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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                   FORM 10-K


(Mark One)
[X]   Annual report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934
 
                For the fiscal year ended December 31, 1996
                
                                     or

[ ]   Transition report pursuant to Section 13 or 15(d) of the Securities  
      Exchange Act of 1934.
      
          For the transition period from ____________to _______________.


Commission File Number: 1-12478


                       IRVINE APARTMENT COMMUNITIES, INC.
             ------------------------------------------------------          
             (Exact Name of Registrant as Specified in Its Charter)



        Maryland                                        33-0698698         
 ----------------------                  --------------------------------------
 (State of Incorporation)                (I.R.S. Employer Identification Number)


      550 Newport Center Drive, Suite 300, Newport Beach, California 92660
      --------------------------------------------------------------------
                    (Address of principal executive offices)


      Registrant's telephone number, including area code:  (714) 720-5500
                                                           ---------------

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

                                                        Name of each exchange
        Title of each class:                             on which registered:
--------------------------------------                 ------------------------ 
Common Stock, par value $.01 per share                  New York Stock Exchange
                                                        Pacific Stock Exchange


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

Number of shares of common stock outstanding as of December 31, 1996: 18,555,647
                                                                      ----------

     Indicate by check mark whether the registrant has (1) 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 for such shorter time as required), and
(2) has been subject to such filing requirements for the past 90 days:  
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. [   ]

     The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of February 28, 1997 was $527,218,902 assuming that all
officers and directors of the Company are affiliates.

Documents incorporated by reference:

        Portions of the annual report to shareholders for the year ended 
        December 31, 1996 are incorporated by reference into Parts I and II 
        of this Form 10-K.

        Portions of the proxy statement for the registrant's annual 
        shareholders' meeting to be held April 25, 1997 are incorporated by 
        reference into Part III of this Form 10-K.

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                                     PART I

ITEM 1.      BUSINESS

ORGANIZATION AND GENERAL BUSINESS DESCRIPTION

     Irvine Apartment Communities, Inc. (the "Company") is a self-administered
equity real estate investment trust ("REIT") engaged in the development and
operation of apartment communities in Orange County, California, and beginning
in 1997, other locations in California. At December 31, 1996, the Company had a
45.4% general partnership interest in Irvine Apartment Communities, L.P. (the
"Operating Partnership") and was its sole managing general partner. At such
date, The Irvine Company held a 54.6% limited partnership interest in the
Operating Partnership.  The Operating Partnership's management and operating
decisions are under the unilateral control of the Company.

     At December 31, 1996, the Operating Partnership owned and operated 52 
apartment communities containing  13,656 operating apartment units and had 864 
units under construction (collectively, the "Properties"). Until July 31, 2020, 
the Company has the exclusive right, but not the obligation, to acquire land 
from The Irvine Company for development of additional apartment communities 
on the Irvine Ranch.

     The Company was formed in December 1993. The "Predecessor" is the apartment
division of The Irvine Company that owned the Company's 43 completed apartment
communities and provided the related management functions prior to the
Company's December 8, 1993 initial public offering.

     The address of the Company is 550 Newport Center Drive, Suite 300, Newport
Beach, California 92660. Its telephone number is (714) 720-5500.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

     The Company operates in one business segment, that of owning, operating and
developing apartment communities in Orange County, California and, beginning in
1997, other locations in California. See the consolidated financial statements
and notes thereto included in Item 8 of this Annual Report on Form 10-K for
financial information about the industry segment.

DESCRIPTION OF BUSINESS

     The Company owns and operates 48 high quality apartment communities
aggregating 13,541 units (the "Stabilized Communities"), of which 11,334 units
have been stabilized for more than two years, and has four additional apartment
communities aggregating 979 units under construction ("Communities Under
Construction"). Upon completion of the Communities Under Construction, the
Company will own a total of 14,520 units in 52 apartment communities,
representing an increase of approximately 28% since the Company's initial public
offering in December 1993. Through July 2020, the Company holds the exclusive
right, but not the obligation, to acquire land from The Irvine Company, the
owner and developer of the Irvine Ranch, for development of additional apartment
communities on the Irvine Ranch. As of December 31, 1996, all of the Company's
Properties were located on the Irvine Ranch.

     The Irvine Ranch is located in central Orange County, California between
San Diego and Los Angeles. The western boundary of the Irvine Ranch borders
approximately six miles of the Pacific Ocean. Today, the portion of the Irvine
Ranch which is still owned  by The Irvine Company covers approximately 90 square
miles and includes more than 50,000 undeveloped acres. The developed portion of
the Irvine Ranch, which includes significant parts of the cities of Irvine,
Newport Beach and Tustin, is one of the largest urban master-planned communities
in the United States. The Irvine Ranch has been developed over the past 30 years
in accordance with an original master plan (the "Master Plan") which, over time,
has been refined to accord with locally approved general plans. The Irvine Ranch
is one of the major commercial, retail and residential centers in Southern
California. The Irvine Ranch is home to more than 175,000 residents and 17,000
businesses with more than 200,000 employees.





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     The Irvine Company is a real estate investment and community development
firm engaged in the long-term development of the Irvine Ranch.  The urbanization
of the Irvine Ranch began in the 1960s with the adoption of a comprehensive
Master Plan for future community development which originally consisted of a
large map of the Irvine Ranch and a series of supporting maps detailing land
uses. Subsequently, The Irvine Company worked closely with the various local
jurisdictions which govern the Irvine Ranch to adopt general plans for the
future development of their jurisdictions.  The Irvine Company's overall Master
Plan was refined to accord with the approved general plans and the residential,
commercial, industrial, environmental and aesthetic balance desired by each
jurisdiction.  As a result, today the Master Plan is a compilation of the
various interlocking general plans described above.  The Irvine Company
continuously engages in planning activities and the Master Plan refinement
process is ongoing.  The Irvine Company works closely with local government
representatives, community residents, the Company and other civic and
environmental groups to obtain the necessary local support and entitlement for
its developments.  The goal of the Master Plan was and remains to create
innovative urban and suburban environments through the well-planned, coordinated
development of residential communities and employment centers.

     The Company believes that a variety of factors have produced a historically
strong apartment market in Orange County.  The Company believes that these same
factors continue to support significant opportunities for the development of
additional apartment communities.  Among the most important of these are:

  -  The dominant market position of the Company, which owns over 65% of all
     apartment units and approximately 85% of all units in apartment communities
     having 100 or more units, on the Irvine Ranch;

  -  The Company's exclusive right through July 2020 to acquire land from The
     Irvine Company for development of additional rental apartment communities 
     on the Irvine Ranch;

  -  The limited supply of developable land, other than on the Irvine Ranch,
     adjacent to major employment centers in Orange County;

  -  The Irvine Company's Master Plan strategy which emphasizes market 
     segmentation in order to ensure adequate and appropriate allocation of 
     land uses and supports sustained growth for the long term;

  -  The high quality of design, construction and maintenance of the 
     Properties and their location in or near the City of Irvine which is 
     consistently ranked among the safest cities with populations of 100,000 
     or more in the United States;

  -  The close proximity of the Properties and of future development sites to 
     major employment centers, high quality schools, extensive resort, 
     recreational and open space amenities, and the Pacific Ocean;

  -  An affluent, growing population and a diversified employment base in Orange
     County and on the Irvine Ranch;

  -  The Company's ability to defer the purchase of land under its land rights
     agreement until the site and zoning entitlements have been obtained, the 
     land is ready for construction and the Company determines favorable market
     conditions exist;

  -  The operating efficiencies available to the Company because the 
     Properties are located in a single geographic area;

  -  An average of approximately 20 years of experience among the Company's ten
     most senior members of management in the design, development, construction,
     property management and financing of apartment communities; and

  -  The effectiveness of management's policies regarding property management 
     and expense control.

     For the year ended December 31, 1996, the average physical occupancy (the
number of units occupied in stabilized communities divided by the total number
of units in stabilized communities) of the Stabilized Communities was 94.9% and
the average monthly rent per unit was $1,025. The Communities Under
Construction,





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when completed, will contain 979 apartment units and have an aggregate
estimated cost of approximately $127.2 million.  As of December 31, 1996, 115
units were completed with 88 units occupied and generating rental revenue. In
addition, pre-lease deposits had been received for 27 units. It is anticipated
that two of the Communities Under Construction will be substantially completed
by mid-1997 and will achieve stabilized occupancy by the end of 1997.

     In early 1997, IAC launched an expansion program beyond its traditional
Irvine Ranch boundaries.  The Company's strategic intent is to create meaningful
market positions in a handful of the state's most promising growth centers.  As
a first step, the Company acquired the assets and absorbed the senior management
team of a Northern California-based developer, Thompson Residential Company.
Included in the acquisition were the purchase rights to three Northern
California development sites situated in the Silicon Valley.  The Company
expects to begin construction on one of these sites in 1997.

     The information set forth in this Form 10-K relating to the expansion
program, timing of completion of construction and initial stabilized occupancy
and estimated costs of apartment communities that are in development are only
estimates. Actual results will depend on numerous factors, many of which are
beyond the control of the Company. These include the extent and timing of
economic growth in the Company's rental markets; future trends in the pricing of
construction materials and labor; entitlement decisions by local government
authorities; changes in interest rate levels; and other changes in capital
markets. No assurance can be given that the timing or estimates will not vary
substantially from actual results.

BUSINESS STRATEGY

     The Company's primary business objective is to deliver strong, consistent
total annual returns to its shareholders while enhancing the long-term growth
in value of its real estate portfolio. The Company believes it is well
positioned to meet this objective given the size and strength of the economic
region in which it operates, the quality of its existing apartment community
portfolio and the significant opportunities for new development within its
market, and in similar high growth regions of California.  Through adherence to
specific operating and development strategies, the most important of which are
discussed below, the Company seeks to achieve growth in its funds from
operations through maximization of cash flow from its Stabilized Communities and
the development of new apartment communities.

Operating Strategies

o  Provide an exceptional living environment for residents. The Company's
   Stabilized Communities have been developed and are maintained to appeal to
   the highly educated, relatively affluent base of renters attracted to the
   Irvine Ranch. As a result of the region's closely managed master-planning
   process, the Properties are situated amid parks and other open space, and in
   close proximity to employment centers, schools, retail centers, and
   recreational facilities. They provide generous amenities, are well maintained
   and offer a high standard of customer service. The Company's success in
   providing an exceptional quality of life for its residents is evidenced in
   part by the strong average rental rates its properties command relative to
   average rental rates for Orange County as a whole. In 1996, the Stabilized
   Communities produced an average monthly rent of $1,025 per unit, which is
   approximately $200 more than the average monthly rent in Orange County.

o  Enhance efficiency of operations. Management selectively subcontracts on-site
   staffing, personnel management and accounting functions to three independent
   property management firms which enables it to focus on marketing, product
   pricing and positioning, and approval of operating budgets. Management
   additionally directs and tests the standards of property-level activities
   conducted by the firms, including training of on-site staff. Management also
   seeks to enhance operating efficiency and, as a result, property expenses
   were reduced by 2.8% during 1996 within communities stabilized more than two
   years.

o  Capitalize on strong brand identity with enhanced marketing and merchandising
   programs. The Company enhanced certain of its marketing programs to broaden
   its already strong brand name recognition in order to attract new residents
   into its portfolio and broaden the existing resident base. The Company's
   marketing programs include: a single source 800 telephone number to provide
   information on all 52 Properties; rental





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   information centers within major shopping centers and the University of
   California, Irvine; and a targeted advertising campaign promoting the 
   Company's portfolio and its strong quality of life characteristics.

Development Strategies

o  Develop new communities to complement and expand the Company's existing
   rental market base. A diverse regional economy, continuing population growth,
   and an attractive quality of life all contribute to a broad and varied demand
   for rental housing on the Irvine Ranch. As a result, opportunities exist for
   a variety of apartment property types and amenity levels, including projects
   designed for the family, luxury and senior markets, and the area's large
   population of young professionals. The Company's development program seeks to
   capitalize on these opportunities through market segmentation. Supported by
   consumer research and focus group studies, market segmentation decisions are
   made at the earliest planning stages, when new residential villages for the
   Irvine Ranch are conceived and the villages' largest and most important
   amenities are selected. Location of schools, recreational facilities, retail
   centers, open space and views are all important considerations. Individual
   development decisions--including site location, product design, amenities and
   marketing programs -- are also geared to appeal to the needs and desires of
   the target rental market.

o  Utilize experienced management to create high-quality, well-built properties
   designed to sustain their value. The Company brings considerable management
   expertise to all aspects of the development, construction and leasing
   process. Senior management is actively involved in new project development
   from the inception of a new Irvine Ranch village and is responsible for
   target market identification; design of site plans, building plans, and floor
   plans; project and unit amenity selection; and site-specific governmental
   approvals. In addition, the Company directs the bidding and contracting of
   all major construction activities, in essence acting as general contractor.
   The Company engages experienced independent construction managers to act as
   intermediaries with subcontractors and to manage on-site activities under the
   close supervision of the Company's internal construction group. The Company
   builds properties using only high-quality construction materials and
   techniques, and believes that this higher initial investment in quality
   enhances long-term value creation by sustaining high community rental income
   levels and reducing long-term expense levels.

     While the Company's principal focus has been on the development of
apartment communities on the Irvine Ranch, as discussed above, the Company has
and will continue to consider other opportunities to acquire or develop
apartment communities, principally in California, that offer attractive
risk-adjusted returns.

     The Company and The Irvine Company are parties to an exclusive land rights
and non-competition agreement (the "Land Rights Agreement"). This agreement,
which extends through July 31, 2020, provides the Company with the exclusive
right, but not the obligation, to acquire additional land sites which have been
entitled for residential use and designated by The Irvine Company as ready for
apartment development in accordance with the Master Plan. The determination to
exercise an option with respect to a site is made solely by a majority of a
committee of independent directors of the Company (the "Independent Directors
Committee"), whose members are unaffiliated with The Irvine Company. In
addition, The Irvine Company, and its Chairman, Donald Bren, have agreed to
conduct their apartment community development and ownership activities on the
Irvine Ranch solely through the Company.

     Under terms of the Land Rights Agreement, through July 31, 2000, the
purchase price for any apartment community sites acquired may be paid with
either cash, common stock or Operating Partnership units at the option of the
Company. After July 31, 2000, the choice of consideration will revert to The
Irvine Company. In no event shall the purchase price for any site exceed 95% of
the value of that site as determined by independent appraisals.  In addition,
the purchase price for future apartment sites after December 31, 1996,
encompassing the next 821 apartment units the Company develops, will be set at
an amount such that each project's budgeted pro forma unleveraged return on
costs for the first 12 months following stabilized occupancy will be between
10.0% and 10.5%.  A 316-unit site was purchased in February 1997 in accordance
with this arrangement.

     The principal raw materials used in construction are concrete, forest
products, sheetrock and glass. The Company expects to maintain efficient
operations by utilizing standardized materials that are commercially available
on competitive terms from a number of sources.





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Capital and Financing Strategies

     The Company employs conservative financing policies, although there are no
limitations on the level of debt that the Company may incur. The Company's
policy is to maintain a ratio of debt to total market capitalization of less
than 60% (i.e., total debt of the Company as a percentage of the market value of
issued and outstanding shares of common stock of the Company and the limited
partnership units of the Operating Partnership plus total debt.) As of December
31, 1996, the ratio of debt to total market capitalization was 35.1%.

     The Company has established a debt policy relative to its total market
capitalization, a ratio commonly employed by REITs, rather than to the book
value of its assets because the Company believes that the book value of its
assets (which to a large extent is the depreciated value of its apartments) does
not accurately reflect its ability to borrow and to meet debt service
requirements. The market capitalization of the Company, however, is more
variable than book value and does not necessarily reflect the fair market value
of the underlying assets of the Company.

     The Company completed two significant finance-related transactions in 1996.
In July, its credit facility was amended to reduce the line's interest rate to
Eurodollar plus 1.5% and a follow-on offering of stock was completed, along with
an investment from The Irvine Company in the Operating Partnership, providing
aggregate proceeds of $60.0 million. All of these transactions are more fully
discussed in Management's Discussion and Analysis included in this Annual Report
on Form 10-K.  In February 1997, the credit facility was amended to increase the
borrowing capacity from $175 million to $250 million.

COMPETITION

     The Properties are located in developed areas. There are numerous other
rental apartment properties within and around the market area of each Property.
The number of competitive rental properties in the area could have a material
effect on the Company's ability to rent the apartments at the Properties and the
rents charged.

EMPLOYEES

     As of February 28, 1997, the Company had 53 employees. None of the
Company's employees is subject to a collective bargaining agreement and the
Company has experienced no labor-related work stoppages. The Company considers
its relations with its personnel to be good.

TAX STATUS

     The Company has made an election to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). The
Company generally will not be subject to federal income tax to the extent it
distributes at least 95% of its REIT taxable income to its shareholders. If the
Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate rates. Even if the Company qualifies
for taxation as a REIT, the Company may be subject to certain state and local
taxes on its income and property and to federal income and excise taxes on its
undistributed income.

CYCLICALITY

     The Company's business, and the residential housing industry in general,
are cyclical. The Company's operations and markets are affected by local and
regional factors such as local economies, demographic demand for housing,
population growth, property taxes, energy costs, and by national factors such as
short and long-term interest rates, federal mortgage financing programs, federal
income tax provisions and general economic trends. Occupancy varies only
slightly on a seasonal basis, with the lowest occupancy typically occurring in
the summer months.

ENVIRONMENTAL MATTERS

     Under various federal, state and local laws, ordinances and regulations, an
owner of real property may be held liable for the costs of removal or
remediation of certain hazardous or toxic substances located on or in the
property. These laws often impose such liability without regard to whether the
owner knew of, or was responsible for, the





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presence of the hazardous or toxic substances. The costs of any required
remediation or removal of such substances may be substantial. In addition, the
owner's liability as to any property is generally not limited under such laws,
ordinances and regulations and could exceed the value of the property and/or
the aggregate assets of the owner. The presence of such substances, or the
failure to remediate such substances properly, may also adversely affect the
owner's ability to sell or rent the property or to borrow using the property as
collateral. Under such laws, ordinances and regulations, an owner or any entity
who arranges for the disposal of hazardous or toxic substances, such as
asbestos, at a disposal facility may also be liable for the costs of any
required remediation or removal of the hazardous or toxic substances at the
facility, whether or not the facility is owned or operated by such owner or
entity. In connection with the ownership of the Properties or the disposal of
hazardous or toxic substances, the Company may be liable for such costs.

     The groundwater underlying portions of the City of Irvine generally
contains elevated levels of certain inorganic compounds. In addition, two United
States Marine Corps air bases where soil and groundwater contamination have been
discovered are located adjacent to the Irvine Ranch.  Although the Company
believes that contamination at one of these bases is localized, there can be no
assurances that it has not migrated onto any of the Properties. The other base
is listed on the National Priorities List and activities from this base have
resulted in groundwater contamination in the vicinity of this base. The Company
has knowledge that contamination from this base has migrated into the
groundwater underlying some of the Properties. The Company believes that most of
the groundwater is located at a substantial depth under the land surface. Since
the Company believes that the Orange County Water District together with the
Department of Defense are currently conducting and will continue to conduct
remediation activities at this base and in the area, the Company believes that
it will not incur any remediation costs in connection with the groundwater
contamination.

     Other federal, state and local laws may impose liability for release of
asbestos containing materials (ACMs) into the air or require the removal of
damaged ACMs in the event of remodeling or renovation. There are ACMs at 11 of
the Properties, primarily in floor coverings and acoustical ceiling materials.
The Company believes that the ACMs at these properties are generally in good
condition. Comprehensive operations and maintenance plans have been implemented
for properties where ACMs are present. In addition, property custodial and
maintenance workers are trained to deal effectively with the maintenance of
existing ACMs. The Company believes it is in compliance in all material respects
with all federal, state, and local laws relating to ACMs and that there are no
regulatory requirements that currently require the removal of these ACMs;
however, if the Company were required to remove all ACMs present in its
properties over a short time frame, the cost of such removal would have a
material adverse effect on its financial condition and results of operations.
The Company also believes that ACMs are not present in the remaining Properties.
The Irvine Ranch Water District, a municipal corporation, owns and maintains
underground cement water pipes which contain asbestos and which are serving a
number of the Properties. Since these pipes are owned and maintained by the
Irvine Ranch Water District, the Company believes that any potential
environmental liabilities associated with these pipes will be incurred by the
Irvine Ranch Water District.

     The Company has not been notified by any governmental authority of any
material noncompliance, liability, or other claim in connection with any of the
Properties. In addition, environmental assessments (which involve physical
inspections without soil or groundwater analyses and generally without radon
testing) were obtained on all 48 Stabilized Communities in 1993 or later except
for two which were obtained more than five years ago. Environmental assessments
were performed on all sites under construction prior to their purchase. The
Company is not aware of any environmental liability relating to the Properties
that it believes would have a material adverse effect on its business, assets or
results of operations. Nevertheless, it is possible that the environmental
assessments did not reveal all environmental liabilities with respect to the
Properties, that environmental liabilities have developed with respect to the
Properties since the environmental assessments were prepared or that there are
material environmental liabilities of which the Company is unaware with respect
to the Properties. Moreover, no assurance can be given that future laws,
ordinances or regulations will not impose material environmental liabilities or
that the current environmental condition of the Properties will not be affected
by residents and occupants of the Properties or by the uses or condition of
properties in the vicinity of the Properties, such as leaking underground
storage tanks, or by third parties unrelated to the Company.





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REGULATION

     Apartment community properties are subject to various laws, ordinances, and
regulations, including regulations relating to recreational facilities such as
swimming pools, activity centers and other common areas. The Company believes
that each property has all material permits and approvals to operate its
business. Rent control laws currently are not applicable to any of the
Properties. However, there can be no assurance that rent control requirements
will not be initiated in the future.

     The Properties and any newly acquired or developed apartment communities
must comply with Title II of the Americans with Disabilities Act (ADA) to the
extent that such properties are "public accommodations" and/or "commercial
facilities" as defined by the ADA. Compliance with the ADA requires removal of
structural barriers to handicapped access in certain public areas of the
Company's Properties where such removal is "readily achievable." The ADA does
not, however, consider residential properties, such as apartment communities, to
be public accommodations or commercial facilities, except to the extent portions
of such facilities, such as a leasing office, are open to the public. The
Company believes that the Properties comply in all material respects with all
present requirements under the ADA and applicable state laws. Noncompliance with
the ADA could result in imposition of fines or an award of damages to private
litigants.

     The Fair Housing Act (FHA) requires, as part of the Fair Housing Amendments
Act of 1988, apartment communities first occupied after March 13, 1990 to be
accessible to the handicapped. Noncompliance with the FHA could result in the
imposition of fines or an award of damages to private litigants. The Company
believes that the Properties that are subject to the FHA are in compliance with
such law.

     Approximately 2,900 units in portions of 31 of the Company's Stabilized
Communities are currently subject to resident income limitations which generally
restrict rental of the affected units to low or moderate income residents and
which, in most instances, also limit the amount of rent that may be charged for
a particular unit. A brief summary of the basis and effect of these resident
income and other limitations follows:

     The development of 23 of the 31 Stabilized Communities was financed with
the proceeds of tax-exempt multifamily housing revenue bonds issued by various
local municipalities. These bonds were refunded in May 1995 and consolidated
under one issuer, California Statewide Communities Development Authority.
Regulatory agreements applicable to such financings (a) require that a specified
percentage of the units be set aside for residents whose incomes do not exceed a
specified percentage of the area median income and (b) in most instances, limit
the rent which can be charged to a percentage of the maximum qualifying resident
income level for the affected unit. Most of these restrictions will terminate
upon the maturity date of the bond issue.

     In addition to the rental restrictions imposed by the bond regulatory
agreements, many of the 23 properties and three additional properties are also
subject to resident income and rent limitations by virtue of development and
other agreements entered into with local municipalities and private and
quasi-public interest groups. These restrictions are similar in scope and
substance to the other restrictions discussed above.

     Five of the 31 Stabilized Communities were developed with the assistance of
U.S. Department of Housing and Urban Development (HUD) administered programs
which provided mortgage insurance to the project lender. Certain regulatory and
other agreements with HUD applicable to such financings (a) impose resident
income restrictions similar to those imposed by the bond financing agreements,
and (b) generally require the Company to operate the Properties in accordance
with HUD's standards. With respect to one of the properties (i.e., The
Parklands), a regulatory agreement additionally (a) limits the distribution of
income from the property to 10% of the HUD imputed equity in the property and
(b) requires that any income in excess of such 10% limit be deposited into a
residual receipts account. Amounts paid into such residual receipts account have
historically been used for capital improvements to the property, subject to
HUD's consent. At the expiration of the applicable regulatory or other
agreement, any amount remaining in such residual receipts account belongs to
HUD.

     Under Section 8 of the United States Housing Act of 1937, HUD currently
provides rental assistance payments to each of these five HUD properties
pursuant to certain Housing Assistance Payments (HAP) contracts. Under the HAP
contracts, so long as the units are rented to residents whose income levels do
not exceed specified HUD guidelines, each qualifying resident is required to pay
only 30% of their adjusted monthly income as rent and HUD





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pays the difference between the 30% payment and the unit's market rents as
established by HUD. The above-mentioned restrictions and limitations will
continue for the remainder of each HAP contract term, each HAP contract has an
initial term of 20 years with four 5-year renewal options exercisable at the
owners option. At December 31, 1996, the average remaining term of the HAP
contracts was approximately 7 years.

     Each of the resident and income restricted units within the Company's
portfolio has been subject to one or more of the foregoing restrictions either
since their initial occupancy or as a result of subsequent agreements with the
applicable governmental authority or other private or quasi-public interest
groups. Accordingly, the effect of these restrictions on rental income from the
Properties has been reflected in the historical financial results of the Company
and its Predecessor.

     The Company believes that it is in material compliance with all of the
foregoing requirements. The failure of the Company to comply with the terms of
any of the foregoing could adversely affect the Company's operations.

     The Company may purchase land in the future which as a condition of
purchase has the inclusion of units at below market rental rates.  Construction
of such properties may be financed with tax-exempt debt. In any case, the
Company will evaluate the economics inclusive of any rental restriction and
benefit of below-market, tax-exempt financing prior to purchasing the land.

FACTORS RELATING TO REAL ESTATE OPERATIONS AND DEVELOPMENT

     General: Real property investments are subject to varying degrees of risk.
The investment returns available from equity investments in real estate depend
in large part on the amount of income earned and capital appreciation generated
by the related properties as well as the expenses incurred. If the Properties do
not generate revenue sufficient to meet operating expenses, including debt
service and capital expenditures, the Company's income and ability to make
distributions to its stockholders will be adversely affected. In addition, the
Properties consist exclusively of rental apartment communities located in Orange
County. Income from and the performance of the Properties may therefore be
adversely affected by the general economic climate in Orange County, including
unemployment rates and local conditions such as the supply of and demand for
apartments in the area, the attractiveness of the Properties to residents,
zoning or other regulatory restrictions, competition from other available
apartments and alternative forms of housing, the affordability of single family
homes, the ability of the Company to provide adequate maintenance and insurance
and the potential of increased operating costs (including real estate taxes).
Certain significant expenditures associated with an investment in real estate
(such as mortgage payments, real estate taxes and maintenance costs) generally
are not reduced when circumstances cause a reduction in revenue from the
investment. In addition, income from properties and real estate values are also
affected by a variety of other factors, such as governmental regulations and
applicable laws (including real estate, zoning and tax laws), interest rate
levels and the availability of financing. The Properties in the aggregate
historically have generated positive cash flow from operations; however, no
assurance can be given that such will be the case in the future.

     The Company has recently acquired the assets of Thompson Residential
Company, Inc., a Northern California-based multifamily development company.
This acquisition represents the Company's first strategic expansion off the
Irvine Ranch and the Company may make additional investments in Northern
California and possibly the San Diego area in the future.  See "Recent
Developments - 'Off-Ranch' Expansion."  The development, construction and
operation of rental apartment communities in such new markets may present risks
different than or in addition to the risks discussed above related to the
Properties which are located entirely in Orange County.  No assurance can be
given that the Company will be successful in pursuing any additional "off-Ranch"
expansion or that any "off-Ranch" apartment communities will be successful.

     Equity real estate investments, such as the investments made by the
Operating Partnership in the Properties and any additional properties that may
be developed or acquired by the Operating Partnership, and the Company's
investment in the Operating Partnership are relatively illiquid.  Such
illiquidity limits the ability of the Operating Partnership (and, therefore, the
Company) to vary its portfolio in response to changes in economic or other
conditions. In addition, the Internal Revenue Code places limits on the
Company's ability to sell properties held for fewer than four years, which may
affect the ability of the Company to sell properties without adversely affecting
returns to holders of common stock.





                                       9
<PAGE>   10
     The Properties are subject to all operating risks common to apartment
ownership in general. Such risks include: competition from other apartment
communities both on and off the Irvine Ranch; excessive building of comparable
properties outside the Irvine Ranch which might adversely affect apartment
occupancy or rental rates; increases in operating costs due to inflation and
other factors, which increases may not necessarily be offset by increased rents;
inability or unwillingness of residents to pay rent increases; and future
enactment of rent control laws or other laws regulating apartment housing,
including present and possible future laws relating to access by disabled
persons. If operating expenses increase, the local rental market may limit the
extent to which rents may be increased to meet increased expenses without
decreasing occupancy rates. If any of the above occurred, the Company's ability
to make expected distributions to stockholders could be adversely affected.

     Real Estate Development: A focus of the Company is on the development of
new rental apartment communities on sites acquired primarily from The Irvine
Company, although the Company plans to develop new rental apartment communities
on sites acquired from third parties. The Company may also acquire completed
communities. The real estate development business involves significant risks in
addition to those involved in the ownership and operation of established
apartment communities, including the risks that specific project approvals may
take more time and resources to obtain than expected, that construction may not
be completed on schedule or budget and the properties may not achieve
anticipated rent or occupancy levels. In addition, if permanent debt or equity
financing is not available on acceptable terms to finance new development or
acquisitions undertaken without permanent financing, further development
activities or acquisitions might be curtailed or cash available for distribution
might be adversely affected.

     Insurance: The Operating Partnership carries comprehensive liability, fire,
extended coverage and rental loss insurance covering all of the Properties, with
policy specifications and insured limits which the Company believes are adequate
and appropriate under the circumstances.  There are, however, certain types of
losses (such as from earthquakes) that are not generally insured because they
are either uninsurable or not economically insurable. The Operating Partnership
does not carry earthquake insurance on any of the Properties. Should an
uninsured loss or a loss in excess of insured limits occur, the Operating
Partnership could lose its capital invested in the property, as well as the
anticipated future revenues from the property, and, in the case of debt which is
recourse to the Operating Partnership, would remain obligated for any mortgage
debt or other financial obligations related to the property. Any such loss would
adversely affect the Company. Moreover, as a general partner of the Operating
Partnership, the Company will generally be liable for any unsatisfied
obligations other than non-recourse obligations. The Company believes that the
Properties are adequately insured. In addition, in light of the California
earthquake risk, California building codes since the early 1970s have
established construction standards for all newly built and renovated buildings,
including apartment buildings, the current and strictest construction standards
having been adopted in 1984. Twenty-nine of the 48 Stabilized Communities
(representing approximately 60% of those units) have been completed and occupied
since 1984 and the Company believes that all of the Properties were constructed
in full compliance with the applicable standards existing at the time of
construction. In addition, the Company's apartment communities contain multiple
buildings, all of which are of wood frame construction. While earthquakes have
occurred from time to time in Southern California, the Company has not
experienced any material losses as a result of earthquakes. No assurance can be
given that this will be the case in the future.





                                       10
<PAGE>   11
EXECUTIVE OFFICERS OF THE COMPANY

     The following sets forth certain information regarding the executive
officers of the Company as of March 15, 1997 and other positions held by them
over the last five years:

<TABLE>
<CAPTION>
                                                                                 YEARS POSITIONS
        NAME          AGE          PRESENT AND PRIOR POSITIONS HELD (1)               HELD
        ----          ---          ------------------------------------          ---------------
<S>                   <C>  <C>                                                   <C>
Donald L. Bren        64   Chairman, President and Chief Executive Officer       1997 - Present
                           Chairman, The Irvine Company                          1983 - Present


James E. Mead         37   Senior Vice President, Chief Financial Officer and    1996 - Present
                           Secretary
                           Senior Vice President and Treasurer                   1994 - 1996
                           Vice President, Corporate Finance, The Irvine         1991 - 1994
                           Company

William W. Thompson   51   Senior Vice President, Off-Ranch Operations           1997 - Present
                           President, Thompson Residential                       1996 - 1997
                           Partner, Trammell Crow Residential, Northern          1984 - 1995
                           California

Hank Baker            48   Vice President, Marketing                             1996 - Present
                           Owner, Baker Property Advisors                        1992 - 1996

                           Vice President, Northern California, Forest City
                           Properties Corporation                                1986 - 1992

Bruce N. Dorfman      37   Vice President, Development, Off-Ranch Operations     1997 - Present
                           Vice President, Development, Thompson Residential     1996 - 1997
                           Vice President, Finance, Trammell Crow Residential,
                           Northern California                                   1992 - 1995

Shawn Howie           41   Vice President, Corporate Finance and Controller      1997 - Present
                           Vice President and Controller                         1993 - 1997
                           Senior Manager, Ernst & Young                         1986 - 1993

Robert J. Hughes      46   Vice President, Construction, Off-Ranch Operations    1997 - Present
                           Vice President, Construction, Thompson Residential    1996 - 1997
                           Vice President, Construction, Trammell Crow           1994 - 1996
                           Residential                                           1987 - 1993
                           President of Construction, Grancorp

Richard E. Lamprecht  37   Vice President, Development                           1993 - Present
                           Vice President, Development, Irvine Pacific           1989 - 1993

David A. McAllister   62   Vice President, Construction                          1993 - Present
                           Director of Operations, California Pacific Homes      1992 - 1993

Scott A. Reinert      38   Vice President, Asset Management                      1994 - Present
                           Chief Operating Officer, Southeast, GFS Northstar     1990 - 1994
</TABLE>
----------------------
(1)  The first position held is with the Company.  The Irvine Company and
     California Pacific Homes are affiliates of the Company.  Irvine Pacific 
     is the Predecessor to the Company.


ITEM 2.       PROPERTIES

     As of December 31, 1996, the Company owned stabilized properties containing
13,541 apartment units in Orange County, California. The Company believes that
the Properties are high quality apartment communities with superior locations
near major employment centers within the master- planned Irvine Ranch. The
Properties are all located on the Irvine Ranch within the following individual
jurisdictions:

<TABLE>
<CAPTION>
                                                 COMMUNITIES
                  STABILIZED COMMUNITIES     UNDER CONSTRUCTION               TOTAL
                 -----------------------     ------------------      ----------------------
                  NUMBER OF    NUMBER OF    NUMBER OF   NUMBER OF    NUMBER OF      NUMBER
 MUNICIPALITY    PROPERTIES      UNITS     PROPERTIES     UNITS      PROPERTIES    OF UNITS
 ------------    ----------      -----     ----------     -----      ----------    --------
<S>                  <C>        <C>             <C>         <C>          <C>       <C>
Irvine               35          9,415          2           434          37         9,849
Newport Beach         6          1,760          2           545           8         2,305
Tustin                6          1,854                                    6         1,854
Unincorporated        1            512                                    1           512
                     --         ------          -           ---          --        ------
                     48         13,541          4           979          52        14,520
                     ==         ======          =           ===          ==        ======
</TABLE>





                                       11
<PAGE>   12
     The unit mix of the Properties is as follows:

<TABLE>
<CAPTION>
                            STABILIZED        COMMUNITIES
                           COMMUNITIES    UNDER CONSTRUCTION    TOTAL UNIT    PERCENT OF
      UNIT TYPE             UNIT COUNT        UNIT COUNT           COUNT     TOTAL UNITS
      ---------             ----------        ----------        ----------   -----------
<S>                          <C>                  <C>             <C>           <C>
Studio/Junior                   469                                  469          3.2%
One Bedroom                   3,523               143              3,666         25.3%
Two Bedroom                   8,405               656              9,061         62.4%
Three Bedrooms or More        1,144               180              1,324          9.1%
                             ------               ---             ------        ----- 
               Total         13,541               979             14,520        100.0%
                             ======               ===             ======        =====
</TABLE>

     Information as to the Company's Properties is included on pages 22 and 39
of the Company's 1996 Annual Report to Shareholders, which are included as part
of Exhibit 13 and are incorporated in this Annual Report on Form 10-K. In
addition, the real estate and accumulated depreciation schedule of Irvine
Apartment Communities, Inc. is included on pages 16 and 17 of this Annual Report
on Form 10-K.

     The Company believes that the Properties are well maintained and have no
material deferred maintenance requirements or current need for major
renovations. The average age of the Stabilized Communities is approximately 12
years. The oldest of the Stabilized Communities was completed in 1969, and 29 of
the 48 Stabilized Communities, totaling 8,873 units or approximately 66% of the
Stabilized Communities, have been completed since January 1, 1985. The number of
units per Property ranges from 58 units to 880 units, with an average of
approximately 282 units.

     The Company seeks to assure that the Properties remain attractive dwellings
for apartment residents and desired locations for prospective apartment
residents. Maintenance, custodial and groundskeeping personnel perform regular
maintenance and upkeep on the Properties to preserve and enhance physical and
aesthetic attributes. The physical appearance of and apartment residents'
satisfaction with the Properties and with the performance of the local property
managers is monitored and evaluated on an on-going basis by the Company's senior
management.

     All of the Properties provide residents with numerous amenities and include
extensive landscaping. Approximately 80% of the 48 Stabilized Communities
contain swimming pools, spas, air conditioning and covered parking. Additional
amenities may include a fitness center, recreational room, sauna and tennis
courts. Each apartment unit includes a patio, porch or balcony. Many apartment
units offer one or more of certain additional features, such as vaulted
ceilings, fireplaces, enclosed garages, refrigerators, washers and dryers, and
microwave ovens. The Communities Under Construction contain almost all of these
amenities.

ITEM 3.       LEGAL PROCEEDINGS

     Neither the Company nor the Properties are currently subject to any
material litigation.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

                                    PART II

ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
             MATTERS

     As of February 12, 1997, there were 315 holders of record of the Company's
common stock. The Company believes that there are approximately 10,615
beneficial holders of the Company's common stock.

     Information as to the Company's quarterly stock prices is included on the
inside back cover of the Company's 1996 Annual Report to Shareholders, which is
included as part of Exhibit 13 and is incorporated in this Annual Report on Form
10-K.





                                       12
<PAGE>   13
     Information as to the principal markets on which the Company's common stock
is being traded is included on the inside back cover of the Company's 1996
Annual Report to Shareholders, which is included as part of Exhibit 13 and is
incorporated in this Annual Report on Form 10-K.

     The Company intends to pay regular quarterly distributions. The Company's
historical quarterly distribution payments are included on the inside back cover
of the Company's 1996 Annual Report to Shareholders, which is included as part
of Exhibit 13 and is incorporated in this Annual Report on Form 10-K.

     During 1996 the Operating Partnership sold to affiliates of The Irvine
Company the following units of limited partner interest ("LP units") in the
Operating Partnership pursuant to Section 4(2) of the Securities Act of 1933:

     1.  an aggregate of 15,851 L.P. units were sold at various times for
         $353,861 in cash at prices ranging from $19.784 to $23.875 per L.P.
         unit, in connection with The Irvine Company's exercise of its
         proportional purchase rights with respect to sales of the Company's
         common stock pursuant to its Dividend Reinvestment and Additional Cash
         Investment Plan.

     2.  1,490,700 L.P. units were sold in July 1996 for $30 million in cash,
         $20.125 per L.P. unit, in connection with The Irvine Company's exercise
         of its proportional purchase rights with respect to the Company's
         follow-on offering of 1,490,700 shares of common stock; and

     3.  an aggregate of 388,759 L.P. units were issued at various times in
         connection with the acquisition by the Operating Partnership of three
         land sites pursuant to the Land Rights Agreement.  The number of L.P.
         units issued in each acquisition was equal to the land purchase price
         determined in accordance with the Land Rights Agreement divided by the
         average of the closing prices of the common stock for the 10 trading
         days immediately preceding the closing date of the acquisition.

     Each of the foregoing L.P. units is exchangeable for common stock of the
Company on a one-for-one basis, subject to adjustment and certain limitations
set forth in the Amended and Restated Agreement of Limited Partnership of the
Operating Partnership.

ITEM  6.      SELECTED FINANCIAL DATA

     The Selected Financial Information of Irvine Apartment Communities, Inc.
and Predecessor for the five-year period ended December 31, 1996 is included on
page 17 of the Company's 1996 Annual Report to Shareholders, which is included
as part of Exhibit 13 and is incorporated in this Annual Report on Form 10-K. It
should be read in conjunction with the consolidated financial statements
included on pages 18 through 38 in the Company's 1996 Annual Report to
Shareholders which are also included as part of Exhibit 13 and incorporated in
this Annual Report on Form 10-K and the financial statement schedule below in
Item 14 of this Annual Report on Form 10-K.

ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS

     Management's Discussion and Analysis of Financial Condition and Results of
Operations is included on pages 18 through 24 in the Company's 1996 Annual
Report to Shareholders, which are included as part of Exhibit 13 and are
incorporated in this Annual Report on Form 10-K.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements of Irvine Apartment Communities, Inc.
are included on pages 25 through 38 in the Company's 1996 Annual Report to
Shareholders, which are included as part of Exhibit 13 and are incorporated in
this Annual Report on Form 10-K. Reference is made to the Index to Financial
Statements in Item 14 below.

     A financial statement schedule for the Company is included on pages 16 and
17 of this Annual Report on Form 10-K. Reference is made to the Index to
Financial Statement Schedule in Item 14 below.





                                       13
<PAGE>   14
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.

                                    PART III

     Information regarding executive officers required by Item 401 of Regulation
S-K is furnished in a separate disclosure in Part I of this report because the
Company did not furnish such information in its definitive Proxy Statement
prepared in accordance with Schedule 14A.

     The Notice and Proxy Statement for the 1997 Annual Meeting of Shareholders,
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934,
which is incorporated by reference in this Annual Report on Form 10-K pursuant
to General Instruction G(3) of Form 10-K, provides the remaining information
required under Part III (ITEMS 10, 11, 12, AND 13.)





                                       14
<PAGE>   15
                                    PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

The consolidated financial statements, together with the report thereon of
Ernst & Young LLP dated January 31, 1997, all appearing on pages 25 through 38
in the 1996 Annual Report to Shareholders, are incorporated in this Annual
Report on Form 10-K. The aforementioned information and the information
incorporated in Items 1, 2, 5, 6, 7 and 8, from the 1996 Annual Report to
Shareholders attached as Exhibit 13, is incorporated into this Annual Report on
Form 10-K.

                                                             PAGE NO. IN
                                                            ANNUAL REPORT
IRVINE APARTMENT COMMUNITIES, INC.                         TO SHAREHOLDERS
----------------------------------                         ---------------
Report of Independent Auditors                                    38

Consolidated Balance Sheets as of                                 25
     December 31, 1996 and 1995  

Consolidated Statements of Operations                             26
     for the years ended December 31, 1996,
     1995 and 1994

Consolidated Statements of Changes in                             27
     Shareholders' Equity for the years 
     ended December 31, 1996, 1995 and 1994 

Consolidated Statements of Cash Flows for                         28
     the years ended December 31, 1996, 1995
     and 1994

Notes to Consolidated Financial Statements                   29 through 38

Shareholder Information                                    Inside Back Cover


     Pages 17 through 38 and the inside back cover of the 1996 Annual Report to
Shareholders of Irvine Apartment Communities, Inc. include the Five Year
Summary, Management's Discussion and Analysis of Financial Condition and Results
of Operations, the Consolidated Financial Statements and related notes thereto,
the Report of Independent Auditors, Shareholder Information and Quarterly Stock
Prices. These pages are included as part of Exhibit 13 to this Annual Report on
Form 10-K.

     Schedule III-Real Estate and Accumulated Depreciation is included on pages
16 and 17 of this Annual Report on Form 10-K.





                                       15
<PAGE>   16



                       IRVINE APARTMENT COMMUNITIES, INC.
            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                               December 31, 1996
                                 (in thousands)


<TABLE>
<CAPTION>


                                                                GROSS AMOUNT AT WHICH
                                                                     CARRIED AT 
                                                                DECEMBER 31, 1996(a)(b)
                                                                -----------------------
      CITY, STATE              NUMBER OF                             BUILDINGS AND           ACCUMULATED   DATE OF    DEPRECIABLE
APARTMENT COMMUNITY NAME          UNITS   ENCUMBRANCES(c)   LAND(d)  IMPROVEMENTS    TOTAL   DEPRECIATION  COMPLETION     LIFE(e)
----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>       <C>              <C>       <C>           <C>        <C>           <C>       <C>
STABILIZED MORE THAN 2 YEARS
   IRVINE, CALIFORNIA
       Amherst Court                 162                    $1,430        $11,247  $12,677         $2,255        1991  5-40 yrs.
       Berkeley Court                152          $7,808       858          8,257    9,115          2,821        1986  5-40 yrs.
       Cedar Creek                   176           8,586       519          8,614    9,133          3,021        1985  5-40 yrs.
       Columbia Court                 58           2,601       321          2,683    3,004            881        1984  5-40 yrs.
       Cornell Court                 109           5,202       785          5,044    5,829          1,597        1984  5-40 yrs.
       Cross Creek                   136           6,754       561          7,287    7,848          2,568        1985  5-40 yrs.
       Dartmouth Court               294          17,303     2,674         17,230   19,904          5,513        1986  5-40 yrs.
       Deerfield                     288          10,812     3,810         11,495   15,305          4,383     1975/83  5-40 yrs.
       Harvard Court                 112           5,158     1,034          5,864    6,898          1,952        1986  5-40 yrs.
       Northwood Park                168           7,759     1,246          8,459    9,705          3,058        1985  5-40 yrs.
       Northwood Place               604          30,143     4,613         34,096   38,709         11,191        1986  5-40 yrs.
       Orchard Park                   60                     1,138          2,099    3,237            837        1982  5-40 yrs.
       Park West                     880          33,992    18,768         53,522   72,290         25,328  1970/71/72  5-40 yrs.
       Parkwood                      296          12,642     7,667         12,698   20,365          4,850        1974  5-40 yrs.
       Rancho San Joaquin            368          17,234     7,910         28,325   36,235         12,972        1976  5-40 yrs.
       San Carlo                     354                     2,715         25,720   28,435          5,907        1989  5-40 yrs.
       San Leon                      248          12,380     1,726         14,507   16,233          4,449        1987  5-40 yrs.
       San Marco                     426          24,327     2,873         24,355   27,228          6,199        1988  5-40 yrs.
       San Marino                    200           9,849     1,376         11,567   12,943          3,756        1986  5-40 yrs.
       San Mateo                     283                     1,444         18,621   20,065          3,696        1990  5-40 yrs.
       San Paulo                     382          26,591     1,906         26,785   28,691          2,487        1993  5-40 yrs.
       San Remo                      248          13,832     1,765         14,287   16,052          4,457     1986/88  5-40 yrs.
       Stanford Court                320          13,877     2,202         14,226   16,428          5,202        1985  5-40 yrs.
       The Parklands                 121           6,512        68          7,068    7,136          2,216        1983  5-40 yrs.
       Turtle Rock Canyon            217          18,791     1,889         19,969   21,858          3,703        1991  5-40 yrs.
       Turtle Rock Vista             252          13,405     6,327         13,340   19,667          5,120     1976/77  5-40 yrs.
       Windwood Glen                 196           9,852     1,266          9,668   10,934          3,124        1985  5-40 yrs.
       Windwood Knoll                248                     1,111         11,575   12,686          3,724        1983  5-40 yrs.
       Woodbridge Oaks               120                       832          6,718    7,550          2,217        1983  5-40 yrs.
       Woodbridge Pines              220           8,459     5,755         10,484   16,239          3,985        1976  5-40 yrs.
       Woodbridge Villas             258                     4,353          9,105   13,458          3,729        1982  5-40 yrs.
       Woodbridge Willows            200           9,655     1,421         11,468   12,889          4,888        1984  5-40 yrs.
----------------------------------------------------------------------------------------------------------------------------------
                                   8,156         333,524    92,363        466,383  558,746        152,086
----------------------------------------------------------------------------------------------------------------------------------
   NEWPORT BEACH, CALIFORNIA
       Bayport                       104           4,862     3,146          4,226    7,372          1,678        1971  5-40 yrs.
       Bayview                        64           3,510     2,353          2,925    5,278          1,193        1971  5-40 yrs.
       Baywood                       388          20,972    10,809         20,362   31,171          7,450     1973/84  5-40 yrs.
       Mariner Square                114           5,637       392          5,030    5,422          3,106        1969  5-40 yrs.
       Newport North                 570          37,970     8,849         31,314   40,163          9,963        1986  5-40 yrs.
       Promontory Point              520          36,303    18,775         41,153   59,928         16,083        1974  5-40 yrs.
----------------------------------------------------------------------------------------------------------------------------------
                                   1,760         109,254    44,324        105,010  149,334         39,473
----------------------------------------------------------------------------------------------------------------------------------
   TUSTIN, CALIFORNIA
       Rancho Alisal                 356          20,625     3,558         19,894   23,452          5,884     1988/91  5-40 yrs.
       Rancho Maderas                266          19,372     1,144         16,263   17,407          3,732        1989  5-40 yrs.
       Rancho Mariposa               238          12,839       683         16,241   16,924          2,535        1992  5-40 yrs.
       Rancho Tierra                 252          19,622     1,215         16,470   17,685          3,918        1989  5-40 yrs.
       Sierra Vista                  306                     2,318         22,667   24,985          3,405        1992  5-40 yrs.
----------------------------------------------------------------------------------------------------------------------------------
                                   1,418          72,458     8,918         91,535  100,453         19,474
----------------------------------------------------------------------------------------------------------------------------------
TOTAL STABILIZED MORE THAN 2      
YEARS                             11,334        $515,236  $145,605       $662,928 $808,533       $211,033
----------------------------------------------------------------------------------------------------------------------------------
STABILIZED LESS THAN 2 YEARS
   IRVINE, CALIFORNIA
       Villa Coronado                513                    $5,842        $37,985  $43,827         $2,058      1995/96  5-40 yrs.
       Santa Rosa                    368                     3,169         27,615   30,784          1,410      1995/96  5-40 yrs.
       Santa Clara                   378                     3,624         31,126   34,750          1,468      1995/96  5-40 yrs.
----------------------------------------------------------------------------------------------------------------------------------
                                   1,259                    12,635         96,726  109,361          4,936
----------------------------------------------------------------------------------------------------------------------------------
   TUSTIN, CALIFORNIA
       Rancho Monterey               436                     6,823         33,970   40,793          1,385      1995/96  5-40 yrs.
----------------------------------------------------------------------------------------------------------------------------------
                                     436                     6,823         33,970   40,793          1,385
----------------------------------------------------------------------------------------------------------------------------------
   NEWPORT COAST, CALIFORNIA
       Newport Ridge                 512                     9,357         45,265   54,622          1,813      1995/96  5-40 yrs.
----------------------------------------------------------------------------------------------------------------------------------
                                     512                     9,357         45,265   54,622          1,813
----------------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------------
TOTAL STABILIZED LESS THAN 2       2,207                   $28,815       $175,961 $204,776         $8,134
YEARS                                                      
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on next page.





                                       16
<PAGE>   17


<TABLE>
<CAPTION>

                                                                GROSS AMOUNT AT WHICH
                                                                     CARRIED AT 
                                                                DECEMBER 31, 1996(a)(b)
                                                                -----------------------
     APARTMENT                 NUMBER OF                             BUILDINGS AND              ACCUMULATED   DATE OF    DEPRECIABLE
COMMUNITY NAME (CITY)              UNITS   ENCUMBRANCES(c)   LAND(d)  IMPROVEMENTS       TOTAL  DEPRECIATION  COMPLETION     LIFE(e)
----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>        <C>              <C>         <C>           <C>          <C>            <C>       <C>
DELIVERED UNITS IN PROJECTS 
UNDER CONSTRUCTION
   Baypointe (Newport Beach)         68                        $953         $6,609     $7,562           $13         1996  5-40 yrs.
   Santa Maria (Irvine)              47                         697          4,426      5,123            13         1996  5-40 yrs.
----------------------------------------------------------------------------------------------------------------------------------
TOTAL DELIVERED UNITS               115                      $1,650        $11,035    $12,685           $26
----------------------------------------------------------------------------------------------------------------------------------

TOTAL STABILIZED AND DELIVERED   13,656                    $176,070       $849,924 $1,025,994      $219,193
----------------------------------------------------------------------------------------------------------------------------------

UNITS UNDER CONSTRUCTION

   Baypointe (Newport Beach)        232                      $3,237        $18,602    $21,839
   Santa Maria (Irvine)             180                       2,646         11,638     14,284
   The Colony (Newport Beach)       245                       3,545          9,772     13,317
   Santa Rosa II (Irvine)           207                       5,999          1,323      7,322
   Other                                                                     1,478      1,478
----------------------------------------------------------------------------------------------------------------------------------
TOTAL UNITS UNDER CONSTRUCTION      864                     $15,428        $42,813    $58,241
----------------------------------------------------------------------------------------------------------------------------------
TOTAL                            14,520          $515,236  $191,497       $892,737 $1,084,234      $219,193
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


Notes:


(a)  The aggregate cost of land and buildings for federal income tax purposes is
     approximately $654,007 (unaudited).

(b)  The gross amount at which buildings and improvements are carried represent
     historical cost amounts incurred in the development of the projects and
     capital improvements incurred subsequent to the completion of construction.
     Prior to the Company's December 1993 initial public offering, the gross
     land, buildings and improvements amounts represent The Irvine Company's 
     historical cost basis.

(c)  Encumbrances represent debt secured by deeds of trust.

(d)  Land acquired from The Irvine Company is recorded at cost based on the
     purchase price.

(e)  Estimated useful lives are five to seven years for furniture and fixtures,
     five to twenty years for improvements and forty years for buildings.


A summary of activity of real estate and accumulated
depreciation is as follows:

<TABLE>
<CAPTION>
                                                                 Real Estate
                                                                 December 31,
                                                      ---------------------------------
                                                          1996        1995       1994
---------------------------------------------------------------------------------------
<S>                                                  <C>            <C>        <C>
Balance at beginning of year                          $1,005,633    $869,756   $792,510
Additions:
     Through cash expenditures                            66,857     124,368     61,590
     Through assumption of tax-exempt 
        assessment district debt                           2,771       4,184     15,656
     Through issuance of Operating 
        Partnership units                                  8,973       7,325
---------------------------------------------------------------------------------------
Balance at end of year                                $1,084,234  $1,005,633   $869,756
---------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
                                                           Accumulated Depreciation
                                                                 December 31,
                                                      ---------------------------------
                                                          1996        1995       1994
---------------------------------------------------------------------------------------
<S>                                                  <C>            <C>        <C>
Balance at beginning of year                            $192,106    $169,039   $148,052
Charges to depreciation expense                           27,087      23,067     20,987
---------------------------------------------------------------------------------------
Balance at end of period                                $219,193    $192,106   $169,039
---------------------------------------------------------------------------------------
</TABLE>





                                       17
<PAGE>   18

                               INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
------                           -----------
<S>     <C>

2.1     Agreement and Plan of Merger dated as of March 20, 1996 between the
        Company and Irvine Apartment Communities, Inc., a Delaware corporation
        (incorporated by reference to Exhibit 2.1 of the Company's Registration
        Statement on Form 8-B, filed with the Securities and Exchange Commission
        on April 30, 1996 (the "Form 8-B")).

3.1     Articles of Amendment and Restatement of the Company (incorporated by
        reference to Exhibit 3.1 of the Form 8-B").

3.2     Articles of Merger dated May 2, 1996 between the Company and Irvine
        Apartment Communities, Inc., a Delaware corporation (incorporated by
        reference to Exhibit 14 of Amendment No. 5 to Schedule 13D filed on July
        15, 1996 by The Irvine Company, TIC Investment Company A, TIC Investment
        Company C and Donald L. Bren).

3.3     Amended Bylaws of the Company (incorporated by reference to Exhibit 3.2
        of the Form 8-B).

3.4     Specimen of Certificate Representing Shares of Common Stock
        (incorporated by reference to Exhibit 3.3 of the Form 8-B).

10.1    Agreement of Limited Partnership of the Operating Partnership (the
        "Operating Partnership Agreement") (incorporated by reference to Exhibit
        10.1 of the Annual Report on Form 10-K of the Company for the year ended
        December 31, 1993, File No. 1-12478 (the "1993 Form 10-K")).

10.1.1  Amendment No. 1 to the Operating Partnership Agreement
        (incorporated by reference to Exhibit 10.1.1 of the
        Quarterly Report on Form 10-Q of the Company for the quarter ended June
        30, 1995, File No. 1-12478 (the "1995 Second Quarter Form 10-Q")).

10.1.2  Amendment No. 2 to the Operating Partnership Agreement (incorporated by
        reference to Exhibit 10.1.2 of the 1995 Second Quarter Form 10-Q).

10.1.3  Amendment No. 3 to the Operating Partnership Agreement (incorporated by
        reference to Exhibit 10.1.3 of the 1995 Second Quarter Form 10-Q).

10.1.4  Amendment No. 4 to the Operating Partnership Agreement (incorporated by
        reference to Exhibit 10.1.4 of the Form 8-B).

10.1.5  Amendment No. 5 to the Operating Partnership Agreement (incorporated by
        reference to Exhibit 10.1.5  of the Form 8-B).

10.1.6  Amendment No. 6 to the Operating Partnership Agreement (incorporated by
        reference to Exhibit 24 of Amendment No. 6 to Schedule 13D filed on
        March 4, 1997 by The Irvine Company, TIC Investment Company A, TIC
        Investment Company C and Donald L. Bren ("Amendment No. 6 to the
        Schedule 13D")).

10.1.7  Amendment No. 7 to the Operating Partnership Agreement (incorporated by
        reference to Exhibit 25 of Amendment No. 6 to the Schedule 13D).

10.2    Lease Agreement (incorporated by reference to Exhibit 10.2 of the 1993
        Form 10-K).
</TABLE>





                                       18
<PAGE>   19
<TABLE>
<S>     <C>
10.4    Miscellaneous Rights Agreement among the Company and the persons named
        therein (incorporated by reference to Exhibit 10.4 of the Form 8-B).

10.5    Administrative Services Agreement (incorporated by reference to Exhibit
        10.5 of the 1993 Form 10-K).

10.5.1  Amendment and Extension to the Administrative Services Agreement
        (incorporated by reference to Exhibit 10.5.1 of the Annual Report on
        Form 10-K of the Company for the year ended December 31, 1994).

10.6    Exclusive Land Rights and Non-Competition Agreement (incorporated by
        reference to Exhibit 10.6 of the 1993 Form 10-K).

10.6.1  Amendment No. 1 to the Exclusive Land Rights and Non-Competition
        Agreement (incorporated by reference to Exhibit 10.6.1 of the 1995
        Second Quarter Form 10-Q).

10.6.2  Amendment No. 2 to the Exclusive Land Rights and Non-Competition
        Agreement (incorporated by reference to Exhibit 10.6.2 of the 1995
        Second Quarter Form 10-Q).

10.6.3  Amendment No. 3 to the Exclusive Land Rights and Non-Competition
        Agreement (incorporated by reference to Exhibit 10.6.3 of the Form 8-B).

10.7    Contribution Agreement and Escrow Instructions Agreement (incorporated
        by reference to Exhibit 10.7 of the 1993 Form 10-K).

10.8    Irvine Apartment Communities, Inc. 1993 Stock Option Plan for Directors
        (incorporated by reference to Exhibit 10.8 of the 1993 Form 10-K).

10.9    Irvine Apartment Communities, Inc. 1993 Long-Term Stock Incentive Plan
        (incorporated by reference to Exhibit 10.9 of the 1993 Form 10-K).

10.10   Irrevocable Trust Agreement (incorporated by reference to Exhibit 10.10
        of the 1993 Form 10-K).

10.11   Revolving Credit Agreement dated November 30, 1995 (incorporated by
        reference to Exhibit 10.11 of the Annual Report on Form 10-K of the
        Company for the year ended December 31, 1995, File No. 1-12478 (the
        "1995 Form 10-K)).

10.11.1 Amendment No. 1 to the Revolving Credit Agreement dated July 1, 1996.

10.11.2 Amendment No. 2 to the Revolving Credit Agreement dated August 15, 1996.

10.11.3 Amendment No. 3 to the Revolving Credit Agreement dated February 20,
        1997.

10.12   Indenture of Trust for Tax-Exempt Mortgage Bond Financing (incorporated
        by reference to Exhibit 10.13 of the 1995 Second Quarter Form 10-Q).

10.13   Employment Arrangement Letter with Chief Executive Officer (incorporated
        by reference to Exhibit 10.13 of the 1995 Form 10-K).

10.14   Irvine Apartment Communities, Inc. 1996 Long-Term Stock Incentive Plan
        (incorporated by reference to Exhibit 10.14 of the Form 8-B). Severance
        Agreement with the Company's former Chief Financial Officer.

10.15   Severance Agreement with the Company's former Chief Financial Officer.

10.16   Severance Agreement with the Company's former Chief Executive Officer.

</TABLE>





                                       19
<PAGE>   20
<TABLE>
<S>     <C>
13      Portions of the Company's Annual Report to Shareholders for the year
        ended December 31, 1996.

21      Subsidiaries of the Registrant.

22      Notice and Proxy Statement for the Annual Meeting of Shareholders to be
        held on April 25, 1997.

23.1    Opinion of Ernst & Young LLP on Schedule III.

23.2    Consent of Ernst & Young LLP

27      Financial Data Schedule
</TABLE>


REPORTS ON FORM 8-K

The Company did not file any reports on Form 8-K during the fourth quarter of
1996.





                                       20
<PAGE>   21
                                   SIGNATURES

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

                                        IRVINE APARTMENT COMMUNITIES, INC.


                                        By:  JAMES E. MEAD
                                             ----------------------------------
                                             James E. Mead
                                             Senior Vice President,
                                             Chief Financial Officer and 
                                             Secretary





                                       21
<PAGE>   22
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature                       Title                                  Date
---------                       -----                                  ----
<S>                      <C>                                       <C>
DONALD BREN               Chairman of the Board of Directors;      March 24, 1997
----------------------    President and Chief Executive Officer
Donald Bren               

ANTHONY M. FRANK          Director                                 March 24, 1997
----------------------                                 
Anthony M. Frank

JOHN F. GRUNDHOFER        Director                                 March 24, 1997
----------------------                                      
John F. Grundhofer

BOWEN H. MCCOY            Director                                 March 24, 1997
----------------------                         
Bowen H. McCoy

WILLIAM  H. MCFARLAND     Director                                 March 24, 1997
----------------------                                            
William H. McFarland

MICHAEL D. MCKEE          Director                                 March 24, 1997
----------------------                                    
Michael D. McKee

JACK W. PELTASON          Director                                 March 24, 1997
----------------------                                     
Jack W. Peltason

JOHN F. SEYMOUR, JR.      Director                                 March 24, 1997
----------------------                                            
John F. Seymour, Jr.

JAMES E. MEAD             Senior Vice President,                   March 24, 1997
----------------------    Chief Financial Officer and                    
James E. Mead             Secretary (Principal Financial 
                          Officer)

SHAWN HOWIE               Vice President, Corporate                March 24, 1997
----------------------    Finance and Controller              
Shawn Howie               (Principal Accounting Officer)
</TABLE>





                                       22