<PAGE>


================================================================================


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

                              --------------------

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

               For the Transition Period from _______ to ________

                              --------------------

                         Commission File Number 1-14373

                         INSIGNIA FINANCIAL GROUP, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                 DELAWARE                                 56-2084290
        (State of Incorporation)            (I.R.S. Employer Identification No.)

  200 PARK AVENUE, NEW YORK, NEW YORK                       10166
(Address of Principal Executive Offices)                 (Zip Code)

                                 (212) 984-8033
              (Registrant's Telephone Number, Including Area Code)

                              --------------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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
                                      ---    ---

At August 1, 2001, the Registrant had 22,074,808 shares of Common Stock
outstanding.

================================================================================

<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.

                                    FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 2001

                                   -----------
                                      INDEX
                                   -----------


                                                                            Page
                                                                            ----
PART I--FINANCIAL INFORMATION


      Item 1. Financial Statements

           Condensed Consolidated Statements of Operations for the
              Three and Six Months Ended June 30, 2001 and 2000 .........     2

           Condensed Consolidated Balance Sheets                              4
              at June 30, 2001 and December 31, 2000.....................

           Condensed Consolidated Statements of Cash Flows                    5
              for the Six Months Ended June 30, 2001 and 2000............

           Notes to Condensed Consolidated Financial Statements..........     7

      Item 2. Management's Discussion and Analysis of                        19
              Financial Condition and Results of Operations............

      Item 3. Quantitative and Qualitative Disclosure of Market Risk.....    27


PART II-- OTHER INFORMATION

      Item 1. Legal Proceedings..........................................    28

      Item 6. Exhibits and Reports on Form 8-K...........................    28


SIGNATURES ..............................................................    29


<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                         INSIGNIA FINANCIAL GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED                SIX MONTHS ENDED
                                                                  JUNE 30                           JUNE 30
                                                                  -------                           -------
                                                            2001             2000             2001             2000
                                                            ----             ----             ----             ----
<S>                                                       <C>             <C>              <C>              <C>
REVENUES
   Real estate services                                  $ 200,998        $ 228,201        $ 392,702        $ 397,573
   Property operations                                       1,065            1,156            2,469            1,944
                                                         ---------        ---------        ---------        ---------
                                                           202,063          229,357          395,171          399,517
                                                         ---------        ---------        ---------        ---------
COSTS AND EXPENSES
   Real estate services                                    182,763          201,010          358,454          358,159
   Property operations                                         697            1,008            1,885            1,653
   Internet-based businesses                                     -            7,289                -           13,276
   Indemnity settlement                                      1,500                -            1,500                -
   Administrative                                            2,982            4,995            6,382            7,806
   Depreciation                                              4,720            4,089            9,096            6,591
   Property depreciation                                       146              417              494              537
   Amortization of intangibles                               6,906            6,355           13,678           12,777
                                                         ---------        ---------        ---------        ---------
                                                           199,714          225,163          391,489          400,799
                                                         ---------        ---------        ---------        ---------

    Operating income (loss)                                  2,349            4,194            3,682           (1,282)

OTHER INCOME AND EXPENSES:
   Interest and other income                                 1,410            1,469            3,539            2,812
   Interest expense                                         (4,129)          (3,069)          (7,296)          (5,788)
   Foreign currency gains                                      282              680              339            1,281
   Provisions for loss on Internet investments              (2,639)               -           (7,141)               -
   Equity earnings in real estate ventures                     630              911            1,054            2,641
    Minority interest in Internet-based businesses               -              900                -              900
                                                         ---------        ---------        ---------        ---------
                                                            (4,446)             891           (9,505)           1,846
                                                         ---------        ---------        ---------        ---------

(Loss) income before income taxes and cumulative
    effect of a change in accounting principle              (2,097)           5,085           (5,823)             564

    Benefit (provision) for income taxes                       652           (5,896)           1,844           (6,088)
                                                         ---------        ---------        ---------        ---------

Loss before cumulative effect of a change in
    accounting principle                                    (1,445)            (811)          (3,979)          (5,524)

Cumulative effect of a change in accounting
    principle, net of applicable taxes                           -                -                -          (30,420)
                                                         ---------        ---------        ---------        ---------

Net loss                                                    (1,445)            (811)          (3,979)         (35,944)

Preferred stock dividends                                     (250)            (250)            (500)            (390)
                                                         ---------        ---------        ---------        ---------

Net loss available to common shareholders                $  (1,695)       $  (1,061)       $  (4,479)       $ (36,334)
                                                         =========        =========        =========        =========
</TABLE>


                                       2
<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                                     JUNE 30                  JUNE 30
                                                                                     -------                  -------
                                                                                 2001      2000           2001       2000
                                                                                 ----      ----           ----       ----
<S>                                                                            <C>        <C>            <C>        <C>
PER SHARE AMOUNTS:
  Earnings per common share - basic
     Earnings before cumulative effect of a change in accounting principle     $(0.08)    $(0.05)        $(0.21)    $(0.28)
                                                                               ======     ======         ======     ======
     Cumulative effect of a change in accounting principle                       -          -               -       $(1.45)
                                                                               ======     ======         ======     ======
     Net income                                                                $(0.08)    $(0.05)        $(0.21)    $(1.73)
                                                                               ======     ======         ======     ======

  Earnings per common share - assuming dilution:
     Earnings before cumulative effect of a change in accounting principle     $(0.08)    $(0.05)        $(0.21)    $(0.28)
                                                                               ======     ======         ======     ======
     Cumulative effect of a change in accounting principle                       -          -               -       $(1.45)
                                                                               ======     ======         ======     ======
     Net income                                                                $(0.08)    $(0.05)        $(0.21)    $(1.73)
                                                                               ======     ======         ======     ======

  Weighted average common shares and assumed conversions:
     - Basic and assuming dilution                                             21,890     21,138         21,789     20,972
                                                                               ======     ======         ======     ======
</TABLE>

--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.





                                       3
<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                      JUNE 30,         DECEMBER 31,
                                                                                        2001               2000
                                                                                        ----               ----
                                                                                    (Unaudited)           (Note)
<S>                                                                                  <C>                <C>
ASSETS
  Cash and cash equivalents                                                          $  41,452          $ 124,527
   Receivables                                                                         151,686            183,819
   Mortgage loans held for sale                                                         24,176             11,443
   Restricted cash                                                                      25,621              6,555
   Property and equipment, net                                                          71,950             74,502
   Real estate interests                                                                69,477            102,170
   Investments                                                                           6,401             10,458
   Property management contracts                                                        18,511             22,357
   Costs in excess of net assets of acquired businesses, net of amortization           319,163            324,631
  Other assets                                                                          57,882             49,880
                                                                                     ---------          ---------
Total assets                                                                         $ 786,319          $ 910,342
                                                                                     =========          =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Accounts payable                                                                   $  13,892          $  28,282
  Commissions payable                                                                   49,937             71,688
  Accrued incentives                                                                    28,350             89,963
  Accrued and sundry liabilities                                                        83,191            114,653
  Loss in excess of investment                                                           3,122              3,222
  Mortgage warehouse line of credit                                                     22,692              9,502
  Notes payable                                                                        165,467            135,782
   Real estate mortgage notes payable                                                   15,796             48,369
                                                                                     ---------          ---------
                                                                                       382,447            501,461

Stockholders' Equity:
   Common Stock, par value $.01 per share - authorized 80,000,000 shares,
    21,992,300 (2001) and 21,573,928 (2000) issued and outstanding shares,
    net of 1,502,600 (2001 and 2000) shares held in treasury                               220                216
   Preferred Stock, par value $.01 per share - authorized 20,000,000 shares,
    250,000 (2001 and 2000) issued and outstanding shares                                    3                  3
   Additional paid-in capital                                                          416,902            413,831
   Notes receivable for Common Stock                                                    (1,974)            (2,051)
   Retained (deficit) earnings                                                          (1,883)             2,846
   Accumulated other comprehensive loss                                                 (9,396)            (5,964)
                                                                                     ---------          ---------
Total stockholders' equity                                                             403,872            408,881
                                                                                     ---------          ---------
Total liabilities and stockholders' equity                                           $ 786,319          $ 910,342
                                                                                     =========          =========

</TABLE>

NOTE: The Balance Sheet at December 31, 2000 has been derived from the audited
      financial statements at that date but does not include all the information
      and footnotes required by accounting principles generally accepted in the
      United States for complete financial statements.

--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.




                                       4
<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                           SIX MONTHS ENDED
                                                                                                JUNE 30
                                                                                                -------
                                                                                        2001               2000
                                                                                        ----               ----
<S>                                                                                  <C>                <C>
OPERATING ACTIVITIES
Net loss                                                                             $ (3,979)          $(35,944)
Cumulative effect of a change in accounting principle                                       -             30,420
                                                                                     --------           --------

Loss before cumulative effect of a change in accounting principle                      (3,979)            (5,524)

Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                     23,268             19,905
     Equity earnings in real estate ventures                                           (1,054)            (2,641)
     Minority interest in Internet-based businesses                                         -               (900)
     Foreign currency gains                                                              (339)            (1,281)
     Provisions for loss on Internet investments                                        7,141                  -
    Changes in operating assets and liabilities:
       Receivables                                                                     28,906            (43,087)
       Other assets                                                                    (5,783)               295
       Accounts payable and accrued expenses                                          (85,152)           (14,173)
       Commissions payable                                                            (21,751)            16,400
                                                                                     --------           --------
Net cash used in operating activities                                                 (58,743)           (31,006)
                                                                                     --------           --------

INVESTING ACTIVITIES
     Additions to property and equipment, net                                          (7,188)           (13,769)
     Purchase of property for Internet-based businesses                                     -            (13,017)
     Investment in Internet-based businesses                                           (3,085)           (11,194)
     Payments made for acquisition of businesses                                       (7,283)            (7,868)
     Increase in mortgage loans held for sale                                         (12,733)            (8,627)
     Investment in real estate                                                         (7,215)           (14,101)
     Proceeds from sale of real estate properties                                      40,240                  -
     Distributions from real estate investments                                         4,000             14,426
     Net (increase) decrease in restricted cash                                       (19,454)             5,258
                                                                                     --------           --------
Net cash used in investing activities                                                 (12,718)           (48,892)
                                                                                     --------           --------
</TABLE>








                                       5
<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED
                                                                                JUNE 30
                                                                                -------
                                                                         2001             2000
                                                                         ----             ----
<S>                                                                  <C>               <C>
FINANCING ACTIVITIES
     Proceeds from issuance of Common Stock                                953             1,621
     Proceeds from issuance of Preferred Stock                               -            24,949
     Proceeds from exercise of stock options                             1,657             1,668
     Proceeds from Internet stock offerings                                  -            37,103
     Dividend payments on Preferred Stock                                 (750)                -
     Net advances on mortgage warehouse line of credit                  13,190             9,041
     Payments on notes payable                                        (134,411)           (4,156)
     Proceeds from notes payable                                       143,999            15,776
     Debt issuance costs                                                (2,130)                -
     Payments on real estate mortgage notes payable                    (33,143)                -
     Proceeds from real estate mortgage notes payable                      569            12,009
                                                                     ---------         ---------
Net cash (used in) provided by financing activities                    (10,066)           98,011
                                                                     ---------         ---------

  Effect of exchange rate changes in cash                               (1,548)             (281)
  Net (decrease) increase in cash and cash equivalents                 (83,075)           17,832
  Cash and cash equivalents at beginning of period                     124,527            61,600
                                                                     ---------         ---------
  Cash and cash equivalents at end of period                         $  41,452         $  79,432
                                                                     =========         =========
</TABLE>


--------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements.








                                       6
<PAGE>



        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.  Business

Organization

     Insignia Financial Group, Inc. ("Insignia" or the "Company"), a Delaware
corporation headquartered in New York, New York, is an international real estate
services company with operations throughout the United States and United Kingdom
as well as in continental Europe, Asia and Latin America. Insignia's principal
executive offices are located at 200 Park Avenue, New York, New York 10166, and
its telephone number is (212) 984-8033.

     Insignia's real estate service businesses specialize in commercial real
estate services, apartment brokerage and leasing, single-family home brokerage,
mortgage origination, title services, escrow agency services, condominium and
cooperative apartment management, real estate oriented financial services,
equity co-investment and other services. The Company's principal real estate
service businesses are Insignia/ESG, Inc. (U.S. commercial real estate services
- headquartered in New York), Insignia Richard Ellis (U.K. commercial real
estate services - headquartered in London), Douglas Elliman (residential sales
and rentals), Realty One, Inc. (single-family home brokerage and mortgage
origination) and Insignia Residential Group, Inc. (condominium and cooperative
apartment management).

     Insignia also has established commercial real estate service operations
throughout Europe, Asia and Latin America in the following locations: Frankfurt,
Germany; Milan, Italy; Madrid, Spain; Brussels, Belgium; Dublin, Ireland;
Belfast, Northern Ireland; Amsterdam, the Netherlands; Shanghai and Beijing,
China; Bangkok, Thailand; Tokyo, Japan; Hong Kong; Mumbai, Delhi, Bangalore and
Hyderabad, India; and Mexico City.

     The combined strength of the Company's operations headquartered in New York
and London gives Insignia a commanding position in two of the world's most
important global business centers. The evolving global business environment and
the prominence of New York and London as world financial capitals enhances the
transatlantic cross-selling opportunities between the Company's U.S. and U.K.
commercial operations. Insignia also enjoys overall market preeminence for
commercial and residential real estate services in New York through the leading
market positions of Insignia/ESG, Douglas Elliman and Insignia Residential
Group.

     In addition to real estate services, Insignia invests in real estate assets
through co-investment initiatives with institutional clients, principal
development activities and real estate oriented investment funds. The Company's
real estate service operations and real estate investment activities are more
fully described below.


Real Estate Services

Commercial Real Estate Services

     The Company's commercial real estate services are provided through
Insignia/ESG in the United States, Insignia Richard Ellis ("IRE") in the United
Kingdom and other Insignia subsidiaries in Europe, Asia and Latin America. The
Company's commercial services operations generated aggregate service revenues of
$284.4 million in the first half of 2001, representing 72% of the Company's
total service revenues for the period.


United States Operations

     All commercial real estate services in the U.S. are rendered under the
Insignia/ESG brand. Through Insignia/ESG, the Company is among the leading
providers of commercial real estate services in the U.S., with a leadership
position in the New York metropolitan marketplace and significant positions in
other major markets including Washington, D.C., Philadelphia, Boston, Chicago,
Atlanta, Phoenix, Los Angeles, San Francisco, Dallas and Miami. The Company
delivers its real estate services throughout the U.S. across geographic markets,
property types and disciplines. In all, the Company operates in 50 offices
across the U.S.

     In order to broaden the geographic coverage of commercial services into
select U.S. markets where the Company does not have company-owned operations,
Insignia/ESG launched a Strategic Services Provider Program ("SSP") in June
2001. Under the SSP program, the Company forges strategic alliances with leading
regional real


                                       7
<PAGE>


estate services companies which agree to adopt the Company's branding, marketing
and client service protocols, and to refer business outside its normal market to
Insignia/ESG. The SSP program is a low-cost way for the Company to maintain
consistency of service, while meeting clients' needs in small markets where the
Company has elected not to acquire an existing business or start-up operations.
The SSP program has been launched with three regional service providers: Miller
Corporate Real Estate Services of Baltimore; Oxford Realty Services of
Pittsburgh; and Morton G. Thalhimer of Richmond (with additional offices in
Norfolk and Virginia Beach).

     The Company provides a broad spectrum of commercial real estate services
throughout the U.S. to corporations and other major space users, property owners
and investors. These services include tenant representation, property leasing
and management, property acquisition and disposition services, investment sales,
mortgage financing, equity co-investment, development, redevelopment and
consulting services. The Company serves tenants, owners and investors in office,
industrial, retail, hospitality and mixed-use properties, representing over 224
million square feet of commercial real estate. U.S. commercial real estate
services operations comprise the Company's largest business unit, accounting for
approximately 58%, or $227.6 million, of total service revenues for the first
half of 2001.


United Kingdom and European Operations

     The Company's European businesses consist of commercial real estate service
operations in the United Kingdom, Ireland, Germany, Italy, Belgium, the
Netherlands and Spain. The Company's expansion in Europe began in 1998 with the
acquisition of Richard Ellis Group Limited ("REGL") and was significantly
enhanced through the acquisition of St. Quintin Holdings Limited ("St. Quintin")
in 1999 and its successful integration with REGL into a single U.K. operation
with a leading market position in London. The Company's U.K. subsidiary is among
the three largest commercial real estate service providers in the United Kingdom
and the largest, based on market share for leasing activity, in central London.
The Company provides extensive coverage of the entire United Kingdom market
through full-service offices in London, Glasgow, Birmingham, Leeds, Manchester,
Liverpool and Jersey. The Company also holds an equity interest in an Irish real
estate services company with offices in Ireland and Northern Ireland through
offices in Dublin and Belfast. The Company's U.K. operation provides
broad-ranging real estate services, including agency leasing, tenant
representation, property sales and financing, consulting, project management,
appraisal, zoning and other general services. The major income components are
agency leasing, tenant representation and property sales and financing.

     The U.K. operations are viewed as the springboard for the Company's
continued global expansion of the commercial real estate services platform. The
U.K. operation has assisted in the establishment of service operations in
Frankfurt, Germany, Dublin, Ireland, Milan, Italy, Brussels, Belgium, Amsterdam,
the Netherlands and Madrid, Spain since 1998. The other European operations
outside the U.K. are beginning to produce increasingly meaningful contributions
through the maturation of operations and expansion of service capabilities
throughout their markets. The Company's European commercial services operations
generated aggregate service revenues of $55.4 million in the first half of 2001,
representing 14% of the Company's total service revenues for the period.
Approximately 90% of European operations continue to be derived from the
Company's U.K. business.


Other International Operations

     Asia

     The Company commenced operations in Asia during 2000 with the establishment
of an office in Tokyo, Japan in July 2000 and the acquisition of Brooke
International, a Hong Kong based commercial real estate services company
(founded in 1988), in December 2000. Insignia augmented its Asian reach in April
2001 with the acquisition of Brooke International's operations in India. This
business now operates as Insignia Brooke and employs more than 120 real estate
professionals and support personnel in eight offices in Hong Kong, China,
Thailand and India. Insignia Brooke, along with the established presence in
Japan, provides the Company with a strategic platform from which to serve
existing clients in Asia, particularly in corporate real estate and investment
services, and should also create international cross-selling opportunities with
the U.S., U.K. and other European businesses. The Company anticipates further
expansion in Asia as additional attractive opportunities are identified.


     Latin America

     The Company extended its service capability into Latin America with the
March 2001 acquisition of Grupo Inmobiliario Inova S.A de C.V. ("Inova"). Inova,
headquartered in Mexico City and founded in 1992, is a

                                       8
<PAGE>


commercial real estate service company which provides acquisition advisory and
due diligence services, project coordination and supervision, real estate
valuations, tenant representation, asset management and strategic advisory
services. Inova conducts business throughout the major markets in Mexico and
other leading business centers of South America, including Buenos Aires, Rio de
Janeiro and Sao Paulo. The Company views Inova as the platform from which to
build its presence throughout Latin America. This business now operates under
the Insignia/ESG brand as Insignia/ESG de Mexico.


Residential Real Estate Services

     The Company's residential real estate services are performed in the U.S.
through the collective operations of Douglas Elliman, Realty One and Insignia
Residential Group. Through these businesses the Company provides a diversified
array of residential real estate services throughout northern Ohio and the New
York metropolitan area including apartment brokerage and leasing, single-family
home brokerage, mortgage origination, title services, escrow agency services and
condominium and cooperative apartment management. The Company's residential
services operations generated aggregate service revenues of $108.3 million in
the first half of 2001, representing 28% of the Company's total service revenues
for the period.


Residential Sales and Rentals

     Through Douglas Elliman, the Company operates a residential cooperative,
condominium and rental apartment brokerage and leasing firm in New York City.
Douglas Elliman commands the number one market position for both residential
sales and rentals in New York City according to the annual ranking in the March
2001 issue of Crain's New York Business. In addition, Douglas Elliman operates
in upscale suburban markets through offices in Greenwich and Darien,
Connecticut, Bernardsville/Basking Ridge, New Jersey, and Long Island
(Manhasset, Locust Valley and Port Washington/Sands Point). Douglas Elliman has
more than 900 brokers, supported by 130 corporate employees in 15 offices in the
New York City area. Douglas Elliman's apartment brokerage and leasing business,
which has been affected by lower transaction volume in 2001, closed transactions
valued at over $1.2 billion during the first half of 2001, representing a 16%
decline from the same period in 2000.


Single Family Home Brokerage and Mortgage Origination

     Through Realty One, the Company operates a full-service single-family
residential brokerage, mortgage origination and title insurance business
headquartered in Cleveland and having offices throughout northern Ohio. Realty
One's current business operation is the result of nearly 60 separate mergers and
acquisitions and constitutes the largest residential real estate brokerage firm
in Ohio and the fourteenth largest (based on unit volume) in the United States
according to Real Trends "Big Brokers Report" published in May 2001. Realty One
employs approximately 1,500 sales associates and 600 corporate and support staff
located in 46 offices throughout northern Ohio and represents more than 100
residential builders. Realty One's operating performance improved during the
first half of 2001 with total transaction volume of $1.4 billion, representing a
4% increase over the same period of 2000.


Cooperative and Condominium Management

     Through Insignia Residential Group, the Company is the largest manager of
cooperatives, condominiums and rental apartments in the New York metropolitan
area, according to a survey in the February 2001 issue of The Cooperator.
Insignia Residential Group provides full service third-party fee management for
more than 300 properties, comprising approximately 72,000 residential apartment
units, and employ's over 300 people located in offices throughout the greater
New York metropolitan area. Among the notable properties currently managed by
Insignia Residential Group in New York City are the San Remo, Worldwide Plaza,
Fresh Meadows, Horizon House, West Village Houses and Metropolitan Life
Insurance Company's Peter Cooper Village/Stuyvesant Town Complex. Manhattan is
the largest market for Insignia Residential Group, although it does maintain a
presence in each of the other four boroughs of New York City as well as Long
Island, Westchester County and Northern New Jersey. In addition to property
management, Insignia Residential Group also offers mortgage brokerage services,
including resale and financing arrangements for cooperative and condominium
corporations through third-party financial institutions. Insignia Residential
Group's residential management and mortgage brokerage business generated $13.3
million in service revenues during the first half of 2001.


                                       9
<PAGE>


Real Estate Principal Investment Activities

Co-investment and Development

     Insignia pursues opportunities to invest in operating real estate assets.
The Company identifies investment opportunities for select clients and invests
alongside of those clients in the purchase of qualifying properties.
Co-investment partners include Walton Street Real Estate Fund III, Citibank, ING
Barings, Blackacre Capital Management, The Witkoff Group, Lennar, Lone Star
Opportunity Fund, Prudential, GE Investments and Whitehall Street Real Estate.
As of June 30, 2001, Insignia held ownership in 37 co-investment partnerships
controlling over 10.6 million square feet of commercial property and
approximately 5,300 multi-family apartment and hotel units. The Company's
ownership interests in these partnerships range from 1% to 30%. The Company's
carrying value of these investments totaled approximately $30 million at June
30, 2001.

     The Company is also the sole owner of two real estate properties with an
aggregate carrying value of approximately $18 million at June 30, 2001. These
properties, which are consolidated in the Company's financial statements,
include Brookhaven Village, a 155,000 square foot retail facility located in
Norman, Oklahoma, and Dolphin Village, a 136,000 square foot retail facility
located in St. Petersburg, Florida. The Company holds ownership interests
ranging from 25% to 33% in an office property under development and two parcels
of land held for development and solely owns one parcel of land also held for
development. The Carrying value of development assets totaled approximately $12
million at June 30, 2001. Insignia is directing development activities on all
properties.


Insignia Opportunity Trust

     Insignia Opportunity Trust ("IOT") is an Insignia-sponsored private real
estate investment trust ("REIT") formed in 1999. IOT, through its subsidiary
operating partnership, Insignia Opportunity Partners ("IOP"), invests primarily
in secured real estate debt instruments and, to a lesser extent, in other real
estate debt and equity instruments, with a focus on below investment grade
commercial mortgage-backed securities. At formation, IOT received aggregate
capital commitments of $71 million (of which $9 million was committed by
Insignia and the remainder committed by third-party investors), which IOT in
turn committed to invest in IOP in exchange for an 88.75% general partner
interest in IOP. Insignia also committed to invest an additional $1 million
directly in IOP in exchange for (i) a 1.25% managing general partner equity
interest and (ii) a 10% non-subordinated promoted equity interest in IOP.
Approximately $67 million of the total capital commitments to IOT and IOP have
now been contributed (including approximately $9.3 million funded by Insignia)
and the remaining $5 million of capital commitments are expected to be funded
later in 2001. Insignia maintains ownership interests of approximately 12% in
IOT and 11% in IOP. Insignia accounts for its investment in IOT under the equity
method, based on the significant influence derived from the general partner
interest in IOP, and recorded earnings of approximately $786,000 in the first
half of 2001 related to this investment.


Insignia Opportunity Partners II

     Insignia is nearing the conclusion of the capital-raising phase for a
second securitized real estate debt fund. Insignia Opportunity Partners II ("IOP
II"), currently expected to close in August 2001 with an estimated $50 million
to $75 million of equity raised from Insignia and third-party investors. IOP II
will invest primarily in collateralized mortgage-backed securities, similar to
the investment initiatives of IOT.


Internet Initiatives

     At June 30, 2001, Insignia held remaining investments totaling
approximately $6.4 million in third-party Internet-related businesses, including
$2.9 million in projects sponsored by Octane, the industry consortium comprised
of Insignia, CB Richard Ellis, Jones Lang LaSalle and Trammel Crow. During the
first half of 2001, the Company recorded pretax impairment write-offs totaling
$7.1 million of investments in nine third-party Internet-based businesses. The
Company has now written off the majority of its Internet-based investments made
during 1999 and 2000. While the Company currently maintains investments in
twelve Internet-based businesses which continue to operate, their future
performance is highly dependent upon the ability to raise incremental capital to
fund the on-going development of their business plans. If these businesses are
unsuccessful in raising the necessary capital, Insignia could incur further
losses from impairment write-offs. The Company continues to monitor carefully
the performance of these remaining Internet investments.


                                       10
<PAGE>


     The Company is not currently making material investments in new third-party
Internet-oriented companies and has no intention of making material investments
in Internet technology initiatives other than those developed or invested in by
Octane.

     During the first half of 2000, Insignia incurred pretax operating losses of
$13.2 million (net of $900,000 of minority interest) from internal Internet
initiatives, including consolidated losses of $9.3 million in EdificeRex.com,
Inc. ("EdificeRex"). These consolidated EdificeRex losses exceeded the Company's
investment by approximately $3.1 million. EdificeRex, launched in February 2000,
represented Insignia's first internally developed Internet-based business and
was de-consolidated, beginning with the third quarter of 2000, due to a
restructuring which reduced the Company's voting interest to 47%. The
restructuring did not affect Insignia's ownership in EdificeRex, as the Company
continues to hold an economic interest of approximately 50%. The $3.1 million
excess loss is carried as a deferred credit on the Company's balance sheet until
Insignia disposes of its interest in EdificeRex. The Company has no obligation
or intention to provide additional funding to EdificeRex. All other internal
Internet-based operations were terminated at December 31, 2000.


2.   Acquisitions

     Insignia continues to pursue an acquisition strategy that focuses on
expansion both domestically and internationally. Insignia has acquired the
following real estate services businesses in 2001:


     Inova

     In March 2001, Insignia acquired Inova, a commercial real estate service
company headquartered in Mexico City. Inova provides acquisition advisory
services and due diligence, project coordination and supervision, real estate
valuations, tenant representation, asset management and strategic advisory
services. Inova offers Insignia an operating platform, with quality real estate
professionals, for the expansion of services in Latin America. The base purchase
price was approximately $550,000 and was paid in cash.


     Brooke International

     In April 2001, Insignia further expanded its Asian presence through the
acquisition of Brooke International's operation in India. The base purchase
price for the Indian operation was approximately $700,000, all of which was paid
in cash. The Indian purchase follows the December 2000 acquisition of Hong Kong
based Brooke International and its offices in China and Thailand. Brooke
International is a commercial real estate company specializing in corporate and
investment services.


3.   Change in Accounting Principle

     At December 31, 2000, the Company changed its method of accounting for
revenue recognition for leasing commissions in compliance with Staff Accounting
Bulletin 101 ("SAB 101"), Revenue Recognition in Financial Statements, effective
as of January 1, 2000. Prior to the accounting change, the Company generally
recognized leasing commissions upon execution of the underlying lease, unless
significant contingencies existed. Under the new accounting method, adopted
retroactive to January 1, 2000, the Company's leasing commissions that are
payable upon certain events such as tenant occupancy or payment of rent are
recognized upon the occurrence of such events.

     Operating results for the three and six month periods of 2001 and 2000 are
presented herein in compliance with the requirements of this accounting change.
The restatement of financial results for the 2000 year lowered net earnings
(before the cumulative effect of the accounting change) by $3.6 million and $4
million, respectively, for the three and six months ended June 30, 2000. The
previously reported results for these 2000 periods included net income of $2.8
million ($.11 per share) for the second quarter of 2000 and a net loss of $1.5
million ($.09 per share) for the first half of 2000. The cumulative effect of
the accounting change on prior years resulted in a further reduction to income
of $30.4 million (net of applicable taxes of $23.3 million), which is included
in net earnings for the six months ended June 30, 2000.


                                       11
<PAGE>


     The Company recognized revenue of $8.7 million and $13.1 million,
respectively, for the three and six month periods ended June 30, 2001 that was
included in the $30.4 million cumulative effect adjustment at January 1, 2000.
The effect of that revenue was to increase earnings by approximately $2 million
and $3 million (net of applicable taxes), respectively, during the second
quarter and six months of 2001. While this accounting change affects the timing
of recognition of leasing revenues (and corresponding commission expense), it
does not impact the Company's cash flow from operations.


4.   Credit Agreement

     On May 8, 2001, Insignia closed a new, three-year $230 million revolving
credit facility, representing a $45 million increase over the prior $185 million
facility. The revolving credit facility was arranged by First Union Securities,
Lehman Brothers and Bank of America and involves a syndicate of ten national and
international financial institutions. The credit facility will be used for
working capital and acquisition needs. The Company has current borrowings of
$134 million on the facility and outstanding letters of credit of $12.6 million.


5.   Interim Financial Information

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 2001 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2001. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2000.


6.   Seasonality

     Seasonal factors affecting the Company are disclosed in Item 2 of this Form
10-Q, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" under the caption "Nature of Operations."


7.   Recent Accounting Pronouncements

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and other intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests. Other intangible assets will continue to be
amortized over their estimated useful lives.

     The Company will implement SFAS No. 141 and SFAS No. 142 beginning in the
first quarter of 2002. Initial impairment tests of goodwill and other intangible
assets with indefinite lives required by the Statements will be completed, with
any measured impairment recorded through earnings as a cumulative effect of a
change in accounting principal, during the first quarter of 2002. The Company's
current policy for measuring goodwill impairment is based on an undiscounted
cash flow basis and that method does not indicate any impairment. Amortization
of goodwill for the second quarter and first half of 2001 was $4.9 million and
$9.5 million, respectively. Elimination of this amortization would have improved
diluted earnings per share for these 2001 periods by $0.20 and $0.38,
respectively. Under the provisions of SFAS No. 142, it is possible that amounts
currently carried as goodwill or other identified intangibles could be
re-characterized and reclassified upon implementation of the Statement in 2002.
Insignia does not expect to conclude an analysis of such reclassifications
before the end of 2001. Accordingly, the potential impact of SFAS No. 142 on net
income is uncertain.




                                       12
<PAGE>


8.  Earnings Per Share

     The following table sets forth the computation of the numerator and
denominator used to compute, basic and diluted earnings (loss) per share for the
periods indicated. The potential dilutive shares from the conversion of
preferred stock and the exercise of options, warrants and unvested restricted
stock is not assumed because the inclusion of such shares would be antidilutive.

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED            SIX MONTHS ENDED
                                                                       JUNE 30                       JUNE 30
                                                                       -------                       -------
                                                                    2001          2000         2001           2000
                                                                    ----          ----         ----           ----
<S>                                                              <C>           <C>           <C>           <C>
NUMERATOR:
Numerator for basic earnings per share - income available to
  common stockholders (before cumulative effect)                 $ (1,695)     $ (1,061)     $ (4,479)     $ (5,914)
Effect of dilutive securities:
  Preferred stock dividends                                             -             -             -             -
                                                                 --------      --------      --------      --------

Numerator for diluted earnings per share - income available
  to common stockholders after assumed conversions
  (before cumulative effect)                                     $ (1,695)     $ (1,061)     $ (4,479)     $ (5,914)
                                                                 ========      ========      ========      ========

DENOMINATOR:
Denominator for basic earnings per share - weighted
   average common shares                                           21,890        21,138        21,789        20,972
Effect of dilutive securities:
   Stock options, warrants and unvested restricted stock                -             -             -             -
   Convertible preferred stock                                          -             -             -             -
                                                                 --------      --------      --------      --------

Denominator for diluted earnings per share - weighted
  average common shares and assumed conversions                    21,890        21,138        21,789        20,972
                                                                 ========      ========      ========      ========
</TABLE>


9.   Comprehensive Income (Loss)

     Comprehensive loss for the six months ended June 30, 2001 totaled
approximately $7.4 million and was comprised of a $4 million net loss and other
comprehensive losses of $3.4 million. The following tables set forth the
components of accumulated other comprehensive income (loss) for the periods
indicated:

<TABLE>
<CAPTION>
                                                         FOREIGN         UNREALIZED       ACCUMULATED OTHER
                                                        CURRENCY           GAINS            COMPREHENSIVE
  SIX MONTHS ENDED - JUNE 30, 2001                    TRANSLATION      ON SECURITIES        INCOME (LOSS)
                                                    ---------------  -----------------  ---------------------
                                                                         (In thousands)

  <S>                                                    <C>               <C>                 <C>
  Balance - December 31, 2000                            $(6,007)          $    43             $(5,964)

  Comprehensive (loss) income                             (6,067)              104              (5,963)
  Income tax benefit (provision)                           2,574               (43)              2,531
                                                         -------           -------             -------
                                                          (3,493)               61              (3,432)

                                                         -------           -------             -------
  Ending Balance - June 30, 2001                         $(9,500)          $   104             $(9,396)
                                                         =======           =======             =======
 </TABLE>




                                       13
<PAGE>


<TABLE>
<CAPTION>
                                                                               UNREALIZED       ACCUMULATED OTHER
                                                         FOREIGN CURRENCY    GAINS (LOSSES)       COMPREHENSIVE
 SIX MONTHS ENDED - JUNE 30,  2000                          TRANSLATION      ON SECURITIES        INCOME (LOSS)
                                                        ------------------  ----------------  ---------------------
                                                                             (In thousands)
<S>                                                           <C>               <C>                 <C>
 Balance - December 31, 1999                                  $(1,333)          $ 1,215             $  (118)

 Comprehensive loss                                            (6,663)           (1,383)             (8,046)
 Income tax benefit                                             2,706               599               3,305
                                                              -------           -------             -------
                                                               (3,957)             (784)             (4,741)

                                                              -------           -------             -------
 Ending Balance - June 30, 2000                               $(5,290)          $   431             $(4,859)
                                                              =======           =======             =======
</TABLE>


10.  Industry Segment Data

     Insignia's operating activities encompass three reportable segments. These
segments include (i) commercial real estate services and principal investment
activities; (ii) residential real estate services; and (iii) Internet-based
e-commerce initiatives. The Company's reportable segments are business units
that offer similar products and services and are managed separately because of
the distinction between such services. The commercial segment provides services
including tenant representation, property and asset management, agency leasing
and brokerage, investment sales, development, consulting and other services and
is comprised of the operations of Insignia/ESG in the U.S., IRE in the U.K. and
other businesses in Europe, Asia and Latin America. The commercial segment's
principal real estate investment activities are comprised of investments in real
estate assets (through co-investment ventures with institutional clients),
principal development activities and real estate oriented funds. The residential
segment provides services including apartment brokerage and leasing,
single-family home brokerage services, property management services, mortgage
origination and other services and is comprised of the operations of Douglas
Elliman, Realty One and Insignia Residential Group. The Company's Internet-based
initiatives segment in 2000 comprised equity investments in third-party
Internet-oriented businesses and the internally developed Internet-related
businesses of EdificeRex and PowerChooser. The Company terminated all internally
developed Internet initiatives and substantially ceased equity financing
activities with third-party Internet-based businesses in 2000. The Company's
unallocated administrative expenses and corporate assets, consisting primarily
of cash and property and equipment, are included in "Other" in the segment
reporting. This information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in Item 2 of this Form 10-Q.





                                       14
<PAGE>


The following tables summarize certain financial information by industry
segment:

<TABLE>
<CAPTION>
                                                                                    INTERNET
SIX MONTHS ENDED - JUNE 30, 2001                   COMMERCIAL     RESIDENTIAL      INITIATIVES        OTHER           TOTAL
                                                   ----------     -----------      -----------        -----           -----
                                                                                 (In thousands)
<S>                                                 <C>             <C>             <C>             <C>             <C>
REVENUES:
   Real estate services                             $ 284,437       $ 108,265       $       -       $       -       $ 392,702
   Property operations                                  2,469               -               -               -           2,469
                                                    ---------       ---------       ---------       ---------       ---------
                                                      286,906         108,265               -               -         395,171
                                                    ---------       ---------       ---------       ---------       ---------

COSTS AND EXPENSES:
   Real estate services                               254,627         103,827               -               -         358,454
   Property operations                                  1,885               -               -               -           1,885
   Administrative                                           -               -               -           6,382           6,382
   Indemnity settlement                                     -           1,500               -           1,500
   Depreciation                                         5,916           3,144               -              36           9,096
   Property depreciation                                  494               -               -               -             494
   Amortization of intangibles                         10,642           3,036               -               -          13,678
                                                    ---------       ---------       ---------       ---------       ---------
                                                      273,564         111,507               -           6,418         391,489
                                                    ---------       ---------       ---------       ---------       ---------

   Operating income (loss)                             13,342          (3,242)              -          (6,418)          3,682

OTHER INCOME AND EXPENSE:
   Provisions for loss on Internet investments              -               -          (7,141)              -          (7,141)
   Interest and other income                            1,100             709               -           1,730           3,539
   Interest expense                                      (311)           (694)              -          (6,291)         (7,296)
   Foreign currency gains                                   -               -               -             339             339
   Equity earnings in real estate ventures              1,054               -               -               -           1,054
                                                    ---------       ---------       ---------       ---------       ---------

Income (loss) before income taxes                      15,185          (3,227)         (7,141)        (10,640)         (5,823)

   (Provision) benefit for income taxes                (6,833)          1,290           2,503           4,884           1,844
                                                    ---------       ---------       ---------       ---------       ---------

Net income (loss)                                   $   8,352       $  (1,937)      $  (4,638)      $  (5,756)      $  (3,979)
                                                    =========       =========       =========       =========       =========

Total assets                                        $ 564,936       $ 174,151       $   6,401       $  40,831       $ 786,319
Real estate interests                                  69,477               -               -               -          69,477
</TABLE>



                                       15
<PAGE>


<TABLE>
<CAPTION>
                                                                                 INTERNET
 SIX MONTHS ENDED - JUNE 30, 2000                COMMERCIAL      RESIDENTIAL    INITIATIVES       OTHER           TOTAL
                                                 ----------      -----------    -----------       -----           -----
                                                                              (In thousands)
<S>                                               <C>             <C>             <C>            <C>            <C>
 REVENUES
    Real estate services                          $ 282,978       $ 114,595       $      -       $      -       $ 397,573
    Property operations                               1,944               -              -              -           1,944
                                                  ---------       ---------       --------       --------       ---------
                                                    284,922         114,595              -              -         399,517
                                                  ---------       ---------       --------       --------       ---------

COSTS AND EXPENSES
    Real estate services                            251,744         106,415              -              -         358,159
    Property operations                               1,653               -              -              -           1,653
    Internet-based businesses                             -               -         13,276              -          13,276
    Administrative                                        -               -              -          7,806           7,806
    Depreciation                                      3,765           1,960            837             29           6,591
    Property depreciation                               537               -              -              -             537
    Amortization of intangibles                       9,768           3,009              -              -          12,777
                                                  ---------       ---------       --------       --------       ---------
                                                    267,467         111,384         14,113          7,835         400,799
                                                  ---------       ---------       --------       --------       ---------

    Operating income (loss)                          17,455           3,211        (14,113)        (7,835)         (1,282)

 OTHER INCOME AND EXPENSE:
    Interest and other income                         1,024             471              -          1,317           2,812
    Interest expense                                   (422)           (574)             -         (4,792)         (5,788)
    Foreign currency gains                                -               -              -          1,281           1,281
    Equity earnings in real estate ventures           2,641               -              -              -           2,641
    Minority interest in Internet                         -               -            900              -             900
                                                  ---------       ---------       --------       --------       ---------

 Income (loss) before income taxes and
    cumulative effect of a change in
    accounting principle                             20,698           3,108        (13,213)       (10,029)            564

    (Provision) benefit for income taxes            (10,198)         (1,120)         1,547          3,683          (6,088)
                                                  ---------       ---------       --------       --------       ---------

 Income (loss) before cumulative effect of a
    change in accounting principle                   10,500           1,988        (11,666)        (6,346)         (5,524)

 Cumulative effect of a change in accounting
    principle, net of applicable taxes              (30,391)            (29)             -              -         (30,420)
                                                  ---------       ---------       --------       --------       ---------

 Net income (loss)                                $ (19,891)      $   1,959       $(11,666)      $ (6,346)      $ (35,944)
                                                  =========       =========       ========       ========       =========

 Total assets                                     $ 643,073       $ 162,230       $ 63,909       $ 43,152       $ 912,364
 Real estate interests                               81,080               -              -              -          81,080
</TABLE>



                                       16
<PAGE>


    Certain geographic information is as follows:

                                         SIX MONTHS ENDED
                              JUNE 30, 2001             JUNE 30, 2000
                              -------------             -------------
                                       LONG-LIVED                LONG-LIVED
                           REVENUES      ASSETS      REVENUES      ASSETS
                           --------    ----------    --------    ----------
                                             (In thousands)

United States              $338,309    $295,967      $344,337   $313,793
United Kingdom               49,986     105,936        53,390     95,233
Other countries               6,876       7,721         1,790      3,375
                           --------    --------      --------   --------
                           $395,171    $409,624      $399,517   $412,401
                           ========    ========      ========   ========


     Long-lived assets are comprised of property and equipment, property
management contracts and costs in excess of net assets of acquired businesses.


11.  Material Contingencies

     Antitrust Litigation

     In 1994, Re/Max International and various franchisees filed suit in federal
court in Ohio against Realty One, alleging claims under the federal antitrust
laws and related state law claims. Re/Max International alleged in its complaint
that Realty One conspired with Smythe, Cramer Company to institute a series of
differential commission splits intended to harm Re/Max International and its
franchisees in the northeast Ohio residential real estate brokerage market.
Re/Max International claimed actual damages of $30 million. The federal
antitrust laws provide for trebling of actual damages.

     Insignia acquired Realty One in October 1997. In connection with the
acquisition, the sellers of Realty One agreed to indemnify the Company for any
loss arising from the Re/Max International litigation up to the amount of the
acquisition price of approximately $40 million. The Re/Max International case
was tried before a jury in 2000, resulting in a mistrial. The parties
subsequently settled Re/Max International's claims in July 2000, whereby Realty
One agreed to cease to impose reduced commission splits on the Re/Max
plaintiffs, subject to reinstatement in accordance with the terms of the
settlement. In September 2000, the court entered a judgment against Realty One
in the amount of approximately $6.7 million, as agreed to by the parties;
however, also included in its judgment were several terms governing Realty One's
conduct to which the parties had not agreed. In 2000, the sellers of Realty One
funded the initial cash portion of the settlement, totaling approximately $3.6
million, on behalf of Realty One pursuant to their indemnification obligations
to Insignia.

     In the course of defending the Re/Max suit, Insignia incurred certain legal
fees for which the sellers of Realty One had agreed to reimburse to Insignia
under the terms of the indemnification. In July 2001, Insignia reached a
settlement in principle with the sellers of Realty One regarding the Company's
indemnity claim. The terms of the settlement will require the sellers to pay $2
million to Insignia as reimbursement for certain professional fees incurred in
connection with the Re/Max suit. Insignia expects to collect this payment during
the third quarter of 2001. As a condition to the settlement agreement, the
sellers of Realty One agreed to fund the remaining $3 million cash portion of
the Re/Max settlement on behalf of Realty One pursuant to the indemnification to
Insignia. The remaining payment is to be made by the sellers of Realty One in
semi-annual installments over five years.


     Litigation Claims

     Insignia and certain subsidiaries are defendants in other lawsuits arising
in the ordinary course of business. Management does not expect that the results
of any such lawsuits will have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.


     Indemnification

     In 1998, the Company's former parent entered into a Merger Agreement with
Apartment Investment and Management Company ("AIMCO"), and one of AIMCO's
subsidiaries, pursuant to which the former parent was merged into AIMCO. Shortly
before the merger, the former parent distributed the stock of Insignia to its


                                       17
<PAGE>


shareholders in a Spin-Off transaction. As a requirement of the Merger
Agreement, Insignia entered into an Indemnification Agreement with AIMCO. In the
Indemnification Agreement, Insignia agreed generally to indemnify AIMCO against
all losses exceeding $9.1 million that result from: (i) breaches by the Company
or former parent of representations, warranties or covenants in the Merger
Agreement; (ii) actions taken by or on behalf of former parent prior to the
merger, and (iii) the spin-off. The Company also agreed generally to indemnify
AIMCO against all losses, without regard to any dollar value limitation, that
result from: (i) amounts AIMCO paid to employees of former parent that were not
retained as employees of AIMCO; (ii) pre-merger obligations for goods, services,
taxes or indebtedness except for those that AIMCO agreed to assume; and (iii)
the businesses of former parent that Insignia now owns and operates as a result
of the Spin-Off.

     Since the merger transaction in October 1998, there have been no related
claims except for an examination of the federal income tax returns of the former
parent being conducted by the Internal Revenue Service for the years ended
December 31, 1996 and 1997 and the period ended October 1, 1998. AIMCO has
notified the Company that it is seeking indemnity from Insignia for any
liability as a result of this examination. Insignia agreed to indemnify AIMCO
for taxes, penalties, interest and professional fees for which it is liable as a
result of this audit and has reimbursed over $500,000 to AIMCO for professional
fees incurred in connection with the audit. No determinations have been made or
can be made at this time as to any potential tax liability that may arise as a
result of this examination.


12.  Equity

     During the six month period ended June 30, 2001, the Company had the
following changes in stockholders' equity:

     a)   Net Loss of $3,979,000 for the six months ended June 30, 2001.

     b)   Payment of $750,000 in Preferred Stock dividends.

     c)   Exercise of stock options to purchase 289,546 shares of Common Stock
          at exercise prices ranging from $3.74 to $11.59 per share.

     d)   Sale of 103,476 shares of Common Stock under the Company's Employee
          Stock Purchase Program at an average price of approximately $9.21.

     e)   Issuance of 25,350 shares of Common Stock for vested restricted stock
          awards.

     f)   Accrued compensation of $465,000 relating to restricted stock awards.

     g)   Payments of $77,000 on notes receivable for Common Stock.

     h)   Other comprehensive losses of $3,432,000 for the six months ended June
          30, 2001.











                                       18
<PAGE>



Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations


FINANCIAL CONDITION

     The Company's total assets declined $126 million from $910.3 million at
December 31, 2000 to $786.3 million at June 30, 2001 and was substantially due
to the following factors: (i) an $83 million decline in cash arising principally
from $75 million of incentive payments for the 2000 year and the securing of
approximately $22 million in cash for final purchase consideration of the U.K.
businesses; (ii) a $32 million decline in receivables; and (iii) a $33 million
decline in real estate interests resulting from the sale of real estate
properties developed by the Company.

     Liabilities were lowered approximately $121 million from $501.5 million at
December 31, 2000 to $382.4 million at June 30, 2001. This decrease reflects the
aforementioned payment of accrued incentives for the 2000 year and the
retirement of $33 million in real estate mortgage notes payable from proceeds
received upon the sale of development properties. In addition, commissions
payable declined $21.8 million, consistent with the decline in receivables.
Stockholders' equity was lowered by $5 million to $403.9 million at June 30,
2001, reflecting the $4 million net loss for the 2001 period, foreign currency
translation losses and other comprehensive losses of $3.4 million and stock
issuance's of more than $3 million.


RESULTS OF OPERATIONS

     An exceptionally strong first quarter and a second quarter that suffered
from the effects of a softening U.S. economy have characterized the Company's
operating performance for 2001. As a result, the Company's results for the first
half of 2001 fell short of the robust results achieved in the first half of
2000, yet were consistent with the expectations of management outlined at the
beginning of the 2001 year. It is important to point out that comparative
results for 2000 have been restated in compliance with the SAB101 accounting
change, which lowered service revenues and EBITDA by $21.6 million and $6.9
million, respectively, from results previously reported for this first half of
2000.

     For the second quarter of 2001, the Company's service revenues declined 12%
to $201 million, compared with $228.2 million for the second quarter of 2000.
For the first six months of 2001, service revenues declined modestly to $392.7
million from $397.6 million for the same period in 2000. Net EBITDA for the
second quarter of 2001 totaled $13 million, compared with $22.4 million for the
second quarter of 2000. For the first six months of 2001, Net EBITDA declined
18% to $26.0 million, compared with $31.8 million for the same period in 2000.
Lower transaction levels for U.S. commercial leasing and New York residential
sales and rentals adversely affected performance for 2001. These declines were
partially mitigated by continued strong performance of the Company's European
group, which reported EBITDA growth of 140% over the second quarter of 2000.

     Net EBITDA and pretax earnings for the second quarter and first half of
2001 were lowered by a $1.5 million one-time expense for unrecovered costs
stemming from an indemnity claim against the sellers from whom Insignia acquired
Realty One. In July 2001, Insignia reached a formal settlement in principle with
the sellers of Realty One, who had agreed to indemnify the Company from a
lawsuit pre-dating Insignia's acquisition of Realty One in 1997.

     Earnings for the quarter and first half of 2001 included pretax impairment
write-offs of $2.6 million and $7.1 million, respectively, of investments in
third-party Internet-based businesses. Results for 2000 included pretax
operating losses from internal Internet initiatives totaling $7.1 million in the
second quarter and $13.2 million for the first half. On an after-tax basis, the
internal Internet losses for the first half of 2000 totaled $11.7 million,
reflecting the non-deductible nature of all operating losses attributable to
EdificeRex. The after-tax impact of Internet-related write-offs amounted to $4.6
million for the first six months of 2001.

     As a result of the foregoing, the Company posted a net loss of $1.45
million, or $0.08 per share, for the second quarter of 2001, compared with a net
loss of $811,000, $0.05 per share, for the second quarter of 2000. The Company's
net loss for the first six months of 2001 narrowed to $4.0 million, or $0.21 per
share, from a loss of $5.5 million, or $0.28 per share (before the cumulative
effect of the SAB 101 accounting change), for the first six months of 2000.






                                       19
<PAGE>


     The $30.4 million cumulative effect of the SAB 101 accounting change at
January 1, 2000 increased the net loss for the first half of 2000 to $35.9
million, or $1.73 per share. It is important to note that the adverse effect of
SAB 101 adoption on the first quarter of 2000 constituted a change in the timing
of recognition of leasing revenues and had no impact on cash flow from
operations.

    The Company's outlook for the remainder of 2001 depends on the extent to
which the current uncertainty in real estate markets continues. Unless the
current slowdown in the U.S. and European economies worsens, the Company remains
confident that 2001 will be among the more successful years in its history,
though short of the exceptional results of 2000.

     In addition to net income, Insignia uses EBITDA (defined as real estate
services revenues less direct expenses and administrative costs) and Net EBITDA
(defined as income before depreciation, amortization, income taxes and
non-recurring one-time charges) as indicators of the Company's financial
performance. As compared to net income, these measures effectively eliminate the
impact of non-cash charges for depreciation, amortization of intangibles and
other non-recurring charges. Neither EBITDA nor Net EBITDA, as disclosed above,
should be construed to represent cash provided by operations pursuant to
generally accepted accounting principles ("GAAP"), as neither is defined by
GAAP. Insignia's usage of these terms may differ from other companies' usage of
the same or similar terms. The Company's results of operations are more fully
discussed below.














                                       20
<PAGE>


     The following table sets forth financial data derived from the Company's
condensed consolidated statements of operations for the three and six months
ended June 30, 2001 and 2000, respectively.

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED              SIX MONTHS ENDED
                                                             JUNE 30                         JUNE 30
                                                             -------                         -------
                                                       2001           2000            2001            2000
                                                       ----           ----            ----            ----
                                                                           (In thousands)
<S>                                                   <C>              <C>               <C>               <C>
REAL ESTATE REVENUES
     United States commercial                      $ 107,036       $ 133,257       $ 227,575       $ 227,798
     International commercial                         31,734          27,093          56,862          55,180
     Residential                                      62,228          67,851         108,265         114,595
                                                   ---------       ---------       ---------       ---------
         Total real estate revenues                  200,998         228,201         392,702         397,573
                                                   ---------       ---------       ---------       ---------

COSTS AND EXPENSES
     Real estate services                            182,763         201,010         358,454         358,159
     Indemnity settlement                              1,500               -           1,500               -
     Administrative                                    2,982           4,995           6,382           7,806
                                                   ---------       ---------       ---------       ---------

EBITDA - REAL ESTATE SERVICES(1)                      13,753          22,196          26,366          31,608

     Real estate FFO(2)                                1,703           1,145           3,023           1,913
     Interest and other income                         1,410           1,469           3,539           2,812
     Foreign currency gains                              282             680             339           1,281
     Interest expense                                 (4,129)         (3,069)         (7,296)         (5,788)
                                                   ---------       ---------       ---------       ---------

NET EBITDA(1)                                         13,019          22,421          25,971          31,826

     Applicable income tax provision                     (85)         (6,402)           (473)         (6,510)
                                                   ---------       ---------       ---------       ---------

AFTER TAX NET EBITDA                                  12,934          16,019          25,498          25,316

     Gains on sale of real estate                        464             890             464           2,812
     Tax on real estate                                 (186)           (356)           (186)         (1,125)
     Depreciation - FF&E                              (4,720)         (3,384)         (9,096)         (5,754)
     Amortization of intangibles                      (6,906)         (6,355)        (13,678)        (12,777)
     Depreciation - real estate                       (1,315)         (1,393)         (2,343)         (2,330)
                                                   ---------       ---------       ---------       ---------

INCOME FROM REAL ESTATE OPERATIONS                       271           5,421             659           6,142

   Internet-based businesses                               -          (6,389)              -         (12,376)
   Provision for loss of Internet Investments         (2,639)              -          (7,141)              -
   Internet depreciation                                   -            (705)              -            (837)
   Benefit for income taxes                              923             862           2,503           1,547
                                                   ---------       ---------       ---------       ---------
                                                      (1,716)         (6,232)         (4,638)        (11,666)
                                                   ---------       ---------       ---------       ---------

NET LOSS(3)                                        $  (1,445)      $    (811)      $  (3,979)      $  (5,524)
                                                   =========       =========       =========       =========
</TABLE>


(1) EBITDA and Net EBITDA, as disclosed above, should not be construed to
represent cash provided by operations determined pursuant to generally accepted
accounting principles ("GAAP"). These measures are not defined by GAAP and
Insignia's usage of these terms may differ from other companies' usage of the
same or similar terms. As compared to net income, the EBITDA and Net EBITDA
measures effectively eliminate the impact of non-cash charges for depreciation,
amortization of intangible assets and other non-recurring charges. Management
believes that the presentation of these supplemental measures enhance a reader's
understanding of the Company's operating performance as they provide a measure
of generated cash.


                                       21
<PAGE>


(2) Funds From Operations ("FFO") is defined as income or loss from real estate
operations before depreciation, gains or losses on sales of property and
provisions for impairment. This measure is not defined by GAAP and Insignia's
usage of this term may differ from other companies' usage of the same or similar
terms. Management uses this supplemental measure in the evaluation of principal
real estate investment activities and believes that it provides a measure of
generated cash flows for the Company's real estate property operations.

(3) Represents loss before cumulative effect of the accounting change on prior
years.


Real Estate Services

Commercial Real Estate Operations

     Insignia's commercial real estate service operations - including
Insignia/ESG in the United States, IRE in the United Kingdom and other
businesses in Germany, Italy, Belgium, the Netherlands, Asia and Latin America -
produced results for the second quarter and first half of 2001 which lagged
behind the robust levels in 2000. For the second quarter of 2001, these
commercial businesses collectively produced service revenues of $138.8 million
and EBITDA of $13 million, versus $160.4 million of revenues and $19.5 million
of EBITDA in 2000. However, results for the first half of 2001 approximate those
achieved in last year's first half. For the first six months of 2001, revenues
totaled $284.4 million, up from $283.0 million a year earlier, and EBITDA
reached $29.8 million, compared with $31.2 million for the first half of 2000.
The commercial performance in the first half of 2001 was in line with
management's previously stated expectations that 2001 would not repeat the
exceptional operating levels experienced in 2000. In fact, the 2001 performance
is strong in light of the current state of the U.S. economy.

     In the U.S., commercial performance at Insignia/ESG reflected the effects
of the slowdown of U.S. economic activity in the second quarter. For the 2001
second quarter, Insignia/ESG produced U.S. service revenues of $107 million and
EBITDA of $8 million, representing declines of 20% for revenues and 53% for
EBITDA compared to the second quarter of 2000. This quarterly performance
follows a first quarter of 2001 which produced strong U.S. gains of 27% for
revenues and 98% for EBITDA compared to the same period of 2000. The first
quarter of 2001 was bolstered by continued strong showings by the Company's
bellwether New York region and real estate principal development activities. For
the first half of 2001, U.S. operations generated service revenues of $227.6
million, virtually break-even with 2000, and EBITDA of $24.2 million, down a
modest 4% from $25.2 million in 2000.

     In contrast with U.S. results, European operations generated service
revenues and EBITDA of $30.7 million and $5.8 million, respectively, for the
second quarter of 2001, compared with revenues of $27.1 million and EBITDA of
$2.4 million for the same period of 2000. For the first half of 2001, European
services produced $55.4 million of service revenues, equal to the 2000
performance, while EBITDA improved to $7.2 million from $6.0 million in 2000.
The Company's operations in the United Kingdom, Germany and the Netherlands each
exceeded year-earlier performance by wide margins and IRE's U.K. operation
continued to generate the substantial majority of Europe's production. Although
market activity has fallen below last year's exceptionally high level, the
fee-based businesses out-performed expectations in both the United Kingdom and
mainland Europe.

     The Company's developing commercial operations in Asia and Latin America,
launched in late 2000 and early 2001, respectively, lowered Net EBITDA and
pretax earnings for 2001 through aggregate operating losses of approximately
$800,000 and $1.6 million for the second quarter and first half of 2001,
respectively. These losses remain in line with management's expectations for the
initial start-up periods of operation.


Residential Real Estate Operations

     The Company's residential real estate services operations - comprised of
Douglas Elliman, Realty One and Insignia Residential Group - generated group
service revenues of $62.2 million and $108.3 million for the second quarter and
first half of 2001, respectively, representing an 8% decline for the quarter and
a 6% decline for the first half compared to 2000. Residential EBITDA declined
33% to $5.2 million for the second quarter of 2001 and 46% to $4.4 million for
the first half of 2001 (excluding the $1.5 million one-time charge related to
the Realty One indemnity settlement). In comparison, residential EBITDA was $7.7
million for the second quarter of 2000 and $8.2 million for the first half.
Residential performance in 2001 has been characterized by a modest recovery in
Realty One's single-family brokerage and mortgage origination business and sharp
declines in transactional activity levels in residential sales at Douglas
Elliman.

                                       22
<PAGE>


     Douglas Elliman generated service revenues and EBITDA of $24.7 million and
$1.6 million, respectively, for the second quarter of 2001, down from service
revenue and EBITDA of $32 million and $5.2 million, respectively, in 2000. Sales
transaction volume fell by 24% to $633.1 million for the second quarter of 2001
from $834 million for 2000. For the first half of 2001, Douglas Elliman produced
service revenues of $47.6 million and EBITDA of $2.9 million. For the first half
of 2000, Douglas Elliman reported exceptionally strong results with $55.3
million in service revenues and $7.8 million of EBITDA. Activity levels for the
first half of 2001 reflected a 16% decline in gross transaction volume to $1.2
billion, compared to the first half of 2000. That said, average sales prices
have remained relatively constant compared to 2000 at over $800,000 per unit.
Douglas Elliman's declines in 2001 are consistent with the experience throughout
Manhattan's residential market, which saw the number of transactions drop by 19%
from 2000's robust level.

     Realty One's operating performance rebounded during the first half of 2001
over the same period in 2000. The catalyst for the rebound has been declining
interest rates, which boosted home sales and the mortgage origination activity.
Conversely, during the first half of 2000 Realty One suffered from the erosion
of demand for single-family housing and mortgage services caused by rising
mortgage rates. Realty One reported year-over-year increases of 6% to $30.7
million for service revenues and 40% to $3.3 million for EBITDA in the second
quarter of 2001. The quarterly improvement included an increase of 5% in sales
transaction volume to $896.3 million and a 4% increase in average sales price to
$162,000. Total mortgage origination volume grew 23% to $126.4 million for the
second quarter of 2001. For the first half of 2001, Realty One produced service
revenue of $47.3 million and EBITDA of $860,000, reflecting strong gains over
$45.7 million of revenues and $63,000 of EBITDA in the first half of 2000. For
the first half of 2001, transaction volume rose 4% to $1.4 billion and the
average sales price increased 5% to $159,500 over the same period of 2000.
Realty One's 2001 performance is consistent with the continued strength in the
single-family home sector nationally.

     Insignia Residential Group continued to improve its portion of residential
production with EBITDA of $279,000 for the second quarter of 2001 and $637,000
for the first half of 2001, representing an improvement of 105% for each period
compared to 2000. It is noteworthy to add that Insignia Residential Group's
operations were recently augmented by its selection by Metropolitan Life
Insurance Company as property manager and leasing agent for Peter Cooper Village
and Stuyvesant Town, a 12,000 unit apartment portfolio in Manhattan. This
assignment increases Insignia Residential Group's management portfolio in the
New York area by approximately 15% to more than 70,000 units.


Real Estate Principal Investment Activities

     The Company's real estate principal investment operations produced equity
earnings of $630,000 and $1.1 million for the second quarter and first half of
2001, respectively. This 2001 performance represented declines of 31% and 60%,
respectively, compared with the second quarter and six months of 2000. These
declines in net earnings are entirely the result of decline in pre-tax gains
from property sales during the second quarter and six months of 2001, as
compared to 2000. For the first six months of 2001, pretax gains from property
sales totaled $464,000 from the sale of a single 125,000 square foot office
building in southern California. For the same six months of 2000, pretax gains
totaled $2.8 million from the sale of four properties in the co-investment
portfolio. The sales of investment assets are irregular and the timing of such
sales is not easily predicted. That said, for the 2001 year as a whole Insignia
expects gains from property sales to exceed 2000 levels.

     Principal real estate operations in 2001 produced marked improvement in FFO
performance for the second quarter and six months compared to 2000. FFO grew 49%
to $1.7 million for the second quarter of 2001 and 58% to $3 million for the
first half of 2001, demonstrating the continued strong performance of the
Company's co-investment property portfolio despite the onset of an economic
slowdown in the United States. FFO is defined as income or loss from real estate
operations before depreciation, gains or losses on property sales and provisions
for impairment. This measure is not defined by GAAP and the Company's usage of
this term may differ from other companies' usage of the same or similar terms.
The Company believes this supplemental disclosure provides a measure of cash
generated by property operations.


Internet Operations

     In 2001, the Company recorded impairment write-offs of $2.6 million for the
second quarter and $7.1 million for the first half. During the comparable
periods of 2000, the Company reported pre-tax operating losses of $7.1 million
and $13.2 million for the second quarter and first half, respectively, incurred
in connection with the


                                       23
<PAGE>


development of internal Internet-based businesses. The 2000 losses include the
operations of EdificeRex, the Company's internally developed Internet-based
business launched in February 2000, and other internal Internet exchanges and
consisted substantially of advertising and marketing campaigns, web content,
consulting and personnel costs. All of the Company's internal Internet-based
operations were terminated in 2000; therefore, results for 2001 do not include
any internet-related operating losses.

     The impairment write-downs in 2001 were determined based on information
from new financing activity of the third-party Internet-based businesses or
dissolution's resulting from a lack of necessary funding required to continue
operations. The Company continues to monitor carefully the performance of its
remaining Internet-oriented investments for evidence of impairment. If these
businesses are unable to attain profitability or are unsuccessful in raising the
necessary capital to continue the development of their business plans, the
Company is likely to incur further impairment write-offs.


Other Items Affecting Net Income

     Administrative expenses declined 40% to $3 million for the second quarter
of 2001 and 18% to $6.4 million for the first six months of 2001, as compared to
the same periods of 2000. The year-over-year decreases were substantially
attributable to lower executive incentive compensation compared to 2000. In the
first half of 2000, all executive incentive targets were exceeded as a result of
exceptionally robust operating performance of the core service businesses;
conversely, none of the incentive targets were achieved during the second
quarter of 2001.

     Interest and other income declined 4% to $1.4 million and increased 26% to
$3.5 million, respectively, for the second quarter and first half of 2001, as
compared to 2000. The first half increase was fueled by significantly higher
cash holdings during the first quarter of 2001, compared to 2000, prior to the
March 2001 payment of approximately $75 million in employee bonuses earned for
the 2000 year.

     Interest expense increased 35% to $4.1 million for the second quarter of
2001 and 26% to $7.3 million for the first half of 2001, compared with the same
periods of 2000. These increases were attributed to interest on credit facility
borrowings of $15 million to finance e-commerce initiatives and cash secured
loan notes issued in March 2001 in satisfaction of remaining U.K. purchase
consideration.

     Depreciation expense (excluding consolidated property depreciation) rose
15% to $4.7 million for the second quarter of 2001 and 38% to $9.1 million for
the first half of 2001, compared to 2000. These increases reflect the successful
implementation of new information technology platforms at Insignia/ESG and
Realty One and leasehold improvements in connection with the upgrade and
relocation of offices in key U.S. markets over the past two years. The Company
expended over $60 million on capital improvements for these initiatives and
other normal replacement needs over the course of 1999 and 2000.

    Amortization of intangibles increased 9% to $6.9 million and 7% to $13.7
million for the second quarter and first half of 2001, respectively, compared to
the same periods of 2000. These increases are the result of payments for
contingent earnouts achieved and acquisitions substantially comprised of
purchased intangibles.

     Earnings for the second quarter and six months of 2001 reflected income tax
benefits of $652,000 and $1.8 million, respectively, as a result of the pretax
losses for the periods. Income taxes of $5.9 million and $6.1 million for the
second quarter and six months of 2000, respectively, were attributed to the
adverse affects of $9.3 million in operating losses of EdificeRex, for which no
tax benefit was currently available.


LIQUIDITY AND CAPITAL RESOURCES

     Insignia's liquidity and capital resources consist of its unrestricted cash
on hand, available credit under its credit facilities and cash provided by
operations. The Company utilizes cash holdings and available credit for general
corporate purposes, expansion of the service platform through acquisitions and
office openings and to fund ongoing real estate investment activities.

     Unrestricted cash at June 30, 2001 totaled $41.5 million, representing a
sharp decline from $124.5 million at December 31, 2000. A substantial portion of
the available unrestricted cash at December 31, 2000 was used to pay


                                       24
<PAGE>

approximately $75 million in incentive compensation pertaining to the 2000 year
and $22 million for remaining purchase consideration for the U.K. businesses.
The Company's total debt at June 30, 2001 and December 31, 2000 was comprised of
the following:

                                                    JUNE 30,       DECEMBER 31,
                                                      2001             2000
                                                      ----             ----
                                                         (In thousands)

       Credit facility borrowings                   $134,000        $122,350
       Cash-secured acquisition indebtedness          24,402           6,219
       Other debt of subsidiaries                      7,065           7,213
                                                    --------        --------
            Notes payable                            165,467         135,782

       Mortgage warehouse line of credit              22,692           9,502
       Real estate mortgage notes payable             15,796          48,369
                                                    --------        --------
            TOTAL DEBT                              $203,955        $193,653
                                                    ========        ========


     The real estate mortgages, mortgage warehouse line and cash-secured
acquisition indebtedness are all self-liquidating from the related assets. Other
debt of $141 million at June 30, 2001 (together with approximately $12.6 million
in letters of credit supporting real estate investments) represents the
outstanding obligations under facilities aggregating approximately $245 million.
In May 2001, Insignia completed a renewal and expansion of its revolving credit
facility, resulting in a new three-year $230 million credit facility. With the
expanded facility, the Company had nearly $100 million in unused borrowing
capacity at June 30, 2001.

     Cash used in operating activities increased to approximately $58.7 million
for the first six months of 2001, up from $31 million for the same period of
2000. Cash from operations is generally negative during the first half of each
year due to the payment of annual incentive compensation pertaining to the
preceding year and seasonal factors affecting transactional revenues (see also
"Nature of Operations"). The increase in cash usage from operations during 2001
is principally the result of materially higher incentive payments as compared to
the same period of 2000. Cash flows from investing and financing activities for
the first half of 2001 were characterized primarily by $40 million in proceeds
from the sale of two real estate development properties and the corresponding
payoff of $33 million of real estate debt financing their development. Other
prominent investing and financing activities during the first half of 2001
included increases in mortgage loans and borrowings on the related warehouse
line (of Realty One's mortgage lending unit) and a $19 million increase in
restricted cash due principally to the securing of loan notes issued to former
shareholders of IRE in satisfaction of remaining U.K. purchase consideration.

     Insignia had $7.2 million of capital expenditures during the first half of
2001 and projects approximately $15 million in capital expenditures for the 2001
year. All capital expenditures are to be funded from operations. The Company
believes that its cash on hand, available credit and anticipated cash flows from
operations are sufficient for its short term and long term operating and capital
requirements.


RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets, effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and other intangible
assets deemed to have indefinite lives will no longer be amortized but will be
subject to annual impairment tests. Other intangible assets will continue to be
amortized over their estimated useful lives.

     The Company will implement SFAS No. 141 and SFAS No. 142 beginning in the
first quarter of 2002. Initial impairment tests of goodwill and other intangible
assets with indefinite lives required by the Statements will be completed, with
any measured impairment recorded through earnings as a cumulative effect of a
change in accounting principal, during the first quarter of 2002. The Company's
current policy for measuring goodwill impairment is based on an undiscounted
cash flow basis and that method does not indicate any impairment. Amortization
of goodwill for the second quarter and first half of 2001 was $4.9 million and
$9.5 million, respectively. Elimination of this amortization would have improved
diluted earnings per share for these 2001


                                       25
<PAGE>


periods by $0.20 and $0.38, respectively. Under the provisions of SFAS No. 142,
it is possible that amounts currently carried as goodwill or other identified
intangibles could be re-characterized and reclassified upon implementation of
the Statement in 2002. Insignia does not expect to conclude an analysis of such
reclassifications before the end of 2001. Accordingly, the potential impact of
SFAS No. 142 on net income is uncertain.


IMPACT OF INFLATION AND CHANGING PRICES

     Inflation has not had a significant impact on the results of operations of
Insignia in recent years and is not anticipated to have a significant impact in
the foreseeable future. Insignia's exposure to market risk from changing prices
consists primarily of fluctuations in rental rates of commercial and residential
properties, market interest rates on residential mortgages and debt obligations,
real estate property values and foreign currency fluctuations of its European
operations.

     The revenues associated with the commercial services businesses are
impacted by fluctuations in interest rates, lease rates, real property values
and the availability of space and competition in the market place. Commercial
service revenues are derived from a broad range of services that are primarily
transaction driven and are therefore volatile in nature and highly competitive.

     The revenues of the property management operations with respect to rental
properties are highly dependent upon the aggregate rents of the properties
managed, which are affected by rental rates and building occupancy rates. Rental
rate increases are dependent upon market conditions and the competitive
environments in the respective locations of the properties. Employee
compensation is the principal cost element of property management.

     Changes in market interest rates on residential mortgage loans and changes
in real property values in northern Ohio and New York City impact the revenues
of the Company's residential brokerage and mortgage origination businesses.
Increases in mortgage interest rates typically result in a weak environment for
single-family home sales in the northern Ohio marketplace, thereby adversely
affecting the revenues and profits of Realty One's home brokerage and mortgage
origination business.

     Recent economic trends in 2001 have been characterized by a general
slowdown in U.S. commercial leasing volume and New York residential sales
volume. That said, the economic slowdown in the U.S. marketplace has not
adversely affected commission fees. Market trends during 2001 have seen the
decline of interest rates, resulting in the enhancement of Realty One's
operations in the first half of 2001 compared to the same period of 2000.


NATURE OF OPERATIONS

     Revenues from tenant representation, agency leasing, investment sales and
residential brokerage, which collectively comprise a substantial portion of
Insignia's service revenues, are transactional in nature and therefore subject
to seasonality and changes in business and capital market conditions. Such
seasonal and other factors materially impact the Company's quarterly results,
particularly revenues, earnings and cash flows. The SAB 101 accounting change
affects the timing of revenue recognition and may have an effect on historical
seasonality.

     Consistent with the industry in general, the commercial services segment
has historically experienced its lowest quarterly operating results in the first
quarter of each year as a result of the desire of clients to complete
transactions by calendar year-end. This phenomenon generally results in higher
revenues and income in the last half of the year and a gradual slowdown in
transactional activity and corresponding operating results during the first
quarter.

     The residential services segment is materially impacted by the seasonal
factors of Realty One's home brokerage and mortgage origination business. Due to
the geographic location of Realty One's operations in Ohio, weather conditions
have historically had an adverse effect on single family home sales resulting in
operating losses during the first quarter of each year. The volume of Realty
One's home brokerage and mortgage transactions typically peak during the spring
and summer months, coinciding with both favorable weather conditions and the
increased tendency for moving between school years, resulting in higher revenues
and earnings during the second and third quarters of each year.

     A significant portion of the expenses associated with transactional
activities in the commercial and residential segments is directly correlated to
revenue. As a consequence of the seasonality of revenues, the Company's income
has historically been lowest in the first quarter and highest in the fourth
quarter of each year. Neither the 2001 nor


                                       26
<PAGE>


2000 years have followed this typical seasonal pattern. As evidence, second
quarter of 2000 was abnormally robust and even surpassed the good third quarter
of that year. In 2001, the Company realized its best ever first quarter, yet
produced a much lower second quarter than the preceding year due to the
aforementioned U.S. economic slowdown.

     Insignia continues to believes that its large, diversified client base,
geographical reach, overall size and number of annual transactions help to
minimize the impact of seasonality and other changes in business and capital
market conditions on annual revenues and earnings.


FORWARD LOOKING STATEMENTS

     Certain items discussed in this Report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and, as such, involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. You can
identify such statements by the fact that they do not relate strictly to
historical or current facts. Statements which make reference to the expectations
or beliefs of the Company or any of its management are such forward-looking
statements. These statements use words such as "believe", "expect", "should" and
"anticipate". Such information includes, without limitation, statements
regarding the results of litigation, Insignia's future financial performance,
cash flows, expansion plans, estimated capital expenditures and statements
concerning the performance of the U.S. and international commercial and
residential brokerage markets. Such information also includes statements
regarding the Company's plans to substantially limit its e-commerce business
expenses. Actual results will be affected by a variety of risks and factors,
including, without limitation, international, national and local economic
conditions and real estate and financing risks.

     All such forward-looking statements speak only as of the date of this
Report. The Company expressly disclaims any obligation or undertaking to release
publicly any updates of revisions to any forward-looking statements contained
herein to reflect any change in the Company's expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.


Item 3.  Quantitative and Qualitative Disclosure of Market Risk

     Insignia is exposed to a variety of market risks, including foreign
currency exchange rate fluctuations and changes in interest rates. The Company's
earnings and cash flows are subject to fluctuations due to changes in foreign
currency exchange rates from the Company's operations in foreign jurisdictions.
In addition to the United States, the Company conducts business in the following
foreign jurisdictions: the U.K., Germany, Italy, Belgium, Ireland, the
Netherlands, Spain, Hong Kong, China, Thailand, India and Mexico. The British
Pound (Sterling) represents the only foreign currency of a material business
operation, as almost 90% of Insignia's foreign operations are derived in the
U.K.

     The Company's financial results could be significantly affected by factors
such as fluctuations in foreign currency exchange rates and weak economic
conditions in these foreign markets. These foreign factors have not had a
material adverse effect on the Company; however, they could potentially have a
material adverse affect on the Company's future financial position and results
of operations. A 10% change in the British pound could have an estimated annual
impact of approximately $10 million on revenues and $1 million on net earnings.

     The Company's interest income and expense are most sensitive to the changes
in the general level of interest rates. In this regard, changes in interest
rates affect the interest earned on the Company's cash equivalents and
short-term investments as well as interest paid on its debt. Interest rates are
sensitive to many factors including governmental monetary and tax policies,
domestic and international economic and political considerations and other
factors that are beyond the Company's control. A 100 basis point change in
interest rates at current cash and debt levels would have an estimated annual
net impact of approximately $1 million on the Company's results of operations.
Additionally, changes in interest rates can have a material adverse effect on
Realty One's home brokerage and mortgage origination business in northern Ohio.


                                       27
<PAGE>


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

     See Note 11 - "Material Contingencies" in Notes to Condensed Consolidated
Financial Statements, Part I, Item 1, of this Form 10-Q.


Item 6.  Exhibits and Reports on Form 8-K

     a)  Exhibits

         10.2(a)   Amendment to Employment Agreement, effective as of August 3,
                   2001, by and among Insignia and James A. Aston.

         10.2(b)   Amendment to Second Amended and Restated Employment
                   Agreement, effective as of June 21, 2001, by and among
                   Insignia and Stephen B. Siegel.

         10.2(c)   Promissory Note, effective as of June 21, 2001, by and among
                   Insignia and Stephen B. Siegel.

         10.6(a)   Amendment No. 6 to Warrant Agreement, dated as of July 31,
                   2001, between Insignia and APTS Partners L.P., providing for
                   the issuance of warrants to purchase 293,333 shares of
                   common stock of Insignia.

         10.6(b)   Amendment No. 6 to Warrant Agreement, dated as of July 31,
                   2001, between Insignia and APTS Partners L.P., providing for
                   the issuance of warrants to purchase 266,667 shares of
                   common stock of Insignia.

         10.6(c)   Amendment No. 7 to Warrant Agreement, dated as of July 31,
                   2001, between Insignia and APTS Partners L.P., providing for
                   the issuance of warrants to purchase 316,667 shares of
                   common stock of Insignia.

         10.6(d)   Amendment No. 8 to Warrant Agreement, dated as of July 31,
                   2001, between Insignia and APTS V, LLC, providing for the
                   issuance of warrants to purchase 51,944 shares of common
                   stock of Insignia.

     b)  Reports on Form 8-K filed during the quarter ended June 30, 2001:

          1.   Form 8-K dated and filed May 29, 2001, disclosing the closing of
               a new three-year $230 million revolving credit agreement arranged
               by First Union Securities, Lehman Brothers and Bank of America
               and involving a syndicate of ten national and international
               financial institutions.



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<PAGE>


                                   SIGNATURES


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



                                      INSIGNIA FINANCIAL GROUP, INC.



                                      By: /s/ Andrew L. Farkas
                                          ------------------------------------
                                          Andrew L. Farkas
                                          Chairman and Chief Executive Officer




                                      By: /s/ James A. Aston
                                          ------------------------------------
                                          James A. Aston
                                          Chief Financial Officer