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, 1997
                                       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 any amendment to this
Form 10-K. {X}

     As of February 27, 1998 there were outstanding 30,446,171 shares of Class A
Common Stock.  Based on the closing price of $23.375 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 $508 million.


                       DOCUMENTS INCORPORATED BY REFERENCE

Proxy  Statement for the Annual Meeting of Stockholders 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
350,000 limited  partners.  Insignia  commenced  operations in December 1990 and
since then has grown to provide  property and/or asset  management  services for
over 2,700 properties,  which include  approximately  280,000  residential units
(including  cooperative and  condominium  units) and  approximately  160 million
square feet of commercial space,  located in over 500 cities in 48 states, Italy
and the United Kingdom.

     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 ("IPT"), a majority owned real estate investment trust
("REIT") subsidiary of the Company, or through institutional  co-investments for
both real estate cash flows and profits and additional service revenues.

     Real Estate  Interests.  Insignia's real estate interests consist primarily
of limited partner  interests in controlled  partnerships  which own real estate
properties  ranging from residential  apartment  complexes to commercial office,
retail, and industrial parks. Insignia began making such investments in December
1994  in  connection  with  the  ConCap  acquisition,  and  has  since  acquired
additional  interests through tender offers, the National Properties  Investors,
Inc. ("NPI") acquisition in January 1996, negotiated block purchases,  secondary
market purchases and  co-investment  ventures with  institutional  partners.  In
addition,  in October 1997,  the Company  acquired an interest in First Winthrop
Corporation,   together  with  a  substantial   investment  in  limited  partner
interests.

     Acquisitions. Insignia completed the acquisition of ten property management
and brokerage  companies during 1997. These acquisitions  include the following:
Rostenberg Doern Company,  Inc., HMB Property  Services,  Inc., Frain,  Camins &
Swartchild,  Inc.  ("FC&S"),  The Related  Companies of Florida,  Radius  Retail
Advisors,  Forum Properties,  Inc.,  Realty One, Inc. and affiliated  companies,
100%  of  the  Class  B  stock  of  First  Winthrop  Corporation  and a  general
partnership  interest in Winthrop  Financial  Associates  ("Winthrop"),  Barnes,
Morris, Pardoe & Foster, and expansion  internationally  through the purchase of
60% of the stock in Compagnia di  Amministrazione e Gestioni  Immobiliare S.p.A.
("CAGISA").  CAGISA is one of the leading property management companies in Italy
with management of  approximately  10,000 units of mostly  residential  housing,
primarily in Rome and Milan.

     The aggregate  purchase price paid for these businesses,  including CAGISA,
was approximately $136.7 million paid from cash on hand of $101.6 million ($95.8
million, net of acquired cash from acquisition  entities of $5.8 million),  $4.2
million of the Company's Class A Common Stock, notes payable of $528,000 (net of
$8.0 million in notes receivable),  and $30.4 million in acquisition liabilities
and deferred taxes.

     On February 26, 1998, the Company  completed the acquisition of 100% of the
stock of Richard Ellis Group Limited ("Richard Ellis").  Richard Ellis is a real
estate services firm located in the United Kingdom.  The purchase price paid for
Richard  Ellis was  approximately  $81.5  million,  including $24 million of the
Company's  Class A Common Stock and existing  stock  options,  $14.7  million in
contingencies based on future performance measures and the balance in cash.

     Angeles  Mortgage  Investment  Trust Merger.  On July 18, 1997, IPT entered
into a definitive  merger  agreement to merge with Angeles  Mortgage  Investment
Trust ("AMIT").  The definitive  agreement provides that each AMIT Class A share
will be  exchanged  for 1.625 IPT common  shares.  The  exchange  ratios will be
appropriately  adjusted based on the respective  amounts of per-share  dividends
declared  or paid by AMIT  since  January 1, 1997 and by IPT since  January  31,
1997.  The proposed  transaction  is contingent  upon,  among other  conditions,
AMIT's  receipt  of  a  fairness  opinion  and  the  approval  of  the  proposed
transaction by certain governmental authorities and by the shareholders of AMIT.

     Stock  Repurchase.  The Board of  Directors  of the  Company  approved  the
repurchase of  outstanding  Class A Common Stock of the Company in amounts up to
$50  million.  On July 18,  1997,  the  Company  obtained  the  approval  of its
requisite  lenders  to amend  its  revolving  credit  facility  to  permit  such
repurchases.  At December  31, 1997,  166,400  shares of the  Company's  Class A
Common Stock, aggregating approximately $3.3 million, have been repurchased.

     Purchase  of Limited  Partner  Interests.  On June 17,  1997,  the  Company
completed,  for $15.5 million in cash, the purchase of limited partner interests
in  partnerships  controlled  by IPT.  Certain of those  interests,  aggregating
approximately  $12.6 million,  were contributed to IPT, effective June 30, 1997,
for common stock of IPT. The  remaining  $2.9  million was  contributed  to IPT,
effective  December  31,  1997,  for  limited   partnership  units  in  Insignia
Properties, L.P. ("IPLP"), the controlled operating partnership of IPT.

     Private  Placement.  During the second and third quarters of 1997, IPT sold
$52  million  of its  common  stock of IPT  shares  through a private  placement
offering.  In the fourth  quarter of 1997, IPT sold an additional $10 million of
its  common  shares in an  unrelated  private  placement  transaction.  All such
amounts are reflected in minority interests on Insignia's  consolidated  balance
sheet at December 31, 1997.

     Stock  Repricing  and  Related  Amendments.  On April  18,  1997,  Insignia
approved the repricing of certain employee stock options issued during 1996. The
274,900  options  involved were issued  primarily to new  employees  joining the
Company  through  acquisitions.  The Company  believes  that this  repricing  is
important to its employee retention and incentive programs. The repriced options
have an exercise  price of $17.50 per share over the five year  vesting  period,
compared to a weighted average  exercise price of $23.65 prior to repricing.  On
April  30,  1997,  the  Company's   stockholders   approved  amendments  to  the
Certificate  of  Incorporation,  as previously  amended,  authorizing 50 million
additional  shares of the  Company's  Class A Common Stock and to the 1992 Stock
Incentive  Plan  increasing  the  aggregate  number of  shares  of Common  Stock
authorized for grant of awards from 4,666,666 to 5,250,000.

     Amended and Restated  Credit  Agreement.  In the first quarter of 1997, the
Company completed an amendment to its revolving credit facility,  increasing the
credit limit from $200 million to $275  million.  The amended  revolving  credit
facility  involves  a  syndicate  of 15  national  and  international  financial
institutions.  At December  31, 1997,  the Company had $144 million  outstanding
under the credit facility.

     Reorganization  of Operations.  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/ESG,
Inc.   ("Insignia/ESG"),   Insignia  Financial  Services  ("IFS")  and  Insignia
Properties  Trust  ("IPT"),  through  which the  Company  performs  its  various
services.  IRG  and  Insignia/ESG  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.

     Formation of IPT.  During 1996,  the Company  formed IPT for the purpose of
acquiring  and  owning  interests  in  multifamily  residential  and  commercial
properties,  including  limited and general  partner  interests in  partnerships
which hold such real estate properties.  IPT has been organized in a manner that
will allow it to be taxed as a real estate  investment  trust ("REIT") under the
Internal  Revenue Code of 1986. The Company and certain of its  affiliates  have
transferred to IPT equity  interests in entities  comprising or controlling  the
general partners of certain public real estate limited  partnerships in exchange
for shares of beneficial interest of IPT.

     IPT is the sole general partner of Insignia Properties L.P. ("IPLP"), which
functions as the operating  partnership  of IPT. The Company has  transferred to
IPLP  certain  of  its  limited   partner   interests  in  real  estate  limited
partnerships  (or equity  interests  in entities  which own such  interests)  in
exchange  for  units of  limited  partner  interest  in IPLP,  which  units  are
redeemable  for cash (subject,  however,  to a first right of IPT to acquire any
such units for which redemption is sought in exchange for common shares of IPT).
As a  result  of  these  transactions,  the  Company  held  a 76%  fully-diluted
ownership interest in the combined IPT entity at December 31, 1997.

     Trust Based Convertible  Preferred  Securities.  In November 1996, Insignia
Financing I, a Delaware trust and a consolidated  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 $149.5
million,  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 assets of the Trust are 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 by the Trust and the
common  securities of the Trust  purchased by the Company are  eliminated in the
balance  sheet.  The Securities  are entitled to  distributions  at the rate per
annum of 6.5% of the stated  liquidation  amount,  with quarterly  distributions
payable in arrears.  The Company has the option to defer distributions from time
to  time,  not  to  exceed  20  consecutive  quarters.   The  Company  has  made
distributions  of  approximately  $10.0 million for the year ended  December 31,
1997, which are reflected in minority interests in the consolidated statement of
income.  The Securities are convertible  into the Company's Class A Common Stock
at $26.50 per share 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.
<PAGE>
<TABLE>

     Acquisition History.  Insignia and its affiliates have acquired control of,
or management  rights to, 43 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 1997,  1996 and 1995
only, and their size in residential units and commercial square feet.

<CAPTION>
                                                                                              Commercial
                                                         Residential Units            Square Feet (in thousands)
                                                   ------------------------------- ---------------------------------
                                                            Contractually Third            Contractually   Third
     Year                                          Affiliated Restricted  Party   Affiliated Restricted    Party
      of                                             Proper-   Proper-   Proper-    Proper-    Proper-    Proper-
Acquisition     Portfolio Name                       ties(2)   ties(3)   ties(4)    ties(2)    ties(3)    ties(4)                   
<S>      <C>                                           <C>  
         1997    Barnes Morris ...................                                                         9,000
         1997    Winthrop ........................    16,500
         1997    Realty One
         1997    CAGISA ..........................                       10,000
         1997    Forum ...........................                                                         2,400
         1997    Radius Retail Advisors, Inc. ....                                                         1,231
         1997    Related Companies of Florida ....                       10,370
         1997    Frain, Camins & Swartchild, Inc.                                                          4,930
         1997    HMB Property Services, Inc. .....                                                         1,078
         1997    Rostenberg-Doern Company, Inc. ..                                                         1,289
         1996    GSSW(1) .........................     6,161
         1996    Edward S. Gordon Company, Inc. ..                                                        25,500
         1996    Paragon .........................                                                        21,800
         1996    National Property Investors, Inc.    34,265              3,735     3,885
         1995    Propsys/Compass Ventures ........               565        138
         1995    Douglas Elliman-Gibbons & .......                       54,301
                   Ives/Kreisel Company, Inc.
         1995    Gleichman & Company, Inc. .......             1,500
         1995    O'Donnell Property Services .....                                              3,496     20,102
</TABLE>



(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  or  other  control  mechanism  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.

     In  addition,  over the past 24 months the  Company has  co-invested,  with
institutional  partners,  in the acquisition of 18 limited  partnerships  owning
residential and commercial  properties.  The Company's ownership  percentages in
these  co-investment  partnerships  range from 10% to 35% at December  31, 1997.
These  co-investment  partnerships,  which  are a major  source  of  growth  for
Insignia,  own assets in the aggregate valued at approximately  $575 million and
own 54 properties  comprising 10,300 apartment units and 3.9 million square feet
of commercial space.

     Services. 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.

     The Company's senior management  personnel have an average of over 20 years
of  experience  in the  real  estate  services  industry  and  many of the  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 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 13% of the residential units managed by the
Company were housing  projects  subsidized  under  various  government  programs
administered by HUD. The programs administered by HUD have been under continuing
review by the United States Congress.  Recent changes could result in reductions
of rents, on which  management fees generally are based, in some  HUD-subsidized
projects.  In addition,  rent subsidies which currently are tied to projects may
be converted to  "tenant-based"  assistance,  permitting  tenants in  subsidized
projects to retain their subsidies while moving  elsewhere.  The occupancy level
or  rental  rates of such  projects  could be  affected  and,  accordingly,  the
management  fee paid to the property  manager  could be reduced.  It is possible
that  changes  in  programs  administered  by HUD could  result in lower  rental
revenue and project cash flow from which  management and other fees are derived;
however,  the  details  of the  implementation  of  recent  changes  are not yet
sufficiently specific to determine their actual impact on such fees.
 
     Competition.  Competition  is intense in the  markets for  acquisition  and
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 AIMCO of Denver,  CO,  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,  Grubb &
Ellis Company of Chicago,  Illinois,  LaSalle Partners of Chicago, Illinois, and
Cushman &  Wakefield  of New  York.  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  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  43  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.
 
     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. As of January 1, 1998 this  interest  was
transferred to Andrew Farkas under his amended employment  agreement.  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,  1997,  Insignia  had  approximately  11,000
employees.  Of these  employees,  approximately  68% 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.
<PAGE>
<TABLE>

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.

<CAPTION>
                                                               Beginning Year of
                                                                    Service as
    Name             Age                      Office           Executive Officer
<S>                  <C>                                                 <C> 
Andrew L. Farkas     37  Chairman of the Board of Directors, President   1990
                          Chairman and Chief Executive Officer of  
                          Insignia, Chairman of the Board of Trustees  
                          of Insignia Properties Trust
James A. Aston       45   Office of the Chairman, Chief Financial        1991
                           Officer of Insignia; President of Insignia
                           Properties Trust
Joseph T. Aveni      64   Chief Executive Officer of Realty One          1997
Anthony M. Ciepiel   38   Chief Operating Officer of Realty One          1997
Albert J. Frazia     49   Senior Vice President of Human Resources 
                           of Insignia                                   1997
Frank M. Garrison    43   Executive Managing Director and President of   1993
                           Financial Services Division of Insignia;
                           Executive Managing Director of Insignia 
                           Properties Trust
Adam B. Gilbert      45   General Counsel and Secretary of Insignia      1998
Jeffrey L. Goldberg  36   Managing Director, Investment Banking          1991
Edward S. Gordon     62   Office of the Chairman; Chairman of            1996
                           Insignia/ESG, Inc.
Albert H. Gossett    50   Senior Vice President and Chief Information    1991
                           Officer
Henry Horowitz       51   Executive Managing Director and Chief          1993
                           Operating Officer of Insignia/ESG, Inc.
Neil J. Kreisel      52   Executive Managing Director and President of   1995
                           Insignia Residential Group
Martha L. Long       39   Senior Vice President - Finance and Controller 1996
Stephen B. Siegel    53   Executive Managing Director and President of   1996
                           Insignia/ESG, Inc.
Thomas R. Shuler     52   Executive Managing Director and Chief          1991
                           Operating Officer of Insignia Residential 
                           Group
Ronald Uretta        42   Chief Operating Officer and Treasurer of       1992
                           Insignia and Vice President and Treasurer
                           of Insigina Properties Trust
</TABLE>

     Andrew L.  Farkas has been a director of Insignia  since its  inception  in
July 1990. Mr. Farkas has been Chairman and Chief Executive  Officer of Insignia
since January  1991,  and 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,  with the Office of the  Chairman of Insignia
since July 1994,  and Chief  Financial  Officer  since  August  1996.  He became
President of Insignia Properties Trust in December 1996.

     Joseph T. Aveni assumed his duties as Chief Executive Officer of Realty One
at the time of  Insignia's  acquisition  of  Realty  One,  Inc.  and  affiliated
companies in October 1997. Prior to joining  Insignia,  Mr. Aveni was one of the
principal owners of Realty One, Inc. in Cleveland, Ohio. Mr. Aveni has more than
30 years of  experience  in  residential  brokerage,  development,  and property
management.
 
     Anthony M. Ciepiel assumed his duties as Chief Operating  Officer of Realty
One at the time of Insignia's  acquisition  of Realty One,  Inc. and  affiliated
companies in October 1997.  From 1994 to 1997,  Mr. Ciepiel was the President of
Realty One, Inc. in Cleveland,  Ohio.  Prior to 1994,  Mr. Ciepiel was the Chief
Financial Officer and Executive Vice President of Griswold, Inc., a full service
advertising agency.

     Albert J. Frazia  joined the  Company as the Senior Vice  President - Human
Resources in August  1997.  From July 1987 to August  1997,  Mr.  Frazia was the
Director of Human  Resources  for Ernst & Young  Kenneth  Leventhal  Real Estate
Group.

     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,  and,  from January 1992 to December
1992, Mr. Garrison was Vice President - Investment Banking of Insignia.

     Adam B.  Gilbert  assumed his duties as General  Counsel and  Secretary  of
Insignia in March  1998.  Prior to that time,  Mr.  Gilbert was a partner in the
Manhattan law firm of Nixon, Hargrave, Devans & Doyle, LLP.

     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
and has been Chairman of  Insignia/ESG,  Inc. since July 1996. He is the founder
and was  Chairman  of Edward  S.  Gordon  Company,  Incorporated,  a  commercial
property management and brokerage firm whose assets were acquired by the Company
in June 1996.

     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 was Managing  Director of Insignia  Commercial  Group,  Inc.
since January 1993 and  Executive  Managing  Director and  President  since June
1994. He was promoted to Chief Operating Officer of Insignia Commercial Group in
1997 in connection 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.

     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 of 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.

     Martha L. Long  joined the Company as  Controller  of Insignia in June 1994
and was promoted to Senior Vice  President - Finance and  Controller  in January
1997.  From 1988 to June 1994, Ms. Long was Senior Vice President and Controller
for The First Savings Bank, FSB in Greenville, South Carolina.

     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, from July 1994 to January
1997.

     Stephen B. Siegel  assumed his duties as President  of Insignia  Commercial
Group, Inc. in January 1997 and as President of Insignia/ESG, Inc. in June 1996.
Mr.  Siegel  had been a Managing  Director  of the  Company  since June 1996 and
President of ESG 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 of Insignia.  He also
served  as  Secretary  from  January  1992 to June  1994 and as Chief  Financial
Officer from January 1992 to August 1996.  Since  September 1990, Mr. Uretta has
also served as the Chief Financial Officer and Controller of Metropolitan  Asset
Group, Ltd., a real estate investment banking firm. 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 5%  limited  partnership  interest  in,
Metropolitan  Acquisition Partners IV, L.P. (F"MAP IV"), which together with its
general partner  beneficially  owned 9.0% of the outstanding  Common Stock as of
December  31,  1997,  and (ii) the sole  stockholder  of the general  partner of
Metropolitan  Acquisition  Partners V, L.P.  ("MAP V"),  which together with its
general partner  beneficially  owned 2.8% of the outstanding  Common Stock as of
December 31, 1997.

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  approximately  21,000  square feet at Insignia
Financial Center, in Greenville, South Carolina. The lease expires on August 31,
2004 with two  five-year  renewal  options and  termination  options  during the
third,  sixth,  and  eighth  years of the  lease.  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 98
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

     1997 Tender Offer  Litigation.  In August 1997,  IPLP  Acquisition I LLC, a
wholly-owned  subsidiary of IPLP (the "Purchaser"),  commenced tender offers for
limited  partner  interests in six  partnerships:  Century  Property  Fund XVII,
Century  Property  Fund XIX,  Century  Property  Fund  XXII,  National  Property
Investors 4, Consolidated Capital Properties IV and Fox Strategic Housing Income
Partners (the "Tender Partnerships").

     As previously  reported on Forms 10-Q, three actions were commenced arising
out of these tender offers. All three cases have been discontinued.

     United States Department of Housing and Urban Development.  On or about May
8, 1997, the United States Department of Housing and Urban  Development  ("HUD")
filed a civil  lawsuit  against one of the third party,  unaffiliated  owners of
affordable  housing  to which the  Company  provides  management  services.  The
complaint alleges that the owner,  Associated  Financial  Corporation ("AFC") of
Los  Angeles,  California,  whose  chairman is A. Bruce  Rozet,  had  improperly
received  monies  from 17  properties  managed by the  Company  over a period of
approximately  six years.  The allegations  include  statutory  violations which
could,  if  proven,  give rise to double  and  treble  damages  as well as civil
penalties  for false  filings.  The Company was not named as a defendant  in the
suit.

     On August 13, 1997,  the Company  entered into an agreement  with HUD which
resolved any claims which HUD could have made against the Company arising out of
the  allegations  in the  complaint  against  AFC and  Rozet.  Insignia  has not
admitted to any liability or wrongdoing in the matter,  and it has affirmatively
stated  that it relied on the  advice of legal  counsel  that its  actions  were
proper.  Although the Company  believes it acted properly,  it agreed to resolve
the matter  expeditiously  to avoid  potential  complex,  costly and  disruptive
litigation.  In connection  with the agreement,  the Company paid the Government
the sum of $5 million and recorded a one-time charge of $5 million (pre-tax) for
its third quarter ended September 30, 1997.

     In  addition,  the  Company  agreed  with HUD that it could make  voluntary
disclosures  to  the  Government  concerning  other  conduct  arising  out of or
relating to its  management of HUD-related  properties.  On or about October 13,
1997, the Company provided additional information to the Government.

     Including the $5 million  Release Fee, the Company  recorded  total charges
aggregating  $10.2 million in 1997 for costs incurred and accrued in relation to
its  management of HUD  properties.  At December 31, 1997,  the Company had $4.0
million  included  in  accrued  and  sundry  liabilities   associated  with  its
management of such properties.

     In December 1997,  AFC and a number of affiliates  made a motion to implead
the Company as a third party  defendant.  In the proposed third party compliant,
AFC  and  affiliates  alleged  a  number  of  claims  sounding   principally  in
indemnification.  The Government filed an opposition to that motion. On February
3, 1998,  the Court  denied  AFC's  motion to implead.  On March 11,  1998,  the
Company and HUD resolved all remaining issues for a payment of $2.5 million.

     1996  Tender  Offer   Litigation.   In  May  1996,  Walton  Street  Capital
Acquisition  II,  LLC  ("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 entitled Chipain,  Tom, v. Walton Street Capital Acquisition
II, LLC, 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  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  complaint with prejudice.  Plaintiffs  filed a notice of appeal in
the Dee 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 1997, 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 reported on The New York Stock Exchange for each quarter
of 1996 and 1997.

Calendar Period                                       High              Low

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

1997
   First Quarter.............................        25 6/8            17 3/8
   Second Quarter............................        19 5/8            16 7/8
   Third Quarter.............................        20 3/8            15 1/4
   Fourth Quarter............................        23 5/8            19

     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 February 27, 1998, there were  approximately  1,700 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, on 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, 1997,  1996,  1995,  1994 and 1993, and the balance
sheet data at December 31, 1997, 1996, 1995, 1994, and 1993 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.
<PAGE>
<TABLE>

     The tables set forth  below  provide a variety of  statistical  information
about the Company.  The Company  believes  that Net EBITDA,  which is defined as
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
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.
<CAPTION>

                                                Year Ended December 31,
                                        (In thousands except per share data)
                                    1997      1996      1995      1994    1993
Statement of Operations Data(1):
<S>                               <C>       <C>       <C>       <C>      <C>    
Revenues                          $400,843  $227,074  $123,032  $75,453 $52,577
Operating expenses                 325,886   172,046    94,727   54,757  37,720
Equity earnings                     10,027     3,590     2,461      113      --
Income before extraordinary item    10,233     9,266     6,258    7,261   4,925
Extraordinary (loss) gain               --      (702)     (452)      --    (255)
Net income                          10,233     8,564     5,806    7,261   4,670
Income per common share before
   extraordinary item - diluted       0.32      0.28      0.22     0.35    0.34
Net income per common share - diluted 0.32      0.26      0.20     0.35    0.32

                                                      December 31,
                                                     (In thousands)
                                     1997      1996      1995     1994    1993
Balance Sheet Data(1):
Cash and cash equivalents         $ 88,847  $ 54,614  $ 49,846 $ 36,596 $34,005
Management contracts               147,256   122,915    88,816   73,411  38,620
Investment in real estate limited 
   partnerships and other 
   securities                      215,735   150,863    60,473   37,926      --
Total assets                       800,223   492,402   245,409  174,272  88,835
Notes payable                      170,404    49,840    32,996   63,198   1,139
Redeemable convertible preferred
   stock                                --        --    15,000       --      --
Company-obligated mandatory 
   redeemable convertible  
   preferred securities of a 
   subsidiary trust                144,065   144,169        --       --      --
Stockholders' equity               237,909   217,905   157,013   78,806  71,540
  Properties managed:
   Residential (units)             280,000   265,000   261,000  216,000 141,000
   Commercial properties 
   (thousands of sq. ft.)          160,000   110,000    64,000   43,000  25,000

                                               Year Ended December 31,
                                         (In thousands except per share data)
                                     1997      1996      1995     1994    1993
Supplemental Data
EBITDA(2)                          $57,312   $49,008   $28,305  $20,696 $14,857
Combined EBITDA and FFO(3)          78,844    62,449    32,916   20,809  14,857
Net EBITDA(4)                       60,974    47,713    24,622   20,067  13,988
Net EBITDA per share                  1.93      1.45      1.09     0.98    0.96
</TABLE>

(1)  The Company and its  affiliates  have  acquired  control of, or  management
     rights to, 42  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  and
stockholder  value  through  strategic  growth in the assets that  provide  such
returns.  The Company posted strong  results in pursuit of these  objectives for
the year ended  December 31, 1997 on sharply higher  revenues.  The Company uses
Net  EBITDA as a primary  indicator  of  financial  performance  and Net  EBITDA
increased 28% to $61.0 million in comparison to 1996.  These  financial  results
are impacted by various  one-time  charges  totaling $12.3 million in aggregate,
including  the  previously  announced $5 million  release fee paid to the United
States  Department  of Housing and Urban  Development  ("HUD")  during the third
quarter and $5.2 million in related legal costs and reserves for future costs in
the fourth  quarter.  Net EBITDA,  excluding  the one time  charges,  would have
increased 54% to $73.3  million in comparison to 1996.  Net EBITDA is defined as
earnings  before  interest,  taxes,  depreciation  and  amortization  ("EBITDA")
combined with funds from operations  ("FFO") less interest  expense and earnings
allocable to preferred securities.  EBITDA for the service company increased 17%
to $57.3 million while total FFO increased 60% to $21.5 million in comparison to
1996, respectively.  Assets grew 63% from $492.4 million at December 31, 1996 to
$800.2  million at December 31, 1997.  Growth  occurred  mainly in  receivables,
investments in real estate limited partnerships,  property management contracts,
and costs in excess of net assets of  acquired  businesses.  The growth in these
areas is primarily due to the impact of acquisitions closed in 1997.

     During 1997,  the Company  completed ten business  acquisitions,  including
expansion  internationally through the purchase of 60% of the stock in CAGISA, a
leading management  company in Italy.  Other acquisitions  completed include the
following:  Rostenberg Doern Company, Inc., HMB Property Services,  Inc., Frain,
Camins &  Swartchild,  Inc.  ("FC&S"),  The Related  Company of Florida,  Radius
Retail Advisors,  Forum Properties,  Inc., Realty One, Inc., 100% of the Class B
stock of First  Winthrop  Corporation  and a  general  partnership  interest  in
Winthrop Financial Associates ("Winthrop"), and Barnes, Morris, Pardoe & Foster.
The  businesses,   including  CAGISA,   were  acquired  for  aggregate  purchase
consideration of  approximately  $136.7 million with $101.6 million from cash on
hand ($95.8  million,  net of acquired  cash from  acquisition  entities of $5.8
million),  $4.2 million of the Company's Class A Common Stock,  notes payable of
$528,000 (net of $8.0 million in notes receivable), and $30.4 million in accrued
liabilities and deferred taxes.

     Cash and cash equivalents  increased 63% from $54.6 million at December 31,
1996 to $88.8 million at December 31, 1997. The primary sources of funds include
the  receipt  of  $62.4  million  by  Insignia   Properties  Trust  ("IPT"),   a
consolidated  subsidiary of the Company, from private placement offerings of its
securities, $38.1 million in collections from limited partnership distributions,
and $111 million from borrowings under the revolving credit facility.  The major
uses of funds  include  $95.8  million paid for the  acquisition  of  management
contracts and acquired  businesses  (discussed  above) and $93.1 million for the
purchase of real estate limited partnership interests. See the Statement of Cash
Flows and the  discussion in the Liquidity and Capital  Resources  section below
for more information.

     Receivables  increased  165% from $46.0  million at  December  31,  1996 to
$122.2  million  at  December  31,  1997.  This  increase  is  primarily  due to
substantially increased brokerage and leasing activity transactions primarily in
the commercial  segment,  coupled with substantial  increases in operations from
current year acquisitions. The increase in brokerage and leasing transactions is
attributable to the growth in revenues generated by acquisitions, primarily ESG,
Paragon and FC&S, over the past 18 months.  Such receivables are to be collected
at future dates as defined in the terms of the individual brokerage agreements.

     Property and  equipment  increased  57% from $12.1  million at December 31,
1996 to $19.0  million at December  31, 1997.  This change is  primarily  due to
expenditures  for  computer  equipment  and  software  in  connection  with  the
implementation  of  a  change  in  the  Company's   computer   platform.   Also,
contributing  to the  increase is  approximately  $2.4  million in property  and
equipment acquired through current year acquisition purchases.

     Investments  in real  estate  limited  partnerships  and  other  securities
increased  43% from  $150.9  million at December  31, 1996 to $215.7  million at
December 31, 1997. This increase resulted primarily from the investment of $93.1
million  in  additional  limited  partnership  interests  through  acquisitions,
secondary market purchases and real estate joint ventures,  net of distributions
received of $38.1 million. Also contributing to the increase was the recognition
of $10.0 million in equity earnings for 1997.

     Property management contracts increased 20% from $122.9 million at December
31, 1996 to $147.3  million at  December  31,  1997.  During  1997,  the Company
completed  the  acquisition  of 10  businesses  which in  aggregate  contributed
approximately  $54.6  million in additional  management  contract  bases.  These
acquisition  purchases are offset by $23.2 million in  amortization  expense and
the collection of  approximately  $6.8 million in disposition fees from the sale
of  real  estate  in  limited  partnerships  syndicated  by The  Balcor  Company
("Balcor").  In the second quarter of 1996,  Balcor  announced its intentions 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 for services rendered in the sales transactions. The fees
are paid in cash after close of the sale  transaction  and have been  applied to
the remaining unamortized contract basis associated with the Balcor properties.

     Costs in excess of net assets of acquired  businesses  increased  110% from
$75.6 million at December 31, 1996 to $158.5  million at December 31, 1997.  The
increase is primarily a result of the payment of purchase price of approximately
$87.4 million in excess of the net assets of acquired entities in 1997.

     Other assets increased 223% from $8.1 million at December 31, 1996 to $26.3
million at December 31, 1997. This increase is primarily due to acquisitions and
internal  growth  within the Company.  Contributing  to this  increase is 1) the
capitalization of certain costs, in the amount of approximately $5.0 million, in
connection  with  the  implementation  of a  change  in the  Company's  computer
platform,  2)  organization  costs in the  formation of IPT and proposed  merger
costs with AMIT aggregating  approximately  $4.5 million,  and 3) investments in
debt instruments totaling approximately $3.0 million.

     Accounts  payable  increased 701% from $1.7 million at December 31, 1996 to
$13.7   million  at  December  31,  1997.   Contributing   to  the  increase  is
approximately  $6.9 million in payables acquired through the purchases of CAGISA
and Realty One in combination  with  significant  increases in operations in the
commercial segment from current year acquisition activity.

     Commissions  payable at December 31, 1997  increased  174% or $32.5 million
over December 31, 1996. Consistent with the change in receivables, this increase
is  attributable  to  substantially  increased  brokerage  and leasing  activity
transactions from acquisitions over the past 18 months.

     Accrued  and  sundry  liabilities  increased  150% from  $40.7  million  at
December  31, 1996 to $102.0  million at December  31,  1997.  This  increase is
primarily  due to  the  addition  of  approximately  $30.4  million  in  accrued
acquisition  liabilities  and  deferred  tax  liabilities  coupled  with a $13.3
million  increase in accrued employee  compensation  and incentives  compared to
1996.

     Minority  interests  in  consolidated  subsidiaries  of  $61.5  million  at
December 31, 1997 represents the minority  equity in IPT from private  placement
offerings in combination with the minority equity in CAGISA.

     Notes  payable  increased  242% from $49.8  million at December 31, 1996 to
$170.4  million  at  December  31,  1997.   This  increase  is  attributable  to
acquisition  purchases  in 1997 which  resulted  in $111  million in  additional
borrowings on the revolving  credit facility  coupled with assumed notes payable
of approximately $20.9 million in the Realty One purchase.

     Stockholders'  equity increased 9% from $217.9 million at December 31, 1996
to $237.9  million at  December  31,  1997  primary  due to the  receipt of $7.5
million  from the  issuance of common  stock from the  exercise of options;  the
issuance of the Company's Class A Common Stock in the amount of $4.2 million for
the purchase of Realty One; and net income of $10.2 million for 1997.



<PAGE>

Results of Operations for the Years Ended December 31, 1997 and 1996

     Insignia  posted  strong  results in all major  components  of  operational
activity for 1997 due primarily to continued acquisition  activity.  The Company
uses Net EBITDA as a primary  indicator of its  financial  performance,  and Net
EBITDA  increased 28% from $47.7  million in 1996 to $61.0 million in 1997.  Net
EBITDA  per  common  share  increased  33% from  $1.45 in 1996 to $1.93 in 1997.
EBITDA for the service company increased 17% from $49.0 million to $57.3 million
and total FFO from real estate  operations of IPT and  co-investments  increased
from  $13.4  million to $21.5  million  for 1996 and 1997,  respectively.  These
financial  results are impacted by one-time  charges  totaling  $12.3 million in
aggregate, including $10.2 million in HUD related release fees, legal costs, and
reserves for future costs. Excluding the one time charges, Net EBITDA would have
reflected gains of 54% to $73.3 million and EBITDA for the service company would
have reflected gains of 42% to $69.6 million in comparison to 1996.

     Total  revenues  increased  77% or $173.8  million for the year from $227.1
million in 1996 to $400.8  million in 1997.  The growth in revenues is primarily
reflected in fee based services, which posted gains of 80% to $388.9 million, in
comparison to 1996. This growth rate is primarily  attributable to the fee based
services  revenue in the  commercial  group,  which posted  impressive  gains of
approximately  152% from $98.0 million in 1996 to $246.4  million in 1997.  This
increase is reflective of the  contributions of a full year of operations of ESG
and  Paragon,  which were  acquired  on June 30,  1996,  and the six  commercial
acquisitions  in 1997.  Fee based  services  revenue for the  residential  group
posted an increase of 22% from $111.2 million in 1996 to $135.6 million in 1997.
This growth is due primarily to the  contributions in fee based services revenue
of the four residential acquisitions in 1997, including CAGISA in Italy.

     Interest income  increased 47% from $3.1 million in 1996 to $4.6 million in
1997 due to higher  average  interest  bearing cash holdings in the current year
compared to 1996.

     Apartment property revenue, which represents the operations of a controlled
limited  partnership,  increased  10% to $6.6 million due primarily to increased
rental activity at the property in comparison to 1996.

     Fee based  services  expense  increased 92% from $164.8  million in 1996 to
$315.7 million in 1997.  Consistent with fee based services  revenue,  fee based
services  expense  increased  significantly  in the commercial group as a direct
result of the eight commercial  acquisitions over the past eighteen months.  Fee
based  services  expense  for the  commercial  group  increased  142% from $85.4
million in 1996 to $207.0 million in 1997.  Fee based  services  expense for the
residential  group,  which include a one-time  charge of $2.1 million for a note
receivable deemed uncollectible, reflected an increase of 35% from $71.6 million
in 1996 to $96.9 million in 1997.

     Administrative  expenses  increased  42% from $7.2 million in 1996 to $10.2
million in 1997.  This increase,  which is  significantly  lower that the growth
rate in revenues, is due in part to the increased operational expansion over the
course of 1997 and clearly  demonstrates  the Company's  ability to  efficiently
absorb   acquisitions   into   its   existing   administrative   and   corporate
infrastructure.

     Interest  expense  decreased 39% from $12.9 million in 1996 to $7.9 million
in 1997.  This increase is directly  attributable  to lower average  outstanding
borrowings  on  the  revolving   credit  facility  in  1997  compared  to  1996.
Contributing to the lower outstanding borrowings in 1997 was the use of proceeds
from the  issuance  of the  trust  based  convertible  preferred  securities  in
November 1996 to pay down outstanding notes payable.

     Depreciation and  amortization  increased 38% from $23.0 million in 1996 to
$31.7  million  in 1997.  This  increase  is  consistent  with the growth of the
Company  over  the  past  twelve  months  attributable  to  acquisitions.  These
acquisitions  have  reflected   significant   purchases  of  amortizable  assets
resulting in a corresponding  increase in amortization expense. In addition, the
57% growth in  property  and  equipment  from  internal  growth and  acquisition
activity has resulted in a similar increase in depreciation expense in 1997.

     The $5 million  release fee represents a negotiated one time payment to HUD
to remove the Company from any  potential  liability in a civil lawsuit filed by
HUD against one of the third party unaffiliated  owners of affordable housing to
which the Company provides management  services.  The $5.2 million legal reserve
represents  the  one-time  charge for HUD related  legal costs and  reserves for
potential future incremental costs that the Company believes may result from its
management  of HUD  properties.  The Company does not  anticipate  further costs
beyond those incurred and accrued in 1997.

     Equity  earnings  increased 179% from $3.6 million in 1996 to $10.0 million
in 1997. This increase is  attributable  to: 1) equity earnings of $645,000 from
investments in  co-investment  partnerships  (no comparable  earnings from these
investments  existed in 1996); 2) significant  purchases of limited  partnership
interests in partnerships for which no investments existed in 1996; 3) increased
ownership  in IPT  controlled  partnerships  through  tender  offers  in the 4th
quarter of 1997; and 4) the continued  improvement  in the operating  results of
IPT controlled  partnerships as discussed in the Financial Conditions section on
FFO above.

     Minority  interests in consolidated  subsidiaries  increased 530% from $2.0
million in 1996 to $12.4 million in 1997.  This increase is primarily due to: 1)
$10  million  in  dividends  paid  on  the  trust  based  convertible  preferred
securities in 1997 compared to $1.6 million in 1996 (the  securities were issued
in  November  1996);  2) $1.2  million in minority  equity in the  current  year
earnings of IPT (the Company held an average 87% aggregate ownership interest in
IPT for 1997 compared to 100% in 1996); and 3) $1.3 million in charges resulting
from distributions made by a majority owned partnership subsidiary of IPT to the
holders of minority equity  interests (which resulted in negative equity for the
minority owners). Generally accepted accounting principles requires such charges
to be taken by the majority owner on the presumption that the negative equity of
the minority  owners on a historical book value basis cannot be recovered by the
majority owner.

     The provision  for income taxes  increased 20% from $5.7 million in 1996 to
$6.8 million in 1997. This increase is attributable to the rise in net income in
comparison  to 1996 coupled with an increase in the  effective tax rate from 38%
to 40%  because of changes  in assets and their tax bases as  determined  by the
structure of the purchase  agreements for  acquisitions  completed over the past
twelve months and higher tax rates where these acquisitions occurred.

     As a result of the  foregoing  factors,  net income  increased 19% to $10.2
million in 1997  compared to $8.6  million in 1996.  Diluted  earnings per share
increased to $.32 for 1997 compared to $.26 for 1996.

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
$1.45 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.

     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  factors,  net income  increased 48% from $5.8
million in 1995 to $8.6 million in 1996. Diluted earnings per share was $.26 for
1996 compared to $.20 for 1995.



<PAGE>

Year 2000 Compliance 

     Insignia has  completed an  assessment on the impact of the year 2000 issue
and has  determined  that it will  have to  modify or  replace  portions  of its
software so that computer  systems will function  properly with respect to dates
in the year 2000 and  thereafter.  The project is  estimated  to be completed no
later than early 1999, which is prior to any anticipated impact on its operating
systems.  The Company believes that with current ongoing changes in its computer
platform,   expected  to  be  complete  later  in  1998,  coupled  with  current
modifications  to existing  software  and  software  conversions,  the year 2000
issues will not pose significant  operational problems for its computer systems.
The  Company  is  currently  assessing  the extent to which its  operations  are
vulnerable  should third party vendors and other  organizations,  with which the
Company conducts business, fail to remediate properly their computer systems. In
the event that such necessary modifications and conversions are not made, or are
not completed in a timely fashion,  the year 2000 issue could potentially have a
material impact on the operations of the Company.

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 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.  Certain
aspects of the  Company's  operations  are  subject to  regulation  by the U. S.
Department  of  Housing  and  Urban  Development  ("HUD").  Rental  rates of 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 have been under continuing  review by the
United States  Congress.  Recent changes could result in reductions of rents, on
which management fees generally are based, in some HUD-subsidized  projects.  In
addition,  rent subsidies  which currently are tied to projects may be converted
to  "tenant-based"  assistance,  permitting  tenants in  subsidized  projects to
retain their  subsidies  while moving  elsewhere.  The occupancy level or rental
rates of such projects  could be affected and,  accordingly,  the management fee
paid to the property  manager  could be reduced.  It is possible that changes in
programs  administered  by HUD could result in lower rental  revenue and project
cash flow from which management and other fees are derived; however, the details
of the  implementation  of recent changes are not yet  sufficiently  specific to
determine  their actual  impact on such fees, if any.  Approximately  13% of the
residential units managed by the Company were housing projects  subsidized under
various government programs administered by HUD.

Other

     Certain  items  discussed  in this  report may  constitute  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995  (the  "Reform  Act") and as such may  involve  known  and  unknown  risks,
uncertainties and other factors which may cause the actual results,  performance
or  achievements  of the  Company  to be  materially  different  from any future
results,   performance,   or   achievements   expressed   or   implied  by  such
forward-looking statements. Such forward-looking statements speak only as of the
date  of  this  report.  The  Company  expressly  disclaims  any  obligation  or
undertaking to release publicly any updates of revisions to any  forward-looking
statements contained herein to reflect any change in the Company's  expectations
with regard  thereto or any change in events,  conditions  or  circumstances  on
which any such statement is based.
<PAGE>


Liquidity And Capital Resources

     The Company has several  sources  available  for  capital,  primarily  cash
generated from operations,  distributions  from IPT controlled and co-investment
partnerships,  and  available  credit  under the $275 million  Revolving  Credit
Facility.  At December 31, 1997, a total of $144 million was  outstanding  under
this facility.  As a result of its ability to generate cash, and such additional
sources,  cash  balances  grew from $54.6  million at December 31, 1996 to $88.8
million at December 31, 1997. The Company uses Net EBITDA as an indicator of its
working capital  generated from  operations.  Net EBITDA  increased 28% to $61.0
million in comparison to 1996. Net EBITDA,  excluding  $12.3 million in one-time
charges,  would have  increased 54% to $73.3 million in comparison to 1996.  The
following  chart  specifically  identifies the sources of Net EBITDA and how the
numbers are derived for each period.
<TABLE>

<CAPTION>
                                                             Year Ended
                                                             December 31,
                                                       1997               1996
   
<S>                                                  <C>               <C>     
Fee based services revenue                           $388,922          $215,623
Interest                                                4,571             3,104
Other                                                     704             2,327
                                                      394,197           221,054
Less:
   Fee based services expenses                        315,653           164,830
   Administrative and other                            10,233             7,216
   Release fee                                          5,000                --
   Legal reserve                                        5,202                --
   Earnings attributable to IPT(1)                        797                --
EBITDA - service company                               57,312            49,008
FFO from real estate interests                         21,532            13,441
Combined EBITDA and FFO                                78,844            62,449
Interest expense                                       (7,867)          (12,918)
Preferred distributions                               (10,003)           (1,818)
Net EBITDA                                          $  60,974         $  47,713
</TABLE>

(1)  Earnings  of  $797,000  attributable  to the  operations  of IPT  (which is
     included in the consolidated income statement for the Company) are excluded
     from EBITDA for the service  company.  These  earnings  are included in FFO
     above.

     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.

     At December 31, 1997,  the Company had cash and cash  equivalents  of $88.8
million as a result of positive cash flow from  operations,  distributions  from
partnerships, proceeds from private placement offerings of IPT, and the proceeds
from its debt sources. With the working capital generated through the operations
of the  Company  and the  remaining  availability  under  the  Revolving  Credit
Facility, management believes that the Company's cash and capital resources will
be  sufficient  to finance the  Company's  operations  for 1998.  The  Company's
funding needs are reassessed as acquisitions are identified and pursued.



<PAGE>

Subsequent Events

     Cohen Financial Transactions.  On January 7, 1998, the Company acquired the
rights to perform  property  management,  leasing and  construction  supervision
services for  approximately  4.1 million  square feet of commercial  real estate
from Cohen Financial.  The purchase price was  approximately $1 million,  all of
which was paid in cash.

     Goldie B. Wolfe & Company.  On January 20, 1998, the Company  acquired 100%
of the stock of Goldie B. Wolfe & Company,  a  commercial  real estate  services
firm. The purchase price was approximately  $5.3 million,  all of which was paid
in cash.

     MAE GP Merger.  Effective  as of March 7, 1998,  MAE GP  Corporation  ("MAE
GP"), which until then was a wholly-owned subsidiary of MAE, was merged with and
into IPT, with IPT surviving the merger (the "MAE GP Merger").  As consideration
for the MAE GP Merger,  IPT issued  332,300 shares of the common stock of IPT to
MAE valued for purposes of the MAE GP Merger at $10.53 per share.

     MAE GP owned or controlled  equity interests in entities which comprised or
controlled the general  partners of 29 public and 76 private real estate limited
partnerships (collectively, the "MAE Partnerships"),  nine of which are included
in the IPT  Partnerships.  The  MAE  Partnerships  own,  in the  aggregate,  169
properties  containing  approximately  32,000  residential  apartment  units and
approximately 2.3 million square feetof commercial space. In connection with the
MAE GP Merger,  all of the shares of Class B common stock of AMIT, a real estate
investment trust that has entered into a definitive  agreement to be merged with
IPT, which were until then owned by MAE GP, were  transferred by dividend to MAE
prior to the MAE GP Merger.

     In connection with the MAE GP Merger,  on February 17, 1998, IPLP purchased
certain assets described below from MAE for approximately  $596,000.  The assets
purchased by IPLP from MAE  consisted of (i) a 99% limited  partner  interest in
Insignia Jacques Miller, L.P. ("IJM"), which in turn owns non-controlling equity
interests in entities that comprise or control the general partners of 30 of the
MAE  Partnerships  and various notes receivable (the 1% general partner interest
in IJM was acquired by IPT from MAE GP in the MAE GP Merger),  and (ii) a 6.557%
limited partner  interest in Buccaneer Trace Limited  Partnership,  which owns a
208-unit residential apartment complex located in Savannah, Georgia.

     Also in connection with the MAE GP Merger,  on February 17, 1998,  Insignia
contributed  all  of  the  limited  partner   interests  it  owned  in  the  MAE
Partnerships  to IPLP in exchange for units of limited  partnership in IPLP ("OP
Units").  The value of the interests  contributed was approximately  $5,460,000,
for which  Insignia  received  518,528 OP Units  (based on a value of $10.53 per
unit).

     Richard Ellis Group Limited Acquisition.  In January 1998, the shareholders
of Richard Ellis Group Limited ("Richard Ellis") accepted the Company's offer to
acquire  100% of the stock of  Richard  Ellis.  Richard  Ellis is a real  estate
services and investment firm located in the United  Kingdom.  The transaction is
valued at approximately $81.5 million,  including approximately $14.7 million of
which  is  contingent  on  future  performance  measures.  The  transaction  was
completed on February 26, 1998. The Company funded the  acquisition by borrowing
$35 million from its revolving  credit  facility,  issuing 617,000 shares of its
Class A Common Stock,  and assuming  existing options to purchase 856,000 shares
of its Class A Common Stock.

     Merger and Stock Spin-off. On March 17, 1998, the Company and Insignia/ESG,
Inc.  ("Insignia/ESG") entered into an Agreement and Plan of Merger (the "Merger
Agreement")  with  Apartment  Investment  and  Management  Company,  a  Maryland
corporation   ("AIMCO"),   and  AIMCO  Properties,   L.P.,  a  Delaware  limited
partnership,  pursuant to which the Company will merge with an into AIMCO,  with
AIMCO as the survivor (the  "Merger").  Consummation of the Merger is subject to
certain  conditions,  including  regulatory  approval  and the  approval  of the
stockholders of the Company (but not the approval of the stockholders of AIMCO).

     Prior to the AIMCO  Merger,  the Company will spin off to its  stockholders
the stock of an entity  that will  become a  separate  public  company  and will
include Insignia/ESG;  the international commercial real estate service company;
Insignia  Residential-New  York, a New York based  cooperative  and  condominium
management company;  the Company's  single-family home brokerage  operations and
other select holdings.  Pursuant to an Indemnification Agreement entered into in
connection  with  the  Merger  Agreement,  the  spun off  company  will  provide
indemnification for certain liabilities arising under the Merger Agreement.

     Assuming  the  stockholders  of AIMCO  approve  the  Merger,  shares of the
Company's  Class A Common Stock will be  converted  into the right to receive an
aggregate of  approximately  $303 million in Series E Preferred Stock, par value
$.01 per share of AIMCO (the "Series E Preferred"). In addition to receiving the
same  dividends as holders of AIMCO common stock,  holders of Series E Preferred
are entitled to receive a preferred  dividend of $50 million in the aggregate to
be paid on or before January 15, 1999 and when paid, the Series E Preferred will
automatically convert into AIMCO common stock on a one for one basis, subject to
certain antidilution adjustments. The actual number of Series E Preferred issued
in the Merger will be determined by a formula based on the average  market price
of AIMCO's common stock during a fixed period preceding the Merger, subject to a
fixed maximum AIMCO  exchange value of $38 per share.  If AIMCO's  average price
during that  period is less than $36.50 per share,  AIMCO may elect to pay up to
$15 million of the purchase price in cash,  provided that such payment would not
affect the tax free status of the Merger.

     In addition,  AIMCO will assume  approximately  $308 million in outstanding
indebtedness of the Company and will assume  approximately $150 million of the 6
 .5% Trust Convertible  Preferred  Securities  issued by Insignia  Financing I, a
subsidiary of the Company.

     If the  stockholders  of AIMCO do not approve  the  Merger,  the Merger may
nonetheless be consummated.  However, instead of receiving approximately $303 in
Series E Preferred,  holders of the Company's Class A Common Stock would receive
approximately  $203  million in Series E Preferred  and $100 million in Series F
Preferred  Stock,  par value $.01 per share of AIMCO (the "Series F Preferred").
In either case,  holders of Series E Preferred  would be entitled to receive the
$50 million  preferred  dividend.  Holders of Series F Preferred are entitled to
receive the greater of (i) the same  dividends  as holders of AIMCO common stock
receive and (ii) preferred  distributions of 10% of the face value of the Series
F Preferred,  with the preferred return rate escalating 1% each year until a 15%
annual return is achieved.  Upon the approval by the  stockholders of AIMCO, the
Series F Preferred will convert into Series E Preferred on a one-to-one basis.

     Also, the Merger  Agreement  provides that  following the Merger,  AIMCO is
required to offer to purchase the outstanding  shares of beneficial  interest of
IPT, a Maryland real estate  investment trust, at a price of at least $13.25 per
IPT share. 

     As a  condition  to  execution  with the Merger  Agreement,  certain of the
Company's  executive officers executed voting agreements and irrevocable proxies
in favor of AIMCO, pursuant to which each of the foregoing individuals agreed to
vote the  shares of the  Company's  Class A Common  Stock  owned of  record  and
beneficially by him,  including  shares acquired after the date of the execution
of  the  agreement  (but   excluding   shares   beneficially   owned  by  others
notwithstanding  that such shares may be owned of record by him) in favor of the
Merger and the Merger  Agreement  and  against  any  competing  transaction.  In
addition,  each of Metropolitan  Acquisition  Partners IV, L.P. and Metropolitan
Acquisition  Partners V, L.P.  (collectively,  the "MAPs") also executed  voting
agreements and  irrevocable  proxies,  pursuant to which each has agreed to vote
certain  shares of the  Company's  Class A Common  Stock to which the  Company's
Chairman,  Chief  Executive  Officer,  and  President  would  be  entitled  in a
distribution of shares of the Company's Class A Common Stock made by the MAPs in
favor  of the  Merger  and  the  Merger  Agreement  and  against  any  competing
transaction.




<PAGE>

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.

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.

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.

Item 13.  Certain Relationships and Related Transactions

Incorporated herein by reference to Registrant's definitive Proxy Statement
to be filed in connection with the Annual Meeting of Stockholders.



<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):              Reports on Form 8-K filed in fourth quarter of 1997:

                       Form 8-K dated September 17, 1997 and filed October 31,
                       1997  disclosing  the  completion of tender offers in 
                       six of the  partnerships  controlled  by  IPT,  a  
                       controlled REIT affiliate of the Registrant.

                       Form 8-K dated  October 10, 1997 and filed  October  22,
                       1997  disclosing  Registrant's acquisition of Realty 
                       One, Inc.

                       Form 8-K dated October 27, 1997 and filed  November 10,
                       1997  disclosing  Registrant's  acquisition  of the  
                       Class B stock of First Winthrop  Corporation and limited 
                       partnership interests  in  certain  partnerships   
                       controlled  by  First Winthrop.

                       Form 8-K dated  September  17, 1997 and filed  November  
                       20, 1997  disclosing  Registrant's  acquisition  of 
                       Barnes, Morris, Pardoe & Foster.

                       Form 8-K dated November 14, 1997 and filed November 17, 
                       1997 disclosing Registrant's announcement   that   the
                       preliminary  proxy  statement for the pending merger of
                       IPT, the Registrants'  controlled REIT affiliate,  with
                       Angeles Mortgage  Investment  Trust, was filed with the
                       SEC.

                       Form 8-K/A dated  October 10,  1997 and filed  December 
                       23, 1997  amending  Form 8-K filed October 22, 1997 to 
                       file financial   statements   for  the  Realty   One,  
                       Inc. acquisition.

     (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 indicated.



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



















                           ANNUAL REPORT ON FORM 10-K

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

                          LIST OF FINANCIAL STATEMENTS

                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                CERTAIN EXHIBITS

                          YEAR ENDED DECEMBER 31, 1997

                 INSIGNIA FINANCIAL GROUP, INC. AND SUBSIDIARIES

                           GREENVILLE, SOUTH CAROLINA





<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, 1997 and 1996

      Consolidated  statements of operations - Years ended December 31, 1997,
      1996 and 1995

      Consolidated statements of stockholders' equity - Years ended December 31,
      1997, 1996 and 1995

      Consolidated  statements of cash flows - Years ended December 31, 1997,
      1996 and 1995

      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.


<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, 1997 and 1996, and the
related consolidated statements of income,  stockholders' equity, and cash flows
for each of the  three  years in the  period  ended  December  31,  1997.  These
financial  statements are the  responsibility of the Company's  management.  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 standards 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 December 31, 1997 and 1996, and the consolidated
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  1997,  in  conformity  with  generally  accepted
accounting principles.



                                                               ERNST & YOUNG LLP


Greenville, South Carolina
February 13, 1998,
except for Note 20, as to which the date is
March 19, 1998


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

                           Consolidated Balance Sheets  
<TABLE>
<CAPTION>

                                                                                               December 31
                                                                                               1997 1996
                                                                                   -----------------------------------
                                                                                   -----------------------------------
                                                                                             (In thousands)



<S>                                                                                  <C>                <C>
Assets
Cash and cash equivalents, including $18,822 (1997) and
   $47,255 (1996) of reverse repurchase agreements ............................       $     88,847       $     54,614
Receivables ...................................................................            122,180             46,040
Property and equipment ........................................................             19,011             12,083
Investments in real estate limited partnerships and
   other securities ...........................................................            215,735            150,863
Apartment property ............................................................             22,357             22,125
Property management contracts .................................................            147,256            122,915
Costs in excess of net assets of acquired businesses ..........................            158,524             75,627
Other assets ..................................................................             26,313              8,135
                                                                                           -------            -------
Total assets ..................................................................       $    800,223       $    492,402
                                                                                           =======            =======
Liabilities and Stockholders' Equity
Liabilities:
   Accounts payable ...........................................................       $     13,705       $      1,711
   Commissions payable ........................................................             51,285             18,736
   Accrued and sundry liabilities .............................................            102,009             40,741
   Notes payable ..............................................................            170,404             49,840
   Non-recourse mortgage note payable .........................................             19,300             19,300
                                                                                           -------            -------
                                                                                           356,703            130,328

Company-obligated mandatory redeemable convertible
   preferred securities of a subsidiary trust .................................            144,065            144,169
Minority interests in consolidated subsidiaries ...............................             61,546                 --
Stockholders' Equity:
   Common  Stock,  Class A, par value  $.01 per share -  authorized 
       100,000,000 shares,  issued and  outstanding  30,159,161 (1997) and 
       28,857,097 (1996) shares, and 166,400 (1997) shares held in treasury                    302                289
   Additional paid-in capital .................................................            201,597            189,657
   Retained earnings ..........................................................             36,010             27,959
                                                                                           -------            -------
Total stockholders' equity ....................................................            237,909            217,905
                                                                                           ------- 
Total liabilities and stockholders' equity ....................................       $    800,223       $    492,402
                                                                                           =======            =======
<FN>
See accompanying notes.
</FN>
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

                        Consolidated Statements of Income

                   (In thousands except for per share amounts)

<TABLE>
<CAPTION>
                                                                                  Year Ended December 31
                                                                             1997          1996          1995
                                                                        --------------------------------------------
<S>                                                                         <C>           <C>           <C>
Revenues:
   Fee based services, including fees from affiliated partnerships
     of $67,816 (1997), $55,656 (1996) and $49,478 (1995)                    $388,922      $215,623      $118,828
   Interest                                                                     4,571         3,104         2,780
   Other                                                                          704         2,327         1,424
   Apartment property                                                           6,646         6,020             -
                                                                        --------------------------------------------
                                                                              400,843       227,074       123,032
Costs and expenses:
   Fee based services                                                         315,653       164,830        85,707
   Administrative                                                              10,233         7,216         8,020
   Apartment property                                                           3,251         3,034             -
   Interest                                                                     7,867        12,918         7,049
   Apartment property interest                                                  1,486         1,812             -
   Depreciation and amortization                                               31,709        23,031        13,493
   Apartment property depreciation                                                966           901             -
   Release fee                                                                  5,000             -             -
   Legal reserve                                                                5,202             -             -
   Termination of employment agreements                                             -             -         1,000
                                                                        --------------------------------------------
                                                                              381,367       213,742       115,269

Equity earnings - limited partnership interests                                10,027         3,590         2,461
Minority interests in consolidated subsidiaries                               (12,448)       (1,976)         (131)
                                                                        --------------------------------------------
Income before income taxes and extraordinary item                              17,055        14,946        10,093
Provision for income taxes                                                      6,822         5,680         3,835
                                                                        --------------------------------------------
Income before extraordinary item                                               10,233         9,266         6,258
Extraordinary item - loss on retirement of debt, net of
   income taxes of  $430 (1996) and $276 (1995)
                                                                                    -          (702)         (452)
                                                                        --------------------------------------------
Net income                                                                 $   10,233    $    8,564    $    5,806
                                                                        ============================================
                                                                        ============================================

Per share amounts - basic:
   Income before extraordinary item                                              $.35          $.33          $.23
   Extraordinary item                                                               -           .03           .02
                                                                        ============================================
   Net income                                                                    $.35          $.30          $.21
                                                                        ============================================

Per share amounts - assuming dilution:
   Income before extraordinary item                                              $.32          $.28          $.22
   Extraordinary item                                                               -           .02           .02
                                                                        --------------------------------------------
   Net income                                                                    $.32          $.26          $.20
                                                                        ============================================

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

<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, 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            -             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            -             189,657          27,959
   Exercise of stock options - 1,193,404 shares
     of common stock issued                                    12            -               6,825               -
   Exercise of warrants - 65,000 shares of common
     stock issued                                               1            -                 649               -
   Issuance of 210,000 shares of common
     stock in Realty One acquisition                            2            -               4,198               -
   Repurchase of common stock - 166,400
     shares held in treasury                                   (2)           -              (1,099)         (2,182)
   Restricted stock awards                                      -            -                 550               -
   Tax benefit of exercised options and warrants                -            -                 817               -
   Net income for 1997                                          -            -                   -          10,233
                                                      ==============================================================
Balance at December 31, 1997                                $ 302         $  -            $201,597        $ 36,010
                                                      ==============================================================
<FN>
See accompanying notes.
</FN>
</TABLE>

<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                              Year ended December 31
                                                                     1997              1996             1995
                                                               -----------------------------------------------------
                                                               -----------------------------------------------------
                                                                                  (In thousands)
<S>                                                               <C>              <C>              <C>
Operating activities
Net income                                                         $   10,233       $     8,564      $     5,806
Adjustments to reconcile net income to net cash
   provided by operating activities:
     Depreciation and amortization                                     31,709            23,031           13,493
     Apartment property depreciation                                      966               901                -
     Equity in earnings of partnerships                               (10,027)           (3,590)          (2,461)
     Extraordinary loss                                                     -             1,132              728
     Minority interests in consolidated subsidiaries                   12,448             1,976              131
     Deferred income taxes                                             (4,044)           (2,516)            (820)
     Changes in operating assets and liabilities:
       Accounts receivable                                            (51,362)          (33,429)          (1,234)
       Other assets                                                    (9,682)             (527)             133
       Accrued compensation                                            13,643             7,326            1,635
       Accounts payable and accrued expenses                           13,530            (5,108)          (1,987)
       Commissions payable                                             32,549            18,134                -
                                                               -----------------------------------------------------
                                                                       29,730             7,330            9,618
                                                               -----------------------------------------------------
Net cash provided by operating activities                              39,963            15,894           15,424
                                                               -----------------------------------------------------
                                                               -----------------------------------------------------

Investing activities
Decrease (increase) in restricted cash, net                                 -             6,282           (6,110)
Additions to property and equipment, net                               (7,695)           (6,364)          (3,276)
Payments made for acquisition of management contracts and
   acquired businesses                                                (95,797)          (97,248)         (22,489)
Proceeds from Balcor dispositions                                       6,762             8,231                -
Purchase of real estate partnership interests                         (93,118)          (99,145)         (23,955)
Distributions from partnerships                                        38,061            12,347           11,130
Advances made under note agreements                                    (9,172)           (8,077)         (16,376)
Collections on notes receivable                                         4,523            21,911            4,366
Investment in apartment property, net of
   acquired cash                                                            -            (8,005)               -
Organization costs on formation of IPT                                 (3,743)
                                                               -----------------------------------------------------
Net cash used in investing activities                                (160,179)         (170,068)         (56,710)
                                                               -----------------------------------------------------
</TABLE>

<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

                Consolidated Statements of Cash Flows (continued)

<TABLE>
<CAPTION>

                                                                              Year ended December 31
                                                                     1997              1996             1995
                                                               -----------------------------------------------------
                                                                                  (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 issuance of common stock of IPT                          62,420                 -                -
Proceeds from exercise of stock options                                 7,487             2,519            1,298
Purchase of treasury stock                                             (3,283)                -                -
Payment of preferred stock dividends                                        -              (281)          (1,072)
Payment of distributions on trust based
   convertible preferred securities                                   (10,003)           (1,619)               -
Distributions made to minority interests                               (2,575)             (432)            (100)
Investment made by minority interests                                     249                 -            2,651
Payments on notes payable                                             (15,682)         (162,498)        (121,731)
Payments on non-recourse mortgage note                                      -           (16,876)               -
Proceeds from notes payable                                           118,141           175,740           89,660
Debt and stock issuance costs                                          (2,305)           (6,411)          (2,728)
                                                               -----------------------------------------------------
Net cash provided by financing activities                             154,449           158,942           54,536
                                                               -----------------------------------------------------
Net increase in cash and cash equivalents                              34,233             4,768           13,250
Cash and cash equivalents at beginning of year                         54,614            49,846           36,596
                                                               -----------------------------------------------------
Cash and cash equivalents at end of year                            $  88,847        $   54,614       $   49,846
                                                               =====================================================
<FN>
See accompanying notes.
</FN>
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 1997


1. Organization

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  company   specializing  in  the  ownership  and  operation  of
securitized real estate assets throughout the United States and Italy. 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.

One of the Company's subsidiaries, Insignia Properties Trust ("IPT"), was formed
in 1996 for the  purpose  of  acquiring  and  owning  interests  in  multifamily
residential  and commercial  properties,  including  limited and general partner
interests in partnerships which hold such real estate  properties.  IPT has been
organized in a manner that will allow it to be taxed as a real estate investment
trust ("REIT") under the Internal  Revenue Code of 1986. The Company and certain
of  its  affiliates  have  transferred  to  IPT  equity  interests  in  entities
comprising or  controlling  the general  partners of certain  public real estate
limited partnerships in exchange for shares of beneficial interest of IPT.

IPT is the sole general  partner of Insignia  Properties  L.P.  ("IPLP"),  which
functions as the operating  partnership  of IPT. The Company has  transferred to
IPLP  certain  of  its  limited   partner   interests  in  real  estate  limited
partnerships  (or equity  interests  in entities  which own such  interests)  in
exchange  for  units of  limited  partner  interest  in IPLP,  which  units  are
exchangeable for common shares of IPT or are redeemable for cash. As a result of
these transactions,  at December 31, 1997 and 1996, IPT was 75% and 98% owned by
the Company.

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  conform  with the 1997
presentation.




<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




2. Summary of Significant Accounting Policies (continued)

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.

Loans Receivable

The  allowance  for  credit  losses  related to loans  that are  identified  for
impairment 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.  No  significant  loans are  estimated  to be  impaired  as of
December 31, 1997.

Investments in Real Estate Limited Partnerships

Investments  in real  estate  limited  partnerships  represent  general  partner
interests  of .2% to 4% in certain  limited  partnerships  and  limited  partner
interests in real estate limited  partnerships.  The  investments in real estate
limited partnerships are accounted for by the equity method.  Equity in earnings
from these partnerships  amounted to approximately  $10,027,000,  $3,590,000 and
$2,461,000 for 1997,  1996 and 1995,  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.

Minority Interest

Minority  interests  in  consolidated  subsidiaries  consist  of the  respective
ownership of the minority shareholders.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




2. Summary of Significant Accounting Policies (continued)

Advertising Expense

The  cost  of  advertising  is  expensed  as  incurred.   The  Company  incurred
$2,913,000,  $1,815,000 and $758,000 in advertising  costs during 1997, 1996 and
1995, respectively.

Property and Equipment

Property and equipment is stated at cost,  net of  accumulated  depreciation  of
$8,507,000  (1997),  and $5,681,000  (1996).  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  $2,850,000
(1997), $1,842,000 (1996) and $1,444,000 (1995).

Property  Management  Contracts  and Costs in Excess of Net  Assets of  Acquired
Businesses

Property   management   contracts  are  stated  at  cost,   net  of  accumulated
amortization  of  $68,772,000   (1997)  and  $46,020,000   (1996).  The  Company
capitalizes costs paid or payable to third parties in the successful  pursuit of
acquiring   management   contracts.   These   contracts  are  amortized  by  the
straight-line  method  over  three  to  fifteen  years.  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 circumstances indicate 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,  the
Company's carrying value of the property  management  contract costs are reduced
by the estimated  shortfall on a discounted basis. No significant  contracts are
estimated to be impaired as of December 31, 1997,  although  termination  in the
future could adversely affect this estimate.

Costs in excess of net  assets  of  acquired  businesses  are  amortized  by the
straight-line method primarily over 15 to 25 years.  Accumulated amortization is
$7,036,000 (1997) and $2,553,000 (1996).



<PAGE>


Insignia Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial
                             Statements (continued)



2. Summary of Significant Accounting Policies (continued)

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.

New Accounting Standards

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  No.  131,  Disclosures  about  Segments  of an
Enterprise and Related  Information  ("Statement  131"),  which is effective for
years beginning after December 15, 1997. Statement 131 establishes standards for
the way that public  business  enterprises  report  information  about operating
segments in annual  financial  statements  and requires  that those  enterprises
report  selected  information  about  operating  segments  in interim  financial
reports.  It also establishes  standards for related  disclosures about products
and services, geographic areas, and major customers.  Statement 131 is effective
for financial statements for fiscal years beginning after December 15, 1997, and
therefore  the Company will adopt the new  requirements  retroactively  in 1998.
Management  has not completed its review of Statement  131, but does  anticipate
that the adoption of this  statement will change the method by which the Company
reports segment disclosures.

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 and  commission  revenue  related to
real estate  sales.  Such  revenues are recorded  when the related  services are
performed, unless significant contingencies exist, or at contract closing in the
case of real estate sales.



<PAGE>


Insignia Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial
                             Statements (continued)



2. Summary of Significant Accounting Policies (continued)

Distributions

IPT  intends to pay  distributions  of at least the amount  required to maintain
REIT status  under the Internal  Revenue  Code.  In August  1997,  the IPT Board
adopted a policy to pay a  quarterly  distribution  of $0.15 per  common  share;
however,  the payment of any distribution will be dependent on the liquidity and
cash flows of IPT,  which are  primarily  dependent  on  distributions  from the
underlying partnerships.

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.

IPT elected to be taxed as a real estate  investment  trust  ("REIT")  under the
Internal  Revenue Code of 1986,  as amended  (the  "Code"),  beginning  with its
taxable year ending December 31, 1996. Generally, a REIT which complies with the
provisions of the Code and distributes at least 95% of its taxable income to its
shareholders does not pay federal income taxes on its distributed income. If IPT
fails to qualify  as a REIT in any year,  its  taxable  income may be subject to
income tax at regular  corporate  rates  (including any  applicable  alternative
minimum tax). Even if IPT qualifies for taxation as a REIT, it may be subject to
certain   state  and  local  taxes  on  its  income  and  excise  taxes  on  its
undistributed income.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




2. Summary of Significant Accounting Policies (continued)

Distributions  declared  of $0.53  per  share to IPT  shareholders  of record on
December 30, 1996 and $0.15 per share to  shareholders  of record on October 31,
1997 were paid during the year ended December 31, 1997.  Distributions  declared
of $0.20 per share were paid  during  the year  ended  December  31,  1996.  For
federal tax purposes,  the portions of the 1997 distribution  relating to return
of capital and  earnings  and profits  are 59% and 41%,  respectively.  The 1996
distribution consisted entirely of a return of capital. No REIT operating income
was earned during 1996.  Earnings and profits which  determine the taxability of
dividends  to  shareholders,  differ  from net  income  reported  for  financial
reporting  purposes due to differences for federal tax purposes in the estimated
useful  lives to compute  depreciation  and the  carrying  value  (basis) of the
investment  in  partnership  interests.  The  Company  is taxed on its  share of
distributions received from IPT.

Foreign Currency Translation

The  financial  statements  of all foreign  subsidiaries  were prepared in their
respective  local  currencies  and  translated  into U.S.  dollars  based on the
current  exchange  rate at the end of the  period  for the  balance  sheet and a
weighted-average  rate for the period on the  statement  of income.  Translation
adjustments in 1997 were not material.

3. Earnings Per Share

In 1997,  the Financial  Accounting  Standards  Board issued  Statement No. 128,
Earnings per Share ("Statement 128").  Statement 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share.  Unlike primary earnings per share, basic earnings per share excludes any
dilutive  effects of  options,  warrants  and  convertible  securities.  Diluted
earnings  per share is very similar to the  previously  reported  fully  diluted
earnings per share.  All  earnings  per share  amounts for all periods have been
presented,  and where  appropriate,  restated  to conform to the  Statement  128
requirements.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




3. Earnings Per Share (continued)

<TABLE>
<CAPTION>
                                                                     1997             1996              1995
                                                              ------------------------------------------------------
                                                                    (In thousands, except per share amounts)
<S>                                                                  <C>                <C>             <C>
Numerator
Net income                                                            $ 10,233           $ 8,564         $  5,806
Preferred stock dividends                                                  -                (199)          (1,245)1
                                                              ------------------------------------------------------
Numerator for basic earnings per share - income
   available to common stockholders                                     10,233             8,365            4,561

Effect of dilutive securities:
   Preferred stock dividends                                               -                 199              -1
   Convertible notes                                                       -                 152              -
                                                              ------------------------------------------------------
                                                                           -                 351              -
                                                              ======================================================
Numerator for diluted earnings per share -
   income available to common stockholders after assumed
   conversions                                                        $ 10,233           $ 8,716          $ 4,561
                                                              ======================================================

Denominator
Denominator for basic earnings per share - weighted average
   shares                                                           29,160,330        27,846,807       21,326,414

Effect of dilutive securities:
   Employee stock options                                            1,611,388         3,471,260          672,628
   Warrants                                                            808,773         1,006,861          729,736
   Convertible notes                                                       -             653,658              -
                                                              ------------------------------------------------------
 Dilutive potential common shares                                    2,420,161         5,131,779        1,402,364
                                                              ======================================================
 Denominator for diluted earnings per share - adjusted
   weighted-average shares and assumed conversions
                                                                    31,580,491        32,978,586       22,728,778
                                                              ======================================================

 Basic earnings per share                                             $.35              $.30             $.21
                                                              ======================================================

 Diluted earnings per share                                           $.32              $.26             $.20
                                                              ======================================================
<FN>
 1  Conversion  of  the  convertible  preferred  stock  is  not  assumed  in  
    the computation because its effect is anti-dilutive.
</FN>
</TABLE>

<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




4. Acquisitions

During 1997,  Insignia completed the acquisition of certain property  management
and brokerage companies,  including the following:  Rostenberg-Doern,  Inc.; HMB
Property Services, Inc.; Frain, Camins & Swartchild, Inc.; The Related Companies
of Florida; Radius Retail Advisors; Forum Properties, Inc.; Realty One, Inc. and
affiliated  companies;  100% of the Class B stock of First Winthrop  Corporation
and a general partnership interest in Winthrop Financial Associates; and Barnes,
Morris, Pardoe & Foster. In addition, the Company expanded  internationally with
the  purchase of 60% of the stock of  Compagnia  di  Amministrazione  e Gestioni
Immobiliare S.p.A.  ("CAGISA"),  a privately held property management company in
Italy. The Company's  significant  acquisitions  during the last three years are
discussed below.

                                1997 Acquisitions

Frain, Camins & Swartchild Acquisition

On April 1,  1997,  the  Company  acquired  Frain,  Camins  &  Swartchild,  Inc.
("FC&S").  FC&S is a full service commercial,  retail and industrial real estate
brokerage firm located in Chicago, Illinois. The purchase price paid by Insignia
for FC&S was approximately $4.4 million, consisting of $3.5 million paid in cash
and $850,000 in related  acquisition  costs. In addition,  up to $4.5 million in
contingent  payments may be paid based on certain future  performance  measures.
The contingent payments,  when paid, will be recorded as additional  acquisition
costs.  The  operations  of FC&S have been  included  in the  operations  of the
Company since April 1, 1997. The acquisition was accounted for as a purchase.

The Related Companies of Florida Acquisition

On April 29, 1997, the Company acquired a portfolio of certain management rights
from The Related Companies of Florida ("Related").  The transaction includes the
management of approximately 10,300 units of multifamily residential housing, all
of which are  located  in the  state of  Florida.  The  purchase  price  paid by
Insignia for these rights was approximately  $12.0 million,  consisting of $10.5
million  paid in cash,  $528,000  in notes  payable  (net of $8 million in notes
receivable issued to the sellers) and  approximately  $1.0 million in contingent
payments and acquisition  costs. The operations of Related have been included in
the  operations  of the  Company  since  April 29,  1997.  The  acquisition  was
accounted for as a purchase.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




4. Acquisitions (continued)

Realty One, Inc. and Affiliates Acquisition

On October 13, 1997, the Company  acquired the outstanding  stock of Realty One,
Inc. and affiliated  companies  ("Realty  One"),  including  First Ohio Mortgage
Corporation. Realty One is a full service residential real estate brokerage firm
headquartered  in Cleveland,  Ohio and serving  primarily the northern region of
Ohio. First Ohio Mortgage  Corporation  originates  single family home mortgages
for both  Realty One  clients  and third  parties.  The  purchase  price paid by
Insignia for Realty One was $39.1  million,  consisting of  approximately  $34.1
million in cash,  and  210,000  shares of the  Company's  Class A Common  Stock,
valued at $4.2  million.  In  addition,  the  Company has  incurred  $825,000 of
acquisition  costs.  The  operations  of Realty  One have been  included  in the
operations of the Company since October 10, 1997. The  acquisition was accounted
for as a purchase.

First Winthrop Corporation Acquisition

On October 27,  1997,  the Company  acquired  100% of the Class B stock of First
Winthrop  Corporation and a general  partnership  interest in Winthrop Financial
Associates ("Winthrop").  This acquisition gives the Company the right to direct
the  activities  of  real  estate  limited   partnerships  owning  47  apartment
properties  comprising  approximately  16,500  residential  apartment  units. In
addition, the Company acquired limited partnership interests in, or the right to
acquire limited partner interests in, certain of these partnerships which own 29
properties  comprising  approximately  12,100  residential  apartment units. The
purchase  price paid by Insignia for Winthrop was  approximately  $78.4 million,
including  approximately  $28.3  million for limited  partnership  interests.  A
deferred tax liability of approximately $17.7 million was recorded in connection
with the acquisition.  The Winthrop acquisition was accounted for as a purchase.
All operations  attributable to the Winthrop  acquisition  have been included in
the  operations of the Company since October 27, 1997.  (See Note 16 for further
discussion of Winthrop).

Barnes, Morris, Pardoe & Foster Acquisition

On October 30, 1997,  the Company  acquired  substantially  all of the assets of
Barnes,  Morris,  Pardoe & Foster  ("Barnes  Morris"),  a commercial real estate
services firm located in the greater  Washington,  D.C. area. The purchase price
paid  by  Insignia  for  Barnes   Morris  was  $17.0   million,   consisting  of
approximately  $15.2 million in cash and $1.8 million in  acquisition  costs and
contingent guarantees. The operations of Barnes Morris have been included in the
operations of the Company since October 30, 1997. The  acquisition was accounted
for as a purchase.


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




4. Acquisitions (continued)

                                1996 Acquisitions

Edward S. Gordon Company, Inc. Acquisition

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.

Paragon Group Property Services, Inc. Acquisition

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,  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  per  share.
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.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




4. Acquisitions (continued)

National Properties, Inc. Acquisition

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 interests 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,  (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.

                                1995 Acquisitions

Douglas Elliman-Gibbons & Ives Acquisition

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 Class A 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.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




4. Acquisitions (continued)

O'Donnell Property Services, Inc. Acquisition

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 Class A
Common Stock. Insignia acquired property management rights to approximately 23.6
million square feet of commercial,  retail,  office, and warehouse space located
principally  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.

                                Other Information

Pro forma results of operations for the years ended December 31, 1997,  1996 and
1995 assuming consummation of the FC&S, Related, Realty One, Winthrop and Barnes
Morris  acquisitions  at January 1, 1996, and assuming  consummation of the ESG,
Paragon,  NPI, DEK and OPSI  acquisitions  at January 1, 1995, is as follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                            1997              1996             1995
                                                      -----------------------------------------------------
                                                      -----------------------------------------------------
<S>                                                        <C>               <C>              <C>
Revenues                                                    $508,283          $431,353         $280,197
Income before extraordinary item                               9,413             7,183            7,664
Net income                                                     9,413             6,481            7,212
Diluted earnings per common share:
   Income before extraordinary item                             $.30              $.22             $.24
   Net income                                                   $.30              $.20             $.22
</TABLE>

The  combined  pro forma  results  of  operations  of the  Company's  other 1997
acquisitions  were not disclosed based on the  materiality of each  transaction.
The total  cost of the  Company's  other  1997  acquisitions  approximated  $8.2
million.

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.


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




4. Acquisitions (continued)

The cost of the FC&S, Related, Realty One, Winthrop,  Barnes Morris (1997), ESG,
Paragon, and NPI (1996) acquisitions are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                            1997             1996              1995
                                                     ------------------------------------------------------
                                                     ------------------------------------------------------
<S>                                                      <C>               <C>               <C>
Notes payable and common stock                            $  21,463         $  26,525         $  3,711
Accrued and sundry liabilities                               15,658             4,298            1,789
Deferred tax liability, net                                  17,652            11,909            3,115
Cash paid at the closing dates                              121,415           175,892           17,185
                                                     ------------------------------------------------------
                                                           $176,188          $218,624          $25,800
                                                     ======================================================

The cost was allocated as follows:

                                                            1997             1996              1995
                                                     ------------------------------------------------------
                                                     ------------------------------------------------------

Cash acquired                                            $    1,383     $           -      $         -
Accounts receivable                                           5,533                 -                -
Notes receivable                                                  -             5,000                -
Mortgage loans receivable                                     8,414                 -                -
Property and equipment                                        2,123                 -                -
Property management contracts                                47,811            63,260           24,324
Non-compete agreements                                            -             1,700                -
Goodwill                                                     80,067            74,232                -
Other assets                                                  2,529               594            1,476
Investment in limited partnership units                      28,328            73,838                -
                                                     ------------------------------------------------------
                                                           $176,188          $218,624          $25,800
                                                     ======================================================
</TABLE>



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




5. Reverse Repurchase Agreements

Periodically,  the Company invests in reverse repurchase agreements. At December
31, 1997 and 1996, respectively,  the Company had $8,856,000 and $12,952,000, in
reverse  repurchase  agreements with First Union National Bank of South Carolina
("First  Union")  collateralized  by  obligations  of  the  Government  National
Mortgage  Association  ("GNMA")  with a weighted  average  interest rate of 5.5%
(1997) and 5.8% (1996) with maturities of one to three weeks.  In addition,  the
Company has an agreement  with First Union  whereby it purchases  various  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,  1997 and  1996,
respectively,  the Company had $9,966,000 and $34,303,000 invested in such bonds
with a weighted average interest rate of 5.7% and 3.7%. All investments for 1997
and  1996  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.

6. Receivables

<TABLE>
<CAPTION>
                                                                             December 31
                                                                        1997            1996
                                                                 -----------------------------------
                                                                 -----------------------------------
                                                                           (In thousands)
<S>                                                                  <C>             <C>
Accounts receivable                                                   $  23,466       $  9,899
Commissions receivable                                                   76,838          33,372
Mortgage loans receivable                                                11,991              -
Income tax refund receivable                                              4,488              -
Notes receivable:
   Brokerage employees with interest at prime plus 1%                     1,894          1,104
   Outside entities with interest ranging from 8% to 11%                    238             60
   Affiliates with interest ranging from 8% to 24%                        2,513          1,428
   Chairman, executive officers, and other employees with
     interest ranging from 6% to 10%                                        752            177
                                                                 -----------------------------------
                                                                          5,397          2,769
                                                                 -----------------------------------
                                                                       $122,180        $46,040
                                                                 ===================================
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




6. Receivables (continued)

Accounts  receivable  consist  primarily  of  management  fees  expected  to  be
collected in 1998. The accounts  receivable are not  collateralized,  but credit
losses have been  insignificant and within  management's  estimate.  Commissions
receivable  consist of  commercial  lease  commissions,  substantially  from ESG
operations,   of  $70,808,000  (1997)  and  $29,814,000  (1996).  Certain  notes
receivable are collateralized by various  partnership  interests,  assignment of
notes and liens, and real estate.

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

                           Notes          Commissions
                         Receivable        Receivable
                     ------------------------------------

    1998                   $2,020          $69,506
    1999                      247            6,390
    2000                    2,339              815
    2001                      305               89
    2002                      144               14
Later years                   342               24
                     ------------------------------------
                           $5,397          $76,838
                     ====================================




<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




7. Investments in Real Estate Limited Partnerships

The Company  has  significant  equity  investments  in 50 limited  partnerships,
through IPT controlled  and  co-investment  partnerships,  which own real estate
consisting   primarily  of  residential   apartments  and  commercial   property
throughout the United States.  The Company's  capital  ownership  percentages of
such investments as of December 31, 1997 are as follows:

                                                                Capital
       Real Estate Limited Partnership                         Ownership %
---------------------------------------------------       --------------------

Consolidated Capital Growth Fund                                  39%
Consolidated Capital Institutional Properties                     26%
Consolidated Capital Institutional Properties/3                   12%
Consolidated Capital VI                                           22%
Consolidated Capital III                                          24%
Consolidated Capital IV                                           27%
Johnstown/Consolidated Income Partners                            10%
Davidson Growth Plus, L.P.                                        11%
Shelter Properties I                                              39%
Shelter Properties II                                             33%
Shelter Properties III                                            34%
Shelter Properties IV                                             32%
Shelter Properties V                                              39%
Shelter Properties VI                                             28%
National Property Investors III                                   45%
National Property Investors 5                                     47%
National Property Investors 6                                     44%
National Property Investors 7                                     43%
National Property Investors 8                                     38%
Century Property Fund XIV                                         41%
Century Property Fund XV                                          40%
Century Property Fund XVI                                         37%
Century Property Fund XVII                                        38%
Century Property Fund XVIII                                       29%
Century Property Fund XIX                                         33%
Century Property Fund XXII                                        27%
Fox Strategic Housing Income Partners                             15%
Consolidated Capital Institutional Properties/2                   20%


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




7. Investments in Real Estate Limited Partnerships (continued)

                                                            Capital
    Real Estate Limited Partnership                        Ownership %
------------------------------------------            ---------------------

Courtyard Plaza Associates, L.P.                               20%
101 Marietta Street Associates                                 10%
Mockingbird Associates, L.P.                                   10%
Brickyard Investors, L.P.                                      19%
Southwest Associates, L.P.                                     25%
Brookhollow Associates, L.P.                                   20%
Western Hills Associates LLC                                   10%
Bingham Partners, L.P.                                         10%
Nashpike Partners, L.P.                                        30%
Bennington Square Associates, L.P.                             20%
Sleepy Lake Partners, L.P.                                     20%
Northpoint Partners, L.P.                                      10%
Chimney Ridge Associates, L.P.                                 20%
Cobble Creek, LLC                                              20%
Clayton Investors Associates, LLC                              20%
Fresh Meadows Development, LLC                                 35%
Glades Plaza, L.P.                                             20%
Hiawassee Oak Partners, L.P.                                   30%
Springhill Lake Investors, L.P.                                37%
Riverside Park Associates, L.P.                                35%
Winrock-Houston, L.P.                                          35%
Winthrop Texas Investors, L.P.                                 20%

These limited  partnerships own approximately  212 properties  comprising 54,390
apartment units and 5.5 million square feet of commercial space.

The  Company,  through  its  ownership  in IPT,  owns 62% of  National  Property
Investors  4  and  therefore  consolidates  the  financial  statements  of  this
partnership.




<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




7. Investments in Real Estate Limited Partnerships (continued)

Summarized financial  information of the unconsolidated  limited partnerships is
as follows:

<TABLE>
<CAPTION>
                                                                                   December 31
                                                               -----------------------------------------------------
                                                                     1997              1996             1995
                                                               -----------------------------------------------------
                                                                                  (In thousands)
<S>                                                                 <C>               <C>              <C>
Condensed Statements of Earnings Information
Revenues                                                             $391,807          $255,922         $107,111

Property operating expenses                                           204,716           140,414           59,615
Provision for impairment                                                    -                 -            8,255
Depreciation and amortization                                          72,067            50,504           23,891
Interest                                                               85,897            53,334           14,666
Administrative                                                         14,250            10,897            7,554
                                                               -----------------------------------------------------
Total operating expenses                                              376,930           255,149          113,981
                                                               -----------------------------------------------------
Income (loss) from operations                                          14,877               773           (6,870)
Other gains                                                             8,680             6,640            1,956
                                                               -----------------------------------------------------
Income (loss) before extraordinary items                               23,557             7,413           (4,914)
Extraordinary items - loss on retirement of debt                         (819)           (2,580)             126
                                                               -----------------------------------------------------
Net income (loss)                                                   $  22,738        $    4,833       $   (4,788)
                                                               =====================================================
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




7. Investments in Real Estate Limited Partnerships (continued)

<TABLE>
<CAPTION>
                                                         December 31
                                                    1997             1996
                                              -----------------------------------
                                                        (In thousands)
<S>                                              <C>              <C>
Condensed Balance Sheets Information
Cash and investments                              $   124,194      $   111,034
Receivables and deposits                               75,144           26,762
Other assets                                           38,428           37,231

Real estate                                         2,167,817        1,450,794
Less accumulated depreciation                        (843,658)        (635,942)
                                              -----------------------------------
Net real estate                                     1,324,159          814,852
                                              -----------------------------------
Total assets                                       $1,561,925      $   989,879
                                              ===================================
                                              ===================================

Mortgage notes payable                             $1,262,049      $   706,594
Other liabilities                                      55,668           47,353
                                              -----------------------------------
Total liabilities                                   1,317,717          753,947
Partners' capital                                     244,208          235,932
                                              -----------------------------------
                                                   $1,561,925      $   989,879
                                              ===================================
</TABLE>

At December 31, 1997 the unamortized  excess of the Company's  investments  over
the  historical  cost  of  the  underlying  net  assets  of  the  investees  was
approximately $125.1 million which has been attributed to the fair values of the
investees'  underlying  properties  and is being  depreciated  over their useful
lives.




<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




8. Accrued and Sundry Liabilities

                                                       December 31
                                                  1997              1996
                                            -----------------------------------
                                            -----------------------------------
                                                      (In thousands)

Estimated acquisition liabilities                 $  13,993       $  2,320
Employee compensation                                31,758         14,275
Deferred taxes                                       24,865         10,617
Legal reserve                                         4,000              -
Deferred revenue                                      2,296          1,476
Accrued vacation                                      1,501          1,308
Other                                                23,596         10,745
                                            -----------------------------------
                                                   $102,009        $40,741
                                            ===================================


9. Notes Payable

During 1997,  to better  position  the Company in the  acquisition  market,  the
Company completed an amendment to its revolving credit facility,  increasing the
credit limit from $200 million to $275  million.  The amended  revolving  credit
facility  involves  a  syndicate  of 15  national  and  international  financial
institutions. The revolving credit facility bears interest at the annual rate of
either prime plus an  applicable  margin  ranging  from 1/4 - 3/4%,  the Federal
Funds Rate, as defined,  plus an applicable  margin  ranging from 1/4 - 3/4%, or
LIBOR plus an applicable  margin ranging from 1.5 - 2%, at Insignia's option and
terminates on March 19, 2000 unless  extended.  At December 31, 1997, all of the
outstanding  amounts were subject to the LIBOR based rate. The Company also must
pay an unused  commitment  fee of  either  .25% or .375% 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, 1997
was $144,000,000.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




9. Notes Payable (continued)

Notes payable consist of the following:

<TABLE>
<CAPTION>
                                                                                         December 31
                                                                                    1997              1996
                                                                             -------------------------------------
                                                                             -------------------------------------
                                                                                        (In thousands)

<S>                                                                               <C>                 <C>
Revolving credit  facility with interest only due quarterly at LIBOR plus 1.75%.
   Final payment due date is March 19, 2000 with
   possible extension to December 11, 2000.                                        $144,000            $43,000
Realty One affiliate First Ohio Mortgage Corporation maintains a $15
   million line of credit with a bank that expires on April 30, 1998. The credit
   line is  collateralized  by  substantially  all assets of First Ohio Mortgage
   Corporation and guaranteed by companies  affiliated through common ownership.
   Repayment  of  each  advance  is due  within  fourteen  business  days of the
   funding.  Advances on the line of credit can only be drawn with evidence of a
   committed  residential  mortgage and any one line of credit cannot be used to
   fund any single residential  mortgage in excess of $400,000.  The rate on the
   credit line is equal to the prime rate.                                           12,495                  -
Realty  One  revolving   credit   agreement   with  a  bank  for  $5.5  million,
   collateralized  by the  property  and  receivables  of  Realty  One.  Monthly
   interest payments are due at Realty One's option of three rates (i) the prime
   rate,  (ii) the bank's Money Market rate plus a specified  margin as defined,
   or (iii) the bank's Cost of Funds rate plus 2.5%.  The rate at  December  31,
   1997 was 6.4%.  Advances on the credit line are due at the  maturity  date of
   September 30, 1999.
                                                                                      3,500                  -
</TABLE>

<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)





9. Notes Payable (continued)

<TABLE>
<CAPTION>
                                                                                         December 31
                                                                                    1997              1996
                                                                             -------------------------------------
                                                                             -------------------------------------
                                                                                        (In thousands)
<S>                                                                             <C>               <C> 
Realty  One  term  loan  with  a  bank,  with a $4.5  million  borrowing  limit,
   collateralized  by Realty One's  property and  receivables.  The term loan is
   payable in monthly  installments  of $75,000  plus  interest at Realty  One's
   option of three rates (i) the prime rate,  (ii) the bank's  Money Market rate
   plus a specified margin,  as defined,  or (iii) the bank's Cost of Funds rate
   plus 2.5%. The rate at December 31, 1997 was 6.4%.
   The maturity date is June 1, 2001.                                            $    2,625        $         -
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
   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.                                             1,458              2,158
Realty One affiliate,  Corporate  Relocation  Management,  maintains a revolving
   line of credit  agreement for $3 million that is  collateralized  by accounts
   receivable and the option of the bank to record first and/or second mortgages
   on any acquired  properties.  The outstanding  balance is due on demand.  The
   interest rate on the credit line was approximately 8.2% at December 31, 1997.      1,349                  -
Note payable bearing simple interest of 6.25% per annum
   with principal and interest paid monthly.  Last scheduled payment is
   December 19, 2000.                                                                 1,322              1,711
Unsecured nonrecourse note payable bearing simple interest
   at a rate of 6.5% per annum.                                                           -                430

</TABLE>

<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




9. Notes Payable (continued)

<TABLE>
<CAPTION>
                                                                                         December 31
                                                                                    1997              1996
                                                                             -------------------------------------
                                                                             -------------------------------------
                                                                                        (In thousands)
<S>                                                                            <C>                <C>       
Two promissory  notes  payable  bearing  interest at LIBOR plus a margin of 
   1.75%with quarterly interest payments.
   Principal is payable in full on April 29, 2012.                              $       528        $         -
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.                              1,847              2,568
Realty One, other notes with interest rates from 5.1% - 7.7% due at various
   times through 2001.                                                                  922                  -
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 matured in December
   1997.                                                                                  -                437
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.                                    40                 60
                                                                             -------------------------------------
Subtotal                                                                            172,086             52,364
Less prepaid points                                                                  (1,682)            (2,524)
                                                                             -------------------------------------
                                                                                   $170,404            $49,840
                                                                             =====================================
<FN>
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.
</FN>
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




9. Notes Payable (continued)

The Company paid interest of approximately $4,466,000 (1997), $11,346,000 (1996)
and $6,516,000 (1995).

Scheduled  principal  maturities on notes payable after December 31, 1997 are as
follows (thousands of dollars):

    1998                                   $  19,009
    1999                                       3,149
    2000                                     149,301
    2001                                          99
    2002                                           -
Later years                                      528
                                       -----------------
                                            $172,086
                                       =================

Certain of the Company's 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.

10. Subordinated Convertible Note Payable

In connection  with the Gordon Realty  acquisition  in 1994,  Insignia  issued a
convertible  subordinated 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.

11. 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.  On March 29, 1996, the Company  notified Apollo of
its  intention  to call for the  redemption  of the 15,000  shares of  preferred
stock.  The preferred stock was converted to 1,509,062  shares of Class A Common
Stock on April 29, 1996.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




12. Trust Based Convertible Preferred Securities

In November  1996,  Insignia  Financing I, a Delaware  trust and a  consolidated
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 require  distributions  at the rate of 6.5% per annum,  with  quarterly
distributions   payable  in  arrears.  The  Company  has  the  option  to  defer
distributions  from time to time,  not to exceed 20  consecutive  quarters.  The
Company made  distributions  of  $10,003,000  and  $1,619,000 for 1997 and 1996,
respectively,  which are  reflected in minority  interests  in the  consolidated
statements of income.  The Securities are convertible into the Company's Class A
Common  Stock  at  $26.50  per  share  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 debt under the  revolving
credit facility.

Discounts and offering costs, net of accumulated amortization,  of approximately
$5,435,000  and  $5,331,000  at  December  31,  1997 and 1996,  have been netted
against the Securities and are being amortized over the term of the Securities.

13. Stockholders' Equity

Common Stock, Preferred Stock and Retained Earnings

Effective  December  31,  1995,  the Company  issued a  two-for-one  stock split
effected in the form of a stock dividend of the Company's  Class A Common Stock.
All share related data for the year ended December 31, 1995 has been restated to
give effect to the stock split.




<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




13. Stockholders' Equity (continued)

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 stockholders 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.

IPT's  declaration  of trust has  authorized  the issuance of up to  400,000,000
common shares and 100,000,000 preferred shares of beneficial interest. A private
offering was  completed in August 1997 with a total of 5,231,000  common  shares
issued at $10.00 per share. IPT also granted to certain  potential  investors an
option to purchase for cash up to 1,000,000, in the aggregate,  common shares of
beneficial  interest of IPT, at any time on or before  October 10, 1997,  at the
price of $10 per share,  provided that the purchaser is not in breach of certain
covenants at the time of the purchase.  This option was  exercised  during 1997.
IPLP had 26,972,650 and  19,567,535  units  outstanding at December 31, 1997 and
1996, respectively,  which may be redeemed, subject to certain restrictions, for
an equivalent number of common shares of IPT.

The Company's  ability to pay dividends is subject to restrictions  contained in
its  revolving  credit   facility.   At  December  31,  1997,  the  Company  has
unrestricted  stockholders'  equity  of  $55,182,000.   At  December  31,  1997,
approximately  $8,300,000 of the Company's  retained  earnings is represented by
undistributed  earnings of the  companies  underlying  the  investments  in real
estate limited partnerships that are accounted for by the equity method.

The Company had 2,813,366 (1997) outstanding warrants to acquire shares of Class
A Common Stock of the Company,  with exercise  prices  ranging from $7 - $29 and
expiration dates from 1999 - 2003.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




13. Stockholders' Equity (continued)

Stock-Based Compensation

The Company's 1992 Stock Incentive Plan (the "Plan") has authorized the grant of
options to  management  personnel  for up to 5,250,000  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 Class A
Common Stock at the date of grant.

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  Class A 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 240,800 (1997)  outstanding  restricted  stock awards to acquire
shares of Class A Common Stock of the Company. These awards, which have a 5 year
vesting  period,  were granted to officers and other employees of the Company in
1997.  Total  compensation  expense of $550,000 was recognized by the Company in
1997 for these awards.

During 1997,  Insignia  approved the repricing of certain employee stock options
issued during 1996. The 274,900  options  involved were issued  primarily to new
employees joining the Company through acquisitions. The repriced options have an
exercise price of $17.50 per share over the five year vesting  period,  compared
to a weighted average exercise price of $23.65 prior to repricing.  In addition,
the  Company's   shareholders   approved   amendments  to  the   Certificate  of
Incorporation,  as previously amended,  authorizing 50 million additional shares
of Class A Common Stock, par value $0.01 per share.




<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




13. Stockholders' Equity (continued)

In August 1997,  IPT adopted the 1997 Share  Incentive  Plan (the "IPT Plan") to
provide for the granting of share options and  restricted  shares to certain key
employees  (including  officers),  directors,  consultants  and advisors of IPT,
including  certain  employees of Insignia.  The IPT Plan will be administered by
the Board of Trustees of IPT or a committee  of the Board of  Trustees.  The IPT
Plan provides that options granted may be "incentive  share options" (as defined
in the Code),  non-qualified  options or  restricted  shares,  which vest on the
attainment  of  performance  goals or subject to vesting  requirements  or other
restrictions  prescribed  by the Board of  Trustees.  The maximum  number of IPT
common shares  available for awards is 1,200,000  shares,  subject to adjustment
under  certain  circumstances.  The IPT Plan may be  terminated  by the Board of
Trustees of IPT at any time.

The exercise  price of options  granted  under the IPT Plan may not be less than
100% of the fair  market  value  of an IPT  common  share on the date of  grant.
However, an incentive share option granted to the holder of more than 10% of the
total combined  voting power of all of the shares of beneficial  interest of IPT
or any  subsidiary  must  have an  exercise  price of at least  110% of the fair
market value of the shares on the date of grant and the option by its terms must
not be  exercisable  after  the  expiration  of five  years  from the date it is
granted. Absent a public market for the IPT common shares, the IPT Plan provides
for the fair  market  value to be  determined  by the  Board of  Trustees  (or a
committee thereof if one has been appointed to administer the IPT Plan).

An option may not be granted with a term  exceeding ten years (five years in the
case of  incentive  stock  options  granted  to a holder of more than 10% of the
total  voting  power of all  classes of IPT's  capital  stock on the date of the
grant). Options may be exercised by paying the purchase price in cash or, if the
option agreement permits, wholly or partly in IPT common shares already owned by
the optionee.

At or prior to the exercise of a nonqualified  share option,  the IPT Board will
have the  discretion  to permit the optionee,  in lieu of purchasing  the entire
number of shares subject to purchase under the option, to relinquish all or part
of the  unexercised  portion  of the  option  for  cash  in  the  amount  of the
difference  between the aggregate  value of the shares subject to the option and
the aggregate  exercise price of the option.  At the discretion of the optionee,
this amount may be paid in IPT common shares.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




13. Stockholders' Equity (continued)

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.

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:

                                                   1997        1996        1995
                                                --------------------------------

 Risk-free interest rate                            5.4%       6.2%        6.2%
 Dividend yield                                      N/A       N/A         N/A
 Volitility factors of the expected market price     .45       .40         .42
 Weighted-average expected life of the options      3.72      3.25        3.25

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.




<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




13. Stockholders' Equity (continued)

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):

                                                 1997         1996         1995
                                                --------------------------------

    Pro forma net income                        $6,802       $3,154       $1,208
    Pro forma earnings per share - basic           .23          .10          .05
    Pro forma earnings per share - diluted         .22          .10          .05

Because FAS 123 is applicable only to options granted subsequent to December 31,
1994, its pro forma effect was not fully reflected in 1996 and 1995.

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

<TABLE>
<CAPTION>
                                          1997                          1996                         1995
                                 ------------------------     -------------------------    --------------------------
                                              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                        7,831,558      $11.26        5,904,884       $10.52        2,094,094      $  7.62
Granted                           1,196,700       14.90          881,000        23.97        4,038,128        11.68
Assumed in connection with ESG
   acquisition                                                 1,482,879         5.79                -           -
Exercised                         1,258,404        6.42          352,637         6.97          214,804         4.10
Forfeited/canceled                  592,816       20.27           84,568        12.69           12,534         9.46
                                 ------------ -----------     ------------- -----------    -------------- -----------
Outstanding at end of year        7,177,038      $12.07        7,831,558       $11.26        5,904,884       $10.52

Exercisable at end of year        4,670,004      $10.65        4,982,633      $  9.02        2,795,972       $ 9.08

Weighted-average fair value of
   options granted during the
   year                                         $  7.56                       $  8.56                            -

</TABLE>

<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




13. Stockholders' Equity (continued)

Significant  option and warrant  groups  outstanding  at  December  31, 1997 and
related weighted average price and life information follows:

<TABLE>
<CAPTION>
                                Options/Warrants
                            Options/Warrants Outstanding                                         Exercisable
-------------------------------------------------------------------------------------    ----------------------------
                                                                          Weighted                        Weighted
                                                    Weighted Average      Average                          Average
        Range of                     Number            Remaining          Exercise           Number       Exercise
     Exercise Prices               Outstanding      Contractual Life       Price          Exercisable       Price
-------------------------------- ---------------- --------------------- -------------    --------------- ------------
<S>                                <C>                  <C>              <C>              <C>            <C>
$0.00 to $5.00                        343,933            3 years          $  0.74            103,133      $   2.48
$5.01 to $10.00                     3,240,221            2 years             8.36          2,838,867          8.18
$10.01 to $15.00                    2,161,824            4 years            13.70          1,449,484         13.74
$15.01 to $20.00                      854,560            4 years            18.12            158,520         19.03
$20.01 to $25.00                      246,500            5 years            21.04              2,000         21.00
$25.01 to $29.00                      330,000            4 years            27.29            118,000         27.71
                                 ----------------                       -------------    --------------- ------------
                                    7,177,038                              $12.07          4,670,004        $10.65
                                 ================                       =============    =============== ============
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




14. 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:

<TABLE>
<CAPTION>
                                                               December 31
                                                           1997            1996
                                                     ---------------------------------
                                                              (In thousands)
<S>                                                       <C>             <C>
Deferred tax liabilities:
   Purchased intangibles                                   $(28,769)       $(11,166)
   Tax over book depreciation                                (2,512)         (1,572)
   Partnership earnings differences                          (3,294)         (1,913)
   Compensation and benefits                                      -            (601)
                                                     ---------------------------------
Total deferred tax liabilities                              (34,575)        (15,252)

Deferred tax assets:
   Compensation and benefits                                  2,664              96
   Other, net                                                 5,190           2,811
   State income tax credits                                     853             774
   Net operating losses                                       2,082           1,824
                                                     ---------------------------------
Total deferred tax assets                                    10,789           5,505
Valuation allowance for deferred tax assets                  (1,079)           (870)
                                                     ---------------------------------
Deferred tax assets, net of valuation allowance               9,710           4,635
                                                     ---------------------------------
Net deferred tax (liabilities)                             $(24,865)       $(10,617)
                                                     =================================
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




14. Income Taxes (continued)

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

                                       1997            1996           1995
                                 -----------------------------------------------
                                                 (In thousands)
Current (payable):
   Federal                            $   9,267         $ 6,889        $4,592
   State                                  1,599             877          (213)
                                 -----------------------------------------------
Total current                            10,866           7,766         4,379

Deferred:
   Federal                               (3,595)         (2,298)         (650)
   State                                   (449)           (218)         (170)
                                 -----------------------------------------------
Total deferred                           (4,044)         (2,516)         (820)
                                 -----------------------------------------------
                                      $   6,822         $ 5,250        $3,559
                                 ===============================================

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>
                                               1997                       1996                       1995
                                     -------------------------  -------------------------  -------------------------
                                        Amount      Percent        Amount      Percent        Amount      Percent
                                     -------------------------  -------------------------  -------------------------
                                     -------------------------  -------------------------  -------------------------
<S>                                    <C>           <C>          <C>           <C>          <C>          <C>
Tax at U.S. statutory rates             $5,969        35.0%        $4,835        35.0%        $3,280       35.0%
Effect of incremental tax rates              -          -               -          -            (102)      (1.1)
State income taxes, net of Federal
   tax benefit                             582         3.4            688         5.0            367        3.9
Tax credits                               (189)       (1.1)             -          -               -         -
Effect of permanent differences           (798)       (4.7)          (333)       (2.4)            80        0.9
Change in valuation reserve                205         1.2              -          -              18        0.2
Change in state tax rates                  691         4.1              -          -               -         -
Other                                      362         2.1             60         0.4            (84)       (.9)
                                     -------------------------  -------------------------  -------------------------
                                        $6,822        40.0%       $ 5,250        38.0%        $3,559       38.0%
                                     =========================  =========================  =========================
<FN>
Income  taxes  paid in 1997,  1996 and 1995  were  $16,279,000,  $4,756,000  and
$7,048,000, respectively. Income taxes payable of $1,916,000 (1996) are included
in accrued and sundry liabilities.  Income taxes receivable of $4,488,000 (1997)
are included in receivables.
</FN>
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




14. Income Taxes (continued)

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.  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.

15. Commitments, Contingencies and Other Matters

Litigation

United States  Department of Housing and Urban  Development.  On or about May 8,
1997,  the United  States  Department of Housing and Urban  Development  ("HUD")
filed a civil  lawsuit  against one of the third party,  unaffiliated  owners of
affordable  housing  to which the  Company  provides  management  services.  The
complaint alleges that the owner,  Associated  Financial  Corporation ("AFC") of
Los  Angeles,  California,  whose  chairman is A. Bruce  Rozet,  had  improperly
received  monies  from 17  properties  managed by the  Company  over a period of
approximately  six years.  The allegations  include  statutory  violations which
could,  if  proven,  give rise to double  and  treble  damages  as well as civil
penalties  for false  filings.  The Company was not named as a defendant  in the
suit.

On August  13,  1997,  the  Company  entered  into an  agreement  with HUD which
resolved any claims which HUD could have made against the Company arising out of
the  allegations  in the  complaint  against  AFC and  Rozet.  Insignia  has not
admitted to any liability or wrongdoing in the matter,  and it has affirmatively
stated  that it relied on the  advice of legal  counsel  that its  actions  were
proper.  Although the Company  believes it acted properly,  it agreed to resolve
the matter  expeditiously  to avoid  potential  complex,  costly and  disruptive
litigation.  In connection  with the agreement,  the Company paid the Government
the sum of $5 million  ("Release  Fee") and  recorded  a  one-time  charge of $5
million (pre-tax) for its third quarter ended September 30, 1997.

In  addition,  the  Company  agreed  with  HUD  that  it  could  make  voluntary
disclosures  to  the  Government  concerning  other  conduct  arising  out of or
relating to its  management of HUD-related  properties.  On or about October 13,
1997, the Company  provided  additional  information to the Government,  and the
Government has until March 13, 1998, to determine  whether it will challenge any
of the conduct  voluntarily  disclosed by the  Company.  The parties have agreed
that,  in the event of a dispute,  the  parties  will  attempt  to resolve  that
dispute through mediation. To date the Government has not made any determination
pursuant to the agreement challenging any of the Company's disclosures.


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




15. Commitments, Contingencies and Other Matters (continued)

Including  the $5 million  Release  Fee,  the  Company  recorded  total  charges
aggregating  $10.2 million in 1997 for costs incurred and accrued in relation to
its  management of HUD  properties.  At December 31, 1997,  the Company had $4.0
million  included in accrued and sundry  liabilities  representing the estimated
future costs associated with its management of such properties. The Company does
not  anticipate  further costs beyond those already  incurred and accrued.  (See
Note 20 for further discussion).

In December  1997,  AFC and a number of affiliates  made a motion to implead the
Company as a third party defendant.  In the proposed third party complaint,  AFC
and   affiliates   allege  a  number   of   claims   sounding   principally   in
indemnification.  The  Government  has filed an  opposition  to that motion.  On
February 3, 1998, the Court denied AFC's motion to implead.

1997  Tender  Offer  Litigation.  In August  1997,  IPLP  Acquisition  I LLC,  a
wholly-owned  subsidiary of IPLP (the "Purchaser"),  commenced tender offers for
limited  partner  interests in six  partnerships:  Century  Property  Fund XVII,
Century  Property  Fund XIX,  Century  Property  Fund  XXII,  National  Property
Investors 4, Consolidated Capital Properties IV and Fox Strategic Housing Income
Partners (the "Tender Partnerships").

On September  5, 1997,  City  Partnerships  Co., a  partnership  claiming to own
partnership units in the Tender Partnerships,  filed a complaint with respect to
a purported  class  action and  derivative  suit in the Court of Chancery in the
State  of  Delaware  in and  for  New  Castle  County  (the  "City  Partnerships
Complaint")  seeking,  among other things,  compensatory  damages, a declaration
that the defendants have breached their fiduciary duties to the limited partners
of the Tender Partnerships, an order directing the defendants to carry out their
fiduciary duties and an order enjoining the tender offers. The City Partnerships
Complaint,  which names as  defendants  the  Purchaser,  Insignia,  IPLP and the
Tender  Partnerships,   contains  allegations  that,  among  other  things,  the
defendants  have  intentionally  mismanaged  the Tender  Partnerships  and acted
contrary to the limited  partners'  best interests by  manipulating  the limited
partners   into  selling   their  units   pursuant  to  the  tender  offers  for
substantially  lower prices than the units are worth.  In the City  Partnerships
Complaint,  the plaintiffs also allege that, as a result of the tender offer and
in light of the acknowledged  conflict of interest between the Purchaser and the
general partners,  Insignia breached its duty to provide an independent analysis
of the fair market value of the units sought in the tender offer materials.  The
City  Partnerships  Complaint  contains further  allegations that the defendants
failed to appoint a  disinterested  committee  to review the tender  offer,  and
therefore  did not  adequately  consider  other  alternatives  available  to the
limited partners (such as a liquidation or auction of the Tender Partnerships or
their assets), resulting in an offer that may not be in the best interest of the
Tender Partnerships and the limited partners.


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




15. Commitments, Contingencies and Other Matters (continued)

On September 8, 1997,  persons claiming to own limited  partnership units in the
Tender  Partnerships  filed a complaint with respect to a purported class action
and  derivative  suit in the Superior  Court for the State of California for the
County of San Mateo (the "Kline  Complaint")  seeking,  among other  things,  an
order  requiring  corrections  to the  disclosures  in the offer  documents  and
enjoining  the offers,  an order  requiring the  defendants  to discharge  their
fiduciary duties to the limited  partners of the Tender  Partnerships by seeking
other  transactions  that would maximize  value for the limited  partners of the
Tender  Partnership  and  compensatory  damages.  The Kline  Complaint  named as
defendants the Purchaser,  Insignia,  IPT, IPLP, the Tender Partnerships,  their
Insignia-affiliated  general partners,  and one individual who is an officer and
director of Insignia. The Kline Complaint contains allegations that, among other
things, the defendants have intentionally mismanaged the Tender Partnerships and
acted  contrary  to  the  limited  partners'  best  interests,  through  use  of
non-public material  information gained as a result of the relationship  between
the Purchaser and the general partners of the Tender  Partnerships,  in order to
prolong  the lives of the Tender  Partnerships  and thus  continue  the  revenue
derived  by  Insignia  from the  Tender  Partnerships,  while  at the same  time
reducing  the demand for the Tender  Partnerships'  units in the limited  resale
market for the units by artificially depressing the trading prices for the units
in order to create a favorable  environment for the tender offers.  In the Kline
Complaint,  the  plaintiffs  also allege that, as a result of the tender offers,
the Purchaser will acquire effective voting control over the Tender Partnerships
at  highly  inadequate  prices,  and that the  tender  offer  documents  contain
numerous false and misleading  statements and omissions of material  facts.  The
alleged misstatements and omissions concern,  among other things, the advantages
to limited  partners  of  tendering  units  pursuant to the tender  offers,  the
description of the estimated  liquidation  values in the offer documents and the
estimated  expenses  that were taken into account in computing  that Value;  the
true financial  condition of the Tender  Partnerships and the ability to sell or
refinance any of the Tender Partnerships' properties;  the factors affecting the
likelihood  that  properties  owned by the Tender  Partnerships  will be sold or
liquidated in the near future; the liquidity and value of the units; the limited
secondary market for units; and the true nature of the market for the underlying
assets.  On September 24, 1997, the Court denied  plaintiffs'  application for a
temporary  restraining order and for preliminary  injunctive relief  prohibiting
the Purchaser from proceeding with the tender offers.





<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




15. Commitments, Contingencies and Other Matters (continued)

On September 10, 1997, persons claiming to own limited  partnership units in the
Tender  Partnerships  filed a complaint with respect to a purported class action
and  derivative  suit in the Superior  Court for the State of California for the
County of Alameda (the "Heller Complaint") seeking, among other things, an order
enjoining the tender  offers,  an order  requiring  the  defendants to discharge
their fiduciary  duties to the limited  partners of the Tender  Partnerships by,
among other things, engaging independent persons to act in the best interests of
the limited partners and by seeking other transactions that would maximize value
for the limited  partners,  an order  requiring the  defendants to explore other
alternatives to the tender offers and compensatory damages. The Heller Complaint
names as defendants the Purchaser,  Insignia, IPLP, IPT, the Tender Partnerships
and their  Insignia-affiliated  general partners.  The Heller Complaint contains
allegations  that,  among  other  things,   the  defendants  have  intentionally
mismanaged the Tender  Partnerships and acted contrary to the limited  partners'
best  interests,  through use of  non-public  material  information  gained as a
result of the relationship between the Purchaser and the general partners of the
Tender  Partnerships,  and  failed to  adequately  consider  other  alternatives
available  to the  Tender  Partnerships,  such as a sale or  liquidation  of the
Tender Partnerships'  properties, or to hire an independent person to advise the
general  partners  as  to  such  alternatives.  In  the  Heller  Complaint,  the
plaintiffs  also allege that,  as a result of the tender  offers,  the Purchaser
will acquire  effective  voting control over the Tender  Partnerships  at highly
inadequate  prices,  and that the tender offer documents  contain numerous false
and  misleading   statements  and  omissions  of  material  facts.  The  alleged
misstatements  and  omissions  concern,  among other things,  the  advantages to
limited  partners of tendering  units  pursuant to the tender  offers;  the true
financial  condition  of the  Tender  Partnerships  and the  ability  to sell or
refinance any of the Tender Partnerships' properties;  the factors affecting the
likelihood  that  properties  owned by the Tender  Partnerships  will be sold or
liquidated in the near future; the liquidity and value of the units; the limited
secondary  market for units;  the true  nature of the market for the  underlying
assets;  and the true  intentions of Insignia and its affiliates with respect to
the units.

The Company  believes that the  allegations  contained in the City  Partnerships
Complaint,  the Kline  Complaint and the Heller  Complaint are without merit and
intend to vigorously contest the plaintiffs'  actions.  (See Note 20 for further
discussion).



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




15. Commitments, Contingencies and Other Matters (continued)

1996 Tender Offer Litigation. 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
entitled  Chipain,  Tom, v. Walton Street Capital  Acquisition  II, LLC,. 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,  and 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  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.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




15. Commitments, Contingencies and Other Matters (continued)

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  complaint with prejudice.  Plaintiffs  filed a notice of appeal in
the Dee 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.

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  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 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.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)



15. Commitments, Contingencies and Other Matters (continued)

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, 1997 are as follows (in thousands):

1998                                                     $17,567
1999                                                      15,150
2000                                                      13,156
2001                                                      10,925
2002                                                       9,047
Thereafter                                                19,767
                                                    -----------------
Total minimum payments required                          $85,612
                                                    =================

Rental  expense was  approximately  $12,307,269  (1997),  $7,753,000  (1996) and
$4,726,000 (1995).

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  maximum  of  3%  of  the  employees'  compensation  and
participants  fully vest in employer  contributions  after 5 years.  The Company
expensed $1,990,000, $1,506,000 and $855,000 in contributions to the Plan during
1997, 1996 and 1995, respectively.




<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




15. Commitments, Contingencies and Other Matters (continued)

Department of Housing and Urban Development ("HUD")

Approximately  13% of the residential  units managed by the Company were housing
projects subsidized 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 have been  under  continuing  review by the  United  States
Congress.  Recent  changes  could  result  in  reductions  of  rents,  on  which
management  fees  generally  are  based,  in some  HUD-subsidized  projects.  In
addition,  rent subsidies  which currently are tied to projects may be converted
to  "tenant-based"  assistance,  permitting  tenants in  subsidized  projects to
retain their  subsidies  while moving  elsewhere.  The occupancy level or rental
rates of such projects  could be affected and,  accordingly,  the management fee
paid to the property  manager  could be reduced.  It is possible that changes in
programs  administered  by HUD could result in lower rental  revenue and project
cash flow from which management and other fees are derived; however, the details
of the  implementation  of recent changes are not yet  sufficiently  specific to
determine their actual impact on such fees, if any.

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.  Management  believes  that  the
unamortized  purchase price relating to properties  managed for Balcor  properly
reflects the asset value and that no impairment exists.

General Partners

The  qualified  REIT  subsidiaries  of IPT  either  control  or serve as general
partner  in  limited  partnerships  and these  subsidiaries  may be  liable  for
recourse  obligations of the limited  partnerships  if the limited  partnerships
were  unable to  satisfy  those  obligations.  IPT  believes  that each  limited
partnership  has  more  than  adequate   resources  to  discharge  all  recourse
obligations and maintain adequate insurance.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




15. 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,  1997,  no amounts  were  outstanding  related to the
arrangements.

Obligations to Former General Partners

Each of the  corporate  general  partners  owned by IPT was acquired by Insignia
from  unaffiliated  prior  owners.  The  acquisition  agreements  provided  that
Insignia  and IPT would be  indemnified  from claims  attributable  to events or
actions prior to their  ownership,  and Insignia  (now IPT)  indemnify the prior
owners from claims or causes of action arising after the change in ownership. In
addition,  certain  former  owners  of the  general  partners  of seven  limited
partners  retained the  obligation  with respect to 100% (and in some  instances
75%) for capital contributions that may be required by the general partners upon
windup of the applicable partnerships.

Angeles Mortgage Investment Trust Merger

On July 18, 1997, IPT entered into a definitive  merger  agreement to merge with
Angeles Mortgage  Investment Trust ("AMIT").  The definitive  agreement provides
that each AMIT Class A share will be exchanged  for 1.625 IPT common  shares and
each  outstanding  AMIT  Class B share  will be  exchanged  for 0.033 IPT common
shares.  The  exchange  ratios  will  be  appropriately  adjusted  based  on the
respective amounts of per-share dividends declared or paid by AMIT since January
1,  1997  and by IPT  since  January  31,  1997.  The  proposed  transaction  is
contingent  upon, among other  conditions,  AMIT's receipt of a fairness opinion
and the approval of the proposed transaction by certain governmental authorities
and by the shareholders of AMIT.


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




16. Related Party Transactions

Metropolitan Asset Enhancement, L.P. ("MAE")

The Company holds a 19.1% limited partnership interest in MAE. MAE was formed in
December  1990  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 ("MAE Agreement")
whereby:  1) 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 related
services;  2) 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 incentive management fees, transaction fees, and
cost  reimbursements,  as defined in the MAE 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  such  interests.  The Company and MAE have also
agreed that 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 will 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. As
a result of the MAE GP merger,  as discussed in Note 20, the MAE  Agreement  has
been terminated.


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




16. Related Party Transactions (continued)

During 1997, 1996 and 1995, the Company was paid investment  banking fees in the
amount of $212,000,  $860,000 and $808,000 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
$166,000 for 1997 and $529,000 for 1996,  which are included in notes receivable
from affiliates.

Winthrop Financial Associates ("WFA")

On October 27, 1997,  Insignia  consummated  a  transaction  with WFA,  which is
controlled by Apollo Real Estate  Investment  Fund,  L.P., a shareholder  of the
Company,  and certain affiliates of WFA whereby Insignia  acquired,  among other
things,  limited partner  interests in, or the right to acquire units of limited
partner  interests in certain real estate  limited  partnerships  (the "Winthrop
Partnerships"),  and the right to receive  certain  asset  management,  investor
services and  partnership  management  fees from these  Partnerships  ("Winthrop
Fees").

The  Winthrop  Partnerships  are  controlled  by WFA.  In  connection  with  the
foregoing transaction,  IPT I LLC, a Delaware limited liability company which is
owned 90.1% by Insignia and 9.9% by IPT,  acquired an associate  general partner
interest  in WFA,  as a result of which  IPT I LLC has the power to  effectively
control all property  management  decisions  relating to the properties owned by
six of the Winthrop Partnerships. Insignia also acquired all of the newly-issued
Class B stock of First Winthrop  Corporation  ("FWC"),  which  immediately prior
thereto was a wholly-owned  subsidiary of WFA, as a result of which Insignia has
the right to  appoint  the two Class B  directors  of FWC,  who in turn have the
power to effectively control all property  management  decisions relating to the
properties owned by the other seven Winthrop  partnerships.  In addition,  IPT I
LLC  and  Insignia  caused  the  respective  general  partners  of the  Winthrop
Partnerships to subcontract with IPGP Corporation,  a wholly-owned subsidiary of
Insignia ("IFGP"), to perform the asset management and other services in respect
of which the Winthrop  Fees are payable on behalf of such general  partners,  in
exchange for which IFGP was assigned the rights to receive the Winthrop Fees.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




17. Industry Segments

Insignia is a fully  integrated  real estate services  company,  which currently
operates in principally three business  segments,  including the following:  (1)
property  services,  (2) financial  services and (3) real estate ownership.  The
property  services  business  segment  provides  property  and asset  management
services, partnership accounting, investor relations, leasing and brokerage, and
tenant  representation  services to both  affiliates and  non-affiliates  of the
Company.  The financial services business segment originates loans, brokers real
estate,  coordinates  real estate  workouts,  and is responsible  for merger and
acquisition  activity  for  the  Company,  including  co-investment  partnership
formations,   portfolio  acquisitions,  and  limited  partnership  tender  offer
acquisitions. The real estate business segment consists of the operations of IPT
and co-investment partnerships in which the Company has significant investments.

The following table summarizes certain information by industry segment:

<TABLE>
<CAPTION>

                                                1997           1996           1995
                                           ----------------------------------------------
                                           ----------------------------------------------
                                                          (In thousands)
<S>                                           <C>            <C>            <C>
Identifiable assets:
   Property services                           $467,179       $251,764       $106,107
   Financial services                             3,451            908          2,877
   Real estate                                  282,334        179,879         60,473
   Other                                         47,259         59,851         75,952
                                           ----------------------------------------------
                                               $800,223       $492,402       $245,409
                                           ==============================================

Gross revenues and equity earnings:
   Property services                           $382,470       $208,139       $110,833
   Financial services                             5,878          9,309          6,842
   Real estate                                   18,827         10,037          2,461
   Other                                          3,695          3,179          5,357
                                           ----------------------------------------------
                                               $410,870       $230,664       $125,493
                                           ==============================================
</TABLE>



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)



17. Industry Segments (continued)

<TABLE>
<CAPTION>
                                                     1997           1996           1995
                                                ----------------------------------------------
                                                ----------------------------------------------
                                                               (In thousands)
<S>                                               <C>            <C>            <C>
Operating profit (loss):
   Property services                               $  36,503      $  30,732      $  22,676
   Financial services                                 (5,480)        (1,119)        (3,509)
   Real estate                                        13,917          6,026          2,445
   Other                                              (6,084)        (3,987)        (4,339)
                                                ----------------------------------------------
                                                      38,856         31,652         17,273
   Interest                                           (7,867)       (12,918)        (7,049)
   Apartment property interest                        (1,486)        (1,812)             -
   Minority interests                                (12,448)        (1,976)          (131)
                                                ----------------------------------------------
                                                $  17,055      $  14,946      $  10,093
                                                ==============================================

Depreciation and amortization expense:
   Property services                               $  30,828      $  22,478      $  12,908
   Financial services                                     21             35             40
   Real estate                                           285              -              -
   Other                                                 575            518            545
                                                ----------------------------------------------
                                                   $  31,709      $  23,031      $  13,493
                                                ==============================================

Capital expenditures:
   Property services                              $    6,232     $    6,243     $    3,189
   Financial services                                    130             68             16
   Real estate                                           401            732              -
   Other                                               1,733            469            202
                                                ----------------------------------------------
                                                  $    8,496     $    7,512     $    3,407
                                                ==============================================
</TABLE>

Real estate assets include investments in unconsolidated equity method investees
totaling  $215.7 million and real estate  revenues  include  equity  earnings of
approximately $10 million. These investees represent limited partnerships owning
real  estate  consisting  of  residential  apartments  and  commercial  property
throughout the United States.

Other assets include  primarily cash and property and equipment.  Other revenues
consisted primarily of interest income on short-term investments.  Other expense
includes general corporate administration, professional fees and depreciation.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




17. Industry Segments (continued)

The  financial  services  segment  derived  approximately  $731,350  (1996)  and
$1,862,000  (1995) of its revenues under an exclusive  representation of a major
life insurance company.

Property services revenues include  $2,574,000  (1997),  $16,189,000  (1996) and
$20,165,000 (1995) of property management revenues from properties controlled by
The Balcor Company and $680,000 (1997),  $1,520,000 (1996) and $1,190,000 (1995)
of  amounts  received  from an agency  that  serves as an  insurance  broker for
various partnerships managed by the Company.

18. Quarterly Financial Data  (Unaudited)

<TABLE>
<CAPTION>
                                                                           1997
                                       -----------------------------------------------------------------------------
                                                          Fourth          Third          Second          First
                                           Total          Quarter        Quarter        Quarter         Quarter
                                       -----------------------------------------------------------------------------
                                       -----------------------------------------------------------------------------
                                                          (In thousands, except per share data)
<S>                                     <C>            <C>             <C>             <C>            <C>
Net revenues                             $ 400,843      $ 146,213       $ 100,103       $ 86,615       $ 67,912
Net EBITDA                                  60,974         20,027          10,715         15,857         14,375
Equity earnings                             10,027          4,137           2,254            569          3,067
Net income before extraordinary item
                                            10,233          5,506             149          2,574          2,004
Net income                                  10,233          5,506             149          2,574          2,004

Per common share - assuming dilution:
     Net income                              $.32           $.17            $.01           $.08           $.06


<FN>
Fourth quarter results of 1997 include a $5.2 million legal reserve.

Third quarter results of 1997 include a $5 million release fee paid to HUD.
</FN>
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




18. Quarterly Financial Data  (Unaudited) (continued)

<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
Net 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 - assuming dilution:
     Income before extraordinary items
                                             $.28           $.12            $.01           $.08           $.07
     Net income                               .26            .10             .01            .08            .07

<FN>
Third  quarter  results  of 1996  include a  $935,000  charge  for  unsuccessful
acquisition costs.
</FN>
</TABLE>

<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




19. 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 approximates its fair value.  Receivables reported on the balance
sheet  consist of property  and lease  commission  receivables,  mortgage  loans
receivable,  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  mortgage  loans
receivable and 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  calculate  fair value based on current
interest  rates and market value,  if  applicable.  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):

<TABLE>
<CAPTION>  
                                                                     1997                            1996
                                                      --------------------------------------------------------------
                                                            Carrying          Fair          Carrying        Fair
                                                             Amount           Value          Amount         Value
                                                      --------------------------------------------------------------
<S>                                                         <C>             <C>          <C>           <C>
Cash and cash equivalents                                    $88,847         $88,847      $  54,614     $  54,614
Receivables                                                   45,342          45,342         12,668        12,668
Commissions receivable                                        76,838          76,838         33,372        33,372
Notes payable                                                170,404         174,772         49,840        54,864
Trust based convertible preferred securities                 149,500         149,500        149,500       149,500
</TABLE>


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




20.   Subsequent Events

Litigation

In March 1998, the Company paid an additional  $2.5 million to HUD in connection
with its management of such properties.

In March 1998,  the City  Partnerships  complaint,  the Kline  complaint and the
Heller complaint were discontinued.

Cohen Financial Transactions

On  January 7,  1998,  the  Company  acquired  the  rights to  perform  property
management,  leasing and construction supervision services for approximately 4.1
million square feet of commercial real estate from Cohen Financial.
The purchase price was approximately $1 million, all of which was paid in cash.

Goldie B. Wolfe & Company

On January 20, 1998, the Company acquired 100% of the stock of Goldie B. Wolfe &
Company,  a  commercial  real  estate  services  firm.  The  purchase  price was
approximately $5.3 million, all of which was paid in cash.

MAE GP Merger

Effective as of March 7, 1998, MAE GP Corporation  ("MAE GP"),  which until then
was a  wholly-owned  subsidiary  of MAE, was merged with and into IPT,  with IPT
surviving  the merger (the "MAE GP  Merger").  As  consideration  for the MAE GP
Merger,  IPT issued  332,300 shares of the common stock of IPT to MAE valued for
purposes of the MAE GP Merger at $10.53 per share.

MAE GP owned or  controlled  equity  interests  in entities  which  comprised or
controlled the general  partners of 29 public and 76 private real estate limited
partnerships (collectively, the "MAE Partnerships"),  nine of which are included
in the IPT  Partnerships.  The  MAE  Partnerships  own,  in the  aggregate,  169
properties  containing  approximately  32,000  residential  apartment  units and
approximately  2.3 million square feet of commercial  space.  In connection with
the MAE GP merger, all of the shares of Class B common stock of Angeles Mortgage
Investment  Trust,  a real  estate  investment  trust  that has  entered  into a
definitive  agreement to be merged with IPT,  which were until then owned by MAE
GP, were transferred by dividend to MAE prior to the MAE GP Merger.


<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




20. Subsequent Events (continued)

In addition,  the Company transferred its 19.1% limited partnership  interest in
MAE to the Company's Chairman, Chief Executive Officer and President.

MAE and Insignia Contributions to IPLP

In connection with the MAE GP Merger,  IPLP purchased  certain assets  described
below from MAE for approximately $596,000. The assets purchased by IPLP from MAE
consisted of (i) a 99% limited partner interest in Insignia Jacques Miller, L.P.
("IJM"),  which in turn owns  noncontrolling  equity  interests in entities that
comprise  or control  the general  partners  of 30 of the MAE  Partnerships  and
various notes receivable (the 1% general partner interest in IJM was acquired by
IPT  from  MAE GP in the MAE GP  Merger),  and  (ii) a  6.557%  limited  partner
interest  in  Buccaneer  Trace  Limited  Partnership,   which  owns  a  208-unit
residential apartment complex located in Savannah, Georgia.

Also in  connection  with the MAE GP  Merger,  Insignia  contributed  all of the
limited partner  interests it owned in the MAE  Partnerships to IPLP in exchange
for  units  of  limited  partnership  in IPLP  ("OP  Units").  The  value of the
interests contributed was approximately $5,460,000,  for which Insignia received
518,528 OP Units (based on a value of $10.53 per unit).

Winthrop Option

On February 17, 1998, Insignia granted IPLP an option (the "Winthrop Option") to
acquire all but not less than all of the  Winthrop  Interests  at any time on or
before  December 31, 1998.  The Winthrop  Option is  exercisable  by IPLP for an
aggregate cash amount of approximately $40 million at a rate equal to Insignia's
cost of funds  (based on the  interest  rate in effect  from time to time  under
Insignia's  revolving  credit facility) and a ratable portion of the transaction
costs incurred by Insignia in connection with the acquisition.  Upon exercise of
the Winthrop  Option,  the  Operating  Agreement of IPT I LLC will be amended to
make IPT the sole  managing  member  of IPT I LLC,  with the sole  authority  to
manage the  business  and  affairs  of IPT I LLC,  and  Insignia  will cause the
persons  designated  by IPLP  from time to time to be  appointed  as the Class B
directors of FWC.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




20. Subsequent Events (continued)

Richard Ellis Group Limited Acquisition

In January 1998,  the  shareholders  of Richard  Ellis Group  Limited  ("Richard
Ellis")  accepted  the  Company's  offer to acquire 100% of the stock of Richard
Ellis.  Richard Ellis is a real estate  services and investment  firm located in
the United Kingdom. The purchase price is valued at approximately $81.5 million,
including   approximately  $14.7  million  of  which  is  contingent  on  future
performance  measures.  The  transaction was completed on February 26, 1998. The
Company funded the acquisition by borrowing  approximately  $35 million from its
revolving credit  facility,  issuing 617,000 shares of its Class A Common Stock,
and assuming  existing  options  which will enable  Richard  Ellis  employees to
purchase 856,000 shares of the Company's Class A Common Stock.

Merger and Spin-Off

On March 17, 1998, the Company and Insignia/ESG,  Inc.  ("Insignia/ESG") entered
into an Agreement  and Plan of Merger (the "Merger  Agreement")  with  Apartment
Investment and Management Company, a Maryland corporation  ("AIMCO"),  and AIMCO
Properties, L.P., a Delaware limited partnership,  pursuant to which the Company
will  merge with and into  AIMCO,  with AIMCO as the  survivor  (the  "Merger").
Consummation  of  the  Merger  is  subject  to  certain  conditions,   including
regulatory approval and the approval of the stockholders of the Company (but not
the approval of the stockholders of AIMCO).

Prior to the AIMCO  Merger,  the Company will spin off to its  stockholders  the
stock of an entity that will become a separate  public  company and will include
Insignia/ESG;   the  international  commercial  real  estate  services  company;
Insignia  Residential-New  York, a New York based  cooperative  and  condominium
management company;  the Company's  single-family home brokerage  operations and
other select holdings.  Pursuant to an Indemnification Agreement entered into in
connection  with  the  Merger  Agreement,  the  spun off  company  will  provide
indemnification for certain liabilities arising under the Merger Agreement.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




20. Subsequent Events (continued)

Assuming the  stockholders of AIMCO approve the Merger,  shares of the Company's
Class A Common Stock will be converted into the right to receive an aggregate of
approximately $303 million in Series E Preferred Stock, par value $.01 per share
of AIMCO (the "Series E Preferred"). In addition to receiving the same dividends
as holders of AIMCO common stock,  holders of Series E Preferred are entitled to
receive a preferred  dividend of $50 million in the  aggregate  to be paid on or
before January 15, 1999 and when paid, the Series E Preferred will automatically
convert  into AIMCO  common  stock on a  one-for-one  basis,  subject to certain
antidilution adjustments.  The actual number of Series E Preferred issued in the
Merger will be  determined  by a formula  based on the average  market  price of
AIMCO's  common stock during a fixed period  preceding the Merger,  subject to a
fixed maximum AIMCO  exchange value of $38 per share.  If AIMCO's  average price
during that  period is less than $36.50 per share,  AIMCO may elect to pay up to
$15 million of the purchase price in cash,  provided that such payment would not
affect the tax free status of the Merger.

In  addition,  AIMCO will  assume  approximately  $308  million  in  outstanding
indebtedness  of the Company and will assume  approximately  $150 million of the
6.5% Trust Convertible  Preferred  Securities issued by Insignia  Financing I, a
subsidiary of the Company.

If the  stockholders  of  AIMCO  do not  approve  the  Merger,  the  Merger  may
nonetheless be consummated.  However,  instead of receiving  approximately  $303
million in Series E  Preferred,  holders of the  Company's  Class A Common Stock
would receive  approximately $203 million in Series E Preferred and $100 million
in Series F Preferred  Stock,  par value $.01 per share of AIMCO (the  "Series F
Preferred").  In either case, holders of Series E Preferred would be entitled to
receive the $50 million  preferred  dividend.  Holders of Series F Preferred are
entitled to receive the  greater of (i) the same  dividends  as holders of AIMCO
common stock received and (ii) preferred  distributions of 10% of the face value
of the Series F Preferred,  with the  preferred  return rate  escalating 1% each
year  until  a  15%  annual  return  is  achieved.  Upon  the  approval  by  the
stockholders  of AIMCO,  the  Series F  Preferred  will  convert  into  Series E
Preferred on a one-to-one basis.

Also, the Merger Agreement provides that following the Merger, AIMCO is required
to offer to purchase the outstanding shares of beneficial  interest of IPT, at a
price of at lease  $13.25 per IPT share.  IPT is a 75% owned  subsidiary  of the
Company;  the 25%  interest  of IPT not  owned by the  Company  is  valued at an
aggregate of approximately $100 million, assuming a value of $13.25 per share.



<PAGE>


                 Insignia Financial Group, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)




20. Subsequent Events (continued)

As a condition to execution with the Merger Agreement,  certain of the Company's
executive  officers executed voting agreements and irrevocable  proxies in favor
of AIMCO, pursuant to which each of the foregoing individuals agreed to vote the
shares of the Company's Class A Common Stock owned of record and beneficially by
him,  including shares under options and warrants to the extent exercisable (but
excluding shares beneficially owned by others  notwithstanding  that such shares
may be owned of record by him) in favor of the Merger  and the Merger  Agreement
and  against  any  competing  transaction.  In  addition,  each of  Metropolitan
Acquisition  Partners IV, L.P.  and  Metropolitan  Acquisition  Partners V, L.P.
(collectively,  the "MAPs") also  executed  voting  agreements  and  irrevocable
proxies,  pursuant  to which  each has  agreed  to vote  certain  shares  of the
Company's Class A Common Stock to which the Company's Chairman,  Chief Executive
Officer  and  President  would be entitled  in a  distribution  of shares of the
Company's  Class A Common  Stock made by the MAPs in favor of the Merger and the
Merger Agreement and against any competing transaction.


                                                                               
                                  EXHIBIT INDEX


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

3.2  By-Laws of Insigni a 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 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 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.

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

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

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

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

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

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

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

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

10.10Amendment No. 2 dated as of February 20, 1996 to the  Employment  Agreement
     by and between Insignia Financial Group, Inc. and Frank M. Garrison. (viii)

10.11Amendment No. 2 dated as of February 20, 1996 to the  Employment  Agreement
     by and between Insignia Financial Group, Inc. and Ronald Uretta. (viii)

10.12Purchase 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. (viii)

10.13Agreement of Limited Partnership of Southwest Associates,  L.P. dated as of
     the 31st day of December 1996. (viii)

10.14Registration  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.

10.15Asset 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.

10.16Employment  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.

10.17Employment  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.

10.18Employment  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.

10.19Agreement 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.

10.20Amended and Restated  Employment  Agreement,  dated January 1, 1997, by and
     among Insignia  Financial Group,  Inc.,  Insignia  Commercial Group,  Inc.,
     Insignia/Edward S. Gordon Co., Inc. and Stephen B. Siegel.

10.21Amendment  No.  1 to  Amended  and  Restated  Employment  Agreement,  dated
     December 18, 1997, by and among Insignia  Financial Group,  Inc.,  Insignia
     Commercial Group, Inc.,  Insignia/Edward S. Gordon Co., Inc. and Stephen B.
     Siegel.

10.22Stock  Purchase  Agreement,  dated March 19,  1997,  by and among  Insignia
     Commercial Group, Inc., Insignia Financial Group, Inc., Kirkland B. Armour,
     Scott J.  Brandwein,  Harvey B.  Camins,  James L.  Deiter,  Lyan  Homewood
     Fender,  Ronald T. Frain, Jay Hinshaw,  Thomas E. Moxley,  Robert B. Rosen,
     James H.  Swartchild,  Jr.,  David Tropp,  Gregg F. Witt,  Frain,  Camins &
     Swartchild   Incorporated,   FC&S  Management   Company  and   Construction
     Interiors,  Incorporated,  incorporated herein by reference to Exhibit 10.1
     to Form 8-K of Registrant filed April 17, 1997.

10.23Amended and Restated  Credit  Agreement  dated March 19, 1997, 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 10.1 to Form 8-K of Registrant
     dated March 19, 1997.

10.24Amendment No. 1 to Employment  Agreement,  made April 1, 1997, by and among
     Insignia  Financial Group,  Inc.,  Insignia/Edward  S. Gordon Co., Inc. and
     Edward S. Gordon.

10.25Amended and Restated Employment  Agreement,  made as of May 1, 1997, by and
     among Insignia  Financial Group,  Inc.,  Insignia  Commercial Group,  Inc.,
     Insignia/Edward S. Gordon Co., Inc. and Henry Horowitz.

10.26Amendment  dated  April 30,  1997,  to the 1992 Stock  Incentive  Plan,  as
     amended.

10.27Stock  Purchase  Agreement,  dated as of September  18, 1997,  by and among
     Insignia Financial Group, Inc., Insignia RO, Inc., Joseph T. Aveni, Vincent
     T. Aveni, James C. Miller,  Richard A. Golbach,  Joseph T. Aveni as Trustee
     of the  Joseph T. Aveni  Declaration  of Trust  dated  April 25,  1988,  as
     amended on August 10,  1995,  Vincent T. Aveni as Trustee of the Vincent T.
     Aveni  Declaration  of Trust  dated  February  11,  1988,  as  restated  on
     September  14,  1995,  Joseph T. Aveni as  Trustee of the  Vincent T. Aveni
     Dynasty Trust,  dated July 13, 1994, and Vincent T. Aveni as Trustee of the
     Joseph T. Aveni Dynasty Trust, dated July 13, 1994,  incorporated herein by
     reference to Exhibit 10.1 to Form 8-K of Regsitrant filed October 21, 1997.

10.28Shareholders'  Agreement dated as of October 7, 1997, by and among Insignia
     Financial Group,  Inc., and Joseph T. Aveni,  Joseph T. Aveni as Trustee of
     the Joseph T. Aveni  Declaration  of Trust dated April 25, 1988, as amended
     on August  10,  1995,  Vincent  T.  Aveni as Trustee of the Joseph T. Aveni
     Dynasty  Trust,  dated  July 12,  1994,  Vincent T. Aveni as Trustee of the
     Joseph T. Aveni  Dynasty  Trust  dated  July 12,  1994 FBO  Kristen  Aveni,
     Vincent T. Aveni as Trustee of the Joseph T. Aveni Dynasty Trust dated July
     12,  1994 FBO Kerri  Aveni,  Vincent  T.  Aveni as Trustee of the Joseph T.
     Aveni  Dynasty Trust dated July 12, 1994 FBO Benjamin  Aveni,  incorporated
     herein by reference to Exhibit 10.2 to Form 8-K of Regsitrant filed October
     21, 1997.

10.29Subscription  and Purchase  Agreement  dated as of October 27, 1997,  among
     Insignia   Financial  Group,  Inc.,  IPT  I  LLC,  and  Winthrop  Financial
     Associates,  First Winthroup  Corporation and certain additional  entities,
     incorporated  herein by reference to Exhibit 10.1 to Form 8-K of Registrant
     filed November 10, 1997.

10.30Stockholders'  Agreement  dated as of October 27,  1997,  between  Winthrop
     Financial  Associates and Insignia  Financial  Group,  Inc. ,  incorporated
     herein  by  reference  to  Exhibit  10.2 to Form  8-K of  Registrant  filed
     November 10, 1997.

21.  List of Subsidiaries. (vii)

23.  Consent of Independent  Auditors to Annual Report on Form 10-K for the year
     ended December 31, 1997. (viii)

99.  Form 11-K Re: Insignia Financial Group, Inc. 401(k) Retirement Savings Plan
     for year ended December 31, 1996.

(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.

(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.

(viii) Filed as an Exhibit to Annual  Report on Form 10-K of Insignia  Financial
     Group,  Inc. for the year ended December 31, 1997, and incorporated  herein
     by reference.