UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

{X}Annual Report Pursuant to Section 13 of 15(d) of the Securities  Exchange Act
of 1934 (Fee Required)

                   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 (No Fee Required)

        For the transition period from ............... to ...............

                         Commission file number 0-19066

                         INSIGNIA FINANCIAL GROUP, INC.
            (Exact name of registrant as specified in its charter)

      Delaware                                                   13-3591193
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                           Identification No. 1)

One Insignia Financial Plaza, P.O. Box 1089
     Greenville, South Carolina                                      29602
 (Address of principal executive offices)                        (Zip Code)

        Registrant's telephone number, including area code (864) 239-1000



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

                                      None

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

                 Shares of Class A Common Stock, $.01 Par Value

                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  report),  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. {X}

As of February  28,  1997 there were  outstanding  28,983,777  shares of Class A
Common  Stock.  Based on the closing price of $21.25 per share of Class A Common
Stock as of such date, the aggregate market value of Registrant's Shares held by
non- affiliates was approximately $433 million.

                                                

                      DOCUMENTS INCORPORATION BY REFERENCE

Proxy  Statement for the Annual Meeting of  Stockholders to be held on April 30,
1997 in Part III of this Form 10-K.


<PAGE>

                                     Part I

Item 1.  Business

     General.  Insignia Financial Group, Inc. (the "Company" or "Insignia") is a
Delaware  corporation  incorporated  in  July  1990.  The  Company  is  a  fully
integrated real estate services  organization  specializing in the ownership and
operation  of  securitized  real  estate  assets.  As  the  largest  manager  of
multifamily  residential  properties in the United States and one of the largest
managers of commercial properties,  Insignia performs property management, asset
management,  investor services,  partnership accounting,  real estate investment
banking,  and real  estate  brokerage  services  for  various  types of property
owners,  including  approximately 900 limited  partnerships having approximately
360,000 limited  partners.  Insignia  commenced  operations in December 1990 and
since then has grown to provide  property and/or asset  management  services for
over 2,400 properties,  which include  approximately  265,000  residential units
(including  cooperative and  condominium  units) and  approximately  110 million
square feet of commercial space, located in over 500 cities in 48 states.

     Insignia's  principal  business  strategy  is to  expand  its  real  estate
services business in four primary ways. First, the Company seeks to acquire,  or
to have an affiliate  acquire,  controlling  positions  in entities  that own or
control real estate  properties,  and then, subject to their fiduciary duties to
such entities, engage Insignia to provide management services.  Second, Insignia
seeks to enter into special contractual  relationships with non-affiliated third
parties that own or control  portfolios  of real estate  properties  pursuant to
which Insignia will provide management services to some or all of the properties
within their  portfolios.  Third,  the Company seeks to expand its management of
properties  which  are  owned by  non-affiliated  third  parties,  such as large
insurance companies,  banks, government or quasi-government  agencies, and other
institutional   investors   and  lenders.   Fourth,   Insignia   seeks  to  make
opportunistic real estate investments in controlled entities,  primarily through
Insignia Properties Trust and Insignia Properties,  L.P., its controlled UPREIT,
or through  institutional  co-investments  for both real  estate  cash flows and
profits and additional service revenues.

     Insignia's  real estate  interests  consist  primarily  of limited  partner
interests in controlled  partnerships  which own apartment  complexes.  Insignia
began making such  investments  in December 1994 in  connection  with the ConCap
acquisition,  and has since acquired additional interests through tender offers,
negotiated  block  purchases and secondary  market  purchases.  In addition,  in
January 1996 Insignia  acquired NPI, which included a substantial  investment in
limited partner interests.

     In January 1997, Insignia reorganized its operations from six units to four
units to achieve  greater  operating  efficiencies  and separate its real estate
investment   activities.   Insignia's   operating  units  now  include  Insignia
Residential  Group  ("IRG"),  Insignia  Commercial  Group  ("ICG") and  Insignia
Financial  Services  ("IFS"),  through  which the Company  performs  its various
services. IRG and ICG provide management,  consulting, brokerage, investment and
related services for residential and commercial  properties,  respectively.  IFS
provides  financial  services  including  real  estate  investment  banking  and
co-investment.

     The  Company  formed  Insignia   Properties   Trust  ("IPT")  and  Insignia
Properties,  L.P. ("IPLP") which together comprise an umbrella  partnership real
estate  investment  trust as its  fourth  unit.  IPT and IPLP  are  expected  to
function as the Company's primary vehicles for acquiring and owning interests in
multifamily  real estate  assets.  Insignia and certain of its  affiliates  have
initially contributed to IPT virtually 100% of the limited partnership interests
acquired by Insignia over the course of the past 24 months, as well as the stock
of the  corporate  the  general  partnerships  in  those  partnerships  in which
Insignia has acquired limited partnership interests. Insignia will initially own
virtually  100% of the  stock  in  IPT,  with  IPT  owning  100% of the  general
partnership  interest in IPLP.  Over time,  Insignia  expects to  diversify  the
ownership  base of IPT and grow this  segment  without  significant  recourse to
Insignia.

     In November  1996,  Insignia  Financing I, a Delaware  trust (the "Trust"),
issued and sold 2,990,000  shares of its Convertible  Preferred  Securities (the
"Preferred  Securities") with an aggregate  liquidation  amount of $149,500,000,
sold to  "qualified  institutional  buyers"  (as  defined in Rule 144A under the
Securities Act of 1933, as amended (the "Act")) in compliance with Rule 144A, to
foreign investors pursuant to Regulation S under the Act


<PAGE>

and to institutional  accredited  investors pursuant to Regulation D. All of the
outstanding  common shares of the Trust are owned by the Company.  The Preferred
Securities  will mature on September  30, 2016 and bear  interest at the rate of
6.5% per annum, with quarterly distributions payable in arrears. The Company has
the  option  to defer  interest  payments  from  time to time,  not to exceed 20
consecutive quarters.  The Company's first distribution of $1.6 million was made
on December 31, 1996, and is reflected in minority interests in the consolidated
statements.  The Preferred Securities are convertible into the Company's Class A
Common Stock at $26.50 per share through September 30, 2016. The Company has the
right to redeem the Preferred  Securities  after November 1, 1999. The Preferred
Securities  are  structured  such that the  dividend  is tax  deductible  to the
Company.  The proceeds of the offering  were used to pay down current debt under
the Company's $200,000,000 revolving credit facility.

     Insignia and its affiliates have acquired control of, or management  rights
to, 33 portfolios of properties  since 1990. The Company believes that there are
a  significant  number of other  portfolios  which may be  available  for future
acquisitions.  However,  there can be no assurance  that the closing of any such
potential  acquisitions will be consummated.  The following table summarizes the
portfolio  acquisitions completed in 1996, 1995 and 1994 only, and their size in
units and commercial square feet.
<TABLE>
<CAPTION>

                                                                                                        Commercial
                                                Residential Units                                       Square Feet            
  Year                                                   Contractually    Third                         Contractually    Third
   of                                      Affiliated     Restricted     Party          Affiliated        Restricted     Party
Acquisition     Portfolio Name            Properties(2)  Properties(3) Properties(4)   Properties(2)    Properties(3)  Properties(4)
<S>           <C>                           <C>            <C>          <C>              <C>               <C>          <C>  

  1996        GSSW(1).............           5,710
  1996        Edward S. Gordon Company, Inc.                                                                           25,500,000
  1996        Paragon.............                                                                                      21,800,000
  1996        National Property
                Investors, Inc.....         34,265                       3,735           3,885,000
  1995        Propsys/Compass Ventures                        565          138
  1995        Douglas Elliman-Gibbons &
                Ives/Kreisel Company, Inc.                              54,301
  1995        Gleichman & Company, Inc.                     1,500
  1995        O'Donnell Property Services                                                                 3,496,330    20,102,461
  1994        ConCap Entities.....          15,049                       2,776           2,092,890
  1994        Capital Realty, Group, Inc.    1,565                       5,512                                          2,177,439
  1994        Allegiance Realty Group, Inc.                52,738                                         7,631,339     8,326,458
  1994        Continental.........                                                                                        425,000
  1994        The Rooney Company                                           544                                          2,700,555
  1994        Hampton Real Estate Group      1,167                                         357,690
  1994        SHL Properties Acquisition
                 Partners, Ltd......         2,486                         413             634,000
  1994        GSSW................                                       1,451
  1994        Gross Lancton & Co.                                                                                       3,233,151
<FN>

(1)  The GSSW acquisition added additional  affiliated  management  contracts as
     well as the general partner interest on third party properties  acquired in
     1994.
 
(2)  Affiliated  properties  are  ones in which  some  form of  general  partner
     interest resides with the Company or an affiliate.
 
(3)  Contractually  restricted  properties are ones in which the general partner
     interest has not been relinquished to Insignia or an affiliate, but ones in
     which  restrictions and protection  clauses have been put in the management
     agreements to strengthen the stability of the relationship.
 
(4)  Third  party  properties  are  ones in  which no  control  exists,  and the
     contracts on the properties are cancelable at the option of either party.
</FN>
</TABLE>

     The Company's  services include property  management,  providing all of the
day-to-day  services  necessary to operate a property,  whether  residential  or
commercial;  tenant  representation;  corporate  real estate  consulting;  asset
management,  including long-term financial planning, monitoring and implementing
capital  improvement  plans,  and development and execution of refinancings  and
dispositions;  maintenance and construction services; marketing and advertising;
investor  reporting and accounting,  including  preparation of quarterly reports
and annual K-1 tax reporting  forms for limited  partners,  as well as,  regular
reporting under the Securities Exchange Act of 1934 where applicable; investment
banking,  including  assistance  in  workouts  and  restructurings,  mergers and
acquisitions,  debt and  equity  securitizations,  and  acquisitions  of limited
partner interests; and real estate brokerage.




<PAGE>

     The Company's  senior  residential  property  management  personnel have an
average of over 20 years of experience in property management with a broad range
of types of properties  throughout  the United States.  Many of Insignia's  most
experienced  managers  joined the  Company  in  connection  with  certain of its
acquisitions.   The  Company   believes  that  its   management   expertise  and
state-of-the-art  computer  and  communications  systems  allow it to offer  its
customized services  efficiently and at a cost to the Company that permits it to
be competitive with other real estate management service companies.

     The U.S.  Department of Housing and Urban Development  ("HUD") has approved
Insignia to provide property  management services for certain properties subject
to regulations by HUD. Approximately 16% of the residential units managed by the
Company  are  housing  projects  financed  under  various  government   programs
administered  by HUD. As a result,  certain  aspects of Insignia  operations are
subject to  regulation  by HUD. The programs  administered  by HUD are currently
under review by Congress.  The proposed  changes to the HUD programs would allow
tenants greater freedom in the selection of rental housing.  The tenant can take
this  "rent   voucher"   and  apply  for  lease  at  an  apartment  he  selects.
Additionally,  the rental  vouchers  may  provide  for less  assistance  than is
currently  in place.  It is  possible  that the  combination  of these  proposed
changes  could result in lower  rental  revenue and project cash flow from which
management and other fees are derived;  however,  the current  proposals are not
sufficiently specific to determine their actual impact on such fees, if any.
 
     Competition.  Competition  is intense in the  markets  for  acquisition  of
control  of real  estate  entities  and the  rights  to  manage  the  controlled
properties,   as  well  as  for  management  of  third-party  owner  properties.
Insignia's   competitors  for  residential  property  management  include  major
organizations such as NHP, Incorporated of Washington, D.C. and Lincoln Property
Company of Dallas,  Texas.  Competitors in the  commercial  property real estate
business include CB Commercial Real Estate Group of Los Angeles, California, and
Koll Management Services, Inc. of Newport Beach,  California.  Despite the large
size of these and other  competitors,  the industry is highly  fragmented and no
single  organization  controls or manages  more than a small  percentage  of the
residential or commercial  properties in the United States. Most competitors are
regional  or local  organizations  that  manage a  relatively  small  number  of
properties.

     Insignia  believes  that  competition  for  acquisition  of control of real
estate entities is based principally on the ability to offer reasonable value to
the seller of control, often restructuring the debt and equity of the controlled
entity to allow the  properties  to  provide  positive  cash flow to  investors.
Insignia believes its financial strength,  together with its ability to evaluate
and close acquisitions quickly and effectively using its in-house  capabilities,
its  record  of  successful  property  real  estate  services,  and its low cost
structure, provide credibility in negotiating such restructuring, and complement
its ability to offer attractive terms to the seller.  Insignia believes that its
track  record  of  having  successfully  completed  33  acquisitions  since  its
inception gives it a competitive advantage in obtaining attractive acquisitions.

     Competition for third party  management  contracts is based  principally on
quality of service,  including the ability to enhance  asset  values,  and cost.
Unlike many of its competitors, Insignia's personnel are experienced in managing
a wide variety of types of properties in locations throughout the country.  This
enables Insignia to offer an owner of a large diversified  portfolio the ability
to obtain  experienced  management for most or all of its properties through one
organization.  Insignia  believes it has  demonstrated an ability to effectively
manage,  lease,  and  improve  the value of,  both  residential  and  commercial
properties.  In addition,  Insignia  believes it has developed a reputation  for
quality service and attention to clients, investors, and tenants alike. Insignia
also believes its economies of scale and state-of-the-art management information
system allow it to offer its services  efficiently  and at an overall cost which
is  competitive  with or less  expensive  than is  offered  by other  management
service companies.  However,  while Insignia creates significant savings through
its substantial  purchasing  power, and is able to offer certain cost reimbursed
services (such as partnership administration) so that overall expenses are lower
than  those  of  Insignia's   competitors,   Insignia   believes  its  principal
competitive  advantages  are the experience of its management and the efficiency
and flexibility of its management  information  systems.  As a result,  Insignia
believes it has competed  effectively in the market for provision of real estate
services to third party  entities.  This segment of the business has grown since
inception, although there can be no assurance it can continue to do so.

<PAGE>

     Affiliated  Entities.  Metropolitan  Asset  Enhancement,  L.P.  ("MAE") was
formed prior to 1991 to be the principal  vehicle for acquiring  general partner
interests  in limited  partnerships  owning real estate and real estate  related
assets that would be managed or serviced by the Company.  Insignia holds a 19.1%
limited  partnership  interest in MAE.  Andrew L.  Farkas,  the  Chairman of the
Board,  President  and Chief  Executive  Officer of  Insignia,  owns the general
partner of MAE, which has a 1% partnership interest. In August 1993, the Company
entered into an agreement  with MAE whereby (i) the Company agreed to assist MAE
as its advisor and agent in connection with MAE's acquisition, asset management,
property management,  and securitization  activities and in connection therewith
to perform all services  relating to the  foregoing,  (ii) the Company agreed to
render to MAE full investment  banking,  financial  advisory,  recapitalization,
asset  restructuring,  securitization  and  mortgage  banking  services (as sole
compensation  for the provision of such services,  the Company  receives certain
cost reimbursements,  incentive management fees, and transaction fees as defined
in such  agreement),  and (iii) the  Company and MAE agreed  that,  in the event
either obtains an opportunity to acquire interests in real estate or in entities
which own or control  real  estate,  the  Company  will have the first  right to
acquire such interests. If the Company elects not to acquire any such interests,
but MAE does elect to acquire such  interests and the Company  elects to provide
any financing to MAE for such acquisition, then such financing shall be by means
of loans  that will bear  interest  at a rate equal to the rate then paid by the
Company on indebtedness under a revolving credit facility. If the Company is not
a party to a revolving credit facility, such rate will be the estimated rate the
Company would pay on indebtedness incurred under a revolving credit facility.

     Environmental  Regulation.  Under various  federal and state  environmental
laws and regulations, a current or previous owner or operator of real estate may
be required to investigate and remediate  certain  hazardous or toxic substances
or  petroleum  product  releases  at the  property,  and may be held liable to a
governmental   entity  or  to  third   parties  for  property   damage  and  for
investigation  and cleanup  costs  incurred by such parties in  connection  with
contamination.  In  addition,  some  environmental  laws  create  a lien  on the
contaminated  site in favor of the government for damages and costs it incurs in
connection with the contamination.  The presence of contamination or the failure
to remediate  contamination  may adversely affect the owner's ability to sell or
lease real estate or to borrow using the real estate as collateral. The owner or
operator of a site may be liable under  common law to third  parties for damages
and injuries resulting from environmental contamination emanating from the site.
There can be no assurance  that  Insignia,  or any assets owned or controlled by
Insignia,  currently are in compliance with all of such laws and regulations, or
that Insignia will not become subject to  liabilities  that arise in whole or in
part out of any such laws,  rules,  or  regulations.  Moreover,  there can be no
assurance that any of such liabilities to which Insignia may become subject will
not have a material  adverse effect upon the business or financial  condition of
Insignia.

     Employees.   At  December  31,  1996,   Insignia  had  approximately  9,300
employees.  Of these  employees,  approximately  75% were  employed  as  on-site
personnel such as resident managers and maintenance  people involved in property
management. Fewer than 4% of such employees are covered by collective bargaining
agreements.  Approximately 89% of Insignia's  employees are full time; part-time
employees  include those employed as  housekeepers,  porters,  pool staff,  lawn
maintenance,  and other service  positions at site locations.  Insignia believes
that its employee  relations  are  excellent.  The  Company's  benefit  programs
include group comprehensive  health and life insurance plans, paid vacations,  a
sick leave program, a disability plan, and a 401(k) plan.

   Executive Officers

     The  following  sets  forth  the names  and ages of all  persons  currently
serving as executive  officers of the Company,  their positions with the Company
and their period of service as an executive officer of the Company.  Each person
serves until his successor is elected or appointed by the Board of Directors.

<PAGE>
<TABLE>
<CAPTION>

                                                                                   Beginning Year of
                                                                                       Service as
     Name            Age               Office                                      Executive Officer
<S>                  <C>  <C>                                                             <C> 

Andrew L. Farkas     36   Chairman of the Board of Directors, President and               1990
                           Chief Executive Officer of Insignia and Chairman
                           of the Board of Trustees of Insignia Properties Trust
James A. Aston       44   Office of the Chairman, Chief Financial Officer of              1991
                           Insignia and President, Insignia Properties Trust
Frank M. Garrison    42   Executive Managing Director and President,                      1993
                           Insignia Financial Services Division of Insignia
                           and Executive Managing Director of Insignia
                           Properties Trust
Jeffrey L. Goldberg  35   Managing Director - Investment Banking                          1991
Edward S. Gordon     61   Office of the Chairman, Chairman of Insignia/ESG                1996
Albert H. Gossett    49   Senior Vice President and Chief Information Officer             1991
Henry Horowitz       50   Executive Managing Director and Chief Operating                 1993
                           Officer, Insignia Commercial Group, Inc.
William H. 
  Jarrard, Jr.       50   Managing Director - Partnership Administration                  1991
                           of Insignia and Vice President and Director of
                           Operations of Insignia Properties Trust
Neil J. Kreisel      51   Executive Managing Director and President,                      1995
                           Insignia Residential Group
John K. Lines        37   General Counsel and Secretary of Insignia and Vice
                           President and Secretary of Insignia Properties Trust           1994
Martha L. Long       37   Senior Vice President - Finance and Controller                  1996
Stephen C. 
   Schoenbaechler    44   Senior Vice President - Asset Management                        1995
Thomas R. Shuler     51   Executive Managing Director and Chief Operating                 1991
                           Officer of Insignia Residential Group
Stephen B. Siegel    52   Executive Managing Director and President,                      1996
                           Insignia Commercial Group, Inc., President of Insignia/ESG
Ronald Uretta        41   Chief Operating Officer and Treasurer of Insignia and
                           Vice President and Treasurer of Insignia Properties Trust      1992
</TABLE>

     Andrew L.  Farkas has been a director of Insignia  since its  inception  in
July 1990,  has been  Chairman  and Chief  Executive  Officer of Insignia  since
January 1991, and has been President  since May 1995.  Prior to August 1993, Mr.
Farkas was the sole  director of Insignia.  He has been Chairman of the Board of
Trustees of Insignia Properties Trust since December 1996.

     James A. Aston has been Executive  Managing Director of Investment  Banking
of Insignia  since  January  1991 to July 1994,  with the Office of the Chairman
since July 1994,  and Chief  Financial  Officer  since  August  1996.  He became
President of Insignia Properties Trust in December 1996.

     Frank M.  Garrison  has been  Executive  Managing  Director of Insignia and
President of Insignia Financial Services, a division of the Company,  since July
1994. Mr. Garrison became  Executive  Managing  Director of Insignia  Properties
Trust in December 1996.  Between  January 1993 and July 1994,  Mr.  Garrison was
Managing Director of Investment Banking. From January 1992 to December 1992, Mr.
Garrison was Vice President - Investment Banking of Insignia.

     Jeffrey L.  Goldberg has been Managing  Director of  Investment  Banking of
Insignia since July 1994 and served as Managing  Director of Asset Management of
Insignia from January 1991 until July 1994.

     Edward S.  Gordon has been with the Office of the  Chairman  of the Company
since July 1996.  He is the  founder  and was  Chairman  of the Edward S. Gordon
Company, Incorporated ("ESG"), a commercial property

<PAGE>
management  and brokerage firm whose assets were acquired by the Company in June
1996. The Insignia Commercial Group reports to Mr. Gordon.

     Albert H. Gossett has been Vice President and Chief Information  Officer of
Insignia  since  January 1991 and Senior Vice  President  and Chief  Information
Officer of Insignia since July 1994.

     Henry Horowitz has been Executive Managing Director of Insignia  Commercial
Group,  Inc.  since  January  1993,  and was  Executive  Managing  Director  and
President  since June 1994.  He was promoted to Chief  Operating  Officer of the
Group in January 1997 with the merger of Insignia  Commercial  Group,  Inc. with
ESG. From January 1987 to January  1993,  Mr.  Horowitz was the Chief  Executive
Officer  of First  Resource  Realty,  Inc.,  a  commercial  property  management
organization which Insignia acquired in January 1993.

     William H. Jarrard,  Jr.  became Vice  President and Director of Operations
for Insignia  Properties  Trust in December  1996. Mr. Jarrard has served as the
Managing Director of Partnership Administration of Insignia since January 1991.

     Neil J.  Kreisel has been  Executive  Managing  Director  of  Insignia  and
President of Insignia  Management  Services-New  York, Inc., a subsidiary of the
Company,  since  September  1995.  Mr.  Kreisel was  promoted to his position of
President for the Insignia Residential Group in January 1997. For more than five
years,  Mr.  Kreisel has been President and Chief  Executive  Officer of Kreisel
Company, Inc., a residential property management firm.

     John K.  Lines has been  General  Counsel of  Insignia  since June 1994 and
General  Counsel  and  Secretary  of  Insignia  since July 1994.  He became Vice
President and Secretary of Insignia  Properties Trust in December 1996. From May
1993 until June 1994,  Mr. Lines was employed as Assistant  General  Counsel and
Vice President of Ocwen Financial  Corporation in West Palm Beach, Florida. From
October 1991 until April 1993, Mr. Lines was employed as Senior Attorney of Banc
One Corporation in Columbus, Ohio.

     Martha L. Long  joined the Company as its  Controller  in June 1994 and was
promoted to Senior Vice  President - Finance  and  Controller  in January  1997.
Prior to that time,  she was Senior Vice  President and  Controller of The First
Savings Bank, FSB in Greenville, SC.

     Stephen  C.   Schoenbaechler  has  been  Senior  Vice  President  of  Asset
Management of Insignia  since August 1994.  From January 1992 to August 1994 Mr.
Schoenbaechler was Vice President of Asset Management.

     Thomas R.  Shuler was  promoted  to Chief  Operating  Officer  of  Insignia
Residential  Group,  upon its  creation  in January  1997.  Mr.  Shuler has been
Managing  Director of  Residential  Property  Management of Insignia since March
1991 and  served as  Executive  Managing  Director  and  President  of  Insignia
Management  Services,  a former  division  of the  Company,  since  July 1994 to
January 1997.

     Stephen B. Siegel  assumed his duties as President  of Insignia  Commercial
Group in January 1997.  Mr.  Siegel has been a Managing  Director of the Company
since July 1996 and President of the Edward S. Gordon  Company,  Incorporated in
New York City since 1992.  From 1988 to 1992,  Mr. Siegel was engaged in a joint
venture with Chubb  Corporation to develop and acquire  investment-grade  office
buildings throughout the United States.

     Ronald Uretta has been  Insignia's  Treasurer  since  January  1992.  Since
August  1996,  he has also  served  as Chief  Operating  Officer.  He  served as
Secretary from January 1992 to 1994 and as Chief Financial  Officer from January
1992 to  August  1996.  He became  Vice  President  and  Treasurer  of  Insignia
Properties Trust in December 1996.

     There is no family  relationship  between any of the executive  officers of
the Company.

     Andrew  Farkas,  Chairman,  President  and Chief  Executive  Officer of the
Company is the sole  stockholder  of the general  partner of MAE, which has a 1%
general partner  interest in MAE. Mr. Farkas is also (i) the sole stockholder of
the general partner of, and owns a limited partnership interest in, Metropolitan
Acquisition Partners
<PAGE>
IV, L.P.  ("MAP IV") which  together  with its general  partner owns 9.0% of the
outstanding  Class A Common Stock of the Company and, (ii) the sole  stockholder
of the general  partner of Metropolitan  Acquisition  Partners V, L.P. ("MAP V")
which  together with its general  partner owns 2.8% of the  outstanding  Class A
Common Stock of the Company.

Item 2.  Properties

     The Company's  principal  executive  office is located in a 244,000  square
foot office  building at One Insignia  Financial  Plaza,  in  Greenville,  South
Carolina.  Its lease calls for a term of ten years and six months and expires on
March 31, 2005 with two  five-year  renewal  options  exercisable  by  Insignia.
Presently,  the  Company  occupies  110,000  square  feet  and  will  assume  an
additional 9,000 square feet in the building as the space becomes available. The
Company has a first right of refusal to lease an  additional  16,299 square feet
in the building, subject to its expansion plans. The lease contains an option to
cancel at the end of the seventh  year or ninth year,  each with a  cancellation
penalty.

     The Company also occupies 21,000 square feet at Insignia  Financial Center,
also in Greenville, South Carolina, with lease terms providing for two five-year
renewal  options and  termination  options during the third,  sixth,  and eighth
years of the lease.  The lease expires August 31, 2004. Both buildings are owned
by non- affiliated third parties.  The current aggregate annual lease obligation
for both locations is $1,800,000. Nationally, the Company leases office space in
89 locations and 26 states, all from non-affiliated third parties,  under leases
expiring  at  various  dates  between  1997  and  2005.  Insignia  believes  its
facilities are adequate for their current and planned uses.

  Item 3.  Legal Proceedings

     Gillett Family Trust, et al. v. Insignia  Financial  Group, et al. In April
1995, six  wholly-owned  subsidiaries  of Insignia  commenced  tender offers for
limited  partner  interests in six  partnerships,  Shelter  Properties I Limited
Partnership;  Shelter Properties II Limited Partnership;  Shelter Properties III
Limited  Partnership;   Shelter  Properties  IV  Limited  Partnership;   Shelter
Properties V Limited Partnership;  and Shelter Properties VI Limited Partnership
(collectively,  "Shelter Properties  Partnerships").  In May 1995, in the United
States  District  Court for the  District  of South  Carolina,  certain  limited
partners of the Shelter Properties  Partnerships  commenced a lawsuit, on behalf
of themselves, on behalf of a putative class of plaintiffs,  and derivatively on
behalf  of  the  partnerships,  challenging  the  actions  taken  by  defendants
(including Insignia, the acquiring entities and certain officers of Insignia) in
the management of the Shelter Properties Partnerships and in connection with the
tender offers and certain other matters.

     On September 27, 1995, the parties entered into a stipulation to settle the
matter. The principal terms of the stipulation required supplemental payments to
tendering  limited partners  aggregating  approximately $6 million to be paid by
the Affiliated  Purchasers,  which was paid on September 5, 1996,  together with
the payment of plaintiff's attorney's fees and expenses.

     Chipain,  Tom, et al., v. Walton Street Capital Acquisition II, LLC, et al.
In May 1996,  Walton Street  Capital  Acquisition  II, MLLC  ("Walton  Street"),
together with certain Insignia  affiliates,  commenced tender offers for limited
partner  interests in ten real estate  limited  partnerships  syndicated  by The
Balcor Company  ("Balcor").  In May 1996, certain persons claiming to be holders
of limited  partner  interests  commenced a lawsuit in the Circuit Court of Cook
County, Illinois, County Department, Chancery Division, on behalf of themselves,
on behalf of a putative class of plaintiffs,  and, as amended,  derivatively  on
behalf of the  Balcor-syndicated  partnerships,  challenging  the actions of the
defendants  (including  Insignia,  an Insignia  officer and certain  affiliates,
Walton Street and the general partners of the Balcor-syndicated partnerships) in
connection with the tender offers and certain other matters.

     The complaint,  as amended,  contained  allegations  that the tender offers
were inadequate and coercive based, in part, upon information allegedly obtained
by Insignia in violation of its fiduciary duties.  Defendants  promptly moved to
dismiss the complaint  and on June 5, 1996 the court  dismissed the complaint as
to Insignia and Walton
<PAGE>
Street,  with leave to  replead.  On June 11, 1996  plaintiffs  filed an amended
class and  derivative  action  complaint,  repeating the same  allegations as in
their initial  complaint,  and recasting some as derivative,  rather than direct
class, claims. Defendants moved to dismiss the amended complaint and on June 18,
1996, the court again dismissed plaintiffs' amended complaint as to Insignia and
Walton Street.

     On June 14, 1996 a second class and  derivative  suit,  similar in material
respects  to the  Chipain  litigation,  was filed in the  Circuit  Court of Cook
County, Illinois, County Department, Chancery Division. That complaint, entitled
Sandra Dee v. Walton  Street  Capital  Acquisition  II,  LLC, et al.,  contained
substantially  the same  allegations  as the  Chipain  complaints  and  asserted
additionally  that the tender  offers  violated  certain  state  securities  and
consumer statutes.  Pursuant to the court's orders consolidating the Chipain and
Dee complaints  with another action which does not name Insignia,  a new amended
and  consolidated  class and derivative  action  complaint was filed on July 25,
1996.  The  plaintiffs  in the  Chipain  action are not  parties to this  latest
complaint.

     On August 16, 1996 Insignia  moved to dismiss the amended and  consolidated
class and  derivative  action  complaint.  The  motion was heard by the court on
September 27, 1996 at which time the court granted leave to the plaintiff to (i)
withdraw its pending  complaint and (ii) serve a second amended and consolidated
class and derivative  action  complaint.  On October 8, 1996 plaintiffs  filed a
second amended and  consolidated  class and derivative  action  complaint  which
added claims of alleged antitrust injury and unjust  enrichment.  On October 25,
1996 Insignia moved to dismiss the second amended and consolidated  class action
complaint. That motion was heard by the court in December 1996.

     On December 18, 1996 the court issued a decision granting Insignia's motion
to  dismiss.  By order  dated  January  7, 1997 the court  dismissed  the second
amended and consolidated class action compliant with prejudice. Plaintiffs filed
a notice of appeal in the December action on February 14, 1997.

     The Company and certain  subsidiaries are defendants in lawsuits arising in
the ordinary  course of business.  Such  lawsuits are primarily  insured  claims
arising from  accidents  at managed  properties.  Claims may demand  substantial
compensatory and punitive damages.

     Management  believes  that the  aforementioned  lawsuits  will be  resolved
without material loss to the Company or its subsidiaries.

Item 4.  Submission of Matters to a Vote of Security Holders

     During the fourth quarter of 1996, no matter was submitted to a vote of the
stockholders of the Company through the solicitation of proxies or otherwise.
<PAGE>
                                     Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     In October 1995,  the Company  completed a second public  offering in which
3,850,000  shares of Class A Common Stock were sold by the Company and 1,350,000
shares were sold by certain  stockholders of the Company.  The offering price of
the Class A Common Stock was $14.50 per share.  Prior to that time, in 1993, the
Company had completed an equity  offering in which  5,910,000  shares of Class A
Common  Stock  were  sold  by  the  Company  and  3,060,000  shares  by  certain
stockholders  of the  Company at a price of $8.00 per share.  The Class A Common
Stock traded on the NASDAQ  National  Market prior to October 3, 1995, and since
that date has traded on The New York Stock  Exchange  under the symbol IFS.  The
following  table sets forth the high and low daily  closing  sale prices for the
Class A Common  Stock as quoted  through  the  NASDAQ  National  Market  for the
periods  prior to October 3, 1995,  and since that date as  reported  on The New
York Stock Exchange.

Calendar Period                                             High        Low

1995
  First Quarter.......................................      12 1/8      9 5/8
  Second Quarter......................................      13 1/2      11 3/8
  Third Quarter.......................................      15 5/8      12 5/8
  Fourth Quarter......................................      19 1/4      13 3/16
1996
  First Quarter.......................................      24 3/8      17 3/16
  Second Quarter......................................      29 5/8      20 1/2
  Third Quarter.......................................      27          20 1/4
  Fourth Quarter......................................      26          20 3/4

     The  Company's  transfer  agent  is  First  Union  National  Bank of  North
Carolina, 230 S. Tryon Street, 10th Floor, Charlotte, North Carolina 28288-1154.
As of March 10, 1997, there were  approximately  4,000 shareholders of record of
the Class A Common Stock.

     The Company has never paid dividends upon the Class A Common stock and does
not currently intend to pay any dividends in the foreseeable future. Any payment
of future dividends and the amounts thereof will be dependent upon the Company's
earnings,  financial  requirements  and  other  factors,  including  contractual
obligations.  The payment of dividends is subject to certain  restrictions under
the revolving  credit  facility.  The Company declared a two for one stock split
effected as a stock dividend, with an effective date of January 29, 1996.

Item 6.  Selected Financial Data

     The selected  statement of operations  data set forth below with respect to
the years ended December 31, 1996,  1995,  1994,  1993 and 1992, and the balance
sheet data at December 31, 1996, 1995, 1994, 1993, and 1992 are derived from and
are  qualified by reference  to, the  Consolidated  Financial  Statements of the
Company  and  the  Notes  thereto  and  should  be  read  in  conjunction   with
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations included as Item 7 in this Form 10-K.

     The tables set forth  below  provide a variety of  statistical  information
about the Company.  The Company believes that earnings before  interest,  income
taxes,  depreciation and  amortization  (excluding  equity  earnings,  apartment
properties,   and  minority  interests)   ("EBITDA"  combined  with  funds  from
operations  (as  hereinafter  defined  "FFO" is a  significant  indicator of the
strength of its results.  EBITDA is a measure of a company's ability to generate
cash to service its  obligations,  including  debt service  obligations,  and to
finance capital and other expenditures, including expenditures for acquisitions.
FFO is defined as income or loss from the real estate  operations,  which is net
income in accordance with generally  accepted  accounting  principles  excluding
gains or  losses  from  debt  restructuring,  sales of  property,  and  minority
interests, plus depreciation and provision for
<PAGE>
impairment.  Neither  EBITDA nor FFO represent cash flow as defined by generally
accepted accounting  principles and do not necessarily represent amounts of cash
available to fund the Company's cash requirements.

     It has been the  practice of the Company to allocate  most of the  purchase
price of the  portfolios  acquired by the Company to management  contracts.  The
cost of these contracts is then amortized over three- to  fifteen-year  periods.
The  Company is not  required  to make any  further  capital  investment  in the
management  contracts  subsequent  to such  period.  The  carrying  value of the
property management contracts is reviewed if the facts and circumstances suggest
that it may be  impaired.  If the review  indicates  an  impairment  exists,  an
appropriate  adjustment is made to the property  management  contract  basis. No
significant  contracts are  estimated to be impaired at December 31, 1996.  
<TABLE>
<CAPTION>

                                                      Year
                                               Ended December 31, 
                                         (In thousands except per share data) 
                                    1996       1995      1994     1993     1992
<S>                                <C>        <C>        <C>      <C>      <C>


Statement of Operations  Data(1):  
Revenues                           $227,074   $123,032   $75,453 $52,577  $30,868  
Operating  expenses                 172,046     94,727    54,757  37,720   23,591 
Equity earnings                       3,590      2,461       113      --       -- 
Income before  extraordinary  
   item                               9,266      6,258     7,261   4,925    1,967  
Extraordinary  (loss) gain             (702)      (452)       --    (255)   1,062 
Net income                            8,564      5,806     7,261   4,670    3,029 
Income per common share 
   before  extraordinary  item         0.29       0.22      0.35    0.34     0.19 
Net income per common share            0.27       0.20      0.35    0.32     0.29
</TABLE>

                                           Year Ended December 31,      
                                      (In thousands except per share data)
                                    1996     1995     1994     1993     1992
Supplemental Data
EBITDA(2)                          49,008   28,305   20,696   14,857    7,277
Combined EBITDA and FFO(3)         62,449   32,916   20,809   14,857    7,277
Net EBITDA(4)                      47,713   24,622   20,067   13,988    6,275
Net EBITDA per share                 1.51     1.09     0.98     0.96     0.61

                                                    December 31,              
                                                   (In thousands)
                                    1996     1995     1994     1993     1992
Balance Sheet Data(1):
Cash and cash equivalents       $  54,614$  49,846$  36,596$  34,005  $11,333
Management contracts              122,915   88,816   73,411   38,620   26,704
Investment in real estate limited
  partnerships and other 
  securities                      150,863   60,473   37,926       --       --
Total assets                      492,402  245,409  174,272   88,835   51,484
Notes payable                      49,840   32,996   63,198    1,139   16,060
Redeemable convertible 
   preferred stock                     --   15,000       --       --       --
Company-obligated mandatory redeemable
  convertible preferred securities of a
  subsidiary trust                144,169       --       --       --       --
Stockholders' equity              217,905  157,013   78,806   71,540   18,524
Properties managed:
  Residential (units)             264,675  261,391  216,157  141,035   99,645
  Commercial properties
  (thousands of square feet)      108,771   64,284   43,443   24,825   14,474
<PAGE>
(1)The Company and its affiliates have acquired control of, or management rights
     to, 33 portfolios of properties since 1990, the results of which affect the
     comparability of operations.
 
(2)Earnings  before  interest  expense,  taxes,  depreciation  and  amortization
     (excluding equity earnings, apartment property, and minority interest).

(3)Funds  from  operations  is  a  measure  of  real  estate  operations,  which
     represents  net  income  or  loss in  accordance  with  generally  accepted
     accounting  principles  excluding gains or losses from debt  restructuring,
     sales of property,  and minority interests plus depreciation and provisions
     for impairment.

(4)EBITDA and FFO less  interest  expense and  earnings  allocable  to preferred
     securities.
 
Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations
 
Financial Condition
 
     Insignia's prime objective is to increase income from operations as well as
increase  stockholder  value through strategic growth in the assets that provide
such  returns.   Earnings  before  interest,   income  taxes,  depreciation  and
amortization  (excluding  equity  earnings,   apartment  property  and  minority
interest)  ("EBITDA")  continued  to grow this year with an  increase  of 73% as
compared to December 31, 1995.  Combined  EBITDA and funds from  operations  (as
hereinafter  defined "FFO")  increased 90%, and net EBITDA increased 94%. FFO is
defined as income or loss from the real estate  operations,  which is net income
in accordance with generally accepted accounting  principles  excluding gains or
losses from debt restructuring,  sales of property and minority interests,  plus
depreciation and provision for impairment.  Assets grew 101% from $245.4 million
at December 31, 1995 to $492.4  million at December 31,  1996.  Growth  occurred
mainly in investments in real estate limited  partnerships and other securities,
property  management  contracts  and costs in excess of net  assets of  acquired
businesses. The growth in these areas is due primarily to acquisitions closed in
1996.

     Cash  and  cash  equivalents  increased  10% from  $49.8  million  to $54.6
million.  The primary  sources of funds include $15.0 million in advances drawn,
net of payments, on the $200.0 million revolving credit facility, $149.5 million
from the sale of the trust based convertible preferred securities, $12.3 million
in collections from limited  partnership  distributions and $16.9 million in net
collections on notes receivable.  The major uses of cash include the acquisition
of management  contracts and acquired businesses of ESG, Paragon and NPI ("ESG",
"Paragon" and "NPI" as hereinafter  defined) and real estate limited partnership
interests.  See the Statements of Cash Flows and the discussion on Liquidity and
Capital Resources for more information.

     The $6.3 million in  restricted  cash set aside on  September  27, 1995 was
fully paid out in 1996.  The payment  resulted  from a suit filed in  connection
with purchases of real estate limited partner interests.

     Receivables  increased 74% from $26.4 million for 1995 to $46.0 million for
1996. This increase was attributable to the growth in revenue types generated by
the  acquisitions,   primarily  the  ESG  and  Paragon  acquisitions.  While  no
receivables  were  included  in the  assets  purchased,  the very  nature of the
business  (leasing  and  brokerage)  caused  the  balances  to  grow  since  the
commissions are received in phases as contract requirements are completed.

     Property  and  equipment  owned  increased  57% from $7.7  million to $12.1
million.  The internal growth of the Company in combination with the acquisition
growth  resulted in  additional  capacity  needs in computer  systems and space.
Systems  expenditures  were $3.0  million in 1996 while  leasehold  improvements
resulted in capital expenditures of $1.3 million in 1996.

     Investments  in real  estate  limited  partnerships  and  other  securities
increased  149% from $60.5  million  to $150.9  million  in 1996.  The  increase
resulted  primarily from the NPI acquisition  which included equity interests in
14  limited  partnerships.  Additionally,  there  was  an  increase  in  limited
partnership unit purchases on the
<PAGE>
secondary  market  and  investments  in real  estate  joint  ventures.  In 1996,
distributions  from these  limited  partnerships  to Insignia  amounted to $12.3
million.

     The following  tables  provide  selected  financial  data on each of the 27
public  partnerships  in which the Company  has an  investment,  including  both
balance  sheet and condensed  operating  results as of and for the twelve months
ended December 31, 1996. The Company continued its positioning of the properties
for  maximization  of revenue  growth  through  major  repairs of $3.3  million,
particularly on the NPI partnerships  since this was the first year of ownership
and  management.  The data  has been  derived  from  the  respective  historical
financial statements of each partnership for the applicable period.
<PAGE>
Selected  Financial  Data as of and for the Year Ended  December 31, 1996(1) (2)
(5) (In thousands of dollars, except ownership interest data)
<TABLE>
<CAPTION>

                                CCGF      CCIP      CCIP3    CCP III    CCP IV    CCP VI     JCIP
<S>                           <C>        <C>       <C>       <C>       <C>       <C>       <C>     

Balance Sheet Data
Cash and investments          $ 7,763    $14,646   $15,922   $ 3,603   $  9,754  $  1,783  $  2,030
Receivables and deposits        1,184      3,082     2,174       222      1,124       205       403
Other assets                    1,053      2,709     2,254       554      6,772       219       299
Real estate                    41,105    134,035    61,821    13,818    128,128    16,664    13,533
Less accumulated depreciation (20,683)   (73,823)  (12,634)   (9,198)   (91,934)   (7,150)   (5,691)
Net real estate                20,422     60,212    49,187     4,620     36,194     9,514     7,842
Total assets                  $30,422    $80,649   $69,537  $  8,999    $53,844   $11,721   $10,574

Mortgage notes payable        $30,690    $27,891   $30,525  $  4,226    $72,233   $10,138  $  2,325
Other liabilities                 940      4,656     1,716       363      2,853       633       294
Total liabilities              31,630     32,547    32,241     4,589     75,086    10,771     2,619
Partners' capital (deficit)    (1,208)    48,102    37,296     4,410    (21,242)      950     7,955
Total liabilities and 
   partners' capital          $30,422    $80,649   $69,537  $  8,999    $53,844   $11,721   $10,574

Insignia ownership 
   interest                    35.25%     23.07%    11.01%    23.32%     19.15%    22.84%    9.86%

Operations Data
Revenues                      $11,313    $29,898  $13,767   $ 4,407    $27,907   $  3,314  $ 2,260
Property operating expenses     5,769     19,171    7,782     2,686     14,362      2,085    1,138
Depreciation                    1,894      6,637    2,741       842      7,048        713      515
Interest                        1,884      2,126    1,573       646      6,052        890      191
Administrative                    656      1,462      632       360      1,317        179      293
Total operating expenses       10,203     29,396   12,728     4,534     28,779      3,867    2,137
Income (loss) from 
   operations(3)             $  1,110    $   502 $  1,039  $   (127)  $   (872)  $   (553)  $  123

Other Data
Funds from Operations(4)     $  3,004   $  7,139 $  3,780   $   715   $  6,176   $    160$     638
<FN>
 
(1)  Data for Shelter IV and Shelter VI is as of and for the twelve months ended
     October 31, 1996 and data for Shelter V is as of and for the twelve  months
     ended November 30, 1996.

(2)  Data for CCIP represents the combination of CCIP and  Consolidated  Capital
     Equity  Partners,  which owns the real  properties  that  secure the master
     notes held by CCIP.

(3)  Amounts  shown  before gains on  disposition  of real  property  and/or any
     extraordinary items.

(4)  Funds from  Operations  represents  income or loss from  operations,  which
     represents net income or loss in accordance  with GAAP  excluding  gains or
     losses from debt restructuring or sales of property,  plus depreciation and
     provision for impairment. Depreciation and provision for impairment are the
     only non-cash  adjustments.  Funds from  Operations does not represent cash
     flow  from  operating  activities  in  accordance  with  GAAP  and  is  not
     indicative of cash available to fund all of the Company's cash needs. Funds
     from Operations should not be considered as an alternative to net income or
     any other GAAP  measure as an indicator  of  performance  and should not be
     considered as an  alternative  to cash flow as a measure of liquidity.  

(5)  Selected  financial  data  is  presented  on  the  following  partnerships:
     Consolidated   Capital   Growth   Fund   ("CCGF"),   Consolidated   Capital
     Institutional  Properties  ("CCIP"),   Consolidated  Capital  Institutional
     Properties/3 ("CCIP 3"),  Consolidated  Capital Properties III ("CCP III"),
     Consolidated  Capital  Properties  IV  ("CCP  IV"),   Consolidated  Capital
     Properties VI ("CCP VI"),  Johnstown/Consolidated Income Partners ("JCIP"),
     Shelter Properties I Limited Partnership  ("Shelter I"), Shelter Properties
     II Limited  Partnership  ("Shelter  II"),  Shelter  Properties  III Limited
     Partnership  ("Shelter  III"),  Shelter  Properties IV Limited  Partnership
     ("Shelter IV:),  Shelter  Properties V Limited  Partnership  ("Shelter V"),
     Shelter Properties VI Limited  Partnership  ("Shelter VI"), Davidson Growth
     Properties ("DGP"),  National Property Investors III ("NPI III"),  National
     Property  Investors 4 ("NPI 4"), National  Property  Investors 5 ("NPI 5"),
     National  Property  Investors 6 ("NPI 6"),  National  Property  Investors 7
     ("NPI 7"), National Property Investors 8 ("NPI 8"), Century Properties Fund
     XIV ("CPF XIV"), Century Property Fund XV ("CPF XV"), Century Property Fund
     XVI ("CPF XVI"), Century Property Fund XVII ("CPF XVII"),  Century Property
     Fund XVIII ("CPF XVIII"),  Century  Property Fund XIX ("CPF XIX"),  Century
     Property Growth Fund XXII ("CPF XXII").
</FN>
</TABLE>
<PAGE>
Selected  Financial  Data as of and for the Year Ended  December 31, 1996(1) (2)
(5) - Continued (In thousands of dollars, except ownership interest data)
<TABLE>
<CAPTION>

                        Shelter I    Shelter II   Shelter III   Shelter IV   Shelter V   Shelter VI     DGP
<S>                     <C>           <C>          <C>           <C>         <C>          <C>        <C>
Balance Sheet Data
Cash and investments    $  2,795      $ 2,223      $  1,509      $  2,291    $  6,108     $  3,106   $  1,108
Receivables and deposits   1,086        1,156         1,163         2,548       1,724        1,967        695
Other assets                 493          392           401           838       1,261          919        480
Real estate               19,304       24,496        25,406        59,038      74,061       51,019     23,569
Less accumulated 
   depreciation          (12,952)     (15,043)      (13,288)      (30,365)    (37,446)     (22,800)    (8,377)
Net real estate            6,352        9,453        12,118        28,673      36,615       28,219     15,192
Total assets             $10,726      $13,224       $15,191       $34,350     $45,708      $34,211    $17,475

Mortgage notes payable   $11,563     $  8,738      $  8,440       $24,590     $31,884      $27,372    $12,162
Other liabilities            530          718           779         1,688       1,546        1,413        872
Total liabilities         12,093        9,456         9,219        26,278      33,430       28,785     13,034
Partners' capital 
   (deficit)              (1,367)       3,768         5,972         8,072      12,278        5,426      4,441
Total liabilities and 
   partners' capital     $10,726      $13,224       $15,191       $34,350     $45,708      $34,211    $17,475

Insignia ownership 
   interest               27.43%       22.55%        23.83%        22.72%      25.88%       19.61%     7.17%

Operations Data
Revenues                $  4,826     $  5,509      $  5,377       $10,910     $12,861      $10,079    $ 5,257
Property operating 
   expenses                2,505        3,178         3,060         6,171       7,200        5,357      2,868
Depreciation                 630        1,087           923         1,846       3,045        1,973        757
Interest                     942          813           776         2,257       2,686        2,517      1,076
Administrative               146          174           205           390         328          293        226
Total operating expenses   4,223        5,252         4,964        10,664      13,259       10,140      4,927
Income (loss) from 
   operations(3)       $     603    $     257     $     413      $    246    $   (398)    $  (  61)   $   330

Other Data
Funds from Operations(4)$  1,233     $  1,344      $  1,336      $  2,092    $  2,647     $  1,912    $ 1,087
<FN>

(1)  Data for Shelter IV and Shelter VI is as of and for the twelve months ended
     October 31, 1996 and data for Shelter V is as of and for the twelve  months
     ended November 30, 1996.

(2)  Data for CCIP represents the combination of CCIP and  Consolidated  Capital
     Equity  Partners,  which owns the real  properties  that  secure the master
     notes held by CCIP.

(3)  Amounts  shown  before gains on  disposition  of real  property  and/or any
     extraordinary items.

(4)  Funds from  Operations  represents  income or loss from  operations,  which
     represents net income or loss in accordance  with GAAP  excluding  gains or
     losses from debt restructuring or sales of property,  plus depreciation and
     provision for impairment. Depreciation and provision for impairment are the
     only non-cash  adjustments.  Funds from  Operations does not represent cash
     flow  from  operating  activities  in  accordance  with  GAAP  and  is  not
     indicative of cash available to fund all of the Company's cash needs. Funds
     from Operations should not be considered as an alternative to net income or
     any other GAAP  measure as an indicator  of  performance  and should not be
     considered as an alternative to cash flow as a measure of liquidity.

(5)  Selected  financial  data  is  presented  on  the  following  partnerships:
     Consolidated   Capital   Growth   Fund   ("CCGF"),   Consolidated   Capital
     Institutional  Properties  ("CCIP"),   Consolidated  Capital  Institutional
     Properties/3 ("CCIP 3"),  Consolidated  Capital Properties III ("CCP III"),
     Consolidated  Capital  Properties  IV  ("CCP  IV"),   Consolidated  Capital
     Properties VI ("CCP VI"),  Johnstown/Consolidated Income Partners ("JCIP"),
     Shelter Properties I Limited Partnership  ("Shelter I"), Shelter Properties
     II Limited  Partnership  ("Shelter  II"),  Shelter  Properties  III Limited
     Partnership  ("Shelter  III"),  Shelter  Properties IV Limited  Partnership
     ("Shelter IV"),  Shelter  Properties V Limited  Partnership  ("Shelter V"),
     Shelter Properties VI Limited  Partnership  ("Shelter VI"), Davidson Growth
     Properties ("DGP"),  National Property Investors III ("NPI III"),  National
     Property  Investors 4 ("NPI 4"), National  Property  Investors 5 ("NPI 5"),
     National  Property  Investors 6 ("NPI 6"),  National  Property  Investors 7
     ("NPI 7"), National Property Investors 8 ("NPI 8"), Century Properties Fund
     XIV ("CPF XIV"), Century Property Fund XV ("CPF XV"), Century Property Fund
     XVI ("CPF XVI"), Century Property Fund XVII ("CPF XVII"),  Century Property
     Fund XVIII ("CPF XVIII"),  Century  Property Fund XIX ("CPF XIX"),  Century
     Property Growth Fund XXII ("CPF XXII").
</FN>
</TABLE>
<PAGE>
Selected  Financial Data as of and for the Year Ended December 31,  1996(1)(4) -
Continued (In thousands of dollars, except ownership interest data)
<TABLE>
<CAPTION>

                                                                                           CPF
                           NPI III     NPI 4      NPI 5     NPI 6      NPI 7     NPI 8    XIV(1)
<S>                      <C>        <C>        <C>         <C>       <C>       <C>      <C>    
Balance Sheet Data
Cash and investments     $   964    $  4,674   $  1,901    $15,450   $ 5,471   $ 1,871  $  1,976
Receivables and deposits     127         449         --        199       624     1,550        --
Other assets               1,293       1,218      1,092      3,439       999       441     1,130
Real estate               34,255      25,722     33,073     78,329    45,023    29,536    26,227
Less accumulated 
   depreciation          (22,224)    (17,026)   (22,077)   (47,338)  (22,372)  (13,915)  (13,184)
Net real estate           12,031       8,696     10,996     30,991    22,651    15,621    13,043
Total assets             $14,415     $15,037    $13,989    $50,079   $29,745   $19,483   $16,149

Mortgage notes payable   $23,998     $19,300    $14,536    $34,536   $20,317   $10,983   $16,185
Other liabilities          1,265         796        435     11,975     2,582       889       558
Total liabilities         25,263      20,096     14,971     46,511    22,899    11,872    16,743
Partners' capital 
   (deficit)             (10,848)     (5,059)      (982)     3,568     6,846     7,611      (594)
Total liabilities and 
   partners' capital     $14,415     $15,037    $13,989    $50,079   $29,745   $19,483   $16,149

Insignia ownership 
   interest                44.49%     54.02%     46.06%     44.11%     42.13%   37.28%     41.39%

Operations Data
Revenues                $  7,943   $  6,329   $  5,845    $14,036   $  7,339  $ 4,627     $ 5,897
Property operating 
   expenses                4,215      2,892      3,414      7,134      3,649    2,432       3,050
Depreciation               1,288        957      1,331      3,235      1,681    1,168         850
Interest                   2,113      1,517      1,345      2,526      1,620      907       1,667
Administrative               237        302        270        483        356      256         394
Total operating expenses   7,853      5,668      6,360     13,378      7,306    4,763       5,961
Income (loss) from 
   operations(2)       $      90  $     661  $    (515)  $    658   $     33   $ (136)   $   (64)

Other Data
Funds from Operations(3)$  1,378   $  1,618  $     816   $  3,893   $  1,714 $  1,032    $    786
<FN>

(1)  Data for CPF XIV and XV does not include commercial properties owned by CPF
     XIV and CPF XV. The Company  did not acquire an economic  interest in those
     properties.

(2)  Amounts  shown  before gains on  disposition  of real  property  and/or any
     extraordinary items.

(3)  Funds from  Operations  represents  income or loss from  operations,  which
     represents net income or loss in accordance  with GAAP  excluding  gains or
     losses from debt restructuring or sales of property,  plus depreciation and
     provision for impairment. Depreciation and provision for impairment are the
     only non-cash  adjustments.  Funds from  Operations does not represent cash
     flow  from  operating  activities  in  accordance  with  GAAP  and  is  not
     indicative of cash available to fund all of the Company's cash needs. Funds
     from Operations should not be considered as an alternative to net income or
     any other GAAP  measure as an indicator  of  performance  and should not be
     considered as an alternative to cash flow as a measure of liquidity.

(4)  Selected  financial  data  is  presented  on  the  following  partnerships:
     Consolidated Capital Growth Fund (CCGF), Consolidated Capital Institutional
     Properties ("CCI"),  Consolidated Capital Institutional Properties/3 ("CCIP
     3"), Consolidated Capital Properties III ("CCP III"),  Consolidated Capital
     Properties IV ("CCP IV"),  Consolidated  Capital  Properties VI ("CCP VI"),
     Johnstown/Consolidated  Income  Partners  ("JCIP"),  Shelter  Properties  I
     Limited   Partnership   ("Shelter  I"),   Shelter   Properties  II  Limited
     Partnership  ("Shelter  II"),  Shelter  Properties III Limited  Partnership
     ("Shelter III"), Shelter Properties IV Limited Partnership  ("Shelter IV"),
     Shelter Properties V Limited Partnership  ("Shelter V"), Shelter Properties
     VI Limited Partnership  ("Shelter VI"), Davidson Growth Properties ("DGP"),
     National Property Investors III ("NPI III"),  National Property Investors 4
     ("NPI 4"),  National  Property  Investors  5 ("NPI 5"),  National  Property
     Investors 6 ("NPI 6"),  National  Property  Investors 7 ("NPI 7"), National
     Property  Investors 8 ("NPI 8"),  Century  Properties Fund XIV ("CPF XIV"),
     Century Property Fund XV ("CPF XV"), Century Property Fund XVI ("CPF XVI"),
     Century Property Fund XVII ("CPF XVII"),  Century Property Fund XVIII ("CPF
     XVIII"),  Century  Property Fund XIX ("CPF XIX"),  Century  Property Growth
     Fund XXII ("CPF XXII").
</FN>
</TABLE>
<PAGE>

Selected  Financial Data as of and for the Year Ended December 31,  1996(1)(4) -
Continued (In thousands of dollars, except ownership interest data)
<TABLE>
<CAPTION>

                                                                                       Total
                             CPF      CPF     CPF      CPF      CPF      CPGF         Combined
                            XV(1)     XVI     XVII    XVIII     XIX      XXII       Partnerships
<S>                    <C>        <C>      <C>      <C>      <C>       <C>           <C>
Balance Sheet Data
Cash and investments   $     985  $   535  $  4,441 $ 1,259  $  3,419  $ 1,111        $118,698
Receivables and deposits     720      202       422     526       --       500          24,052
Other assets                 863      350     1,583     309     1,958    4,210          37,529
Real estate               47,190   14,700    65,225  26,701    95,009  129,725       1,336,712
Less accumulated 
   depreciation          (20,877)  (6,873)  (28,140) (9,090)  (37,146) (48,178)       (669,824)
Net real estate           26,313    7,827    37,085  17,611    57,863   81,547         666,888
Total assets             $28,881  $ 8,914   $43,531 $19,705   $63,240  $87,368        $847,167

Mortgage notes payable   $22,066  $ 7,487   $36,374 $18,675   $61,668  $73,164        $662,066
Other liabilities          1,215      376     1,443     591     1,871    2,572          45,569
Total liabilities         23,281    7,863    37,817  19,266    63,539   75,736         707,635
Partners' capital 
   (deficit)               5,600    1,051     5,714     439      (299)  11,632         139,532
Total liabilities and 
   partners' capital      $28,881 $ 8,914   $43,531 $19,705    $63,240 $87,368        $847,167

Insignia ownership 
   interest                39.74%  36.83%    33.79%  28.54%     27.36%   20.15%         --

Operations Data
Revenues                $  8,373  $ 2,721   $12,587 $ 4,737   $15,747   $20,390       $264,256
Property operating 
   expenses                5,783    2,045     6,481   2,221     8,460    10,601        145,709
Depreciation               1,483      460     2,127     679     2,790     3,865         52,565
Interest                   2,177      625     3,539   1,398     5,143     6,591         55,597
Administrative               285      258       307     293       302       391         10,795
Total operating expenses   9,728    3,388    12,454   4,591    16,695    21,448        264,666
Income (loss) from 
   operations(2)         $(1,355) $  (667)  $  133  $   146   $  (948)  $(1,058)       $  (410)

Other Data
Funds from Operations(3) $   128  $  (207)  $2,260  $   825   $1,842     $2,807        $52,155
<FN>

(1)  Data for CPF XIV and XV does not include commercial properties owned by CPF
     XIV and CPF XV. The Company  did not acquire an economic  interest in those
     properties.

(2)  Amounts  shown  before gains on  disposition  of real  property  and/or any
     extraordinary items.

(3)  Funds from  Operations  represents  income or loss from  operations,  which
     represents net income or loss in accordance  with GAAP  excluding  gains or
     losses from debt restructuring or sales of property,  plus depreciation and
     provision for impairment. Depreciation and provision for impairment are the
     only non-cash  adjustments.  Funds from  Operations does not represent cash
     flow  from  operating  activities  in  accordance  with  GAAP  and  is  not
     indicative of cash available to fund all of the Company's cash needs. Funds
     from Operations should not be considered as an alternative to net income or
     any other GAAP  measure as an indicator  of  performance  and should not be
     considered as an alternative to cash flow as a measure of liquidity.

(4)  Selected  financial  data  is  presented  on  the  following  partnerships:
     Consolidated   Capital   Growth   Fund   ("CCGF"),   Consolidated   Capital
     Institutional  Properties  ("CCIP"),   Consolidated  Capital  Institutional
     Properties/3 ("CCIP 3"),  Consolidated  Capital Properties III ("CCP III"),
     Consolidated  Capital  Properties  IV  ("CCP  IV"),   Consolidated  Capital
     Properties VI ("CCP VI"),  Johnstown/Consolidated Income Partners ("JCIP"),
     Shelter Properties I Limited Partnership  ("Shelter I"), Shelter Properties
     II Limited  Partnership  ("Shelter  II"),  Shelter  Properties  III Limited
     Partnership  ("Shelter  III"),  Shelter  Properties IV Limited  Partnership
     ("Shelter IV"),  Shelter  Properties V Limited  Partnership  ("Shelter V"),
     Shelter Properties VI Limited  Partnership  ("Shelter VI"), Davidson Growth
     Properties ("DGP"),  National Property Investors III ("NPI III"),  National
     Property  Investors 4 ("NPI 4"), National  Property  Investors 5 ("NPI 5"),
     National  Property  Investors 6 ("NPI 6"),  National  Property  Investors 7
     ("NPI 7"), National Property Investors 8 ("NPI 8"), Century Properties Fund
     XIV ("CPF XIV"), Century Property Fund XV ("CPF XV"), Century Property Fund
     XVI ("CPF XVI"), Century Property Fund XVII ("CPF XVII"),  Century Property
     Fund XVIII ("CPF XVIII"),  Century  Property Fund XIX ("CPF XIX"),  Century
     Property Growth Fund XXII ("CPF XXII").
</FN>
</TABLE>
<PAGE>
     Apartment properties of $22.1 million and the related non-recourse mortgage
note payable,  reflects Insignia's  consolidation of National Property Investors
4, Limited  Partnership  ("NPI 4"), a 54.02% owned  partnership.  These  limited
partnership  interests were acquired with the NPI acquisition and results of the
partnership's  operations are consolidated with Insignia's  financial statements
at December 31, 1996.

     Property  management  contracts  increased 38% from $88.8 million to $122.9
million as a direct result of three  acquisitions in 1996. The National Property
Investors,  Inc.  ("NPI")  acquisition  occurred  January  19,  1996  and  added
approximately  38,000 units to the  existing  residential  management  portfolio
along  with  3.9  million  square  feet to the  existing  commercial  management
portfolio.  The June 30, 1996  acquisition  of Edward S. Gordon  Company,  Inc.,
("ESG") based out of New York,  added 25.5 million square feet,  comprised of 57
properties,  to the commercial management portfolio.  The Paragon Group Property
Services,  Inc.  ("Paragon")  acquisition  occurred  on June 30,  1996 and added
approximately  22.0 million  square feet,  comprised of 166  properties,  to the
existing  commercial  portfolio.  The  management  contract  basis  increase was
partially  offset by the  receipt of  advisory  fees  received  from the sale of
Allegiance Realty Group, Inc. ("Allegiance")  properties. In November, 1994, the
Company  acquired   substantially  all  of  the  assets  (consisting  mainly  of
management  contracts) of  Allegiance,  a wholly owned  subsidiary of the Balcor
Company,  Inc.  ("Balcor").  Balcor  announced in the second quarter of 1996 its
intention to sell a large portion of the properties  covered by these management
contracts. The Company entered into an agreement with Balcor whereby an advisory
fee  would be paid to the  Company  based on the  property  sales  for  services
rendered in the sales transactions. The fees are paid in cash after the close of
the  transaction  and have been applied to the  remaining  unamortized  contract
basis associated with the Balcor properties. In 1996, approximately $8.2 million
in advisory fees were collected.

     Costs in  excess of net  assets  of  acquired  businesses  increased  $72.5
million from December 31, 1995 to December 31, 1996. The increase  resulted from
the ESG and Paragon  acquisitions and the payment of purchase price in excess of
the net assets.

     Other assets  increased by $5.5 million from  December 31, 1995 to December
31, 1996.  This increase is related to  acquisitions  and internal growth within
the  Company.  Non-compete  agreements  resulting in the payment of $1.7 million
occurred  with the ESG and Paragon  acquisitions.  Deferred  expenses  have also
increased  due  to  the  nature  of the  ESG  and  Paragon  businesses  and  the
recognition  of  expenses  occurring  when the  related  income  is  recognized.
Additionally,  the Company has incurred  approximately  $1.5 million in deferred
expenses in connection with the initial implementation stages of a change in its
computer platform.

     Commissions payable increased by $18.1 million in 1996 due primarily to the
ESG acquisition and the brokerage business purchased.  Insignia did not generate
material amounts of this revenue stream and related expenses in 1995.

     Accrued and sundry liabilities increased by 59% from $25.6 million to $40.7
million.  The increase is largely due to the internal growth of the Company,  as
well as acquisitions.  Benefit  liabilities,  such as 401K, accrued vacation and
accrued bonus liability,  increased in 1996 as the number of Insignia  employees
increased.  Deferred  taxes  increased  by $8.8 million  from  December  1995 to
December  1996.  The  increase  is  primarily  due to deferred  tax  liabilities
incurred with the NPI and Paragon purchases occurring in 1996. Additionally,  at
December 31, 1996,  there were  liabilities  outstanding of  approximately  $2.3
million relating to the ESG and Paragon acquisitions.

     Notes  payable  increased by 51% from $33.0 million to $49.8  million.  The
increase  was  primarily on the $200.0  million  credit  facility  with draws of
$165.0  million in 1996.  The cash drawn was used to fund the NPI, ESG,  Paragon
and GSSW  acquisitions.  In November  1996,  $150.0 million was paid down on the
outstanding  balance of the credit  facility by the funds received from the sale
of the Preferred Securities and cash generated from operating results.

     The  non-recourse  mortgage note payable shows an increase over 1995 with a
balance at December 31, 1996 of $19.3 million.  The mortgage note relates to NPI
4 Partnership which has been consolidated.

<PAGE>

     The  subordinated  convertible  note  payable  and  redeemable  convertible
preferred  stock were converted into Class A Common Stock on April 29, 1996. The
note payable was  converted  into  approximately  1.1 million  shares of Class A
Common Stock while the preferred stock converted into  approximately 1.5 million
shares of Class A Common Stock.

     In  November  1996,  2,990,000  shares of the  Company-obligated  mandatory
redeemable  convertible  preferred  securities of a subsidiary trust ("Preferred
Securities"),  were issued and sold for an aggregate  amount of $149.5  million.
Related  expenses were  incurred of  approximately  $5.4 million.  The Preferred
Securities  will mature on September  30, 2016 and bear  interest at the rate of
6.5% per annum, with quarterly distributions payable in arrears. The Company has
the  option  to defer  interest  payments  from  time to time,  not to exceed 20
consecutive quarters.  The Company's first distribution was made on December 31,
1996. The Preferred Securities are convertible into the Company's Class A Common
Stock at $26.50 per share through  September 30, 2016. The Company has the right
to redeem the Preferred  Securities  after November 1, 1999. The proceeds of the
offering  were used to reduce  current debt under the $200.0  million  revolving
credit facility .

     Stockholders'  equity  increased by 39% from $157.0 million at December 31,
1996 to $217.9  million  primarily  from  issuance  of stock  from  exercise  of
options;  assumption of options in the ESG  acquisition;  and the  conversion of
convertible issues from preferred to common equities.  Additionally,  net income
of $8.6 million less  preferred  dividends of $199,000  increased  stockholders'
equity.

Results of Operations for the Years Ended December 31, 1996 and 1995

     Acquisition activity and real estate investing were the primary reasons for
the Company's growth in results from operations, reflected by an increase of 90%
in combined  EBITDA and FFO,  from $32.9  million for 1995 to $62.4  million for
1996; and an increase of 94% in Net EBITDA, from $24.6 million for 1995 to $47.7
million for 1996.

     The  Company  uses Net  EBITDA  as a  primary  indicator  of its  financial
performance, which is combined EBITDA and FFO less interest expense and earnings
allocable  to  preferred  securities.  See the table in  Liquidity  and  Capital
Resources that breaks out all components of Net EBITDA. Net EBITDA per share was
$1.51 for 1996 compared to $1.09 for 1995.

     Revenues  increased 85% for the year from $123.0 million for 1995 to $227.1
million for 1996, with the primary growth being in fee based services  revenues.
The  acquisitions  completed  during the year  contributed  substantially to the
growth,  with those  acquisitions  being the NPI acquisition in January 1996 and
the ESG and Paragon acquisitions in June 1996.

     Other income increased  $903,000 from $1.4 million for 1995 to $2.3 million
for 1996.  The primary  reason for the  increase  was an increase of $300,000 in
amounts  received from an agency that serves as an insurance  broker for various
partnerships managed by the Company, and approximately $360,000 in a gain on the
sale of a  participation  note.  Various other items flowed through other income
such as miscellaneous fees and legal reimbursements.

     Fee based  services  expenses  increased 92% from $85.7 million for 1995 to
$164.8  million for 1996.  This  increase is primarily  caused by the  completed
acquisitions  mentioned  previously,  as well as expenses incurred in connection
with  unsuccessful  acquisitions of  approximately  $935,000.  Fee based service
expenses have increased at a higher  percentage than fee based service  revenues
as  a  result  of  lower  profit  margins   attributable  to  recent  commercial
acquisitions.  Also included in fee based services revenues and expenses are the
results  of  the  Company's  activities  in  the  consumer  services  area  with
operations contributing losses of $2.0 million for the year.

     Administrative  expenses  decreased  10% from $8.0 million for 1995 to $7.2
million for 1996.  This  decrease was achieved  through a reduction in occupancy
costs with some of the functions  decentralizing  to other locations  within the
Company;  and the revised  structure of the Company's  insurance program for its
operations.

<PAGE>

     During 1995, a one-time charge for $1.0 million was incurred as a result of
terminating a contractual arrangement with a senior executive/director. Both the
Company  and the  employee  agreed to the  termination.  No such  expenses  were
incurred during the year ended December 31, 1996.

     Interest expense  increased 83% from $7.0 million for 1995 to $12.9 million
for 1996,  primarily as a result of the higher debt balances carried as a result
of 1996 acquisitions.

     With the  acquisition  of limited  partner  interests in excess of 50% in a
limited  partnership,  the  Company  now  consolidates  the results of the NPI 4
Partnership.  The categories  entitled apartment  property  revenues,  apartment
property expenses, apartment property interest and depreciation relate solely to
the operations of the property owned by the partnership.

     Depreciation and amortization  increased 71% from $13.5 million for 1995 to
$23.0  million for 1996.  This is a result of the  amortization  of the acquired
property  management  contracts,  goodwill,  and the  additions  to property and
equipment.

     Equity  earnings  increased  from $2.5 million for 1995 to $3.6 million for
1996,  primarily as a result of the increased  ownership of real estate  limited
partner interests. On a same store basis, revenues for the underlying properties
increased 4.5% over 1995, and expenses  (excluding major repairs and maintenance
mentioned  previously)  increased 1.7% over 1995. The Company also  accomplished
the  refinancing of $164 million in loans on 33 properties.  These  refinancings
decreased  interest costs at the partnership level, and increased cash available
for distribution.  Funds from operations increased from $4.6 million for 1995 to
$13.4 million for 1996.

     Minority interests also includes a $1.6 million distribution reflecting the
carrying  costs  on the  Preferred  Securities,  as this  is a form  of  outside
ownership.  The Trust issued $149.5 million in such Preferred  Securities in the
fourth quarter of 1996, with the Company owning 100% of the common securities of
the Trust.

     The provision for income taxes  increased 48% from $3.8 million for 1995 to
$5.7  million for 1996 in direct  proportion  to the  increase in income  before
income taxes and extraordinary item, resulting from the factors discussed above.

     The extraordinary  item relates to the early  extinguishment of debt on the
Company's  books for 1995, and on the limited  partnerships'  books of which the
Company owns equity interests for 1996.

     As a result of the  foregoing,  net income  increased 48% from $5.8 million
for 1995 to $8.6  million  for  1996.  Earnings  per  share  were  $.27 for 1996
compared to $.20 for 1995.

Results of Operations for the Years ended December 31, 1995 and 1994

     The results of operations reflected the high volume of acquisition activity
of both property  management  contracts and limited partner interests.  Revenues
increased  63% from  $75.5  million  for 1994 to  $123.0  million  for 1995 and,
consequently,  EBITDA increased 37% from $20.7 million for 1994 to $28.3 million
for 1995.  Combined  EBITDA and FFO increased 58% from $20.8 million for 1994 to
$32.9 million for 1995. Net EBITDA  increased 23% from $20.1 million for 1994 to
$24.6 million for 1995.

     Property and asset  management  fee based services  revenues  increased 74%
from $63.1 million for 1994 to $109.6  million for 1995.  The primary reason for
the increase was the closing of acquisitions during the last quarter of 1994 and
all of  1995.  Those  acquisitions  were the  property  management  business  of
Allegiance  Realty  Group,  Inc.  and its  subsidiaries  ("Allegiance"),  Gordon
Realty,  Inc., the OPSI acquisition and the DEK acquisition.  Residential  units
managed increased from approximately  216,000 for 1994 to approximately  261,000
for 1995 including co-ops and condos.  Commercial  square feet managed increased
from approximately 43 million for 1994 to approximately 64 million for 1995.

<PAGE>

     Financial services fee based services revenues decreased by 3% from 1994 to
1995,  primarily due to the  performance of the mortgage  subsidiary in place at
that time.  Fluctuations  in interest  rates impact  volume and  resulting  fees
generated in this subsidiary.

     Interest  income  increased  91% from $1.5 million for 1994 to $2.8 million
for 1995,  due in large part to increased cash  balances,  a loan  participation
agreement, and the rise in interest rates.

     Equity  earnings in limited partner  interests  increased from $113,000 for
1994 to $2.5 million for 1995.  While the Company had $37.9 million  invested in
limited partner interests at December 1994, they were acquired at the end of the
year and,  consequently,  the equity earnings were not significant.  During 1995
the  Company  invested  additional  funds to bring  the  total  limited  partner
interests to $60.5 million.  Insignia's  share of funds from operations was $4.6
million for the year ended December 31, 1995.

     Fee based  services  expenses  increased 75% from $49.1 million for 1994 to
$85.7 million for 1995, primarily in the property and asset management function.
Property and asset management fee based services expenses increased 88% from the
acquisitions  described above.  Almost all of the growth in property  management
portfolios  was  contractual  or  third-party  in nature  and,  typically,  such
expenses run slightly higher than with affiliated management.

     Financial  services fee based expenses  increased 15%, primarily because of
compensation  accruals  for  performance-based  bonuses  due to  the  successful
completion of the 1995 equity  offering and the NPI  acquisition  that closed in
January 1996.

     Administrative  expenses  increased  42% from $5.7 million for 1994 to $8.0
million for 1995. The increase was due in part to intercompany  cost allocations
from the financial  services  division for its role in  administrative  support,
causing an increase of  $545,000  over 1994.  This  increased  allocation  was a
direct  result of the  additional  time  spent on the  completion  of the equity
offering and the  Revolving  Credit  Facility.  Professional  fees  increased by
$673,000 and insurance costs increased by $306,000. These expense increases were
a direct result of the growth within Insignia.

     The $1.0 million expense for  termination of an employment  agreement was a
one-time   charge  for   ending  a   contractual   arrangement   with  a  senior
executive/director by mutual agreement. No such expenses were incurred in 1994.

     Interest expense  increased from $742,000 for 1994 to $7.0 million for 1995
as a direct result of the higher debt balances  maintained  throughout the year,
primarily in connection with acquisitions.

     Depreciation and  amortization  increased 69% from $8.0 million for 1994 to
$13.5 million for 1995 as a direct result of the increase in property management
contract rights acquired.

     The provision for income taxes  decreased 21% from $4.8 million for 1994 to
$3.8  million for 1995 in direct  proportion  to the  decrease in income  before
income  taxes  and  extraordinary  items  resulting  from  higher  interest  and
depreciation and amortization expense.

     The  extraordinary  item  related to loan costs (net of taxes) of  $607,000
that had to be written off when the outstanding balance was prepaid.  Also, as a
result of the prepayment, the Company received a prepayment discount of $155,000
(net of taxes).

     As a result of the above,  net income  decreased  20% from $7.3 million for
1994 to $5.8 million for 1995.

Impact Of Inflation And Changing Prices

     The revenues of the property  management division are highly dependent upon
the aggregate  rents of the properties it manages,  which are affected by rental
rates and building occupancy rates. Rental rate increases are
<PAGE>

highly dependent upon market conditions and the competitive  environments in the
properties'  locations.  Employee  compensation is the principal cost element of
property  management.  Recent  price  and cost  trends  have  not  significantly
affected  profit  margins,  and are not  expected to have  significant  negative
effects in the foreseeable future.  Interest rate fluctuations  generally do not
adversely  affect a  property's  ability to perform due to the  underlying  debt
carrying  fixed  rates.  Interest  rates  do not  necessarily  move in the  same
direction or in the same magnitude as the prices of goods and services, inasmuch
as such prices are affected by inflation.

     For the last several years,  rental and occupancy  rates across the country
have generally been stable.  However, in most areas of the Company's operations,
the absence for several years of any significant  new apartment  construction is
now resulting in upward  pressure on both  occupancy and rental  levels.  Rental
rates of U.S. Department of Housing and Urban Development ("HUD") properties are
generally  based on the  expenses of  maintaining  the  properties,  rather than
market forces,  and are subject to regulatory  approval.  Occupancy rates of HUD
properties,  as well as both  occupancy and rental rates at non-HUD  properties,
generally respond to market forces along with other properties in a region.  The
Company  believes  that  increased  collected  rents  arising from either higher
occupancy or higher rents would have no material effect on overhead costs. There
can be no assurance that rent  collections  will increase or that costs will not
increase due to inflation or other causes.

     The programs  administered  by HUD are  expected to go through  substantial
changes in the coming year.  These proposed  changes  include  provisions  which
affect the manner in which HUD provides rental  subsidies to many of the tenants
in HUD-regulated properties.  The essence of these changes is to provide tenants
with  greater  freedom in the  selection  of where they live by  decoupling  the
subsidy from the project, as is the current practice,  and providing the subsidy
directly to the tenant.  The tenant can take this "rent  voucher"  and apply for
lease to an apartment  that he selects.  Additionally,  the rental  vouchers may
provide for less  assistance than is currently in place. It is possible that the
combination of these  proposed  changes could result in lower rental revenue and
project cash flow from which management and other fees are derived; however, the
current proposals are not sufficiently specific to determine their actual impact
on such fees.  Approximately 16% of the units managed participate in various HUD
programs.
<PAGE>

Liquidity And Capital Resources

     The Company has several  sources  available  for  capital,  primarily  cash
generated from operations,  distributions from partnerships and available credit
under the $200 million Revolving Credit Facility.  As a result of its ability to
generate  cash,  and such  additional  sources,  cash  balances  grew from $49.8
million at December 31, 1995 to $54.6 million at December 31, 1996.  The Company
uses combined  EBITDA and FFO as an indicator of its working  capital  generated
from  operations.  Combined  EBITDA and FFO increased 90% from $32.9 million for
1995 to $62.4 million for 1996. The following chart specifically  identifies the
sources of the combined  EBITDA and FFO and how the numbers are derived for each
period.
<TABLE>
<CAPTION>

                                                            Year Ended
                                                            December 31,      
                                                      1996                  1995 
                                                           (in thousands)
<S>                                                  <C>           <C>   

Fee based services revenue......................     $215,623      $118,828
Interest........................................        3,104         2,780
Other...........................................        2,327         1,424
                                                      221,054       123,032
Less:
   Fee based services expenses..................      164,830        85,707
   Termination of agreement.....................           --         1,000
   Administrative and other.....................        7,216         8,020
EBITDA - service company........................       49,008        28,305
FFO.............................................       13,441         4,611
Combined EBITDA and FFO.........................       62,449        32,916
Interest expense................................       12,918         7,049
Preferred dividends.............................        1,818         1,245
Net EBITDA......................................    $  47,713     $  24,622
</TABLE>

     The Company's capital expenditure requirements for 1997 are projected to be
approximately  $14 million primarily as a result of the Company's plan to change
automation  platforms  and  computer  equipment to a more  sophisticated  system
associated with the significant  past growth and anticipated  future growth.  As
part of the Company's cash management program, investments are periodically made
in reverse repurchase agreements collateralized by obligations of the government
National  Mortgage  Association  ("GNMA") with maturities of one to three weeks.
The Company generally does not take possession of the securities purchased under
agreements  to resell.  Insignia only invests in reverse  repurchase  agreements
which are short-term and collateralized by government backed securities, such as
GNMA or municipal bonds.

     At December 31, 1996,  the Company had cash and cash  equivalents  of $54.6
million as a result of positive cash flow from  operations,  distributions  from
partnerships,  and the proceeds from its debt sources.  Management believes that
the  Company's  cash and capital  resources  will be  sufficient  to finance the
Company's  operations  for 1997  including  its  projected  capital  expenditure
requirements  of $14 million,  which is primarily a result of the Company's plan
to change automation  platforms and computer equipment.  The Company may require
additional financing for acquisition activities,  depending on the level of such
activities,  and is  currently  working with the banks in the  Revolving  Credit
Facility to increase the credit line.  The  amendments  to the credit line would
increase the line from $200 million to $275 million, and would provide graduated
interest rates and fee structures  based on rating levels  obtained from Moody's
Investors and Standard & Poor.

     Item 8. Financial Statements and Supplementary Data

     The response to this item is submitted in Item 14(a) of this report.

     Item 9. Changes in and  Disagreements  with  Accountants  on Accounting and
Financial Disclosure

     None.
<PAGE>
                                   Part III

   Item 10.

     Directors and Executive Officers of the Registrant - incorporated herein by
reference to Registrant's  definitive  Proxy Statement to be filed in connection
with the Annual Meeting of Stockholders to be held April 30, 1997.
 
   Item 11. 

     Executive  compensation - incorporated  herein by reference to Registrant's
definitive  Proxy Statement to be filed in connection with the Annual Meeting of
Stockholders to be held April 30, 1997.

   Item 12.

     Security   Ownership  of  Certain   Beneficial   Owners  and  Management  -
incorporated  herein by reference to Registrant's  definitive Proxy Statement to
be filed in connection  with the Annual Meeting of Stockholders to be held April
30, 1997.

   Item 13. 

     Certain  Relations  and  Related  Transactions  -  incorporated  herein  by
reference to Registrant's  definitive  Proxy Statement to be filed in connection
with the Annual Meeting of Stockholders to be held April 30, 1997.

<PAGE>
                                   Part IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)  (1) and  (2):The  response  to this  portion of Item 14 is  submitted  as a
     separate section of this report - see Page F-2.

      (3) Exhibits:See Exhibit Index contained herein.

(b): Report on Form 8-K filed in fourth quarter of 1996:

     Form 8-K, dated December 9, 1996 disclosing pro forma financial  statements
     for the effect of the convertible preferred securities offering and certain
     1995 acquisition transactions.
 
     Form 8-K, dated December 10, 1996  disclosing  financial  statements of NPI
     Property  Management  Corporation,  National Property  Investors,  Inc. and
     NPI-CL Management, L.P.
 
     Form 8-K, dated December 10, 1996 disclosing  financial statements for year
     end 1995 for the following NPI and Century Properties limited partnerships:

          National  Property   Investors  II  National  Property  Investors  III
          National Property  Investors 4 National Property  Investors 5 National
          Property  Investors 6 National Property  Investors 7 National Property
          Investors 8 Century Property Fund XIV Century Property Fund XV Century
          Property  Fund XVI Century  Property  Fund XVII Century  Property Fund
          XIVII Century  Property  Fund XVIII Century  Property Fund XIX Century
          Property Growth Fund XXII

(c)  Exhibits:  The  response  to this  portion  of Item  14 is  submitted  as a
     separate section of this report.

(d)  Financial Statement Schedules:
 
          The  response to this  portion of Item 14 is  submitted  as a separate
          section of the report. See Page F-2.

<PAGE>


                                   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.

                                       INSIGNIA FINANCIAL GROUP, INC.



                                       By:  /s/Andrew L. Farkas               
                                       ---------------------------------------
                                            Andrew L. Farkas
                                            Chairman of the Board, President and
                                            Chief Executive Officer

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



By:  /s/Andrew L. Farkas                       By:  /s/Robin L. Farkas  
--  -------------------                       ---  ------------------     
     Andrew L. Farkas                               Robin L. Farkas
     Chairman of the Board, President and           Director
     Chief Executive Officer



By:  /s/James A. Aston                 By:  /s/Merril M. Halpern              
---  -----------------                 ---  --------------------              
     James A. Aston                         Merril M. Halpern
     Chief Financial Officer                Director



By:  /s/Martha L. Long                 By:  /s/Robert G. Koen       
---  -----------------                 ---  -----------------       
     Martha L. Long                            Robert G. Koen
     Senior Vice President -                   Director
     Finance and Controller                            



                                       By:  /s/Michael I. Lipstein            
                                       ---------------------------------------
                                            Michael I. Lipstein
                                            Director



                                       By:  /s/Buck Mickel                    
                                       ---------------------------------------
                                            Buck Mickel
                                            Director



                                       By:  /s/Robert J. Denison              
                                       ---------------------------------------
                                            Robert J. Denison
                                            Director

<PAGE>

<PAGE>













                           ANNUAL REPORT ON FORM 10-K

                      ITEM 8, 14(a)(1) AND (2), (c) AND (d)

                          LIST OF FINANCIAL STATEMENTS

                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                CERTAIN EXHIBITS

                          YEAR ENDED DECEMBER 31, 1996

                 INSIGNIA FINANCIAL GROUP, INC. AND SUBSIDIARIES

                           GREENVILLE, SOUTH CAROLINA




                                    F-1

<PAGE>
FORM 10-K - ITEM 14(a)(1) AND (2)

INSIGNIA FINANCIAL GROUP, INC. AND SUBSIDIARIES

LIST OF FINANCIAL STATEMENTS

The following  consolidated  financial  statements of Insignia  Financial Group,
Inc. and subsidiaries are included in Item 8:

     Insignia Financial Group, Inc. and subsidiaries

          Consolidated balance sheets - December 31, 1996 and 1995
 
          Consolidated statements of operations - Years ended December 31, 1996,
          1995 and 1994
 
          Consolidated  statements of stockholders' equity - For the years ended
          December 31, 1996, 1995 and 1994
 
          Consolidated statements of cash flows - Years ended December 31, 1996,
          1995 and 1994
 
          Notes to consolidated financial statements

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

                                    F-2

<PAGE>

                Report of Ernst & Young LLP, Independent Auditors



Stockholders and Board of Directors
Insignia Financial Group, Inc.


We have  audited  the  accompanying  consolidated  balance  sheets  of  Insignia
Financial Group, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income,  stockholders' equity, and cash flows
for each of the  three  years in the  period  ended  December  31,  1996.  These
financial  statements are the  responsibility of the Company's man agement.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those stan dards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
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 consolidated financial position of Insignia Financial
Group,  Inc.  and  subsidiaries  at  Decem  ber  31,  1996  and  1995,  and  the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity  with generally
accepted accounting principles.




                                            /s/ ERNST & YOUNG LLP


Greenville, South Carolina
February 14, 1997

                                    F-3

<PAGE>
                 Insignia Financial Group, Inc. and Subsidiaries

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                               December 31

                                                            1996          1995
                                                       ----------------------------
                                                              (In thousands)
<S>                                                      <C>           <C> 

Assets                                                                 
Cash and cash equivalents, including $47,255 (1996) and                
  $38,195 (1995) of reverse repurchase agreements        $  54,614     $  49,846
Restricted cash                                                  -         6,282
Receivables                                                 46,040        26,445
Property and equipment                                      12,083         7,700
Investments in real estate limited partnerships and                    
  other securities                                         150,863        60,473
Apartment property                                          22,125             -
Property management contracts                              122,915        88,816
Costs in excess of net assets of acquired businesses        75,627         3,169
Other assets                                                 8,135         2,678
                                                       ----------------------------
                                                                       
  Total assets                                            $492,402      $245,409
                                                       ============================
                                                                       
  Liabilities and Stockholders' Equity                                 
  Liabilities:                                                         
  Accounts payable                                      $    1,711    $    1,497
  Commissions payable                                       18,736           602
  Accrued and sundry liabilities                            40,741        25,619
  Notes payable                                             49,840        32,996
  Non-recourse mortgage note payable                        19,300             -
  Subordinated convertible note payable                          -        10,000
                                                       ----------------------------
                                                                       
                                                           130,328        70,714
                                                                       
   Redeemable convertible preferred stock                        -        15,000
                                                                       
Company-obligated mandatory redeemable convertible                     
  preferred securities of a subsidiary trust               144,169             -
                                                                       
Minority interests in consolidated subsidiaries                  -         2,682
                                                                       
Stockholders' Equity:                                                 
  Common Stock, Class A, par value $.01 per share - authorized         
   50,000,000 shares, issued and outstanding 28,857,097 (1996)         
   and 25,877,666 (1995) shares                                289           259
  Additional paid-in capital                               189,657       137,160
  Retained earnings                                         27,959        19,594
                                                       ----------------------------
                                                                       
   Total stockholders' equity                              217,905       157,013
                                                       ----------------------------
                                                                       
   Total liabilities and stockholders' equity             $492,402      $245,409
                                                       ============================
<FN>
See accompanying notes.
</FN>
</TABLE>

                                    F-4

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

                        Consolidated Statements of Income

                   (In thousands except for per share amounts)

<TABLE>
<CAPTION>

                                                    Year Ended December 31

                                                1996          1995         1994
                                           -----------------------------------------
<S>                                           <C>           <C>           <C>  
Revenues:                                                               
  Fee based services, including fees from                               
   affiliated partnerships of $55,656 (1996),                           
   $49,478 (1995) and $40,256 (1994)          $215,623      $118,828      $72,576
  Interest                                       3,104         2,780        1,457
  Other                                          2,327         1,424        1,420
  Apartment property                             6,020             -            -
                                           -----------------------------------------
                                                                        
                                               227,074       123,032       75,453
                                                                        
   Costs and expenses:                                                  
  Fee based services                           164,830        85,707       49,090
  Administrative                                 7,216         8,020        5,667
  Apartment property                             3,034             -            -
  Interest                                      12,918         7,049          742
  Apartment property interest                    1,812             -            -
  Depreciation and amortization                 23,031        13,493        7,966
  Apartment property depreciation                  901             -            -
  Termination of employment agreements               -         1,000            -
                                           -----------------------------------------
                                                                        
                                               213,742       115,269       63,465
                                                                        
   Equity earnings-limited partnership interest  3,590         2,461          113
                                                                        
Minority interests in consolidated subsidiaries (1,976)         (131)           -
                                           -----------------------------------------
                                                                        
Income before income taxes and extraordinary                            
  item                                          14,946        10,093       12,101
                                                                        
Provision for income taxes                       5,680         3,835        4,840
                                           -----------------------------------------
                                                                        
Income before extraordinary item                 9,266         6,258        7,261
                                                                        
Extraordinary item - loss on retirement of debt,                        
  net of income taxes of $430 (1996) and $276                           
  (1995)                                          (702)         (452)           -
                                           -----------------------------------------
                                                                        
Net income                                  $    8,564    $    5,806     $  7,261
                                           =========================================
                                                                        
Per share amounts:
  Income before extraordinary item                $.29          $.22         $.35
                                           =========================================
                                                                        
  Net income                                      $.27          $.20         $.35
                                           =========================================
<FN>

See accompanying notes.
</FN>
</TABLE>

                                    F-5

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

                 Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>

                                             Common       Common      Additional
                                             Stock        Stock        Paid-in      Retained
                                            Class A      Class B       Capital      Earnings
                                         ------------------------------------------------------
                                         --------------------------------------------------
                                                           (In thousands)

<S>                                          <C>       <C>           <C>          <C>   

Balance at December 31, 1993                 $  98     $ 2           $  63,668    $  7,772
                                                                                   
  Exercise of stock options - 56,404 shares                                        
   of common stock issued                        1       -                 184           -
                                                                                   
  Additional stock issuance costs                -       -                (180)          -
                                                                                   
  Net income for 1994                            -       -                   -       7,261
                                         ------------------------------------------------------
                                                                                   
   Balance at December 31, 1994                 99       2              63,672      15,033
                                                                                   
  Issuance of 2,747,924 shares of                                                  
   common stock                                 28      -               72,320           -
                                                                                   
  Exercise of stock options - 132,179 shares                                       
   of common stock issued                        1      -                1,297           -
                                                                                   
  Conversion of Class B common                                                     
   stock to Class A                              2     (2)                   -           -
                                                                                   
  Dividend on convertible preferred                                                
   stock                                         -      -                    -      (1,245)
                                                                                   
  Net income for 1995                            -      -                    -       5,806
                                                                                   
  Adjustment for two-for-one stock split                                           
   12,938,833 shares                           129      -                 (129)          -
                                         ------------------------------------------------------
                                                                                   
Balance at December 31, 1995                   259      0               137,160     19,594
                                                                                   
  Exercise of stock options - 334,937 shares                                       
   of common stock issued                        3      -                 2,225          -
                                                                                   
  October 1995 issuance costs                    -       -                  (79)          -
                                                                                   
  Exercise of warrants - 17,700 shares of                                         
   common stock issued                           1       -                  141           -
                                                                                   
  Tax benefit of exercised options and warrants  -       -                  637           -
                                                                                   
  Conversion of subordinated note payable -                                        
   1,117,732 shares of common stock issued      11       -               10,048           -
                                                                                   
  Conversion of redeemable preferred stock -                                        
   1,509,062 shares of common stock issued      15       -               15,075           -
                                                                                   
  Assumption of options in ESG acquisition       -       -               24,450           -
                                                                                   
  Dividend on convertible preferred                                                
   stock                                         -       -                   -        (199)
                                                                                   
  Net income for 1996                            -       -                   -       8,564
                                         ------------------------------------------------------
                                                                                   
   Balance at December 31, 1996               $289        $  0        $189,657     $27,959
                                         ======================================================
<FN>
See accompanying notes.
</FN>
</TABLE>

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>

                                                    Year Ended December 31

                                                1996          1995         1994
                                           -----------------------------------------
                                                        (In thousands)
<S>                                         <C>         <C>            <C>   
Operating activities                                                    
Net income                                  $   8,564   $     5,806    $   7,261
Adjustments to reconcile net income to net cash                         
  provided by operating activities:
   Depreciation and amortization               23,031        13,493        7,966
   Apartment properties depreciation              901             -            -
   Equity in earnings of partnerships          (3,590)       (2,461)        (113)
   Extraordinary loss                           1,132           728            -
   Minority interest in consolidated 
     subsidiaries                               1,976           131            -
   Deferred income taxes                       (2,516)         (820)      (1,495)
   Changes in operating assets and liabilities:                         
     Accounts receivable                      (33,429)       (1,234)      (4,337)
     Other assets                                (527)          133         (342)
     Accrued compensation                       7,326         1,635          485
     Accounts payable and accrued expenses     (5,108)       (1,987)       4,230
     Commissions payable                       18,134             -            -
                                           -----------------------------------------
                                                                        
                                                7,330         9,618        6,394
                                           -----------------------------------------
                                                                        
        Net cash provided by operating 
            activities                         15,894        15,424       13,655
                                           -----------------------------------------
                                                                        
        Investing activities                                            
        Decrease (increase) in restricted cash, 6,282        (6,110)          (6)
        Additions to property and equipment, 
            net                                (6,364)       (3,276)      (3,421)
Payments made for acquisition of management                             
  contracts and acquired businesses           (97,248)      (22,489)      (6,201)
Proceeds from Balcor dispositions               8,231             -            -
Purchase of real estate partnership interests (99,145)      (23,955)     (27,813)
Distributions from partnerships                12,347        11,130            -
Advances made under note agreements            (8,077)      (16,376)      (2,869)
Investment in apartment properties, net of                              
  acquired cash                                (8,005)            -            -
Collections on notes receivable                21,911         4,366        5,466
  Other, net                                        -             -         (307)
                                           -----------------------------------------
                                                                        
  Net cash used in investing activities      (170,068)      (56,710)     (35,151)
                                           -----------------------------------------

</TABLE>

                                    F-7

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>

                                                    Year Ended December 31
                                                1996          1995         1994
                                           -----------------------------------------
                                                       (In thousands)
<S>                                        <C>           <C>            <C>  
                                                                        
Financing activities                                                    
Proceeds from issuance of common stock      $      -     $   71,558     $      -
Proceeds from issuance of preferred stock          -         15,000            -
Proceeds from trust based convertible                                   
  preferred securities                        149,500             -            -
Proceeds from refinancing non-recourse                                  
  mortgage note                                19,300             -            -
Proceeds from exercise of stock options         2,519         1,298          185
Payment of preferred stock dividends             (281)       (1,072)           -
Payment of trust based convertible preferred                            
  securities distributions                     (1,619)            -            -
Distributions made to minority interests         (432)         (100)           -
Investment made by minority interests               -         2,651            -
  Payments on notes payable                  (162,498)     (121,731)      (8,988)
  Payments on non-recourse mortgage note      (16,876)            -            -
Proceeds from notes payable                   175,740        89,660       34,000
Debt and stock issuance costs                  (6,411)       (2,728)      (1,110)
                                           -----------------------------------------
                                                                        
Net cash provided by financing activities     158,942        54,536       24,087
                                           -----------------------------------------
                                                                        
Net increase in cash and cash equivalents       4,768        13,250        2,591
                                                                        
Cash and cash equivalents at beginning of year 49,846        36,596       34,005
                                           -----------------------------------------
                                                                        
Cash and cash equivalents at end of year    $   54,614    $   49,846    $ 36,596
                                           =========================================
<FN>
See accompanying notes.
</FN>
</TABLE>

                                    F-8
<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 1996


1. Organization

Insignia  Financial  Group,  Inc. (the  "Company" or  "Insignia")  is a Delaware
corporation  incorpo rated in July 1990. The Company is a fully  integrated real
estate  services  company   specializing  in  the  ownership  and  operation  of
securitized real estate assets  throughout the United States.  As a full service
real estate management  organization,  Insignia  performs  property  management,
asset  management,   investor  services,  partnership  accounting,  real  estate
investment  banking,  mortgage  banking and real estate  brokerage  services for
various types of property owners.


2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  subsidiaries,  all  of  which  are  wholly-owned  or  majority-owned.   All
significant intercompany balances and transactions have been eliminated. Certain
amounts  for  prior  years  have  been  reclassified  to con form  with the 1996
presentation.

Use of Estimates

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The amount of cash on deposit in  federally  insured  institutions  periodically
exceeds the limit on insured  deposits.  The Company considers all highly liquid
investments  with  original  maturities  of  three  months  or  less  to be cash
equivalents.

Restricted Cash

For 1995, restricted cash includes $6,025,000 in funded,  undistributed payments
to tendering  limited  partners.  These funds were distributed in 1996 (see Note
14).




                                    F-9

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Loans Receivable

In 1995, the Company adopted Financial  Accounting Standards Board Statement No.
114 ("FAS 114"),  "Accounting by Creditors for Impairment of a Loan".  Under the
new  standard,  the allow  ance for  credit  losses  related  to loans  that are
identified for evaluation in accordance with FAS 114 is based on discounted cash
flows using the loan's initial effective  interest rate or the fair value of the
collateral for certain collateral  dependent loans. Prior to 1995, the allowance
for credit losses related to these loans was based on undiscounted cash flows or
the fair value of the collateral for collateral dependent loans. The adoption of
FAS 114 had no material effect on the accompanying financial statements.

Investments in Partnerships

Investments in partnerships  represent general partner interests of .2% to 4% in
certain limited  partnerships,  a 19.1% limited partnership  interest in MAE and
limited partner interests in real estate limited partnerships ranging from 4% to
54%. The  investments  in real estate limited part nerships are accounted for by
the equity  method.  Equity in  earnings  from these  partnerships  amounted  to
approximately  $3,590,000,  $2,461,000  and  $113,000  for 1996,  1995 and 1994,
respectively. Equity in earnings for 1996 excludes the Company's equity interest
in extraordinary  losses by the partnerships from early  extinguishments of debt
of $1,132,000.  The Company owns 54% of National Property  Investors 4 ("NPI 4")
and therefore consolidates the accounts of this partnership.

Advertising Expense

The  cost  of  advertising  is  expensed  as  incurred.   The  Company  incurred
$1,815,000,  $758,000 and $776,000 in  advertising  costs during 1996,  1995 and
1994, respectively.

Property and Equipment

Property and equipment is stated at cost,  net of  accumulated  depreciation  of
$5,681,000  (1996) and  $3,915,000  (1995).  Property and equipment  consists of
office furniture and fixtures, data processing equipment, computer software, and
leasehold improvements.

Depreciation  is  computed  principally  by the  straight-line  method  over the
estimated  useful  lives of the  assets.  Depreciation  expense  was  $1,842,000
(1996), $1,444,000 (1995) and $956,000 (1994).


                                    F-10

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. Summary of Significant Accounting Policies (continued)

Property Management Contracts and Costs in Excess of Net Assets Acquired

Property   management   contracts  are  stated  at  cost,   net  of  accumulated
amortization  of  $46,020,000   (1996)  and  $26,885,000   (1995).  The  Company
capitalizes costs paid or payable to third parties in the successful  pursuit of
acquiring  management  contracts.  These  contracts are amortized  over three to
fifteen years based on the estimated  lives of the contracts.  All costs related
to  unsuccessful  attempts to acquire  management  contracts are expensed by the
Company.

The carrying value of the property management contracts is reviewed if the facts
and circum stances suggest that it may be impaired. If the review indicates that
the property management contract costs will not be recoverable, as determined by
the estimated  profitability of the revenue generated by each portfolio over the
remaining  amortization  period,  the Company's  carrying  value of the property
management contract costs are reduced by the estimated shortfall. No significant
contracts  are  estimated  to be  impaired  as of December  31,  1996,  although
termination in the future could adversely affect this estimate.

Costs in excess of net assets acquired are amortized by the straight-line method
over 15 to 25 years.  Accumulated amortization is $2,553,000 (1996) and $780,000
(1995).

During 1996,  the Company  adopted FASB Statement No. 121,  "Accounting  for the
Impairment of  Long-Lived  Assets to be Disposed Of" (FAS 121),  which  requires
impairment losses to be recognized for long-lived assets used in operations when
indicators of  impairment  are present and the  undiscounted  cash flows are not
sufficient  to recover  the  assets  carrying  amount.  The  impairment  loss is
measured by comparing  the fair value of the asset to its carrying  amount.  The
adoption  of FAS  121  had no  material  effect  on the  accompanying  financial
statements.

Loan Costs

The Company capitalizes costs paid to third parties for obtaining or refinancing
outstanding  indebtedness.  These  costs  are  amortized  over  the  term of the
respective  outstanding debt.  Prepaid points are deducted from the related debt
and are amortized over the term of the debt.

Revenue Recognition

Fee based services  includes  property  management and commercial  leasing fees,
partnership  administration and asset management fees, loan origination and loan
servicing fees and investment  banking fees. Such revenues are recorded when the
related services are performed, unless significant contingencies exist.


                                    F-11

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2. Summary of Significant Accounting Policies (continued)

Income Taxes

The Company accounts for income taxes in accordance with FASB Statement No. 109,
"Accounting for Income Taxes". Under Statement 109, the liability method is used
in  accounting  for income  taxes.  Under this  method,  deferred tax assets and
liabilities are determined based on differences  between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.

Earnings Per Share

Primary net income per common share is based on  31,560,650  (1996),  22,681,158
(1995) and 20,556,758  (1994) weighted  average number of shares of common stock
outstanding  during the year and common  stock  equivalents  of  dilutive  stock
options. Earnings are reduced by the divi dend on preferred stock when computing
earnings per share. All years have been restated for the two for one stock split
effected as a stock  dividend on January 29, 1996.  Fully  diluted  earnings per
common share is not presented since dilution is less than 3%.


3. Acquisitions

The Company and its affiliates have acquired control of or management  rights to
33 portfolios of properties since 1990. The Company's  significant  acquisitions
during the last three years are discussed below.

On June 30, 1996, the Company acquired the business and substantially all of the
assets of Edward S. Gordon Company, Incorporated ("ESG"). ESG's services include
commercial real estate leasing,  including  tenant and landlord  representation,
real estate consulting  services and commercial real estate brokerage as well as
commercial  property  management  in the New York  City  metropolitan  area.  At
closing, ESG managed  approximately 25.5 million square feet of commercial space
comprised of 57 properties in New York, New Jersey and Connecticut. The purchase
price paid by Insignia for ESG was $73.8 million, consisting of $49.3 million in
cash,  and $24.5 million of stock options for ESG employees.  Additionally,  the
Company has incurred  $875,000 in acquisition costs and a loan of $5 million was
granted at the time of the purchase to Edward S. Gordon.


                                    F-12

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

3. Acquisitions (continued)

On June 30, 1996,  the Company  acquired  the  commercial  real estate  services
business  of  Paragon  Group  Property  Services,  Inc.  ("Paragon").  Paragon's
services include property  management,  leasing and tenant improvement  services
for managed  properties as well as brokerage,  fee  development  and real estate
consulting services performed for various institutional clients. At closing, the
acquired  business  managed and leased  approximately  22 million square feet of
commercial space comprised of 166 properties  located in 17 states. The purchase
price paid by Insignia for Paragon was $18.5 million in cash, plus an additional
$4 million in future contingent purchase price (without interest),  and warrants
to acquire  50,000 shares of Class A Common Stock of Insignia.  The warrants are
exercisable  for a period of five years from closing at $29.  Additionally,  the
Company incurred  $930,000 of acquisition  costs and recorded a net deferred tax
liability of $1.2 million resulting from book and tax differences related to the
acquisition.

Both the ESG and Paragon  acquisitions  were  accounted  for as  purchases.  The
operations  of  Paragon  and ESG have been  included  in the  operations  of the
Company since June 30, 1996.

On January 19, 1996, the Company  purchased  substantially  all of the assets of
National  Properties,  Inc.  ("NPI"),  its property  management  affiliates  and
certain of its limited partner interest in real estate limited  partnerships for
an aggregate  purchase  price of  approximately  $116 million.  In the purchase,
Insignia  acquired  (a) a  significant  percentage  of the  limited  partnership
interests in 14 public real estate limited  partnerships held by NPI, (b) all of
the  issued  and  outstanding  common  stock  of NPI,  which  in turn  owned  or
controlled,  directly  or  indirectly,  one or more of the  general  partners of
certain  public real estate limited  partnerships  and certain  private  limited
partnerships,  and (c)  affiliates of NPI which  provide real estate  management
services, including not less than $13.5 million in net liquid assets. A deferred
tax liability of approximately $10.8 million was recorded in connection with the
acquisition.  All of the funds used to  purchase  NPI were  drawn on  Insignia's
revolving credit facility with First Union National Bank of South Carolina.  The
NPI acquisition was accounted for as a purchase. The operations of NPI have been
included in the operations of the Company since January 19, 1996.

On September 5, 1995,  Insignia  purchased the residential  property  management
business of Douglas  Elliman-Gibbons  & Ives and all of the outstanding stock of
Kreisel  Company,  Inc.   (collectively  "DEK").   Collectively,   the  acquired
operations manage approximately 300 properties  containing  approximately 54,000
residential units, all of which are within the metropolitan New York City market
and a substantial  majority of which are within  Manhattan.  The purchase  price
paid by Insignia for these  businesses  was $14.0  million,  consisting of $13.0
million in cash, of which $10 million was financed  with a short-term  loan from
First Union  National Bank of South  Carolina,  and $1.0 million in newly issued
shares of Insignia Common Stock (68,708 shares at $14.56 per share).  A deferred
tax  liability  of $3.1  million  was  recorded  as a  result  of  book  and tax
differences related to the acquisition.  This acquisition was accounted for as a
purchase.  The  operations  of DEK have been  included in the  operations of the
Company since September 5, 1995.


                                    F-13

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

3. Acquisitions (continued)

On May 1,  1995,  Insignia  acquired  all of the  outstanding  common  stock  of
O'Donnell Property Services, Inc. ("OPSI") for consideration having an aggregate
value as of the date of acquisition  of  approximately  $7.0 million,  including
$2,000,000 in unsecured  convertible  notes and 55,556 shares of Insignia Common
Stock.  Insignia  acquired  property  management  rights to approxi  mately 23.6
million square feet of commercial,  retail,  office, and warehouse space located
princi  pally  in  California  and  Nevada.  Insignia  entered  into  consulting
agreements with certain of the principal executives of OPSI for a period of five
years.  Such  executives  also entered  into non-  competition  agreements  with
Insignia  precluding  their  engaging  in the  business of  commercial  property
management  in  California  or  Nevada  for a  period  of five  years.  The OPSI
acquisition resulted in a significant increase in commercial property management
by Insignia.  The operations of OPSI have been included in the operations of the
Company since May 1, 1995. This acquisition was accounted for as a purchase.

On December 8, 1994, Insignia and certain of its affiliates  purchased the stock
and  assets of  certain  affiliates  of  Gordon  Realty,  Inc.  In  addition,  a
wholly-owned  subsidiary  of MAE acquired an option to purchase all of the stock
of GII Realty,  Inc., the parent of the general partners in thirteen real estate
limited  partnerships,  and pursuant to an exercise of such option, has acquired
100% of such  stock.  Insignia  also  acquired  units  of  real  estate  limited
partnership interests in Consolidated Capital Growth Fund,  Consolidated Capital
Institutional Properties and Consolidated Capital Institutional Properties/3 and
all of the  outstanding  capital  stock  of LP 6  Acceptance  Corporation  which
accepted  for purchase  pursuant to a tender offer units of limited  partnership
interest in  Consolidated  Capital  Properties VI. The aggregate  purchase price
paid by the Company was  approximately  $42,501,000,  which was  financed by (a)
delivery of a $10 million  convertible  subordinated  note of Insignia;  (b) $16
million  borrowed under  Insignia's  revolving  credit facility with First Union
National  Bank of  South  Carolina  ("First  Union")  and (c) the  balance  from
Insignia's cash. This acquisition was accounted for as a purchase.

On  November  4,  1994,  Insignia  acquired  substantially  all of the assets of
Allegiance  Realty  Group,  Inc.  ("Allegiance")  which was  accounted  for as a
purchase.  The assets purchased  consisted of accounts receivable of $3,404,000,
fixed  assets of $480,000,  other  assets of $134,000  and  property  management
contract rights of $29,783,000. The Company also assumed existing liabilities of
Allegiance of $784,000 and incurred an  additional  $250,000 in costs related to
this  acquisition.  The purchase  price was  $33,000,000  payable  together with
interest  at four  percent  per annum,  and was paid in full on January 31, 1995
through amounts borrowed under  Insignia's  revolving credit facility with First
Union.


                                    F-14

<PAGE>

               Insignia Financial Group, Inc. and Subsidiaries

            Notes to Consolidated Financial Statements (continued)

3. Acquisitions (continued)

Pro forma unaudited  results of operations for the years ended December 31, 1996
and 1995  assuming  consummation  of the ESG,  Paragon and NPI  acquisitions  at
January  1,  1995,  and  assuming  consummation  of the DEK,  OPSI,  Gordon  and
Allegiance acquisitions at January 1, 1994, is as follows (in thousands,  except
per share data):

                                          1996          1995         1994
                                     -----------------------------------------

Revenues                               $284,120       $280,197     $140,843
Income before extraordinary item          8,923          7,664        8,039
Net income                                8,221          7,212        8,039
Earnings per common share:
  Income before extraordinary item          .27           .24          .32
  Net income                                .25           .22          .32


These results do not purport to represent the  operations of the Company nor are
they  necessarily  indicative  of the  results  that  actually  would  have been
realized by the Company if the  purchase of the  operating  entities had been in
effect the entire period.

The cost of the ESG (1996),  Paragon  (1996),  NPI  (1996),  DEK (1995) and OPSI
(1995) acquisi tions are summarized as follows (in thousands):

                                                      1996          1995
                                                 ----------------------------
                                                                 
Notes payable and common stock                    $  26,525      $  3,711
Accrued and sundry liabilities                        4,298         1,789
Deferred tax liability, net                          11,909         3,115
Cash paid at the closing dates                      175,892        17,185
                                                 ----------------------------
                                                                 
                                                   $218,624       $25,800
                                                 ============================

The cost was allocated as follows:

                                                      1996          1995
                                                 ----------------------------
                                                                 
Notes receivable                                  $    5,000    $       -
Property management contracts                        63,260        24,324
Non-compete agreements                                1,700             -
Goodwill                                             74,232             -
Other assets                                            594         1,476
Investment in limited partnership units              73,838             -
                                                 ----------------------------
                                                                 
                                                   $218,624       $25,800
                                                 ============================


                                    F-15

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

4. Reverse Repurchase Agreements

Periodically,  the Company invests in reverse repurchase agreements. At December
31, 1996 and 1995, respectively, the Company had $12,952,000 and $25,000,000, in
reverse  repurchase  agreements with First Union National Bank of South Carolina
collateralized by obligations of the Government  National  Mortgage  Association
("GNMA")  with a weighted  average  interest rate of 5.8% (1996) and 5.3% (1995)
with maturities of one to three weeks. In addition, the Company has an agreement
with First Union  whereby it  purchases at par tax exempt  municipal  bonds with
variable interest rates. The bank has guaranteed  repurchase of the bonds at par
with  a  7-day  notice  from  the  Company.  At  December  31,  1996  and  1995,
respectively, the Company had $34,303,000 and $13,195,000 invested in such bonds
with a weighted average interest rate of 3.7% and 4.4%. All investments for 1996
and  1995  are  reflected  in the  accompanying  balance  sheet  at  cost  which
approximated  market  value as of such  date and are  included  in cash and cash
equivalents.

The Company generally does not take possession of the securities purchased under
agreements to resell. The Company only invests in reverse repurchase  agreements
which are short-term and collateralized by government backed securities, such as
GNMA or municipal bonds.


5. Receivables

                                                                December 31
                                                            1996          1995
                                                        ------------------------
                                                                (In thousands)
                                                                       
     Accounts receivable                                 $  9,899      $  6,156
     Commissions receivable                                33,372         1,991
Income tax refund receivable                                    -         1,703
                                                                       
Notes receivable:                                                      
  Brokerage employees with interest at prime plus 1%        1,104             -
  NPI (participation agreement) with interest rate of                  
   prime plus 1.25%                                             -        14,060
  Outside entities with interest ranging from 8.0% to 11.2%    60           842
  Affiliates with an interest rate of 8.0%                  1,428         1,498
  Chairman and executive officers with interest ranging                
   from 6% to 10%                                             177           195
                                                       ------------------------
                                                                       
                                                            2,769        16,595
                                                       ------------------------
                                                                       
                                                          $46,040       $26,445
                                                       ========================


                                    F-16

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

5. Receivables (continued)

Accounts  receivable  consist  primarily  of  management  fees  expected  to  be
collected in 1997. The accounts  receivable are not  collateralized,  but credit
losses have been  insignificant and within  management's  estimate.  Commissions
receivable  at December  31,  1996,  consist of  commercial  lease  commissions,
substantially  from ESG  operations of  $29,814,000.  The notes  receivable  are
collateralized by various partnership interests,  assignment of notes and liens,
and real estate. In 1996, the NPI note was collected in full.

Principal   collections  on  notes  receivable  are  scheduled  as  follows  (in
thousands):

                                                       Notes    Commissions
                                                   Receivable    Receivable
                                                 ----------------------------
                                                                 
   1997                                              $1,428       $25,428
   1998                                                 144         2,559
   1999                                                 195         4,867
   2000                                                 204           518
   2001                                                 213             -
   Later years                                          585             -
                                                 ----------------------------
                                                                 
                                                     $2,769       $33,372
                                                 ============================


6. Investments in Real Estate Limited Partnerships

The  Company  has  invested  in 33 limited  partnerships  which own real  estate
consisting primarily of apartments and commercial property throughout the United
States.  The Company's  limited part ner interests and ownership  percentages of
such limited  partnerships  range from 4% to 54% as of December 31, 1996.  These
limited   partnerships  own  approximately  169  properties   comprising  43,400
apartment units and 2,698,000 square feet in commercial space. The Company or an
affiliate serves as general partner in these limited partnerships.


                                    F-17

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

6. Investments in Real Estate Limited Partnerships (continued)

Summarized   financial   information   from  the  date  of  acquisition  of  the
unconsolidated limited partnerships is as follows:
<TABLE>
<CAPTION>

                                                         December 31
                                           --------------------------------------
                                                 1996          1995         1994
                                           -----------------------------------------
                                                        (In thousands)

<S>                                          <C>           <C>             <C> 
                                                                        
Condensed Statements of Earnings Information                            
  Revenues                                   $262,251      $ 113,276       $2,864
                                                                        
  Property operating expenses                 143,306         62,376        1,802
  Provision for impairment                          -          8,255            -
  Depreciation                                 51,461         24,880          657
  Interest                                     54,851         16,204          204
  Administrative                               11,199          7,732          133
                                           -----------------------------------------
                                                                        
  Total operating expenses                    260,817        119,447        2,796
                                           -----------------------------------------
                                                                        
  Income (loss) from operations                 1,434         (6,171)          68
                                                                        
  Other gains                                   6,640          1,956           41
                                           -----------------------------------------
                                                                        
  Income (loss) before extraordinary items      8,074         (4,215)         109
                                                                        
  Extraordinary items - loss on retirement 
       of debt                                 (2,580)           126          110
                                           -----------------------------------------
                                                                        
  Net income (loss)                         $    5,494    $    (4,089)    $   219
                                           =========================================

</TABLE>

                                    F-18

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

6. Investments in Real Estate Limited Partnerships (continued)

                                                        December 31
                                                      1996          1995
                                                 ----------------------------
                                                         (In thousands)
                                                                  
Condensed Balance Sheets Information                             
Cash and investments                              $   115,708   $   83,082
Receivables and deposits                              27,211       29,929
Other assets                                          38,449        9,696
                                                                 
Real estate                                        1,476,516      645,016
Less accumulated depreciation                       (652,968)    (332,471)
                                                 ----------------------------
                                                                 
  Net real estate                                    823,548      312,545
                                                 ----------------------------
                                                                 
  Total assets                                    $1,004,916    $ 435,252
                                                 ============================
                                                                 
  Mortgage notes payable                          $   725,894   $ 275,866
  Other liabilities                                   48,149       20,759
                                                 ----------------------------
                                                                 
  Total liabilities                                  774,043      296,625
                                                                 
  Partners' capital                                  230,873      138,627
                                                 ----------------------------
                                                                 
                                                  $1,004,916    $ 435,252
                                                 ============================


At December 31, 1996 the unamortized  excess of the Company's  investments  over
the  historical  cost  of  the  underlying  net  assets  of  the  investees  was
approximately $101,212,000,  which has been attributed to the fair values of the
investees'  underlying  properties  and is being  depreciated  over their useful
lives.



                                    F-19

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

7. Accrued and Sundry Liabilities

                                                               December 31
                                                            1996          1995
                                                       -------------------------
                                                              (In thousands)
                                                                       
Estimated liabilities for acquisitions                   $  2,320      $  2,574
Employee compensation                                      14,275         7,144
Deferred taxes                                             10,617         1,752
Accrued vacation                                            1,308           875
Deferred revenue                                            1,476         1,460
Employee insurance                                          1,337           935
Settlement of tender litigation (see Note 14)                   -         6,788
Other                                                       9,408         4,091
                                                       -------------------------
                                                                       
                                                          $40,741       $25,619
                                                       =========================


8. Notes Payable

To better  position  the  Company  in the  acquisition  market,  a  $200,000,000
revolving  credit facility was closed on December 11, 1995 involving a syndicate
of 13 national and international  financial  institutions.  The revolving credit
facility bears interest at the annual rate of either prime plus 1% or LIBOR plus
2 1/4% at Insignia's option and terminates on December 11, 1998 unless extended.
All of the outstanding  amounts are subject to the LIBOR based rate. The Company
also must pay an unused  commitment fee of 50 basis points on the average unused
balance for each  quarter.  The  facility is secured by a pledge of the stock of
all material  subsidiaries and a negative pledge on all of the Company's service
fee contracts and limited partner interests in real estate limited partnerships.
The outstanding balance on the revolving credit facility as of December 31, 1996
is $43,000,000.


                                    F-20

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

8. Notes Payable (continued)

Notes payable consist of the following:
<TABLE>
<CAPTION>

                                                                   December 31
                                                               1996          1995
                                                          ---------------------------
                                                                 (In thousands)
<S>                                                          <C>           <C> 
                                                                     
Revolving credit facility with interest only due quarterly at        
  LIBOR plus a margin of 2.25%.  Final payment due date is           
  December 11, 1998 with possible extension to December 11,          
  2000.                                                      $43,000       $28,000
                                                                     
Unsecured convertible notes bearing interest at 10% with             
  quarterly interest payments.  Principal is payable in full at      
  maturity date of April 30, 1998 along with any unpaid              
  interest.                                                    2,000         2,000
                                                                     
Term note, secured by equipment, bearing simple interest at          
  a rate of prime plus 1/4% with principal being paid equally        
  in 60 monthly installments of $58,333 plus interest.  Last         
  scheduled payment is January 15, 2000.                       2,158         2,858
                                                                     
Note payable bearing simple interest of 6.25% per annum              
  with principal and interest paid monthly.  Last scheduled          
  payment is December 19, 2000.                                1,711             -
                                                                     
Unsecured nonrecourse note payable bearing simple interest           
  at a rate of 6.5% per annum.  Note payments are payable in         
  installments upon the receipt of distributions from certain        
  partnerships.                                                  430             -
                                                                     
Purchase money note at a rate per annum of 8% with                   
  quarterly principal and interest payments.  The note               
  matures on April 1, 2000 and is secured by assignment              
  of certain general and limited partnership interests.        2,568         3,233
                                                                     
</TABLE>
                                    F-21

<PAGE>

               Insignia Financial Group, Inc. and Subsidiaries

            Notes to Consolidated Financial Statements (continued)

8. Notes Payable (continued)
<TABLE>
<CAPTION>

                                                                    December 31
                                                                1996          1995
                                                           -----------------------------
                                                                  (In thousands)
<S>                                                          <C>           <C>                    
Unsecured note bearing interest at 8% payable quarterly              
  beginning June 1993.  Principal is payable in ten equal            
  semi-annual payments beginning June 1993.  The note                
  matures in December 1997.                                  $     437     $     875
                                                                     
Secured promissory note bearing simple interest of 7% per            
  annum due on the last day of the year in 5 equal installments      
  of principal plus interest.  Maturity date is December 31,         
  1999.                                                             60            80
                                                            -----------------------------
                                                                     
Subtotal                                                        52,364        37,046
                                                                     
Less prepaid points                                             (2,524)       (4,050)
                                                            -----------------------------
                                                                     
                                                               $49,840       $32,996
                                                            =============================
</TABLE>
The  non-recourse  mortgage note payable of $19,300,000  bears interest at 7.33%
payable monthly. Principal is payable at maturity.  Maturity date is November 1,
2003. The mortgage note is secured by the underlying apartment property.

The Company paid interest of approximately $11,346,000 (1996), $6,516,000 (1995)
and $255,000 (1994).

Scheduled  principal  maturities on notes payable after December 31, 1996 are as
follows (thousands of dollars):

   1997                                                   $  2,496
   1998                                                     47,114
   1999                                                      2,005
   2000                                                        749
                                                         ------------
                                                           
                                                           $52,364
                                                         ============


Certain of the note agreements contain various restrictive  covenants requiring,
among other things,  minimum  consolidated  net worth,  minimum  liquidity,  and
various other financial ratios.

The Company is in compliance with its restrictive covenants.


                                    F-22

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

9. Subordinated Convertible Note Payable

In connection  with the Gordon Realty  acquisition  in 1994,  Insignia  issued a
convertible subordi nated note of $10,000,000 with interest at 7.5%, due January
17, 2002. The note was converted to 1,117,732  shares of Class A Common Stock on
April 29,  1996.  If the note had been  converted  as of January 1, 1996 and the
additional  shares  were issued at that date,  1996  supplemental  earnings  per
common share would have been unchanged assuming  elimination of related interest
expense, net of the income tax effect.

10. Redeemable Cumulative Convertible Preferred Stock

On January 17, 1995,  the Company sold 15,000  shares of  redeemable  cumulative
convertible  preferred  stock  (voting)  to  Apollo  Real  Estate  Advisors,  LP
("Apollo") for $15,000,000.  Divi dends accrue at the rate of 7.5% for the first
18 months, payable quarterly; thereafter dividends would accrue at 10%. On March
29,  1996,  the  Company  notified  Apollo  of its  intention  to  call  for the
redemption of the $15,000,000 preferred stock. The preferred stock was converted
to 1,509,062  shares of common stock on April 29, 1996. If the  preferred  stock
had been converted as of January 1, 1996 and the  additional  shares were issued
at that  date,  1996  supplemental  earnings  per common  share  would have been
unchanged assuming elimination of related dividends payable.

11. Trust Based Convertible Preferred Securities

In November  1996,  Insignia  Financing 1, a Delaware  trust and a  consolidated
wholly owned subsidiary of the Company (the "Trust"),  issued and sold 2,990,000
shares of Trust Based Convertible  Preferred  Securities (the "Securities") with
an aggregate  liquidation  amount of  $149,500,000,  sold pursuant to exemptions
under the Securities Act of 1933, as amended,  and the rules thereunder.  All of
the  outstanding  common  securities of the Trust are owned by the Company.  The
sole  asset  of the  Trust  is the  $154.1  million  principal  amount  of 6.5 %
convertible  subordinated  debentures of the Company due September 30, 2016. The
Company has certain  obligations  relating to the  Securities  which amount to a
full  and  unconditional   guarantee  of  the  Trust's   obligations  under  the
Securities.  The debentures  issued and the common  securities  purchased by the
Company are  eliminated  in the balance  sheet.  The  Securities  will mature on
September  30,  2016 and bear  interest  at the  rate of 6.5%  per  annum,  with
quarterly  distributions payable in arrears. The Company has the option to defer
interest payments from time to time, not to exceed 20 consecutive quarters.  The
Company's first distribution of $1,619,000 was made on December 31, 1996, and is
reflected in minority interests in the consoli dated statements.  The Securities
are  convertible  into the  Company's  Class A Common  Stock at $26.50 per share
beginning 60 days after the Securities first issuance date through September 30,
2016 or upon the Company's  option to redeem the  Securities  after  November 1,
1999.  The  Securities  are  structured  such  that  the  distributions  are tax
deductible  to the Company.  The proceeds of the offering  were used to pay down
current debt under the $200,000,000 revolving credit facility.

Discounts and offering  costs of  approximately  $5,331,000,  net of accumulated
amortization,  at December 31, 1996, have been netted against the Securities and
are being amortized over the term of the Securities.

                                    F-23

<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

12. Stockholders' Equity

In December 1995,  the Company sold 1,000,000  shares of Class A Common Stock to
HFS Incorporated as part of a strategic alliance between the two companies.  The
aggregate purchase price was $13,940,000 and was used by the Company to continue
reducing  its  outstanding  debt  balances  and provide  additional  capital for
acquisitions.

In October  1995,  the Company  completed a public  offering in which  3,850,000
shares of Class A Common  Stock were sold by the  Company and  1,350,000  shares
were sold by certain  stock  holders of the Company.  The gross selling price of
the stock was $14.50 per share. The Company received approximately  $57,600,000,
including  proceeds from options  exercised in anticipation of the offering,  in
cash after the payment of certain underwriting costs. The proceeds were used to:
1) repay the majority of its long-term indebtedness, and 2) fund in part the NPI
acquisition.  If the  debt  had  been  retired  as of  January 1,  1995  and the
additional  shares  were issued at that date,  1995  supplemental  earnings  per
common share amounts would have been as follows assuming  elimination of related
interest expense, net of the income tax effect:

Income before extraordinary item                        $.29
Net income                                               .27



The Company's  ability to pay dividends is subject to restrictions  contained in
its  revolving  credit   facility.   At  December  31,  1996,  the  Company  has
unrestricted stockholders' equity of $41,411,000.

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related  interpretations
in accounting for its employee stock based  compensation  because,  as discussed
below, the alternative  fair value accounting  provided for under FASB Statement
No. 123,  "Accounting  for  Stock-Based  Compensation,"  requires  use of option
valuation  models  that were not  developed  for use in valuing  employee  stock
options and warrants.  Under APB 25, because the exercise price of the Company's
employee  stock options and warrants  equals the market price of the  underlying
stock on the date of grant, no compensation expense is recognized.

The Company's 1992 Stock Incentive Plan (the "Plan") has authorized the grant of
options to  management  personnel  for up to 4,666,666  shares of the  Company's
common stock.  The term of each option will be determined by the Company's Board
of  Directors  but will not be more than ten years  from the date of grant.  The
Plan may be  terminated by the Board of Directors at any time.  Options  granted
typically have five year terms and vest ratably over a five-year period. Options
are granted at prices not less than 100% of the fair market  value of the Common
Stock at the date of grant.


                                    F-24

<PAGE>
                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

12. Stockholders' Equity (continued)

The  Company's  1995  Non-Employee  Director  Stock Option Plan (the  "Directors
Plan")  has  authorized  the grant of options  for up to  500,000  shares of the
Company's Common Stock. The terms of the Directors Plan are similar to the Plan.

The  Company  assumed  1,482,879  options  under   Non-Qualified   Stock  Option
Agreements  in  connection  with the  acquisition  of Edward S.  Gordon  Company
Incorporated  and Edward S.  Gordon  Company of New  Jersey,  Inc.  The  options
granted are vested and have 5 year terms.

The Company had  2,971,966  (1996),  2,211,666  (1995) and  1,780,874  (1994) in
outstanding warrants for Class A Common Stock of the Company, with terms similar
to the Plan.

Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the  information be determined as if the
Company has  accounted  for its  employee  stock  options and  warrants  granted
subsequent  to December 31, 1994 under the fair value method of that  Statement.
The fair value for these options and warrants was estimated at the date of grant
using a Black-Scholes  option pricing model with the following  weighted-average
assumptions for 1996 and 1995, respectively, risk-free interest rate of 6.2%; no
dividend yield; volatility factors of the expected market price of the Company's
common stock of .40 and .42, and a weighted-average expected life of the options
and warrants of 3.25 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options and warrants which have no vesting restrictions and
are fully transferable.  In addition, option valuation models required the input
of highly subjective  assumptions including the expected stock price volatility.
Because the Company's  employee stock options and warrants have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options and warrants.

For purposes of pro forma disclosures,  the estimated fair values of the options
and warrants are  amortized to expense over the options' and  warrants'  vesting
period.  The Company's pro forma information  follows (in thousands,  except for
earnings per share information):

                                                     1996      1995
                                                ------------------------
                                                             
  Pro forma net income                             $3,154      $1,208
                                                             
  Pro forma earnings per share                        .10         .05

                                    F-25

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

12. Stockholders' Equity (continued)

Because FAS 123 is applicable only to options granted subsequent to December 31,
1994, its pro forma effect will not be fully reflected until 1997.

Summaries  of the  Company's  stock  option and  warrant  activity,  and related
information for the years ended December 31 are as follows:
<TABLE>
<CAPTION>

                                    1996                    1995                    1994
                             -------------------    --------------------    --------------------
                                         Weighted                  Weighted                 Weighted
                                         Average                   Average                   Average
                                         Exercise                  Exercise                 Exercise
                               Shares     Price          Shares     Price         Shares      Price
                             ---------------------    ----------------------    ----------------------
<S>                           <C>        <C>           <C>         <C>          <C>         <C>

Outstanding at beginning                                                    
  of year                     5,904,884  $10.52        2,094,094   $  7.62        871,524   $5.31
Granted                         881,000   23.97        4,038,128     11.68      1,282,466    8.92
Granted in connection with                                                             
  Edward S. Gordon 
  acquisition                 1,482,879    5.79                -          -              -      -
Exercised                       342,599    6.97           214,804     4.10         59,896    1.74
Forfeited/canceled               94,606   12.69            12,534     9.46              -       -
                             ---------------------    ----------------------    ----------------------
                                                                            
Outstanding at end of 
   year                       7,831,558  $11.26         5,904,884   $10.52      2,094,094   $7.62
                                                                            
Exercisable at end of 
   year                       4,982,633   $9.02         2,795,972    $9.08      1,080,708   $7.76
                                                                            
Weighted-average fair value of                                                         
  options granted during the                                                           
  year                                    $8.56                          -                        -

</TABLE>


Significant  option and warrant  groups  outstanding  at  December  31, 1996 and
related weighted average price and life information follows:
<TABLE>
<CAPTION>

                                                                       Options/Warrants
               Options/Warrants Outstanding                               Exercisable
-----------------------------------------------------------            ----------------------
                                                       Weighted                   Weighted
                                        Weighted       Average                     Average
       Range of           Number         Average       Exercise         Number    Exercise
   Exercise Prices      Outstanding     Remaining       Price         Exercisable   Price
                                     Contractual Life
-----------------------------------------------------------------    -----------------------
<S>                     <C>              <C>          <C>            <C>          <C> 

$0.00 to $5.00            230,512        3 years      $  2.52          178,771    $  2.40
$5.01 to $10.00         4,429,566        4 years         7.93        3,692,431       7.58
$10.01 to $15.00        2,302,730        5 years        13.71          992,431      13.77
$15.01 to $20.00          300,000        4 years        19.50           60,000      19.50
$20.01 to $25.00           69,750        5 years        21.05                -          -
$25.01 to $29.00          499,000        4 years        27.19           59,000      28.48
                       -------------                 ------------    -----------------------
                                                                       
                        7,831,558                      $11.26        4,982,633    $  9.02
                       =============                 ============    =======================
</TABLE>
                                    F-26

<PAGE>
                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

13. Income Taxes

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:

                                                        December 31
                                                      1996       1995
                                                   ---------------------
                                                      (In thousands)
Deferred tax liabilities:
  Management contracts and related costs           $  (6,835) $       -
  Cost in excess of net assets of acquired businesses (1,144)    (1,192)
  Tax over book depreciation                          (1,572)      (881)
  Partnership earnings differences                    (1,913)    (1,587)
  Compensation and benefits                             (601)  
  Other, net                                            (376)         -
                                                   ---------------------
                                                               
   Total deferred tax liabilities                    (12,441)    (3,660)
                                                               
   Deferred tax assets:                                        
  Management contracts and related costs                   -        715
  Compensation and benefits                                -        903
  Other, net                                              96        365
  NOL acquired in purchase of Paragon                  1,824          -
                                                   ---------------------
                                                               
   Total deferred tax assets                           1,920      1,983
                                                               
   Valuation allowance for deferred tax assets           (96)       (75)
                                                   ---------------------
                                                               
   Deferred tax assets, net of valuation allowance     1,824      1,908
                                                   ---------------------
                                                               
   Net deferred tax (liabilities)                   $(10,617)   $(1,752)
                                                   =====================


                                    F-27

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

13. Income Taxes (continued)

     Significant  components of the  provision  for income taxes,  including the
     income tax provision for extraordinary items, are as follows:

                                             1996       1995       1994
                                        ------------------------------------
                                                   (In thousands)
Current (payable):
  Federal                                  $ 6,889      $4,592    $ 5,354
  State                                        877        (213)       981
                                        ------------------------------------
                                                                 
Total current                                7,766      4,379       6,335
                                                                 
Deferred:                                                        
  Federal                                   (2,298)       (650)    (1,321)
  State                                       (218)       (170)      (174)
                                        ------------------------------------
                                                                 
Total deferred                              (2,516)       (820)    (1,495)
                                        ------------------------------------
                                                                 
                                           $ 5,250     $3,559     $ 4,840
                                        ====================================

The reconciliation of income tax attributable to continuing  operations computed
at the U.S.  statutory  rate to income tax  expense is shown  below  (dollars in
thousands):
<TABLE>
<CAPTION>

                                 1996                   1995                  1994
                         ---------------------  --------------------  ---------------------
                            Amount   Percent      Amount    Percent      Amount   Percent
                         ---------------------  --------------------  ---------------------
<S>                       <C>        <C>         <C>        <C>        <C>        <C>   

Tax at U.S. statutory 
   rate                   $4,835     35.0%       $3,280     35.0%      $4,235     35.0%
Effect of incremental 
   tax rates                   -         -         (102)    (1.1)        (100)    (0.8)
State income taxes, net 
   of Federal tax benefit    688     5.0            367      3.9          490      4.1
Federal tax credits            -       -              -        -          (55)    (0.5)
Effect of permanent 
   differences              (333)   (2.4)            80      0.9          215      1.8
Tax effect of valuation 
   reserve                      -      -             18      0.2           18        -
Other                         60     0.4            (84)     (.9)          37      0.4
                         ---------------------  --------------------  ---------------------
                                                                        
                         $ 5,250    38.0%        $3,559     38.0%      $4,840     40.0%
                         =====================  ====================  =====================
</TABLE>

Income  taxes  paid in 1996,  1995  and 1994  were  $4,756,000,  $7,048,000  and
$5,583,000,  respec tively.  Income taxes currently payable of $1,916,000 (1996)
are  included  in  accrued  and  sundry  liabilities.   Income  taxes  currently
receivable of $1,703,000 (1995) are included in other receivables.

As a result of the acquisition of Paragon Group Properties  Services,  Inc., the
Company acquired use of net operating losses of approximately $5,000,000.  These
losses carryforward to the calendar year ended December 31, 2010. A deferred tax
asset of  $1,800,000  has been  recorded  on  acquisition  to  account  for this
carryforward.  The carryforward is subject to provisions of the Internal Revenue
Code,  which limit the use of the carryforward to the lesser of the value of the
stock  multiplied by the Federal  long-term  tax-exempt rate or the subsidiary's
income.

                                    F-28

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

14. Commitments, Contingencies and Other Matters

Litigation

Gillett Family Trust, et al. v. Insignia  Financial Group, et al. In April 1995,
six  wholly-owned  subsidiaries of Insignia  commenced tender offers for limited
partner interests in six partnerships, Shelter Properties I Limited Partnership;
Shelter  Properties  II Limited  Partnership;  Shelter  Properties  III  Limited
Partnership;  Shelter  Properties IV Limited  Partnership;  Shelter Properties V
Limited   Partnership;   and   Shelter   Properties   VI   Limited   Partnership
(collectively,  "Shelter Properties  Partnerships").  In May 1995, in the United
States  District  Court for the  District  of South  Carolina,  certain  limited
partners of the Shelter Properties  Partnerships  commenced a lawsuit, on behalf
of themselves, on behalf of a putative class of plaintiffs,  and derivatively on
behalf  of  the  partnerships,  challenging  the  actions  taken  by  defendants
(including Insignia, the acquiring entities and certain officers of Insignia) in
the management of the Shelter Properties Partnerships and in connection with the
tender offers and certain other matters.

On September  27, 1995,  the parties  entered into a  stipulation  to settle the
matter. The principal terms of the stipulation required supplemental payments to
tendering  limited partners  aggregating  approximately $6 million to be paid by
Insignia,  which was paid on  September  5, 1996,  together  with the payment of
plaintiff's attorney's fees and expenses.

Chipain,  Tom, et al., v. Walton Street Capital  Acquisition  II, LLC, et al. In
May 1996, Walton Street Capital Acquisition II, MLLC ("Walton Street"), together
with certain  Insignia  affiliates,  commenced tender offers for limited partner
interests  in ten real  estate  limited  partnerships  syndicated  by The Balcor
Company  ("Balcor").  In May 1996,  certain  persons  claiming  to be holders of
limited  partner  interests  commenced  a lawsuit in the  Circuit  Court of Cook
County, Illinois, County Department, Chancery Division, on behalf of themselves,
on behalf of a putative class of plaintiffs,  and, as amended,  derivatively  on
behalf of the  Balcor-syndicated  partnerships,  challenging  the actions of the
defendants  (including  Insignia,  an Insignia  officer and certain  affiliates,
Walton Street and the general partners of the Balcor-syndicated partnerships) in
con nection with the tender offers and certain other matters.

The complaint,  as amended,  contained  allegations  that the tender offers were
inadequate and coercive based, in part, upon information  allegedly  obtained by
Insignia in violation of its  fiduciary  duties.  Defendants  promptly  moved to
dismiss the complaint and on June 5, 1996, the court  dismissed the complaint as
to  Insignia  and  Walton  Street,  with leave to  replead.  On  June 11,  1996,
plaintiffs filed an amended class and derivative action complaint, repeating the
same  allegations  as  in  their  initial  complaint,   and  recasting  some  as
derivative,  rather than direct class  claims.  Defendants  moved to dismiss the
amended  complaint and on June 18, 1996, the court again  dismissed  plaintiffs'
amended complaint as to Insignia and Walton Street.

                                    F-29

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

14. Commitments, Contingencies and Other Matters (continued)

On June 14,  1996,  a second  class and  derivative  suit,  similar in  material
respects  to the  Chipain  litigation,  was filed in the  Circuit  Court of Cook
County, Illinois, County Department, Chancery Division. That complaint, entitled
Sandra Dee v. Walton  Street  Capital  Acquisition  II,  LLC, et al.,  contained
substantially  the same  allegations  as the  Chipain  complaints  and  asserted
addition  ally that the tender offers  violated  certain  state  securities  and
consumer statutes.  Pursuant to the court's orders consolidating the Chipain and
Dee complaints  with another action which does not name Insignia,  a new amended
and  consolidated  class and derivative  action  complaint was filed on July 25,
1996.  The  plaintiffs  in the  Chipain  action are not  parties to this  latest
complaint.

On August 16, 1996, Insignia moved to dismiss the amended and consolidated class
and deriva tive action complaint. The motion was heard by the court on September
27, 1996 at which time the court  granted leave to the plaintiff to (i) withdraw
its pending complaint and (ii) serve a second amended and consolidated class and
derivative  action  complaint.  On October 8,  1996,  plaintiffs  filed a second
amended and  consolidated  class and  derivative  action  complaint  which added
claims of alleged antitrust injury and unjust  enrichment.  On October 25, 1996,
Insignia  moved to dismiss the second  amended  and  consolidated  class  action
complaint.

On December 18, 1996, the court issued a decision granting  Insignia's motion to
dismiss.  By order dated January 7, 1997, the court dismissed the second amended
and  consolidated  class action  complaint with  prejudice.  Plaintiffs  filed a
notice of appeal in the December action on February 14, 1997.

The Company and certain  subsidiaries  are defendants in lawsuits arising in the
ordinary course of business.  Such lawsuits are primarily insured claims arising
from accidents at managed properties. Claims may demand substantial compensatory
and punitive damages.

Management  believes that the  aforementioned  lawsuits will be resolved without
material loss to the Company or its subsidiaries.



                                    F-30

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

14. Commitments, Contingencies and Other Matters (continued)

Environmental Liabilities

Under various Federal and state environmental laws and regulations, a current or
previous  owner or operator of real  estate may be required to  investigate  and
clean up certain  hazardous or toxic substances or petroleum product releases at
the  property,  and may be held  liable  to a govern  mental  entity or to third
parties for property damage and for  investigation and cleanup costs incurred by
such parties in connection with contamination.  In addition,  some environmental
laws  create a lien on the  contaminated  site in favor  of the  government  for
damages and costs it incurs in connection with the  contamination.  The owner or
operator of a site may be liable under  common law to third  parties for damages
and injuries resulting from environmental contamination emanating from the site.
There can be no assurance that the Company, any of its affiliates, or any assets
owned or  controlled  by the Company or any of its  affiliates  currently are in
compliance  with all of such laws and  regulations,  or that the  Company or its
affiliates will not become subject to liabilities that arise in whole or in part
out of any such laws,  rules, or regulations.  Management is not currently aware
of any  environmental  liabilities which are expected to have a material adverse
effect on the Company's operations or financial condition.

Operating Leases

The Company  leases office space and  equipment  under  noncancelable  operating
leases.  Minimum annual rentals under operating leases for the five years ending
after December 31, 1996 are as follows (in thousands):

1997                                                     $  8,996
1998                                                        8,410
1999                                                        7,103
2000                                                        6,542
2001                                                        5,975
Thereafter                                                 21,146
                                                       --------------
                                                         
Total minimum payments required                           $58,172
                                                       ==============




                                    F-31

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

14. Commitments, Contingencies and Other Matters (continued)

Rental  expense  was  approximately  $7,753,000  (1996),  $4,726,000  (1995) and
$2,708,000 (1994).

Certain of the leases are  subject to annual  escalation  based on the  Consumer
Price  Index  or  annual   increases  in  operating   expenses.   The  Company's
headquarters lease contains two renewal options of five years each.

Retirement Plan

The Company established a 401(k) savings plan covering  substantially all of its
employees.  The Company may make a  contribution  equal to 50% of the employees'
contribution  up to a  maxi  mum  of  3%  of  the  employees'  compensation  and
participants  fully vest in employer  contributions  after 7 years.  The Company
expensed  $1,506,000,  $855,000 and $512,000 in contributions to the Plan during
1996, 1995 and 1994, respectively.

Department of Housing and Urban Development ("HUD")

Approximately  16% of the residential  units managed by the Company were housing
projects financed under various government  programs  administered by the United
States Department of Housing and Urban Development ("HUD") As a result,  certain
aspects of Insignia  operations  are subject to  regulation by HUD. The programs
administered by HUD are currently under review by Congress. The proposed changes
to the HUD program would provide  rental  subsidy  directly to the tenant rather
than the project.  This would allow  greater  freedom in the selection of rental
housing.  The  tenant  can take this  "rent  voucher"  and apply for lease at an
apartment  he selects.  Additionally,  the rental  vouchers may provide for less
assistance  than is currently in place.  It is possible that the  combination of
these  proposed  changes  could result in lower rental  revenue and project cash
flow from which  management  and other fees are  derived;  however,  the current
proposals are not sufficiently specific to determine their actual impact on such
fees.

Property Dispositions

In  November  1994,  the  Company  acquired  substantially  all  of  the  assets
(consisting  primarily of management  contracts) of Allegiance  Realty Group,  a
wholly owned subsidiary of the Balcor Company, Inc. ("Balcor"). Balcor announced
in the  second  quarter  of 1996 its  intention  to sell a large  portion of the
properties  covered by these management  contracts.  The Company entered into an
agreement with Balcor whereby an advisory fee would be paid to the Company based
on the  property  sales for  services  rendered in the sales  transactions.  The
Advisory Agreements have terms of one year and the fees range from .75% to 1.25%
of the sales price of the property. The fees are and will continue to be paid in
cash after the close of each transaction.  Presently, all unamortized management
contract  costs,  associated  with the completed  property sales have been fully
recovered.  Management believes that the unamortized  purchase price relating to
properties  managed  for Balcor  properly  reflects  the asset value and that no
impairment exists.

                                    F-32

<PAGE>
                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

14. Commitments, Contingencies and Other Matters (continued)

Commitments

In connection with the NPI acquisition, Insignia assumed outstanding commitments
under arrangements established prior to the acquisition.  Under the terms of the
arrangements,  Insignia  may be  obligated  to loan up to  $500,000  to  certain
partnerships   ($2,600,000   in   aggregate)   and  $150,000  to  certain  other
partnerships  ($6,000,000  in aggregate)  at interest  rates not to exceed prime
plus 2%. At  December  31,  1996,  no amounts  were  outstanding  related to the
arrangements.


15. Related Party Transactions

The Company holds a 19.1% limited  partnership  interest in  Metropolitan  Asset
Enhancement,  L.P.  ("MAE").  MAE was formed prior to 1991  originally to be the
principal   vehicle  for  acquiring   general   partner   interests  in  limited
partnerships  owning real estate and real  estate  related  assets that would be
managed or serviced by the Company.  The Chairman,  Chief Executive Officer, and
President of the Company is the sole  stockholder of the general partner of MAE,
which has a 1% general partnership interest in MAE.

In August 1993, the Company  entered into an agreement with MAE whereby:  1) the
Company  agreed to assist MAE as its advisor and agent in connection  with MAE's
acquisition,   asset  man  agement,  property  management,   and  securitization
activities and in connection  therewith to per form all services relating to the
foregoing;  2) the Company  agreed to render to MAE full  invest  ment  banking,
financial advisory,  recapitalization,  asset restructuring,  securitization and
mortgage  banking  services  (as sole  compensation  for the  provision  of such
services,  the Company receives Incentive  Management Fees and Transaction Fees,
as defined in this  agreement);  and 3) the Company and MAE agreed that,  in the
event either obtains an  opportunity  to acquire  interests in real estate or in
entities which own or control real estate, the Company will have the first right
to acquire any such interests. In addition, the Company and MAE have also agreed
that, if the Company elects not to acquire such interests, but MAE does elect to
acquire such  interests  and the Company  elects to provide any financing to MAE
for such acquisition,  then such financing shall be by means of loans, that will
bear  interest at a rate equal to the rate then paid, or estimated it would pay,
on any revolving credit facility.

During 1996, 1995 and 1994, the Company was paid investment  banking fees in the
amount of $860,000,  $808,000 and $382,000 in connection with services  rendered
to MAE and its various subsidiaries.

The  Company  has made loans to MAE or an MAE  affiliate.  All  advances  accrue
interest at prime plus 1% and  repayment is made  through cash  generated by the
underlying property or investment. The outstanding balance of these advances was
$529,000 for 1996 and $613,000 for 1995,  which are included in notes receivable
from affiliates.


                                    F-33

<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

16. Industry Segments

The Company  currently  operates  in  principally  two  business  segments:  (1)
property and asset management and (2) financial services. The property and asset
management  business  segment  manages  multifamily,  retail and commercial real
estate  properties  and  provides  asset  management,   investor  relations  and
partnership accounting services for affiliates and non-affiliates. The financial
services business segment originates loans on commercial  properties and brokers
real  estate  and  leasing  for  both  affiliates  and  non-affiliates;  and  is
responsible for merger and acquisition  activity for the Company,  joint venture
formations,  portfolio  acquisitions,  limited partner interest acquisitions and
real estate workouts.

The following table summarizes certain information by industry segment:

                                              1996        1995        1994
                                          ------------------------------------
                                                     (In thousands)
Identifiable assets:
  Property and asset management             $251,764    $106,107   $  82,823
  Financial services                             908       2,877       3,852
  Corporate                                   59,851      75,952      49,671
  Real estate                                179,879      60,473      37,926
                                          ------------------------------------
                                                                    
                                            $492,402    $245,409    $174,272
                                          ====================================

Gross revenues and equity earnings:                                 
  Property and asset management             $205,574    $110,833   $  64,208
  Financial services                           9,309       6,842       9,392
  Corporate                                    5,744       5,357       1,853
  Real estate                                 10,037       2,461         113
                                          ------------------------------------
                                                                    
                                            $230,664    $125,493   $  75,566
                                          ====================================

Operating profit (loss):                                            
  Property and asset management            $  28,168   $  22,676   $  16,706
  Financial services                          (1,119)     (3,509)        400
  Real estate, net of minority interest        5,670       2,314           -
                                          ------------------------------------
                                                                    
                                              32,719      21,481      17,106
  Corporate expense, net                      (3,043)     (4,339)     (4,263)
  Interest expense - corporate               (12,918)     (7,049)       (742)
  Interest expense - apartment properties     (1,812)          -           -
                                          ------------------------------------
                                                                    
Income before income taxes and                                      
  extraordinary item                         $  14,946   $  10,093   $  12,101
                                          ====================================


                                    F-34

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

16. Industry Segments (continued)

                                              1996        1995        1994
                                          ------------------------------------
                                                     (In thousands)
Depreciation and amortization expense:                              
  Property and asset management            $  22,478   $  12,908   $    7,494
  Financial services                              35          40           23
  Corporate                                      518         545          449
                                          ------------------------------------
                                                                    
                                           $  23,031   $  13,493   $    7,966
                                          ====================================

Capital expenditures:                                               
  Property and asset management            $    6,243  $    3,189  $    2,660
  Financial services                              68           16         125
  Corporate                                      469          202       1,116
  Real estate                                    732           -           -
                                          ------------------------------------
                                                                    
                                           $    7,512  $    3,407  $    3,901
                                          ====================================


Corporate assets include cash, receivables, property and equipment, and costs in
excess  of  net  assets  of  acquired  businesses.  Corporate  income  consisted
primarily  of interest  income on short-  term  investments.  Corporate  expense
included general corporate administration and professional fees.

Within the financial  services  segment,  the mortgage banking operation derived
approximately  $731,350 (1996),  $1,862,000  (1995) and $1,878,000 (1994) of its
revenues under an exclusive representation of a major life insurance company.

Property  and  asset  management   revenues  include   $16,189,000   (1996)  and
$20,165,000 (1995) of property management revenues from properties controlled by
The Balcor  Company and  $1,520,000  (1996),  $1,190,000  (1995) and  $1,061,000
(1994) of amounts received from an agency that serves as an insurance broker for
various partnerships managed by the Company.


                                    F-35

<PAGE>
                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

17. Quarterly Financial Data  (Unaudited)
<TABLE>
<CAPTION>

                                                       1996
                           ------------------------------------------------------------
                                          Fourth      Third      Second       First
                              Total      Quarter     Quarter     Quarter     Quarter
                           ------------------------------------------------------------
                            (In thousands, except per share data)
<S>                         <C>          <C>         <C>        <C>         <C> 
                                                                            
Net revenues                $227,074     $77,870     $65,885    $43,098     $40,221
Net EBITDA                    47,713      16,222       9,998     11,654       9,839
Equity earnings                3,590         518         732        886       1,454
Income before                                                           
  extraordinary item           9,266       4,246         252      2,648       2,120
Net income                     8,564       3,544         252      2,648       2,120
                                                                            
Per common share:
  Income before extraordinary
   items                       $.29        $.13        $.01       $.08        $.07
  Net income                    .27         .11         .01        .08         .07


</TABLE>

Third  quarter  results  of 1996  include a  $935,000  charge  for  unsuccessful
acquisition costs.

<TABLE>
<CAPTION>

                                                       1995
                           ------------------------------------------------------------
                                          Fourth      Third      Second       First
                              Total      Quarter     Quarter     Quarter     Quarter
                           ------------------------------------------------------------
                            (In thousands, except per share data)
<S>                         <C>          <C>         <C>        <C>         <C> 
                                                                            
Net revenues                $123,032     $36,233     $31,092    $29,146     $26,561
Net EBITDA                    24,622       5,776       5,605      6,415       6,826
Equity earnings                2,461          83         700      1,216         462
Income before                                                           
  extraordinary items          6,258         954       1,030      1,953       2,321
Net income                     5,806         502       1,030      1,953       2,321
                                                                            
Per common share:
  Income before extraordinary
   items                       $.22        $.02        $.03       $.08        $.09
  Net income                    .20         .01         .03        .08         .09


</TABLE>

Second quarter  results of 1995 include a $1,000,000  charge for the termination
of an agreement.

                                    F-36

<PAGE>

                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)

18. Fair Values of Financial Instruments

The fair  value  estimates  of  financial  instruments  presented  below are not
necessarily indicative of the amounts the Company might pay or receive in actual
market  transactions.  Potential  taxes  and  other  taxes  have  also  not been
considered in estimating fair value. The carrying amount reported on the balance
sheet for cash and  restricted  cash  approximates  its fair value.  Receivables
reported  on  the  balance  sheet  consist  of  property  and  lease  commission
receivables,  income tax  refunds,  and various note  receivables.  The property
receivables  and  income  tax  refunds  approximate  their  fair  values.  Lease
commissions  receivable are carried at their discounted present value, therefore
the  carrying  amount and fair value amount are the same.  The notes  receivable
earn  interest at either fixed or variable  rates.  Interest  rates  approximate
current market interest rates for similar instruments,  therefore,  the carrying
amount  approximates their fair value. Notes payable were analyzed  individually
to verify that  carrying  value is fair value.  The fixed rate note balances are
insignificant  and have no quotable  market prices,  however,  carrying value is
believed to approx imate market value.  The large revolving credit facility note
carries a variable rate of interest, and therefore,  its carrying value adjusted
for the prepaid points  approximates its fair value. The Trust Based Convertible
Preferred  Securities were issued in November 1996 and the Company  believes the
fair value has not changed significantly since issuance.

Summary

The carrying amounts and fair values of the Company's  financial  instruments at
December 31, are as follows (amounts in thousands):

                                             1996                 1995
                                     --------------------- -------------------
                                      Carrying     Fair     Carrying   Fair
                                       Amount     Value      Amount    Value
                                     --------------------- -------------------

Cash and cash equivalents            $  54,614  $  54,614    $49,846   $49,846
Restricted cash                              -          -      6,282     6,282
Receivables                             12,668     12,668     26,445    26,445
Commissions receivable                  33,372     33,372          -         -
Notes payable                           49,840     54,864     32,996    38,896
Trust based convertible preferred secur149,500    149,500          -         -
Subordinated convertible note payable        -          -     10,000    21,389
Redeemable cumulative convertible                                     
  preferred stock                            -          -     15,000    28,875




                                    F-37

<PAGE>

                                  EXHIBIT INDEX
EXHIBIT 
NUMBER                                       EXHIBIT
 
3.1  Certificate  of  Incorporation  of  Insignia   Financial  Group,  Inc.,  as
     amended.(i)

3.2  By-Laws of Insignia Financial Group, Inc.(i)

4.1  Certificate of  Designation of Series A Preferred  Stock Par Value $.01 Per
     Share of Insignia Financial Group, Inc.(iii)

4.2  Certificate  of  Correction  to  Certificate  of  Designation  of  Series A
     Preferred  Stock Par  Value  $.01 Per Share of  Insignia  Financial  Group,
     Inc.(iii)

4.3  Securities  Purchase  Agreement  dated  as of May  27,  1992  by and  among
     Insignia Financial Group, Inc.,  Metropolitan  Acquisition Partners V, L.P.
     and IFG Limited  Liability  Company.  Incorporated  by reference to Exhibit
     28.3 to Form 8-K of Registrant dated June 2, 1992.

4.4  Warrant  Agreement dated as of January 17, 1995 between Insignia  Financial
     Group, Inc. and APTS Partners, L.P.(vi)

4.5  Certificate  of  Designation,  Preferences  and Rights of the 7.5% Step- Up
     Rate Cumulative  Convertible  Preferred Stock of Insignia  Financial Group,
     Inc.(vi)

4.6  Warrant No. 32 to purchase 50,000 shares of Insignia  Financial Group, Inc.
     Class A Common Stock issued to Marvin Chudnoff (vii)

4.7  Warrant  issued  to APTS  Partners,  L.P.  to  purchase  300,000  shares of
     Insignia Financial Group, Inc. Class A Common Stock. (vii)

4.8  Warrant  issued  to APTS  Partners,  L.P.  to  purchase  137,500  shares of
     Insignia Financial Group, Inc. Class A Common Stock. (vii)

4.9  Warrant No. 12 to purchase 46,800 shares of Insignia  Financial Group, Inc.
     Class A Common Stock issued to The J & P O'Donnell Revocable Trust. (vii)

4.10 Warrant No. 13 to purchase 23,400 shares of Insignia  Financial Group, Inc.
     Class A Common Stock issued to The D & S Grant Revocable Trust. (vii)

4.11 Warrant No. 14 to purchase 23,400 shares of Insignia  Financial Group, Inc.
     Class A Common Stock issued to The J & C Westling Revocable Trust. (vii)

4.12 Warrant No. 15 to purchase 23,400 shares of Insignia  Financial Group, Inc.
     Class A Common Stock issued to Douglas C. Neff. (vii)

4.13 Warrant No. 16 to purchase 13,000 shares of Insignia  Financial Group, Inc.
     Class A Common Stock issued to John G. Combs. (vii)

4.14 Convertible  Promissory Note from Insignia Financial Group, Inc. to Douglas
     C. Neff in the amount of $400,000. (vii)

4.15 Convertible  Promissory Note from Insignia Financial Group, Inc. to The J &
     C Westling Revocable Trust in the amount of $400,000. (vii)

4.16 Convertible  Promissory Note from Insignia Financial Group, Inc. to The D &
     S Grant Revocable Trust in the amount of $400,000. (vii)

4.17 Convertible  Promissory Note from Insignia Financial Group, Inc. to The J &
     P O'Donnell Revocable Trust in the amount of $800,000. (vii)

4.18 Warrant No. 33 to purchase 63,750 shares of Insignia  Financial Group, Inc.
     Class A Common Stock issued to Gotham Partners, L.P. (vii)

4.19 Warrant No. 34 to purchase 38,958 shares of Insignia  Financial Group, Inc.
     Class A Common Stock issued to APTS V, L.L.C. (vii)

4.20 Declaration of Trust of Insignia  Financing I, dated as of October 4, 1996,
     among First Union Bank of Delaware, as Delaware Trusteee, and John K. Lines
     and Ronald Uretta, Trustees incorporated herein by


<PAGE>

     reference  to Exhibit 4.1 of Form S-3 of the  Registrant  filed on December
     10, 1996.

4.21 Amended and Restated Declaration of Trust of Insignia Financial I, dated as
     of November 1, 1996,  among  Insignia  Financial  Group,  Inc., as Sponsor,
     First Union National Bank of South  Carolina,  as Property  Trustee,  First
     Union Bank of Delaware,  as Delaware Trustee and Andrew L. Farkas,  John K.
     Lines  and  Ronald  Uretta  as  Regular  Trustees  incorporated  herein  by
     reference  to Exhibit 4.2 of Form S-3 of the  Registrant  filed on December
     10, 1996.

4.22 Indenture for the 6.5%  Convertible  Subordinated  Debentures,  dated as of
     November 1, 1996,  between Insignia  Financial Group,  Inc., as Issuer, and
     First Union National Bank of South Carolina, as Trustee incorporated herein
     by reference to Exhibit 4.3 of Form S-3 of the Registrant filed on December
     10, 1996.

4.23 Warrant  Agreement  dated as of June 30, 1996 by and between Paragon Group,
     L.P. and Insignia Financial Group, Inc. incorporated herein by reference to
     Exhibit 4.1 of Form 8-K of Registrant filed on July 15, 1996.

4.24 Warrant No. 38 to Purchase up to 50,000  Shares of Class A Common  Stock of
     Insignia  Financial Group, Inc. issued to Paragon Group, L.P.  incorporated
     herein by reference to Exhibit 4.2 of Form 8-K of Registrant  filed on July
     15, 1996.

10.1 Asset Purchase Agreement dated September 28, 1994 among Insignia Allegiance
     Management,  Inc., Allegiance Realty Group, Inc., certain ARG subsidiaries,
     and The Balcor  Company,  incorporated  by reference to Exhibit 2.1 to Form
     8-K of Registrant on November 4, 1994.

10.2 Stock and Asset  Purchase  Agreement  dated  December  8, 1994 by and among
     Insignia Financial Group, Inc., Insignia Management  Corporation,  MAE-ICC,
     Inc., Gordon Realty, Inc., GII Realty, Inc., LP Acceptance Corporation,  LP
     2  Acceptance  Corporation,  LP 3 Acceptance  Corporation,  LP 6 Acceptance
     Corporation,  Coventry  Properties,  Inc. and  Partnership  Services,  Inc.
     incorporated  by  reference to Exhibits of Schedule  13D of  Registrant  on
     December 19, 1994.

10.3 Insignia 1992 Stock  Incentive  Plan, as amended through March 28, 1994 and
     November  13,  1995.  Incorporated  by  reference  to  Exhibit  B to  Proxy
     Statement of Registrant filed on April 22, 1996.

10.4 Stockholders  Agreement,  dated May 27,  1992,  by and  among  Metropolitan
     Acquisition Partners IV, L.P.,  Metropolitan  Acquisition Partners V, L.P.,
     Andrew L. Farkas,  IFG Limited Liability  Company,  and Insignia  Financial
     Group, Inc.(iv)

10.5 Registration  Rights  Agreement,  dated May 27,  1992,  by and  between IFG
     Limited Liability Company and Insignia Financial Group, Inc.(iv)

10.6 Registration  Rights  Agreement,  dated  April  15,  1993,  by and  between
     Metropolitan  Acquisition Partners,  IV, L.P. and Insignia Financial Group,
     Inc.  incorporated  by reference to Exhibit 10.41 to Form S-1 of Registrant
     dated August 16, 1993.

10.7 Registration  Rights  Agreement,  dated  April  15,  1993,  by and  between
     Metropolitan  Acquisition  Partners V, L.P. and Insignia  Financial  Group,
     Inc.  incorporated  by reference to Exhibit 10.42 to Form S-1 of Registrant
     dated August 16, 1993.

10.8 Registration  Rights Agreement,  dated June 30, 1993, by and among Security
     Properties   Investments,   Inc.  and  Insignia   Financial   Group,   Inc.
     incorporated  by reference to Exhibit 2.2 of Form 8-K of  Registrant  dated
     July 14, 1993.

10.9 Agreement  dated  April  15,  1993  by  and  between   Metropolitan   Asset
     Enhancement, L.P. and Insignia Financial Group, Inc. incorporated by


<PAGE>

     reference to Exhibit 10.43 to Form S-1 of Registrant dated August 16, 1993.

10.10Employment  Agreement  dated  September  1, 1993,  by and between  Insignia
     Financial  Group,  Inc. and Andrew L. Farkas  incorporated  by reference to
     Exhibit 10.44 to Amendment No. 1 to Form S-1 of Registrant  dated September
     23, 1993.

10.11Employment  Agreement  dated  September  1, 1993,  by and between  Insignia
     Financial  Group,  Inc.  and James A. Aston  incorporated  by  reference to
     Exhibit 10.59 to Amendment No. 1 to Form S-1 of Registrant  dated September
     23, 1993.

10.12Employment  Agreement  dated  September  1, 1993,  by and between  Insignia
     Financial Group, Inc. and Jeffrey L. Goldberg  incorporated by reference to
     Exhibit 10.60 to Amendment No. 1 to Form S-1 of Registrant  dated September
     23, 1993.

10.13Employment  Agreement  dated  September  1, 1993,  by and between  Insignia
     Financial  Group,  Inc.  and Ronald  Uretta  incorporated  by  reference to
     Exhibit 10.61 to Amendment No. 1 to Form S-1 of Registrant  dated September
     23, 1993.

10.14Employment  Agreement  dated  September  1, 1993,  by and between  Insignia
     Financial  Group,  Inc.  and John F. Jacques  incorporated  by reference to
     Exhibit 10.45 to Amendment No. 1 to Form S-1 of Registrant  dated September
     23, 1993.

10.15Stock  Exchange  Agreement and Plan of  Reorganization  made June 30, 1993,
     among Security  Properties  Investments,  Inc.,  Insignia  Financial Group,
     Inc., and ISPMC, Inc.  incorporated by reference to Exhibit 2.2 of Form 8-K
     of Registrant dated July 14, 1993.

10.16Registration  Rights  Agreement  dated  as of June  20,  1993 by and  among
     Security  Properties  Investments,  Inc. and Insignia Financial Group, Inc.
     incorporated  by reference to Exhibit 2.3 to Form 8-K of  Registrant  dated
     July 14, 1993.

10.17Stock  Pledge  Agreement  dated  as of  June  30,  1993,  between  Security
     Properties   Investments,   Inc.  and  Insignia   Financial   Group,   Inc.
     incorporated  by reference to Exhibit 2.3 of Form 8-K of  Registrant  dated
     July 14, 1993.

10.18Promissory  Note dated as of  December  14,  1994 of  Gleichman  & Company,
     Housing/State of the Art, Inc. and Pamela W. Gleichman in favor of Insignia
     Financial Group, Inc. in the amount of $400,000.(vi)

10.19Promissory  Note dated March 18, 1994 of RTL  Holdings,  Ltd. in the amount
     of $400,000 in favor of Insignia Financial Group, Inc.(vi)

10.20Lease  Agreement by and between 15 S. Main,  Inc.  and  Insignia  Financial
     Group, Inc. dated May 18, 1994.(vi)

10.21Lease  Agreement by and between  Metropolitan  Life  Insurance  Company and
     Insignia Financial Group, Inc. dated October 13, 1994.(vi)

10.22Amended  and  Restated  Purchase  Agreement  by and  among  SHL  Properties
     Acquisition  Partners,  Ltd.  and  SHL  Properties  Management,  Ltd.,  SHL
     Properties  Acquisition  Corp. II, SHL Properties  Acquisition  Corp.  III,
     certain shareholders,  IH Limited Partnership and Insignia Financial Group,
     Inc. dated March 18, 1994.(vi)

10.23Purchase  Agreement by and among Hampton  Realty  Partners,  L.P.,  Hampton
     UREF Acquisition Corp., IH, Inc., Davidson Diversified Properties, Inc. and
     Insignia Management Group, L.P. dated August 8, 1994.(vi)

10.24Asset Purchase Agreement by and among Insignia  Commercial Group, Inc., The
     Rooney Company and Insignia Financial Group, Inc. dated May 31, 1994.(vi)
 

<PAGE>

10.25Stock  Purchase  Agreement  by  and  among  MAE  GP  Corporation,  Insignia
     Management  Corporation,  Insignia  Financial Group,  Inc.,  Capital Realty
     Group  Management,  Inc.,  Capital Realty Group Properties,  Inc.,  Capital
     Realty  Group   Properties  II,  Inc.,   Capital  Realty  Group  Corp.  and
     International Property Management, Inc. dated September 21, 1994.(vi)

10.26Stock and Warrant  Purchase  Agreement  dated as of January 17, 1995 by and
     between Insignia Financial Group, Inc. and APTS Partners, L.P.(vi)

10.27Employment  Agreement as of January 1, 1994 by and among Insignia Financial
     Group, Inc. and Frank M. Garrison.(vi)

10.28Partnership  Units  Purchase  Agreement  dated as of August 17,  1995 among
     Registrant, Insignia NPI, L.L.C., Riverside Drive L.L.C., DeForest Ventures
     I L.P.,  DeForest Ventures II, L.P., QAL Associates,  QAL II Associates and
     the other parties named therein incorporated herein by reference to Exhibit
     No. 2.1 to Form 8-K of Registrant dated August 17, 1995.

10.29Management   Purchase   Agreement   dated  as  of  August  17,  1995  among
     Registrant,  Insignia  Management  Corporation,  Insignia Management Group,
     L.P.,  Insignia NPI, L.L.C.,  and other parties named therein  incorporated
     herein by  reference  to Exhibit  No. 2.2 to Form 8-K of  Registrant  dated
     August 17, 1995.

10.30Stock  Purchase  Agreement  dated as of August 17,  1995 among  Registrant,
     IFGP Corporation and the other parties named therein incorporated herein by
     reference  to Exhibit No. 2.3 to Form 8-K of  Registrant  dated  August 17,
     1995.

10.31Limited Liability  Company Agreement of Riverside Drive L.L.C.  dated as of
     August 17, 1995 between Insignia NIP, L.L.C. and QALA V incorporated herein
     by reference to Exhibit No. 2.4 to Form 8-K of Registrant  dated August 17,
     1995.

10.32Master  Indemnity  Agreement dated as of August 17, 1995 among  Registrant,
     Insignia NPI, L.L.C., Insignia Management Corporation,  Insignia Management
     Group,  L.P.,  Riverside Drive L.L.C.,  and the other parties named therein
     incorporated  herein  by  reference  to  Exhibit  No.  2.5 to  Form  8-K of
     Registrant dated August 17, 1995.

10.33Purchase   Agreement  dated  September  5,  1995  by  and  between  Douglas
     Elliman-Gibbon  & Ives and  Insignia  Management  Services-New  York,  Inc.
     incorporated  herein  by  reference  to  Exhibit  No.  2.1 to  Form  8-K of
     Registrant dated September 5, 1995.

10.34Option  Exercise and Stock Purchase  Agreement  dated  September 5, 1995 by
     and between Neil Kreisel and Insignia  Management  Services-New  York, Inc.
     incorporated  herein  by  reference  to  Exhibit  No.  2.2 to  Form  8-K of
     Registrant dated September 5, 1995.

10.35Employment  Agreement dated as of September 5, 1995 by and between Insignia
     Financial  Group,  Inc.,   Kreisel  Company,   Inc.  and  Neil  J.  Kreisel
     incorporated  herein  by  reference  to  Exhibit  No.  2.3 to  Form  8-K of
     Registrant dated September 5, 1995.

10.36Purchasing  Services  Agreement  dated as of November  30, 1995 between HFS
     Incorporated  and Compleat  Resource  Group,  Inc.  incorporated  herein by
     reference to Exhibit No. 10.1 to Form 8-K of Registrant  dated December 19,
     1995.

10.37Stock  Purchase  Agreement  dated  as of  November  30,  1995  between  HFS
     Incorporated and Insignia  Financial  Group,  Inc.  incorporated  herein by
     reference to Exhibit No. 10.2 to Form 8-K of Registrant  dated December 19,
     1995.

10.38Registration  Rights  Agreement  dated as of November  30, 1995 between HFS
     Incorporated and Insignia Financial Group, Inc. incorporated


<PAGE>

     herein by  reference  to Exhibit No. 10.3 to Form 8-K of  Registrant  dated
     December 19, 1995.

10.39Credit  Agreement  dated as of  December  11,  1995 by and  among  Insignia
     Financial Group, Inc. as Borrower,  the Lenders referred to therein,  First
     Union  National Bank of South Carolina as  Administrative  Agent and Lehman
     Commercial  Paper,  Inc.  as  Syndication  Agent  incorporated   herein  by
     reference to Exhibit No. 10.1 to Form 8-K of  Registrant  dated January 29,
     1996.

10.40Form of Indemnification  Agreement by and between Insignia Financial Group,
     Inc. and each of its Directors  and Executive  Officers as of May 25, 1995.
     (vii)

10.41Agreement  made and entered into as of the 16th day of August 1995,  by and
     among Insignia  Financial Group,  Inc.,  Insignia  Management Group,  L.P.,
     Pamela W. Gleichman,  Gleichman & Company, Inc.,  Housing/State of the Art,
     Inc., and Franklin Oxford Associates. (vii)

10.42First  Amendment to  Agreement  made and entered into as of the 16th day of
     August 1995 by and among Insignia, IMG and Sellers. (vii)

10.43Amended and Restated  Promissory Note dated as of December 14, 1994 wherein
     Gleichman  & Company  promises  to pay  Insignia  the  principal  amount of
     $428,312.74. (vii)

10.44Management  Rights  Agreement  made and entered  into as of the 15th day of
     September  1995 by and  among  Insignia  Financial  Group,  Inc.,  Insignia
     Management  Group,  L.P.,  PropSys,  Compass  Ventures,  Inc.,  Stephen  L.
     Griswold and Lee F. Griswold. (vii)

10.451995  Registration  Right  Agreement  dated as of May 1,  1995 by and among
     Insignia Financial Group, Inc. and The D & S Grant Revocable Trust. (vii)

10.461995  Registration  Right  Agreement  dated as of May 1,  1995 by and among
     Insignia  Financial  Group,  Inc. and The J & P O'Donnell  Revocable Trust.
     (vii)

10.471995  Registration  Right  Agreement  dated as of May 1,  1995 by and among
     Insignia Financial Group, Inc. and Douglas C. Neff. (vii)

10.481995  Registration  Right  Agreement  dated as of May 1,  1995 by and among
     Insignia  Financial  Group,  Inc. and The J & C Westling  Revocable  Trust.
     (vii)

10.491995  Registration  Right  Agreement  dated as of May 1,  1995 by and among
     Insignia Financial Group, Inc. and John G. Combs. (vii)

10.50Registration  Rights  Agreement  dated  as of May 10,  1995 by and  between
     Insignia  Financial  Group,  Inc. and APTS  Partners,  L.P.  regarding  the
     warrant to purchase 300,000 shares of Insignia  Financial Group, Inc. Class
     A Common Stock. (vii)

10.51Registration  Rights  Agreement  dated  as of May 10,  1995 by and  between
     Insignia  Financial  Group,  Inc. and APTS  Partners,  L.P.  regarding  the
     warrant to purchase 137,500 shares of Insignia  Financial Group, Inc. Class
     A Common Stock. (vii)

10.52Amended and  Restated  Registration  Rights  Agreement  dated as of May 10,
     1995 by and between James A. Aston and Insignia Financial Group, Inc. (vii)

10.53Amended and  Restated  Registration  Rights  Agreement  dated as of May 10,
     1995 by and between Frank M. Garrison and Insignia  Financial  Group,  Inc.
     (vii)

10.54Amended and  Restated  Registration  Rights  Agreement  dated as of May 10,
     1995 by and between Jeffrey L. Goldberg and Insignia  Financial Group, Inc.
     (vii)

 

<PAGE>

10.55Amended and  Restated  Registration  Rights  Agreement  dated as of May 10,
     1995 by and between  John F.  Jacques and Insignia  Financial  Group,  Inc.
     (vii)

10.56Amended and  Restated  Registration  Rights  Agreement  dated as of May 10,
     1995 by and between Ronald Uretta and Insignia Financial Group, Inc. (vii)

10.57Stock  Purchase  Agreement  made as of the  28th  day of  June  1995 by and
     between Farallon Capital Partners, L.P. and M-VI Limited Liability Company.
     (vii)

10.58Stock  Purchase  Agreement  made as of the  28th  day of  June  1995 by and
     between  Farallon  Capital  Institutional  Partners,  L.P. and M-VI Limited
     Liability Company. (vii)

10.59Stock  Purchase  Agreement  made as of the  28th  day of  June  1995 by and
     between Farallon Capital  Institutional  Partners II, L.P. and M-VI Limited
     Liability Company. (vii)

10.60Stock  Purchase  Agreement  made as of the  28th  day of  June  1995 by and
     between Tinicum Partners, L.P. and M-VI Limited Liability Company. (vii)

10.61Registration  Rights  Agreement  made as of June 28, 1995 between  Insignia
     Financial Group, Inc. and Farallon Capital Partners, L.P. (vii)

10.62Registration  Rights  Agreement  made as of June 28, 1995 between  Insignia
     Financial Group,  Inc. and Farallon Capital  Institutional  Partners,  L.P.
     (vii)

10.63Registration  Rights  Agreement  made as of June 28, 1995 between  Insignia
     Financial Group, Inc. and Farallon Capital Institutional  Partners II, L.P.
     (vii)

10.64Registration  Rights  Agreement  made as of June 28, 1995 between  Insignia
     Financial Group, Inc. and Tinicum Partners, L.P. (vii)

10.65Stock  Purchase  Agreement  made as of June 28,  1995 by and  between  APTS
     Partners IV-AB, L.P. and M-VI Limited Liability Company. (vii)

10.66Registration  Rights  Agreement  made as of June 28, 1995 between  Insignia
     Financial Group, Inc. and APTS IV-AB, L.P. (vii)

10.67Stock Purchase  Agreement made as of June 28, 1995 by and between Blackacre
     Capital Group, L.P. and M-VI Limited Liability Company. (vii)

10.68Registration  Rights  Agreement  made as of June 28, 1995 between  Insignia
     Financial Group, Inc. and Blackacre Capital Group, L.P. (vii)

10.69Note  Purchase  Agreement  made as of the 7th day of June 1995 by and among
     APTS Partners III, L.P., Gordon  Investments,  Inc. and Insignia  Financial
     Group, Inc. (vii)

10.70Registration  Rights  Agreement  dated as of June 7, 1995 between  Insignia
     Financial Group, Inc. and APTS Partners III, L.P. (vii)

10.71Separation  Agreement  dated as of April 20, 1995 by and between  Marvin H.
     Chudnoff and Insignia Financial Group, Inc. (vii)

10.72Employment  Agreement  dated as of July 20,  1995 by and  between  Insignia
     Financial Group, Inc. and Thomas R. Shuler. (vii)

10.73Amendment No. 1 dated as of February 19, 1996 to the  Employment  Agreement
     by and between Insignia Financial Group, Inc. and Thomas R. Shuler. (vii)

10.74Amendment  No. 1 dated as of April 1, 1995 to the  Employment  Agreement by
     and between Insignia Financial Group, Inc. and James A. Aston. (vii)

10.75Amendment  No. 1 dated as of June 20, 1995 to the  Employment  Agreement by
     and between Insignia Financial Group, Inc. and Andrew L. Farkas. (vii)

 

<PAGE>

10.76Amendment  No. 1 dated as of April 1, 1995 to the  Employment  Agreement by
     and between Insignia Financial Group, Inc. and Frank M. Garrison. (vii)

10.77Amendment  No. 1 dated as of April 1, 1995 to the  Employment  Agreement by
     and between Insignia Financial Group, Inc. and John F. Jacques. (vii)

10.78Amendment  No. 1 dated as of April 1, 1995 to the  Employment  Agreement by
     and between Insignia Financial Group, Inc. and Ronald Uretta. (vii)

10.79Registration  Rights  Agreement dated as of December 5, 1995 by and between
     Insignia Financial Group, Inc. and APTS V, L.L.C. (vii)

10.80Assignment  and  Consent  Agreement  dated as of  December  15, 1995 by and
     among APTS Partners IV-AB, L.P.,  Blackacre Capital Group,  L.P.,  Farallon
     Capital  Institutional  Partners,   L.P.,  Farallon  Capital  Institutional
     Partners II, L.P., Farallon Capital Partners, L.P., Tinicum Partners, L.P.,
     Cerberus  Partners,  L.P., Ultra Cerberus Ltd., Pequod  Investments,  L.P.,
     Cerberus  International Ltd. of Stockholders  Agreement dated as of May 27,
     1992 by and among Metropolitan  Acquisition Partners IV, L.P., Metropolitan
     Acquisition  Partners V, L.P.,  Andrew L. Farkas,  M-VI  Limited  Liability
     Company and Insignia Financial Group, Inc. (vii)

10.81Assignment  and  Consent  Agreement  dated as of  December  15, 1995 by and
     among Metropolitan Acquisition Partners IV, L.P., Insignia Financial Group,
     Inc.,  Andrew L. Farkas,  Charterhouse  Equity Partners,  L.P.,  Northern &
     Midland Nominees Limited and M-VI Limited Liability Company. (vii)

10.82Settlement   Agreement   by  and  between  IAP  GP   Corporation,   MAE  GP
     Corporation, Insignia Financial Group, Inc., Angeles Acceptance Directives,
     Inc.,  Angeles Realty  Corporation,  Angeles Realty Corporation II, Angeles
     Securitization  Corporation,   Angeles  Corporation,  Angeles  Real  Estate
     Corporation  and the  Official  Committee of  Creditors  Holding  Unsecured
     Claims in the Chapter 11 case of Angeles Corporation. (vii)

10.83Stock Purchase  Agreement by and among  Insignia  Commercial  Group,  Inc.,
     Insignia  Financial  Group,  Inc.,  Insignia  Commercial  Group West, Inc.,
     O'Donnell  Property  Services,  Inc., John D.  O'Donnell,  Donald S. Grant,
     Douglas C. Neff,  James R. Westling,  The J & P O'Donnell  Revocable Trust,
     The D & S Grant Revocable Trust,  The J & C Westling  Revocable Trust dated
     as of March 30, 1995. (vii)

10.84Amendment  No. 2 dated as of March 1, 1996 to the  Employment  Agreement by
     and between Insignia Financial Group, Inc. and Andrew L. Farkas.

10.85Amendment No. 2 dated as of February 20, 1996 to the  Employment  Agreement
     by and between Insignia Financial Group, Inc. and James A. Aston.

10.86Amendment No. 2 dated as of February 20, 1996 to the  Employment  Agreement
     by and between Insignia Financial Group, Inc. and Frank M. Garrison.

10.87Employment  Agreement  dated as of January 1, 1996 by and between  Insignia
     Financial Group, Inc. and John K. Lines.

10.88Amended  and  Restated   Employment   Agreement  by  and  between  Insignia
     Financial Group, Inc. and John F. Jacques dated as of December 19, 1996.

10.89Amendment No. 2 dated as of February 20, 1996 to the  Employment  Agreement
     by and between Insignia Financial Group, Inc. and Ronald Uretta.

10.90Purchase   Agreement  dated  as  of  December  31,  1996  between  GSSW-REO
     Ownership  Corporation,  GSSW Limited Partnership and Southwest Associates,
     L.P. with respect to all of the General Partnership and Limited Partnership
     Interests of Certain Limited Partnerships.
 


<PAGE>

10.91Agreement of Limited Partnership of Southwest Associates,  L.P. dated as of
     the 31st day of December 1996.

10.92Registration  Rights  Agreement,  dated  November 1, 1996,  among  Insignia
     Financing I, and Insignia Financial Group, Inc. and Lehman Brothers,  Inc.,
     Dillon,  Read & Co., Inc.  Goldman,  Sachs & Co., and A.G.  Edwards & Sons,
     Inc.,  as Initial  Purchasers  incorporated  herein by reference to Exhibit
     10.1 to Form S-3 of Registrant filed on December 10, 1996.
 
10.93Asset  and  Stock  Purchase  Agreement  dated  as of June  17,  1996  among
     Insignia  Financial  Group,  Inc.,  Insignia Buyer  Corporation,  Edward S.
     Gordon Company  Incorporated,  Edward S. Gordon Company of New Jersey, Inc.
     and Edward S. Gordon  incorporated  herein by  reference  to Exhibit 2.1 of
     Form 8-K of Registrant dated July 1, 1996.

10.94Employment  Agreement  dated  as of June  17,  1996 by and  among  Insignia
     Financial  Group,  Inc.,  Insignia Buyer  Corporation  and Edward S. Gordon
     incorporated  herein by reference to Exhibit 10.2 of Form 8-K of Registrant
     dated July 1, 1996.

10.95Employment  Agreement  dated  as of June  17,  1996 by and  among  Insignia
     Financial Group, Inc., Insignia Buyer Corporation and Anthony M. Saytanides
     incorporated  herein by reference to Exhibit 10.3 of Form 8-K of Registrant
     dated July 1, 1996.
 
10.96Employment  Agreement  dated  as of June  17,  1996 by and  among  Insignia
     Financial  Group,  Inc.,  Insignia Buyer  Corporation and Stephen B. Siegel
     incorporated  herein by reference to Exhibit 10.4 of Form 8-K of Registrant
     dated July 1, 1996.

10.97Agreement  dated  as of May 31,  1996  among  Paragon  Group,  L.P.,  Texas
     Paragon Management  Partners,  L.P., Paragon Group Property Services,  Inc.
     and Insignia  Commercial  Group, Inc.  incorporated  herein by reference to
     Exhibit 10.1 of Form 8-K of Registrant dated July 1, 1996.

11.  Statement re: Computation of Per Share Earnings.

21.  List of Subsidiaries.

23.  Consent of Independent  Auditors to  Registration  Statement on Form S-8 of
     Insignia 1992 Stock Incentive Plan.

27.  Financial Data Schedule
 
(i)  Filed as an  exhibit  to  Registration  Statement  on Form S-4 of  Insignia
     Financial Group, Inc. (then MetSouth Financial  Corporation),  Registration
     No. 33-38094, on December 7, 1990, and incorporated herein by reference.

(ii) Filed as an Exhibit  to Annual  Report on Form 10-K of  Insignia  Financial
     Group, Inc., for the year ended December 31, 1990 on September 27, 1991 and
     incorporated herein by reference.

(iii)Filed as an Exhibit  to Annual  Report on Form 10-K of  Insignia  Financial
     Group,  Inc. for the year ended December 31, 1991, and incorporated  herein
     by reference.

(iv) Filed as an  Exhibit  to  Registration  Statement  on Form S-1 of  Insignia
     Financial Group, Inc.,  Registration No. 33-67486,  on October 13, 1993 and
     incorporated herein by reference.

(v)  Filed as an Exhibit  to Annual  Report on Form 10-K of  Insignia  Financial
     Group,  Inc. for the year ended December 31, 1993, and incorporated  herein
     by reference.

(vi) Filed as an Exhibit  to Annual  Report on Form 10-K of  Insignia  Financial
     Group,  Inc. for the year ended December 31, 1994, and incorporated  herein
     by reference.

(vii)Filed as an Exhibit  to Annual  Report on Form 10-K of  Insignia  Financial
     Group,  Inc. for the year ended December 31, 1995, and incorporated  herein
     by reference.