turn over the decision based on a
technicality. Shockingly, the judge did not notify our attorney that he was
hearing arguments to have the eviction overturned, and therefore, we were not
able to defend this matter. The ruling was made without our attorney even having
the option of being present. We are scheduled to be in court again on Thursday,
August 1. It is an extremely frustrating situation.

Popeye's (Park Forest, Illinois) was a dynamite store, doing $1,650,260 in sales
at its peak. We had worked through the bankruptcies with the original tenant and
achieved a good rental structure with favorable percentage rent terms. The
property was sold in 1999. The sales have since plummeted and the prior year
percentage rents due of $72,075 are past due. The new owner thinks we should
re-negotiate the lease. We will not be the "shock absorber" for the new owners
bad deal nor his obviously poor management abilities. If we have to take back
this store and find the right operator ... we will.

In conclusion, the current economy is more difficult than it appears. Even the
sales of our Wendy's stores have gone flat after years of strong annual growth.
We do, however, have good long-term assets, which will weather the challenges,
but in the short-term, distributions may be below expectations. Such
distributions still represent strong investment yields in relationship to
alternative investments in the market.


Sincerely,

Bruce A. Provo
--------------------------------------------------------------------------------

              ADDITIONAL RETURN OF CAPITAL EXPECTED IN THE 3RD QTR

o     Hardee's (Hartford, WI). We expect to close on the sale of this property
      during the 3rd Quarter. Assuming this occurs, an estimated return of
      capital distribution in the amount of $600,000 would be paid.

<PAGE>
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PAGE 3                           DIVALL 2                                 2 Q 02
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                             DISTRIBUTION HIGHLIGHTS

o  $360,000 total amount distributed for the    o  $7.78 per unit (approx.) for
   Second Quarter 2002 which is $155,000           the Second Quarter 2002.
   lower than originally projected. (See
   Reconciliation of "Budgeted" distribution
   to "Actual", below)

o  The Second Quarter distribution represents   o  $1,117.00 to $919.00 range of
   an approximate 6.3% annualized return from      distributions per unit from
   operations based on $22,680,000                 the first unit sold to the
   (estimated net asset value as of 12/31/01).     last unit sold before the
                                                   offering closed (2/90)
                                                   respectively. (Distributions
                                                   are from both cash flow from
                                                   operations and "net" cash
                                                   activity from financing and
                                                   investing activities.)



             RECONCILIATION OF "BUDGETED" DISTRIBUTION TO "ACTUAL"

Budgeted Distribution ................................................ $515,000
Less Reconciling items:
   Popeye's Park Forest Delinquent 2001 Percentage Rent ............... (72,000)
   Court Judgment Relating to Mulberry Street Grill ................... (45,000)
   Increased Operating Expenditures (Legal Fees) ...................... (14,000)
   Utility Deposit for vacant property at N. 7th Street, Phoenix, AZ .. (12,000)
   Other Miscellaneous Items .......................................... (12,000)
                                                                       ---------
Actual 2nd Quarter Distribution ...................................... $360,000
                                                                       =========


                            MORE PROPERTY HIGHLIGHTS

        In addition to the properties outlined in Bruce's letter, please
             note the current activity of the following properties:

o  Hardee's (South Milwaukee, WI) has vacated the property. The Lease expired on
   November 30, 2001. We are actively seeking a new tenant for this location,
   however due to the location of the property and the current economy the
   potential re-lease or sale is taking longer than we had hoped.

o  Miami Subs (Palm Beach, FL) was delinquent at June 30, 2002 in the amount of
   $8,751. We have made several efforts to accommodate this tenant during "slow
   season". He has not honored our accommodations and we have defaulted the
   tenant and will move toward eviction.


--------------------------------------------------------------------------------
PAGE 4                             DIVALL 2                               2 Q 02
--------------------------------------------------------------------------------

<PAGE>

o  Hardee's (Hartford, WI). We received notice from the operator that they had
   ceased operations in November 2001. This operator is a subtenant of Hardee's
   Corporate. Hardee's Corporate remains liable for all obligations under the
   Lease. They have continued to pay the rents and there is no balance due. This
   property is currently under contract for a sale price of $618,000. Hardee's
   Corporate has agreed to pay all outside commissions involved.

o  Hardee's (Fond du Lac, WI). We received notice from the operator that they
   had ceased operations in April 2002. This operator is a subtenant of Hardee's
   Corporate. Hardee's Corporate remains liable for all obligations under the
   Lease. They have continued to pay the rents and there is no balance due.

                               QUESTIONS & ANSWERS

o  When can I expect my next distribution mailing?

   Your distribution correspondence for the Third Quarter of 2002 is scheduled
   to be mailed on November 15, 2002.

o  Who are the new members of the advisory board?

   Unfortunately, only one limited partner was nominated for the Board. That
   individual never returned his qualification forms for review. Therefore, we
   plan to move forward with the current board members for another one year
   term.

o  If I have questions or comments, how can I reach your office?

   MAIL:      Investor Relations, 101 W. 11th Street, Suite 1110
              Kansas City, MO  64105

   PHONE:     800-547-7686 OR (816) 421-7444

   FAX:       (816) 221.2130

   E-MAIL:    mevans@theprovogroup.com









<PAGE>
--------------------------------------------------------------------------------
                    DIVALL INSURED INCOME PROPERTIES 2 L.P.
                   STATEMENTS OF INCOME AND CASH FLOW CHANGES
                 FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2002
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                PROJECTED             ACTUAL               VARIANCE
                                               ----------           --------               --------
                                                   2ND                 2ND
                                                 QUARTER             QUARTER                BETTER
OPERATING REVENUES                               6/30/02             6/30/02                (WORSE)
                                               ----------------------------------------------------
<S>                                             <C>                 <C>                    <C>
 Rental income                                   $487,869           $527,523               $39,654
 Interest income                                    9,000              4,659                (4,341)
 Other income                                           0                232                   232
                                               ----------------------------------------------------
TOTAL OPERATING REVENUES                         $496,869           $532,414               $35,545

OPERATING EXPENSES
 Insurance                                         $6,612             $6,611                    $2
 Management fees                                   48,561             49,911                (1,350)
 Overhead allowance                                 3,996              4,028                   (32)
 Advisory Board                                     2,189              2,188                     2
 Administrative                                    25,211             22,691                 2,520
 Professional services                             11,000             11,878                  (878)
 Auditing                                          14,350             14,150                   200
 Legal                                              6,000             16,886               (10,886)
 Defaulted tenants                                  2,100              5,239                (3,139)
                                               ----------------------------------------------------
TOTAL OPERATING EXPENSES                         $120,019           $133,579              ($13,560)
                                               ----------------------------------------------------
INVESTIGATION AND RESTORATION EXPENSES                 $0                 $9                   ($9)
                                               ----------------------------------------------------

NON-OPERATING EXPENSES

 Uncollectible Receivable                              $0            $56,352              ($56,352)
 Depreciation                                      86,100             83,021                 3,079
 Amortization                                       3,563              3,304                   259
 Judgement Expense                                      0             45,128               (45,128)
                                               ----------------------------------------------------
TOTAL NON-OPERATING EXPENSES                      $89,663           $187,805              ($98,142)
                                               ----------------------------------------------------
TOTAL EXPENSES                                   $209,682           $321,393             ($111,711)
                                               ----------------------------------------------------
NET INCOME (LOSS)                                $287,187           $211,021              ($76,166)

OPERATING CASH RECONCILIATION:                                                            VARIANCE
                                                                                          --------
 Depreciation and amortization                     89,663             86,324                (3,339)
 Recovery of amounts previously written off             0               (232)                 (232)
 (Increase) Decrease in current assets            277,054              6,099              (270,955)
 Increase (Decrease) in current liabilities       (10,388)            27,864                38,252
 (Increase) Decrease in cash reserved for
  payables                                          9,239            (28,708)              (37,947)
 Advance from/(to) current cash flows for
  future distributions                           (133,600)            61,400               195,000
                                               ----------------------------------------------------
Net Cash Provided From Operating Activities      $519,155           $363,768             ($155,387)
                                               ----------------------------------------------------
CASH FLOWS FROM (USED IN) INVESTING
 AND FINANCING ACTIVITIES
 Indemnification Trust (Interest earnings
  reinvested)                                      (4,500)            (1,679)                 2,821
 Recovery of  amounts previously written off            0                232                    232
                                               ----------------------------------------------------
Net Cash Provided From Investing And Financing
 Activities                                       ($4,500)           ($1,447)                $3,053
                                               ----------------------------------------------------
Total Cash Flow For Quarter                      $514,655           $362,321             ($152,334)

Cash Balance Beginning of Period                  959,215          1,073,967               114,752
Less 1st quarter distributions paid 5/02         (515,000)          (500,000)               15,000
Change in cash reserved for payables or future
 distributions                                    124,361            (32,692)             (157,053)
                                               ----------------------------------------------------
Cash Balance End of Period                     $1,083,231           $903,596             ($179,635)

Cash reserved for 2nd quarter L.P.               (515,000)          (360,000)              155,000
 distributions

Cash reserved for payment of accrued expenses    (187,061)          (173,456)               13,605
Cash advanced from (reserved for) future
 distributions                                   (317,850)          (317,850)                    0
                                               ----------------------------------------------------
Unrestricted Cash Balance End of Period           $63,321            $52,290              ($11,030)
                                               ====================================================

                                                PROJECTED            ACTUAL               VARIANCE
                                               ----------------------------------------------------
  Quarterly Distribution                        $515,000            $360,000             ($155,000)
* Mailing Date
                                                8/15/02            (enclosed)             -
* Refer to distribution letter for detail of
   quarterly distribution.
</TABLE>

<PAGE>
<TABLE>


PROJECTIONS FOR
DISCUSSION PURPOSES
                                                           DIVALL INSURED INCOME PROPERTIES 2 LP
                                                                  2002 PROPERTY SUMMARY
                                                                   AND RELATED RECEIPTS
<CAPTION>

PORTFOLIO            (Note 1)
                                      ----------------------------------------------------------------------------------------------
                                               REAL ESTATE                    EQUIPMENT                            TOTALS
                                      ----------------------------------------------------------------------------------------------
                                                ANNUAL              LEASE              ANNUAL
                                                 BASE     %       EXPIRATION           LEASE      %                 ANNUAL
CONCEPT              LOCATION          COST      RENT    YIELD       DATE      COST   RECEIPTS  RETURN     COST    RECEIPTS   RETURN
------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>              <C>      <C>      <C>         <C>        <C>      <C>    <C>       <C>       <C>        <C>

APPLEBEE'S          COLUMBUS, OH     1,059,465  135,780  12.82%                84,500    0       0.00%   1,143,965  135,780   11.87%

BLOCKBUSTER         OGDEN, UT          646,425   99,000  15.32%                                            646,425   99,000   15.32%

DENNY'S             PHOENIX, AZ        972,726   65,000   6.68%               183,239    0       0.00%   1,155,965   65,000    5.62%
VACANT (7)          PHOENIX, AZ        865,900   37,500   4.33%               221,237    0       0.00%   1,087,137   37,500    3.45%

VACANT              TWIN FALLS, ID     699,032        0   0.00%               190,000    0       0.00%     889,032        0    0.00%

VACANT              S MILWAUKEE, WI    808,032        0   0.00%                                            808,032        0    0.00%

HARDEE'S (3)(9)     HARTFORD, WI       686,563   37,335   5.44%                                            686,563   37,335    5.44%
HARDEE'S (3)(6)     FOND DU LAC, WI    849,767   88,000  10.36%       (2)     290,469    0       0.00%   1,140,236   88,000    7.72%

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

HOSTETTLER'S        DES MOINES, IA     845,000   60,000   7.10%                52,813    0       0.00%     897,813   60,000    6.68%


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

MIAMI SUBS (8)      PALM BEACH, FL     743,625   56,000   7.53%                                            743,625   56,000    7.53%


</TABLE>

Note 1: This property summary includes only property and equipment held by the
        Partnership as of March 31, 2002.
     2: The lease was terminated and the equipment sold to Hardee's Food Systems
        in conjunction with their assumption of the Terratron leases in November
        1996.
     3: These leases were assumed by Hardee's Food Systems at a reduced rental
        rate from that stated in the original leases.
     4: The lease with Hardee's Food Systems was terminated as of April 30,
        2001. A new lease with Omega Restaurants was negotiated and monthly
        rent commmenced in October 2001.
     5: The tenant vacated the property in February 2002, however, Village Inn
        remains liable until a lease termination agreement with Management is
        executed.
     6: Management received notice that Hardee's Food Systems intends to close
        this restaurant in April 2002. Hardee's will remain liable until a
        lease termination agreement with Management is executed.
     7: Due to the rejection of the Phoenix Restaurant Group, Inc. lease by the
        Bankruptcy Court in the Fourth Quarter of 2001, the sublessee does not
        wish to continue to lease the property. Rent charges ceased as of
        June 1, 2002.
     8: Management agreed to reduce Miami Sub's monthly rent from $5,000 to
        $4,000 for the months of July-October 2002.
     9: Management has entered a contract to sell the property in late July
        2002 at a price of $618,000.

                                                                    Page 1 of 2

<PAGE>
<TABLE>

PROJECTIONS FOR
DISCUSSION PURPOSES                                        DIVALL INSURED INCOME PROPERTIES 2 LP
                                                                    2001 PROPERTY SUMMARY
                                                                     AND RELATED RECEIPTS

PORTFOLIO           (Note 1)
<CAPTION>
                                     -----------------------------------------------------------------------------------------------
                                                           REAL ESTATE                      EQUIPMENT                        TOTALS
                                     -----------------------------------------------------------------------------------------------
                                                 ANNUAL             LEASE              ANNUAL
                                                  BASE       %    EXPIRATION            LEASE      %                 TOTAL
CONCEPT               LOCATION          COST      RENT     YIELD     DATE       COST   RECEIPTS  RETURN     COST    RECEIPTS  RETURN
------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>              <C>         <C>      <C>                <C>       <C>      <C>     <C>         <C>       <C>
OMEGA RESTAURANT(4)  MILWAUKEE, WI    1,010,045    84,840    8.40%            260,000    0       0.00%  1,421,983    84,840    5.97%
"               "      "        "                                             151,938    0       0.00%
"               "      "        "                                             780,000    0       0.00%    780,000         0    0.00%

POPEYE'S             PARK FOREST, IL    580,938    77,280   13.30%                                        580,938    77,280   13.30%

SUNRISE PS           PHOENIX, AZ      1,084,503   123,318   11.37%             79,219    0       0.00%  1,182,735   123,318   10.43%
                                                                               19,013    0       0.00%
VILLAGE INN  (5)     GRAND FORKS, ND    739,375    96,600   13.07%                                        739,375    96,600   13.07%

WENDY'S              AIKEN, SC          633,750    90,480   14.28%                                        633,750    90,480   14.28%
WENDY'S              CHARLESTION, SC    580,938    77,280   13.30%                                        580,938    77,280   13.30%
WENDY'S              N. AUGUSTA, SC     660,156    87,780   13.30%                                        660,156    87,780   13.30%
WENDY'S              AUGUSTA, GA        728,813    96,780   13.28%                                        728,813    96,780   13.28%
WENDY'S              CHARLESTON, SC     596,781    76,920   12.89%                                        596,781    76,920   12.89%
WENDY'S              AIKEN, SC          776,344    96,780   12.47%                                        776,344    96,780   12.47%
WENDY'S              AUGUSTA, GA        649,594    86,160   13.26%                                        649,594    86,160   13.26%
WENDY'S              CHARLESTON, SC     528,125    70,200   13.29%                                        528,125    70,200   13.29%
WENDY'S              MT. PLEASANT, SC   580,938    77,280   13.30%                                        580,938    77,280   13.30%
WENDY'S              MARTINEZ, GA       633,750    84,120   13.27%                                        633,750    84,120   13.27%
------------------------------------------------------------------------------------------------------------------------------------
PORTFOLIO TOTALS (26 Properties)     19,658,534 1,959,433    9.97%           2,312,42     0      0.00% 21,970,962 1,959,433    8.92%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>




Note 1: This property summary includes only property and equipment held by the
        Partnership as of March 31, 2002.
     2: The lease was terminated and the equipment sold to Hardee's Food Systems
        in conjunction with their assumption of the Terratron leases in November
        1996.
     3: These leases were assumed by Hardee's Food Systems at a reduced rental
        rate from that stated in the original leases.
     4: The lease with Hardee's Food Systems was terminated as of April 30,
        2001. A new lease with Omega Restaurants was negotiated and monthly
        rent commmenced in October 2001.
     5: The tenant vacated the property in February 2002, however, Village Inn
        remains liable until a lease termination agreement with Management is
        executed.
     6: Management received notice that Hardee's Food Systems intends to close
        this restaurant in April 2002. Hardee's will remain liable until a
        lease termination agreement with Management is executed.
     7: Due to the rejection of the Phoenix Restaurant Group, Inc. lease by the
        Bankruptcy Court in the Fourth Quarter of 2001, the sublessee does not
        wish to continue to lease the property. Rent charges ceased as of
        June 1, 2002.
     8: Management agreed to reduce Miami Sub's monthly rent from $5,000 to
        $4,000 for the months of July-October 2002.
     9: Management has entered a contract to sell the property in late July
        2002 at a price of $618,000.


                                                                     Page 2 of 2