FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

(Mark One)

For the fiscal year ended December 31, 20132014

OR

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)

1100 Main Street, Suite 1830 Kansas City, Missouri 64105

(Address of principal executive offices, including zip code)

(816) 421-7444

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

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

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

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

Index to Exhibits located on page: 45 – 46

TABLE OF CONTENTS

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 20132014

PART I

Background

The Registrant, DiVall Insured Income Properties 2 Limited Partnership (the “Partnership”), is a limited partnership organized under the Wisconsin Uniform Limited Partnership Act pursuant to a Certificate of Limited Partnership dated as of November 20, 1987, and governed by a Limited Partnership Agreement, as amended from time to time (collectively, the “Partnership Agreement”). The Partnership is managed by its general partner, The Provo Group, Inc. (the(“TPG” or the “General Partner”). As of December 31, 2013,2014, the Partnership had 1,574 Limited Partners1,519 limited partners owning an aggregate of 46,280.3 Limited Partnership Interests (the “Interests”).

The Partnership is engaged in the business of owning and operating its investment portfolio of commercial real estate properties (the “Properties”). At December 31, 2013,2014, the Partnership owned twelveeleven properties, located in a total of fivefour states. The Properties are leased on a triple net basis primarily to, and operated by, primarily franchisees of national, regional and local retail chains under long-term leases. The lessees are predominantly fast food, family style, and casual/theme restaurants.

At December 31, 20132014 nine of the twelveeleven Properties were and continue to be leased to three Wendy’s Franchisee’s,Franchisees, with six of the Properties being leased to Wendgusta, LLC (“Wendgusta”), two of the Properties being leased to Wendcharles I, LLC (“Wendcharles I”), and one of the Properties being leased to Wendcharles II, LLC (“Wendcharles II”). Operating base rents from these nine leases comprised approximately 75%79% of the total 20132014 operating base rents. During 2013,2014, additional percentage rents were also generated from these nine Wendy’s properties and totaled $470,478.$500,747. Additionally, the nine properties exceeded 75%82% of the Partnership’s total Properties, both by historical asset value and number. One of the Wendy’s leases is set to expire in November 2016, another seven are set to expire in November 2021, with a ninth lease set to expire in November 2026.

See Properties under Item 2 below for the table of all Properties and lease expirations and a discussion of Properties with significant developments.

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

The Partnership will be dissolved on November 30, 2020, or earlier upon the prior occurrence of any of the following events: (a) the disposition of all its Properties; (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 Partnerslimited partners owning a majority of the outstanding limited partner 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.limited partners. During the second quarters of the last six odd numbered years from 2001-2011, consent solicitations

were circulated to the Partnership’s limited partners (each being a “Consent”). If approved, any of these consentsConsents would have authorized the sale of all of the Properties and the dissolution of the Partnership. ALimited partners owning a majority of the Limited Partnerslimited partnership interests did not vote in favor of any of the Consents. Therefore, the Partnership continued to operate as a going concern. Again, in the third quarter of 2013, consent solicitations were circulated (the “2013 Consent”), which if approved would have authorized the sale of all of the Properties and the dissolution of the Partnership. ALimited partners owning a majority of the Limited Partnerslimited partnership interests did not vote in favor of the 2013 Consent, and the General Partner declared the 2013 Consent solicitation process concluded on August 30, 2013. Therefore, the Partnership continues to operate as a going concern.

The Permanent Manager Agreement

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

TPG, as the General Partner, has been operating and managing the affairs of the Partnership in accordance with the provisions of the PMA and the Partnership Agreement since February 8, 1993.

Effective January 1, 2013,2015, the PMA was renewed by the General Partner for a two-year period ending December 31, 2014.2016. The PMA can be terminated earlier (a) by a vote at any time by a majority interest of the Limited Partners, (b) upon the dissolution and winding up of the Partnership, (c) upon the entry of an order of a court finding that TPG has engaged in fraud or other like misconduct or has shown itself to be incompetent in carrying out its duties under the Partnership Agreement, or (d) upon sixty days written notice from TPG to the Limited Partnerslimited partners of the Partnership.

Advisory Board

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

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

The Partnership has no employees.

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

Available Information

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

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

As a smaller reporting company, the Partnership is not required to report risk factors in its annual report on Form 10-K.

None.

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

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

The Partnership owned the following Properties as of December 31, 2013:2014:

Footnotes:

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

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

(5)	Ownership of lessee’s interest is under a ground lease. The tenant is responsible for payment of all rent obligations under the ground lease.

(6)

One of the twelveeleven Properties owned as of December 31, 20132014 was leased to Wendcharles II. Since more than 75%82% of the Partnership’s Properties, both by historical asset value and number are leased to Wendy’s franchisees the financial status of the tenant may be considered relevant to investors. At the request of the Partnership, Wendcharles II provided it with a copy of its reviewed financial statements for the fiscal years ended December 29, 201328, 2014 and December 30, 2012.29, 2013. Those reviewed financial statements are attached to this Annual Report on Form 10-K as Exhibit 99.2.

(7)

Six of the twelveeleven Properties owned as of December 31, 20132014 were leased to Wendgusta. Since more than 75%82% of the Partnership’s Properties, both by historical asset value and number, are leased to Wendy’s franchisees, the financial status of the tenant may be considered relevant to investors. At the request of the Partnership, Wendgusta provided it with a copy of its reviewed financial statements for the fiscal years ended December 29, 201328, 2014 and December 30, 2012.29, 2013. Those reviewed financial statements are attached to this Annual Report on Form 10-K as Exhibit 99.0.

(8)

Two of the twelveeleven Properties owned by the Partnership as of December 31, 20132014 were leased to Wendcharles I. Since more than 75%82% of the Partnership’s Properties, both by historical asset value and number, are leased to Wendy’s franchisees, the financial status of the tenant may be considered relevant to investors. At the request of the Partnership, Wendcharles I provided it with a copy of its reviewed financial statements for the fiscal years ended December 29, 201328, 2014 and December 30, 2012.29, 2013. Those reviewed financial statements are attached to this Annual Report on Form 10-K as Exhibit 99.1.

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

Vacant Phoenix, AZ Property

The China Super Buffet restaurant ceased operations and vacated the Phoenix, AZ property in late June of 2011. Management sent a letter of default to the former tenant in June, due to its delinquent May and June of 2011 lease obligations totaling $12,312. Management regained possession of the property in July 2011, and although the former tenant was responsible for lease obligations through its lease end date of January 20, 2013, management did not anticipate any further rent collections and, therefore, monthly base rent charges of $6,000 per month ceased as of June 30, 2011.

The Partnership was unsuccessful in finding a new tenant for the vacant Phoenix, AZ property, and during the third quarter of 2011, the property was reclassified to properties held for sale upon the late September of 2011 execution of an Agency and Marketing Agreement (“Agreement”) with an unaffiliated Agent. The Agreement gave the Agent the exclusive rightA contract to sell the vacant Phoenix, AZ property and the Denny’s, Phoenix, AZ property through auction, sealed bid, hybrid sealed bid, on-line bid or through private negotiations. The vacant, Phoenix, AZ property did not sell at the October 18, 2011 auction. Per the Agreement, the Agent had the right to continue to market the property to potential buyers until the Agreement was set to terminate upon the later of 30 days after the Live Outcry Auction date, or a closing or settlement, if applicable. A marketing fee of approximately $7,700 was paid to the Agent in September of 2011 for the purpose of advertising, marketing and promoting the properties to the buying public. Management continued to market the property to potential buyers.

The carrying amount of the vacant Phoenix, AZ property was reduced by $390,117 during the fiscal year 2011, to its estimated fair value of $150,000.

A contract (“Contract”) to sell thethen vacant Phoenix, AZ property to an unaffiliated party was executed on February 14, 2012 for the sale price of $325,000. The sale was closed on October 22, 2012, resulting in net cash proceeds of $293,000, after third party commissions and other selling expenses, which is greater than the Property’s estimated fair value of $150,000 as of September 30, 2012. The carrying amount of the property was increased by $142,747 during the fourth quarter of 2012 to reflect the net proceeds of the sale.

Wendy’s- 1721 Sam Rittenberg, Charleston, SC

The Sam Rittenberg property lease with tenant, Wencoast, was set to expire on November 6, 2016. On September 4, 2008 the lease was assumed and assigned to Wendcharles I. Per the Assumption and Assignment of Lease agreement, the monetary lease obligations and original lease expiration date remained the same. However, per a Lease Amendment agreement (“Amendment”) with Wendcharles I, dated September 4, 2008, the original lease was extended five (5) years to November 6, 2021 and provided for two options to renew for additional five (5) year periods. On November 17, 2011, per a new Assumption and Assignment of Lease agreement, the lease was assumed and assigned to Wendcharles II.

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

On November 30, 2010, the County of Charleston (the “County”) made a purchase offer of approximately $177,000 to the Partnership in connection with an eminent domain (condemnation) land acquisition of approximately 5,000 square feet of the approximately 44,000 square feet of the Wendy’s- Mt. Pleasant, SC (“Wendy’s- Mt.Wendy’s-Mt. Pleasant”) property. The Partnership received Notice that the County filed condemnation proceedings on October 12, 2011, which resulted in a partial taking of the Wendy’s- Mt.Wendy’s-Mt. Pleasant property leased by tenant Wendcharles I, LLC (“Tenant”). In May 2013, Thethe Partnership and Tenant settled the condemnation action for the sum of $871,500 and the widening of the remaining curb cut at the property. Subsequently, the Partnership and Tenant settled the adjudication of lease and just compensation award allocation of the $724,247 deposited with the Clerk of Court before a trial on the allocation of just compensation occurred. On July 19, 2013, the Partnership entered into a Release, evidencing the settlement that provides for a payout of the monies held by the Clerk of Court and an amendment to the lease with Tenant providing for a reduction in monthly rent of the property. Per the terms of the Release, on August 15, 2013 the Tenant received $181,062 of the monies on deposit with the Clerk of Court. The Tenant will receive the balance of $181,062 ratably over the balance of the original term of the lease effective August 1, 2013 in the form of a rent reduction in monthly savings of $1,829 in rent on the condition that Tenant continues to lease the property without default, and the Tenant’s annual rent under the lease will revert to the current annual fixed rent beginning in November 2021 at the onset of the five year renewal option lease term.

Contemporaneously with the Partnership’s execution of the Release, the Partnership entered into an Amendment of Lease with Tenant, dated July 19, 2013 (the “Amendment”), which amends the original lease, as amended (“Lease”), as a condition to the Release. The Amendment renews the Lease under the first extension term, commencing on November 7, 2021 and ending on November 6, 2026. The Amendment revised the legal description of the premises under the Lease and replaces Section 1.12 of the Lease to provide that the Base Monthly Rent for the remainder of the Lease, beginning on the Effective Date and ending on November 6, 2021, shall be $4,611.09 and for the first extension term beginning on November 7, 2021 and ending on November 6, 2026 and for the second extension term shall be $6,440. Finally, the Amendment further provides that it, together with the Release, settles all claims relating to the apportionment of the condemnation award and Article X of the Lease is deemed satisfied with respect to such condemnation proceedings. The Lease and the Amendment were filed with the SEC as Exhibits 99.1 and 99.2, respectively to the Partnerships current report on Form 8-K on July 24, 2013.

Daytona’s All Sports Café-Vacant Property – 4875 Merle Hay Rd, Des Moines, IA Property(Formerly Daytona’s All-Sports Café “Daytona’s”)

Daytona’s lease expired May 31, 2014 and the tenant vacated the premises on or about the same date. On January 24, 2014, the Partnership sent Daytona’s a 30-day Notice of Default for failure to pay its January rent. On February 3, 2014, the Partnership received payment for a portion of Daytona’s January rent and real estate tax escrow payment. The second amendment to the lease for the Daytona’s All Sports Café (“Daytona’s) located in Des Moines, IA30-day Notice of Default expired on May 31, 2011. In April of 2011, management and Daytona’s signed a letter of intent (“LOI”) which agreed to a third amendment for an additional three year lease which began on June 1, 2011 and expires on May 31,February 23, 2014. The third amendment to the lease was executed in early May of 2011 and provides for an annual base rent of $72,000, rent abatement for June for each of the three years, and a continued potential $600 rent credit per month for both timely payment and sales reporting. In addition, Daytona’s is to pay as percentage rent 8% of its annual sales over $850,000.

Beginning in December of 2005, management requested that Daytona’s escrow its future property tax liabilities with the Partnership on a monthly basis. As of December 31, 2013,2014 Daytona’s was current onhas not made its monthly rent and propertyor real estate tax escrow obligations. The escrow payments held byfor February, March, April or May 2014. On May 29, 2014, the Partnership totaled $24,307filed a motion for default judgment, which the tenant filed an answer denying all claims made against it. On July 10, 2014, the Partnership filed for summary judgment against the tenant for all amounts owing and were included in property tax payable inas of December 31, 2014, and is still pursuing collection against the Partnership’s condensed balance sheets. Astenant.

On July 8, 2014, the Partnership signed a listing agreement with a broker, Hubbell Commercial Brokers, L.C. On September 12, 2014, the Partnership signed a purchase agreement with Sundance, Inc., for the sale of the dateproperty at a sale price of this filing, Daytona’s has only$555,000. The Partnership completed the sale of the property on December 22, 2014 with net proceeds of approximately $490,000 paid rent forto the month of January in 2014. Management does not expect to renew the lease when it expires, and has begun prospecting for a replacement tenant.Partnership.

Applebee’s- Columbus, OH Property

An Amendment and Extension of Lease (“Amendment”) was executed with the Applebee’s restaurant occupying the property located in Columbus, OH on November 4, 2009 and was set to expire on October 31, 2012. The Partnership waived the Amendment’s 90 day notice period and allowed the tenant to exercise the first option to renew its lease for an additional two year period, effective November 1, 2012.

On December 20, 2013 the lease was assigned from Thomas & King, Inc. to RMH Franchise Corporation. Per the Assumption and Assignment of Lease agreement, the monetary lease obligations and original lease expiration date remained the same.

On October 23, 2014, the tenant, RMH Franchise Corporation, and the Partnership, agreed to the two year extension of Applebee’s lease via option exercise, even though the notice given to the landlord by the tenant was not within the terms of the lease agreement. Applebee’s lease now expires October 31, 2016 and the rent will increase by 2% each year, effective November 1, 2014 and 2015.

Formerly Owned Panda Buffet Restaurant- Grand Forks, ND Property

A sales contract was executed on September 30, 2009 for the installment sale of the Panda Buffet restaurant property (“Panda Buffet”) located in Grand Forks, ND to the owner tenant. The Partnership completed the sale of the Panda Buffet property on November 12, 2009 for $450,000. The buyer paid $150,000 at closing with the remaining balance of $300,000 being delivered in the form of a Promissory note (“Buyers Note”) to the Partnership. The Buyers Note reflected a term of three years, an interest rate of 7.25%, and principal and interest payments paid monthly. Principal was amortized over a period of ten years beginning December 1, 2009 with a balloon payment due on November 1, 2012. Pursuant to the Buyers Note, there will beis no penalty for early payment of principal. The Buyers Note also required the buyer to escrow property taxes with the Partnership beginning January of 2010 at $1,050 per month (lowered to $900 beginning February 1, 2011 and $700 beginning January 1, 2012)2012 and increased to $925 beginning January 1, 2013). The

Effective November 1, 2012, the Partnership amended the Buyers Note in the amount of $232,777, to $200,000 after a principal payment of $32,777 was received on October 19, 2012 under the following extended terms: The principal balance of $200,000 will be amortized over five years at an interest rate of 7.25% per annum with a full balloon payment of $133,396 due November 1, 2014. As of December 31, 2013, the buyer was current on its 2013 monthly property tax escrow obligations and escrow payments.

Effective November 1, 2014, the Partnership agreed to another two year extension as follows: Buyer will make a principal payment of $13,396 which reduces the principal balance to $120,000 as of November 1, 2014, and the balance will be amortized over two years with a monthly payment of approximately $5,386 per month. The loan will be fully paid off by October 31, 2016. The property tax escrow cash balance held by the Partnership amounted to $1,390$2,530 as December 31, 2013,2014, after the $9,859$9,960 payment of the 2013 property taxes in December 20132014 and is included in the property tax payable in the condensed balance sheets.

Per the Buyer’s Note amortization schedule, the monthly payments are to total approximately $3,916$5,386 per month. The amortized principal payments yet to be received under the Buyer’s Note amounted to $163,491$115,339 as of December 31, 2013.2014. During the year ended December 31, 2013,2014, twelve note payments were received by the Partnership which totaled $33,801$48,152 in principal and $13,195$10,599 in interest.

Other Property Information

Property taxes, general maintenance, insurance and ground rent on the Properties are the responsibility of the respective tenants. However, when a tenant fails to make the required tax payments or when a property becomes vacant (such as the Phoenix, AZDes Moines, IA property, formerly operated as China Buffet,)Daytona’s), the Partnership makes the appropriate property tax payments to avoid possible foreclosure of the property. In a property vacancy the Partnership pays for insurance and maintenance related to the vacant property.

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

None.There are no material pending legal proceedings, other than ordinary routine litigation incidental to the Partnership’s business, to which the Partnership is a party.

Not applicable.

PART II

Not Applicable.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT

Item 7 of thisThis Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this section and located elsewhere in this Annual Report on Form 10-K regarding the prospects of our industry1934, as well as the Partnership’s prospects, plans, financial position and business strategy may constitute forward-looking statements.amended (the “Exchange Act”). These forward-looking statements are not historical facts but are the intent, belief or current expectations of management of DiVall Insured Income Properties 2 Limited Partnership (as defined above, the General Partner“Partnership”) based on its knowledge and understanding of the business and industry. Words such as “may,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “would,” “could,” “should” and variations of these words and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. These statements are not guarantees of the future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Examples of forward-looking statements include, but are not limited to, statements we make regarding:

Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. The Partnership cautions readers not to place undue reliance on forward-looking statements, which reflect management’s view only as of the date of this Form 10-K. All subsequent written and oral forward-looking statements attributable to the Partnership, or persons acting on the Partnership’s behalf, are expressly qualified in their entirety by this cautionary statement. Management undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Factors that could cause actual results to differ materially from any forward-looking statements made in this Form 10-K include, without limitation, changes in general economic conditions, changes in real estate conditions, including without limitation, decreases in valuations of real properties, increases in property taxes and lack of buyers should the Partnership want to dispose of a property, lease-up risks, ability of tenants to fulfill their obligations to the Partnership under existing leases, sales levels of tenants whose leases include a percentage rent component, adverse changes to the restaurant market, entrance of competitors to the Partnership’s lessees

in markets in which the Properties are located, inability to obtain new tenants upon the expiration of existing leases, the potential need to fund tenant improvements or other capital expenditures out of operating cash flows, and our inability to realize value for Limited Partnerslimited partners upon disposition of the Partnership’s assets.assets, such other factors as discussed in reports we file with the SEC.

Critical Accounting Policies and Estimates

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

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

Depreciation methods and lives- Depreciation of the properties is provided on a straight-line basis over the estimated useful life of the buildings and improvements. While the Partnership believes these are the appropriate lives and methods, use of different lives and methods could result in different impacts on net income. Additionally, the value of real estate is typically based on market conditions and property performance. As a result, 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 when collectability is assured. Percentage rents are accrued only when the tenant has reached the sales breakpoint stipulated in the lease.

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

Investment Properties

As of December 31, 2013,2014, the Partnership owned twelveeleven properties (as defined above, the “Properties”) each containing a fully constructed fast-food restaurants. In addition, one propertyor casual restaurant. One Property is located on a parcel of land which is subject to a ground lease (see paragraph below). The twelveeleven tenants are composed of the following: nine Wendy’s restaurants, an Applebee’s restaurant, and a KFC restaurant, and a Daytona’s All Sports Café.restaurant. The twelve propertiesProperties are located in a total of fivefour states.

Property taxes, general maintenance, insurance and ground rent on the Properties are the responsibility of the respective tenants. A more detailed discussion of tax payments, insurance and ground rent is provided in Item 2, and incorporated herein by this reference.

There were no building improvements capitalized during 20132014 or 2012.2013.

In accordance with Financial Accounting Standards Board (“FASB”) guidance for “Accounting for the Impairment or Disposal of Long-Lived Assets”, current and historical results from operations for disposed properties and assets classified as held for sale are reclassified separately as discontinued operations. The guidance also requires the adjustment to carrying value of properties due to impairment in an attempt to reflect appropriate market values.

Further Information

A summary of significant developments as of December 31, 2013,2014, by property, for properties with such developments, can be found in Item 2, Properties.

As described in Item 2, related to the portion of the Wendy’s – Mt. Pleasant property condemned by the County of Charleston, classified as discontinued operations in our financial statements and included in our quarterly report on Form 10-Q for the second and third quarters ended June 30, 2013 and September 30, 2013 management had reconsidered the accounting treatment for the condemnation award and, it was determined that the gain should be included in continuing operations. This change is being handled prospectively and in management’s opinion is not material to the overall presentation of the financial statements.

Net Income

Net income for the fiscal years ended December 31, 2014, 2013 and 2012 were $903,463, $1,041,105, and 2011 were $1,041,105, $862,195, and $275,643, respectively. Net income per Limited Partnership Interest for the fiscal years ended December 31, 2014, 2013 and 2012 were $19.33, $22.27, and 2011 were $22.27, $18.44, and $5.90, respectively.

The increase in netIn each of the last three years, the Partnership has had income for 2013 over prior years is primarily due to the second quarter of 2013 gain onfrom the sale of a property. These sales have been the condemned portionmain reason for the fluctuation in total net income. The gain on sale in 2014 was $227,943 related to the Des Moines, IA property, and the gain in 2013 was $303,106 related to the resolution of the eminent domain proceedings in Mt. Pleasant, SC property. Property impairments taken in 2012 and 2011 were not repeated in 2013.SC. The 2012 net income also includes the fiscal year 2012 property impairment write up of $142,747 related to the vacant Phoenix, AZ property. The 2011 net income includessale of the fiscal year 2011 property impairment write downs of $390,117 related to thethen vacant Phoenix, AZ property and $104,705 related to the Denny’s, Phoenix, AZ property.

Net income for the fiscal years ended December 31, 20122014, 2013 and 20112012 included the results from both operations and discontinued operations. There were no discontinued operations in 2013. Assets disposed of or deemed to be classified as held for sale require the reclassification of current and previous years’ operations to discontinued operations in accordance with GAAP applicable to “Accounting for the Impairment or Disposal of Long Lived Assets”. As such, prior year operating results for those properties considered as held for sale or properties no longer considered for sale have been reclassified to conform to the current year presentation without effecting total net income. When properties are considered held for sale, depreciation of the properties is discontinued, and the properties are valued at the lower of the depreciated cost or fair value, less costs to dispose.

Results of Operations

IncomeNet income from continuing operations for the fiscal years ended December 31, 2014, 2013 and 2012 were $695,052, $997,958, and 2011 were $1,041,105, $752,954 and $754,133,$708,682, respectively. See the paragraphs below for further information as to individual operating income and expense items and explanations as to 2014, 2013 2012 and 20112012 variances.

Fiscal year ended December 31, 20132014 as compared to fiscal years ended December 31, 20122013 and 2011:2012:

Operating Rental Income:Operating rental income for the fiscal years ended December 31, 2014, 2013 and 2012 and 2011 were $1.5was $1.469 million, $1.49$1.436 million, and $1.46$1.428 million, respectively. The rental income was comprised of monthly lease obligations per the tenant leases, percentage rents obligations related to operating tenants who had reached their sales breakpoint, and included adjustments for straight-line rent. The slight increase in 2014 and compared to 2013 and 2012 compared to 2011 is due to an overallthe continued increase in reported 2013 and 2012 sales for tenants who had reached their sales breakpoint.

Management expects total base operating rent revenuesrental income to be approximately $1 million$970,000 for the year 20142015 based on operating leases currently in place. Future operating rent revenues haverental income has the potential to either decrease or increase. TheyFuture operating rental income may decrease with tenantsa tenant default and/or we may reclassify certain properties as properties held for sale. TheyFuture operating rental income may also increase with additional rents due from tenants, if those tenants experience increased sales levels, which require the payment of additional rent to the Partnership. Operating percentage rents included in operating rental income in 2014, 2013, and 2012 were $500,747, $470,478, and 2011 were $470,478, $465,407, and $431,250, respectively. Management expects the 20142015 percentage rents to be about the same as 2013.2014.

Insurance Expense:Insurance expense for the fiscal years ended December 31, 2014, 2013 and 2012 and 2011 was approximately $6,000. Insurance expense for all three years was comprised of general liability insurance. Each tenant is responsible for insurance protection and beginning October 31, 2010 the Partnership only purchases property insurance for an individual property if the tenant cannot provide proof of insurance

protection or due to a property vacancy. For 2014,2015, management expects operating insurance expense to again be approximately $6,000. This amount could increase upon a property insurance default or vacancy by a tenant or an increase in the general liability insurance premium for the 2014/20152015/2016 insurance year, which is expected to be paid in the fourth quarter of 2014.2015.

General and Administrative Expense:General and administrative expenses for the fiscal years ended December 31, 2014, 2013 and 2012 were $95,785, $60,702, and 2011 were $60,702, $82,515, and $63,355, respectively. General and administrative expenses were comprised of management expense, state/city registration and annual report filing fees, office supplies and printing costs, outside storage expenses, copy/fax costs, postage and shipping expenses, long-distance telephone expenses, website fees, bank fees and state income tax expenses. The variance inTotal 2014 operating general and administrative expenses iswere higher than 2013 expenses, primarily due to increased 2013 state and local income tax expenses as a result of the steady decreasecondemnation sale that were paid in 2014. In 2014 the Partnership paid $54,424 in state income tax since 2010 after selling the two propertiesand local taxes versus $10,404 paid in Arizona in 2011 and 2012. Lower printing and mailing expenditures were incurred in 2013 and 2012 as the 2012 and 2011 Annual Reports on Form 10-K were posted to the Partnership website for viewing and printing. Hard copies were only mailed to an investor upon request. Also, the 2013 Consent Statement materials were posted to the Partnership website in the third quarter of 2013 and hard copies were only mailed upon request.2013. Management expects the total 20142015 operating general and administrative expenses to be about the same as 201310% lower than 2014 expenses.

Professional services: Professional services expenses for the fiscal years ended December 31, 2014, 2013 and 2012 were $251,521, $261,501, and 2011 were $261,501, $229,339, and $226,482, respectively. Professional service expenses were primarily comprised of investor relations data processing, investor mailings processing, website design, legal, auditing and tax preparation fees, electronic tax filings, and SEC report conversion and processing fees. The variance in professional services expenses is primarily due to the SEC mandated XBRL financial statement conversion and filing requirements for the Partnership beginning in the second quarter of 2011, the 2013 and 2011 ConsentsConsent and related SEC filings, and additional electronic state income tax filings in 20122013 and 2011.2012. Management anticipates that the total 2014 operating2015 professional services expenses will be lower than 2013 because there will be no consent solicitation2014 in anticipation of lower legal fees. Legal fees in 2014 and the costs relatedwere unusually high due to the additional SEC mandated XBRL financial statement footnotes conversion and filing requirements for the Partnership are becoming more predictable and streamlined.Daytona’s tenant default.

Note Receivable Interest Income:Note receivable interest income for the fiscal years ended December 31, 2014, 2013 and 2012 was $10,599, $13,195, and 2011 were $13,195, $17,370, and $19,273, respectively. The interest income was comprised of interest income associated with the Buyer’s Note from the Panda Buffet property sale in November of 2009. Management expects note receivable interest income to approximate $10,000be approximately $6,450 in 2014.2015. See Item 2, Properties, for further information.

Recovery of Amounts Previously Written-off: Recovery of amounts previously written-off for the fiscal years ended December 31, 2014, 2013 and 2012 were $0, $0, and 2011 were approximately $0, $1,000, and $7,000, respectively, and were comprised of unexpected small recoveries from former general partners in connection with the misappropriation of assets by the former general partners and their affiliates. Management anticipates that such revenue type may continue to be generated until Partnership dissolution; however, no significant recoveries are anticipated.

Results of Discontinued Operations

In accordance with FASB guidance for “Accounting for the Impairment or Disposal of Long Lived Assets”, discontinued operations represent the operations of properties disposed of or classified as held for sale as well as any gain or loss recognized in their disposition. During the fiscal years ended December 31, 20122014, 2013 and 2011,2012, the Partnership recognized income (loss) from discontinued operations of $109,241,$208,411, $43,147 and $(478,490),$153,513, respectively. There were noThe 2014 and 2013 income from discontinued operations in 2013. As discussed previously, the gain onwas attributable to the sale of land in the second quarter of 2013, originally reported as discontinued operations, was later determined to be part of continuing operations.vacant Des Moines, IA property. The 2012 and 2011 income (loss)

from discontinued operations was attributable to the third quarter of 2012 impairment adjustments of $142,747 due to the sale of the Vacant Phoenix, AZ property, the third quarter of 2011 reclassifications of the vacant Phoenix, AZ property and the Denny’s, Phoenix, AZ property to properties held for sale upon the execution of Agency and Marketing Agreements with an unaffiliated party in September of 2011 to sell both of the properties. The 2011 loss from discontinued operations also includes the fiscal year 2011 property impairment write downs of $390,117 related to the vacant Phoenix, AZ property and $104,705 related to the Denny’s, Phoenix, AZ property, and the fourth quarter of 2011 loss of approximately $1,000 in relation to the sale of the Denny’s, Phoenix, AZ property. See the components of discontinued operations included in the statements of income for the years ended December 31, 2014, 2013 2012 and 20112012 in Note 3 Investment Properties and Properties Held for Sale.

Management anticipates that there will be no discontinued operatingoperations expenditures in 2014 should approximate $0,2015, since no additional properties are expected to be classified as property held for the sale.

Cash Flow Analysis

Net cash flows provided by operating activities for the fiscal years ended December 31, 2014, 2013 and 2012 were $791,837, $698,618, and 2011 were $698,618, $871,443, and $907,454.respectively. Operating cash flows in 2013 were lower than 20122014 and 20112012 due to the increase in the security deposit escrow and the establishment of the deferred tenant award proceeds escrow of $181,062. The decrease

General administrative expenses increased in operating cash flows from 20112014 due to 2012 was significantly impacted by the loss of rentalincreased state income from the vacancytaxes due as a result of the Phoenix, AZ property beginningMt. Pleasant, SC condemned land sale in July, 2011 and continuing through October 2012 when2013. The Partnership also established a $25,483 allowance for doubtful accounts due to the property was sold. Property taxes paid were $10,000 in 2011 and $13,000 in 2012.

Vacant tenant expenses increased from approximately $10,000 in 2011 to $16,000 in 2012.judgment against the former Daytona’s tenant. Legal, audit, and data processing fees have increased from an aggregate $186,000$230,000 to $230,000$250,000 over the same timeframe due to the additional expense of the SEC mandated XBRL financial statement filing requirements beginningthat began in 2011.

Property impairment write-downs, depreciation and amortization are non-cash items and do not affect the current operating cash flow of the Partnership or distributions to the Limited Partners.

Cash flows from investing activities for the fiscal years ended December 31, 2014, 2013 and 2012 were $528,964, $536,656, and 2011 were $536,656, $341,297, and $468,882, respectively. Investing cash flows in 2013 were higher than 20122014 and 20112012 due to the deferred rent proceeds from the Mt. Pleasant, SC sale of condemned land. The 2014 amount was comprised of $489,558 in net proceeds from the sale of the Des Moines, IA property and $48,152 in note receivable principal payments from the promissory note, offset by a leasing commission payment relating to the Applebee’s lease extension. The 2013 amount was comprised of $337,097 in net proceeds from the sale of the condemned land in Mt. Pleasant, SC, $171,918 ofin deferred rent proceeds, and the receipt of $33,801 in note receivable principal payments from the Buyer’s Note,promissory note, offset by a leasing commission payment relating to the Wendy’s, Mt. Pleasant, SC property. The 2012 amount was comprised of $292,747 in net proceeds from the sale of the Vacant,vacant, Phoenix, AZ property, small recoveries from former general partners, and the receipt of $55,955 in note receivable principal payments from the Buyer’s Note,promissory note, offset by a leasing commission payment in relation to the Applebee’s, Columbus, OH property. The 2011 amount was comprised of $443,773 in net proceeds from the sale of the Denny’s, Phoenix, AZ property, small recoveries from former general partners, the receipt of $22,991 in note receivable principal payments from the Buyer’s Note, offset by a leasing commission payment in relation to the Daytona’s, Des Moines, IA property.

During 2014,2015, principal payments to be received by the Partnership under the Buyer’s Note amortization schedule total $163,491.$58,182. The Partnership anticipates paying $8,600 inno leasing commissions in 2015.

For the fiscal year ended December 31, 2014, related to Applebee’s anticipated lease extension.

cash flows used in financing activities were $860,589 and consisted of aggregate limited partner distributions of $857,000 million (including $48,152 in promissory note principal payments received), and General Partner distributions of $3,589. For the fiscal year ended December 31, 2013, cash flows used in financing activities were $1.684 million and consisted of aggregate Limited Partnerlimited partner distributions of $1.68 million (including $62,708 in Buyer’s Notepromissory note principal payments received), and General Partner distributions of $4,176. For the fiscal year ended December 31, 2012, cash flows used in financing activities were approximately $1.288 million and consisted of aggregate Limited Partnerlimited partner distributions of $1.28 million (including $55,000 in Buyer’s Notepromissory note principal payments received), and General Partner distributions of $2,878. For the fiscal year ended December 31, 2011, cash flows used in financing activities were approximately $1.033 million and consisted of aggregate Limited Partner distributions of $1.03 million (including $23,000 in Buyer’s Note principal payments received), and General Partner distributions of $3,081. Both Limited Partnerlimited partner and General Partner distributions have been and will continue to be made in accordance with the Amended Agreement of Limited Partnership Agreement.of the Partnership. Management anticipates that aggregate Limited Partnerlimited partner distributions could be approximately $950,000$1,390,000 during 2014.2015.

Liquidity and Capital Resources

The Partnership’s cash balance was $244,319$704,531 at December 31, 2013.2014. Cash of $100,000,$600,000, which includes $11,749$19,588 in Buyer’s Notepromissory note principal and interest payments received, will be used to fund the fourth quarter of 20132014 aggregate distribution to Limited Partnersbe paid to limited partners in February of 2014,2015, and cash of approximately $51,000$27,000 is anticipated to be used for the payment of quarter-end accrued liabilities, net of property tax cash escrow, which are included in the balance sheets. The remainder represents amounts deemed necessary to allow the Partnership to operate normally.

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

As of December 31, 20132014 and 2012,2013, the current twelveeleven Properties were leased 100 percent. In addition, the Partnership collected 97.5% and 100% of its base rent from current operating tenants for the fiscal years ended December 31, 2014 and 2013, and 2012,respectively, which we believe is a good indication of overall tenant quality and stability. There are twono leases due to expire within 2014. The Daytona’s lease expires May 30, 2014 and the Applebee’s lease expires October 31, 2014. Applebee’s has a two year option which management expects they will exercise; management does not expect to renew their lease with Daytona’s.2015. See Item 2, Investment Properties for further information regarding properties with significant developments.

Nine of the Partnership’s twelve propertieseleven Properties operate as Wendy’s fast food restaurants and are franchises of the international Wendy’s Company. Operating base rents from the nine Wendy’s leases comprised approximately 75%79% of the total 20132014 operating base rents included in operating rental income. As of December 31, 2014, additional 2014 percentage rents totaled $500,747, all of which were unbilled and were accrued in relation to the Wendy’s properties. Therefore, during 2014, the Partnership generated approximately 85% of its total operating revenues from the nine properties. During 2013, additional

2013 percentage rents totaled 470,478,$470,478, all of which were unbilled and were accrued in relation to the Wendy’s properties. Therefore, during 2013, the Partnership generated approximately 83% of its total operating revenues from thethose nine properties. During 2012, additional 2012 percentage rents totaled $456,896, all of which were unbilled and were accrued in relation to the Wendy’s properties. Therefore, during 2012, the Partnership generated approximately 82% of its total operating revenues from the nine properties.Properties. The 20122013 percentage rents were both billed and fully collected as of December 31, 2013.2014.

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

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

There is no way to determine, with any certainty, which, if any, tenants will succeed or fail in their business operations over the term of their respective leases with the Partnership. The nationwide economic downturnEconomic volatility, either locally or nationally, may affect a lessee’s operational activity and its ability to meet lease obligations. Based on past experience, it can be reasonably anticipated that some lessees will default on future lease payments to the Partnership, which will result in the loss of expected lease income for the Partnership. The General Partner will use its best efforts to vigorously pursue collection of any defaulted amounts and to protect the Partnership’s assets and future rental income potential by trying to re-lease any properties with rental defaults. External events, which could impact the Partnership’s liquidity, areinclude the entrance of other competitors into the market areas of our tenants; the relocation of the market area itself to another traffic area; liquidity and working capital needs of the lessees; and failure or withdrawal of any of the national franchises held by the Partnership’s tenants. Each of these events, alone or in combination, would affect the liquidity level of the lessees resulting in possible default by a tenant. Since the information regarding plans for future liquidity and expansion of closely held organizations, which are tenants of the Partnership, tend to be of a private and proprietary nature, anticipation of individual liquidity problems is difficult.

Despite an apparent slow economic recovery, the prior nationwide economic downturn has createdcontributed to a continuing difficult credit environment.environment for certain borrowers. Fortunately, the Partnership has limited exposure to the credit markets, as the Partnership has no mortgage debt. Management monitors the depository institutions that hold the Partnership’s cash on a regular basis and believes that funds have been deposited with creditworthy financial institutions. However, the economic environment and any lack of available credit could delay or inhibit the General Partner’s ability to dispose of the Properties, or cause management to have to dispose of the Properties for a lower than anticipated return. As a result, the General Partner continues to maintain an objective to preserve capital and sustain property values while selectively disposing of the Properties as appropriate.

Off-Balance Sheet Arrangements

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

Disposition Policies

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

Inflation

To the extent that tenants can pass through commodity inflation in their sales prices, the Partnership will benefit from additional percentage rent from increased sales. The majority of the Partnership’s leases have percentage rental clauses. Revenues from operating percentage rentals represented 33% of operating rental income for the fiscal year ended December 31, 2014, and 31% of operating rental income for the fiscal years ended December 31, 2013 and 2012, and 30% of operating rental income for the fiscal year ended December 31, 2011.2012. If, however, inflation causes sales to decrease, operating margins to deteriorate for lessees, or if expenses grow faster than revenues, then, inflation may well negatively impact the portfolio through tenant defaults.

Due to the “triple-net” nature of the property leases, asset values generally move inversely with interest rates.

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

Item 8.

Financial Statements and Supplementary Data

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

(A Wisconsin limited partnership)

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

Report of Independent Registered Public Accounting Firm

To The Partners

Divall Insured Income Properties 2 Limited Partnership

We have audited the accompanying balance sheet of Divall Insured Income Properties 2 Limited Partnership (a Wisconsin limited partnership) as of December 31, 2014 and the related statements of income, partners’ capital, and cash flows for the year then ended. Our audit also included the financial statement schedule of Divall Insured Income Properties 2 Limited Partnership listed in Item 15(a)(2). These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Divall Insured Income Properties 2 Limited Partnership as of December 31, 2014 and the results of their operations, and their cash flows for year then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

RBSM, LLP

Leawood, Kansas

March 30, 2015

Las Vegas, NV    Kansas City, MO    Houston, TX    New York, NY    Washington DC

Mumbai, India    Athens, Greece    San Francisco, CA    Beijing, China

Member ANTEA INTERNATIONAL with offices worldwide

Report of Independent Registered Public Accounting Firm

To the Partners

Divall Insured Income Properties 2 Limited Partnership

We have audited the accompanying balance sheetssheet of Divall Insured Income Properties 2 Limited Partnership (a Wisconsin limited partnership) as of December 31, 2013 and 2012, and the related statements of income, partners’ capital, and cash flows for each of the three years in the period ended December 31, 2013.then ended. Our audits also included the financial statement schedules of Divall Insured Income Properties 2 Limited Partnership listed in Item 15(a)(2). These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Divall Insured Income Properties 2 Limited Partnership as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the three years in the periodyear then ended, December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

/S/s/ McGladrey LLP

Chicago, Illinois

March 28, 2014, except for Note 3,

as to which the date is March 30, 2015

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

BALANCE SHEETS

December 31, 20132014 and 20122013

ASSETS

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

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

BALANCE SHEETS

December 31, 20132014 and 20122013

LIABILITIES AND PARTNERS’ CAPITAL

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

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF INCOME

For the Years Ended December 31, 2014, 2013, 2012, and 20112012

The accompanying notes are an integral part of these financial statements

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF PARTNERS’ CAPITAL

For the years ended December 31, 2014, 2013 2012 and 20112012

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

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2014, 2013, 2012, and 20112012

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

DIVALL INSURED INCOME PROPERTIES 2 LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2014, 2013 2012 AND 20112012

1.ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:

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

The Partnership is currently engaged in the business of owning and operating its investment portfolio of commercial real estate properties (the “Properties”). The Properties are leased on a triple net basis primarily to, and operated by, franchisors or franchisees of national, regional, and local retail chains under primarily long-term leases. The lessees are fast food, family style, and casual/theme restaurants. As of December 31, 2013,2014, the Partnership owned twelveeleven Properties, which are located in a total of fivefour states.

The Partnership will be dissolved on November 30, 2020, or earlier upon the prior occurrence of any of the following events: (a) the disposition of all its Properties; (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 Partnerslimited partners owning a majority of the outstanding limited partner 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.limited partners. During the second quarters of the last six odd numbered years from 2001-2011, consent solicitations were circulated to the Partnership’s limited partners (each being a “Consent”). If approved, any of these consentsConsents would have authorized the sale of all of the Properties and the dissolution of the Partnership. ALimited partners owning a majority of the Limited Partnerslimited partnership interests did not vote in favor of any of the Consents. Therefore, the Partnership continued to operate as a going concern. Again, in the third quarter of 2013, consent solicitations were circulated (the “2013 Consent”), which if approved would have authorized the sale of all of the Properties and the dissolution of the Partnership. ALimited partners owning a majority of the Limited Partnerslimited partnership interests did not vote in favor of the 2013 Consent, and the General Partner declared the 2013 Consent solicitation process concluded on August 30, 2013. Therefore, the Partnership continues to operate as a going concern.

Significant Accounting Policies

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

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

As of December 31, 20132014 and 20122013 there were no recorded$25,483 and $0 values for allowance for doubtful accounts based on an analysis of specific accounts and historical experience.

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

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

Deferred charges represent leasing commissions paid when the Properties are leased and upon the negotiated extension of a lease. Leasing commissions are capitalized and amortized over the term of the lease. As of December 31, 20132014 and 2012,2013, accumulated amortization amounted to $129,795$157,456 and $101,123,$129,795, respectively. Fully amortized deferred charges of $57,300,$83,292, including related accumulated amortization, were removed from the condensed balance sheets as of September 30, 2011.December 31, 2014.

Deferred tenant award proceeds escrow represents the portion of the award proceeds from the sale of the portion of the Mt. Pleasant, SCSouth Carolina property that will be paid to the tenant ratably over 99 months beginning August 1, 2013.

The Partnership generally maintains cash in federally insured accounts which, at times, may exceed federally insured limits. The Partnership has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk.

Financial instruments that potentially subject the Partnership to significant concentrations of credit risk consist primarily of cash investments and leases. Additionally, as of December 31, 2013,2014, nine of the Partnership’s twelveeleven Properties are leased to three significant tenants, Wendgusta, LLC (“Wendgusta”), Wendcharles I, LLC (“Wendcharles I”) and Wendcharles II, LLC (“Wendcharles II”), all three of whom are Wendy’s restaurant franchisees. The property lease(s) for thethese three tenants comprised approximately 53%56%, 14%15% and 8%, respectively, of the Partnership’s total 20132014 operating base rents reflected for the fiscal year ended December 31, 2013.2014.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (and disclosure of contingent assets and liabilities) at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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

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

The Partnership periodically reviews its long-lived assets, primarily real estate, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Partnership’s review involves comparing current and future operating performance of the assets, the most significant of which is undiscounted operating cash flows, to the carrying value of the assets. Based on this analysis, a provision for possible loss is recognized, if any. The carrying amount of the formerly owned Denny’s Phoenix, AZ property (property was sold on November 23, 2011) was reduced by $104,705 to its estimated fair value less estimated costs to sell of $445,000 during the third quarter of 2011. The carrying amount of the vacant, Phoenix, AZ property was reduced by $390,117 during the fiscal year 2011, to its estimated fair value of $150,000. The carrying amount of the Vacant, Phoenix, AZ property(which we later sold) was increased by $142,747 to its estimated fair value less estimated costs to sell of $293,000 during the fourth quarter of 2012. There were no adjustments to carrying values for the fiscal yearyears ended December 31, 2013.2013 and 2014.

The Financial Accounting Standards Board (“FASB”) guidance on “Fair Value Measurements and Disclosure”, defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. The adoption of the provisions of this FASB issuance, with respect to nonrecurring fair value measurements of nonfinancial assets and liabilities, including (but not limited to) the valuation of reporting units for the purpose of assessing goodwill impairment and the valuation of property and equipment when assessing long-lived asset impairment, did not have a material impact on how the Partnership estimated its fair value measurements but did result in increased disclosures about fair value measurements in the Partnership’s financial statements as of and for the years ended December 31, 20132014 and 2012.2013. See Note 12 for further disclosure.

GAAP applicable to Disclosure About Fair Valuedisclosure about fair value of Financial Instrumentsfinancial instruments requires entities to disclose the fair value of all financial assets and liabilities for which it is practicable to estimate. Fair value is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The General Partner believes that the carrying value of the Partnership’s assets (exclusive of the Properties) and liabilities approximate fair value due to the relatively short maturity of these instruments.

No provision for federal income taxes has been made, as any liability for such taxes would be that of the individual partners rather than the Partnership. At December 31, 20132014 the tax basis of the Partnership’s assets exceeded the amounts reported in the December 31, 20132014 financial statements by approximately $6,926,237.$6,861,581.

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

The Partnership is not subject to federal income tax because its income and losses are includable in the tax returns of its partners, but may be subject to certain state taxes. FASB has provided guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the entity’s tax returns to determine whether the tax positions are more-likely-than-not to be sustained when challenged or when examined by the applicable taxing authority. Management has determined that there were no material uncertain income tax positions. Tax returns filed by the Partnership generally are subject to examination by U.S. and state taxing authorities for the years ended after December 31, 2009.2011.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and IFRSs (:ASU No. 2011-04”). ASU No. 2011-04 updates and further clarifies requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Additionally, ASU No. 2011-04 clarifies the FASB’s intent about the application of existing fair value measurements. ASU No. 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively.

2.REGULATORY INVESTIGATION:

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

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

In 1993, the General Partner estimated an aggregate recovery of $3 million for the three original 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 three original partnerships based on their pro rata share of the total misappropriation, and restoration costs and recoveries have been allocated based on the same percentage. Through

December 31, 2013,2014, approximately $5,918,000 of recoveries have been received which exceeded the original estimate of $3 million. As a result, from January 1, 1996 through December 31, 2013,2014, the Partnership has recognized a total of approximately $1,229,000 as recovery of amounts previously written off in the statements of income, which represents its share of the excess recovery. The General Partner continues to pursue recoveries of the misappropriated funds; however, no further significant recoveries are anticipated.

3. INVESTMENT PROPERTIES and PROPERTY HELD FOR SALE:

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

As of December 31, 2013,2014, the Partnership owned twelveeleven Properties that contained fully constructed fast-foodfast-food/casual dining restaurant facilities. The twelveeleven tenants are composed of the following: nine Wendy’s restaurants, an Applebee’s restaurant, and a KFC restaurant, and a Daytona’s All Sports Café.restaurant. The twelve propertieseleven Properties are located in a total of fivefour states.

A summary of significant developments as of December 31, 2013,2014, by property, for properties with such developments, can be found in Item 2, Properties.

Discontinued Operations

During the fiscal years ended December 31, 20122014, 2013 and 2011,2012, the Partnership recognized income (loss) from discontinued operations of $109,241,$208,411, $43,147 and $(478,490),$153,513, respectively. There were noThe 2014 and 2013 income from discontinued operations was attributable to the sale of the vacant Des Moines, IA property in 2013.2014. The 2012 and 2011 income (loss) from discontinued operations was attributable to the third quarter of 2011 reclassifications2012 impairment adjustments of $142,747 due to the sale of the vacant Phoenix, AZ property and the Denny’s, Phoenix, AZ property to properties held for sale upon the execution of Agency and Marketing Agreement with an unaffiliated party in September of 2011 to sell both of the properties. The 2012 income from discontinued operations includes the fiscal year 2012 property impairment write up of $142,747 related to the sale of the Vacant Phoenix, AZ property. The 2011 loss from discontinued operations includes the fiscal year 2011 property impairment write downs of $390,117 related to the vacant Phoenix, AZ property and $104,705 related to the Denny’s, Phoenix, AZ property, and the 2011 loss of approximately $1,000 on the fourth quarter of 2011 sale of the Denny’s, Phoenix, AZ property.

The components of property held for sale in the balance sheets as of December 31, 2013 and 2012 are outlined below:

The components of discontinued operations included in the statements of income for the years ended December 31, 2014, 2013 2012 and 20112012 are outlined below: