<PAGE>   1

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

                                 FORM 10-KSB
(Mark One)

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)

                  For the fiscal year ended December 31, 1996
                                       or
[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)

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

                        Commission file number  0-20272

                          RESOURCE CAPITAL GROUP, INC.
                  --------------------------------------------
                 (Name of Small Business Issuer in its Charter)


                             DELAWARE                        13-3617377
                             --------                        ----------
                 (State or Other Jurisdiction of           (I.R.S. Employer
                 Incorporation or Organization)            Identification No.)

                        419 Crossville Road
                        Suite 204
                        Roswell, Georgia                       30075
                        ----------------                       -----
                 (Address of Principal Executive Offices)   (Zip Code)

                                 (770) 649-7000
                                 --------------

                 Issuer's Telephone Number, Including Area Code

Securities registered under Section 12(b) of the Exchange Act:

                                      None
                                      ----

Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.01 per share
                     --------------------------------------
                                (Title of Class)

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X  No___

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge. In definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]

            State issuer's revenues for its most recent fiscal year.
                                   $1,558,471

     State the aggregate market value of the voting stock held by
non-affiliates of the registrant.  The aggregate market value shall be computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of December 31, 1996.

                                 Not applicable

                        (ISSUERS INVOLVED IN BANKRUPTCY
                    PROCEEDINGS DURING THE PAST FIVE YEARS)

     Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13, or 5(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.  Yes X   No___

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of December 31, 1996.

           Common stock, par value $.01 per share    406,726 shares
<PAGE>   2



                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
PART I                                                                 PAGE
                                                                       ----
<S>     <C>                                                              <C>
         Item  1.     Description of Business                             1

         Item  2.     Description of Properties                           6

         Item  3.     Legal Proceedings                                   7

         Item  4.     Submission of Matters to a Vote of                  7
                        Security Holders

PART II

         Item  5.     Market for Common Equity and Related                7
                        Stockholder Matters

         Item  6.     Management's Discussion and Analysis or             7
                        Plan of Operation


         Item  7.     Financial Statements                               11

         Item  8.     Changes in and Disagreements with                  11
                        Accountants on Accounting and
                        Financial Disclosure

PART III

         Item  9.     Directors, Executive Officers, Promoters           11
                        and Control Persons; Compliance with
                        Section 16(a) of the Exchange Act

         Item 10.     Executive Compensation                             13

         Item 11.     Security Ownership of Certain Beneficial           14
                        Owners and Management

         Item 12.     Certain Relationships and Related                  14
                        Transactions

PART IV

         Item 13.     Exhibits and Reports on Form 8-K                   15

         Signatures                                                      18
</TABLE>


<PAGE>   3


                                     Part I


ITEM 1.  DESCRIPTION OF BUSINESS


General

         The Registrant, Resource Capital Group, Inc. (the "Company"), was
organized as a Delaware corporation in November, 1990.  In 1991, the Company
issued 433,425 shares of common stock to 683 shareholders under the
registration requirements of Section 5 of the Securities Act of 1933, as
amended.  The Company began operations and its Common Stock was originally
issued and  eligible for trading on September 1, 1991.

Background Information

         The Company was organized to become a successor in interest to AGS
Properties (AGS) as the general partner of AGS Partners MLP, L.P. (MLP) which
owns an apartment complex in Nashville, Tennessee and an apartment complex in
Oklahoma City, Oklahoma  and assumed certain of AGS' general and limited
partnership interests.

         As a result, the Company owns a 27.55% limited partnership interest in
MLP in addition to its 1% general partnership interest.  The Company also
assumed AGS' 2.55% general partnership interest and 43.10% limited partnership
interests in AGS Meadow Oaks Associates (Meadow) which owns an apartment
complex in Kansas City, Kansas; assumed AGS' 5% general partner interests in
both AGS Carriage House Associates (Carriage) which owns an apartment complex
in Gautier, Mississippi; and AGS Compass Pointe Associates (Compass) which owns
an apartment complex in Pascagoula Mississippi.

         The issuance of Common Stock in the Company was made pursuant to
Section 1145 of the Bankruptcy Code which provides an exemption from the
registration requirements of Section 5 of the Securities Act.

         The Company was established primarily to acquire, own, operate and
dispose of income producing real property and to own, hold, dispose and invest
in junior mortgage loans and wraparound mortgage loans.


Mortgage Loan Investments

         MLP issued subordinated promissory notes to the Company which are
secured by mortgages and deeds of trust on its properties.  A summary of the
remaining subordinated notes at December 31, 1996 is as follows:





                                       1
<PAGE>   4


<TABLE>
<CAPTION>
Secured Asset                  Maturity Date             Amount
--------------              -------------------         --------
<S>                          <C>                      <C>
Aspen Walk Apts.             December 1, 2005         $  325,554
Rolling Hills Apts.          October  1, 2005          1,657,947
                                                       ---------

                                                      $1,983,501
                                                       =========
</TABLE>

         All of the Company's remaining mortgage loan investments are owed by
MLP.  The Notes held by the Company are prepayable in whole at any time without
a prepayment penalty.  The mortgages require monthly payments of interest only
through maturity.  Interest accrues at 15% per annum, while payments are
limited to 90% of cash flows, as defined.  The mortgages also require the
payment of additional interest on the sale or refinancing of the mortgaged
property equal to a 35% participation in the net proceeds as defined.

         The Company may purchase other existing mortgage loans.  In this
connection some of the loans it may acquire may be in default.  The Company
would endeavor to acquire these defaulted loans at a discount with the
intention of restructuring the loan with the property owner or acquiring fee
title to the property in a subsequent foreclosure sale.

Real Property Investments

         In September 1996 Colonial Park Commons LLC (Colonial) was formed and
capitalized with a $300,000 contribution, of which $297,000 was funded by the
Company while the remaining $3,000 was funded by Hunter Management Company
(Hunter).  Colonial acquired an 18,387 square foot office building located in
Fulton County, Georgia for $1,010,000.  The purchase was financed in part with
a $787,500 mortgage payable.  Additionally in September 1996, Meggan Lot, LLC
(Meggan) and Heide Lot, LLC (Heide) were also formed and capitalized with a
$100,000 contribution into each of which $99,000 was funded by the Company
while the remaining $1,000 was funded by Hunter.  Meggan and Heide each paid
$100,000 to acquire approximately .8 acres of land surrounding the Colonial
property in Fulton County, Georgia.

In June, 1996 the Company acquired a 94% limited partnership interest in
Carriage and Compass. Prior to June, 1996 the Company had only a 5% general
partnership interest in these partnerships.  The mortgages on each property
were held by the US Department of Housing and Urban Development (HUD); however
during 1995 HUD sold the mortgages to an unrelated financial institution.   In
prior years the Carriage and Compass Partnerships had been unable to generate
sufficient cash flows to fund the required debt service payments and, as a
result, had been in technical default under the mortgage agreement.  Following
the purchases of the mortgages from HUD, the financial institution began
foreclosure proceedings on





                                       2
<PAGE>   5

each property.   The Company, acting as General Partner decided to expand the
Carriage and Compass partnerships to raise sufficient cash to fund all unpaid
and accrued debt service payments.  Additionally to expedite the process of
raising capital the Company offered to purchase from the limited partners their
partnership interest for $1,000 per unit.  In this regard, during May and June
1996, the Company paid $39,325 to 74% of the limited partners in Carriage and
91% of the limited partners in Compass for their limited partner units.  The
remaining limited partners in Carriage and Compass forfeited their interests
pursuant to the terms of their respective partnerships agreements.  The
Carriage and Compass partnerships do not intend to allocate any profits or
losses or make distributions to the partners who forfeited their interests.

In 1996 the Company made capital contributions aggregating $802,465 into
Carriage and Compass to fund the accrued and unpaid debt service payments and
fully reinstate the mortgages.  As a result, the acquisition of a majority of
the limited partner interest and the forfeiture of the remaining limited
partner interests, effective June 1, 1996 the Company owned 99% (5% general
partner interest and 94% limited partner interest) of each partnership.  The
remaining 1% limited partner interest is owned by Hunter who contributed $8,105
into Carriage and Compass.

During 1995 8050 Roswell Associates, LLC (Roswell) was formed and capitalized
with a $440,000 contribution, of which $330,000 was funded by the Company while
the remaining $110,000 was funded by Hunter.  Additionally, in 1995 419
Crossville Associates, LLC (Crossville) was formed and capitalized with a
$1,000,000 capital contribution of which $750,000 was funded by the Company
while the remaining $250,000 was funded by Hunter.  Roswell acquired a 9,000
square foot office building located in Fulton County, Georgia for approximately
$440,000 and subsequently obtained a $360,000 mortgage payable on the property.
Crossville acquired a 19,000 square foot office building located in Fulton
County, Georgia for approximately $1,000,000.  In May 1996 Crossville obtained
a $880,000 mortgage note on its property.

         The Company is actively seeking new real estate acquisitions and
investments.  In March, 1997 the Company entered into a contract to purchase
the Harvill Building for $600,000.  This property is located in Woodstock,
Cherokee County, Georgia and consists of an 11,250 square foot office building.
A $50,000 deposit has been escrowed by the Company pending the closing of this
transaction.

     Although the Company is currently in negotiations it is not committed to
make any other real property acquisitions.  However, the Company is evaluating
various potential property acquisitions and is engaging in discussions with
sellers regarding the purchase of properties for the Company.  Purchase
agreements are subject to various terms and conditions, including receipt of
satisfactory closing documentation.  There can be no assurance that all of the





                                       3
<PAGE>   6

terms and conditions of any agreement will be satisfied and therefore it is
possible that certain investments will not be acquired.

         The Company has obtained adequate insurance coverage for all
properties acquired.

Note and Mortgages Payables

Note Payable

     The Company issued a $358,000 note in favor of its former Executive Vice
President as a settlement of the termination of his employment agreement.  The
terms of the note provide for  monthly payments of varying amounts over a six
year period ending December 31, 1998.  The Company discounted this note at 6%
to a present value of $291,240.

     The following is a summary of the remaining payments due under this
agreement:

                                 1997         $78,000
                                 1998          88,000
                                              -------
                                              166,000
      Less unamortized discount               (10,172)
                                             --------
                                             $155,828
                                             ========

Mortgages Payable

         The mortgages payable by the Company as of December 31, 1996 consist
of the following:

Roswell - The mortgage payable, acquired in June 1995,
bears interest of 9.53% and matures on July 1, 2010.
The terms of the mortgage require that monthly payments
of $3,766 be applied first to interest and the balance
to reduction of principal. Interest on this loan adjusts
every five years and is computed as 325 basis points over
the average yield on U.S. Treasury securities, as
defined.                                                 $343,780

Crossville - The mortgage payable, acquired in May 1995,
bears interest at 8.8% per annum and matures in June
2011.  The terms of the mortgage require monthly
payments of $8,821 be applied first to interest with
the balance to reduction of principal.  Interest on this
loan adjusts every five years and is computed as 325
basis points over the average yield on U.S. Treasury
securities, as defined.                                  865,530





                                       4
<PAGE>   7

Colonial - The mortgage payable, acquired in September
1996 bears interest at 9.375% per annum and matures
on October 1, 2006.  The terms of the mortgage require
monthly payments of $7,276 be applied first to interest
with the balance to reduction of principal.  Interest
on this loan adjusts every five years and is computed as
300 basis points over the average yield on U.S.
Treasury securities, as defined.  In addition,
the terms of the mortgage require that Colonial obtain
written approval from the mortgagor prior to any
sale or financing of the property or any sale of
office leases.                                         785,243

Compass - The mortgage payable matures in December
2023 and requires monthly payments of $15,753
applied first to interest at 9-3/4% per annum with
the balance to reduction of principal.               1,797,900

Carriage - The mortgage payable matures in December
2023 and requires monthly payments of $16,812 applied
first to interest at 9-3/4% per annum with the
balance to reduction of principal.                   1,918,784
                                                   -----------

                                                    $5,711,237
                                                   ===========

         A schedule of future amortization payments at December 31, 1996 are as
follows:


                        1997              $   87,923
                        1998                  96,486
                        1999                 105,873
                        2000                 116,180
                        2001                 127,493
                        Thereafter         5,177,282
                                          ----------
                                          $5,711,237
                                          ==========

         The mortgage notes payable of Roswell, Crossville and Colonial have
been guaranteed by both the Company and Hunter.

Other Business Factors

         The business of the Company is not seasonal and the Company does no
foreign or export business.


Personnel

         As of December 31, 1996, the Company had two employees. The Company
also supervises, as sole general partner of the MLP, approximately 35 people
who are located at the various properties.  None of the Company's staff is
employed on a part-time basis.  The employees are not represented by a
collective bargaining unit.





                                       5
<PAGE>   8





Offices

         The Company's headquarters are located at 419 Crossville Road,  Suite
204, Roswell, Georgia 30075 where the Company leases approximately 1,300 square
feet of space from Crossville.


ITEM 2.  DESCRIPTION OF PROPERTIES

         The Company's executive, administrative and operational offices are
located at 419 Crossville Road, Suite 204, Roswell, Georgia, 30075 where the
Company leases approximately 1,300 square feet of space from Crossville.

         In September 1996, the Company purchased a 99% interest in Colonial.
Colonial owns a 18,387 square foot office building located in Roswell, Fulton
County, Georgia.  Colonial leases office space to various tenants at rates
ranging from $11.43 to $14.74 per square foot and terms ranging from 2 to 5
years.  At December 31, 1996 the property was 100% occupied with 1996 rental
revenue since acquisition of $58,175.  The gross potential rent for the
building  based on December 1996 rents is $224,755 annually.  The 1996 real
estate taxes on this property totaled $12,388.

In 1996, the Company purchased a 99% interest in Meggan and Heide.  Meggan and
Heide each own a development lot totaling .8 acres adjoining the Colonial
property. The 1996 real estate taxes on these lots totaled $2,453.

In June 1996, in addition to its 5% general partner interest the Company
acquired a 94% limited partner interest in Carriage and Compass.  Carriage owns
a 102 unit apartment complex located in Gautier, Jackson County Mississippi and
Compass owns a 113 unit apartment complex located in Pascagoula, Jackson
County, Mississippi. Carriage and Compass lease their residential apartments to
tenants at rates ranging from $345 monthly for a studio to $1385 per month for
full service furnished units with terms ranging from 6 to 12 months.  At
December 31, 1996 Carriage was 95% occupied with 1996 rental revenue reportable
by the Company since June 1, 1996 of $373,621 and Compass was 95% occupied with
1996 rental revenue  reportable by the Company since June 1, 1996 of $357,187.
The gross potential rent for Carriage, if 100% occupied is $646,500 annually
which is based on the vacant units valued at market value.  The gross potential
rent for Compass, if 100% occupied is $595,776 annually which is based on the
vacant units valued at market value. The 1996 real estate taxes for Carriage
totaled $31,764 and for Compass totaled $39,375.

         In 1995, the Company purchased a 75% interest in Roswell.  Roswell
owns a 9,000 square foot office building located in





                                       6
<PAGE>   9

Atlanta, Fulton County, Georgia.  Roswell entered into a five year lease of the
entire building to a single tenant for $88,500 annually with the tenant being
responsible for all electricity and fuel bills.  The 1996 real estate taxes on
this property totaled $6,628.

         In 1995, the Company purchased a 75% interest in Crossville.
Crossville owns a 19,000 square foot office building located in Roswell, Fulton
County, Georgia.  Crossville leases office space to various tenants at rates
ranging from $10.50 to $14.50 per square foot and terms ranging from nine
months to 6 years.  At December 31, 1996 the property was 100% occupied with
annual rental revenue of $190,318.  The gross potential rent for the building,
if based on December 1996 rents is $223,584 annually.  The 1996 real estate
taxes on this property totaled $13,949.


 ITEM 3.  LEGAL PROCEEDINGS

         The Company is not aware of any material pending or threatened legal
proceedings against the Company or its officers and directors.


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

         There were no matters submitted to a vote of security holders during
1996.

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         On September 1, 1991 the Common Stock originally issued to the public,
was valued at $10 per share (denominated value).

         Although the Company anticipates that it will request listing as soon
as permissible and practicable, the Company shares are not currently traded on
the NASDAQ Over-the-Counter Market.

         As of December 31, 1996, there were 709 record holders of the
Company's Common Stock and 406,726 shares outstanding.  At December 31, 1996,
there was no established broker-dealer price quotation for the Company's Common
Stock.  There are currently no market-makers for the Company's Common Stock.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Liquidity and Capital Resources

         The Company's liquidity is based primarily on its cash reserves, real
estate  operating and investment income, its ability to obtain mortgage
financing, and the interest income and loan





                                       7
<PAGE>   10

repayments received on its notes receivable from MLP.  These funds are to be
used to pay the Company's normal operating expenses and fund new acquisitions.

         As of December 31, 1996, the Company had cash reserves of $298,655.
For the year ended December 31, 1996, the Company received $297,525 in interest
income from MLP and allowed the advances receivable from MLP to increase by
$197,500 for major capital improvements.  The Company's cash reserves and
current level of income are sufficient to meet the Company's current level of
operating expenses on an ongoing basis.

         Occupancy levels and rental rates have increased substantially over
the past 3 years on the MLP properties.  The net operating income at the
property levels continue to be sufficient to make full interest payments on the
notes payable to the Company.  As the rental markets have continued to recover,
the Company has advanced funds to MLP to  make capital improvements,
replacements and upgrades to the individual apartment units, buildings and
mechanical systems.  As a result of this program, in January, 1995 MLP
successfully sold two of its properties, the Birchwood and Foxfire Apartments
at a substantial profit and refinanced in March 1995, Aspen Walk and Rolling
Hills Apartments. MLP plans to continue to make major capital improvements
during 1997 in an attempt to maximize the resale values of the properties.

         The ultimate realization of the Company's investment in and receivable
from MLP is dependent on the future operations and/or sale of the MLP
properties.  However based on 1997 and future budgets and recent property
valuations, management believes that the two remaining MLP properties have
potential for future operating cash flows and future re-sale values.  In the
fourth quarter of 1995, management decided to make a valuation allowance
against the MLP notes of $200,000.  Based upon current cash flow projections of
the MLP, management feels the $200,000 valuation allowance is more than
adequate at December 31, 1996.

         The operating properties of MLP and the various other real estate
partnerships in which the Company is the general partner are financed with
non-recourse debt.  The Company is not liable for the principal or interest on
the mortgages and the other assets of the partnerships are more than adequate
to satisfy  other recourse liabilities.  Therefore, the Company's liquidity
should not be adversely affected by these general partner obligations.

         In May, 1995, the Company acquired for $330,000 a 75% interest in 8050
Roswell Associates, LLC (Roswell) a Georgia limited liability Company which
owns a 9,000 square foot office building located in Atlanta, Fulton County,
Georgia.  Hunter Management Company owns the remaining 25% interest.  The
purchase price for the Roswell property approximated $440,000 and was financed,
in part, with a new $360,000 mortgage on the building.  The Company was repaid
$247,500 in capital from the proceeds of the mortgage.  The Company and Hunter
have both guaranteed this mortgage.  Based on 1997 and future budgets and
recent property valuations the





                                       8
<PAGE>   11

investment should produce future operating cash flows and future resale values
for the Company.

         In November, 1995 the Company purchased for $750,000 a 75% interest in
419 Crossville Associates, LLC (Crossville) a Georgia limited liability Company
which owns a 19,000 square foot office building in Roswell, Fulton County,
Georgia.  Hunter Management Company owns the remaining 25% interest. The
building was purchased in an all cash transaction, however, in May 1996
Crossville  obtained an $880,000 mortgage on the property and used the proceeds
to return $600,000 to the Company.  The Company and Hunter have both guaranteed
this mortgage. Based on 1997 and future budgets and recent property valuations,
the investment should produce future operating cash flows and future resale
values for the Company.

         The Company is the General Partner and also a Limited Partner of AGS
Carriage House Associates and AGS Compass Pointe Associates.  In 1996, the
Company expanded both partnerships to raise additional capital. In this regard
the Company has contributed $802,465 to these two properties and has obtained a
94% limited partner interest in the partnerships.  Hunter contributed $8,105
and has obtained a 1% limited partner interest.  The capital was utilized by
the partnerships to satisfy debt requirements.  Based on 1997 and future
budgets and recent property valuations, the investment should produce future
operating cash flows and future resale values for the Company.

         In September 1996, the Company purchased for $297,000 a 99% interest
in Colonial Park Commons, LLC (Colonial Park) which owns a 18,387 square foot
office building in Roswell, Fulton County, Georgia.  Hunter Management
contributed $3,000 and owns the remaining 1%.  Colonial Park obtained a
$787,500 mortgage on the office building.  The mortgage is guaranteed by the
Company and Hunter.  In addition, the Company acquired for $198,000 a 99%
interest in Heide Lot, LLC and Meggan Lot, LLC which owns the two developmental
building lots adjacent to the Colonial Park office building.  Hunter
contributed $2,000 and owns the remaining 1%.  Based on 1997 and future budgets
and recent property valuations, these investments should produce future
operating cash flows and future resale values for the Company.

         In 1996 the Company received $60,000 in fees from Hunter Management
Company for management supervisory services.

         In March 1997 the Company entered into a contract to purchase the
Harvill Building for $600,000.  This property is located in Woodstock, Cherokee
County, Georgia and consists of an 11,250 square foot office building.  A
$50,000 deposit has been escrowed by the Company pending the closing of this
transaction.

         During the fourth quarter of 1996 the Company listed Compass Pointe
and Carriage House for sale and MLP listed Rolling Hills for sale.  A
successful sale of any of these properties is expected to substantially
increase the Company's working capital and further finance the transition
described in the next section.





                                       9
<PAGE>   12




Results of Operations

   1996 versus 1995

         The Company's business plan includes a transition from its current
asset base of mortgage receivables from MLP and general and limited partner
interests in apartment buildings located throughout the country, into small
apartment properties and suburban office buildings concentrated in Atlanta,
Georgia and other fast growing metropolitan areas in the southeast.  Consistent
with this transition, in 1996 the Company recorded an increase of $977,047 in
rental income over the $82,915 reported in 1995.  This increase is due
primarily to the acquisition of 419 Crossville, and the September 1996
acquisition of Colonial Park and the June 1996 acquisition of Carriage House
and Compass Pointe.  For the year ended December 31, 1996, the Company
recognized net income of $26,751 compared to net income of $792,969 in 1995.
Total revenue in 1996 was $1,558,471 versus $1,891,699 in 1995.  However, most
of the 1995 revenue was reported as a result of the sale or refinancing of MLP
assets.  1995 revenue included the recognition of the Company's share of the
MLP's gain from the sale of the Birches and FoxFire Apartments. In 1995, MLP
also refinanced Rolling Hills Apartments and the Company recognized a gain on
the settlement of its second mortgage note receivable from the property in the
amount of $529,091.

                 Total expenses for the year ended December 31, 1996 were
$1,509,263 compared to $699,577 in 1995.  The increase in expenses from 1996 to
1995 were caused, in part, by the 1996 acquisitions of Colonial Park, Heide
Lot, Meggan Lot, Carriage House and Compass Pointe.  Rental operating expenses
increased by $522,925 because of these acquisitions.

         A valuation allowance of $200,000 was recorded in 1995 based upon an
evaluation of the Company's notes receivable from MLP, to reflect its estimate
of their realizability. No valuation adjustments were made in 1996.

         General and administrative expenses of $453,031 increased $29,889 over
the 1995 level.  The increase is primarily attributable to the increased
professional fees incurred relating to the Company's new acquisitions, as well
as expenses incurred in connection with proposed acquisitions of properties and
mortgages and also the Company's financing and refinancing activities.

         Depreciation and amortization of $164,823 increased $152,185
from 1995 primarily due to the acquisitions mentioned above.

         Interest expense increased  $304,687 in 1996 due to the mortgages
obtained or assumed on the 1996 acquisitions and on the mortgage obtained in
1996 on 419 Crossville.





                                       10
<PAGE>   13

         A substantial decrease in provision for income taxes resulted from the
related decrease in income from operations.

Inflation

     Inflation in the future may increase rental revenues as well as operating
expenses, all in accordance with general market trends.

ITEM 7.  FINANCIAL STATEMENTS

     See Index to Consolidated Financial Statements on Page F-1 of Item 7 of
Form 10-KSB for financial statements.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

     There have been no changes in or reported disagreements with the
accountants on any matter of accounting principles, practices or financial
statement disclosure.


                                    Part III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT


         The principal officers and directors of the Company are:

<TABLE>
<CAPTION>
          Name                     Age   Office
         -----                     ----  -------
      <S>                          <C>   <C>
      Albert G. Schmerge, III      52    Chairman of the Board,
                                         Chief Executive Officer,
                                         President and Director

      Norman F. Swanton            58    Secretary and Director

      Martin D. Newman             58    Director
</TABLE>


         All Directors are elected to three year terms.

Albert G. Schmerge III

         Prior to the formation of the Company, Mr. Schmerge was the sole
general partner and Chief Executive Officer of AGS Properties.  Mr. Schmerge
began specializing in real estate investments and acquisitions in 1970.  He
combined several family owned and related businesses and co-founded AGS
Properties in 1974 which operated in the acquisition, management and operation
of more than 100 major real estate properties located throughout the United
States.  In addition, his experience includes syndication, mortgage financing
and refinancing, rehabilitation, operations/management and purchase and sales
of income and investment properties.





                                       11
<PAGE>   14


         Mr. Schmerge earned a Bachelor of Science degree from Villanova
University, and a Masters of Business Administration from Iona Graduate School
of Business.  After several years in the electronics and satellite industry he
entered the financial planning and real estate investment business with his
father in 1968.

         Mr. Schmerge has been the President and CEO of the Company since 1991.
Just prior to the formation of the Company, he was primarily responsible for
the successful reorganization of AGS Properties and its 27 affiliated entities.
Prior to its reorganization, AGS Properties had been a well known and highly
respected real estate owner/operator and had acted as the general partner as it
grew in the 1970's and 1980's to participate and control more than 70 real
estate partnerships and entities over the years.  In his capacity as General
Partner he was responsible for the acquisition, formation, financial
structuring, financing and sale of several hundred million dollars worth of
real estate, primarily suburban apartment developments and suburban office
properties.


Norman F. Swanton

         Mr. Swanton currently serves as Chairman of the Board and Chief
Executive Officer of Warren Resources, Inc. which engages in the acquisition
and development of existing oil properties.  From 1989 to 1992, Mr. Swanton
also served as President and Investment Manager of Harbor View Horizons Corp.,
which engaged in equity options trading.  From October 1986 to June 1989, Mr.
Swanton was also an independent financial advisor managing investment funds for
his own account and outside investors.

         Mr. Swanton received a B.A. Degree from Long Island University in 1962
and attended Bernard Baruch Graduate School of Business PH.D. Program in
Accountancy and Finance.

Martin D. Newman

         Mr. Newman currently is a partner in the law firm of Ballon, Stoll,
Bader and Nadler, PC.  His law expertise includes many aspects of real estate,
corporate representation of public and private companies, particularly those
engaged in the ownership, operation and management of real estate and
securities representation of public, private and not-for profit entities
generally as issuer's counsel, in connection with private placements and public
offerings, including such matters arising under the Securities Exchange Act of
1934, periodic reporting requirements under said Act and other compliance
matters. Previously,  Mr. Newman was with the law firm of Wien Malkin & Bettex.
He was also with the law firm of Chadbourne & Parke from 1968 to 1977 and a
staff attorney with the U.S. Securities  and Exchange Commission from 1963 to
1967.





                                       12
<PAGE>   15

         Mr. Newman received a B.A. Degree from the University of Michigan in
1960 and a JD from Harvard Law School in 1963.


ITEM 10.  EXECUTIVE COMPENSATION

         Effective July 1, 1996, the Company amended the employment agreement
and extended the term to June 30, 1999 with  Albert G. Schmerge III, the
Chairman of the Board, Chief Executive Officer, President and Director of the
Company.  The amended agreement calls for an annual base salary of $250,000
plus an annual bonus equal to 10% of the Company's net income in excess of a
10% return on shareholder equity.  Salaries earned by Mr. Schmerge during 1996
amounted to $250,000.

Outside Director Compensation

         The non-salaried outside directors of the Company, Mr. Norman F.
Swanton and Mr. Martin D. Newman receive a stipend of $750 for each Board of
Directors meeting attended.  In 1997 the Company issued warrants for $1 per
share to the outside directors as a group equal to 2% of the capitalization of
the Company.  It is anticipated that the Board will hold four regular meetings
each year.  The Board appointed an audit committee and a compensation
committee, which is comprised of the Outside Directors.

         Mr. Swanton is also paid a consultant fee for financial consulting
services rendered to the Company at the rate of $20,000 per year pursuant to a
consulting agreement terminable at will by the Company.  Mr. Swanton was paid
$20,000 in 1996 relating to 1995 consulting services and the Company accrued
$20,000 for 1996 services which were paid in 1997.

Officer Compensation

         Effective July 1, 1996, the Company amended the employment agreement
and extended the term to June 30, 1999 with Albert G. Schmerge III.  The
amended agreement calls for an annual base salary of $250,000 plus an annual
bonus equal to 10% of the Company's net income in excess of a 10% return on
shareholder equity.  Mr. Schmerge is also entitled to the grant of incentive
stock options to purchase a number of shares equal to 25% of the aggregate
initial outstanding shares of Common Stock (108,356 shares) at a purchase price
of $10 per share.  The option has a five-year term  which expires June 30, 1997
and is exercisable, over successive 12-month periods, at the rate of 20% each
year so long as Mr. Schmerge remains in the employ of the Company.

         The employment agreement also provided for Mr. Schmerge to continue to
participate in employee benefit plans consisting of life and medical insurance
plans.





                                       13
<PAGE>   16

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT

         (a)  As of December 31, 1996, two persons owned of record or were
known by the Company to own beneficially more than five percent (5%) of the
Common Stock then outstanding.

         (b)  The following table sets forth certain information with respect
to the beneficial ownership (determined in accordance with Securities and
Exchange Commission Rule 13d-3 under the Securities Exchange Act of 1934) of
the Company's Common Stock by each person known to the Company to beneficially
own more than 5% of the Company's outstanding Common Stock, by each director of
the Company and by all officers and directors as a group.

<TABLE>
<CAPTION>
        Name and Address of             Amount of          Percent
         Beneficial Owner          Beneficial Ownership   of Class
        -------------------        --------------------   --------
        <S>                              <C>              <C>
        Albert G. Schmerge III (1)       48,000           11.8016%
        Norman F. Swanton (2)             1,500            0.3688%
        Cullen Associates (3)            31,808            7.8205%
        Judith F. Schmerge,
        as Trustee (4)                    3,533            0.8686%
        Martin D. Newman (5)              1,013            0.2490%
        Officers and Directors
        as a Group (three people)         50,513          12.4194%
</TABLE>

____________________
(FOOTNOTES)

(1)  Mr. Schmerge is an Officer and Director of the Company.
(2)  Mr. Swanton is an Officer and Director of the Company.
(3)  A partnership owned by the estate of Albert G. Schmerge III's father and
     his family.
(4)  A grantor trust having as its trustee Judith F. Schmerge, the wife of
     Albert G. Schmerge, III, the Chairman & President of the Company, and as
     its beneficiaries, Judith F. Schmerge and her children.
(5)  Mr. Newman is a Director of the Company.

         (c)  There are no other arrangements which may at a subsequent date
result in a compensatory change in control of the Company.

         In January, 1996 the Company purchased 10,000 shares of its common
stock for $40,000 from Cullen Associates and in June 1996 the Company purchased
an additional 2,500 shares of its Common Stock for $10,000 from Cullen
Associates.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Reference is made to the Notes to Consolidated Financial Statements,
contained in this report, for various transactions between the Company and its
affiliates.

         (a)  No management person is indebted to the Company.





                                       14
<PAGE>   17

         (b) There have been no significant transactions with promoters.

                                    Part IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  The following documents are filed as part of this report:

              (1) (2)  The financial statements indicated in Item 7, "Financial
Statements".

         An annual report will be sent to the Shareholders subsequent to this
filing and the Company will furnish copies of such report to the Commission at
that time.

         (b)  Exhibits

         The following is a complete list of Exhibits filed as part of the Form
10-KSB Annual Report.  Exhibit numbers correspond to the numbers in the Exhibit
Table of Item 601(a) of Regulation S-B, which are incorporated herein:

<TABLE>
         <S>  <C>  <C>
         (2)  (a)  Second Amended Joint Disclosure Statement     *
                   with respect to Plans of Reorganization of
                   AGS Northbrook Associates, AGS Properties
                     and Related Debtors.

              (b)  First Amended Plan of Reorganization of       *
                   Birchwood Associates dated February 27,
                   1991.

              (c)  First Amended Plan of Reorganization of       *
                   AGS Aspen Walk Associates dated February
                   27, 1991.

              (d)  First Amended Plan of Reorganization of       *
                   AGS Rolling Hills Associates dated
                   February 27, 1991

              (e)  First Amended Plan of Reorganization of       *
                   AGS Jackson Associates dated February 27,
                   1991.

              (f)  First Amended Plan of Reorganization of       *
                   AGS Southern Lights Associates dated
                   February 27, 1991.

              (g)  First Amended Plan of Reorganization of       *
                   AGS Fountain Lake Associates dated
                           February 27, 1991.
</TABLE>

              *The exhibit was previously included with the Form 10
                filed in June, 1992.





                                       15
<PAGE>   18

<TABLE>
         <S>                                                     <C>
              (h)  Confirmation Order dated June 12, 1991        *
                   by Chief United States Bankruptcy Judge
                   Burton Lifland.

              (i)  Second Amended Plan of Reorganization of      *
                   AGS Fountains Associates dated January, 1992.


              (j)  Confirmation Order dated March 10, 1992       *
                   by Chief United States Bankruptcy Judge
                   Burton Lifland.

         (3)  Articles of Incorporation and By-laws.             *

              (a) Certificate of Correction to Certificate of    *
                   Amendment to Certificate of Incorporation
                   of Resource Capital Group, Inc.

         (4)  Form of certificate representing Common Stock      *
                   of the Issuer.

         (10) (a) Amended and Restated Agreement of Limited      *
                   Partnership of AGS Partners MLP, L.P.
                   dated September 1, 1991.

              (b) Stock Option Agreement dated as of July        *
                   1, 1991 between Resource Capital Group,
                   Inc. and Mr. Norman F. Swanton, a
                   Director of the Company.

              (c) Consulting Agreement dated July 1, 1991,       *
                   between Resource Capital Group, Inc. and
                   Norman F. Swanton, a Director of the Company.

               (d) Employment Agreement, dated as of July 1,     *
                   1991 between the Issuer and Albert G.
                   Schmerge, III, the Issuer's Chairman,
                   President, Chief Executive Officer and
                   Director.

               (e) Minutes of Board of Directors meeting         *
                   January 15, 1993.

               (f) Letter Agreement dated August 16, 1993        *
                   between Resource Capital Group, Inc. and
                   Household Commercial Realty, Inc. including
                   Assignment of Deed of Trust.

               (g) Settlement Agreement dated November 23, 1993  *
                   between Resource Capital Group, Inc. and
                   Eastrich Multiple Investor Fund, L.P.
</TABLE>

     *The exhibit was previously included with the Form 10 filed in
      June, 1992 on the Form 10 KSB filed in 1993 or 1994.





                                       16
<PAGE>   19



<TABLE>
     <S>   <C>
           (h) Operating agreement dated April 25, 1995 for *
               8050 Roswell Associates, LLC a Georgia
               Limited Liability Company

           (i) Operating agreement dated November 8, 1995 *
               for 419 Crossville Associates, LLC a Georgia
               limited liability Company.


     (28)  (a) Report on Form 8-K filed February 7, 1995     *
               regarding the sale of Birches and Foxfire
               Apartments by AGS Partners MLP, L.P.

           (b) Report on Form 8-K originally filed on       *
               November 21, 1995 and amended on January 23,
               1996 regarding the purchase of a 75%
               interest in 419 Crossville Associates, LLC
               in November, 1995
</TABLE>


       *   The exhibit was previously included with the Form 10-KSB
           filed in 1995 or 1996.





                                       17
<PAGE>   20












                          RESOURCE CAPITAL GROUP, INC.

                       Consolidated Financial Statements
                                 for year ended
                               December 31, 1996





<PAGE>   21

Item 7. Consolidated Financial Statements





                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





<TABLE>
<CAPTION>
                                                                                 Page
 <S>                                                                             <C>
 Independent Auditor's Report                                                    F-2

 Consolidated Balance Sheet                                                      F-3

 Consolidated Statement of Operations                                            F-4

 Consolidated Statement of Stockholders' Equity                                  F-5

 Consolidated Statement of Cash Flows                                            F-6

 Notes to Consolidated Financial Statements                                      F-7
</TABLE>





                                      F-1






<PAGE>   22





                          Independent Auditor's Report




To the Board of Directors
Resource Capital Group, Inc.

We have audited the accompanying consolidated balance sheet of Resource Capital
Group, Inc. and Subsidiaries as of December 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1996.  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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Resource Capital
Group, Inc. and Subsidiaries at December 31, 1996, and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.




                                                PANNELL KERR FORSTER PC



January 31, 1997
New York, New York

                                      F-2





<PAGE>   23


                          RESOURCE CAPITAL GROUP, INC.

                           Consolidated Balance Sheet
                               December 31, 1996

                                     Assets

<TABLE>
<S>                                                                                  <C>               <C>
Cash and cash equivalents (note 2)                                                                     $     298,655

Investment in marketable equity securities (note 2)                                                          104,375

Escrow deposits                                                                                               61,639

Investments in and receivables from partnerships (notes 2 and 3)                                           2,719,316

Receivables                                                                                                  181,122

Real and personal property, at cost (notes 1, 2 and 4)
    Land                                                                             $    1,106,231
    Buildings and improvements                                                            6,070,520
    Furniture and equipment                                                                 284,199
                                                                                         ----------
                                                                                          7,460,950
    Less accumulated depreciation                                                          (181,500)       7,279,450
                                                                                         ----------
Deferred costs - net of accumulated amortization of $7,504 (note 2)                                          269,670

Other assets                                                                                                 116,661
                                                                                                       -------------
                                                                                                       $  11,030,888
                                                                                                       -------------
                                           Liabilities and Stockholders' Equity

Liabilities
    Note payable (note 10)                                                                             $     155,828
    Accounts payable - including $16,090 to an affiliated entity (note 9)                                     59,684
    Accrued expenses
         Interest                                                                    $       46,243
         Payroll                                                                             35,418
         Professional fees                                                                   36,000
         Taxes                                                                               76,289
         Other                                                                               25,438
    Security deposits                                                                   -----------          219,388
    Mortgages payable (note 5)                                                                                71,351
    Deferred tax liability (note 8)                                                                        5,711,237
                                                                                                              81,607
                                                                                                           ---------
                 Total liabilities                                                                         6,299,095

Commitments and contingencies (notes 5 and 9)

Minority interest (note 4)                                                                                   109,409

Stockholders' equity
    Common stock - $.01 par value per share, authorized
     1,000,000 shares, issued 498,608 shares (note 6)                                         4,986
    Additional paid-in capital                                                            4,459,034
    Retained earnings                                                                       273,829
    Unrealized gain on investment (note 2)                                                   16,247
    Treasury stock, at cost, (note 6)                                                      (131,712)       4,622,384
                                                                                          ---------    -------------
                                                                                                       $  11,030,888
                                                                                                       -------------
</TABLE>
See notes to consolidated financial statements

                                      F-3






<PAGE>   24




                          RESOURCE CAPITAL GROUP, INC.

                      Consolidated Statement of Operations





<TABLE>
<CAPTION>
                                                                                                  Year Ended
                                                                                                 December 31
                                                                                      --------------------------------
                                                                                            1996             1995
                                                                                      --------------   ---------------
<S>                                                                                   <C>              <C>
Income
    Rental operations (note 4)                                                        $   1,059,962    $       82,915
    Equity in earnings of unconsolidated partnerships (note 3)                                1,181           777,325
    Management fees  - affiliated entity (note 9)                                            60,000            60,000
    Interest - affiliated entity (notes 3 and 7)                                            212,581           352,674
    Gain on settlement of note - affiliated entity (note 7)                                 147,122           529,091
    Interest and other income                                                                77,625            89,694
                                                                                        -----------     -------------
                                                                                          1,558,471         1,891,699
                                                                                        -----------     -------------
Expenses
    Rental operations (note 4)                                                              554,796            31,871
    General and administrative                                                              453,031           423,142
    Interest (notes 5 and 10)                                                               336,613            31,926
    Valuation allowance (note 3)                                                                -             200,000
    Depreciation and amortization                                                           164,823            12,638
                                                                                        -----------     -------------
                 Total expenses                                                           1,509,263           699,577
                                                                                        -----------     -------------
                 Income before minority share of income                                      49,208         1,192,122

Minority share of income                                                                     14,373             5,680
                                                                                        -----------     -------------
                 Income before provision for income taxes                                    34,835         1,186,442

Provision for income taxes (note 8)                                                           8,084           393,473
                                                                                        -----------     -------------
                 Net income                                                           $      26,751    $      792,969
                                                                                        -----------     -------------
                 Net income per share (note 2)                                        $         .06    $         1.79
                                                                                        -----------     -------------
</TABLE>





See notes to consolidated financial statements


                                      F-4





<PAGE>   25




                          RESOURCE CAPITAL GROUP, INC.

                 Consolidated Statement of Stockholders' Equity
                   For Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>

                                                                                         Unrealized
                                                                Additional   Retained       Gain                       Total
                                                    Common       Paid-in     Earnings     (Loss) on     Treasury   Stockholders'
                                                    Stock        Capital     (Deficit)   Investment      Stock         Equity
                                                 ---------  -------------  ----------  ----------   -----------   --------------
<S>                                              <C>        <C>            <C>         <C>          <C>           <C>
Balance, December 31, 1994                       $   4,986  $   4,459,034  $ (545,891) $      -     $      (543)  $   3,917,586

Net income for year ended December 31, 1995            -              -       792,969         -             -           792,969

Treasury stock acquired (note 6)                       -              -           -           -         (60,000)        (60,000)

Net unrealized (loss) on investment                    -              -           -        (3,754)          -            (3,754)
                                                 ---------  -------------  ----------  ----------   -----------   ------------
Balance, December 31, 1995                           4,986      4,459,034     247,078      (3,754)      (60,543)      4,646,801

Net income for year ended December 31, 1996            -              -        26,751         -             -            26,751

Treasury stock acquired (note 6)                       -              -           -           -         (71,169)        (71,169)

Net unrealized gain on investment                      -              -           -        20,001           -            20,001
                                                 ---------  -------------  ----------  ----------   -----------   --------------
Balance, December 31, 1996                       $   4,986  $   4,459,034  $  273,829  $   16,247   $  (131,712)  $   4,622,384
                                                 ---------  -------------  ----------  ----------   -----------   --------------
</TABLE>



See notes to consolidated financial statements

                                      F-5





<PAGE>   26


                          RESOURCE CAPITAL GROUP, INC.

                      Consolidated Statement of Cash Flows

<TABLE>
<CAPTION>
                                                                                                 Year Ended
                                                                                                 December 31
                                                                                     --------------------------------
                                                                                            1996             1995
                                                                                     ---------------   --------------
<S>                                                                                  <C>               <C>
Cash flows from operating activities
    Net income                                                                       $       26,751    $      792,969
    Adjustments to reconcile net income to net cash provided (used)
     by operating activities
         Depreciation and amortization
         Equity in earnings of unconsolidated partnerships                                  164,823            12,638
         Minority share of income                                                            (1,181)         (777,325)
         Provision for deferred income taxes                                                 14,373             5,680
         Gain on settlement of note - affiliated entity                                      12,616           334,394
                                                                                           (147,122)         (529,091)
         Valuation allowance                                                                    -             200,000
         Changes in certain other accounts, net of acquisitions
             Receivables                                                                    (34,000)              -
             Accrued interest receivable                                                     84,944         1,207,594
             Deferred costs and other assets                                                 80,824           (29,026)
             Accounts payable                                                              (273,696)           22,835
             Accrued expenses                                                              (669,381)           35,122
             Receivable from affiliated entity                                              225,000          (225,000)
             Security deposits                                                               16,190            12,625
                                                                                     ---------------   --------------
                 Net cash provided (used) by operating activities                          (499,859)        1,063,415
                                                                                     ---------------   --------------
Cash flows from investing activities
    Advances to investees                                                                  (317,500)         (359,081)
    Repayment of advances                                                                   120,000           293,000
    Additions to real and personal property                                                (155,793)          (34,764)
    Purchases of majority interest in subsidiaries                                       (1,263,314)       (1,080,000)
    Purchase of marketable equity securities                                                    -             (88,128)
    Proceeds from mortgage note receivable                                                      -           1,204,224
                                                                                     ---------------   --------------
                 Net cash (used) by investing activities                                 (1,616,607)          (64,749)
                                                                                     ---------------   --------------
Cash flows from financing activities
    Proceeds from mortgage payable                                                        1,667,500           360,000
    Note amortization payments                                                              (54,852)          (40,045)
    Mortgage amortization payments                                                         (174,460)           (4,514)
    Purchase of treasury stock                                                              (71,169)          (60,000)
    Net distributions to minority interest                                                 (188,100)          (82,500)
                                                                                     ---------------   --------------
                 Net cash provided by financing activities                                1,178,919           172,941
                                                                                     ---------------   --------------
                 Net increase (decrease) in cash and cash equivalents                      (937,547)        1,171,607
Cash and cash equivalents at beginning of year                                            1,236,202            64,595
                                                                                     ---------------   --------------
Cash and cash equivalents at end of year                                             $      298,655    $    1,236,202
                                                                                     ---------------   --------------
Supplemental disclosures of cash flow information
    Cash paid during the year for interest                                           $    1,152,810    $       29,303
                                                                                     ---------------   --------------
    Cash paid during the year for income taxes                                       $       83,989    $        8,635
                                                                                     ---------------   --------------
Details of purchases in majority
 interest in subsidiaries
    Working capital                                                                  $      593,868    $          -
    Real and personal property                                                           (3,777,353)       (1,080,000)
    Cost in excess of net liabilities acquired                                           (1,942,540)              -
    Mortgages payable                                                                     3,862,711               -
                                                                                     ---------------   --------------
Cash paid for purchases of majority interest in subsidiaries                         $   (1,263,314)   $   (1,080,000)
                                                                                     ---------------   --------------
</TABLE>

See notes to consolidated financial statements

                                      F-6






<PAGE>   27



                          RESOURCE CAPITAL GROUP, INC.

                   Notes to Consolidated Financial Statements
                               December 31, 1996



Note 1 - Organization

Resource Capital Group, Inc. (the Company) was organized as a Delaware
Corporation in November 1990 to become successor in interest of AGS Properties
(AGS) and assumed AGS' general and limited partnership interests in AGS
Partners MLP, LP (MLP), which owns apartment complexes in Nashville, Tennessee
and Oklahoma City, Oklahoma; AGS Meadow Oaks Associates (Meadow); which owns an
apartment complex in Kansas City, Kansas; AGS Carriage House Associates
(Carriage), which owns an apartment complex in Gautier, Mississippi; and AGS
Compass Pointe Associates (Compass), which owns an apartment complex in
Pascagoula, Mississippi.

In May 1995, the Company acquired a 75% interest in 8050 Roswell Associates LLC
(Roswell), an entity which owns a 9,000 square foot office building located in
Fulton County, Georgia.  In November 1995, the Company acquired a 75% interest
in 419 Crossville Associates LLC (Crossville), an entity which owns a 19,000
square foot office building located in Fulton County, Georgia (see note 4).

In May 1996, the Company acquired a majority of the remaining limited
partnership interests in both Compass and Carriage (see note 4).  Additionally,
in September 1996, the Company acquired 99% interests in Colonial Park Commons,
LLC (Colonial), Meggan Lot, LLC (Meggan), and Heide Lot, LLC (Heide).  Colonial
owns an 18,387 square foot office building in Fulton County, Georgia.  Meggan
and Heide own .39 acres and .42 acres, respectively, of unimproved land
surrounding the Colonial property in Fulton County, Georgia (see note 4).

Note 2 - Significant accounting policies

Basis of Accounting

The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries, Roswell, Crossville, Carriage, Compass,
Colonial, Meggan and Heide (see note 4).  All intercompany transactions and
balances have been eliminated in consolidation.

Prior to June 1996, Carriage and Compass were accounted for under the equity
method (see note 4).  The Company's general and limited partnership interests
in both MLP and Meadow continue to be accounted for under the equity method.

Use of estimates

The financial statements of the Company are prepared in conformity with
generally accepted accounting principles, which require management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those estimates.

Long-lived assets

Management evaluates the Company's long-lived assets, which consist primarily
of its investments in real property, for impairment based on the recoverability
of their carrying amounts.  When it is probable that undiscounted cash flows
will not be sufficient to recover the carrying amount of a specific property,
the assets will be written down to its fair value.  No such write-downs were
required in 1996 and 1995.





                                      F-7
<PAGE>   28



                          RESOURCE CAPITAL GROUP, INC.

                   Notes to Consolidated Financial Statements
                               December 31, 1996





Disclosure about fair value of financial instruments

The carrying amount of the Company's cash and cash equivalents, and notes
receivable and mortgages and notes payable is a reasonable approximation of
fair value.

Stock based compensation

In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
(SFAS 123) "Accounting for Stock-Based Compensation," which encourages
companies to recognize compensation expense in the income statement based on
the fair value of the underlying common stock at the date the awards are
granted.  However, it permits continued accounting under APB Opinion 25,(APB
25) "Accounting for Stock Issued to Employees," accompanied by disclosure of
the pro forma effects on net income and earnings per share had the new
accounting rules been applied.  The Company has elected to continue accounting
for stock options under APB 25.  The pro forma disclosure requirements of SFAS
123 do not have a material effect on net income or earnings per share and
therefore have not been provided.

Depreciation and amortization

Depreciation of real and personal property is being provided on straight-line
and accelerated methods over estimated service lives ranging from 5 to 39
years.

Amortization of deferred mortgage costs are being provided on a straight-line
basis over the term of the mortgages payable.

Income taxes

Deferred tax assets and liabilities are recognized for both the expected future
tax impact of differences between the financial statement and tax basis of
assets and liabilities, and for the expected future tax benefit to be derived
from tax loss and tax credit carryforwards.  Deferred tax assets are reflected
at their likely realizable amount.

Cash and cash equivalents

For purposes of reporting cash flows, cash and cash equivalents includes cash
on hand and in banks, money market funds which are available for current
operations, and certificates of deposit with original maturities of three
months or less.  Substantially, all of the Company's cash and cash equivalents
are maintained in a money market account on deposit with one bank.  The Company
has not experienced any losses on its cash deposits.

Net income per share

The net income per share is based upon the weighted average of outstanding
shares of common stock (1996 - 415,246, 1995 - 442,411).  Options and warrants
to purchase stock are not included in the determination of net income per share
since the estimated fair value of the related stock did not exceed the exercise
price of such options and warrants and therefore are anti-dilutive.





                                      F-8
<PAGE>   29



                          RESOURCE CAPITAL GROUP, INC.

                  Notes to Consolidated Financial Statements
                        (continued) December 31, 1996





Investment in marketable equity securities

The Company's investment in marketable equity securities are classified as
available for sale and accordingly are stated at fair value with the related
unrealized gains and losses included as a separate component of stockholders'
equity.  The cost of the Company's available-for-sale securities is $88,128.

Investments in partnerships

The Company uses the equity method of accounting for its partnership interests
in MLP, Meadow, Carriage, (through May 1996) and Compass (through May 1996)
whereby the original costs are adjusted by the Company's share of the
undistributed earnings or losses of these entities.  Since the Company is
responsible as general partner for obligations of these entities, losses
recorded under the equity method, related to the Company's investment as
general partner, could exceed the cost of the Company's general partnership
investment.  Since, as a limited partner, the Company is not responsible for
the obligations of these entities in excess of its investments, the costs of
such limited partnership investments, plus advances, will not be reduced below
zero for losses related to such limited partnership interests.

The equity in earnings (loss) of MLP is adjusted annually to eliminate
transactions with the Company.

Note 3 - Investment in and receivables from partnerships

The balance at December 31, 1996 is summarized as follows:

<TABLE>
                   <S>                                                                 <C>
                   Notes receivable from MLP (a)                                       $   1,983,501
                   Accrued interest receivable on MLP notes (a)                               24,794
                   Advances receivable from MLP                                            1,041,678
                   Accountability to partnerships (b)                                       (130,657)
                                                                                       -------------
                                                                                           2,919,316
                   Valuation allowance (a)                                                   200,000
                                                                                       -------------
                                    Net                                                $   2,719,316
                                                                                       -------------
</TABLE>

a)  In connection with the formation of both the Company and MLP in 1991, MLP
    issued various subordinated promissory notes to the Company which are
    secured mortgages and deeds of trust and require monthly payments of
    interest only through maturity.  Interest accrues at 15% per annum, while
    payments are limited to 90% of cash flows, as defined.  The notes also
    require the payment of additional interest on the sale or refinancing of
    the mortgaged property equal to a thirty-five percent participation in the
    net proceeds as defined.

    In January 1995, MLP completed the sale of two of its properties, the
    Birchwood and FoxFire Apartments.  As a result of this sale, MLP repaid the
    Company $942,581 covering (1) the principal and accrued interest on the
    Birchwood and FoxFire Apartments notes receivable and (2) a portion of the
    advances receivable due to the Company.  In addition, MLP refinanced the
    mortgage loans on its two remaining properties, Aspen Walk Apartments and
    Rolling Hills Apartments on March 17, 1995.  Cash proceeds from this
    refinancing were used to retire a substantial portion of the remaining
    accrued interest receivable on the MLP notes and the $600,000 mortgage
    payable (see note 7).  Interest income on the MLP notes during 1996
    amounted to $297,525 and in 1995 amounted to $493,594 while interest
    payments received in 1996 amounted to $297,525 and in 1995 amounted to
    $1,365,735.





                                      F-9
<PAGE>   30



                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                               December 31, 1996





    A summary of remaining subordinated notes at December 31, 1996 is as
follows:

<TABLE>
<CAPTION>
                               Secured Asset                       Maturity Date
                  -----------------------------------       ----------------------------
                  <S>                                       <C>                          <C>
                  Aspen Walk Apartments                     December 1, 2005             $    325,554
                  Rolling Hills Apartments                  October 1, 2005                 1,657,947
                                                                                         ------------
                                                                                         $  1,983,501
                                                                                         ------------

</TABLE>

    Based upon an evaluation of the Company's notes receivable from MLP,
    management has provided a $200,000 valuation allowance to reflect its
    estimate of their realizability.

b)  As discussed in note 2, the Company's policy is to reflect its investments
    in unconsolidated partnerships on the equity method.  The following is a
    summary of the Company's investments in (accountability to) Partnerships as
    of December 31, 1996:

<TABLE>
              <S>                                                                           <C>
              MLP
                  1% General partnership interest and
                   27.55% Limited partnership interest                                      $     (66,627)

              AGS Meadow Oaks Associates
                  2.55% General partnership interest and
                  43.10% Limited partnership interest (1)                                         (64,030)
                                                                                            -------------
                                                                                            $    (130,657)
                                                                                            -------------
</TABLE>
Equity in earnings (loss) of Partnership investments for the years ended
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
                                                                                 1996             1995
                                                                           -------------    -------------
              <S>                                                          <C>              <C>
              MLP                                                          $     (60,232)   $     651,959
              AGS Meadow Oaks Associates (1)                                      (9,245)         (14,334)
              AGS Carriage House Associates (2)                                   (6,806)            (641)
              AGS Compass Pointe Associates (2)                                   (7,480)            (580)
                                                                           -------------    -------------
                               Sub-total                                         (83,763)         636,404
              Elimination of interest on notes payable from MLP                   84,944          140,921
                                                                           -------------    -------------
                               Total                                       $       1,181    $     777,325
                                                                           -------------    -------------
</TABLE>

    (1)  As discussed in note 2, the Company does not reflect its equity in
         losses of limited partnership interest when such losses are in excess
         of the Company's investment.  Unrecorded losses in AGS Meadow Oaks
         Associates aggregated $1,082,240 at December 31, 1996.

    (2)  The Company accounted for its 5% general partnership investment in
         Carriage and Compass on the equity method through May 1996.  Effective
         June 1996, the operations of both Carriage and Compass are included in
         the consolidated financial statements of the Company (see note 4).





                                      F-10
<PAGE>   31



                         RESOURCE CAPITAL GROUP, INC.

            Notes to Consolidated Financial Statements (continued)
                              December 31, 1996

Summarized financial information of the Company's investments in unconsolidated
partnerships as of and for the year ended December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                                                                                         AGS
                                                                                                        Meadow
                                                                                                         Oaks
                                                                                     MLP              Associates
                                                                              --------------      ----------------
<S>                                                                           <C>                 <C>
Real and personal property - net                                              $    2,035,736      $      2,806,881
Other assets                                                                         332,927               435,605
                                                                              --------------      ----------------
                 Total assets                                                      2,368,663             3,242,486
                                                                              --------------      ----------------

Mortgages and accrued interest payable (A)                                         5,572,545             8,554,310
Notes payable, accrued interest and advances
 to Resource Capital Group, Inc.                                                   3,049,973                   -
Other liabilities                                                                    222,101               126,965
                                                                              --------------      ----------------
                 Total liabilities                                                 8,844,619             8,681,275
                                                                              --------------      ----------------

Equity (deficit)                                                                  (6,475,956)           (5,438,789)
                                                                              --------------      ----------------
Revenues                                                                           2,365,823             1,429,965
                                                                              --------------      ----------------
Net (loss)                                                                    $     (210,972)     $       (362,540)
                                                                              --------------      ----------------
</TABLE>

(A) The partners are not personally liable for the mortgages encumbering the
real property.

Note 4 -  Property Acquisitions

1996 Acquisitions

In September 1996 Colonial (see note 1) was formed and capitalized with a
$300,000 contribution of which $297,000 was funded by the Company, while the
remaining $3,000 was funded by Hunter Management Company (Hunter).  Colonial
then acquired an 18,387 square foot office building located in Fulton County,
Georgia for $1,010,000.  The purchase was financed in part, with a; $787,500
mortgage payable (see note 5).  Additionally, in September 1996, Meggan and
Heide (see note 1) were also formed and $100,000 capital contribution was made
into each; of which $99,000 was funded by the Company with the remaining $1,000
funded by Hunter.  Meggan and Heide each paid $100,000 to acquire approximately
 .8 acres of land surrounding the Colonial property in Fulton County, Georgia.

Prior to June 1996, the Company had only a 5% general partnership interest in
Carriage and Compass (see note 1).  Carriage and Compass are Mississippi
limited partnerships which each own and operate residential apartment
complexes.  Prior to 1995, the mortgages on each property were held by the U.S.
Department of Housing and Urban Development (HUD); however, during 1995 HUD
sold the mortgages to an unrelated financial institution (Bank).  The Carriage
and Compass Partnerships had been unable to generate sufficient cash flows to
fund the required debt service payments and, as a result, had been in technical
default under the mortgage agreement with HUD.  Immediately following the
purchases of the mortgages from HUD, the Bank instituted foreclosure
proceedings on each property and demanded that the accrued and unpaid principal
and interest balances be





                                      F-11
<PAGE>   32



                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                               December 31, 1996



brought current.  As a result, during 1995, both Partnerships filed for
protection under Chapter 11 of the U.S.  Bankruptcy Code.  In 1996 the Court
ruled in favor of the Bank, who again initiated foreclosure proceedings.




During May and June 1996, the Company paid $39,325 to 74% of the limited
partners of Carriage and 91% of the limited partners of Compass in exchange for
their partnership units.  The remaining limited partners forfeited their
interests pursuant to the terms of the respective partnership agreements.  The
Carriage and Compass Partnerships do not intend to allocate any profits or
losses or make distributions to the partners who forfeited their interests.
Additionally, in 1996, the Company made capital contributions aggregating
$802,465 into Carriage and Compass to fund the accrued and unpaid debt service
payments.  As a result of the acquisition of a majority of the limited partner
interests and the forfeiture of the remaining limited partner interests
,effective June 1, 1996 the Company effectively owned 99% (5% general partner
interest and a 94% limited partner interest) of each of Carriage and Compass.
The remaining 1% is owned by Hunter.  Accordingly, effective June 1, 1996 the
operations of Carriage and Compass have been consolidated in the accompanying
financial statements.  In connection therewith, the Company has recorded in
consolidation approximately $1,943,000 of excess cost over the underlying
equity in Carriage and Compass Partnerships, and has allocated the excess to
real and personal property.

1995 acquisitions

During 1995, Roswell was formed and capitalized with a $110,000 contribution,
of which $82,500 was funded by the Company while the remaining $27,500 was
funded by Hunter.  Additionally, in 1995 Crossville was formed and a $1,000,000
capital contribution was made, of which $750,000 was funded by the Company
while the remaining $250,000 was funded by Hunter.  Roswell acquired a 9,000
square foot office building located in Fulton County, Georgia for approximately
$440,000 and subsequently obtained a $360,000 mortgage payable (see note 5) on
the property.  Crossville acquired a 19,000 square foot office building located
in Fulton County, Georgia for approximately $1,000,000.  In May 1996 Crossville
obtained a $880,000 mortgage note on its property (see note 5).

Hunter, the minority interest in each of the 1996 and 1995 acquisitions
provides management services to each of the acquired properties and each of the
other investees of the Company.  Additionally, Hunter is an affiliate of the
Company.

The following summarized unaudited pro forma results of operations for the
years ended December 31, 1996 and 1995 assume each of the aforementioned
acquisitions occurred on January 1, 1995.

<TABLE>
<CAPTION>
                                                                             1996             1995
                                                                    -------------    -------------
                     <S>                                            <C>              <C>
                     Rental operating income                        $   1,745,090    $   1,791,892
                                                                    -------------    -------------
                     Net income (loss)                              $    (130,441)   $     791,019
                                                                    -------------    -------------
                     Net income (loss) per share                    $        (.31)   $        1.79
                                                                    -------------    -------------
</TABLE>





                                      F-12
<PAGE>   33



                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                               December 31, 1996





Note 5 - Mortgages payable

The mortgages payable as of December 31, 1996 consist of the following:

<TABLE>
       <S>                                                                                         <C>
       Roswell - The mortgage payable bears interest at 9.53% per annum
       and matures in July 2010.  The terms of the mortgage require
       that monthly payments of $3,766 be applied first to interest and
       the balance to reduction of principal.  Interest on this loan
       adjusts every five years and is computed as 3.25 basis points
       over the average yield on U.S. Treasury securities, as defined.
                                                                                                   $  343,780

       Crossville - The mortgage payable bears interest at 8.8% per
       annum and matures in June 2011.  The terms of the mortgage
       require monthly payments of $8,821 be applied first to interest
       with the balance to reduction of principal.  Interest on this
       loan adjusts every five years and is computed as 325 basis
       points over the average yield on U.S. Treasury securities, as
       defined.                                                                                       865,530

       Colonial - The mortgage payable matures in October 2006 and
       requires monthly payments of $7,276 be applied first to interest
       at 9.375% with the balance to reduction of principal.  Interest
       on this loan adjusts every five years and is computed as 300
       basis points over the average yield on U.S. Treasury securities,
       as defined.  In addition, the terms of the mortgage require that
       Colonial obtain written approval from the mortgagor prior to any
       sale or financing of the property or any sale of office leases.

                                                                                                      785,243


       Compass - The mortgage payable matures in December 2023 and
       requires monthly payments of $15,753 be applied first to
       interest at 9-3/4% per annum with the balance to reduction of
       principal.                                                                                   1,797,900
</TABLE>





                                      F-13
<PAGE>   34



                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                               December 31, 1996



<TABLE>
<S>                                                                                               <C>
       Carriage - The mortgage payable matures in December 2023 and
       requires monthly payments of $16,812 be applied first to
       interest at 9-3/4% per annum with the balance to reduction of
       principal.                                                                                   1,918,784
                                                                                                  -----------
                                                                                                  $ 5,711,237
                                                                                                  -----------




A schedule of future amortization payments at December 31, 1996 follows:

                                        1997                       $     87,923
                                        1998                             96,486
                                        1999                            105,873
                                        2000                            116,180
                                        2001                            127,493
                                        Thereafter                    5,177,282
                                                                   ------------
                                                                   $  5,711,237
                                                                   ------------

</TABLE>

The mortgage notes payable of Roswell, Crossville and Colonial have been
guaranteed by both the Company and Hunter.

Note 6 - Stockholders' equity

At December 31, 1996, the Company has 498,608 of $0.01 par value common shares
issued.  During 1996, the Company acquired as treasury stock 22,555 shares for
$71,169, while in 1995 the Company acquired as treasury stock 15,000 shares for
$60,000.  At December 31, 1996, the Company has 91,882 shares of treasury
stock.

The Company entered into a stock option agreement with its President which
allows the purchase of 108,356 shares of the Company's common stock at a price
of $10 per share.  These options are exercisable for up to 20% of the option
shares each year over a five-year term expiring June 30, 1997.  At December 31,
1996, none of these options have been exercised.

Note 7 - Mortgage note receivable - affiliated entity

During 1996, the Company entered into a settlement agreement whereby they
received $147,122 in 1997, in full satisfaction of a mortgage note receivable
from MLP.  The Company had placed a valuation allowance on the entire note
receivable in 1994, and accordingly has reflected the $147,122 as revenue in
the accompanying 1996 statement of operations.

In March 1995, the Company received $652,524 in full settlement of its $600,000
second mortgage note and accrued interest receivable due from MLP.  This note,
which carried a face value of $600,000, along with accrued interest thereon was
purchased from a finance company in 1993 for $100,000.  The Company was





                                      F-14
<PAGE>   35



                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                               December 31, 1996



carrying the note on its books at its cost basis of $70,909 and accordingly
reflected a gain of $529,091 in the accompanying 1995 statement of operations.
Interest income on this note for 1995 amounted to $13,226.  Interest earned in
1995 includes an additional $49,298 of interest based upon a percentage of
MLP's revenue as defined in the note.





Note 8 - Income taxes

The provision for (benefit of) income taxes for the years ended December 31,
1996 and 1995 is as follows:

<TABLE>
<CAPTION>
                                                               1996             1995
                                                         -------------    ------------
                                 <S>                     <C>              <C>
                                 Current
                                     Federal             $     (25,521)   $     56,444
                                                         -------------    ------------
                                     State                      20,989           2,635
                                                         -------------    ------------
                                                                (4,532)         59,079
                                 Deferred
                                     Federal                    12,616         334,394
                                     State                         -               -
                                                         -------------    ------------
                                                                12,616         334,394
                                                         -------------    ------------
                                                         $       8,084    $    393,473
                                                         -------------    ------------
</TABLE>

The difference between the total tax provision and that obtained by applying
the statutory rate is as follows:
<TABLE>
<CAPTION>
                                                                                      1996            1995
                                                                                -------------   -------------
          <S>                                                                   <C>             <C>
          Tax provision at statutory rate                                       $      11,844   $     403,390
          Other                                                                        (3,760)         (9,917)
                                                                                -------------   -------------
                           Provision for income taxes                           $       8,084   $     393,473
                                                                                -------------   -------------
</TABLE>

A summary of the net deferred income tax (liability) by source at December 31,
1996 is as follows:

<TABLE>
                  <S>                                                                   <C>
                  Deferred tax asset
                       Incentive stock compensation                                     $      19,720
                       Discounted note payable                                                 52,982
                       Notes receivable                                                        68,000
                       Tax credit carryforward                                                 50,000
                       Net operating loss carryforwards                                        47,600
                                                                                        -------------
                                   Subtotal                                                   238,302
                       Valuation allowance                                                        -
                                                                                        -------------
</TABLE>






                                      F-15
<PAGE>   36



                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                               December 31, 1996



<TABLE>
                  <S>                                                                   <C>
                                   Total                                                      238,302
                  Deferred tax liability
                       Basis in Partnership investments                                      (319,909)
                                                                                        -------------
                                   Net deferred tax (liability)                         $     (81,607)
                                                                                        -------------
</TABLE>

The Company's 1996 Federal income tax returns will reflect losses from
operations because it accounts for certain items differently for income tax
purposes as compared to financial reporting purposes (see note 2).  At December
31, 1996, the Company had available net operating loss carryforwards for income
tax purposes of approximately $140,000 which expire during the years 1997
through 2012.





Note 9 - Commitments

a.  Employment agreement

Effective July 1, 1996, the Company amended the employment agreement with its
President and extended the term to June 30, 1999.  The amended agreement calls
for an annual base salary of $250,000 plus an annual bonus based on the
Company's net income.  Salaries earned by the Company's President during 1996
and 1995 amounted to $250,000 and $209,000, respectively.

b.  Management agreement

The President of the Company has been providing Hunter with direct assistance
in the management of MLP and other properties and, as a result the Company
received $60,000 in both 1996 and 1995 for such services.  In connection
therewith, the Company has paid rent and related expense on behalf of its
President of $30,800 and $54,480 for 1996 and 1995, respectively.

Additionally, Hunter manages the real estate operations of the Company's
majority owned subsidiaries for fees equal to 5% of gross rental revenue, as
defined.  Included in rental operations are management fees amounting to
$52,955 and $3,997 during 1996 and 1995, respectively.  At December 31, 1996
$16,090 was due to Hunter for unpaid management fees.

c.  Operating leases

Roswell, Crossville and Colonial lease office space under operating agreements
expiring in various years through  2002.  Future minimum annual rents to be
received under operating leases currently in effect are as follows:

<TABLE>
                                        <S>                       <C>
                                        1997                      $     443,314
                                        1998                            315,311
                                        1999                            182,387
                                        2000                             75,851
                                        2001                             17,543
</TABLE>





                                      F-16
<PAGE>   37



                          RESOURCE CAPITAL GROUP, INC.

             Notes to Consolidated Financial Statements (continued)
                               December 31, 1996



<TABLE>
                                        <S>                       <C>
                                        Thereafter                        5,458
                                                                  -------------
                                                                  $   1,039,864
                                                                  -------------
</TABLE>

Compass and Carriage leases its residential apartments to tenants under
operating leases with terms ranging from six to twelve months.  In addition,
included in rental revenue in 1996 is $7,674 from Hunter, which leases office
space in the Company's Crossville property.

d.  Consulting fees

The Company has entered into a consulting agreement with a member of its Board
of Directors which provides for annual fees of $20,000.





Note 10 - Note payable

The Company issued a promissory note in favor of its former Executive Vice
President as a settlement of the termination of his employment agreement in
1993.  The terms of the agreement provide for monthly payments over a six year
period ending December 1998.

The following is a summary of remaining payments due under this agreement.

<TABLE>
                                   <S>                                 <C>
                                   1997                                $      78,000
                                   1998                                       88,000
                                                                       -------------
                                                                             166,000

                                   Less unamortized discount                  10,172
                                                                       -------------
                                                                       $     155,828
                                                                       -------------
</TABLE>





                                      F-17
<PAGE>   38




SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                  RESOURCE CAPITAL GROUP, INC.
                                  ----------------------------


                                By:\s\Albert G. Schmerge III
                                   -------------------------
                                Albert G. Schmerge III,
                                Chairman of the Board, Chief
                                Executive Officer, President
                                and Director

                                Date:  March 28, 1997


In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

         Signature               Title                     Date
         ---------               -----                     ----



\s\Albert G. Schmerge III
-------------------------
Albert G. Schmerge III     Chairman of the Board, Chief
                           Executive Officer, President
                           and Director                      March 28, 1997




\s\Norman F. Swanton
------------------------
Norman F. Swanton          Secretary-Treasurer               March 28, 1997
                           and Director





                                       18