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

                                    FORM 10-K

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 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)

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

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

           Title of each class              Name of exchange on which registered

Common Stock, Par Value $0.01 Per Share            New York Stock Exchange

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

                                      None

                                (Title of Class)

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 report), and (2) has been subject to such filing
requirements for the past 90 days. Yes X  No   .
                                      ---   ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

At March 1, 2002, there were 22,892,356 shares of common stock outstanding.
Based on the reported closing price of $10.58 per share on the New York Stock
Exchange on such date, the aggregate market value of common stock held by
non-affiliates of the Registrant was approximately $200 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement for the Annual Meeting of Stockholders is incorporated by
reference in Part III of this Form 10-K.


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                                     PART I

ITEM 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 market leading operations in the United States, the United
Kingdom and France, as well as other growing operations 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 leasing,
sales brokerage, corporate real estate consulting, property management, property
development and re-development, apartment brokerage and leasing, condominium and
cooperative apartment management, real estate oriented financial services,
equity co-investment and other services. Insignia's real estate service
businesses include the following: Insignia/ESG, Inc. (U.S. commercial real
estate services), Insignia Richard Ellis (U.K. commercial real estate services),
Insignia Bourdais (French commercial real estate services; acquired in December
2001), Insignia Douglas Elliman (apartment brokerage and leasing) and Insignia
Residential Group, Inc. (condominium and cooperative apartment management).
Insignia also offers commercial real estate services in other key markets
throughout continental Europe, Asia and Latin America in the following
locations: Madrid, Spain; Frankfurt, Germany; Milan, Italy; Brussels, Belgium;
Dublin, Ireland; Belfast, Northern Ireland; Amsterdam, the Netherlands; Tokyo,
Japan; Hong Kong, Beijing and Shanghai, China; Bangkok, Thailand; Mumbai,
Hyderabad, Chennai and New Delhi, India; Manila, Philippines; and Mexico City,
Mexico.

     In addition to traditional real estate services, Insignia deploys its own
capital, together with the capital of third party investors, in principal real
estate oriented ventures, including co-investment in existing property assets,
real estate development and managed private investment funds. In addition to
venture related investment returns, Insignia generates revenues from fee-based
services provided to these minority owned real estate investment entities.

     With the December 2001 acquisition of Insignia Bourdais in France, Insignia
now enjoys an unrivaled position in the New York-London-Paris axis. These cities
represent key centers for international investing and global corporate
headquarters. In addition, Insignia enjoys a unique position in New York, where
it is the preeminent service provider of real estate services in New York City
through market leading positions of Insignia/ESG in commercial real estate
services and Insignia Douglas Elliman and Insignia Residential Group in
residential real estate services. The Company's real estate services operations
and real estate principal investment activities are more fully described below.

REAL ESTATE SERVICES

Commercial Real Estate Services

     The Company's commercial real estate services are performed through
Insignia/ESG in the United States, Insignia Richard Ellis in the United Kingdom,
Insignia Bourdais in France and other subsidiaries in continental Europe, Asia
and Latin America. Insignia Bourdais, headquartered in Paris, France, is the new
name of the recently acquired Groupe Bourdais and is a leading real estate
service provider in France. The Company's commercial services operations
generated aggregate service revenues of $618.5 million in 2001, representing 84%
of the Company's total service revenues for the year. The 2001 results do not
include any contribution from Insignia Bourdais, which commenced operations as a
part of the Insignia group beginning in January 2002. For the 2001 calendar
year, Groupe Bourdais generated revenues and pre-tax earnings of approximately
$39 million and $5 million, respectively.

     United States

     The Company's U.S. commercial real estate services operations commenced in
1991. The move into full-service brokerage commenced in 1996 with the
acquisition of Edward S. Gordon Company Incorporated and subsequent expansion of
brokerage operations nationwide. 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 a significant
presence in other major markets, including Washington, D.C., Philadelphia,
Boston, Chicago, Atlanta, Phoenix, Los Angeles, San Francisco, Dallas and Miami.
The Company's growth in the late 1990's was fueled largely by acquisitions of
regional commercial real estate service companies. Domestic growth over the past
two years has been achieved predominately through the organic expansion of
Insignia/ESG's client base. In 2001, Insignia


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acquired Baker Commercial Realty Inc., a leading service provider in the Dallas
marketplace. The Baker Commercial Realty operations have been combined with the
existing Insignia/ESG local operations - augmented by recruitment of superior
new talent in tenant representation and property services - to significantly
fortify the Company's presence in the greater Dallas area.

     Insignia's U.S. commercial real estate services operation represents the
Company's largest business unit, accounting for approximately 68% of the
Company's total service revenues for the 2001 year. U.S. commercial service
operations generated service revenues of approximately $498.1 million in 2001,
relatively unchanged from $500.2 million in 2000 - an exceptionally strong year
- and up from $389.2 million in 1999.

     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
corporate real estate consulting services. The Company serves tenants, owners
and investors in office, industrial, retail, hospitality and mixed-use
properties. During 2001, the Company completed U.S. sales and leasing
transactions valued at approximately $33 billion, including more than $4.3
billion of commercial property sales and financing transactions. Insignia/ESG's
major corporate clients include JP Morgan Chase, Lehman Brothers, The New York
Times Company, Marsh & McLennan, Empire Blue Cross Blue Shield, Deutsche Bank,
Metropolitan Life Insurance, and Credit Suisse First Boston. The Company
provides services for approximately 235 million square feet of commercial real
estate including 161 million square feet of office properties, 55 million square
feet of industrial properties, 15 million square feet of retail properties and 4
million square feet of mixed-use properties. The Company's 20 largest
institutional clients account for approximately 40% of its national property
services revenues. These clients include The Irvine Company, Metropolitan Life
Insurance Co., Teachers Insurance and Annuity Association, JP Morgan Chase, and
UBS Brinson.

     During 2001, Insignia/ESG sustained its market-leading position in New York
City with responsibility for 22 of Manhattan's 50 largest office-leasing
transactions, including the top two, according to a list published in the
February 2002 issue of Crain's New York Business. This represents the fifth
consecutive year that Insignia/ESG held the number one position in this survey.

     The Company prides itself on the consistent, high-quality delivery of its
services across geographic markets, property types and disciplines. The Company
is active to varying degrees in 56 U.S. markets, including markets in which it
has affiliate relationships with local service providers. Affiliate
relationships are established in secondary markets where Insignia wants to offer
services for its multi-market clients without owning the local operations. The
Company currently has affiliations in the Richmond, Baltimore, Pittsburgh and
Seattle markets. In addition, specialized divisions within the U.S. commercial
services business include Capital Advisors (investment sales and financing
activities), Hotel Partners (hotel/hospitality brokerage services), Multi
Housing Properties (sales and financing of multifamily properties) and the
Development Group (fee-based development and redevelopment services).

     The Company's reputation and success throughout the U.S. serves as the
primary catalyst for growth and expansion of commercial real estate services
both domestically and internationally. The Company's growth strategy combines
targeted acquisitions of companies that offer complementary skill sets as well
as the expansion of servicing capabilities in select markets through broker
recruitment initiatives. Expansion is primarily focused on first tier markets
(those comprising 75 million square feet or more) and secondarily on
opportunities in second tier U.S. and international markets (those comprising 25
million to 74 million square feet). Since the late 1990s, the Company has
expanded its U.S. commercial real estate services organization significantly
through acquisitions in Chicago, Philadelphia, Boston, Washington, DC, and
Dallas and has expanded its service capabilities in Los Angeles, San Francisco,
Atlanta and Miami through office openings and broker hiring initiatives.

     United Kingdom and Continental Europe

     The Company's European businesses consist of commercial real estate
operations in the United Kingdom, France, Germany, Italy, Belgium, Spain,
Ireland and the Netherlands. European operations, which accounted for 16% of
Insignia's total service revenues in 2001, produced approximately $116.4 million
in service revenues for the 2001 year. The European operations concluded sales
and lease transactions valued in excess of $14.3 billion during 2001. For the
2000 and 1999 years, Insignia's European operations generated service revenues
of $141.8 million and $108.6 million, respectively. For 2001, the British pound
continued to represent the sole foreign currency of a material business
operation, as more than 90% of Insignia's foreign operations were derived in the
U.K. in 2001 and 2000. The continental European businesses contributed positive
results for 2001 with more than $10.5 million of service revenues, representing
10% growth over 2000.

     The Company's European operations were enhanced materially with the
December 2001 acquisition of Groupe Bourdais, one of France's premier real
estate service companies. Groupe Bourdais adopted the name Insignia Bourdais
from the date of closing.


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Insignia Bourdais has five offices in the greater Paris region. The Company also
maintains offices in the Aix-en-Provence, Lyon and Marseille markets and has
affiliate relationships in 20 additional markets throughout France. Insignia
Bourdais's major clients include AOL Time Warner, Siemens, GE Capital, France
Telecom, Unibail, Renault and Groupe AMA. For the calendar year 2001, the French
business completed sales and leasing transactions valued in excess of $685
million. The addition of Bourdais to the Insignia family provides the Company
with an unparalleled leadership position in three of the world's foremost
international business capitals - New York, London and Paris - and is expected
to lead to increased cross-market business activity among continental Europe,
the United Kingdom and the United States. The Company's unique competitive
position in the U.K., France and the U.S. is central to its global strategy.
Almost half of the Fortune global 500 companies are headquartered in these three
countries, and the U.K. and France account for 40% of all direct foreign
investment capital flowing into the U.S.

     The Company's U.K. subsidiary, Insignia Richard Ellis, is among the three
largest commercial real estate service providers in the United Kingdom. Through
Insignia Richard Ellis, the Company provides extensive coverage of the entire
United Kingdom market through full-service offices in London, Glasgow,
Birmingham, Leeds, Manchester, Liverpool and Jersey, and holds a minority equity
interest in an Irish real estate services company with offices in the Republic
of Ireland and Northern Ireland. The Company's U.K. operation provides
broad-ranging real estate services, including agency leasing, tenant
representation, investment sales and financing, consulting, project management,
appraisal, zoning and other general property services. The major income
components are agency leasing, tenant representation, investment sales and
financing and valuation consulting.

     Insignia Richard Ellis directs the Company's European expansion. The U.K.
operation spearheaded the acquisition of Groupe Bourdais as well as the
establishment of service operations in Frankfurt, Germany, Milan, Italy,
Brussels, Belgium, Madrid, Spain and Amsterdam, the Netherlands since 1998.

     Asia and Latin America

     The Company commenced operations in Asia in late 2000 with the
establishment of an office in Tokyo, Japan and the acquisition of Brooke
International, a Hong Kong based commercial real estate services company
(founded in 1988). Insignia augmented its Asian reach in April 2001 with the
acquisition of Brooke International's affiliated operations in India. The Brooke
businesses now operate under the Insignia Brooke name and collectively employ
approximately 190 real estate professionals and support personnel in eleven
offices in Hong Kong, China, Thailand, the Philippines and India.

     The Company extended its service capability into Latin America with the
March 2001 acquisition of Grupo Inmobiliario Inova ("Inova"). Inova,
headquartered in Mexico City and founded in 1992, is a commercial real estate
service company that provides acquisition advisory and due diligence services,
project coordination and supervision, real estate valuations, tenant
representation, asset management and strategic advisory services. Inova now
operates as Insignia/ESG de Mexico and 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.

     Insignia Brooke along with the Japan operation and Insignia/ESG de Mexico
represent the Company's strategic platforms of choice from which to serve
existing clients in Asia and Latin America. They are expected to create
increasing international cross-selling opportunities with the U.S., the U.K. and
other European operations. The Asian and Latin American businesses remained in
the start-up mode during 2001, incurring operating losses of an aggregate $3.9
million for the year. Insignia expects further losses in Asia and Latin America
in the first half of 2002, but expects to break even for the full 2002 year as
these operations begin to mature and benefit from their access to the Company's
global network of clients.

Services

     The full range of commercial services provided by the Company world-wide
include the following:

     Tenant Representation-- acquisition or disposition of leased or owned space
on behalf of space users

     Corporate Real Estate Consulting -- specialization in large, multi-faceted
transactions (usually 50,000 square feet or more) requiring in-depth planning,
analysis and execution

     Investment Sales-- sale or acquisition of all types of commercial property
on behalf of owners

     Mortgage Financing -- arrangement of financing (either debt or equity) on
behalf of owners of all types of commercial properties


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     Agency Leasing -- marketing of available space within commercial properties
on behalf of owners/landlords and the consummation of leases with tenants

     Property Management -- responsibility for the financial and operational
aspects of a commercial property, which sometimes involve specialized services
such as construction management, engineering or energy management

     Facilities Management -- responsibility for the delivery of services for
properties owned and occupied by corporations, institutions, government
agencies, hospitals, colleges and universities

     Industrial Services -- specialized services performed for the owners and/or
users of manufacturing, warehouse, distribution or flex-space (combining office
and industrial uses) facilities

     Multi Housing Services - sale and/or financing of income-producing
multi-family housing assets

     Property Development and Redevelopment -- fee-based development and
construction services for owners of office, industrial and retail properties,
and the re-development/re-positioning of properties for owners looking to create
enhanced value

     Real Estate Investment -- primarily through ownership in equity
co-investment partnerships and development property with select clients

Market Trends

     United States

     Activity in most of the Company's U.S. markets was hampered in 2001 by the
national recession, punctuated by the terrorist attacks of September 11th. These
two events caused companies to become more hesitant about real estate plans,
delaying or canceling new space commitments, and in many instances, putting
surplus space on the market for sublease. The exception to the nationwide
pullback was New York City, which saw a sudden surge of fourth quarter leasing
activity precipitated by loss of the World Trade Center complex. Companies
dislocated from the World Trade Center area scrambled to find replacement space
on a temporary and permanent basis.

     Europe

     Activity also slowed markedly in the United Kingdom and Europe, as the U.S.
recession spread globally. The same forces that affected U.S. markets -
decreased corporate expansion, reduced flows of investment capital into real
property and general hesitancy in an uncertain environment - became increasingly
evident in Europe during the second half of 2001. This was exacerbated by the
events of September 11th with global corporations deferring real estate
decisions.

     The consensus forecast for the U.K. economy projects continued slowdown of
overall growth in the commercial real estate sector in 2002. Economic
assumptions are that the U.K. will avoid an outright recession and GDP growth
will be 1% or better, due mainly to sustained retail spending and increased
public expenditure. Tenant representation is expected to decline in 2002 due to
increased supply, weaker demand and longer transaction periods. Investment
market activity is projected to be weaker overall for 2002, although the
favorable interest rate/yield gap may provide some upside in this part of the
market. Consulting services, which accounts for over one-third of the Company's
U.K. business, remain robust.

     In France, the real estate market for 2001 showed a marked decrease in
activity levels; however, there are encouraging signs that 2002 will be more
robust than 2001, though not up to the extraordinary levels of 2000. The
demand/supply equation for office space is relatively stable, although rental
levels remain soft. The French investment market remains a key target for
international investors and this sector of the market is expected to be strong
in 2002. In Germany, space released by companies from the banking and technology
sectors is causing increases in office vacancy rates and corresponding declines
in rental rates. Yields for office buildings are low compared to the rest of
Europe; however, investment activities, mainly from local German investors, is
continuing in the major cities.


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     Holland is anticipating no change in office rents during 2002 compared to
2001 levels. This is due to the downturn of demand in the technology sector and
economic expectations generally. Vacancy levels in the major markets are
increasing fast. In 2000, vacancy levels stood at 1% to 1.5%, whereas they now
stand at the 9% mark, and may increase further.

     After rapid growth in 2000 and the first half of 2001, the Italian office
market stabilized following the events of September 11th and the general slowing
of the world economy. The investment market remains strong with interest coming
from international investors, particularly Germany, the U.S. and the U.K.

     In Spain, the weak and worsening office leasing market is expected to
result in low levels of transactional activity in 2002. Generally, the retail
and industrial markets are more robust than the office market, largely
attributable to their early stage of evolution in the Spain.

     In Belgium, the Company began 2002 with considerable project work in
backlog. Activity in the investment market is expected to be strong in 2002,
remaining relatively constant with 2001 levels. The leasing market in 2002 is
expected to be difficult due to a lack of demand, which is expected to adversely
affect transactional activity by 10% to 15%.

Competitive Position/Competition

     The Company believes that it is well positioned to meet the competitive
challenges present in the commercial real estate marketplace. Among its
competitive strengths are:

       o strong reputation and recognition of the Company's brand names within
         the industry

       o quality and depth of both its management and brokerage staff

       o entrepreneurial corporate culture, which allows it to respond quickly
         to opportunities

       o unique methodologies for implementing large, complex transactions

       o complete array of services, which allows it to both meet existing
         client needs and take advantage of cross-selling opportunities

       o extensive property services portfolio, which provides significant
         economies of scale

       o proven mergers and acquisitions capability to enhance and expand the
         platform

       o market leadership in three of the world's most important financial
         centers -- New York, London and Paris

       o ability to attract, retain, support and promote the highest quality,
         most skilled personnel in the industry

       o resources and expertise to deploy the Company's capital to create
         transactional and property services opportunities.

     United States

     Competition is intense in the U.S. commercial property services industry,
particularly in the areas of tenant representation, agency leasing and property
management. Historically, most competitors have been regional or local companies
specializing in one or more aspects of the business (e.g., property management,
tenant representation, etc.). However, the consolidation trend has spawned
fewer, larger international competitors that are integrated across property
types and disciplines. The Company competes increasingly with these full-service
national competitors, including Jones Lang LaSalle, Trammel Crow, CB Richard
Ellis, Cushman & Wakefield and Grubb & Ellis.

     Different factors weigh heavily in the competition for tenant
representation and property services assignments. For major tenant
representation assignments, competition is based on quality of services,
demonstrated track record, breadth of resources, analytical skills and market
knowledge. The Company has a distinct methodology for executing major tenant
representation assignments, which combines brokerage and consulting disciplines.
This methodology, honed in New York over the past decade, is being exported to
top tier markets throughout the United States. Further, the Company has an
outstanding track record in completing major tenant representation assignments.
The Company, as tenant representative, has arranged major transactions over the
past three years for such well-known entities as the following: JP Morgan Chase,
Lehman Brothers, Credit Suisse First Boston,


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Barclay's, Marsh & McLennan, Metropolitan Life Insurance, Deutsche Bank, The New
York Times Company, Empire Blue Cross Blue Shield, Waterhouse Securities,
Citigroup, Sidley Austin Brown & Wood and Martha Stewart Enterprises.

     As previously noted, the Company participated in the top two office-leasing
transactions and 22 of Manhattan's 50 largest office-leasing transactions for
the 2001 year, according to a list published in the February 2002 issue of
Crain's New York Business. Insignia's creativity and transaction-structuring
expertise have been recognized by a leading trade group, which annually
recognizes two New York City transactions as its "Deals of the Year." The
Company has been the recipient of such awards in five of the past six years,
including in 2001 (awarded for the Company's representation of Arthur Andersen
and Boston Properties in connection with a new corporate headquarters
development). The Company believes that its outstanding track record provides a
distinct competitive advantage.

     Competition for third-party commercial property services is based
principally on the cost and the quality of service, including the ability to
enhance asset values. The Company's personnel are experienced in managing a wide
variety of property types in locations throughout the country. This enables
Insignia to offer an owner of a large diversified portfolio the ability to
obtain experienced management for most or all of its properties through one
organization. The Company believes that it has demonstrated an ability to
effectively manage, lease and improve the value of properties. In addition, the
Company believes that it has developed a reputation for quality service and
attention to detail for clients, investors and tenants alike. The Company also
believes that its economies of scale and state-of-the-art management information
systems allow it to offer services efficiently and at an overall cost that is
competitive with or less expensive than those offered by other property service
companies. Because of its size and diversity, the Company is able to control
operating costs by spreading fixed overhead expenses across its large service
base, which enhances profitability and enables Insignia to pass cost savings on
to the property owners for which it provides services. Major property owner
clients include The Irvine Company, JP Morgan Chase, Metropolitan Insurance
Company, Teachers Insurance and Annuity Association and UBS-Brinson.

     United Kingdom and Continental Europe

     Competition is also intense among commercial service providers in Europe.
The Company's U.K. subsidiary has established itself as a market leader with a
"top three" position in the U.K. in commercial property markets, along with DTZ
and Jones Lang LaSalle. In 2001, the Company retained the number one position in
the highly competitive central London market for leasing and acquisition
services according to a survey published in the March 9, 2002 issue of Estates
Gazette. The Company believes that its U.K. subsidiary's operations and
reputation place Insignia at a strategic advantage over other primary
competitors including CB Hillier Parker, Knight Frank, Cushman & Wakefield and
FPD Savills. In France, the real estate marketplace is dominated by Vendome Rome
Auguste Thouard and Insignia Bourdais. Based on a survey published by
L'Immobiliere d'enterprise Magazine, these two firms collectively control
approximately 60% of leasing and investment activity in France, with Insignia
Bourdais maintaining almost a 20% share. DTZ Jean Thouard, Soprec and Keops are
other key players in France, but each maintains considerably less market share.

Residential Real Estate Services

     The Company's residential real estate services are focused on the New York
City marketplace through the operations of Insignia Douglas Elliman and Insignia
Residential Group. Through these businesses, the Company provides apartment
brokerage and leasing and condominium and cooperative apartment management. The
Company's residential services operations generated aggregate service revenues
of $119.2 million in 2001, or approximately 16% of the Company's total service
revenues.

     New York City Apartment Sales and Rentals

     Insignia Douglas Elliman, founded in 1911 and acquired by Insignia in June
1999, provides sales and rental services in the New York City residential
cooperative, condominium and rental apartment market. Through Insignia Douglas
Elliman, the Company commands the number two position in this market, according
to the March 11, 2002 issue of Crain's New York Business, with gross sales
volume of approximately $2.4 billion in 2001. Insignia Douglas Elliman also
operates in upscale suburban markets in Long Island (Manhasset, Locust Valley
and Port Washington/Sands Point). Insignia Douglas Elliman has approximately 850
brokers, supported by approximately 120 corporate employees in 12 offices in the
New York City area. In 2001, Insignia Douglas Elliman generated service revenues
of approximately $92.9 million, or 13% of the Company's total service revenues
for the year.


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     New York City Apartment Management

     Insignia Residential Group is the largest manager of cooperative,
condominium and rental apartments in the New York metropolitan area, according
to a survey in the February 2002 issue of The Cooperator. Insignia Residential
Group provides full service third-party fee management for more than 300
properties, comprising in excess of 60,000 residential units, and employs more
than 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 Worldwide Plaza, Fresh Meadows and Horizon House.
In 2001, Insignia was engaged to manage Stuyvesant Town/Peter Cooper Village, an
11,000-unit residential community owned by Metropolitan Life - one of the single
largest property services assignments ever awarded in New York City. Manhattan
is the largest market for Insignia Residential Group, although it also maintains
a presence in three other 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 total service
revenues of $26.3 million in 2001.

Services

     The residential services provided by the Company include the following:

     Residential Apartment Brokerage -- agency representation of both buyers and
sellers in the purchase and sale of residential housing, including assisting the
seller in pricing the property, marketing and advertising the property, showing
the property to prospective buyers, assisting the parties in negotiating the
terms of the sale and closing the transaction

     Leasing -- marketing of available space on behalf of owners/landlords of
properties and the consummation of leases with tenants

     Rental Brokerage -- agency representation of rental clients in the
procurement of suitable apartment housing

    Property Management -- accounting services on a cash or accrual basis, lease
administration, central purchasing, cash management, insurance oversight,
collections and compliance monitoring and construction management

    Mortgage Brokerage Services -- mortgage brokerage services including resale
and financing arrangements for customers through third-party financial
institutions

Market Trends

     The New York City co-op and condo market soared throughout the late 1990's
and into 2000, fueled by a robust economy and exceptional performance of the
nation's financial markets. The average sale price for a New York City apartment
grew from $531,000 in the first quarter of 1999 to $787,000 at year-end 2000.
The gross value of apartments sold reached a peak of $7.2 billion in 2000. Sales
of New York co-op and condo apartments began to slow in 2001 from the record
pace of 2000. Sales activity had been trending lower for most of 2001, mirroring
the weakening economy and contraction of the financial services sector. These
trends were magnified in the immediate aftermath of September 11th. New contract
signings declined significantly as apartment buyers put purchases on hold. Over
the course of the fourth quarter of 2001, the moderate-priced market segment
(units valued at less than $1 million) began to recover as buyer confidence was
slowly restored. Subsequently, the recovery began spreading to higher priced
market segments, but the high-end of the market - apartments listing for $5
million or more - had yet to show any appreciable recovery at year-end, as
buyers continued to put off lifestyle driven purchases.

Competitive Position/Competition

     The Company believes its competitive strengths in the residential real
estate marketplace include the following:

       o exceptional reputation and recognition of the Company's residential
         brand names

       o market leadership in the New York City  residential market

       o superior service capabilities


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       o inherent synergies between co-op/condo sales and rental activities and
         management of residential properties

       o developing synergies with the Company's commercial real estate services
         operations

       o leading edge use of information technology platforms tailored to the
         specific needs of residential clients

       o full range of residential services and innovative marketing practices

     Apartment Sales and Rentals

     Through Insignia Douglas Elliman, the Company enjoys a long-established
leadership presence in the New York City marketplace with a well-recognized
brand name and strong market share. Insignia Douglas Elliman's primary
competitors in New York City include, most notably, Terra Holdings, The Corcoran
Group, Inc. and Sotheby's International Realty. In 2001, Insignia Douglas
Elliman achieved the number two ranking in New York City, according to a survey
published in the March 11, 2002 issue of Crain's New York Business, based on
total sales volume of approximately $2.4 billion. This ranking represents a fall
from the number one position in 2000 and results solely from the combination of
three competitors - the former Brown Harris Stevens, Halstead/Feathered Nest and
Halstead Property Co. - under the ownership of Terra Holdings. Insignia Douglas
Elliman's brand name, geographic reach in the New York marketplace and its
alignment alongside the Company's other market leading New York operations of
Insignia/ESG and Insignia Residential Group represent clear advantages over most
competitors in the New York marketplace.

     Apartment Management

     Insignia Residential Group operates the largest cooperative and condominium
management business in the New York metropolitan area. The cooperative,
condominium and apartment management business is extremely competitive, with
price and service-quality being the primary determinants of success. In addition
to several large companies, including Charles Greenthal, Inc. and Brown, Harris
and Stevens, Inc., there are many small entities that aggressively compete for
business on price. Further, some owner associations have opted for
self-management, which eliminates the need for third-party service providers.
Despite the competitive landscape, the Company believes Insignia Residential
Group has a proven record and that it has the capability to continue to compete
successfully. Insignia Residential Group has grown to be a market leader by
offering superior service while providing its clients cost benefits not
available from smaller competitors. Examples are the lower cost of supplies,
insurance and other items that Insignia Residential Group purchases on behalf of
its clients using the buying power available because of its size volume.

REAL ESTATE PRINCIPAL INVESTMENT ACTIVITIES

Co-investment and Development

     Through Insignia Financial Services, the Company pursues opportunities to
invest in operating real estate assets. The Company identifies investment
opportunities for various clients and invests alongside of those clients or, in
limited instances, by itself in the purchase of qualifying properties. The
Company's co-investment partners include the following notable business
entities: Citigroup, ING Barings, Blackacre Capital Management, The Witkoff
Group, Lennar, Praedium, Lone Star Opportunity Fund, Prudential, GE Investments
and Whitehall Street Real Estate. As of December 31, 2001, Insignia had invested
capital of $29.3 million in 37 minority owned property assets. These properties
own over 9.5 million square feet of commercial property, 950 multi-family
apartment units and 875 hotel rooms. The Company's minority ownership interests
in co-investment property range from 1% to 30%. The gross aggregate asset
carrying value of these properties totaled more than $1 billion at December 31,
2001.

     As of December 31, 2001, wholly-owned subsidiaries of the Company owned
three commercial properties. The carrying amount of these properties totaled
$41.8 million and real estate mortgage notes encumbering the properties totaled
$37.3 million. These properties, which are consolidated in the Company's
financial statements, include the following: (i) Brookhaven Village, a 155,000
square foot retail facility located in Norman, Oklahoma; (ii) Dolphin Village, a
136,000 square foot retail facility located in St. Petersburg, Florida; and
(iii) Shinsen Place, an office building located in Tokyo, Japan that was
acquired for, and is currently under contract to be sold to, a client in late
March 2002. Insignia has invested capital of $5.5 million in these three
properties and has no further obligations to the subsidiaries or their
creditors.

     In addition, Insignia has an ownership interest in, and directs the
development of, four office developments. The Company also owns a parcel of
land, located adjacent to one of the developments, that is held for future
development. The Company's total


                                       9
<PAGE>

investment at December 31, 2001 in development assets was approximately $13.1
million. The four development properties have investment partners, with
Insignia's ownership in each ranging from 25% to 33%. Insignia has not initiated
any new development activities since mid-2000. The Company's obligations with
respect to development assets, beyond its investment, is limited to $8.9 million
in partial guarantees of construction financing.

Private Investment Funds

     Insignia Opportunity Trust

     Insignia Opportunity Trust ("IOT") is an Insignia-sponsored private real
estate investment fund formed in late 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
equity 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. All
capital commitments to IOT and IOP have been called and funded. Insignia has an
aggregate ownership interest of approximately 13% in IOT and IOP. Insignia
realized total earnings from IOT and IOP of approximately $2.8 million and
$847,000 during 2001 and 2000, respectively.

     Insignia Opportunity Partners II

     In September 2001, Insignia closed the capital-raising phase for a second
real estate investment fund, Insignia Opportunity Partners II ("IOP II"), with
$50 million of equity capital commitments from Insignia and third-party
investors. IOP II intends to invest primarily in secured real estate debt
instruments, similar to the investment initiatives of IOT. Insignia holds a 10%
ownership in IOP II and serves as its day-to-day advisor. The investment
activities of IOP II commenced in December 2001 and no earnings were generated
during the 2001 year.

     At year-end 2001, Insignia held investments totaling $11.6 million in IOT
and IOP II and had commitments to invest an additional $4 million in IOP II. The
gross carrying value of assets owned and managed by these two funds totaled
approximately $125 million at December 31, 2001.

DISCONTINUED OPERATIONS

     In late December 2001, Insignia entered into a contract to sell its Realty
One single-family home brokerage business and affiliated companies to Real
Living, Inc., effective as of December 31, 2001. Real Living, Inc. is a
privately held company formed by HER Realtors of Columbus, Ohio and Huff Realty
of Cincinnati, Ohio. The sale formally closed on January 31, 2002. The sale
price was approximately $33 million, including approximately $29 million in cash
at closing and additional payments aggregating as much as $4 million. These
payments include a $1 million reimbursement for Realty One operating losses in
January 2002; a potential earn-out of as much as $2 million payable over the
next two years (depending on the performance of the business); and a $1 million
operating lease payable over four years for the use of proprietary software
developed by Insignia for an Internet-based residential brokerage model. Realty
One's operations were discontinued for financial reporting purposes at December
31, 2001 and the results of operations for Realty One are reported separately in
the Company's financial statements for all periods presented for comparability.
The Company recognized a loss in connection with the sale of Realty One of
approximately $17.6 million (net of applicable taxes of $4 million) for the year
ended December 31, 2001. Assets and liabilities of Realty One have been
classified separately in the Company's consolidated balance sheets at December
31, 2001 and 2000. Further information on discontinued operations can be found
in Note 3 to the Company's consolidated financial statements included in Item 14
of this Form 10-K.

2002 OUTLOOK

     As expected, activity levels in all segments of the Company's real estate
service business declined in 2001 from the record levels of 2000. The breadth
and depth of the global recession - punctuated by September 11 - took a sharp
toll on nearly all the markets in which Insignia operates. The exception was the
New York City office market, which received a short-term stimulus in the fourth
quarter from the scores of businesses that were forced to procure new premises
in the wake of the terrorist attack in lower Manhattan. Absent such a stimulus,
the New York commercial market would have been characterized by the same
deteriorating fundamentals - slowing leasing activity, negative absorption,
decreased rents - as the rest of the nation.


                                       10
<PAGE>

     At the turn of 2002, U.S. commercial markets had yet to respond materially
to signs of an emerging economic recovery. Companies continue to be slow to make
occupancy decisions and excess supply continues to enter the markets in the form
of sublease space, albeit at rates markedly decreased from late 2001. When the
U.S. economy recovers, it will take time for U.S. commercial real estate markets
to rebuild momentum. That said, Insignia expects to benefit from its leadership
position in most first-tier U.S. central business districts, and should be able
to continue expanding its market share in a recovering economy.

     In Europe, GNP growth forecasts of approximately 1% in the U.K. and 0.8% in
France will present a challenging environment in 2002. However, any reduction in
U.K. leasing activity can be expected to be offset by increased consulting
assignments and a continuing favorable environment for investment activity. The
interest rate/yield gap can be expected to generate continued investor interest
in leveraged transactions. However, tightening credit standards will make
acquisitions more difficult to close. The French investment market continues to
attract a great deal of foreign capital, a trend that is expected to continue in
2002.

Roughly 16% of the drop in the Company's Net EBITDA (defined as income before
depreciation, amortization, income taxes and non-recurring charges) from 2000 to
2001 was attributable to losses associated with the Company's emerging Asian and
Latin American platform. The Company expects these operations to continue
incurring losses during the first half of 2002 as Insignia invests in
stabilizing these platforms. The Company expects these operations to achieve
break-even status for the 2002 year.

     The Insignia Douglas Elliman operations accounted for approximately 28% in
the year-to-year decrease in the Company's Net EBITDA. This business underwent a
management, marketing and branding re-positioning in 2001, which is expected to
improve market share and lower costs. To some extent, Insignia Douglas Elliman's
performance will track the overall prosperity of the New York City residential
real estate market. In early 2002, the market has shown signs of recovering from
the lackluster period exacerbated by September 11th. New contract signings
jumped 80% in January 2002 from December 2001. The continued strength of the New
York residential market will be dependent on an economic recovery, stability in
U.S. capital markets and the absence of new terrorist incidents.

     In the current environment, the Company has gone to great lengths to wring
discretionary expenses out of its cost structure and to defer non-essential
capital spending. As a result, the Company believes that it has aligned its cost
structure with the reduced level of business activity. However, contingency
expense reductions have been identified in the event that global real estate
markets deteriorate further in 2002. At the same time, Insignia is highly
conscious of maintaining and enhancing its essential platform - including, most
significantly, the human capital - that drives its business.

ACQUISITIONS

     Over the past decade, Insignia has continually demonstrated the ability to
recognize accretive acquisition opportunities and to successfully integrate them
within the Company's existing infrastructure. Insignia continues to seek
opportunities to align its business with other market leading real estate
service firms that fit the Company's objectives for expansion. Insignia
maintains an internal mergers and acquisitions staff comprised of experienced
professionals in both the U.S. and the U.K. Insignia acquired the following
commercial real estate services businesses during 2001:

Groupe Bourdais

     In late December 2001, Insignia completed the acquisition of Groupe
Bourdais, one of France's premier commercial real estate services companies.
Founded in 1954, Paris-based Bourdais has a total staff of 350 and operates
eight offices, including five in the Ile de France region (Greater Paris) and
regional offices in Lyon, Aix-en-Provence and Marseille. Bourdais also has
strategic affiliations and franchise agreements with local companies in 20
markets throughout France. The purchase price consists of total potential
consideration of approximately $49 million, including an initial payment of
approximately $21.4 million in cash and stock and additional payments totaling
up to approximately $28 million over the three years ending December 31, 2004,
depending on the performance of the Bourdais operation. Groupe Bourdais now
operates under the Insignia Bourdais name.

Baker Commercial

     In October 2001, Insignia acquired Baker Commercial Realty, Inc. ("Baker"),
a leading provider of commercial real estate services in the greater Dallas
area. Baker provides tenant representation, land and investment property sales
and strategic real estate planning. The Baker acquisition will augment
Insignia's existing regional tenant representation and investment sales
capabilities in the greater Dallas area. The base purchase price was
approximately $2.2 million and was paid in cash at closing. Additional purchase
consideration of up to $1.5 million, payable over three years, is contingent on
the future performance of the Dallas operations.


                                       11
<PAGE>

Brooke International - India

     In April 2001, Insignia further expanded its Asian presence through the
acquisition of Brooke International's operation in India. The purchase price for
the Indian operation was approximately $700,000, all of which was paid in cash
at closing. The India purchase followed 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.

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 purchase
price was approximately $550,000 and was paid in cash.

CREDIT AGREEMENT

     In May 2001, Insignia entered into 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 is used for working
capital and acquisition needs. At December 31, 2001, Insignia had borrowings of
$149 million on the facility and outstanding letters of credit of $12.3 million.
The Company paid down $32 million of revolving credit facility debt in January
2002 and at March 20, 2002 had maximum remaining availability of more than $100
million.

INDUSTRY SEGMENT DATA

     Insignia's operating activities for 2001 encompass three reportable
segments. The Company's segments include (i) commercial real estate services and
principal investment activities; (ii) residential real estate services; and
(iii) Internet-based e-commerce initiatives. The commercial segment provides
services including tenant representation, property and asset management, agency
leasing and brokerage, investment sales, development and re-development,
consulting and other services. The commercial segment also includes the
Company's principal real estate investment activities. Insignia's commercial
segment in 2001 comprises the operations of Insignia/ESG in the U.S., Insignia
Richard Ellis in the U.K. and other businesses in continental Europe, Asia and
Latin America. Insignia Bourdais, in France, commenced operations in January
2002. The residential segment provides services including apartment brokerage
and leasing, rental brokerage, property management and mortgage brokerage
services and consists of the New York based operations of Insignia Douglas
Elliman and Insignia Residential Group. Insignia's Internet initiatives, which
were launched in late 1999, have been terminated. The operating impact for 2001
is limited to $13.4 million of write-downs on equity Internet investments made
during late 1999, 2000 and early 2001 and $3.2 million of income resulting from
the liquidation of EdificeRex. The EdificeRex income represents the recognition
of losses in excess of investment incurred during the first half of 2000, prior
to de-consolidation of this once proprietary web-based business. Such excess
losses had been carried on the Company's balance sheet as a deferred credit
since de-consolidation in the third quarter of 2000. The Company terminated its
internally developed Internet initiatives at December 31, 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. Segment operations are disclosed in the notes to the
accompanying consolidated financial statements of the Company included in Item
14 of this Form 10-K. These financial statements should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 7 of this Form 10-K.

CHANGES IN ACCOUNTING PRINCIPLES

Revenue Recognition

     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,


                                       12
<PAGE>

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 years ended December 31, 2001 and 2000 are
presented in compliance with the requirements of this accounting change. The
cumulative effect of the accounting change on prior years resulted in a
reduction to income of $30.4 million (net of applicable taxes of $23.3 million),
which is included in net earnings for the year ended December 31, 2000. The
Company recognized revenue of $18.8 million and $80.4 million (before associated
commission expenses) during 2001 and 2000, respectively, that was included in
the cumulative effect adjustment at January 1, 2000. 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.

Business Combinations and Goodwill and Other Intangibles

     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 has adopted SFAS No. 141 for all business combinations
completed after July 1, 2001 and will fully implement SFAS No. 141 and SFAS No.
142 beginning in the first quarter of 2002. Amortization of goodwill that would
become non-amortizable under SFAS No. 142 totaled approximately $17.3 million
for the 2001 year. Elimination of this amortization would have improved income
by approximately $10 million (net of applicable taxes) and diluted earnings per
share by approximately $0.43 for 2001. The Company's initial impairment tests on
goodwill and other indefinite-lived intangible assets will be completed, with
any measured impairment recorded through earnings as a cumulative effect of a
change in accounting principle, during the first quarter of 2002. Insignia
preliminarily estimates an aggregate impairment charge before tax effects of
between $20 million and $50 million, based on current industry multiples. The
Company is obtaining a third party valuation to support its estimates, and the
amount of the impairment charge (together with related tax benefit) will not be
determined until the end of the first quarter.

RISK FACTORS

Market Conditions

     Periods of economic slowdown or recession, rising interest rates or
declining demand for real estate will adversely affect Insignia's business and
may cause, among other things:

     o   a decline in leasing activity;
     o   a decline in consumer demand for Manhattan residences;
     o   a declines in the availability of capital for investment in and
         mortgage financing for commercial real estate; and
     o   a decline in rental rates and/or a decline in real estate prices, with
         a commensurate decline in real estate service revenues, such as leasing
         and brokerage commissions and management fees.

     The real estate market tends to be cyclical and related to the condition of
the economy as a whole or, at least, to the public perception of the economic
outlook. Capital availability also tends to be cyclical, leading to periods of
excess supply or shortages. When supply is constrained or the economic outlook
is poor, leasing volumes may decline. When capital is constrained or there is
excess supply, property investment volume may decline.

Principal Investment Activities

     In addition to providing real estate services, Insignia invests in real
estate assets and real estate debt. Generally, the Company's investment strategy
involves identifying investment opportunities and investing as a minority owner
in entities formed to acquire such assets. Accordingly, the Company's ability to
make those kinds of investments depends in part on the supply of third party
investment capital for commercial real estate and related assets.

     As of December 31, 2001, the Company held investments totaling
approximately $29.3 million in 37 minority-owned entities that acquired existing
real estate throughout the United States and, in one instance, in London. The
Company's ownership interests in these entities ranged from 1% to 30%. In
addition to its investment, the Company is obligated to fund $455,000 in
additional


                                       13
<PAGE>

capital contributions and has entered into a guarantee of $5.2 million with
respect to a portion of the debt encumbering one of the assets.

     As of December 31, 2001, two wholly owned subsidiaries of the Company owned
three commercial properties. The carrying amount of these assets was $41.8
million, and real estate mortgage notes totaling $37.3 million encumbered the
assets. Two of these assets are shopping centers located in the United States,
and the third is an office building in Japan that was acquired for, and is under
contract to sell to, a client. The property sale is expected to close in late
March 2002.

     In addition, the Company has an ownership interest in, and directs the
development of, four office developments. The Company also owns a parcel of
land, located adjacent to one of the developments, that is held for future
development. The Company's total investment in these properties was
approximately $13.1 million at December 31, 2001 for interests ranging from 25%
to 100%. A subsidiary of the Company is obligated to complete construction of
each asset, and the Company has further outstanding $8.9 million in guarantees
of construction loans secured by letters of credit.

     Each entity in which the Company holds an investment is a single purpose
entity, the assets of which are subject to the obligations only of that entity.
Each entity's debt, except to the extent of the guarantees mentioned above, is
either (i) non-recourse except to the real estate assets of the subject entity
(subject to carve-outs standard in such non-recourse financing, including the
misapplication of rents or environmental liabilities) or (ii) an obligation
solely of such limited liability entity and thus is non-recourse to other assets
of the Company.

     These investments carry inherent risk, including the loss of the Company's
entire investment in any single asset. Because the disposition of a single
significant investment can impact the Company's financial performance in any
period, the Company's real estate investment activities could increase (and have
historically increased) fluctuations in the Company's net income. The Company's
acquisition of additional investments is subject to the availability of capital
to fund such investments. Because covenants in the Company's revolving credit
facility restrict the Company's ability to incur indebtedness and to raise
additional capital in many respects, the Company's investment activities may be
limited, which may impact the Company's future financial performance. An
inability to acquire additional investments will reduce the likelihood that the
Company will realize investment gains in future periods. The Company, as a
minority owner in investments it does acquire, has limited control over the
timing of the disposition of these investments and the realization of any gain.
The Company evaluates each asset on a quarterly basis for evidence of
impairment. Impairment losses are recognized whenever circumstances indicate
declines in property values below carrying amount and the related cash flows are
not believed sufficient to recover the Company's investment carrying amount.

     The Company provides real estate services to and receives real estate
service fees from the entities comprising its principal investment activities.
Such fees generally include property management fees, asset management fees,
development management fees, leasing commissions, acquisition fees, sales
commissions or financing fees. With respect to fees that are currently recorded
as expense by the entities, the Company includes the fees in current income,
while its share as owner of such fee is reflected in the income or loss from the
investment entity. If the fee is capitalized by the investment entity, the
Company records only the portion of the fee attributable to third party
ownership and defers the portion attributable to its ownership. The amount of
fees received in cash by the Company during 2001 and 2000 from such real estate
entities totaled approximately $8.8 million and $14 million, respectively. Of
such fees, $684,000 and $788,000 in 2001 and 2000, respectively, were not
recognized in revenue during the periods by virtue of the Company's ownership
interest.

Private Investment Funds

     The Company has sponsored the formation of two private investment funds to
make opportunistic investments in real estate related assets, primarily real
estate debt securities with an emphasis on below investment grade securitized
debt obligations backed by mortgages on commercial and multifamily real estate.
As of December 31, 2001, the Company had, through special purpose subsidiaries,
investments totaling $11.6 million in these funds and had an obligation to
invest an additional $4 million. The Company also receives certain fees in
connection with its management of the investments made by these funds. The
Company's minority ownership in these two entities ranges from 10% to 13%
(excluding promoted interests).

     The investments made by the funds are subject to risks similar to those
that the Company and its co-investment activities are subject to; including
risks associated with economic downturns, interest rate fluctuations and
declining demand for real estate. In addition, the activity of identifying,
acquiring and realizing on attractive real estate investment securities and
non-securitized obligations has, from time to time, been highly competitive and
involves a high degree of uncertainty. There can be no assurance that the
Company's funds will recognize their rate of return objectives.


                                       14
<PAGE>

     The risk with respect to these investments is increased by the use of
leverage to finance assets. While such leverage has generally been maintained at
no more that 25% of total capital, leverage available for this purpose has been
limited to repo financing. Such financing is much like margin debt, and if the
value of the asset financed declined, could result in losses from forced sales
by the lender.

Urban Concentration of Operations

     The Company's operations are concentrated in the world's largest financial
centers, including New York, London and Paris. In addition to risks related to
the local real estate markets and economies of these cities, there is the risk
that unusual events, including events such as those of September 11th, in one or
more of these cities could have a material adverse effect on the Company's
business and financial performance.

Acquisitions

     The Company's future success and profitability will depend, in part, on its
ability to enhance its management and operating systems, anticipate and adapt to
advances in technology, secure financing for capital expenditures and strategic
acquisitions and retain employees and customers through periods of internal
change. As discussed in Item I of this Form 10-K under the heading
"Acquisitions," the Company has in the past pursued and may in the future
continue to pursue an acquisition strategy that focuses on expansion both
domestically and internationally. This historical growth and any significant
future growth will continue to place demands on the Company's resources and
there can be no assurance that the Company will be able to acquire businesses on
favorable terms in the future. Challenges and issues commonly encountered in
strategic acquisitions include:

     o   diversion of management's attention to assimilating the acquired
         business;
     o   maintaining employment relationships with the Company's employees and
         employees of the acquired business;
     o   assimilating geographically dispersed personnel and operations;
     o   adverse short-term effects on results of operations;
     o   integrating financial and other administrative systems; and
     o   maintaining uniform standards, controls, procedures and policies.

     If the Company is not able to manage these risks, and there can be no
assurance that it will, its business could suffer significantly. In addition,
the clients of an acquired business could determine not to do business with the
Company. Conflicts could exist or arise out of the Company's representation of
both its long-term clients and the clients of the acquired business that could
threaten the Company's relationships with both its existing clients and its new
clients. If the acquired business does not perform as well as is expected, which
could be affected by the resignation of key employees, the loss of clients or
otherwise, goodwill recorded in connection with the acquisition could be written
off, having a negative impact on the Company's earnings.

     Insignia expects to finance future acquisitions and internal growth through
a combination of funds available under its revolving credit facility and cash
flow from operations. However, covenants in the revolving credit facility
restrict the Company's ability to make acquisitions and raise additional capital
in many respects. Accordingly, the Company may not be able to obtain financing
to complete acquisitions that it believes would benefit its business or
financial condition, resulting in lost business and growth opportunities.

International Operations

     Insignia derived approximately 16% of its total service revenues (20% after
giving pro forma effect to the acquisition of Groupe Bourdais) from outside the
United States in the fiscal year ended December 31, 2001. The increased scope of
international operations may lead to more volatile financial results and
difficulties in managing the combined businesses because of, but not limited to,
the following:

     o   unexpected changes in regulatory requirements;
     o   the burden of complying with multiple and potentially conflicting laws
         in differing jurisdictions;
     o   the impact of regional or country-specific business cycles and economic
         instability;
     o   currency restrictions and exchange rate fluctuations;
     o   limited familiarity with local business customs and operating
         environments;
     o   difficulties and costs of staffing and managing international
         operations;
     o   potentially adverse tax and tariff consequences;
     o   the geographic, time zone, language and cultural differences between
         personnel in different areas of the world; and
     o   war, civil disturbances and terrorist acts.


                                       15
<PAGE>

     Insignia intends to expand its international activities and to grow the
market in which its services and products are available. If the Company were
unable to successfully implement these plans, maintain adequate long-term
strategies that successfully manage the risks associated with its global
business or adequately manage operational fluctuations, its business, results of
operations or financial condition could be materially and adversely affected.

     On a pro forma basis, including the acquired Groupe Bourdais operation, for
the year ended December 31, 2001, 20% of the Company's service revenues and 37%
of EBITDA were derived from European operations conducted using the British
pound or euro currencies. All currencies other than the pound, euro and dollar
have comprised less than 1% of the Company's revenues. Because the pound and
euro have declined relative to the dollar over the three years ended December
31, 2001, the Company's reported revenues and earnings from European operations
during that period have been adversely affected when translated to dollars.
Continued changes in the value of such currencies against the dollar will affect
the Company's reported financial results in dollars.

     Insignia has in the past borrowed in pounds and euros under its revolving
credit facility, and in late 2000 entered into forward exchange contracts to
purchase pounds for pound denominated payments made in March 2001. These
activities were undertaken to hedge acquisition costs in Europe. The pound and
euro declined in value against the dollar while these hedges were outstanding
and, as a result, Insignia reported profits from the positions. In the second
quarter of 2001, Insignia closed all of its hedge positions and has not hedged
its pound and euro exposures since that date.

     Insignia also acquired an office building in Japan in late 2001,
simultaneously contracting to resell to a client in March 2002. Insignia
purchased yen to close the acquisition and simultaneously purchased a contract
to resell the same number of yen at a fixed dollar price in March.

     Insignia is authorized to use currency hedging instruments, including
foreign currency forward contracts, purchased currency options and borrowings in
foreign currency. Economic risks associated with these hedging instruments
include: (i) unexpected fluctuations in interest rates impacting Insignia's
future buying power for purchasing foreign currencies; and (ii) unexpected
changes in the timing and collection of funds related to the hedging
instruments, both of which can cause hedging instruments to be ineffective. An
ineffective hedging instrument may expose Insignia to currency losses, which
could have an adverse effect on Insignia's business, results of operations or
financial condition. There can be no assurance that such hedging will be
effective, nor can there be any assurance that Insignia will undertake hedges to
prevent losses on its foreign currency investments.

Competition

     Insignia competes across a variety of business disciplines within the real
estate services industry, including commercial agency leasing, tenant
representation, corporate property services, property and asset management,
investment sales, development, redevelopment, consulting services, real estate
oriented financial services and equity co-investment, as well as apartment
brokerage and leasing and condominium and cooperative apartment management. In
general, with respect to each of Insignia's business disciplines, it cannot
assure that it will be able to continue to compete effectively, will be able to
maintain current fee arrangements or margin levels or will not encounter
increased competition. Each of the business disciplines in which Insignia
competes is highly competitive on an international, national, regional and local
level. Depending on the industry segment, Insignia faces competition from other
real estate service providers, institutional lenders, insurance companies,
investment banking firms, investment managers and accounting firms (any of which
may be a global, national, regional or local firm). The consolidation trend has
spawned a number of larger international and national competitors that are
integrated across property types and disciplines, however many of Insignia's
competitors are local or regional firms, which are substantially smaller in
size, but which may be larger than Insignia in a specific local or regional
market.

     The advent of the Internet has introduced new ways of providing real estate
services, as well as new competitors to the industry. Insignia cannot currently
predict which competitors will remain in the industry nor can it predict what
its response to them will be. This response could require significant capital
resources, changes in Insignia's organization or technological changes. If
Insignia is not successful in developing and implementing a strategy to address
the risks and to capture the related opportunities presented by technological
changes on the emergence of e-business, its business, results of operations or
financial condition could be materially adversely affected.

     The Company has faced increased competition in recent years. In addition,
in recent years, there has been a significant increase in real estate ownership
by REITs that self-manage their real estate assets. Continuation of this trend
could shrink the number of properties available to be managed by third party
service providers, decrease the demand for the Company's services and thereby
significantly increase its competition. In general, the Company expects the
industry to become increasingly competitive in


                                       16
<PAGE>

the future. There can be no assurance that such competition will not have a
material adverse effect on the Company's business, results of operations or
financial condition.

Government Regulation

     The Company and its brokers, salespersons and, in some instances, property
managers are regulated by the jurisdictions in which they do business. These
regulations include licensing procedures, prescribed fiduciary responsibilities
and anti-fraud prohibitions. For example, the Company's brokerage of real estate
sales and leasing transactions requires the Company to maintain brokerage
licenses in each jurisdiction in which it operates. If the Company fails to
maintain its licenses or conducts brokerage activities without a license, it may
be required to pay fines or return commissions received or have its license
suspended. The Company's activities are also subject to various local, state,
national and international jurisdictions, fair advertising, trade, housing and
real estate settlement laws and regulations and are affected by laws and
regulations relating to real estate and real estate finance and development. In
particular, a number of jurisdictions have imposed environmental controls,
permitting requirements and zoning restrictions on the development of real
estate.

     The Company is subject to laws governing its relationship with employees,
including minimum wage requirements, overtime, working conditions and work
permit requirements. The Company believes that it has the necessary permits and
approvals to operate each of its properties and their respective businesses.

     Under the Americans with Disabilities Act of 1990 ("ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While the Company believes that the
properties in which it holds an equity interest are substantially in compliance
with these requirements, a determination that such properties are not in
compliance with the ADA could result in the imposition of fines or an award of
damages to private litigants.

Brokerage Activities

      In addition to the governmental regulations discussed above, as a licensed
real estate broker, Insignia and its licensed employees are subject to statutory
due diligence, disclosure and standard-of-care obligations in connection with
brokerage transactions. Failure to fulfill these obligations could subject
Insignia or its employees to litigation from parties who purchased, sold or
leased properties Insignia or its employees brokered. Insignia may become
subject to claims by participants in real estate sales claiming that Insignia
did not fulfill its statutory obligations as a broker.

     Project leasing revenues are derived from the steady turnover of tenants,
which provides the Company with an opportunity to earn a commission paid by the
owner of the property for renewing the existing tenant's lease or releasing the
space to a new tenant. In an economic downturn, occupancy rates can be affected
and there can be no assurance that existing tenants will renew or that new
tenants will be in the real estate market.

     The residential brokerage industry is subject to market compression, market
fragmentation and consolidation. Profit margins are being compressed primarily
as a result of increasing splits paid to real estate agents and rising marketing
costs in response to increased market competition.

Property Management

     Many of Insignia's property management clients are long-term clients that
use the Company's services for new projects as well as existing assignments. If
Insignia fails to maintain its existing client relationships or fails to develop
and maintain new client relationships, it could experience a material adverse
effect on its business, results of operations or financial condition. Consistent
with general practice in the real estate industry, many of these agreements are
cancelable by the client for any reason on as little as 30 to 60 days' notice.
The Company has been successful in retaining and renewing a significant portion
of its contracts, but may not be able to do so in the future. Moreover,
increased competition may force the Company to renew such contracts on less
favorable terms. The failure to secure renewals of existing contracts or the
necessity of entering into new contracts on less favorable terms could
negatively impact the Company's business, results of operations or financial
condition.




                                       17
<PAGE>


     Insignia's revenue from property management services is generally based
upon percentages of the revenue generated by the properties that it manages.
Therefore, Insignia's revenue would be adversely affected by decreases in the
performance of the properties it manages. Property performance typically depends
upon the following factors, many of which are partially or completely outside of
Insignia's control:

     o   the ability to attract and retain creditworthy tenants;
     o   the magnitude of defaults by tenants under their respective leases;
     o   governmental regulations, local rent control or stabilization
         ordinances that are or may be put into effect;
     o   the ability to manage operating expenses;
     o   various uninsurable risks;
     o   the nature and extent of competitive properties;
     o   financial and economic conditions generally and in the specific areas
         where properties are located; and
     o   the real estate market generally.

     In addition, in its property management business, Insignia supervises third
party contractors providing construction and engineering services for these
properties. While its role is limited to that of a supervisor, Insignia may be
subjected to claims for construction defects or other similar actions. Adverse
outcomes of property management litigation could negatively impact Insignia's
business, financial condition or results of operations.

Seasonality

     Insignia's operating income and earnings have historically been lower
during the first three calendar quarters than in the fourth quarter. The reasons
for the concentration of income and earnings in the fourth quarter include a
general, industry-wide focus on completing transactions by calendar year end, as
well as the constant nature of the Company's non-variable expenses throughout
the year versus the seasonality of its revenues. Based on its operating history,
the Company generally expects a pattern of 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. Neither the 2001 nor
2000 years have followed this typical seasonal pattern. As evidence, the 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 much lower second and third quarters than the preceding year due to the
effects of the global economic slowdown and the tragic events of September 11th.
As a result, quarter-to-quarter comparisons may be difficult to interpret. In
addition, market disruptions like that of the third quarter of 2001 can alter or
increase the effect of "normal" seasonality. Finally, revenue recognition on
lease commissions was changed as required by SAB 101, and the Company does not
yet have sufficient experience with this accounting method to predict its impact
on income seasonality. The Company plans its capital and operating expenditures
based on its expectations of future revenues. If revenues are below expectations
in any given quarter, the Company may be unable to adjust expenditures to
compensate for any unexpected revenue shortfall. The Company's business could
suffer as a consequence.

Environmental

     Under various federal and state environmental laws and regulations, a
current or previous owner or operator of real estate may be required to
investigate and remediate certain hazardous or toxic substances or
petroleum-product releases at the property, and may be held liable to a
governmental entity or to third parties for property damage and for
investigation and cleanup costs incurred by such parties in connection with
contamination. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs in
connection with the contamination. The owner or operator of a site may be liable
under common law to third parties for damages and injuries resulting from
environmental contamination emanating from or at the site, including the
presence of asbestos containing materials. Insurance for such matters may not be
available.

     The presence of contamination or the failure to remediate contamination may
adversely affect the owner's ability to sell or lease real estate or to borrow
using the real estate as collateral. There can be no assurance that Insignia, or
any assets owned or controlled by Insignia (as on-site property manager),
currently are in compliance with all of such laws and regulations or that
Insignia will not become subject to liabilities that arise in whole or in part
out of any such laws, rules or regulations. The liability may be imposed even if
the original actions were legal and Insignia did not know of, or was not
responsible for, the presence of such hazardous or toxic substances. Insignia
may also be solely responsible for the entire payment of any liability if it is
subject to joint and several liability with other responsible parties who are
unable to pay. Insignia may be subject to additional liability if it fails to
disclose environmental issues to a buyer or lessee of property. Management is
not currently aware of any environmental liabilities that are expected to have a
material adverse effect upon the operations or financial condition of the
Company.



                                       18
<PAGE>


Existing Debt

     The loans under the revolving credit facility bear interest at LIBOR plus a
margin that varies according to the ratio of debt to consolidated net income
before interest expense, taxes, depreciation, amortization and specified other
costs. Insignia is vulnerable to increases in interest rates as a result of
either increases in the base rate or the variable LIBOR margin. At December 31,
2001, the amount outstanding on the revolving credit facility was $149 million,
and the interest rate on amounts drawn was approximately 4.9%. A 100 basis
points increase in the effective interest rate would have increased interest
expenses by $1.3 million for the year ended December 31, 2001. The margin above
LIBOR for subsequent draws or rollovers is 2.50%. The Company used existing cash
to repay $32 million under the facility in January 2002.

     The revolving credit agreement contains covenants that limit actions. These
covenants could materially and adversely affect Insignia's ability to finance
its future operations or capital needs or to engage in other business activities
that may be in its best interest. The covenants limit Insignia's ability to,
among other things:

     o   engage in new lines of business or substantially alter its method of
         doing business;
     o   encumber assets;
     o   enter into sale and leaseback transactions;
     o   merge, consolidate or dispose of a substantial part of assets;
     o   dispose of stock in subsidiaries or have subsidiaries issue stock;
     o   engage in acquisitions, make loans or advances, or extend guarantees or
         enter into other investments;
     o   incur indebtedness;
     o   declare or pay dividends or make other distributions to shareholders;
     o   enter into transactions with affiliates; and
     o   engage in any real estate development activities except through special
         purpose unrestricted subsidiaries whose capitalization is subject to
         aggregate limits

     The revolving credit agreement also contains covenants concerning the
maintenance of a minimum consolidated net worth, a maximum ratio of total debt
to consolidated net income before interest, taxes, depreciation and amortization
and specified other costs, and certain other financial ratios.

     Insignia's ability to comply with these covenants may be affected by events
beyond its control, and it cannot be sure that it will be able to comply. A
breach of any of these covenants could result in a default under the revolving
credit agreement and, potentially, an acceleration of the obligation to repay
the indebtedness under the revolving credit agreement.

Anti-Takeover Considerations

     Certain provisions of the Company's Certificate of Incorporation and
By-Laws could have an anti-takeover effect. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of the
Board of Directors and in the policies formulated by the Board of Directors and
to discourage, delay, defer or prevent a takeover attempt, including an attempt
that might result in a premium over the market price for its common stock. These
provisions include:

     o   Staggered Board of Directors - The Company's Board of Directors is
         divided into three classes serving staggered three-year terms. Because
         the Company's Board of Directors is divided into classes, members of
         its Board of Directors may only be removed from office prior to the
         expiration of their terms if such removal is for "cause" and only by
         the vote of holders of a majority of the outstanding voting stock. The
         classified board provision could increase the likelihood that, in the
         event an outside party acquired a controlling block of Insignia's
         capital stock or initiated a proxy contest, incumbent directors
         nevertheless would retain their positions for a substantial period,
         which may have the effect of discouraging, delaying or preventing a
         change in control of Insignia.

     o   Stockholder Meetings - No action may be taken by the Company's
         stockholders except at an annual or special meeting of stockholders and
         no action may be taken by written consent in lieu of a meeting. Special
         meetings of the Company's stockholders may be called only by the
         Company's Chairman, President or Chief Executive Officer or by a
         majority of the Board of Directors. This limitation makes it more
         difficult for stockholders to take action opposed by the Board of
         Directors.

     o   Stockholder Proposals - The Company's stockholders must follow an
         advance notification procedure for certain stockholder nominations of
         candidates for the Company's Board of Directors and for certain other
         business to be conducted at any stockholders' meeting. This limitation
         on stockholder proposals could inhibit a change of control.


                                       19
<PAGE>

     o   Preferred Stock - The Company's Certificate of Incorporation authorizes
         the Company's Board of Directors to issue up to 20,000,000 shares of
         preferred stock, in one or more series, having such rights and
         preferences as may be designated by the Company's Board of Directors,
         without stockholder approval. The issuance of such preferred stock
         could inhibit a change of control. At December 31, 2001, 250,000 shares
         of Convertible Preferred Stock were outstanding. The approval of
         holders of at least two-thirds of the outstanding shares of Convertible
         Preferred Stock would be required in order to authorize, effect or
         validate any amendment, alteration or repeal of any of the provisions
         of the Company's Certificate of Incorporation or By-laws that would
         materially affect the preferences, rights or powers of the Convertible
         Preferred Stock.

     o   Delaware Anti-takeover Statute - Section 203 of the Delaware General
         Corporation Law restricts certain business combinations with interested
         stockholders upon their acquiring 15% or more of the Company's common
         stock. This statute may have the effect of inhibiting a non-negotiated
         merger or other business combination.

Employees

     The growth of the Company's business is largely dependent upon its ability
to attract and retain qualified personnel in all areas of its business,
particularly high-production real estate brokers. If the Company is unable to
attract and retain such qualified personnel, it may be forced to limit its
growth, and its business, financial condition or results of operations could
suffer. The pace of change within the Company (i.e. organizational and
technological) could impact its ability to retain personnel.

Insurance

     The Company has the types of insurance coverage, including comprehensive
general liability and excess umbrella liability insurance, that it believes are
appropriate for a company in the lines of business in which it operates. The
Company's management uses its discretion in determining the amounts, coverage
limits and deductibility provisions of appropriate insurance coverage on the
Company's properties and operations at a reasonable cost and on suitable terms.
This might result in insurance coverage that, in the event of a substantial
loss, would not be sufficient to pay the full value of the damages suffered by
the Company.

Lack of Terrorism Insurance

     In the wake of September 11th, commercial insurance underwriters have begun
to exclude acts of terrorism from commercial property liability insurance and/or
to offer such coverage at exorbitant rates. The lack of reasonably priced
terrorism insurance could severely limit the availability of debt and equity
capital to finance building acquisitions, new development and property
renovations, particularly for high-profile real estate in markets such as New
York City, London and Paris. The Company's principal investment activities and
investment sales business would potentially be affected, as buyers of real
estate would be unable to close on building acquisitions. The U.S. real estate
industry has mounted a lobbying campaign to persuade Congress to address the
urgent need for commercial terrorism insurance. However, as of March 20, 2002,
Congress had not taken any action.

EMPLOYEES

     Insignia has approximately 6,500 employees worldwide, including employee
brokers and other qualified real estate agents and sales associates.
Approximately 5,000 employees are located in the U.S. and the remaining
approximately 1,500 employees are located in Europe, Asia and Latin America.
Insignia believes that its employee relations are excellent.




                                       20
<PAGE>


EXECUTIVE OFFICERS

     The following persons serve as executive officers of Insignia. All
executive officers of Insignia serve at the discretion of the Board of
Directors.

<TABLE>
<CAPTION>
           NAME           AGE                         PRINCIPAL POSITIONS
           ----           ---                         -------------------
    <S>                  <C>     <C>
    Andrew L. Farkas       41    Chairman of the Board; Chief Executive Officer
    Stephen B. Siegel      57    Director; President; Chairman and Chief Executive Officer of
                                 Insignia/ESG, Inc.
    James A. Aston         49    Chief Financial Officer
    Jeffrey P. Cohen       34    Executive Vice President
    Frank M. Garrison      47    Office of the Chairman; President of Insignia Financial Services,
                                 Inc.
    Adam B. Gilbert        49    Executive Vice President; General Counsel; Secretary
    Ronald Uretta          46    Chief Operating Officer; Treasurer; President of Insignia/ESG,
                                 Inc.; President of Insignia Residential Group, Inc.
</TABLE>

     Andrew L. Farkas has been a director and Chairman of Insignia since its
inception in May 1998 and Chief Executive Officer of Insignia since August 1998.
Mr. Farkas served as a director of the Company's former parent from its
inception in August 1990 until the AIMCO merger in September 1998 and as
Chairman and Chief Executive Officer of the former parent from January 1991
until September 1998. Mr. Farkas also served as Chairman of the Board of
Trustees of Insignia Properties Trust, a publicly traded REIT subsidiary of the
former parent, from December 1996 until February 1999 (when it was merged into
AIMCO) and as Chief Executive Officer of Insignia Properties Trust from December
1996 until September 1998.

     James A. Aston has been Chief Financial Officer of Insignia since
August 1998. Mr. Aston served as Chief Financial Officer of the Company's former
parent from August 1996 until September 1998. Additionally, Mr. Aston served as
a Trustee of Insignia Properties Trust from December 1996 until February 1999
and President of Insignia Properties Trust from December 1996 until September
1998. Mr. Aston commenced employment with the Company's former parent in January
1991.

     Jeffrey P. Cohen has been an Executive Vice President of Insignia since
March 2000, and was Senior Vice President of Insignia from May 1998 until that
time. Mr. Cohen also serves as an Executive Vice President of Insignia Financial
Services, Inc. He was a Senior Vice President of the Company's former parent
from April 1997 until September 1998, and Executive Vice President and Secretary
of Insignia Properties Trust from May 1997 until February 1999. From September
1993 until March 1997, Mr. Cohen was an attorney with the law firm of Rogers &
Wells in New York, New York.

     Frank M. Garrison has held the title of the Office of the Chairman since
August 1998, and also serves as President of Insignia Financial Services, Inc.
Mr. Garrison served as an Executive Managing Director of the Company's former
parent and President of its Financial Services division from July 1994 until
September 1998. Additionally, Mr. Garrison served as a Trustee of Insignia
Properties Trust from December 1996 until February 1999 and Executive Managing
Director of Insignia Properties Trust from December 1996 until September 1998.
Mr. Garrison commenced employment with the Company's former parent in January
1992.

     Adam B. Gilbert has been General Counsel and Secretary of Insignia since
its inception in May 1998 and Executive Vice President of Insignia since August
1998. Mr. Gilbert also serves as a Senior Vice President of Insignia/ESG. He was
General Counsel and Secretary of the Company's former parent from March 1998
until September 1998. From January 1994 until February 1998, Mr. Gilbert served
as a partner in the law firm of Nixon, Hargrave, Devans & Doyle, LLP in New
York, New York.

     Stephen B. Siegel has been a director of Insignia since its inception in
May 1998 and President of Insignia since August 1998 and is Chairman and Chief
Executive Officer of Insignia/ESG. Mr. Siegel served as President of the Edward
S. Gordon Company Incorporated (now Insignia/ESG) from June 1992 to May 1998.

     Ronald Uretta has served as Chief Operating Officer and Treasurer of
Insignia since August 1998. Mr. Uretta also serves as President of Insignia/ESG
and President of Insignia Residential Group. He was Treasurer of the Company's
former parent from January 1992 until September 1998 and Chief Operating Officer
of the former parent from August 1996 until September 1998. Mr. Uretta served as
a Trustee of Insignia Properties Trust from December 1996 until October 1998.

     There are no family relationships among any of the executive officers of
Insignia.




                                       21
<PAGE>

ITEM 2 - PROPERTIES

     Insignia's principal executive office is located at 200 Park Avenue, in New
York, New York. The following table sets forth information on the operating
leases for the principal headquarters for each of Insignia's principal operating
units:

<TABLE>
<CAPTION>
      OPERATING UNIT                      LOCATION                   ANNUAL RENT      SQUARE FT.        EXPIRATION
      --------------                      --------                   -----------      ----------        ----------
<S>                             <C>                                  <C>               <C>            <C>
Insignia/ESG                    200 Park Avenue, New York, NY        $ 6,940,000       120,000        June 2011
Insignia Richard Ellis          Berkeley Square House, London          3,000,000        42,000        June 2003
Insignia Bourdais               160 Boulevard Haussmann, Paris           875,000        17,500        December 2010
Insignia Douglas Elliman        575 Madison Avenue, New York, NY         635,000        32,000        April 2004
Insignia Residential Group      675 Third Avenue, New York, NY         1,700,000        72,500        January 2009
</TABLE>

     The Company occupies additional office space in locations throughout the
United States, United Kingdom, continental Europe, Asia and Latin America under
leases expiring at various dates through 2012. Insignia believes its facilities
are adequate for current and future planned uses.


ITEM 3 - LEGAL PROCEEDINGS

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.

     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. 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; in November 2001, the Sixth Circuit
affirmed the terms of that judgment. In 2000, the sellers of Realty One funded
the initial cash portion of the settlement, totaling approximately $3.7 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 with the sellers of Realty One regarding the Company's indemnity
claim. The terms of the settlement required the sellers to pay $2 million to
Insignia as reimbursement for certain professional fees incurred in connection
with the Re/Max suit and this payment was collected in October 2001. The Company
incurred a one-time charge of $1.5 million in the second quarter of 2001 for
unrecovered costs stemming from the Re/Max suit. 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 the four years ending in
September 2005. The Company was provided with promissory notes that could be
entered against the sellers in the event of non-payment of these amounts.

     As part of the indemnity settlement, Insignia also agreed to share with the
sellers in the costs and expenses and any potential judgment or settlement of
two similar cases brought by individual Re/Max franchisees. One of these cases
was settled in late 2001 at a cost of approximately $30,000 to the Company.

     In January 2002, Insignia sold the Realty One business to a third party.
Insignia retains the obligation to defend against the remaining case and has
indemnified the buyer for costs associated with all Re/Max litigation. Insignia
continues to vigorously defend the remaining action.




                                       22
<PAGE>


ORDINARY COURSE OF BUSINESS 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
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.

     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. This
examination was concluded in November 2001. Insignia paid approximately $1.1
million upon final settlement, pursuant to the examiner's report.

     In December 2001, the Company entered into a stock purchase agreement with
Real Living, Inc., the purchaser, that provided for the sale of 100% of the
stock of Realty One and its affiliated companies. Such affiliated companies
included First Ohio Mortgage Corporation, Inc., First Ohio Escrow Corporation,
Inc. and Insignia Relocation Management, Inc. As a part of sale, the Company
agreed generally to indemnify the purchaser against all losses up to the
purchase price (subject to certain deductible amounts), resulting from the
following: (i) breaches by the Company of any representations, warranties or
covenants in the stock purchase agreement; (ii) pre-disposition obligations for
goods, services, taxes or indebtedness except for those assumed by Real Living,
Inc.; (iii) change of control payments made to employees of Realty One; and (iv)
any third party losses arising or related to the period prior to the
disposition. In addition, the Company provided an indemnification for losses
incurred by Wells Fargo Home Mortgage, Inc. ("Wells Fargo") and/or the purchaser
in respect of (i) mortgage loan files existing on the date of closing; (ii)
fraud in the conduct of its home mortgage business; and (iii) the failure to
follow standard industry practices in the home mortgage business. The aggregate
loss for which the Company is potentially liable to Wells Fargo is limited to
$10 million and the aggregate of any claims made by the purchaser and Wells
Fargo shall not exceed the purchase price. As of March 20, 2002, the Company is
not aware of any matters that would give rise to a claim under these warranties
and indemnities.

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

     No matter was submitted to a vote of the Company's stockholders, through
the solicitation of proxies or otherwise, during the fourth quarter of 2001.



                                       23
<PAGE>


                                     PART II

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

MARKET INFORMATION

     Insignia's common stock trades on the New York Stock Exchange under the
trading symbol "IFS". The following table sets forth the high and low daily
closing sale prices for the Company's common stock as reported on the New York
Stock Exchange for each quarter of 2000 and 2001:

<TABLE>
<CAPTION>
CALENDAR PERIOD                                            HIGH               LOW
---------------                                            ----               ---
<S>                                                      <C>               <C>
2000
   First Quarter..................................        $16.63             $7.56
   Second Quarter.................................        $13.75             $9.75
   Third Quarter..................................        $11.25             $9.19
   Fourth Quarter.................................        $11.94             $9.50

2001
   First Quarter..................................        $13.24            $11.30
   Second Quarter.................................        $12.82            $10.45
   Third Quarter..................................        $12.80             $9.50
   Fourth Quarter.................................        $10.95             $9.15
</TABLE>

     The closing sales price for Insignia's common stock on March 1, 2002, as
reported on the New York Stock Exchange, was $10.58. The Company's transfer
agent is First Union National Bank, 1525 West W. T. Harris Boulevard. Suite 3C3,
Charlotte, North Carolina 28288. As of March 1, 2002, there were approximately
1,500 shareholders of record of the Company's common stock.

     The Company has never paid dividends on its common stock and does not
currently intend to pay any dividends in the foreseeable future. Any payment of
future dividends and the amounts thereof will be dependent upon the Company's
earnings, financial requirements and other factors, including contractual
obligations. The payment of dividends is subject to certain restrictions under
the Company's credit facility.

Sales of Unregistered Equity Securities

     In connection with the December 2001 acquisition of Groupe Bourdais in
France, the Company issued 402,645 shares of the Company's common stock (valued
at a price of $9.93 per share) as partial consideration for the purchase. The
remainder of the base purchase consideration, totaling approximately $17.4
million, was paid in cash at closing. Additional purchase consideration of up to
approximately $28 million, payable over the three years ending December 31,
2004, is contingent upon the future performance of the Bourdais operation. The
Company has committed to pay the sellers a portion of the potential earnout (up
to approximately $2.3 million) in shares of the Company's common stock.

     The shares of the Company's common stock were issued in the acquisition to
the existing shareholders of Groupe Bourdais, none of whom were U.S. persons (as
defined in Rule 902 promulgated under the Securities Act of 1933, as amended).
Insignia issued such unregistered securities in reliance upon the exemption
provided by Regulation S promulgated under the Securities Act of 1933, as
amended.

Employee Stock Purchase Program

     The Company's 1998 Employee Stock Purchase Plan was adopted to provide
employees with an opportunity to purchase common stock through payroll
deductions at a price not less than 85% of the fair market value of the
Company's common stock. This plan is designed to qualify under Section 423 of
the Internal Revenue Code of 1986. During 2001, approximately 160,000 shares of
common stock were sold under this plan at an average price of approximately
$9.23 per share.

                                       24
<PAGE>

Stock Repurchases

     At December 31, 2001, Insignia held in treasury 1,502,600 repurchased
shares of its common stock. Such shares were repurchased at an aggregate cost of
approximately $16.2 million and are reserved for issuance upon the exercise of
warrants granted in 2000 to certain executive officers, non-employee directors
and other employees of the Company.

Preferred Stock Issuance

     On February 9, 2000, Insignia sold 250,000 shares of perpetual convertible
preferred stock, with a stated value of $100 per share, to investment funds
advised by Blackacre Capital Management for an aggregate purchase price of $25.0
million. The issuance was exempt from registration under the Securities Act of
1933, as amended, pursuant to Section 4 (2) thereof. The preferred stock pays a
4% cumulative annual dividend, payable at Insignia's option in cash or common
stock, and is convertible into the Company's common stock at the option of the
holder at $14 per share, subject to adjustment. The preferred stock is callable
by the Company, at stated value, at any time on or after February 15, 2004. In
2001, the Company paid cash dividends of $1 million and stock dividends of
$250,000 through the issuance of 25,000 shares of the Company's common stock.



                                       25
<PAGE>


ITEM 6 - SELECTED FINANCIAL DATA

     The following table sets forth selected historical financial data of
Insignia for the years ended December 31, 2001, 2000, 1999, and of those
Insignia businesses included in the Company's September 1998 spin-off for the
years ended December 31, 1998 and 1997. The selected financial data for all
periods presented has been restated to segregate the results of Realty One on a
discontinued basis. Operating results for the years ended December 31, 2001 and
2000 are presented in compliance with the requirements of the SAB 101 accounting
change. All prior years are presented as previously reported without
restatement.

     This information has been derived from and is qualified by reference to the
consolidated financial statements of the Company and the notes thereto and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included as Item 7 in this
Report. Certain amounts for prior years have been reclassified to conform to the
2001 presentation.

<TABLE>
<CAPTION>
                                                                      FOR THE YEAR ENDED DECEMBER 31,
                                                   ---------------------------------------------------------------------
                                                         2001        2000          1999          1998         1997
                                                         ----        ----          ----          ----         ----
                                                                    (In thousands, except per share data)
<S>                                                <C>            <C>            <C>           <C>          <C>
STATEMENTS OF OPERATIONS DATA:
  Total revenues                                      $ 741,749    $ 781,211     $ 576,319     $ 404,067    $ 271,470
  Service revenues                                      737,780      775,999       574,442       404,067      271,470
  Income from continuing operations                       5,721       21,229         7,724         8,073       12,692
  (Loss) income from discontinued operation             (19,229)         558         2,574         2,980          363
  (Loss) income before cumulative effect of a
    change in accounting principle                      (13,508)      21,787        10,298        11,053       13,055
  Cumulative effect of a change
    in accounting principle                                --        (30,420)           --            --           --
  Net (loss) income                                     (13,508)      (8,633)       10,298        11,053       13,055

PER SHARE AMOUNTS - ASSUMING DILUTION (1):
  Income from continuing operations                   $    0.20    $    0.87     $    0.34     $    0.37          N/A
  (Loss) income from discontinued operation               (0.82)        0.02          0.12          0.13          N/A
  (Loss) income before cumulative effect of a
    change in accounting principle                        (0.62)        0.89          0.46          0.50          N/A
  Cumulative effect of a change
    in accounting principle                                --          (1.24)           --            --          N/A
  Net (loss) income                                       (0.62)       (0.35)         0.46          0.50          N/A

OTHER DATA:
  Cash provided by operating activities               $  26,705    $  80,368     $  57,977     $  35,857    $  31,370
  Cash used in investing activities                     (25,809)     (74,044)     (171,107)     (128,140)     (87,667)
  Cash provided by financing activities                   9,985       59,023       121,443       140,194       61,767
  EBITDA (2)                                             56,262       77,777        51,503        40,359       35,244
  Net EBITDA (2)                                         54,458       78,046        48,871        44,741       36,382
</TABLE>

<TABLE>
<CAPTION>
                                                                               AT DECEMBER 31,
                                                   ---------------------------------------------------------------------
                                                         2001        2000          1999          1998         1997
                                                         ----        ----          ----          ----         ----
                                                                               (In thousands)
<S>                                                <C>            <C>            <C>           <C>          <C>
BALANCE SHEET DATA:
  Cash and cash equivalents                           $ 131,860    $ 122,196     $  61,600     $  53,489    $    5,514
  Real estate investments                                95,710      102,170        76,298        58,196        19,454
  Total assets                                          918,343      925,625       795,313       595,489       337,945
  Total debt                                            207,241      176,938       164,322        44,438        19,969
  Investment and net advances from the
    Company's former parent                                  --           --            --            --       208,444
  Stockholders' equity                                  399,857      408,881       393,069       383,243            --
</TABLE>

(1) Per share amounts for 1997 are not presented because Insignia was not a
separate entity during that period.


                                       26
<PAGE>

(2) EBITDA is defined as real estate services revenues less direct expenses and
administrative costs. Net EBITDA is defined as income before depreciation,
amortization, income taxes and non-recurring charges.

     Neither EBITDA nor Net EBITDA, as disclosed above, should be construed to
represent cash provided by operations pursuant to accounting principles
generally accepted in the United States ("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. As compared to net income, these measures effectively
eliminate the impact of non-cash charges for depreciation, amortization of
intangible assets and other non-recurring charges. Management believes
presentation of these supplemental measures enhance a reader's understanding of
the Company's operating performance.

      The selected financial data for the periods prior to the Company's
spin-off in September 1998 from its former parent are based on the historical
financial statements of those Insignia businesses owned by the former parent as
if Insignia were a separate entity for those entire periods presented. Such
financial information is not necessarily indicative of results that would have
occurred had Insignia operated as a stand-alone entity separate from the former
parent during the periods presented prior to the spin-off.





                                       27
<PAGE>

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

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2001 AND 2000

     Insignia's 2001 year was marked by a slowing worldwide economy, disruption
in the markets following the September 11th tragedy and the strategic decision
to sell Realty One. Service revenues from continuing operations declined 5% to
$737.8 million, and income from continuing operations declined 73% to $5.7
million. The year began following heady 35% services revenue growth in 2000 with
most markets, particularly the Manhattan office market, the central London
office market and the Manhattan co-op and condominium market, marked by short
supply. Insignia's business plan for 2001 at the beginning of the year noted
such short supply as the constraining factor that would likely limit volume.

     Following a better than normal first quarter, volume began to slow. In
retrospect, this was the first sign of a slowing global economy. That condition
became the factor most affecting operations during 2001 rather than the short
supply originally anticipated. The third quarter was particularly poor. A
disproportionate amount of third quarter volume is typically concluded in the
post Labor Day (U.S.) and post August holiday (Europe) periods. However, the
usually high volume month of September became the weakest month of the year in
the aftermath of September 11th. This was particularly the case in New York,
which is by far the largest market for Insignia.

     The fourth quarter rebounded both as a result of business beginning to
return to normal, including the conclusion of many of the largest transactions
in progress during the year as well as some additional, unanticipated volume
assisting tenants displaced in New York City. As a result, Insignia reported
acceptable results for the year, particularly considering the economic
conditions and their affect on client decisions. However, such results were well
below the record 2000 results.

     Insignia management monitors and evaluates its financial performance using
three measures. Net EBITDA is defined as income before depreciation,
amortization, income taxes and non-recurring charges. Net EBITDA deducts all
interest expense and includes Funds From Operations ("FFO") from real estate
investments. Real estate FFO is defined as income or loss from real estate
operations before depreciation, gains or losses on sales of property and
provisions for impairment. The second measure used by management is Income from
Real Estate Operations. This measure deducts depreciation and amortization from
the Net EBITDA measure. It also includes gains or losses on real estate
investments together with income taxes associated with service operations and
real estate investments. The final measure is Income from Continuing Operations.
This measure further incorporates the now completed Internet business and
investment strategy as well as non-recurring life insurance proceeds in 2000.
Net EBITDA, FFO and Income from Real Estate Operations are measures that are not
defined by GAAP and Insignia's usage of these terms may differ from other
companies' usage of the same or similar terms.

     The table on the following page depicts our operating results, in a format
that highlights the above three measures, for the years ended December 31, 2001,
2000 and 1999, respectively. Operating results for all periods presented reflect
the results of Realty One on a discontinued basis for financial reporting
purposes. Certain amounts for the year ended December 31, 1999 have been
reclassified to conform to the current presentation. This information has been
derived from the Company's consolidated statements of operations for the years
then ended.



                                       28
<PAGE>


<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                             2001                2000                 1999
                                                             ----                ----                 ----
                                                                               (In thousands)
    <S>                                                <C>                   <C>                   <C>
     REAL ESTATE SERVICES REVENUES
         Insignia/ESG                                     $  498,073          $  500,152           $  389,208
         Europe                                              120,475             141,752              108,562
         Residential                                         119,232             134,095               76,672
                                                       ---------------------------------------------------------
           TOTAL REAL ESTATE SERVICES REVENUES               737,780             775,999              574,442

     COST AND EXPENSES
         Real estate services                                668,079             681,867              511,113
         Administrative                                       13,439              16,355               11,826
                                                       ---------------------------------------------------------
     EBITDA - REAL ESTATE SERVICES (1)                        56,262              77,777               51,503
         Real estate FFO (2)                                   6,064               3,877                3,758
         Interest and other income                             4,869               6,772                4,103
         Foreign currency transaction gains                      331               1,365                  827
         Interest expense                                    (12,407)            (11,745)              (7,048)
         Merger related expenses                                (661)                 --               (4,272)
                                                       ---------------------------------------------------------
     NET EBITDA (1)                                           54,458              78,046               48,871
         Applicable income tax                                (3,207)            (17,013)              (9,780)
                                                       ---------------------------------------------------------
     AFTER TAX NET EBITDA                                     51,251              61,033               39,091
         Gains on sale of real estate                         10,986               3,884                2,767
         Real estate impairment                                 (824)             (1,806)                  --
         Tax on real estate                                   (4,376)               (831)              (1,107)

         Depreciation - FF&E                                 (15,392)            (10,350)              (5,911)
         Amortization of intangibles                         (24,408)            (23,825)             (21,703)
         Depreciation - real estate                           (5,754)             (5,125)              (4,465)
                                                       ---------------------------------------------------------
                                                             (45,554)            (39,300)             (32,079)
                                                       ---------------------------------------------------------
     INCOME FROM REAL ESTATE OPERATIONS                       11,483              22,980                8,672
         Life insurance proceeds                                  --              19,100                   --
         Losses from Internet investments                    (10,263)            (35,527)              (1,580)
         Income tax benefit                                    4,501              14,676                  632
                                                       ---------------------------------------------------------
                                                              (5,762)             (1,751)                (948)
                                                       ---------------------------------------------------------

     INCOME FROM CONTINUING OPERATIONS                         5,721              21,229                7,724
       Discontinued operations:
          (Loss) income from discontinued operation,
             net of applicable taxes                          (1,600)                558                2,574
          Provision for loss on disposal, net of
             applicable taxes                                (17,629)                 --                   --
                                                       ---------------------------------------------------------

      (Loss) income before cumulative effect of a
          change in accounting principle                     (13,508)             21,787               10,298

    Cumulative effect of a change in accounting
      principle, net of applicable taxes                          --             (30,420)                  --
                                                       ---------------------------------------------------------
      NET (LOSS) INCOME                                   $  (13,508)         $   (8,633)          $   10,298
                                                       =========================================================
</TABLE>


(1) Neither EBITDA nor Net EBITDA, as disclosed above, should be construed to
represent cash provided by operations determined pursuant to 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.


                                       29
<PAGE>

(2) Real estate 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 operations.

Commercial Real Estate Services

     Revenues from commercial services declined 4%, or $23 million, to $618.5
million in 2001. United States commercial services revenue declined by $2
million to $498 million, European revenues declined by $25.3 million to $116.4
million and start-up operations in Asia and Mexico added $4 million in revenues.
EBITDA from commercial services declined by 23%, or $19 million, to $64 million.
United States EBITDA declined by $5.6 million to $51.1 million, European EBITDA
declined by $9.3 million to $16.6 million and the start-up Asian and Latin
American operations produced negative EBITDA of $3.9 million.

     Revenues in commercial services are significantly impacted by SAB 101. The
impact is primarily confined to the United States, though a small number of
European transactions are impacted. SAB 101 required a change as of the
beginning of 2000 in the manner in which leasing commissions are recognized as
revenue. Leasing is the single largest source of revenue to Insignia. For 2001,
leasing commissions accounted for 70% of U. S. commercial services revenue, more
than 60% of worldwide commercial services revenue and more than 50% of
Insignia's total revenues.

     Insignia represents both tenants and landlords in the leasing of commercial
property -- office, industrial and retail. The leasing process may last from
weeks to years. Once a lease is signed and a commission agreement is in place,
Insignia's services are concluded. However, market customs and individual
negotiations govern the terms of the commission agreement. Some commissions are
earned and payable upon execution of the lease. Some are payable in installments
on specific dates. Others are payable in installments on the occurrence of
certain events, such as lease execution, occupancy by the tenant, or payment of
rent for a specified period (typically first month, first six months or first
year). In other much rarer instances, installments are paid on a schedule that
may require a refund by Insignia if events such as those identified in the
preceding sentence fail to occur. Under SAB 101, any commission billable (or
refundable) upon a condition other than the passage of time may not be
recognized until the billing condition is met or the refund contingency expires.
The primary impact of SAB 101 is the recognition of income on affected leases
from the date Insignia's performance is complete to the date the tenant
satisfies the obligations under his lease that are specified conditions in the
commission agreement.

     In 2000, application of SAB 101 reduced reported revenues by $59.8 million.
In 2001, the application of SAB 101 increased revenues by more than $30 million.
The impact on 2001 was the result of recognition of previously completed leases
closed during the years 1998 - 2000, reduced by deferrals of 2001 transactions.
It is important to note that SAB 101 does not affect many leasing transactions.
In fact, the largest transactions concluded in both 2000 and 2001 were not
affected by the provisions of SAB 101. This accounting requirement does limit
Insignia's ability to predict its revenues in the short term (one quarter to one
year). This occurs because the conditions of SAB 101 are controlled by the
tenant and not by Insignia, and Insignia's estimate of the date those events
will occur often varies by months. Further, while Insignia monitors its
transaction backlog from prospect to conclusion, no particular transaction can
be reliably forecast from a revenue recognition standpoint until the commission
agreement is executed with the conditions to billing specified. This often
occurs at or near the same time as the execution of the lease.

     United States commercial services benefited from the investment programs
undertaken in prior years by the financial services portion of the business.
Those investments reached a meaningful income production stage in 2001,
increasing their EBITDA contribution by $5 million to $5.3 million. An earnings
contribution of approximately $2.8 million was provided by Insignia Opportunity
Trust, which became fully invested in 2001, representing an increase from
$847,000 in the year 2000. A second similar fund was launched in late 2001 did
not begin to produce income during the 2001 year. In addition, the development
program commenced several years ago increased its contribution to approximately
$2.9 million in 2001, compared to approximately $1.5 million in 2000. Insignia
is currently emphasizing its investment programs; however, no new development
projects have commenced since mid-2000, and four properties are currently under
development.

     The traditional commercial services portion of the U.S. operation suffered
a decline in EBITDA of more than $10 million in 2001, compared to 2000. This
decline - on only a marginal decrease in revenues - arose from a number of
factors, the largest of which was higher commission expense. Commission expense
includes a formulaic bonus to the consulting department computed on commission
revenues allocated to that department. In 2000, revenues were recognized under
SAB 101 as to which contractual bonuses to the consulting department had been
paid in prior years, without any ability to recover. This circumstance created a
$10 million lower commission expense in 2000 than would have occurred without
the accounting change under SAB 101 and also contributes to an increase in the
average reported commission rate for 2001. In late 2000, the Company modified
the formulaic


                                       30
<PAGE>

consulting department bonus such that the expense of such bonus would match
reported revenues in future periods. Further, production in 2001 was skewed
toward markets with higher average commission rates, and within those markets,
production was relatively greater among brokers who had attained higher
commission splits. The result was an overall commission expense of $15 million
higher than the amount that would have been recorded at 2000 average commission
rates. There were no changes in overall commission programs that would otherwise
account for this change.

     Rent expense increased by approximately $3.5 million in 2001. Of this
increase, approximately $1.25 million arose from the renewal at the Company's
New York City headquarters. Most of the remainder of the increase was
attributable to expansions primarily in California, Boston and Washington. Also,
Insignia's share of expenses of the Octane consortium increased by nearly $1
million, to $1.9 million, in 2001. Conversely, incentive compensation declined
by approximately $10 million as a result of lower earnings.

     Insignia's European operations are dominated by its U.K. offices, which
produced more than 90% of European revenues and EBITDA for 2001 and 2000. The
decline in European revenues and EBITDA in 2001 is directly attributable to
lower leasing and investment sales volume in the key London market. For 2001,
revenues from leasing and investment sales declined from 2000 levels by 34% and
35% to $21.4 million and $19.8 million, respectively. The year 2000 was an
exceptional period for both of these service lines as transaction volume reached
unprecedented levels. Entering 2001, market expectations were that 2000 activity
levels would not be sustained and results for 2001 reflected this expected
decline. The weakened economic conditions and the unavoidable period of
inactivity that followed the events of September 11th further compounded the
declines in Europe.

     At the same time, revenues from professional services and consulting in
2001 remained relatively flat as compared to 2000. Property services revenues
for 2001 were maintained by the valuation practice, which experienced growth in
assignments compared to the levels experienced in 2000.

     During 2001, Insignia opened a small office in Madrid, Spain and added
staff to its offices in Brussels and Milan. Most importantly, in December 2001,
Insignia acquired Insignia Bourdais, one of the largest real estate service
firms in France. For 2001 (not included in Insignia's results), Insignia
Bourdais produced revenues of almost $39 million.

     Asian and Latin American operations were started in 2001 and collectively
produced EBITDA losses of $3.9 million. These operations now give Insignia the
ability to serve clients in Hong Kong, China, Japan, Thailand, India, Mexico and
parts of South America. The losses for the 2001 year were greater than Insignia
had anticipated as a result of later additions of important capability and the
weak Asian economies. Insignia had expected these operations to be profitable in
2002 when the decision was made to expand into the markets. However, it now
seems likely that losses will continue in the first half of 2002 with an
objective of attaining break-even status for the 2002 year.

Residential Real Estate Services

     Revenues from residential services - provided through New York-based
Insignia Douglas Elliman and Insignia Residential Group -declined 11%, or $14.9
million, to $119.2 million in 2001. Virtually all of the decline from year
2000's exceptionally strong pace can be attributed to the erosion in transaction
volume and sales prices in the New York apartment market.

     Insignia Douglas Elliman produced service revenues and EBITDA of $92.9
million and $4.7 million, respectively, for the 2001 year. These operating
results represented sharp declines of 14%, or $14.6 million, for revenues and
58%, or $6.5 million, for EBITDA, compared to 2000. The softening of the economy
in early 2001, which continued up to and was exacerbated by the events of
September 11th, led to a serious deterioration in contract activity in the New
York City and tri-state area markets. The volume of units sold dropped more than
13% from 2000 and average sales prices declined 3% year-over-year. Further,
gross transaction volume declined 16% to $2.4 billion in 2001. The decrease in
activity was experienced across the mix of real estate inventory in the New York
City marketplace, with the only exceptions being increases in sales of new
cooperative development projects and commercial space leasing.

     Insignia Douglas Elliman's earnings in 2001 were hindered most
significantly by the adverse affects of the lower transaction volume on
revenues. Although, an increase in average commission expense rates also
contributed to the decline in EBITDA in 2001. Broker commission splits entering
2001 were in many cases maintained at 2000 year-end levels, which had reached
heightened levels due to the robust volumes achieved during the 2000 year. The
higher commission rate in 2001 resulted in a $1.2 million decline in EBITDA from
the amount that would have been generated at 2000 commission levels. Other
operating expenses in 2001 declined modestly from 2000.


                                       31
<PAGE>

     Insignia Residential Group in 2001 showed a significant increase in EBITDA
compared to 2000, despite a marginal decline in revenues to $26.3 million. For
all of 2001, Insignia Residential Group generated EBITDA of $1.2 million,
representing an increase to almost three times the level experienced in 2000
($452,000). Revenues from core management increased almost 6% over 2000 as a
result of higher fees on new business, the implementation of 2001 management fee
increases to all existing clients and material declines in un-reimbursed
property related expenditures. These operating efficiencies were achieved in
part through a reorganization plan implemented in late 2000 that resulted in the
termination of non-profitable management engagements, prudent expense reductions
and a better matching of revenues and operating expenses on a individual project
basis. This reorganization resulted in the achievement of more than $1 million
in total expense savings in 2001. The 2001 year was also marked by the second
quarter engagement as property manager and leasing agent for Peter Cooper
Village and Stuyvesant Town, a 11,000 unit portfolio in Manhattan. The addition
of this significant property portfolio contributed $800,000 to total 2001
revenues. On an annualized basis, this engagement is estimated to contribute
approximately $1.5 million to Insignia Residential Group's total service
revenues.

Administrative

     Administrative expenses declined by 18% to $13.4 million in 2001. Virtually
the entire change relates to lower incentive compensation attributable to the
lower overall performance of the Company.

Other Items Included in the Determination of Net EBITDA

     Interest and other income declined by 28% to $4.9 million. One reason was
lower interest rates available on short-term investment of cash on hand. The
average rate for 2001 declined to approximately 3% from over 5% in 2000. At the
same time, cash declined significantly in March 2001 as record incentive
compensation was paid based on 2000 performance. In addition, all remaining
contingent purchase consideration for Insignia's U.K. operations was achieved,
resulting in a payment of more than $22 million in March 2001 (through issuance
of loan notes secured by restricted cash). As a result, average cash available
for short-term investment also declined by approximately $25 million from 2000.

     Interest expense increased despite lower interest rates. Insignia's
interest rate on its revolving credit facility averaged approximately 6% in 2001
versus 8% in 2000. The average rate at December 31, 2001 was 4.9%. Average
borrowings were approximately $15 million higher in 2001 as a result of $15
million borrowed in mid-2000 for Internet investments and a further $10 million
drawn in early 2001. The average interest rate on the $117 million outstanding
under the revolving credit facility after a $32 million pay-down in January 2002
was approximately 4.5%.

     In 2001, Insignia acquired Baker Commercial in Dallas in an attempt to
transform its predominantly property management business in Dallas to a more
balanced operation with quality brokerage capability. As a part of that
acquisition, Insignia decided to vacate its existing office space and move to a
location more suitable to the new business mix. A charge of $661,000 was taken
at the acquisition date in connection with the lease.

     Foreign currency translation was not a significant factor in 2001 as
Insignia closed out substantially all of its euro and pound borrowings in the
second quarter the year.

     Real Estate FFO from Insignia's investment portfolio increased 56% to $6.1
million in 2001. More than $200,000 of the change was attributable to adding or
selling properties during 2001, while almost $2 million of the increase was
achieved solely from improved property operations. Of the FFO reported in 2001,
more than $1 million related to properties sold during the year and no longer
owned at December 31, 2001. FFO is a financial measure that is not defined by
GAAP and Insignia's usage of this term may differ from other companies' usage of
the same or similar terms.

Other Items Included in the Determination of Income

     Gains on sales of real estate through minority-owned entities nearly
tripled to $11 million. The increase is substantially attributable to the sale
of Fresh Meadows, an apartment complex in New York in which Insignia held a
17.5% profits interest. This property was acquired in December 1997. Property
sales are difficult to predict and will likely vary considerably from year to
year. In addition, as a minority owner, Insignia does not control the sale
decision. Insignia currently expects to sell in 2002 between four and seven
properties out of the thirty-seven minority owned properties at December 31,
2001. Based on Insignia's current estimates of value, gains realized by Insignia
could range from $5 million to $10 million in 2002, although there can be no
assurances of the timing or amount of any gains.


                                       32
<PAGE>

     Insignia owns minority interests in entities owning three properties
acquired in 2001. This was a lower than expected addition to the portfolio as a
result of declining property prospects in our view. Insignia also recorded
impairment write-downs on four investments in 2001. Insignia's analysis
indicated that the lease prospects of a telecom building and lower income being
produced by certain hotel assets resulted in values less than their carrying
amounts.

     Depreciation expense (excluding property depreciation) in 2001 rose 49% to
$15.4 million, or $5 million over 2000. The increases are attributed to capital
spending of more than $65 million over the past three years for new information
technology platforms and leasehold improvements in connection with the upgrade
and relocation of offices in key U.S. markets and London.

     Amortization of intangibles increased 2% to $24.4 million for the 2001
year. This increase reflects amortization of contingent earnouts paid in 2001.
Such additional purchase consideration was recorded as costs in excess of net
assets of acquired businesses.

     Insignia wrote off all remaining Internet business assets and investments
in 2001, except for a $1 million investment in a multiple venture fund
equivalent to fair value of that investment as reported by that fund's manager.
Internet losses for 2001 totaled a net $10.3 million, before tax effects,
reflecting Internet investment write-downs of approximately $13.4 million and
income of $3.2 million resulting from the final liquidation of EdificeRex in
December 2001. This income represented the culmination of those losses of
EdificeRex in excess of the Company's investment basis incurred during the first
half of 2000 when the Company consolidated EdificeRex.

     Income taxes declined in 2001, as compared to 2000, commensurate with lower
income.

     Insignia reported a net loss for 2001 of $13.5 million, or $0.62 per
diluted share. This net loss includes the effects of a $17.6 million loss on
disposal and a $1.6 million net operating loss for the discontinued Realty One
operations. Despite the resulting significant book loss on disposal in 2001, the
decision to sell Realty One was one of strategic significance. The sale price of
Realty One was six times that operation's 2001 EBITDA, representing a multiple
that management believes is a significant premium over the value the public
markets have placed on the Company over the past three years.

YEARS ENDED DECEMBER 31, 2000 AND 1999

     Insignia's results for 2000 and 1999 have been restated to segregate the
operations of Realty One on a discontinued basis for financial reporting
purposes. As disclosed above, Insignia entered into a contract in late December
2001 to sell Realty One and its affiliated companies headquartered in Cleveland,
Ohio and completed the sale on January 31, 2002.

     Insignia's financial results for 2000 were highlighted by record financial
performance levels and a change in accounting for revenue recognition for
leasing commissions in compliance with SAB 101, which was reflected as a
cumulative effect of a change in accounting principle as of January 1, 2000. The
cumulative effect of the SAB 101 accounting change on prior years resulted in a
reduction to income for 2000 of $30.4 million (net of applicable taxes of $23.3
million), or $1.24 per share. The effect of retroactive application of the
accounting change to January 1, 2000 lowered service revenues by $59.8 million,
Net EBITDA by $18.1 million and income before the cumulative effect of the
accounting change by $10.5 million, or $0.43 per share, for the 2000 year.

     For 2000, Insignia reported substantial growth compared to 1999 in all
financial measures as service revenues grew 35% to $776 million and Net EBITDA
grew 60%, or $29.2 million, to $78 million. Income from Real Estate Operations
grew sharply to $23 million for 2000, reflecting a gain of 165% over $8.7
million for 1999. These operating results were fueled by vigorous organic growth
in the Company's U. S. and European commercial real estate services operations
and full year contributions from Insignia Douglas Elliman (acquired in June
1999) and St. Quintin (acquired in March 1999).

Commercial Real Estate Services

     For 2000, commercial services produced aggregate service revenues of $641.9
million and EBITDA of $82.5 million, reflecting gains of 29% for revenues and
46% for EBITDA, as compared to 1999. These results for 2000 reflect
year-over-year growth pursuant to the SAB 101 accounting change, which
materially understates actual growth over 1999 on a comparable basis. Commercial
real estate services produced approximately 73% and 84%, respectively, of
Insignia's total service revenues and EBITDA (before unallocated administrative
costs) for 2000. Substantially all of the revenue and EBITDA gains in 2000 were
from organic growth, reflecting the Company's continued success in securing
assignments from new and existing commercial real estate


                                       33
<PAGE>

customers in both the United States and Europe. The Company's Asian operations
were launched in December 2000 with the acquisition of Brooke International.

     The year 2000 was an extraordinary period for the U.S. commercial real
estate services operation. The Company's well developed U.S. commercial service
delivery platform and the continuation of strong economic conditions propelled
operating performance to record levels. For 2000, the Company generated U.S.
commercial service revenues of $500.2 million and EBITDA of $56.7 million,
representing material gains of 29% for revenues and 36% for EBITDA, compared to
1999. U.S. commercial leasing activity remained strong across the board, with
all Insignia/ESG regions contributing to the revenue and EBITDA growth for the
year. It is noteworthy to add that the year-over-year domestic gains were almost
entirely attributed to organic growth. The New York region, the Company's
largest market, continued to produce exceptional operating results, generating
more than 50% of the Company's total U.S. commercial services revenue and EBITDA
for 2000.

     In Europe, financial results for 2000 were also significant, with reported
services revenue of $141.8 million and EBITDA of $25.9 million. Such operating
results reflected revenue gains of $33.2 million, or 31%, and EBITDA gains of
$11.1 million, or 76%, over 1999. The year 2000 was one of the most successful
years in Insignia Richard Ellis's history with operating results reflective of
the full benefits of the 1999 merger with St. Quintin. Insignia Richard Ellis
achieved the number one market position in central London, with responsibility
for more leasing activity than any other firm. As evidence, the Company's U.K.
operation generated service revenues and EBITDA of $132.2 million and $24.6
million, respectively, for 2000. These operating results represented growth of
26% in revenues and 66% in EBITDA compared to 1999. The Company's continental
European businesses produced aggregate service revenues and EBITDA of $9.6
million and $2.1 million (before European administrative expenses),
respectively, for 2000. These results, which represented gains over 1999 of $5.5
million for revenues and $1.7 million for EBITDA, were attributable primarily to
marked improvement in Germany together with positive contributions from the
Netherlands operations, acquired in March 2000.

Residential Real Estate Services

     Residential services of Insignia Douglas Elliman and Insignia Residential
Group generated aggregate service revenues and EBITDA of $134.1 million and
$11.6 million, respectively, for 2000. This operating performance represented
revenue gains of 75% and EBITDA gains of 67% over 1999 and was substantially
attributable to contributions from the full year of operations for Insignia
Douglas Elliman. Insignia Douglas Elliman produced service revenue and EBITDA of
$107.5 million and $11.2 million, respectively, for the 2000 year. These
operating results represented material increases of $57.8 million, or 116%, for
revenues and $4.8 million, or 75%, for EBITDA, compared to 1999. Insignia
Residential Group produced relatively flat operating results for 2000, compared
to 1999, generating service revenues of $26.5 million and EBITDA of $452,000.
The comparable results for 1999 were service revenues of $26.9 million and
EBITDA of $581,000.

Administrative

     Administrative expenses rose 38% from $11.8 million in 1999 to
approximately $16.4 million in 2000. These increases reflect increased executive
compensation in connection with a new employment agreement with the Chairman and
robust performance meeting maximum incentive targets for the 2000 year.

Other Items Included in the Determination of Net EBITDA

     Interest and other income increased from $4.1 million in 1999 to $6.8
million in 2000. The increase is attributed to materially higher average cash
holdings during the 2000 year, in combination with gains of approximately
$862,000 on forward contracts to purchase British pounds. In addition, the
Company realized foreign currency gains of approximately $1.4 million in 2000,
principally from facility borrowings in declining European currencies. In
comparison, foreign currency gains totaled $827,000 for the 1999 year.

     Interest expense increased 67%, or $4.7 million, to approximately $11.7
million for 2000, compared to 1999. This increase is due principally to
increases in prevailing interest rates throughout 2000, interest charges on 1999
credit facility borrowings of approximately $110 million to finance the
acquisitions of Lynch Murphy in Boston, St. Quintin in the U.K. and Douglas
Elliman and further borrowings of $15 million in 2000 to finance e-commerce
initiatives.

     The Company recognized gains of $1.4 million in 2000 from foreign currency
transactions, principally from facility borrowings in declining European
currencies. Such gains in 1999 totaled $827,000, again attributed primarily to
fluctuations in pound and euro currency borrowings on the Company's revolving
credit facility.


                                       34
<PAGE>

     In 1999, the Company incurred a one-time charge of $4.3 million ($3.1
million net of tax) for merger related expenses in connection with the March
1999 acquisition of St. Quintin and its merger with Richard Ellis Group Limited.
The one-time charge was substantially comprised of costs to vacate excess office
space and, to a lesser extent, severance costs. The charge included provisions
for rent expense during the period from vacancy to sublease, costs of
improvements required for sublease, rent concessions, excess rent over sublease
terms and severance. All excess office space was subleased and severance costs
were incurred prior to December 31, 1999.

     Real estate FFO from the Company's investment programs totaled
approximately $3.9 million for 2000, remaining relatively flat compared to $3.8
million generated in 1999. FFO is a financial measure that is not defined by
GAAP and Insignia's usage of this term may differ from other companies' usage of
the same or similar terms.

Other Items Included in the Determination of Income

     Gains from the sale of real estate totaled $3.9 million for the 2000 year,
increasing $1.1 million over the $2.8 million realized in 1999. Real estate
investment earnings for 2000 were lowered by impairment write-downs of $1.8
million in two investments in under-performing assets. Based on the Company's
evaluation of the occupancy levels and operating cash flows of these properties
it was concluded that the estimated recoverable value of these investments was
less than book carrying value.

     Internet-based business initiatives adversely affected income for 2000,
resulting in pre-tax losses of approximately $35.5 million for the year. These
losses include approximately $18.4 million in aggregate impairment write-downs
(including both internal initiatives and third-party investments), $9.3 million
of EdificeRex operating losses during the first half of 2000 prior to
de-consolidation, and $7.8 million of other internal operating expenses.

     Depreciation expense (excluding property and Internet depreciation)
continued to increase during 2000 consistent with capital spending during 1999
and 2000 for leasehold improvements, IT infrastructure and financial accounting
systems for the U.S. businesses. Depreciation totaled approximately $10.4
million in 2000, a $4.4 million increase over 1999.

     Amortization of intangibles increased 10% to $23.8 million in 2000,
compared to $21.7 million during 1999. The 2000 year reflects a full year impact
of purchased intangible amortization for the 1999 acquisitions of St. Quintin
and Insignia Douglas Elliman.

     Income taxes for 2000 declined 69% compared to 1999, despite higher income,
due primarily to the non-taxable nature of income of $19.1 million from life
insurance proceeds.

     The Company's net earnings for 2000 were favorably affected by income of
$19.1 million from life insurance proceeds. Conversely, income for 2000 was
adversely affected by pre-tax Internet losses totaling $35.5 million, including
$18.4 million in impairment write-downs of the Company's internally developed
businesses and certain third party investments.

     Earnings for the 1999 year were marked by the first quarter absence of
large brokerage transactions in the aftermath of the late 1998 capital markets
turmoil and the aforementioned $4.3 million merger related charge related to the
merger of the Company's U.K. operations.

     In 2000, the Company reported income, before cumulative effect of a change
in accounting principle, of $21.8 million. This performance represented a
significant increase of 112%, over $10.3 million, over 1999. On a per share
basis, such earnings represented $0.89 for 2000 compared to $0.46 for 1999. The
Company reported a net loss of $8.6 million for 2000, after the $30.4 million
cumulative effect of the SAB 101 accounting change. The cumulative effect of the
SAB 101 accounting change lowered 2000 earnings per share by $1.24 to a loss per
share of $0.35.

LIQUIDITY AND CAPITAL RESOURCES

     Insignia's liquidity and capital resources are available in the form of
cash, unused capacity under its revolving credit facility and cash generated by
operations. Historically, capital expenditures and investments in minority
ownership interests in real estate related investments have been funded through
cash from operations, and the revolving credit facility has been used to fund
the cash portion of acquisitions of businesses and, in one instance, to fund
e-commerce investments of $15 million.


                                       35
<PAGE>

     The Company uses After Tax Net EBITDA as a proxy for its cash flow from
operations. While this measure differs from cash provided by operations under
GAAP, the GAAP measure differences tend to be temporary in Insignia's businesses
and by its construction matches incentives earned in the prior year with current
year operations. Thus, cash provided by operations for 2000 does not reflect
record incentives for that year, while the lower performance of 2001 bears those
record 2000 incentives in cash provided by operations. Additionally, cash
provided by operations includes certain real estate interests and Internet
activity, which Insignia views as non-operating activities.

     Insignia's unrestricted cash at December 31, 2001 was approximately $132
million. Of this amount, approximately $50 million was used in the March 2002 to
pay 2001 incentive compensation. The remaining incentive compensation is payable
only when and to the extent certain leasing commissions are collected. Other
than this use, Insignia does not expect the remainder to be required for
operations other than for very short-term fluctuations. As a result, $32 million
was applied to reduce the outstanding balance under the revolving credit
facility in January 2002. The table below summarizes Net EBITDA after income tax
effects and deductions for capital expenditures for the last three years to
derive a measure of working capital resources produced by operations. Such
capital resources represent amounts generally available for real estate
investment or other purposes.

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                 2001           2000          1999
                                                 ----           ----          ----
                                                           (In thousands)
           <S>                               <C>            <C>            <C>
           NET EBITDA                        $   54,458     $   78,046     $   48,871
           Applicable income tax                 (3,207)       (17,013)        (9,780)
                                           --------------------------------------------
           AFTER TAX NET EBITDA                  51,251         61,033         39,091

           Capital expenditures                 (15,604)       (25,807)       (25,399)
                                           --------------------------------------------
              TOTAL                          $   35,647     $   35,226     $   13,692
                                           ============================================
</TABLE>

Insignia's debt at December 31, 2001 and 2000 consisted of the following:

<TABLE>
<CAPTION>
                                                                          2001            2000
                                                                     ------------------------------
                                                                             (In thousands)
          <S>                                                          <C>             <C>
          DEBT
          Outstanding amount under revolving credit facility           $  149,000      $  122,350
          Loan notes payable to sellers of acquired U.K.
             businesses, secured by restricted cash holdings               20,972           6,219
                                                                     ------------------------------
          Notes payable                                                   169,972         128,569

          Real estate mortgage notes payable                               37,269          48,369
                                                                     ------------------------------
             TOTAL                                                     $  207,241      $  176,938
                                                                     ==============================
</TABLE>

     With respect to the loan notes, all amounts are guaranteed by a bank as
required by the terms of the respective purchase agreements and the bank holds
restricted cash deposits sufficient to repay the notes in full when due. Real
estate mortgage notes consist of three notes each secured by a single asset
owned by Insignia subsidiaries and is recourse only to the applicable real
estate asset. Insignia's equity at book value in these three property
subsidiaries totaled $5.5 million at December 31, 2001. As a result of these two
circumstances, Insignia only considers the revolver in its analysis of liquidity
and capital resources.

     Insignia's revolving credit facility matures in May 2004 and has a maximum
availability of $230 million. In addition to the amount outstanding, Insignia
has outstanding letters of credit described further below of $12.3 million
($11.6 million pertaining to real estate investment obligations) that are
considered outstanding amounts under the terms of the revolving credit facility.
As a result, the maximum remaining availability at December 31, 2001, was $68.7
million (increasing to $100 million after giving effect to the use of existing
cash in January 2002 to reduce the balance outstanding by $32 million).

     The revolving credit facility is subject to certain covenants, the most
restrictive of which is the leverage ratio. Under this covenant, the maximum
amount outstanding cannot exceed 3 times EBITDA for the trailing four quarters,
after giving pro forma


                                       36
<PAGE>

effect to acquisitions and dispositions. Because the third quarter of 2001 was
so negatively affected by September 11th, Insignia requested and obtained a
temporary increase of the leverage ratio to 3.25 until the third quarter of 2001
is no longer included in the trailing four quarters calculation. Insignia's
request was not in respect of any default or potential default. Rather, Insignia
recognized that the inclusion of such a poor quarter, caused by very unusual and
uncontrollable events, in the four quarters calculation would render
availability for unforeseen investment opportunities unacceptably low.

     At December 31, 2001, the actual availability under the revolver was
approximately $42 million, without taking into account any pro forma EBITDA with
respect to any future acquisition that might be made with a use of proceeds.
Actual availability increased to $74 million with the pay-down in January 2002.
Insignia believes that the existing revolver contains sufficient capacity for
any anticipated investment opportunities.

     The revolving credit facility also is subject to a minimum net worth
covenant of $345 million. Insignia expects that it will record impairment on
certain goodwill during the first quarter of 2002 as a cumulative effect of an
accounting change required under SFAS 142. The amount of such impairment is not
yet known, but it is possible that the amount could violate this covenant or
bring Insignia's net worth unacceptably close to the covenant. Insignia
preliminarily estimates an aggregate impairment charge before tax effects in the
range of $20 million to $50 million, based on current industry multiples. The
revolver contains a requirement for the banks to negotiate in good faith with
Insignia to effect a modification so that required accounting changes in
accordance with GAAP do not adversely affect Insignia's compliance with
covenants.

     Insignia invests in real estate assets and real estate related assets,
usually as a minority owner and asset manager or property manager, with third
party investors. These investments include operating real estate properties,
real estate under development and investment entities investing in below
investment grade or lower rated securitized real estate debt. Each of these
entities is debt financed. The real estate entities in which Insignia owns a
minority interest are obligated on aggregate debt of $698 million at December
31, 2001. Each entity is liable only for its own debt, and a substantial
majority of the debt is non-recourse other than to the asset financed. At
December 31, 2001, the Company's real estate investments totaled $95.7 million
and consisted of the following:

<TABLE>
<CAPTION>
                                                                                AMOUNT
                                                                           ----------------
                                                                            (In thousands)
         <S>                                                               <C>
         Minority interests in operating properties                          $   29,282
         Wholly-owned properties                                                 41,788
         Minority interests in development properties                            10,761
         Land held for future development                                         2,308
         Minority interests in real estate debt investment funds                 11,571
                                                                           ----------------

            TOTAL REAL ESTATE INVESTMENTS                                    $   95,710
                                                                           ================
</TABLE>

     The real estate carrying amounts of the three wholly-owned properties at
December 31, 2001 were financed by real estate mortgage notes encumbering the
assets totaling $37.3 million. At December 31, 2001, Insignia had invested
capital of approximately $5.5 million in these wholly-owned properties and has
no further obligations to the subsidiaries or their creditors. One of the
properties is an office building in Tokyo, Japan that was acquired for, and is
under contract for sale to, a client. The sale is expected to close in late
March 2002.



                                       37
<PAGE>


     Apart from the potential loss of its net investment, which totaled $59
million at book value in all real estate entities at December 31, 2001,
Insignia's other assets are only at risk with respect to specific obligations it
has undertaken or to standard carve-outs in the mortgage lending industry from
the non-recourse provisions of mortgage loans. Insignia, as a matter of policy,
would consider advancing funds to such an entity beyond its obligation as a new
investment requiring normal returns. At December 31, 2001, Insignia's aggregate
obligations to all such real estate entities consisted of the following:

<TABLE>
<CAPTION>
                                                                               AMOUNT
                                                                          ----------------
                                                                           (In thousands)
          <S>                                                             <C>
          Letters of credit partially backing construction loans             $    8,900
          Other partial guarantees of property debt                               5,250
          Future capital contributions for capital improvements                     455
          Future capital contributions for acquisitions                           4,000
                                                                          ----------------

             TOTAL OBLIGATIONS                                               $   18,605
                                                                          ================
</TABLE>

     Insignia also has obligations for earnouts, or contingent consideration,
with respect to past acquisitions. One earnout of a maximum amount of $6.4
million is believed extremely unlikely to ever become payable. Other acquisition
earnouts, excluding Insignia Bourdais, are believed more likely than not of
being met, and the amounts payable in that case would be as follows:

                        YEAR                         AMOUNT
                      ----------------------------------------
                                                 (In thousands)
                        2002                        $  7,500
                        2003                           3,500
                        2004                           2,500
                        2005                           1,000
                                                 --------------
                        TOTAL EARNOUTS              $ 14,500
                                                 ==============

     Insignia expects to pay these amounts from cash provided from operations.

     With respect to Insignia Bourdais, the $21.4 million paid at closing in a
combination of cash and stock was based on an annual minimum EBITDA expectation
of $4 million. To the extent actual EBITDA of Insignia Bourdais for the year
ending March 31, 2002 exceeds that amount, additional purchase consideration of
up to approximately $9.5 million would become payable. Further, an earnout
provision over calendar years 2002, 2003 and 2004 provides for additional
purchase price of up to $18.5 million. Earnout payments of that amount would
require average annual EBITDA over the three years of more than $10 million, and
all earnout calculations are based upon a multiple of total purchase
consideration to EBITDA of approximately 4.2.

     Insignia's capital expenditure estimate for 2002 is approximately $15
million; however, a substantial portion of this amount will be deferred until
the Company is reasonably comfortable that economic activity is increasing. The
Company's capital expenditures for 2001 totaled approximately $15.6 million
(excluding Realty One's discontinued operation).

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 has adopted SFAS No. 141 for all business combinations
completed after July 1, 2001 and will fully implement SFAS No. 141 and SFAS No.
142 beginning in the first quarter of 2002. Amortization of goodwill that would
become non-amortizable under SFAS No. 142 totaled approximately $17.3 million
for the 2001 year. Elimination of this amortization would have improved income
by approximately $10 million (net of applicable taxes) and diluted earnings per
share by approximately $0.43 for 2001. The Company's initial impairment tests on
goodwill and other indefinite-lived intangible assets will be completed,


                                       38
<PAGE>

with any measured impairment recorded through earnings as a cumulative effect of
a change in accounting principle, during the first quarter of 2002. Insignia
anticipates an aggregate impairment charge before tax effects of between $20
million and $50 million based on current industry multiples. The Company is
obtaining a third party valuation to support its estimates, and the amount of
the impairment charge (together with related tax benefit) will not be determined
until the end of the first quarter.

     In October 2001, the Financial Accounting Standards Board issued SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No.
144 provides accounting guidance for financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. It also supersedes the accounting and reporting of APB
Opinion No. 30 "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" related to the disposal of a segment of a
business. SFAS No. 144 is effective for fiscal years beginning after December
15, 2001, although early adoption is encouraged. Insignia adopted SFAS No. 144
at December 31, 2001 in conjunction with the Company's sale of Realty One.

CRITICAL ACCOUNTING POLICIES

     Management's discussion and analysis of financial condition and results of
operations is based upon the Company's consolidated financial statements, which
have been prepared in accordance with GAAP. The preparation of these financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. The Company
bases its estimates on historical experience and assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis
for making judgments about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Insignia believes the
following critical accounting policies affect its significant judgments and
estimates used in the preparation of its consolidated financial statements.

     Revenue Recognition

     The Company's real estate services revenues are generally recorded when the
related services are performed or at closing in the case of real estate sales.
Prior to 2000, leasing commission revenues were recorded when the related
services were performed, generally at lease signing, unless significant
contingencies existed. With the adoption of SAB 101 in 2000, the Company was
required to change its method of accounting for leasing commissions. Under SAB
101, leasing commissions that are payable upon tenant occupancy, payment of rent
or other events beyond the Company's control are now recognized upon the
occurrence of such events. As certain conditions to revenue recognition for
leasing commissions are outside of the Company's control, judgment must be
exercised in determining when such required events to recognition have occurred.

     Bad Debts

     Insignia maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of clients to make required payments. If the
financial condition of the Company's clients were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be
required.

     Valuation of Investments

     The Company reviews each of its investments in unconsolidated real estate
and Internet entities on a quarterly basis for evidence of impairment.
Impairment losses are recognized whenever events or changes in circumstances
indicate declines in value of such investments below carrying value and the
related undiscounted cash flows are not sufficient to recover the assets
carrying amount. In 2001, the Company recorded impairment losses of $13.4
million on remaining Internet investments and $824,000 on four real estate
investments based on this evaluation. In 2000, Insignia recorded Internet
impairment losses totaling $18.4 million.




                                       39
<PAGE>


     Valuation of Intangibles

     The Company's intangible assets substantially consist of property
management contracts and costs paid in excess of net assets of acquired
businesses. Through December 31, 2001, the Company used an undiscounted cash
flow methodology to determine whether underlying operating cash flows were
sufficient to recover the carrying amount of intangible assets. Beginning
January 1, 2002, costs in excess of net assets of acquired businesses will no
longer be amortized but will be evaluated annually for impairment based on a
reporting unit fair value approach as required by SFAS 142. In determining fair
value of a reporting unit, the Company relies on the application of generally
accepted valuation approaches including an income approach (discounted cash
flows) and a market approach, which includes both comparisons to other
comparable publicly traded businesses and searches of recent transactions
involving similar businesses.

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 affecting
operating results in Europe, Asia and Latin America.

     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 and real property values impact the revenues of the
Company's New York-based co-op and condo brokerage and apartment leasing
business.

     Economic trends in 2001 were characterized by general slowdowns in
commercial leasing volume in the U.S. and European markets and the erosion of
New York residential sales volume, particularly at the high end of that market.
Average sales prices for New York co-op and condo sales declined 3% from 2000
levels to $801,000 in 2001, reflecting the higher percentage of sales at the low
end of the pricing spectrum. Conversely, the effects of the weakening world
economies did not adversely affect the Company's commission fees earned on
services.

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. A
significant portion of the expenses associated with these transactional
activities is directly correlated to revenue.

     Consistent with the industry in general, Insignia's operating income and
earnings have historically been lower during the first three calendar quarters
than in the fourth quarter. The reasons for the concentration of earnings in the
fourth quarter include a general, industry-wide focus on completing transactions
by calendar year end, as well as the constant nature of the Company's
non-variable expenses throughout the year versus the seasonality of its
revenues. This phenomenon has generally produced a historical pattern of 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.

     Neither the 2001 nor 2000 years 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 much lower second and third quarters than the
preceding year due to the effects of the global economic slowdown and the tragic
events of September 11th. As a result, quarter-to-quarter comparisons may be
difficult to interpret. In addition, market disruptions like that of the third
quarter of 2001 can alter or increase the effect of "normal" seasonality.
Finally, revenue recognition on lease commissions was changed as required by SAB
101, and the Company does not yet have sufficient experience with this
accounting method to predict its impact on income seasonality. The Company plans
its capital and operating expenditures


                                       40
<PAGE>

based on its expectations of future revenues. If revenues are below expectations
in any given quarter, the Company may be unable to adjust expenditures to
compensate for any unexpected revenue shortfall. The Company's business could
suffer as a consequence.

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 that 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. 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, as well as those
set forth under the caption "Risk Factors" in Item I of this Form 10-K.

     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.






                                       41
<PAGE>


Item 7A. Quantitative and Qualitative Disclosure of Market Risk
---------------------------------------------------------------

     The real estate market tends to be cyclical and related to the condition of
the economy as a whole and to public perception of the economic outlook. In
addition, capital availability tends to also be cyclical, leading to periods of
excess supply or shortages. When supply is constrained or the economic outlook
is poor, leasing and sales volumes may decline. When capital is constrained or
there is excess supply, property investment volume may decline.

     Periods of economic slowdown or recession, rising interest rates, inflation
or declining demand for real estate will adversely affect Insignia's business
and may cause, among other things: (i) declines in leasing activity; (ii)
declines in the availability of capital for investment in and mortgage financing
for commercial real estate; (iii) declines in consumer demand for New York
co-ops and condominiums; and (iv) declines in rental rates and property values,
with a commensurate decline in real estate service revenues.

    Insignia is exposed to a variety of market risks, including foreign currency
fluctuations and changes in interest rates. In addition to the United States,
the Company conducts business in foreign jurisdictions throughout Europe, Asia
and Latin America. However, currencies other than the British pound, euro and
dollar have comprised less than 1% of annual revenues. On a pro forma basis,
including the acquired Groupe Bourdais operation, 20% of total service revenues
and 37% of Net EBITDA for the year ended December 31, 2001 were derived from
European operations conducted using the pound or euro currencies.

     Because the pound and euro have declined over the last three years, the
Company's reported revenues and earnings have been adversely affected when
translated to dollars. Continued changes in the value of such currencies against
the US Dollar will affect the Company's reported results. As evidence, only a
10% change in the British pound and euro could have an annual impact of more
than $10 million on revenues and $2 million on net earnings.

     The Company's residential brokerage and leasing business is affected by
changes in the general level of market interest rates. Consumer buying habits
related to co-op and condo properties in New York are influenced to some degree
by mortgage interest rates, particularly at the lower end of the spectrum of
sales prices. Changes in interest rates also affect the interest earned on the
Company's cash and equivalents 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 average debt levels during 2001 would have affected interest
expense for the 2001 year by approximately $1.3 million.

Item 8. Financial Statements and Supplementary Data
---------------------------------------------------

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

Item 9. Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
        Financial Disclosure
        --------------------
     None.





                                       42
<PAGE>

                                    Part III
                                    --------

Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------

Incorporated herein by reference to Registrant's definitive Proxy Statement to
be filed in connection with the 2002 Annual Meeting of Stockholders.

Item 11. Executive Compensation
-------------------------------

Incorporated herein by reference to Registrant's definitive Proxy Statement to
be filed in connection with the 2002 Annual Meeting of Stockholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

Incorporated herein by reference to Registrant's definitive Proxy Statement to
be filed in connection with the 2002 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------

Incorporated herein by reference to Registrant's definitive Proxy Statement to
be filed in connection with the 2002 Annual Meeting of Stockholders.




                                       43
<PAGE>



                                     Part IV
                                     -------

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

<TABLE>
<CAPTION>
<S>                   <C>
(a) (1) and (2):      The response to this portion of Item 14 is submitted as a separate section of this
                      Report. See Page F-2.

   (3) Exhibits:

          2.1         Amended and Restated Agreement and Plan of Merger, dated as of May 26, 1998, by
                      and among Apartment Investment and Management Company, AIMCO Properties, L.P.,
                      the Company's former parent and Insignia Financial Group, Inc. (incorporated herein
                      by reference to Exhibit 2.1 to the Registration Statement on Form S-4 (the "Form
                      S-4") filed by Apartment Investment and Management Company on August 4, 1998)

          2.2         Form of Agreement and Plan of Distribution, dated as of September 16, 1998, by
                      and between the Company's former parent and Insignia Financial Group, Inc.
                      (incorporated herein by reference to Exhibit 2.2 to Report on Form 10-K of Insignia
                      Financial Group, Inc. filed on March 29, 2000)

          3.1(a)      Certificate of Incorporation of Insignia Financial Group, Inc. (incorporated herein
                      by referenced to Exhibit 3.1 of the Form 10)

          3.1(b)      Certificate of Amendment to the Certificate of Incorporation of Insignia Financial
                      Group, Inc., dated October 16, 1998, changing the name of the corporation from
                      Insignia/ESG Holdings, Inc. to Insignia Financial Group, Inc. (incorporated herein
                      by reference to Exhibit 3.1 of the Report on Form 10-Q of Insignia Financial Group,
                      Inc. filed on November 16, 1998)

          3.1(c)      Certificate of Designation of Insignia Financial Group, Inc. classifying 250,000 of
                      the authorized shares of Preferred Stock of the Company as "Convertible Preferred
                      Stock" (incorporated herein by reference to Exhibit 3.1(c) to Report on Form 10-K of
                       Insignia Financial Group, Inc. filed on March 29, 2000)

          3.2         By-laws of Insignia Financial Group, Inc. (incorporated herein by reference to Exhibit
                      3.2 of the Form 10)

          4.1         Registration Rights Agreement, dated as of February 9, 2000, by and among Insignia
                      Financial Group, Inc. and the initial stockholders specified therein (incorporated
                      herein by reference to Exhibit 4.1(b) to Report on Form 10-K of Insignia Financial
                      Group, Inc. filed on March 29, 2000)

          10.1(a)     Asset and Stock Purchase Agreement, dated as of June 17, 1996, among the Company's
                      former parent, Insignia Buyer Corporation, Edward S. Gordon Company Incorporated,
                      Edward S. Gordon Company of New Jersey, Inc. and Edward S. Gordon (incorporated herein
                      by reference to Exhibit 10.15 of the Report on Form 10-K of Former Parent filed on
                      March 24, 1998)

          10.1(b)     Stock Purchase Agreement, dated March 19, 1997, by and among Insignia Commercial
                      Group, Inc., the Company's former parent, Kirkland B. Armour, Scott J. Brandwein,
                      Harvey B. Camins, James L. Deiter, Lyan Homewood Fender, Ronald T. Frain, Jay
                      Hinshaw, Thomas E. Moxley, Robert B. Rosen, James H. Swartchild, Jr., David Tropp,
                      Gregg F. Witt, Frain, Camins & Swartchild Incorporated, FC&S Management Company and
                      Construction Interiors, Incorporated (incorporated herein by reference to Exhibit 10.22
                      to the Report on Form 10-K of the Company's former parent filed on March 24, 1998)
</TABLE>


                                       44
<PAGE>

<TABLE>
<CAPTION>
<S>             <C>
 10.1(c)        Stock Purchase Agreement, dated as of September 18, 1997, by and among the
                Company's former parent, Insignia RO, Inc., Joseph T. Aveni, Vincent T. Aveni,
                James C. Miller, Richard A. Golbach, Joseph T. Aveni as Trustee of the Joseph T.
                Aveni Declaration of Trust dated April 25, 1988, as amended on August 10, 1995,
                Vincent T. Aveni as Trustee of the Vincent T. Aveni Declaration of Trust dated
                February 11, 1988, as restated on September 14, 1995, Joseph T. Aveni as Trustee
                of the Vincent T. Aveni Declaration Trust, dated July 13, 1994, and Vincent T.
                Aveni as Trustee of the Joseph T. Aveni Declaration Trust, dated July 13, 1994
                (incorporated herein by reference to Exhibit 10.27 to Report on Form 10-K of
                former parent filed on March 24, 1998)

 10.1(d)        Deed of Warranty & Indemnity, dated February 25, 1998, by and among the Company's
                former parent and each of the Shareholders of Richard Ellis Group Limited
                (incorporated herein by referenced to Exhibit 10.4 of the Form 10)

 10.1(e)        Amended and Restated Indemnification Agreement, dated as of May 26, 1998, by and
                between Apartment Investment and Management Company and Insignia Financial
                Group, Inc. (incorporated herein by reference to Exhibit 2.2 to the Form S-4)

 10.1(f)        Deed of Assumption and Variation, dated September 30, 1998, by and among the
                Company's former parent, Certain Covenantors and Insignia/ESG, Inc.
                (incorporated herein by reference to Exhibit 10.1(f) to Report on Form 10-K of
                Insignia Financial Group, Inc. filed on March 31, 1999)

 10.1(g)        Deed of Variation, dated as of March 5, 1999, between Insignia Financial Group,
                Inc. and Alan Charles Froggatt, as agent and attorney for the Covenantors
                (incorporated herein by reference to Exhibit 10.1(g) to Report on Form 10-K of
                Insignia Financial Group, Inc. filed on March 31, 1999)

 10.1(h)        Agreement for the Sale and Purchase of Shares in the Capital of St. Quintin
                Holdings Limited, dated March 5, 1999, by and among the Vendors listed therein
                and Insignia Financial Group, Inc. (incorporated herein by reference to the
                Report on Form 8-K of Insignia Financial Group, Inc. filed on March 18, 1998)

 10.1(i)        Purchase Agreement, dated May 27, 1999, among Douglas Elliman, Douglas Elliman,
                Inc. and Douglas Elliman Insurance Brokerage Corp. as seller and DE Acquisition,
                LLC as buyer (incorporated herein by reference to the Report on Form 8-K of
                Insignia Financial Group, Inc. filed on July 8, 1999)

 10.1(j)        Share Purchase Agreement, dated as of December 16, 2001, between Jean Claude
                Bourdais and others listed therein as sellers, Insignia Financial Group, Inc.
                and Insignia France SARL as buyer (incorporated herein by reference to Exhibit
                10.1 of the Report on Form 8-K of Insignia Financial Group, Inc. filed on
                December 28, 2001)

 10.1(k)        Stock Purchase Agreement, dated as of December 31, 2001, by and among Insignia
                Financial Group, Inc., Insignia ESG, Inc., Insignia RO, Inc. (as seller) and
                Real Living, Inc. (as buyer) (incorporated herein by reference to Exhibit 10.1
                of the Report on Form 8-K of Insignia Financial Group, Inc. filed on February
                20, 2002)

 10.1(l)        First Amendment to Stock Purchase Agreement, made and entered into as of January
                31, 2002, by and among Insignia Financial Group, Inc., Insignia ESG, Inc.,
                Insignia RO, Inc. (as seller) and Real Living, Inc. (as buyer) (incorporated
                herein by reference to Exhibit 10.2 of the Report on Form 8-K of Insignia
                Financial Group, Inc. filed on February 20, 2002)

 10.2(a)        Second Amended and Restated Employment Agreement, dated as of July 31, 1998, by
                and between Insignia Financial Group, Inc., Insignia/ESG, Inc. and Stephen B.
                Siegel (incorporated herein by reference to Exhibit 10.6 of the Form 10)
</TABLE>


                                       45
<PAGE>


<TABLE>
<CAPTION>
<S>             <C>
 10.2(b)        Employment Agreement, dated as of August 3, 1998, by and between Insignia
                Financial Group, Inc. and Ronald Uretta (incorporated herein by reference to
                Exhibit 10.7 of the Form 10)

 10.2(c)        Employment Agreement, dated as of June 17, 1996, by and among the Company's
                former parent, Insignia Buyer Corporation and Edward S. Gordon (incorporated
                herein by reference to Exhibit 10.2 to the Report on Form 8-K of the Company's
                former parent dated July 12, 1996)

 10.2(d)        Amendment No. 1 to Employment Agreement, dated April 1, 1997, by and among the
                former parent, Insignia/Edward S. Gordon Co., Inc. and Edward S. Gordon
                (incorporated herein by reference to Exhibit 10.24 to the Report on Form 10-K of
                the former parent filed on March 24, 1998)

 10.2(e)        Assignment, Assumption, Consent and Release Agreement, dated as of July 1, 1998,
                by and among the former parent, Insignia Financial Group, Inc. and Edward S.
                Gordon (Exhibit A thereto is omitted because it is the same document as Exhibit
                10.7 to the Form 10)

 10.2(f)        Employment Agreement, dated as of August 3, 1998, by and between Insignia
                Financial Group, Inc. and James A. Aston (incorporated herein by reference to
                Exhibit 10.13 of the Form 10)

 10.2(g)        Executive Service Agreement, dated February 4, 1998, by and between Richard
                Ellis Group Limited and Andrew John Mack Huntley (incorporated herein by
                reference to Exhibit 10.2(j) to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 31, 1999)

 10.2(h)        Supplemental Service Agreement, dated February 24, 1998, by and between Insignia
                Financial Group, Inc. and Andrew John Mack Huntley (incorporated herein by
                reference to Exhibit 10.2(k) to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 31, 1999)

 10.2(i)        Assignment, Assumption, Consent and Release Agreement, dated July 1, 1998, by
                and among Former Parent, Insignia Financial Group, Inc. and Andrew John Mack
                Huntley (incorporated herein by reference to Exhibit 10.2(l) to Report on Form
                10-K of Insignia Financial Group, Inc. filed on March 31, 1999)

 10.2(j)        Employment Agreement, entered into on May 18, 2000, effective as of January 1,
                2000, by and between Insignia Financial Group, Inc. and Andrew Lawrence Farkas,
                including, as Exhibit A thereto, resolutions of the Compensation Committee
                empowering Andrew L. Farkas, as Chief Executive Officer of the Company, to
                direct and participate in the grants of equity interests in certain subsidiaries
                of the Company (incorporated herein by reference to Exhibit 10.2(a) to the
                Report on Form 8-K of Insignia Financial Group, Inc. filed on May 25, 2000)

 10.2(k)        Amended and restated Employment Agreement, dated as of May 19, 2000, by and
                between Insignia Financial Group, Inc. and Adam B. Gilbert (incorporated herein
                by reference to Exhibit 10.2(b) to the Report on Form 8-K of Insignia Financial
                Group, Inc. filed on May 25, 2000)

 10.2(l)        Amended and restated Employment Agreement, dated as of May 12, 2000, by and
                between Insignia Financial Group, Inc. and Jeffrey B. Cohen (incorporated herein
                by reference to Exhibit 10.2(c) to the Report on Form 8-K of Insignia Financial
                Group, Inc. filed on May 25, 2000)
</TABLE>


                                       46
<PAGE>

<TABLE>
<CAPTION>
<S>             <C>
 10.2(m)        Employment Agreement, dated as of August 1, 2000, by and between Insignia
                Financial Group, Inc. and Frank M. Garrison (incorporated herein by reference to
                Exhibit 10.2 of the Report on Form 10-Q of Insignia Financial Group, Inc. filed
                on August 14, 2000)

 10.2(n)        Amendment to Employment Agreement, effective as of August 3, 2001, by and among
                Insignia Financial Group, Inc. and James A. Aston (incorporated herein by
                reference to Exhibit 10.2(a) of the Report on Form 10-Q of Insignia Financial
                Group, Inc. filed on August 14, 2001)

 10.2(o)        Amendment to Second Amended and Restated Employment Agreement, effective as of
                June 21, 2001, by and among Insignia Financial Group, Inc. and Stephen B. Siegel
                (incorporated herein by reference to Exhibit 10.2(b) of the Report on Form 10-Q
                of Insignia Financial Group, Inc. filed on August 14, 2001)

 10.2(p)        Amendment to Employment Agreement, effective as of August 3, 2001, by and among
                Insignia Financial Group, Inc. and Ronald Uretta (incorporated herein by
                reference to Exhibit 10.2(a) of the Report on Form 10-Q of Insignia Financial
                Group, Inc. filed on November 14, 2001)

 10.2(q)        Promissory Note, effective as of June 21, 2001, by and among Insignia Financial
                Group, Inc. and Stephen B. Siegel (incorporated herein by reference to Exhibit
                10.2(c) of the Report on Form 10-Q of Insignia Financial Group, Inc. filed on
                August 14, 2001)

 10.2(r)        Executive Service Agreement, dated as of January 31, 2001, between Insignia
                Richard Ellis Limited and Alan Charles Froggatt (incorporated herein by
                reference to Exhibit 10.2(n) of the Report on Form 10-K of Insignia Financial
                Group, Inc. filed on March 28, 2001)

 10.2(s)        Form of Transferee Agreement, dated as of September 24, 1999, by and between
                Insignia Financial Services, Inc., as a Member of Insignia Opportunity
                Directives, LLC, and certain individuals (see attached schedule thereto)
                (incorporated herein by reference to Exhibit 10.2(n) to Report on Form 10-K of
                Insignia Financial Group, Inc. filed on March 29, 2000)

 10.2(t)        Form of Transferee Agreement, dated as of November 17, 1999, by and between
                Insignia Internet Initiatives, Inc., as a Member of IIII-SLI Holdings, LLC, and
                certain individuals (see attached schedule thereto) (incorporated herein by
                reference to Exhibit 10.2(o) to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 29, 2000)

 10.2(u)        Form of Transferee Agreement, dated as of November 24, 1999, by and between
                Insignia Internet Initiatives, Inc., as a Member of IIII-OSA Holdings, LLC, and
                certain individuals (see attached schedule thereto) (incorporated herein by
                reference to Exhibit 10.2(p) to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 29, 2000)

 10.2(v)        Form of Transferee Agreement, dated as of December 30, 1999, by and between
                Insignia Internet Initiatives, Inc., as a Member of IIII-MCI Holdings, LLC, and
                the individuals listed on the schedule annexed thereto (incorporated herein by
                reference to Exhibit 10.2(q) to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 29, 2000)

 10.2(w)        Form of Transferee Agreement, dated as of December 30, 1999, by and between
                Insignia Internet Initiatives, Inc., as a Member of IIII-LNI Holdings, LLC, and
                certain individuals (see attached schedule thereto) (incorporated herein by
                reference to Exhibit 10.2(r) to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 29, 2000)
</TABLE>


                                       47
<PAGE>

<TABLE>
<CAPTION>
<S>             <C>
 10.2(x)        Form of Transferee Agreement, dated as of December 30, 1999, by and between
                Insignia Internet Initiatives, Inc., as a Member of IIII-PFI Holdings, LLC, and
                certain individuals (see attached schedule thereto) (incorporated herein by
                reference to Exhibit 10.2(s) to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 29, 2000)

 10.2(y)        Form of Transferee Agreement, dated as of December 30, 1999, by and between
                Insignia Internet Initiatives, Inc., as a Member of IIII-CCI Holdings, LLC, and
                certain individuals (see attached schedule thereto) (incorporated herein by
                reference to Exhibit 10.2(u) to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 29, 2000)

 10.2(z)        Form of Warrant Agreement, dated as of January 14, 2000, between Insignia
                Financial Group, Inc. and each of the executive officers listed on the schedule
                annexed thereto (incorporated herein by reference to Exhibit 10.2(v) to Report
                on Form 10-K of Insignia Financial Group, Inc. filed on March 29, 2000)

 10.2(aa)       Form of Warrant Agreement, dated as of January 14, 2000, between Insignia
                Financial Group, Inc. and each of the non-employee directors listed on the
                schedule annexed thereto (incorporated herein by reference to Exhibit 10.2(w) to
                Report on Form 10-K of Insignia Financial Group, Inc. filed on March 29, 2000)

 10.2(ab)       Form of Assignment of Limited Liability Company Interest, dated as of January
                12, 2000, by and between ("Assignor") and certain individuals (see attached
                exhibit thereto) (Assignees") (incorporated herein by reference to Exhibit
                10.2(x) to Report on Form 10-K of Insignia Financial Group, Inc. filed on March
                29, 2000)

 10.2(ac)       Form of Assignment of Member or Limited Partner Interests by and among Insignia
                Financial Group, Inc., Insignia/ESG, Inc. ("Assignors") and certain individuals
                (see attached schedule thereto) (Assignees") (incorporated herein by reference
                to Exhibit 10.2(y) to Report on Form 10-K of Insignia Financial Group, Inc.
                filed on March 29, 2000)

 10.2(ad)       Form of Assignment of Member or Limited Partner Interests by and among Insignia
                Financial Group, Inc., Insignia/ESG, Inc. ("Assignors") and the individual
                identified therein (Assignee") (incorporated herein by reference to Exhibit
                10.2(z) to Report on Form 10-K of Insignia Financial Group, Inc. filed on March
                29, 2000)

 10.2(ae)       Form of Agreement for potential incentive compensation in connection with
                development activities, by and between Insignia/ESG, Inc. ("Assignor") and
                certain individuals (see attached schedule thereto) (Assignees") (incorporated
                herein by reference to Exhibit 10.2(aa) to Report on Form 10-K of Insignia
                Financial Group, Inc. filed on March 29, 2000)

 10.2(af)       Form of Transferee Agreement, dated as of March 4, 2002, by and between Insignia
                Financial Services, Inc., as a member of Insignia Opportunity Directives II,
                LLC, and certain individuals (see attached schedule thereto)

 10.2(ag)       Form of Transferee Agreement, dated as of _____, by and between Insignia Capital
                Investments, Inc., as a member of ICII-WV Holdings, LLC, and certain individuals

 10.3(a)        Insignia Financial Group, Inc. 1998 Stock Incentive Plan (incorporated herein by
                referenced to Exhibit 10.14 of the Form 10)

 10.3(b)        Insignia Financial Group, Inc. 1998 Supplemental Stock Purchase and Loan Program
                Under the Insignia Financial Group, Inc. 1998 Stock Incentive Plan (incorporated
                herein by referenced to Exhibit 10.15 of the Form 10)

 10.3(c)        Insignia Financial Group, Inc. Executive Performance Incentive Plan
                (incorporated herein by referenced to Exhibit 10.16 of the Form 10)
</TABLE>


                                       48
<PAGE>

<TABLE>
<CAPTION>
<S>             <C>
 10.3(d)        Insignia Financial Group, Inc. 1998 Employee Stock Purchase Plan (incorporated
                herein by referenced to Exhibit 10.17 of the Form 10)

 10.3(e)        Form of Indemnification Agreement to be entered into separately by and between
                Insignia Financial Group, Inc. and each of the directors and executive officers
                listed on the schedule annexed thereto (incorporated herein by referenced to
                Exhibit 10.18 of the Form 10)

 10.3(f)        Insignia Financial Group, Inc. 401(k) Retirement Savings Plan (incorporated
                herein by reference to Exhibit 4.1 to the Registration Statement on Form S-8
                filed by Insignia Financial Group, Inc. on September 2, 1998)

 10.3(g)        Amendment No. 1 to Insignia Financial Group, Inc. 401(k) Retirement Savings
                Plan, effective January 1, 2000

 10.3(h)        Amendment No. 2 to Insignia Financial Group, Inc. 401(k) Retirement Savings
                Plan, effective January 1, 2002

 10.3(i)        Richard Ellis Group Limited 1997 Unapproved Share Option Scheme (incorporated
                herein by reference to Exhibit 4.1 to the Registration Statement on Form S-8
                filed by Insignia Financial Group, Inc. on November 18, 1998)

 10.3(j)        Insignia Financial Group, Inc. 401(k) Restoration Plan (incorporated herein by
                reference to Exhibit 10.3(h) to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 31, 1999)

 10.3(k)        Amendment No. 1 to Insignia Financial Group, Inc. 401(k) Restoration Plan,
                effective June 1, 2000

 10.3(l)        Amendment No. 2 to Insignia Financial Group, Inc. 401(k) Restoration Plan,
                effective December 19, 2001

 10.3(m)        St. Quintin Holdings Limited 1999 Unapproved Share Option Scheme, as amended
                (incorporated herein by reference to Exhibit 4.1 to the Registration Statement
                on Form S-8 filed by Insignia Financial Group, Inc. on April 29, 1999)

 10.3(n)        Form of Non-Qualified Stock Option Agreement and form of amendment thereto
                (incorporated herein by reference to Exhibit 4 to the Registration Statement on
                Form S-8 filed by Insignia Financial Group, Inc. on October 4, 1999)

 10.3(o)        Brooke International (China) Limited Share Option Scheme (incorporated herein by
                reference to Exhibit 4.1 to the Registration Statement on Form S-8 filed by
                Insignia Financial Group, Inc. on February 16, 2001)

 10.4 (a)       Credit Agreement, dated as of May 4, 2001, by and among Insignia Financial
                Group, Inc., as Borrower, the Lenders referred to therein, First Union National
                Bank, as Administrative Agent, and Lehman Commercial Paper, Inc., as Syndication
                Agent and Bank of America, N. A., as Documentation Agent (incorporated herein by
                reference to Exhibit 10.1 to Report on Form 8-K of Insignia Financial Group,
                Inc. filed on May 29, 2001)

 10.4 (b)       First Amendment to Credit Agreement, dated as of November 26, 2001, by and among
                Insignia Financial Group, Inc., as Borrower, the Lenders referred to therein,
                First Union National Bank, as Administrative Agent, Lehman Commercial Paper,
                Inc., as Syndication Agent and Bank of America, N.A., as documentation agent
</TABLE>


                                       49
<PAGE>

<TABLE>
<CAPTION>
<S>             <C>
 10.5           Stock Subscription Agreement, dated as of February 9, 2000, among Insignia
                Financial Group, Inc. and the purchasers named therein (incorporated herein by
                reference to Exhibit 10.7 to Report on Form 10-K of Insignia Financial Group,
                Inc. filed on March 29, 2000)

 21.1           Subsidiaries of Insignia Financial Group, Inc.

 23.1           Consent of Independent Auditors
</TABLE>

(b)  Reports on Form 8-K filed in the fourth quarter of 2001:

     Form 8-K dated and filed on December 3, 2001 disclosing the sale of Fresh
     Meadows apartment by a partnership in which the Registrant was a minority
     investor.

     Form 8-K dated December 19, 2001 and filed on December 28, 2001 disclosing
     the Registrant's acquisition of all of the outstanding share capital of
     Societe Financiere Bourdais and affiliated companies ("Groupe Bourdais").










                                       50
<PAGE>


                                   SIGNATURES
                                   ----------

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

                                             INSIGNIA FINANCIAL GROUP, INC.



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


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


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



By: /s/ Stephen B. Siegel                    By: /s/ Robert G. Koen
    -------------------------------------        -------------------------------
    Stephen B. Siegel                            Robert G. Koen
    Director and President                       Director



By: /s/ James A. Aston                       By: /s/ H. Strauss Zelnick
    -------------------------------------        -------------------------------
    James A. Aston                               H. Strauss Zelnick
    Chief Financial Officer                      Director
    (Principal Accounting Officer)



By: /s/ Alan C. Froggatt                     By: /s/ Robert J. Denison
    -------------------------------------        -------------------------------
    Alan C. Froggatt                             Robert J. Denison
    Director and Chief Executive Officer         Director
    of Insignia Richard Ellis


                                             By: /s/ Stephen M. Ross
                                                 -------------------------------
                                                 Stephen M. Ross

                                                 Director





                                       51
<PAGE>









                           ANNUAL REPORT ON FORM 10-K

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

                          LIST OF FINANCIAL STATEMENTS

                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          YEAR ENDED DECEMBER 31, 2001

                         INSIGNIA FINANCIAL GROUP, INC.

                               NEW YORK, NEW YORK














                                       F-1



<PAGE>


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

INSIGNIA FINANCIAL GROUP, INC.

LIST OF FINANCIAL STATEMENTS




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

      INSIGNIA FINANCIAL GROUP, INC.

         Consolidated balance sheets - December 31, 2001 and 2000

         Consolidated statements of operations - Years ended December 31, 2001,
         2000 and 1999

         Consolidated statements of stockholders' equity - Years ended
         December 31, 2001, 2000 and 1999

         Consolidated statements of cash flows - Years ended December 31, 2001
         2000 and 1999

         Notes to consolidated financial statements


ALL OTHER FINANCIAL STATEMENTS AND SCHEDULES FOR WHICH PROVISION IS MADE IN THE
APPLICABLE ACCOUNTING REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION ARE
NOT REQUIRED UNDER THE RELATED INSTRUCTIONS OR ARE INAPPLICABLE AND THEREFORE
HAVE BEEN OMITTED.









                                      F-2
<PAGE>


                         Report of Independent Auditors


Board of Directors
Insignia Financial Group, Inc.

We have audited the accompanying consolidated balance sheets of Insignia
Financial Group, Inc. as of December 31, 2001 and 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Insignia Financial
Group, Inc. at December 31, 2001 and 2000, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

As discussed in Note 4 to the financial statements, in 2000 the Company changed
its method of accounting for revenue recognition for leasing commissions.


                                               ERNST & YOUNG LLP


New York, New York
February 8, 2002







                                      F-3
<PAGE>


                         Insignia Financial Group, Inc.
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                           DECEMBER 31
                                                                                        2001        2000
                                                                                    --------------------------
                                                                                            (In thousands)
<S>                                                                                 <C>          <C>
ASSETS
   Cash and cash equivalents                                                         $ 131,860    $ 122,196
   Receivables, net of allowance of $5,972 (2001) and $5,512 (2000)                    176,120      195,870
   Restricted cash                                                                      21,617        6,555
   Property and equipment                                                               62,198       62,426
   Real estate investments                                                              95,710      102,170
   Property management contracts                                                        16,877       22,357
   Costs in excess of net assets of acquired businesses                                288,353      284,289
   Deferred taxes                                                                       43,132       31,079
   Other assets                                                                         24,654       27,158
   Assets of discontinued operation                                                     57,822       71,525
                                                                                    ---------------------------
Total assets                                                                         $ 918,343    $ 925,625
                                                                                    ===========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Accounts payable                                                                  $  12,876    $  22,850
   Commissions payable                                                                  86,387       65,589
   Accrued incentives                                                                   63,911       86,105
   Accrued and sundry liabilities                                                      100,863      121,529
   Loss in excess of investment                                                              -        3,222
   Deferred taxes                                                                       12,636       15,333
   Notes payable                                                                       169,972      128,569
   Real estate mortgage notes payable                                                   37,269       48,369
   Liabilities of discontinued operation                                                34,572       25,178
                                                                                    ---------------------------
 Total liabilities                                                                     518,486      516,744

Stockholders' Equity:
   Common Stock, par value $.01 per share - authorized 80,000,000 shares
     22,852,034 (2001) and 21,573,928 (2000) issued and outstanding shares,
     net of 1,502,600 (2001 and 2000) shares held in treasury                              229          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                                                          422,309      413,831
   Notes receivable for common stock                                                    (1,882)      (2,051)
   Retained earnings (deficit)                                                         (11,912)       2,846
   Accumulated other comprehensive loss                                                 (8,890)      (5,964)
                                                                                    ---------------------------
Total stockholders' equity                                                             399,857      408,881
                                                                                    ---------------------------
Total liabilities and stockholders' equity                                           $ 918,343    $ 925,625
                                                                                    ===========================
</TABLE>


See accompanying notes.



                                      F-4
<PAGE>


                         Insignia Financial Group, Inc.
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31
                                                                             2001           2000            1999
                                                                      -----------------------------------------------
                                                                                      (In thousands)
<S>                                                                   <C>                 <C>             <C>
REVENUES
    Real estate services                                                   $ 737,780      $ 775,999       $ 574,442
    Property operations                                                        3,969          5,212           1,877
                                                                      -----------------------------------------------
                                                                             741,749        781,211         576,319
                                                                      -----------------------------------------------
COSTS AND EXPENSES
    Real estate services                                                     668,079        681,867         511,113
    Property operations                                                        2,889          4,214           1,589
    Internet-based businesses                                                      -         17,168           1,580
    Administrative                                                            13,439         16,355          11,826
    Depreciation                                                              15,392         11,638           5,911
    Property depreciation                                                        990          1,623             512
    Amortization of intangibles                                               24,408         23,825          21,703
                                                                      -----------------------------------------------
                                                                             725,197        756,690         554,234
                                                                      -----------------------------------------------

    Operating income                                                          16,552         24,521          22,085

OTHER INCOME AND EXPENSES:
    Merger related expenses                                                     (661)             -          (4,272)
    Life insurance proceeds                                                        -         19,100               -
    Losses from Internet investments                                         (10,263)       (18,435)              -
    Interest and other income                                                  4,869          7,236           4,103
    Interest expense                                                         (12,407)       (11,745)         (7,048)
    Foreign currency transaction gains                                           331          1,365             827
    Equity earnings in real estate ventures                                   10,381          1,455           2,284
    Minority interests                                                             -            900               -
                                                                      -----------------------------------------------

Income from continuing operations before income taxes                          8,802         24,397          17,979

    Provision for income taxes                                                 3,081          3,168          10,255
                                                                      -----------------------------------------------

Income from continuing operations                                              5,721         21,229           7,724

Discontinued operations (see Note 3):
    (Loss) income from discontinued operation, net of applicable
         taxes                                                                (1,600)           558           2,574
    Provision for loss on disposal, net of applicable taxes                  (17,629)             -               -
                                                                      -----------------------------------------------
                                                                             (19,229)           558           2,574
                                                                      -----------------------------------------------
(Loss) income before cumulative effect of a change in
      accounting principle                                                   (13,508)        21,787          10,298

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

Net (loss) income                                                            (13,508)        (8,633)         10,298

Preferred stock dividends                                                     (1,000)          (890)              -
                                                                      -----------------------------------------------

Net (loss) income available to common shareholders                         $ (14,508)     $  (9,523)      $  10,298
                                                                      ===============================================
</TABLE>




                                      F-5
<PAGE>


                         Insignia Financial Group, Inc.
                Consolidated Statements of Operations (continued)

<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31
                                                                             2001          2000          1999
                                                                       --------------------------------------------
                                                                          (In thousands, except per share data)
<S>                                                                    <C>               <C>            <C>
PER SHARE AMOUNTS:
   Earnings per common share - basic
     Income from continuing operations                                    $     0.21     $     0.96     $    0.36
     (Loss) income from discontinued operations                                (0.87)          0.03          0.12
                                                                       --------------------------------------------
     (Loss) income before cumulative effect of a change in
           accounting principle                                                (0.66)          0.99          0.48
     Cumulative effect of a change in accounting principle                          -         (1.44)            -
                                                                       --------------------------------------------
     Net (loss) income                                                    $    (0.66)    $    (0.45)    $    0.48
                                                                       ============================================
   Earnings per common share - assuming dilution:
     Income from continuing operations                                    $     0.20     $     0.87     $    0.34
     (Loss) income from discontinued operations                                (0.82)          0.02          0.12
                                                                       --------------------------------------------
     (Loss) income before cumulative effect of a change in
           accounting principle                                                (0.62)          0.89          0.46
     Cumulative effect of a change in accounting principle                         -          (1.24)            -
                                                                       --------------------------------------------
     Net (loss) income                                                    $    (0.62)         (0.35)    $    0.46
                                                                       ============================================
   Pro forma amounts assuming retroactive application of the new
     accounting principle:
       Net income                                                                                       $   3,158
                                                                                                    ===============
       Earnings per common share - basic                                                                $    0.15
                                                                                                    ===============
       Earnings per common share - assuming dilution                                                    $    0.14
                                                                                                    ===============
   Weighted average common shares and assumed conversions:
       - basic                                                                22,056         21,200        21,294
                                                                       ============================================
       - assuming dilution                                                    23,398         24,428        22,622
                                                                       ============================================
</TABLE>


See accompanying notes.




                                      F-6
<PAGE>


                         Insignia Financial Group, Inc.
                 Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                                                                   NOTES      ACCUMULATED
                                                         ADDITIONAL  RECEIVABLE   RETAINED       OTHER
                                      COMMON  PREFERRED   PAID-IN    FOR COMMON   EARNINGS   COMPREHENSIVE  COMPREHENSIVE
(In thousands, except share data)      STOCK    STOCK     CAPITAL      STOCK      (DEFICIT)  INCOME (LOSS)  INCOME (LOSS)   TOTAL
                                      ----------------------------------------------------------------------------------------------
<S>                                   <C>     <C>        <C>         <C>          <C>        <C>            <C>            <C>
Balances at December 31, 1998         $  214   $     -    $383,075    $ (1,843)    $ 1,656      $   141       $      -     $383,243
  Net income                               -                     -           -      10,298            -         10,298       10,298
  Other comprehensive income:
    Foreign currency translation,
      net of tax benefit of $1,113         -                     -           -           -       (1,474)        (1,474)      (1,474)
    Unrealized gains on securities,
      net of tax of $900                   -                     -           -           -        1,215          1,215        1,215
                                                                                                             ----------
  Total comprehensive income                                                                                  $ 10,039
                                                                                                             ==========
  Exercise of stock options and
    warrants - 155,558 shares of
    Common Stock issued                    2                 1,166           -           -            -                       1,168
  Issuance of 112,006 shares of
    Common Stock under Employee
    Stock Purchase Program                 1                 1,017           -           -            -                       1,018
  Issuance of 305,981 shares of
    Common Stock pursuant to the
    St. Quintin acquisition                3                 8,097           -           -            -                       8,100
  Notes receivable from employees
    for shares of Common Stock             1                   299        (300)          -            -                           -
  Payments on notes receivable
    for shares of Common Stock             -                     -         385           -            -                         385
  Purchase of treasury shares            (14)              (14,323)          -           -            -                     (14,337)
  Restricted stock awards                  -                   737           -           -            -                         737
  Adjustment for certain amounts
    estimated at Spin-Off                  -                 2,716           -           -            -                       2,716
                                      ---------------------------------------------------------------------                ---------
Balances at December 31, 1999            207               382,784      (1,758)     11,954         (118)                    393,069
  Net loss                                 -         -           -           -      (8,633)           -       $ (8,633)      (8,633)
  Other comprehensive loss:
    Foreign currency translation,
      net of tax of $4,518                 -         -           -           -           -       (4,674)        (4,674)      (4,674)
    Unrealized loss on securities,
      net of tax of $456                   -         -           -           -           -         (685)          (685)        (685)
    Reclassification adjustment for
      realized gains, net of tax of
      $324                                 -         -           -           -           -         (487)          (487)        (487)
                                                                                                             ----------
  Total comprehensive loss                                                                                    $(14,479)
                                                                                                             ==========
  Exercise of stock options and
    warrants - 446,541 shares of
    Common Stock issued                    5         -       3,777           -           -            -                       3,782
  Issuance of 307,413 shares of
    Common Stock under Employee
    Stock Purchase Program                 3         -       2,380           -           -            -                       2,383
  Issuance of 250,000 shares of
    Preferred Stock                        -         3      24,948           -           -            -                      24,951
  Restricted stock awards - 62,135
    shares of Common Stock issued          1         -         708           -           -            -                         709
  Assumption of options pursuant
    to Brooke acquisition                  -         -         479           -           -            -                         479
  Preferred stock dividend                 -         -         475           -        (475)           -                           -
  Notes receivable from employees
    for shares of Common Stock             -         -         405        (405)          -            -                           -
  Payments on notes receivable
    for shares of Common Stock             -         -           -         112           -            -                         112
  Adjustment for certain amounts
    estimated at Spin-Off                  -         -      (2,125)          -           -            -                      (2,125)
                                      ----------------------------------------------------------------------------------------------
Balances at December 31, 2000         $  216   $     3    $413,831    $ (2,051)    $  2,846     $(5,964)                   $408,881
</TABLE>


                                      F-7
<PAGE>



                         Insignia Financial Group, Inc.
           Consolidated Statements of Stockholders' Equity (continued)

<TABLE>
<CAPTION>
                                                                     NOTES                  ACCUMULATED
                                                       ADDITIONAL  RECEIVABLE   RETAINED       OTHER
                                    COMMON  PREFERRED   PAID-IN    FOR COMMON   EARNINGS   COMPREHENSIVE   COMPREHENSIVE
(In thousands, except share data)    STOCK    STOCK     CAPITAL      STOCK      (DEFICIT)  INCOME (LOSS)  INCOME (LOSS)    TOTAL
                                   -------------------------------------------------------------------------------------------------
<S>                                <C>      <C>       <C>          <C>          <C>        <C>            <C>             <C>
Balances at December 31, 2000
  (from previous page)              $  216    $   3     $413,831    $ (2,051)    $ 2,846     $ (5,964)       $      -     $408,881
  Net loss                               -        -            -           -      13,508)           -         (13,508)     (13,508)
  Other comprehensive loss:
    Foreign currency
      translation, net of tax
      benefit of $1,769                  -        -            -           -           -       (2,033)         (2,033)      (2,033)
    Unrealized gain on
      securities, net of tax
      of $7                              -        -            -           -           -            7               7            7
    Minimum pension liability,
      net of tax benefit of
      $696                               -        -            -           -           -         (900)           (900)        (900)
                                                                                                            -----------
  Total comprehensive loss               -        -            -           -           -            -        $(16,434)           -
                                                                                                            ===========
  Exercise of stock options
    and warrants-381,241 shares
    of Common Stock issued               4        -        2,139           -           -            -                        2,143
  Issuance of 159,520 shares
    of Common Stock under
    Employee Stock Purchase
    Program                              2        -        1,470           -           -            -                        1,472
  Issuance of 402,645 shares
    of Common Stock in
    connection with Insignia
    Bourdais acquisition                 4        -        3,995           -           -            -                        3,999
  Restricted stock awards-
    30,330 shares of Common
    Stock issued                         -        -          627           -           -            -                          627
  Restricted stock-279,370
    shares exercised                     3        -           (3)          -           -            -                            -
  Preferred stock dividend-
    25,000 shares of Common
    Stock issued                         -        -          250           -      (1,250)           -                       (1,000)
  Payments on notes receivable
    for shares of Common Stock           -        -            -         169           -            -                          169
                                   ---------------------------------------------------------------------              ------------
Balances at December 31, 2001       $  229    $   3     $422,309    $ (1,882)   $(11,912)    $ (8,890)                    $399,857
                                   =====================================================================              ============
</TABLE>


See accompanying notes



                                      F-8
<PAGE>


                         Insignia Financial Group, Inc.
                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                                         YEARS ENDED DECEMBER 31
                                                                                  2001             2000           1999
                                                                           --------------------------------------------------
                                                                                              (In thousands)
<S>                                                                        <C>                  <C>              <C>
  OPERATING ACTIVITIES
  Income from continuing operations                                              $  5,721        $  21,229       $  7,724

  Adjustments to reconcile income from continuing operations to net cash
     provided by operating activities:
       Depreciation and amortization                                               40,790           37,086         28,126
       Merger related expenses                                                        661                -          4,272
       Equity earnings in real estate ventures                                    (10,381)          (1,455)        (2,284)
       Minority interests                                                               -             (900)             -
       Foreign currency transaction gains                                            (331)          (1,365)          (827)
       Losses from Internet investments                                            10,263           18,435              -
       Deferred income taxes                                                       (5,493)          (3,465)         4,213
       Changes in operating assets and liabilities:
         Receivables                                                               22,500          (79,781)       (37,580)
         Other assets                                                               1,218           (3,264)        (3,629)
         Accrued incentives                                                       (22,194)          46,307         11,831
         Accounts payable and accrued expenses                                    (34,834)          16,953         19,452
         Commissions payable                                                       18,785           30,588         26,679
                                                                           --------------------------------------------------
  Cash provided by operating activities                                            26,705           80,368         57,977

  INVESTING ACTIVITIES
       Additions to property and equipment                                        (15,604)         (25,807)       (25,399)
       Investment in Internet-based businesses                                     (4,010)         (22,502)       (14,907)
       Proceeds from sale of real estate properties                                40,240                -              -
       Payments made for acquisition of businesses, net of
          acquired cash                                                           (21,198)         (13,981)      (107,835)
       Investments in real estate                                                 (33,905)         (37,099)       (40,711)
       Distributions from real estate investments                                  23,547           18,215         24,589
       (Increase) decrease in restricted cash                                     (14,879)           7,130         (6,844)
                                                                           --------------------------------------------------
  Cash used in investing activities                                               (25,809)         (74,044)      (171,107)
</TABLE>





                                      F-9
<PAGE>


                         Insignia Financial Group, Inc.
                Consolidated Statements of Cash Flows (continued)


<TABLE>
<CAPTION>
                                                                                      YEARS ENDED DECEMBER 31
                                                                              2001             2000            1999
                                                                        --------------------------------------------------
                                                                                          (In thousands)
  <S>                                                                    <C>                 <C>              <C>
  FINANCING ACTIVITIES
       Proceeds from issuance of Common Stock                              $    1,472       $    2,383      $    1,018
       Proceeds from issuance of Preferred Stock                                    -           24,951               -
       Proceeds from exercise of stock options                                  2,143            3,782           1,168
       Purchase of treasury stock                                                   -                -         (14,337)
       Preferred stock dividends                                               (1,000)               -               -
       Payments on notes payable                                             (138,400)          (7,659)         (4,858)
       Proceeds from notes payable                                            158,999           15,652         118,653
       Payments on real estate mortgage notes payable                         (33,086)               -               -
       Proceeds from real estate mortgage notes payable                        21,987           19,914          19,799
       Debt issuance costs                                                     (2,130)               -               -
                                                                        -------------------------------------------------
  Cash provided by financing activities                                         9,985           59,023         121,443

  Cash flows from discontinued operations:
      Net cash provided by (used in) discontinued operation                     3,846           (1,751)             82
      Effect of exchange rate changes in cash                                  (1,217)            (669)           (284)
                                                                        -------------------------------------------------
      Net increase in cash and cash equivalents                                13,510           62,927           8,111

  Cash and cash equivalents at beginning of year                              124,527           61,600          53,489
                                                                        -------------------------------------------------
                                                                              138,037          124,527          61,600

      Less: Cash of discontinued operation                                     (6,177)          (2,331)         (4,082)

                                                                        -------------------------------------------------
  Cash and cash equivalents at end of year                                 $  131,860       $  122,196      $   57,518
                                                                        =================================================
</TABLE>


See accompanying notes





                                      F-10
<PAGE>


                         Insignia Financial Group, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 2001


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 market leading operations in the United States, the United
Kingdom and France, as well as other growing operations 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 leasing,
sales brokerage, corporate real estate consulting, property management, property
development and re-development, apartment brokerage and leasing, condominium and
cooperative apartment management, real estate oriented financial services,
equity co-investment and other services. Insignia's real estate service
businesses include the following: Insignia/ESG, Inc. (U.S. commercial real
estate services), Insignia Richard Ellis (U.K. commercial real estate services),
Insignia Bourdais (French commercial real estate services; acquired in December
2001), Insignia Douglas Elliman LLC (apartment brokerage and leasing) and
Insignia Residential Group, Inc. (condominium and cooperative apartment
management). Insignia also offers commercial real estate services in other key
markets in continental Europe, Asia and Latin America in the following
locations: Madrid, Spain; Frankfurt, Germany; Milan, Italy; Brussels, Belgium;
Dublin, Ireland; Belfast, Northern Ireland; Amsterdam, the Netherlands; Tokyo,
Japan; Hong Kong, Beijing and Shanghai, China; Bangkok, Thailand; Mumbai,
Hyderabad, Chennai and New Delhi, India; Manila, Philippines; and Mexico City,
Mexico.

In addition to traditional real estate services, Insignia deploys its own
capital, together with the capital of third party investors, in real estate
ventures, including co-investment in existing property assets, real estate
development and private investment funds. In addition to venture related asset
returns, Insignia generates revenues from fee-based services provided to these
minority owned real estate investment entities.










                                      F-11
<PAGE>


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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

These financial statements present the consolidated balance sheets of Insignia
as of December 31, 2001, and 2000, and the related consolidated statements of
operations and cash flows for each of the three years in the period ended
December 31, 2001, prepared in accordance with accounting principles generally
accepted in the United States.

PRINCIPLES OF CONSOLIDATION

The financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated. Certain amounts for prior years have been reclassified to conform to
the 2001 presentation.

USE OF ESTIMATES

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

CASH AND CASH EQUIVALENTS

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







                                      F-12
<PAGE>


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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RESTRICTED CASH

At December 31, 2001, restricted cash consisted of approximately $21.2 million
in cash pledged to secure the bond guarantee of notes issued in connection with
the Richard Ellis Group Limited ("REGL") and St. Quintin Holdings Limited ("St.
Quintin") acquisitions and approximately $400,000 related to other businesses.
At December 31, 2000, restricted cash consisted of approximately $4.8 million in
cash pledged to secure the bond guarantee of notes issued in connection with the
REGL and St. Quintin acquisitions, and approximately $1.8 million restricted for
contingent payments related to other business acquisitions.

REAL ESTATE INVESTMENTS

Real estate investments include investments in operating real estate properties,
real estate under development and investment entities that hold below investment
grade or lower rated securitized real estate debt. Three real estate assets
carried at $41.8 million are wholly-owned. All other investments represent
minority holdings.

ADVERTISING EXPENSE

The cost of advertising is expensed as incurred. The Company incurred
approximately $17,511,000, $18,931,000 and $10,914,000 in advertising costs
during 2001, 2000, and 1999, respectively.

INTANGIBLE ASSETS

The Company's intangible assets consist of property management contracts and
costs paid in excess of net assets of acquired businesses. Property management
contracts are stated at cost, less accumulated amortization of $54,049,000
(2001), and $47,476,000 (2000). These contracts are amortized using the
straight-line method over 3 to 15 years. Costs in excess of net assets of
acquired businesses have been amortized by the straight-line method, over 5 to
25 years.. Accumulated amortization of costs in excess of net assets of acquired
businesses was $57,992,000 (2001) and $40,637,000 (2000). Property management
contracts and costs in excess of net assets of acquired businesses are reviewed
when indicators of impairment exist. Through December 31, 2001, an undiscounted
cash flow methodology was used to determine whether underlying operating cash
flows were sufficient to recover the assets' carrying amount. Beginning January
1, 2002, costs in excess of net assets of acquired businesses will no longer be
amortized but will be evaluated annually for impairment (See Note 2 - Recent
Accounting Pronouncements).



                                      F-13
<PAGE>


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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets, typically ranging from 3 to 10 years.

REVENUE RECOGNITION

Real estate services revenue includes commercial leasing, tenant representation,
property and asset management, investment sales, consulting, residential
brokerage, mortgage origination, escrow agency, and commission revenue related
to real estate sales. Such revenues are recorded when the related services are
performed or at closing in the case of real estate sales. Prior to 2000, leasing
commission revenue was recorded when the related service was performed
(generally at lease signing), unless significant contingencies existed.
Effective January 1, 2000, the Company changed its method of accounting to
comply with the Securities and Exchange Commission's Staff Accounting Bulletin
101 ("SAB 101"), Revenue Recognition in Financial Statements. As a result,
leasing commissions that are payable upon tenant occupancy, payment of rent or
other specified events are now recognized upon the occurrence of such events
(see Note 4).

FOREIGN CURRENCY TRANSLATION

The financial statements of the Company's foreign subsidiaries are measured
using the local currency as the functional currency. Revenues and expenses of
such subsidiaries have been translated into U.S. dollars at the average exchange
rates prevailing during the period. Assets and liabilities have been translated
at the rates of exchange at the balance sheet date. Translation gains and losses
are deferred as a separate component of stockholders' equity in other
comprehensive income, unless there is a sale or complete liquidation of the
underlying foreign investment. Gains and losses from foreign currency
transactions, such as those resulting from the settlement of foreign receivables
or payables, are included in the statement of operations in determining net
income.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) consists of unrealized gains (losses) on
marketable equity securities, foreign currency translation and minimum pension
liability adjustments. At December 31, 2001, accumulated other comprehensive
losses totaled $8,890,000 (net of applicable taxes), comprised of unrealized
gains on marketable securities of $50,000, foreign currency translation losses
of $8,040,000 and a minimum pension liability of $900,000. At December 31, 2000,
accumulated other comprehensive losses totaled $5,964,000 (net of applicable
taxes), comprised of unrealized gains on marketable securities of $43,000 and
foreign currency translation losses of $6,007,000.





                                      F-14
<PAGE>


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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

MINORITY INTEREST

Through June 30, 2000, minority interests consisted of minority equity in
EdificeRex.com, Inc. ("EdificeRex"), the Company's internally developed
Internet-based business that launched in February 2000. During the first half of
2000, Insignia consolidated EdificeRex and recorded net operating losses of
approximately $9.3 million, or $3.2 million in excess of the Company's
investment. EdificeRex was de-consolidated in the third quarter of 2000, due to
a restructuring that reduced the Company's voting interest to approximately 47%.
The $3.2 million excess loss was carried as a deferred credit on the Company's
balance sheet at December 31, 2000. EdificeRex disposed of all of its operating
divisions and liquidated during the fourth quarter of 2001; accordingly the
Company recognized the deferred credit of $3.2 million in earnings, which is
included in losses from Internet investments.

INCOME TAXES

Deferred income tax assets and liabilities are recorded to reflect the tax
consequences on future years of temporary differences of revenue and expense
items for financial statement and income tax purposes. Valuation allowances are
provided against deferred tax assets that are unlikely to be realized. Federal
income taxes are not provided on the unremitted earnings of foreign subsidiaries
because it has been the practice of the Company to reinvest those earnings in
the businesses outside the United States.

IMPAIRMENT

Impairment losses are recognized for long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows are not
sufficient to recover the assets' carrying amount. Impairment losses are
measured for assets held for sale by comparing the fair value of assets (less
costs to dispose) to their respective carrying amounts.

RISKS AND UNCERTAINTIES

The Company's future results could be adversely affected by a number of factors,
including (i) a general economic downturn in the Company's principal markets,
most notably New York, London and Paris; (ii) unfavorable foreign currency
fluctuations; (iii) changes in interest rates; and (iv) fluctuations in rental
rates and real estate values.



                                      F-15
<PAGE>


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


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

EARNINGS PER SHARE

Basic earnings per share is calculated using income available to common
shareholders divided by the weighted average of common shares outstanding during
the year. Diluted earnings per share is similar to basic earnings per share
except that the weighted average of common shares outstanding is increased to
include the number of additional common shares that would have been outstanding
if the potentially dilutive securities, such as preferred stock, options and
warrants, had been issued or exercised.

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 has adopted SFAS No. 141 for all business combinations completed
after July 1, 2001 and will fully implement SFAS No. 141 and SFAS No. 142
beginning in the first quarter of 2002. Amortization of goodwill that would
become non-amortizable under SFAS No. 142 totaled approximately $17.3 million
for the 2001 year. The Company's initial impairment tests on goodwill and other
indefinite-lived intangible assets will be completed, with any measured
impairment recorded through earnings as a cumulative effect of a change in
accounting principle, during the first quarter of 2002. Insignia preliminarily
estimates an aggregate impairment charge before tax effects of between $20
million and $50 million, based on current industry multiples. The Company is
obtaining a third party valuation to support its estimates, and the amount of
any impairment charge (together with related tax benefit) will not be determined
until the end of the first quarter.

In October 2001, the Financial Accounting Standards Board issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144
provides accounting guidance for financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. It also supersedes the accounting and reporting of APB
Opinion No. 30 "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" related to the disposal of a segment of a
business. SFAS No. 144 is effective for fiscal years beginning after December
15, 2001, although early adoption is encouraged. Insignia adopted SFAS No. 144
at December 31, 2001 in conjunction with the Company's sale of Realty One (see
Note 3).



                                      F-16
<PAGE>


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


3. DISCONTINUED OPERATION

In late December 2001, Insignia entered into a contract to sell its Realty One
single-family home brokerage business and affiliated companies to Real Living,
Inc., effective as of December 31, 2001. Real Living, Inc. is a privately held
company formed by HER Realtors of Columbus, Ohio and Huff Realty of Cincinnati,
Ohio. The sale formally closed on January 31, 2002. The sale price was
approximately $33 million, including approximately $29 million in cash at
closing and additional payments aggregating as much as $4 million. These
payments include a $1 million reimbursement for Realty One operating losses in
January 2002; a potential earn-out of as much as $2 million payable over the
next two years (depending on the performance of the business); and a $1 million
operating lease payable over four years for the use of proprietary software
developed by Insignia for an Internet-based residential brokerage model. Realty
One's operations were discontinued for financial reporting purposes at December
31, 2001 and the results of operations for Realty One are reported separately in
the Company's financial statements for all periods presented for comparability.
The Company provided for a loss in connection with the January 2002 sale of
Realty One of approximately $17.6 million (net of applicable taxes of $4
million) for the year ended December 31, 2001.

The results of operations of Realty One are reported separately as discontinued
operations for the years ended December 31, 2001, 2000 and 1999. Assets and
liabilities of Realty One have been classified separately in the Company's
consolidated balance sheets at December 31, 2001 and 2000. The following table
summarizes financial information of Realty One for all periods presented:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                          2001                2000
                                                   --------------------------------------
                                                              (In thousands)
<S>                                                <C>                  <C>
ASSETS
  Cash and cash equivalents                          $       6,177       $       2,331
  Receivables                                                3,655               3,232
  Mortgage loans held for sale                              20,555              11,443
  Property and equipment                                     9,852              12,076
  Costs in excess of net assets acquired                    15,711              40,342
  Other assets                                               1,872               2,101
                                                   --------------------------------------
Total assets                                                57,822              71,525
                                                   --------------------------------------
LIABILITIES
   Accounts payable                                          1,043               3,332
   Accrued incentives                                        3,937               3,858
   Accrued and sundry liabilities                            1,499               1,273
   Mortgage warehouse line of credit                        20,554               9,502
   Notes payable                                             7,539               7,213
                                                   --------------------------------------
                                                            34,572              25,178
                                                   --------------------------------------

NET ASSETS OF DISCONTINUED OPERATION                  $     23,250        $     46,347
                                                   ======================================
</TABLE>



                                      F-17
<PAGE>


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


<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31
                                                                             2001             2000                1999
                                                                     ------------------------------------------------------
                                                                                        (In thousands)
<S>                                                                  <C>                <C>                <C>
Revenues                                                                 $   102,811      $     99,152        $   104,029
                                                                     ======================================================
(Loss) income from operations before taxes                                    (2,282)            1,117              4,497
                                                                     ======================================================
(Loss) income from operations                                                 (1,600)              558              2,574
Provision for loss on disposal, net of applicable taxes of $4,000            (17,629)               --                 --
                                                                     ------------------------------------------------------
Net (loss) income                                                        $   (19,229)     $        558        $     2,574
                                                                     ======================================================
</TABLE>

Included in Realty One's earnings for 2000 was a $811,000 gain from the sale of
a marketable security. Gross proceeds of $1,293,000 were collected from this
sale.

4. 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 2001 and 2000 years are presented in compliance with
the requirements of this accounting change. The cumulative effect of the
accounting change on prior years resulted in a reduction to income of $30.4
million (net of applicable taxes of $23.3 million), which is included in net
earnings for the year ended December 31, 2000. The Company recognized revenue of
$18.8 million and $80.4 million (before associated commission expenses) during
2001 and 2000, respectively, that was included in the cumulative effect
adjustment at January 1, 2000. 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.




                                      F-18
<PAGE>


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

5. MERGER RELATED EXPENSES

In 2001, Insignia recorded a non-recurring charge of $661,000 for merger related
expenses in connection with the October 2001 acquisition of Baker Commercial
Real Estate, Inc. ("Baker"). The one-time charge was composed of the costs to
vacate excess office space. The charge included provisions for rent expense
during the period from vacancy to sublease and cost of improvements required for
sublease. All excess office space was subleased prior to December 31, 2001.

Insignia, in 1999, recorded a one-time charge of $4.3 million for merger related
expenses in connection with the March 1999 acquisition of St. Quintin and its
subsequent combination with REGL. The charge was substantially comprised of
costs to vacate excess office space and, to a lesser extent, severance costs.
The charge included provisions for rent expense during the period from vacancy
to sublease, costs of improvements required for sublease, rent concessions,
excess rent over sublease terms and severance. All excess office space was
subleased and severance costs were incurred prior to December 31, 1999.




                                      F-19
<PAGE>


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


6. EARNINGS PER SHARE

The following table sets forth the computation of the numerator and denominator
used for the computation of basic and diluted earnings per share for the periods
indicated.

<TABLE>
<CAPTION>
                                                                              2001               2000             1999
                                                                        ----------------------------------------------------
                                                                                           (In thousands)
<S>                                                                     <C>               <C>                <C>
NUMERATOR:
Numerator for basic earnings per share - income available to common
   stockholders (before discontinued operations and cumulative effect)      $  4,721           $ 20,339         $ 10,298

Effect of dilutive securities:
   Preferred stock dividends                                                       -                890                -
                                                                        ----------------  -----------------  ---------------
Numerator for diluted earnings per share - income available to common
   stockholders after assumed conversions (before
   discontinued operations and cumulative effect)                           $  4,721           $ 21,229         $ 10,298
                                                                        ================  =================  ===============
DENOMINATOR:
Denominator for basic earnings per share - weighted
   average common shares                                                      22,056             21,200           21,294
Effect of dilutive securities:
   Stock options, warrants and unvested restricted stock                       1,342              1,442            1,328
   Convertible preferred stock                                                     -              1,786                -
                                                                        ----------------  -----------------  ---------------
Denominator for diluted earnings per share - weighted
   average common shares and assumed conversions                              23,398             24,428           22,622
                                                                        ================  =================  ===============
</TABLE>


The potential dilutive shares from the conversion of preferred stock is not
assumed for the year ended December 31, 2001, because the inclusion of such
shares would be antidilutive.



                                      F-20
<PAGE>


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


7. ACQUISITIONS

The Company's acquisitions during the last three years are discussed below. All
acquisitions were accounted for as purchases and the results of operations have
been included in Insignia's statement of operations from the respective date of
acquisition. Contingent purchase consideration is generally accounted for as
additional costs in excess of net assets of acquired businesses when incurred.

2001 ACQUISITIONS

GROUPE BOURDAIS

In December 2001, Insignia acquired Groupe Bourdais ("Bourdais"), one of
France's premier commercial real estate services companies with operations in
eight offices in the Greater Paris region. The base purchase price was
approximately $21.4 million, comprised of $17.4 million paid in cash at closing
and the issuance of 402,645 shares of the Company's Common Stock. Additional
purchase consideration of up to approximately $28.0 million, payable over the
three years ending December 31, 2004, is contingent on the future performance of
Bourdais. Bourdais now operates under the Insignia Bourdais name.

BAKER COMMERCIAL

In October 2001, Insignia acquired Baker, a leading provider of commercial real
estate services in the greater Dallas area. Baker provides tenant
representation, land and investment property sales, and strategic real estate
planning. The Baker acquisition will augment Insignia's existing regional tenant
representation and investment sales capabilities in the greater Dallas area. The
base purchase price was approximately $2.2 million and was paid in cash.
Additional purchase consideration of up to $1.5 million, payable over three
years, is contingent on the future performance of the Dallas operations.

BROOKE INTERNATIONAL - INDIA

In April 2001, Insignia further expanded its Asian presence through the
acquisition of Brooke International's operation in India ("Brooke - India"). The
purchase price for the Indian operation was approximately $700,000, all of which
was paid in cash. The Brooke - India 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.

INOVA

In March 2001, Insignia acquired Grupo Immobiliario Inova ("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 represents the Company's operating
platform, with quality real estate professionals, for the expansion of services
in Latin America. The purchase price was approximately $550,000 and was paid in
cash.



                                      F-21
<PAGE>


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


7. ACQUISITIONS (CONTINUED)

2000 ACQUISITIONS

BROOKE INTERNATIONAL

In December 2000, Insignia acquired Brooke International ("Brooke"), a
commercial real estate service company based in Hong Kong with additional
offices in China and Thailand. The base purchase price was approximately $1.6
million, comprised of approximately (i) $1.1 million paid in cash and (ii)
$500,000 in reserved Common Stock and an assumed option plan enabling certain
Brooke employees to purchase 110,000 shares of the Company's Common Stock.
Options to purchase 40,000 shares of the Company's Common Stock at $11.8125 had
been granted under this plan and remained outstanding at December 31, 2001.
Additional purchase consideration of up to $1.0 million, payable over three
years, is contingent on the future performance of Brooke.

BDR

In March 2000, the Company entered into a definitive agreement to acquire BDR, a
Dutch real estate services company headquartered in Amsterdam, the Netherlands.
The base purchase price was approximately $2.4 million, all of which was paid in
cash upon final closing in September 2000. BDR provides a variety of commercial
real estate services with a specialization in international advisory assignments
and other corporate services. Additional purchase consideration of approximately
$2.5 million, payable over three years, is contingent on the future performance
of this business.

1999 ACQUISITIONS

LYNCH MURPHY WALSH & PARTNERS

On March 1, 1999, Insignia acquired Lynch Murphy Walsh & Partners ("Lynch
Murphy"), a provider of commercial real estate services located in Boston,
Massachusetts. Lynch Murphy specializes in brokerage services, including
representation of tenants and landlords, investment sales and debt placements,
valuation services and advisory/consulting services. The base purchase price was
$12.0 million, all of which was paid in cash from borrowings under Insignia's
revolving credit facility. Additional purchase consideration of up to $10.0
million, payable over three years, is contingent on the future performance of
Lynch Murphy. As of December 31, 2001, $6.0 million of additional purchase
consideration had been paid and the maximum remaining potential consideration
was approximately $4.0 million.



                                      F-22
<PAGE>


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


7. ACQUISITIONS (CONTINUED)

ST. QUINTIN

On March 5, 1999, Insignia acquired St. Quintin, a British real estate services
firm headquartered in London. The base purchase price for St. Quintin was
approximately $32.0 million. The base purchase price was funded with
approximately $24.3 million in borrowings under the Company's revolving credit
facility, the issuance of approximately 306,000 shares of the Company's Common
Stock and assumed options enabling certain employees of St. Quintin to purchase
approximately 612,000 shares of the Company's Common Stock. The remaining
additional purchase consideration of approximately $11.2 was incurred in 2000.

The operations of St. Quintin were merged with REGL in 1999 and the combined
entities now operate under the name Insignia Richard Ellis throughout the United
Kingdom.

DOUGLAS ELLIMAN

On June 23, 1999, Insignia acquired Douglas Elliman Brokerage, a residential
real estate brokerage firm located in New York City. The base purchase price was
approximately $65.0 million and was paid in cash from borrowings under
Insignia's revolving credit facility. Additional purchase consideration of up to
$10.0 million, payable over five years, is contingent on the future revenues of
Douglas Elliman. Through December 31, 2001 approximately $4.0 million of
additional purchase consideration had been paid and the maximum remaining
potential consideration was approximately $6.0 million.

OTHER INFORMATION (UNAUDITED)

Pro forma unaudited results of operations for the years ended December 31, 2001,
2000 and 1999, assuming consummation of the Bourdais acquisition at January 1,
2001 and 2000 and assuming consummation of the Lynch Murphy, St. Quintin and
Douglas Elliman acquisitions at January 1, 1999 are as follows:

<TABLE>
<CAPTION>
                                                2001              2000              1999
                                           ---------------------------------------------------
                                                   (In thousands, except per share data)
<S>                                        <C>                <C>                <C>
Revenues                                      $ 780,635        $  827,020        $  629,186
Net (loss) income                               (11,053)           (3,164)           11,260
Pro forma per share amounts:
   Net (loss) income - basic                      (0.50)            (0.15)             0.53
   Net (loss) income - assuming dilution          (0.47)            (0.13)             0.50
</TABLE>

Pro forma results of operations for Baker, Brooke-India and Inova (2001 and
2000) and Brooke International and BDR (2000 and 1999) are not provided as the
impact of these acquisitions on the Company's results of operations were not
material.


                                      F-23
<PAGE>

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


7. ACQUISITIONS (CONTINUED)

These pro forma results do not purport to represent the operations of the
Company nor are they necessarily indicative of the results that actually would
have been realized by the Company if the purchase of these businesses had
occurred at the beginning of the periods specified.

The base purchase consideration for the Bourdais, Baker, Brooke - India and
Inova (2001), BDR and Brooke (2000) and Lynch Murphy, St. Quintin and Douglas
Elliman (1999) acquisitions is summarized as follows:

<TABLE>
<CAPTION>
                                             2001            2000            1999
                                     -------------------------------------------------
                                                      (In thousands)
<S>                                  <C>                  <C>             <C>
Common Stock                               $  4,000        $     479      $   8,100
Accrued and sundry liabilities               10,990            2,398          4,316
Pension liability                                 -                -          2,105
Cash paid at the closing dates               20,508            3,458        101,609
                                     -------------------------------------------------
                                           $ 35,498        $   6,335      $ 116,130
                                     =================================================
</TABLE>

The base purchase consideration was allocated as follows:

<TABLE>
<CAPTION>
                                                       2001            2000            1999
                                                --------------------------------------------------
                                                                  (In thousands)
<S>                                             <C>                 <C>            <C>
Cash acquired                                       $     8,856       $        -     $       -
Receivables                                               5,469            1,600           873
Property and equipment                                      415              152         2,824
Property management contracts                             1,008                -             -
Non-compete agreements                                      153                -           120
Costs in excess of net assets of acquired
   businesses                                            14,540            4,070       107,280
Other assets                                              5,057              513         5,033
                                                --------------------------------------------------
                                                    $    35,498       $    6,335     $ 116,130
                                                ==================================================
</TABLE>

Base purchase consideration for Bourdais has been allocated based on tentative
estimates of value for acquired intangible assets. The Company's evaluation of
acquired intangibles - consisting of property management contracts, backlog, a
favorable lease, trademarks and goodwill - has not been finalized as of March
20, 2002.



                                      F-24
<PAGE>


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


7. ACQUISITIONS (CONTINUED)

The base purchase consideration allocated to costs in excess of net assets of
acquired businesses is summarized as follows:

<TABLE>
<CAPTION>
     ACQUISITION                            YEAR               AMOUNT
     ---------------------------------------------------------------------
                                                           (In thousands)
    <S>                                    <C>                <C>
     Bourdais                               2001               $11,377
     Baker                                  2001                 2,164
     Brooke - India                         2001                   442
     Inova                                  2001                   557
     BDR                                    2000                 2,190
     Brooke International                   2000                 1,880
     Lynch Murphy                           1999                11,838
     St. Quintin                            1999                33,215
     Douglas Elliman                        1999                62,227
</TABLE>


8. RECEIVABLES

Receivables consist of the following:

<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                                         2001              2000
                                                                   ------------------------------------
                                                                             (In thousands)
<S>                                                                <C>                 <C>
Commissions and accounts receivable                                     $   161,041      $   183,145

Notes receivable:
   Brokerage and other employees                                             11,356           10,276
   Executive officers with interest ranging from 6.7% to 8.4%                 1,500            1,304
   Other                                                                      2,223            1,145
                                                                   ------------------------------------
                                                                             15,079           12,725
                                                                   ------------------------------------
                                                                        $   176,120      $   195,870
                                                                   ====================================
</TABLE>




                                      F-25
<PAGE>


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


8. RECEIVABLES (CONTINUED)

Accounts receivable consists primarily of property management fees and cost
reimbursements. Commissions receivable consists primarily of brokerage and
leasing commissions from users of the Company's real estate services. The
Company's receivables are not collateralized; however, credit losses have been
insignificant and within management's estimate.

Principal collections on notes receivable are as follows:

<TABLE>
<CAPTION>
                                                          AMOUNT
                                                   ---------------------
                                                      (In thousands)
    <S>                                           <C>
    2002                                                 $   10,743
    2003                                                      1,951
    2004                                                      1,501
    2005                                                        726
    2006                                                        158
    Thereafter                                                    -
                                                   ---------------------
                                                         $   15,079
                                                   =====================
</TABLE>

9. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                             2001              2000
                                                       ------------------------------------
                                                                 (In thousands)
         <S>                                          <C>                <C>
         IT equipment                                        $ 29,231         $ 26,186
         Software                                              26,870           21,691
         Furniture and fixtures                                15,351           12,619
         Leasehold improvements                                17,957           14,911
         Other equipment                                        8,086            7,079
                                                       ------------------------------------
                                                               97,495           82,486
         Less: Accumulated depreciation                       (35,297)         (20,060)
                                                       ------------------------------------
                                                             $ 62,198         $ 62,426
                                                       ====================================
</TABLE>




                                      F-26
<PAGE>


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


10. REAL ESTATE INVESTMENTS

CO-INVESTMENT AND DEVELOPMENT

Insignia pursues opportunities to invest in operating real estate assets. The
Company identifies investment opportunities for various clients and invests
alongside of those clients or, in limited instances, by itself in the purchase
of qualifying properties. The Company's co-investment partners include the
following notable business entities: Citigroup, ING Barings, Blackacre Capital
Management, The Witkoff Group, Lennar, Praedium, Lone Star Opportunity Fund,
Prudential, GE Investments and Whitehall Street Real Estate. As of December 31,
2001, Insignia had invested capital of $29.3 million in 37 minority owned
property assets. These properties own over 9.5 million square feet of commercial
property, 950 multi-family apartment units and 875 hotel rooms. The Company's
minority ownership interests in such co-investment property ranges from 1% to
30%.

As of December 31, 2001, wholly-owned subsidiaries of the Company owned three
commercial properties. The carrying amount of these assets was $41.8 million and
real estate mortgage notes encumbering the assets totaled $37.3 million. These
properties, which are consolidated in the Company's financial statements,
include the following: (i) Brookhaven Village, a 155,000 square foot retail
facility located in Norman, Oklahoma; (ii) Dolphin Village, a 136,000 square
foot retail facility located in St. Petersburg, Florida; and (iii) Shinsen
Place, an office building located in Tokyo, Japan. The property in Japan was
acquired for, and is currently under contract for sale to, a client. The sale is
expected to close in late March 2002. Insignia has invested capital of $5.5
million in these three properties.

The Company recorded pre-tax gains from the sale of minority owned properties of
approximately $11.0 million, $3.9 million and $2.8 million in 2001, 2000 and
1999, respectively. Insignia also recorded impairment write-downs of its
investment in certain minority owned properties totaling $824,000 and $1.8
million in 2001 and 2000, respectively, to reflect their estimated fair values.
The gains and write-downs are included in equity earnings in real estate
ventures in the Company's statements of operations and its commercial segment.

In addition, Insignia has an ownership interest in, and directs the development
of, four office developments. The Company also owns a parcel of land, located
adjacent to one of the developments, that is being held for future development.
The Company's investments at December 31, 2001 in these properties totaled $13.1
million. The four development properties have investment partners, with
Insignia's ownership in each ranging from 25% to 33%. Insignia has not initiated
any new development activities since mid-2000.

The Company realized earnings of approximately $2.9 million and $1.5 million in
2001 and 2000, respectively, from the sale of two properties in each year that
were developed by Insignia. Gains from sales of development assets are included
in real estate services revenues in the Company's statements of operations and
its commercial segment.



                                      F-27
<PAGE>

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


10. REAL ESTATE INVESTMENTS (CONTINUED)

PRIVATE INVESTMENT FUNDS

     INSIGNIA OPPORTUNITY TRUST

Insignia Opportunity Trust ("IOT") is an Insignia-sponsored private real estate
investment fund formed in late 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 $71.0 million (of which $9.0 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. All capital commitments to
IOT and IOP have been called and funded. Insignia has an aggregate ownership
interest of approximately 13% in IOT and IOP.

Insignia realized total earnings from IOT and IOP of approximately $2.8 million
and $847,000 during 2001 and 2000, respectively.

     INSIGNIA OPPORTUNITY PARTNERS II

In September 2001, Insignia closed the capital-raising phase for a second real
estate investment fund, Insignia Opportunity Partners II ("IOP II"), with $50.0
million of equity capital commitments from Insignia and third-party investors.
IOP II intends to invest primarily in secured real estate debt instruments,
similar to the investment initiatives of IOT. Insignia holds a 10% ownership in
IOP II and serves as its day-to-day advisor. The investment activities of IOP II
commenced in December 2001 and no earnings were generated during the 2001 year.

At year-end 2001, Insignia held investments totaling $11.6 million in IOT and
IOP II and had commitments to invest an additional $4.0 million in IOP II. The
following table summarizes financial information of IOT and IOP II:

                                            2001             2000
                                      ----------------------------------
                                                 (In thousands)

  Total assets                           $   125,221      $   79,932
  Total liabilities                           30,416          20,806
  Total revenues                              15,828           6,234
  Total income                                13,481           4,500




                                      F-28
<PAGE>


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


10. REAL ESTATE INVESTMENTS (CONTINUED)

At December 31, 2001, the Company's real estate investments totaled $95.7
million, consisting of the following:

<TABLE>
<CAPTION>
                                                                          AMOUNT
                                                                    -----------------
                                                                      (In thousands)
     <S>                                                            <C>
     Minority interests in operating properties                      $      29,282
     Wholly-owned properties                                                41,788
     Minority owned development properties                                  10,761
     Land held for future development                                        2,308
     Minority interests in real estate debt investment funds                11,571
                                                                    -----------------

        TOTAL REAL ESTATE INVESTMENTS                                $     95,710
                                                                    =================
</TABLE>

The real estate carrying amounts of the three wholly-owned properties at
December 31, 2001 were financed by real estate mortgage notes encumbering the
assets totaling $37.3 million. At December 31, 2001, Insignia had invested
capital of approximately $5.5 million in these wholly-owned properties and has
no further obligations to the subsidiaries or their creditors.

Apart from its real estate investments, Insignia had obligations totaling $18.6
million to all real estate entities at December 31, 2001, consisting of the
following:

<TABLE>
<CAPTION>
                                                                         AMOUNT
                                                                     --------------
                                                                     (In thousands)
       <S>                                                           <C>
       Letters of credit partially backing construction loans          $    8,900
       Other partial guarantees of property debt                            5,250
       Future capital contributions for capital improvements                  455
       Future capital contributions for acquisitions                        4,000
                                                                     -------------

          TOTAL OBLIGATIONS                                            $   18,605
                                                                     =============
</TABLE>





                                      F-29
<PAGE>


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


10. REAL ESTATE INVESTMENTS (CONTINUED)

Summarized financial information of unconsolidated real estate entities is as
follows:

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31
                                                                        2001               2000                1999
                                                                -------------------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS INFORMATION                                      (In thousands)
----------------------------------------------
<S>                                                             <C>                <C>                 <C>
Revenues                                                             $  222,502         $  166,101          $  110,324

Total operating expenses                                               (208,556)          (176,252)           (112,726)
                                                                -------------------------------------------------------
Income (loss) before gains on sale of property                           13,946            (10,151)             (2,402)
Gains on sale of property                                               107,025             24,939              18,196
                                                                -------------------------------------------------------
Net income                                                           $  120,971        $    14,788          $   15,794
                                                                =======================================================

Company's share of net income:
  Included  in  equity earnings in real estate ventures              $   10,381        $      1,455         $    2,284
                                                                =======================================================
  Included in real estate services revenues                               5,632               2,326                  -
                                                                =======================================================
</TABLE>

Income included in equity earnings includes pre-tax gains on dispositions of
investments totaling $11.0 million, $3.9 million and $2.8 million in 2001, 2000
and 1999, respectively.

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31
                                                                               2001                2000
                                                                       --------------------------------------
CONDENSED BALANCE SHEET INFORMATION                                               (In thousands)
-----------------------------------
<S>                                                                     <C>                 <C>
Cash and investments                                                      $     29,662        $     35,257
Receivables and deposits                                                        28,963              23,438
Investments in commercial mortgage backed securities                           116,363              69,053
Investments in mezzanine loans                                                   2,249               2,669
Other assets                                                                    36,837              27,542

Real estate                                                                  1,007,432           1,152,522
Less accumulated depreciation                                                  (75,049)            (60,085)
                                                                       --------------------------------------
Net real estate                                                                932,383           1,092,437
                                                                       --------------------------------------
Total assets                                                               $ 1,146,457          $1,250,396
                                                                       ======================================

Mortgage notes payable                                                    $    698,452         $   847,706
Other liabilities                                                               29,187              34,842
                                                                       --------------------------------------
Total liabilities                                                              727,639             882,548
Partners' capital                                                              418,818             367,848
                                                                       --------------------------------------
Total liabilities and partners' capital                                    $ 1,146,457          $1,250,396
                                                                       ======================================
</TABLE>



                                      F-30
<PAGE>


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


10. REAL ESTATE INVESTMENTS (CONTINUED)

Interest capitalized in connection with development properties totaled
approximately $500,000, $1,225,000, and $1,074,000 for 2001, 2000, and 1999,
respectively.

Insignia provides incentives to its employees through the participation, either
through equity grants at the time investments are made or through granting of
rights to proceeds, in its real estate investments. With respect to real estate
investments, such grants generally consist of an aggregate grant of 50% of
proceeds after Insignia has recovered its investment plus a 10% per annum return
thereon. Gains on sale of real estate are shown after payments pursuant to these
grants of $7.0 million, $4.4 million and $4.1 million in 2001, 2000 and 1999,
respectively.

As sponsor and manager of IOT and IOP II, Insignia is entitled to promotional
participation in cash distributions of up to 30% after investors, including
Insignia, achieve return of capital and a 10% cumulative return. Insignia
granted equity interests in the advisor or rights to distributions received by
the advisor to certain employees of approximately 60% of such promotional
distributions. Earnings realized by the Company from these funds were reduced by
$745,000 and $323,000 during 2001 and 2000, respectively, as a result of
payments pursuant to such equity grants.





                                      F-31
<PAGE>


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


11.      INTERNET INVESTMENTS

At December 31, 2001, Insignia held one remaining Internet investment of
approximately $1.0 million. During 2001, the Company recorded pre-tax impairment
write-offs totaling $13.4 million of investments in sixteen third-party
Internet-based businesses, including $3.3 million invested in 2001 in ventures
sponsored by Project Octane, the industry consortium comprised of Insignia, CB
Richard Ellis, Jones Lang LaSalle and Trammel Crow.

During 2000, Insignia incurred pre-tax operating losses of $15.2 million (before
depreciation and minority interests) from internal Internet initiatives,
including consolidated losses of $9.3 million in EdificeRex. In addition, the
Company recorded $2.3 million of pretax impairment write-offs during the third
quarter of 2000. The above-mentioned EdificeRex loss exceeded the Company's
investment by approximately $3.2 million and was carried as a deferred credit on
the balance sheet at December 31, 2001. 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
held an economic interest of approximately 50%. EdificeRex disposed of all of
its operating divisions and liquidated in the fourth quarter of 2001;
accordingly the Company recognized the deferred credit of $3.2 million in
earnings, which is included in losses from Internet investments.




                                      F-32
<PAGE>


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


12. ACCRUED AND SUNDRY LIABILITIES

Accrued and sundry liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                                            DECEMBER 31
                                                                                        2001              2000
                                                                                ------------------------------------
                                                                                          (In thousands)
<S>                                                                             <C>              <C>
Employee compensation and benefits                                                   $    19,445      $    13,515
Lease and annuity liabilities                                                              6,385            7,259
Amounts payable in connection with acquisitions                                            1,781           27,663
Deferred compensation                                                                     23,103           20,070
Deferred revenue                                                                          25,306           28,205
Current taxes payable                                                                      3,683            5,912
Value added taxes                                                                          2,628            5,594
Accrued rent                                                                               3,876            1,921
U.K. pension liability                                                                     1,596                -
Other                                                                                     13,060           11,390
                                                                                ------------------------------------
                                                                                     $   100,863      $   121,529
                                                                                ====================================
</TABLE>

At December 31, 2000, amounts payable in connection with acquisitions included
$22.5 million of remaining additional purchase consideration for the combined
U.K. entity (comprising St. Quintin and REGL). This amount was paid in March
2001 through the issuance of deferred acquisition loan notes. At December 31,
2001, $21 million of such loan notes remained outstanding.

Deferred revenue consists of the Company's ownership portion of acquisition and
development fees in certain real estate partnerships of $1.0 million and lease
commissions collected but deferred pursuant to SAB 101. Deferred acquisition and
development fees are realized in income upon disposal of the Company's
ownership, generally from property sales, and deferred leasing commissions are
recognized upon the fulfillment of all conditions to commission payment, such as
tenant occupancy or payment of rent.



                                      F-33
<PAGE>


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


13. NOTES PAYABLE AND OTHER DEBT

In May, Insignia entered into 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 had borrowings of $149
million on the facility and outstanding letters of credit of $12.3 million at
December 31, 2001. The interest rate at December 31, 2001 was LIBOR plus 2.50%
(approximately 4.5%). The current facility provides for foreign denominated
borrowings up to an aggregate $75 million. The facility is collateralized by a
pledge of the stock of all material subsidiaries.

At December 31, 2000 the outstanding balance on the previous revolving credit
facility was $122,350,000 including foreign denominated borrowings of 7,750,000
British pounds and 11,450,000 euros. The interest rates on borrowings at
December 31, 2000 were 8.56% for U.S. dollar denominated borrowings, 7.94% for
British pounds and 6.625% for euros. In addition, the Company had outstanding
letters of credit against the facility in the amount of $14.4 million at
December 31, 2000.

Notes payable consist of the following:

<TABLE>
<CAPTION>
                                                                                           DECEMBER 31
                                                                                     2001               2000
                                                                              --------------------------------------
                                                                                         (In thousands)
<S>                                                                            <C>                   <C>
Revolving credit facility with interest due quarterly at LIBOR plus 2.0 to
   2.5%. Final payment due date is May 8, 2004.                                      $149,000           $122,350
Insignia Richard Ellis $3 million loan collateralized by restricted cash and
   due on demand.                                                                           -              1,832
Acquisition loan notes, secured by restricted cash with an interest rate of
   approximately 3.0% and a final maturity of April 2010                               20,972              4,387
                                                                              --------------------------------------
                                                                                     $169,972           $128,569
                                                                              ======================================
</TABLE>


The acquisition loan notes have a semiannual callable feature at the discretion
of the note holder.




                                      F-34
<PAGE>


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

13. NOTES PAYABLE AND OTHER DEBT (CONTINUED)

Certain notes payable and other debt agreements contain various restrictive
covenants requiring, among other things, minimum consolidated net worth and
certain other financial ratios. The Company's revolving credit facility
restricts the payment of cash dividends to an amount not to exceed twenty-five
percent of net income for the immediately preceding fiscal quarter. At December
31, 2001 and 2000, the Company was in compliance with all debt covenants.

REAL ESTATE MORTGAGE NOTES PAYABLE

Real estate mortgage notes payable represent non-recourse loans collateralized
by real estate properties consisting of the following:

<TABLE>
<CAPTION>
                                                                                             2001              2000
                                                                                    -------------------------------------
                                                                                               (In thousands)
<S>                                                                                 <C>                 <C>
Brookhaven Village, mortgage loan bearing interest at 6.24% at December 31, 2001.
   The note matures in December 2002, with principal payable in full on such date          $  8,305           $  8,305
Dolphin Village, mortgage loan bearing interest at 6.07% at December 31, 2001.  The
   note matures on October 8, 2003                                                            7,608              6,977
One Telecom, $26.1 million credit facility                                                        -             26,100
Sun Microsystems, mortgage loan                                                                   -              6,987
Shinsen Place, mortgage loan bearing interest at approximately 1.0% and having a
   final maturity of April 30, 2002                                                          21,356                  -
                                                                                    -------------------------------------
                                                                                           $ 37,269           $ 48,369
                                                                                    =====================================
</TABLE>

The mortgage note encumbering Brookhaven Village includes a participation
feature whereby the lender is entitled to 35% of the net cash flow, net
refinancing proceeds or net sales proceeds after the Company has achieved a 10%
annual return on equity. The participation liability to the lender totaled
approximately $658,000 and $600,000 at December 31, 2001 and 2000, respectively.
One Telecom and Sun Microsystems were sold during the first quarter of 2001.

Scheduled principal maturities on all notes payable after December 2001 are as
follows:

                                          AMOUNT
                                    -------------------
                                       (In thousands)

         2002                           $    50,633
         2003                                 7,608
         2004                               149,000
                                    -------------------
                                        $   207,241
                                    ===================

The Company paid interest of approximately $11,036,000, $9,342,000, and
$5,287,000 in 2001, 2000, and 1999, respectively.



                                      F-35
<PAGE>


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


14. STOCK COMPENSATION PLANS

The Company's 1998 Stock Incentive Plan (the "1998 Plan") authorized the grant
of options and restricted stock awards to management personnel totaling up to
3,500,000 shares of the Company's Common Stock. The term of each option is
determined by the Company's Board of Directors but will in no event exceed ten
years from the date of grant. Options granted typically have five-year terms and
are granted at prices not less than 100% of the fair market value of the
Company's Common Stock on the date of grant. The 1998 Plan may be terminated by
the Board of Directors at any time. In September 1998, the Company was spun-off
from its former parent, a company also named Insignia Financial Group, Inc. At
the spin-off date, the Company assumed, under the 1998 Plan, approximately
1,787,000 options issued by the former parent to employees of the businesses
included in the spin-off. At December 31, 2001, approximately 2,820,000 options
were outstanding under the 1998 Plan.

At December 31, 2001, approximately 111,000 unvested restricted stock awards to
acquire shares of the Company's Common Stock were outstanding under the 1998
Plan. These awards, which have a five-year vesting period, were granted to
executive officers and other employees of the Company. Compensation expense
recognized by the Company for these awards totaled approximately $627,000,
$709,000 and $737,000 for 2001, 2000 and 1999, respectively.

The Company assumed 1,289,329 options under Non-Qualified Stock Option
Agreements in connection with the acquisition of REGL. The options had five-year
terms at the date of grant and the terms remained unchanged at the date of
assumption. At December 31, 2001, approximately 771,000 options remained
outstanding.

The Company assumed approximately 612,000 options under Non-Qualified Stock
Option Agreements in connection with the acquisition of St. Quintin. The options
had five-year terms at the date of grant and the terms remained unchanged at the
date of assumption. At December 31, 2001 approximately 321,000 options remained
outstanding.

The Company assumed 110,000 options under a Non-Qualified Stock Option Plan in
connection with the acquisition of Brooke. At December 31, 2001 60,000 options
had been issued and remained outstanding under the plan. The options had five
and one half-year terms at the date of grant and the terms remained unchanged at
the date of assumption.

The terms of all options assumed in connection with acquisitions remained
subject to continued vesting over their original terms. These options have been
accounted for as additional purchase consideration for each respective business
combination.



                                      F-36
<PAGE>


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


14. STOCK COMPENSATION PLANS (CONTINUED)

During 2000, Insignia granted 1,493,000 warrants to purchase Insignia Common
Stock to certain key executives, non-employee directors and other employees
under Warrant Agreements. Such warrants had five-year terms at the date of
grant. At December 31, 2001, approximately 1,448,000 warrants remained
outstanding.

The Company also has sold shares of its Common Stock to certain employees in
exchange for notes receivable collateralized by the Common Stock. The
outstanding principal balances of these notes totaled approximately $1,882,000
and $2,051,000 at December 31, 2001 and 2000, respectively. These notes
receivable are classified as a reduction of stockholders' equity.

The Company's 1998 Employee Stock Purchase Plan (the "Employee Plan") was
adopted to provide employees with an opportunity to purchase Common Stock
through payroll deductions at a price not less than 85% of the fair market value
of the Company's Common Stock. The Employee Plan was developed to qualify under
Section 423 of the Internal Revenue Code of 1986.

In connection with the Company's spin-off in September 1998, 1,196,000 warrants
to purchase shares of Common Stock of the Company were issued to holders of the
Convertible Preferred Securities of the Company's former parent. The term of
each warrant is five years. The Company's former parent purchased the warrants
from Insignia in 1998 for approximately $8.5 million. At December 31, 2001, all
warrants remained outstanding and were fully exercisable.

The Company's Common Stock reserved for future issuance in connection with stock
compensation plans totaled approximately 6.6 million shares at December 31,
2001.

The Company has elected to follow Opinion No. 25, Accounting for Stock Issued to
Employees ("APB 25"), in accounting for its employee stock based compensation
because, as discussed below, the alternative fair value accounting provided for
under SFAS 123, Accounting for Stock-Based Compensation, requires use of option
valuation models that were not developed for use in valuing employee stock
options, warrants and unvested restricted stock awards. Under APB 25, when the
exercise price equals the market price, no compensation expense is recognized.
Restricted stock is recorded as compensation cost over the requisite vesting
periods based on the market value on the date of grant.






                                      F-37
<PAGE>


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


14. STOCK COMPENSATION PLANS (CONTINUED)

Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options, warrants and unvested
restricted stock awards granted subsequent to December 31, 1994 under the fair
value method required by that Statement. The fair value for these options,
warrants and restricted stock awards have been estimated at the date of grant
using a Black-Scholes option-pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
                                                                 2001              2000              1999
                                                         -------------------------------------------------------
<S>                                                      <C>                <C>                 <C>
Risk-free interest rate                                          3.7%              5.1%               6.2%
Dividend yield                                                   N/A               N/A                N/A
Volatility factors of the expected market price                  0.49              0.52               0.43
Weighted-average expected life of the options                    4.3               4.3                3.3
</TABLE>

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

For purposes of pro forma disclosures, the estimated fair values of all options,
warrants and unvested restricted stock awards are amortized to expense over the
respective vesting periods. The Company's pro forma information follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                           2001             2000              1999
                                                        ----------------------------------------------
<S>                                                     <C>              <C>               <C>
PRO FORMA:
   Income from continuing operations                     $  3,383         $  16,040          $ 4,542
   Net (loss) income                                      (15,846)          (13,822)           4,542

PER SHARE AMOUNTS:
Pro forma earnings per share - basic
   Income from continuing operations                     $   0.15         $    0.76          $  0.21
   Net (loss) income                                        (0.72)            (0.65)            0.21
Pro forma earnings per share - assuming dilution
   Income from continuing operations                         0.14              0.66             0.20
   Net (loss) income                                        (0.68)            (0.57)            0.20
</TABLE>




                                      F-38
<PAGE>


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


14. STOCK COMPENSATION PLANS (CONTINUED)

Summaries of the Company's stock option, warrant and restricted stock activity,
and related information for the years ended December 31, 2001, 2000 and 1999 are
as follows:

<TABLE>
<CAPTION>
                                               2001                        2000                         1999
                                     ---------------------------------------------------------------------------------------
                                                      WEIGHTED                      WEIGHTED                     WEIGHTED
                                                      AVERAGE                       AVERAGE                      AVERAGE
                                                      EXERCISE                      EXERCISE                     EXERCISE
                                           SHARES      PRICE            SHARES       PRICE        SHARES          PRICE
                                     ---------------------------------------------------------------------------------------
<S>                                  <C>            <C>              <C>           <C>           <C>            <C>
Outstanding at beginning of year         8,304,155   $   10.06        6,859,368     $  10.02      6,643,398      $  10.29
Options and warrants granted                30,000       11.70        2,189,174         8.54        128,897          6.65
Options granted in connection with
  Brooke acquisition                        20,000       10.80           40,000        11.81              -             -
Options assumed in connection with
   St. Quintin acquisition                       -        -                   -            -        611,962          6.58
Exercised                                 (690,941)       6.64         (508,676)        6.36       (155,558)         5.87
Forfeited/canceled                      (1,046,810)       9.40         (275,711)        8.62       (369,331)        11.27
                                     ---------------------------------------------------------------------------------------
Outstanding at end of year               6,616,404   $   10.32        8,304,155     $  10.06      6,859,368      $  10.02
                                     =======================================================================================

Exercisable at end of year               4,233,299   $   11.31        4,359,468     $  11.24      2,200,701      $   9.45
                                     =======================================================================================
Weighted-average fair value of
grants during the year                               $    5.32                      $   4.09                     $   6.59
                                                   ==============                 ============                  ===========
</TABLE>

Significant option, warrant and unvested restricted stock groups outstanding at
December 31, 2001 and related weighted average price and life information
follows:

<TABLE>
<CAPTION>
                                     OUTSTANDING                                                      EXERCISABLE
--------------------------------------------------------------------------------------- ----------------------------------------
                                                   WEIGHTED AVERAGE       WEIGHTED                                WEIGHTED
     RANGE OF                     NUMBER              REMAINING           AVERAGE                 NUMBER          AVERAGE
  EXERCISE PRICES               OUTSTANDIN G       CONTRACTUAL LIFE    EXERCISE PRICE          EXERCISABLE     EXERCISE PRICE
--------------------------------------------------------------------------------------- ----------------------------------------
<S>                         <C>                    <C>               <C>                 <C>                   <C>
  $0.00 to $6.00                   193,235            2.4 years           $     0.00                8,000       $    0.00
  $6.01 to $6.50                   770,910            1.7 years                 6.37              336,550            6.37
  $6.51 to $7.50                   321,019            2.7 years                 6.58               62,846            6.58
  $7.51 to $8.00                 1,762,000            3.0 years                 7.99            1,112,474            7.99
  $8.01 to $11.00                  233,646            1.1 years                10.87              165,516           10.87
  $11.01 to $12.50                 511,687            1.6 years                11.58              369,838           11.62
  $12.51 to $13.00                 915,357            2.1 years                12.63              557,713           12.63
  $13.01 to $16.00               1,908,550            1.9 years                14.21            1,620,362           14.36
                            -------------------                       ---------------- -----------------------------------------
                                 6,616,404                                    $10.32            4,233,299        $  11.31
                            ===================                       ================ =========================================
</TABLE>




                                      F-39
<PAGE>


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


15. INCOME TAXES

In the 2001 year, the Company generated taxable income that allowed for the
utilization of net operating losses for federal and state income tax purposes.
Net operating losses in the U.S. were carried forward from 2000 for federal and
state purposes. A portion of such net operating losses was utilized in 2001. At
December 31, 2001, approximately $10.8 million and $9.1 million of net operating
losses for federal and state purposes will carry forward to 2002. These amounts
expire in 2018.

In 2001, the Company entered into an agreement to sell Realty One and its
affiliated companies. In connection with the Realty One sale, the Company
incurred a pre-tax loss of approximately $21.6 million. Under the tax law
existing at December 31, 2001, approximately $12.5 million of the loss could not
be deducted for income tax purposes and no tax benefit has been provided on this
portion of the loss in 2001. Subsequent to year-end, the U.S. Treasury
Department issued new legislative regulations that could potentially allow for
the deduction of the loss for income tax purposes, subject to the generation of
sufficient capital gains to offset the loss.

Undistributed earnings of the Company's U.K. operation, Insignia Richard Ellis,
amounted to approximately $22.8 million in aggregate as of December 31, 2001.
Deferred income taxes have not been provided at U.S. tax rates on these earnings
as it is intended that the earnings will be permanently reinvested outside of
the U.S. Any such taxes should not be significant, since U.S. tax rates are no
more than 5% in excess of U.K. tax rates and goodwill with respect to the U.K.
operation is amortizable for U.S. tax purposes.

During 2001, certain of the Company's non-U.K. foreign operations generated
operating losses in aggregate of approximately $5.6 million. All potential tax
benefits pertaining to such losses have been fully reserved due to the absence
of profits. During 1999, the Company's U.K. operation utilized operating losses
recorded on acquisition of approximately $5.6 million.

In 2000, the Internal Revenue Service ("IRS") commenced an examination of the
income tax returns for the 1998 (January 1, 1998 through September 30, 1998),
1997 and 1996 tax years. In November 2001, the IRS made a final determination to
which the Company agreed. The agreed assessment paid by the Company was in the
amount of approximately $1.1 million, including taxes and interest.




                                      F-40
<PAGE>


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


15. INCOME TAXES (CONTINUED)

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

<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                                       2001                    2000
                                                          -------------------------------------------------
                                                                              (In thousands)
<S>                                                        <C>                          <C>
   Deferred tax liabilities:
      Acquisition related intangibles                              $    (7,323)            $   (7,560)
      Tax over book depreciation                                             -                 (1,747)
      Partnership earnings differences                                  (1,841)                     -
      Compensation                                                      (2,177)                (4,866)
      Other, net                                                        (1,295)                (1,160)
                                                          -------------------------------------------------
   Total deferred tax liabilities                                      (12,636)               (15,333)

   Deferred tax assets:
      Net operating losses                                               7,132                  6,422
      Acquisition related items                                            734                      -
      Book over tax depreciation                                         5,262                      -
      Alternative minimum tax credit                                     4,270                    417
      Partnership earnings differences                                       -                  2,329
      Bad debt reserves                                                  1,164                  1,111
      Valuation reserve                                                 10,243                    943
      Compensation and benefits                                         15,786                 16,968
      Comprehensive income                                               6,872                  4,500
      Other, net                                                           632                    584
                                                          -------------------------------------------------
   Total deferred tax assets                                            52,095                 33,274
   Valuation allowance for deferred tax assets                          (8,963)                (2,195)
                                                          -------------------------------------------------
   Deferred tax assets, net of valuation allowance                      43,132                 31,079
                                                          -------------------------------------------------
   Net deferred tax assets                                         $    30,496             $   15,746
                                                          =================================================
</TABLE>



                                      F-41
<PAGE>


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


15. INCOME TAXES (CONTINUED)

For financial reporting purposes, income from continuing operations before
income taxes includes the following components:

<TABLE>
<CAPTION>
                                          2001             2000            1999
                                    -----------------------------------------------
                                                    (In thousands)
<S>                                 <C>               <C>              <C>
Pretax income (loss):
   United States
                                         $3,128          $   5,932       $  12,903
   Foreign                                5,674             18,465           5,076
                                    -----------------------------------------------
                                         $8,802          $  24,397       $  17,979
                                    ===============================================
</TABLE>

Significant components of the provision for income taxes on income from
continuing operations are as follows:

<TABLE>
<CAPTION>
                                           2001            2000            1999
                                    -----------------------------------------------
                                                    (In thousands)
<S>                                 <C>               <C>             <C>
Current:
   Federal                              $    2,498       $     (27)     $   4,150
   Foreign                                   4,868           6,619            808
   State                                     1,208              41          1,084
                                    -----------------------------------------------
Total current                                8,574           6,633          6,042

Deferred:
   Federal                                  (3,387)         (1,465)         2,260
   Foreign                                    (944)           (804)          (142)
   State                                    (1,162)         (1,196)         2,095
                                    -----------------------------------------------
Total deferred                              (5,493)         (3,465)         4,213
                                    -----------------------------------------------
                                        $    3,081       $   3,168      $  10,255
                                    ===============================================
</TABLE>





                                      F-42
<PAGE>


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


15. INCOME TAXES (CONTINUED)

The reconciliation of income tax attributable to continuing operations computed
at the U.S. statutory rate to income tax expense is shown below (In thousands):

<TABLE>
<CAPTION>
                                                2001                      2000                       1999
                                      ------------------------- -------------------------- -------------------------
                                          AMOUNT      PERCENT        AMOUNT      PERCENT      AMOUNT      PERCENT
                                      ------------------------- -------------------------- -------------------------
<S>                                   <C>            <C>        <C>              <C>        <C>         <C>
Tax at U.S. statutory rates             $   3,081       35.0%       $  8,539       35.0%     $  6,293       35.0%
Effect of different tax rates in
   foreign jurisdictions                     (424)      (4.8)           (867)      (3.6)         (310)      (1.7)
State income taxes, net of federal
   tax benefit                             (1,450)     (16.5)           (150)      (0.6)        1,149        6.4
Effect of nondeductible meals and
   entertainment expenses                   1,092       12.4             783        3.2         1,022        5.7
Effect of nondeductible goodwill
   amortization                             1,386       15.7             824        3.4         1,009        5.6
Change in valuation allowance for
   Italian operating losses                  (105)      (1.2)              -          -             -          -
Change in valuation allowance for
   European operating losses                1,573       17.9            (884)      (3.6)            -          -
Change in valuation allowance for
   U.S. operating  losses                       -          -             884        3.6           303        1.7
Effect of life insurance proceeds               -          -          (7,000)     (28.7)            -          -
Effect of settlement of IRS exam           (1,961)     (22.3)              -          -             -          -
Other                                        (111)      (1.2)          1,039        4.3           789        4.3
                                      ------------------------- -------------------------- -------------------------
                                        $   3,081       35.0%       $  3,168       13.0%     $ 10,255       57.0%
                                      ========================= ========================== =========================
</TABLE>

Income tax payments were approximately $7,714,000 (2001), $11,779,000 (2000),
and $766,000 (1999).

16. EMPLOYEE BENEFIT PLANS

401(K) RETIREMENT PLAN

The Company established a 401(k) savings plan covering substantially all U.S.
employees. The Company may make a contribution equal to 50% of the employees'
contribution up to a maximum of 3% of the employees' compensation and
participants fully vest in employer contributions after 5 years. All
contributions to the 401(k) plan are expensed currently in earnings. The Company
expensed approximately $1,660,000, $2,044,000, and $1,681,000 in contributions
to the 401(k) plan during 2001, 2000, and 1999, respectively.




                                      F-43
<PAGE>


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


16.  EMPLOYEE BENEFIT PLANS (CONTINUED)

DEFINED CONTRIBUTION PLAN

Insignia Richard Ellis maintains a defined contribution plan that is available
to all of its employees at their option after the completion of six months of
service and the attainment of 25 years of age. Insignia Richard Ellis
contributions are 3.5% of salary for ages 25 to 30, 4.5% of salary for ages 31
to 35 and 5.5% of salary for ages 36 and over. Insignia Richard Ellis expensed
approximately $1,430,000, $1,558,000 and $96,000 in contributions to the plan
during 2001, 2000, and 1999, respectively.

DEFINED BENEFIT PLAN

Insignia Richard Ellis maintains two defined benefit plans for certain of its
employees. The plans provide for benefits based upon the final salary of
participating employees. The funding policy is to contribute annually an amount
to fund pension cost as actuarially determined by an independent pension
consulting firm. Insignia Richard Ellis expensed approximately $168,000,
$572,000, and $778,000 in net periodic pension expense during 2001, 2000, and
1999, respectively.






                                      F-44
<PAGE>


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


16. EMPLOYEE BENEFIT PLANS (CONTINUED)

The following table summarizes the funded status and net periodic pension cost
of the Insignia Richard Ellis defined benefit plans:

<TABLE>
<CAPTION>
                                                                       DECEMBER 31
PROJECTED BENEFIT OBLIGATION ("PBO")                                2001            2000
------------------------------------                         ---------------------------------
                                                                      (In thousands)
<S>                                                          <C>                  <C>
 PBO - Beginning of year                                          $ 46,230        $ 51,227
   Service cost                                                        909           1,370
   Interest cost                                                     2,657           2,545
   Benefits paid net of participant contributions                     (533)           (719)
   Net actuarial loss (gain)                                           368          (4,269)
   Foreign currency exchange rate changes                           (1,276)         (3,924)
                                                             ---------------------------------
 PBO - End of year                                                  48,355          46,230
                                                             ---------------------------------

CHANGE IN PLAN ASSETS
---------------------

Fair value of plan assets at beginning of year                      50,114          51,062
   Actual return on plan assets                                     (4,947)          2,579
   Employer contributions                                              916           1,103
   Benefits paid net of participant contributions                     (533)           (719)
   Foreign currency exchange rate changes                           (1,419)         (3,911)
                                                             ---------------------------------
Fair value of plan assets at end of year                            44,131          50,114
                                                             ---------------------------------
Funded status of the plans                                          (4,224)          3,884
Unrecognized net actuarial loss (gain)                               5,002          (3,857)
                                                             ---------------------------------
Net pension asset recognized in the
   consolidated balance sheet                                     $    778        $     27
                                                             =================================

NET PERIODIC PENSION COST
-------------------------
   Service cost                                                   $    909        $  1,370
   Interest cost                                                     2,657           2,545
   Return on plan assets                                            (3,398)         (3,343)
                                                             ---------------------------------
                                                                  $    168        $    572
                                                             =================================
ASSUMPTIONS USED IN DETERMINING PBO
-----------------------------------
   Discount rate                                                       6.0%            6.0%
   Weighted average increase in compensation levels                    4.5%            5.0%
   Rate of return on plan assets                                       6.5%            7.0%
</TABLE>




                                      F-45
<PAGE>


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


17. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

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

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. 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; in November 2001, the Sixth Circuit
affirmed the terms of that judgment. In 2000, the sellers of Realty One funded
the initial cash portion of the settlement, totaling approximately $3.7 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
with the sellers of Realty One regarding the Company's indemnity claim. The
terms of the settlement required the sellers to pay $2 million to Insignia as
reimbursement for certain professional fees incurred in connection with the
Re/Max suit and this payment was collected in October 2001. The Company incurred
a one-time charge of $1.5 million in the second quarter of 2001 for unrecovered
costs stemming from the Re/Max suit. 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 the four years ending in September 2005. The
Company was provided with promissory notes that could be entered against the
sellers in the event of non-payment of these amounts.

As part of the indemnity settlement, Insignia also agreed to share with the
sellers in the costs and expenses and any potential judgment or settlement of
two similar cases brought by individual Re/Max franchisees. One of these cases
was settled in late 2001 at a cost of approximately $30,000 to the Company.

In January 2002, Insignia sold the Realty One business to a third party.
Insignia retains the obligation to defend against the remaining case and has
indemnified the buyer for costs associated with all Re/Max litigation. Insignia
continues to vigorously defend the remaining action.




                                      F-46
<PAGE>


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


17. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)

ORDINARY COURSE OF BUSINESS 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
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.

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. This examination was
concluded in November 2001. Insignia paid approximately $1.1 million upon final
settlement, pursuant to the examiners report.

As a part of the sale of Realty One, the Company agreed generally to indemnify
the purchaser against all losses, up to the amount of the total purchase price
(and subject to certain deductible amounts), resulting from; (i) breaches by the
Company of any representations, warranties or covenants in the stock purchase
agreement; (ii) obligations for goods, services, taxes or indebtedness except
for those assumed by the purchaser; (iii) change of control payments made to
employees of Realty One; and (iv) any third party losses arising or related to
the period prior to the disposition. In addition, the Company provided an
indemnification for losses in respect of (i) mortgage loan files existing on the
date of closing, (ii) fraud in the conduct of its home mortgage business, and
(iii) the failure to follow standard industry practices in the home mortgage
business. As of March 20, 2002, the Company is not aware of any matters that
would give rise to a claim under these warranties and indemnities.




                                      F-47
<PAGE>


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


17. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)

ENVIRONMENTAL LIABILITIES

Under various federal and state environmental laws and regulations, a current or
previous owner or operator of real estate may be required to investigate and
remediate certain hazardous or toxic substances or petroleum-product releases at
the property, and may be held liable to a governmental entity or to third
parties for property damage and for investigation and cleanup costs incurred by
such parties in connection with contamination. In addition, some environmental
laws create a lien on the contaminated site in favor of the government for
damages and costs it incurs in connection with the contamination. The owner or
operator of a site may be liable under common law to third parties for damages
and injuries resulting from environmental contamination emanating from or at the
site, including the presence of asbestos containing materials. Insurance for
such matters may not be available.

The presence of contamination or the failure to remediate contamination may
adversely affect the owner's ability to sell or lease real estate or to borrow
using the real estate as collateral. There can be no assurance that Insignia, or
any assets owned or controlled by Insignia (as on-site property manager),
currently are in compliance with all of such laws and regulations or that
Insignia will not become subject to liabilities that arise in whole or in part
out of any such laws, rules or regulations. The liability may be imposed even if
the original actions were legal and Insignia did not know of, or was not
responsible for, the presence of such hazardous or toxic substances. Insignia
may also be solely responsible for the entire payment of any liability if it is
subject to joint and several liability with other responsible parties who are
unable to pay. Insignia may be subject to additional liability if it fails to
disclose environmental issues to a buyer or lessee of property. Management is
not currently aware of any environmental liabilities that are expected to have a
material adverse effect upon the operations or financial condition of the
Company.

REAL ESTATE INVESTMENTS

Insignia invests in real estate assets and real estate related assets, usually
as a minority owner and asset manager or property manager, with third party
investors. Apart from the potential loss of its investment, which totaled $59
million at net book value in all entities at December 31, 2001, Insignia's other
assets are only at risk with respect to specific obligations it has undertaken
or to standard carve-outs in the mortgage lending industry from the non-recourse
provisions of mortgage loans. At December 31, 2001, Insignia's aggregate
obligations to all such real estate entities totaled approximately $18.6 million
and consisted of the following: (i) letters of credit of $8.9 million partially
backing construction loans; (ii) other partial guarantees of property debt of
approximately $5.2 million; (iii) future capital contributions for capital
improvements of $455,000; and (iv) future capital contributions for acquisitions
of approximately $4.0 million.



                                      F-48
<PAGE>


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


17. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)

OPERATING LEASES

The Company leases office space and equipment under noncancelable operating
leases. Minimum annual rentals under operating leases for the five years ending
after December 31, 2001 and thereafter are as follows:

                                                 AMOUNT
                                           -------------------
                                             (In thousands)

2002                                           $   35,929
2003                                               32,646
2004                                               28,846
2005                                               24,542
2006                                               21,707
Thereafter                                         74,629
                                           -------------------
TOTAL MINIMUM PAYMENTS                         $   218,299
                                           ===================

Rental expense, which is recorded on a straight-line basis, was approximately
$29,282,000 (2001) $26,579,000 (2000) and $23,945,000 (1999). Certain of the
leases are subject to renewal options and annual escalation based on the
Consumer Price Index or annual increases in operating expenses.

STOCK REPURCHASE

At December 31, 2001 and 2000, Insignia held in treasury 1,502,600 repurchased
shares of its Common Stock. Such shares were repurchased at an aggregate cost of
approximately $16.2 million and are reserved for issuance upon the exercise of
warrants granted in 2001 to certain executive officers, non-employee directors
and other employees of the Company (See Note 14).

PREFERRED STOCK ISSUANCE

On February 9, 2000, Insignia sold 250,000 shares of non-voting perpetual
convertible preferred stock with a stated value of $100 per share to investment
funds advised by Blackacre Capital Management, LLC for an aggregate purchase
price of $25 million. The preferred stock pays a 4% cumulative annual dividend,
payable at Insignia's option in cash or Common Stock, and is convertible into
the Company's Common Stock at the option of the holder at $14 per share, subject
to adjustment. The preferred stock is callable by the Company, at stated value,
at any time on or after February 15, 2004. The Company paid $1,250,000 of
dividends in 2001, of which $1 million was paid in cash and $250,000 was paid
through the issuance of shares of the Company's Common Stock. Stock dividends of
$475,000 were paid in 2000 through the issuance of shares of the Company's
Common Stock.




                                      F-49
<PAGE>


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


17. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (CONTINUED)

LIFE INSURANCE PROCEEDS

In October 2000, Insignia collected $20 million in life insurance proceeds from
a "key man" insurance policy on the life of Edward S. Gordon, a member of the
Company's Office of the Chairman who passed away on September 21, 2000. The
policy was purchased in connection with Insignia's acquisition of Edward S.
Gordon Incorporated in June 1996. Insignia incurred approximately $900,000 in
obligations payable to Mr. Gordon's estate at the time of his death. The Company
recognized the resulting net income of $19.1 million in the third quarter of
2000.

18. INDUSTRY SEGMENTS

Insignia's operating activities for 2001 encompass three reportable segments.
The Company's segments include (i) commercial real estate services and principal
investment activities; (ii) residential real estate services; and (iii)
Internet-based e-commerce initiatives. The commercial segment provides services
including tenant representation, property and asset management, agency leasing
and brokerage, investment sales, development and re-development, consulting and
other services. The commercial segment also includes the Company's principal
real estate investment activities. Insignia's commercial segment in 2001
comprises the operations of Insignia/ESG in the U.S., IRE in the U.K. and other
businesses in continental Europe, Asia and Latin America. Insignia Bourdais, in
France, commenced operations in January 2002. The residential segment provides
services including apartment brokerage and leasing, rental brokerage, property
management and mortgage brokerage services and consists of the New York based
operations of Insignia Douglas Elliman and Insignia Residential Group.
Insignia's Internet initiatives, which were launched in late 1999, have been
terminated. The operating impact for 2001 is limited to $13.4 million of
write-downs on equity Internet investments made during late 1999, 2000 and early
2001 and $3.2 million of income resulting from the liquidation of EdificeRex.
The EdificeRex income represents the recognition of losses in excess of
investment incurred during the first half of 2000, prior to de-consolidation of
this once proprietary web-based business. Such excess losses had been carried on
the Company's balance sheet as a deferred credit since de-consolidation in the
third quarter of 2000. The Company terminated its internally developed Internet
initiatives at December 31, 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.

The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. The Company's
reportable segments are business units that offer similar products and services
and are managed separately because of the distinction between services.




                                      F-50
<PAGE>


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


18. INDUSTRY SEGMENTS (CONTINUED)

The following tables summarize certain financial information by industry
segment:

<TABLE>
<CAPTION>
                                                                                     INTERNET
YEAR ENDED DECEMBER 31, 2001                         COMMERCIAL     RESIDENTIAL     INITIATIVES         OTHER         TOTAL
                                                  -----------------------------------------------------------------------------
                                                                             (In thousands)
     <S>                                          <C>              <C>            <C>               <C>          <C>
      REVENUES:

         Real estate services                       $    618,548    $    119,232   $           -     $        -   $    737,780
         Property operations                               3,969               -               -              -          3,969
                                                  -----------------------------------------------------------------------------
                                                         622,517         119,232               -              -        741,749
                                                  -----------------------------------------------------------------------------
      COSTS AND EXPENSES:
         Real estate services                            554,744         113,335               -              -        668,079
         Property operations                               2,889               -               -              -          2,889
         Administrative                                        -               -               -         13,439         13,439
         Depreciation                                     12,431           2,883               -             78         15,392
         Property depreciation                               990               -               -              -            990
         Amortization of intangibles                      20,344           4,064               -              -         24,408
                                                  -----------------------------------------------------------------------------
                                                         591,398         120,282               -         13,517        725,197
                                                  -----------------------------------------------------------------------------
         Operating income (loss)                          31,119          (1,050)              -        (13,517)        16,552

      OTHER INCOME AND EXPENSE:
         Merger related expenses                            (661)              -               -              -           (661)
         Losses from Internet investments                      -               -         (10,263)             -        (10,263)
         Interest and other income                         2,084              16               -          2,769          4,869
         Interest expense                                   (639)            (38)              -        (11,730)       (12,407)
         Foreign currency transaction gains                    -               -               -            331            331
         Equity earnings in real estate ventures          10,381               -               -              -         10,381
                                                  -----------------------------------------------------------------------------
      Income from continuing operations before
         income taxes                                     42,284          (1,072)        (10,263)       (22,147)         8,802
         Provision (benefit) for income taxes             17,049            (442)         (4,501)        (9,025)         3,081
                                                  -----------------------------------------------------------------------------
      Income from continuing operations                   25,235            (630)         (5,762)       (13,122)         5,721

      Discontinued operations:
          Loss from discontinued operation, net of
            applicable taxes                                   -          (1,600)              -              -         (1,600)
          Provision for loss on disposal, net of
            applicable taxes                                   -         (17,629)              -              -        (17,629)
                                                  -----------------------------------------------------------------------------
                                                               -         (19,229)              -              -        (19,229)
                                                  -----------------------------------------------------------------------------
      Net income (loss)                            $      25,235    $    (19,859)  $      (5,762)   $  (13,122)   $   (13,508)
                                                  =============================================================================

      Total assets                                 $     678,091    $    147,654   $       1,007    $    91,591   $    918,343
      Real estate investments                             95,710               -               -              -         95,710
      Capital expenditures, net                           11,704           3,815               -             85         15,604
</TABLE>




                                      F-51
<PAGE>


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


18. INDUSTRY SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                   INTERNET
YEAR ENDED DECEMBER 31, 2000                        COMMERCIAL      RESIDENTIAL   INITIATIVES          OTHER        TOTAL
                                                -----------------------------------------------------------------------------
                                                                               (In thousands)
<S>                                             <C>                <C>           <C>             <C>            <C>
REVENUES:
   Real estate services                              $ 641,904       $ 134,095     $        -     $         -    $  775,999
   Property operations                                   5,212               -              -               -         5,212
                                                -----------------------------------------------------------------------------
                                                       647,116         134,095              -               -       781,211
                                                -----------------------------------------------------------------------------

COSTS AND EXPENSES:
   Real estate services                                559,400         122,467              -               -       681,867
   Property operations                                   4,214               -              -               -         4,214
   Internet-based businesses                                 -               -         17,168               -        17,168
   Administrative                                            -               -              -          16,355        16,355
   Depreciation                                          8,084           2,206          1,288              60        11,638
   Property Depreciation                                 1,623               -              -               -         1,623
   Amortization of intangibles                          19,853           3,972              -               -        23,825
                                                -----------------------------------------------------------------------------
                                                       593,174         128,645         18,456          16,415       756,690
                                                -----------------------------------------------------------------------------

   Operating income (loss)                              53,942           5,450        (18,456)        (16,415)       24,521

OTHER INCOME AND EXPENSE:
   Life insurance proceeds                                   -               -              -          19,100        19,100
   Losses from Internet investments                          -               -        (18,435)              -       (18,435)
   Interest and other income                             2,316               -            464           4,456         7,236
   Interest expense                                     (1,032)            (48)             -         (10,665)      (11,745)
   Foreign currency transaction gains                        -               -              -           1,365         1,365
   Equity earnings in real estate ventures               1,455               -              -               -         1,455
   Minority interests                                        -               -            900               -           900
                                                -----------------------------------------------------------------------------

Income from continuing operations before income
   taxes                                                56,681           5,402        (35,527)         (2,159)       24,397

   Provision (benefit) for income taxes                 22,691             553        (14,327)         (5,749)        3,168
                                                -----------------------------------------------------------------------------

Income from continuing operations                       33,990           4,849        (21,200)          3,590        21,229

Discontinued operations:
Income from discontinued operation, net of
   applicable taxes                                          -             558              -               -           558
                                                -----------------------------------------------------------------------------

Income (loss) before cumulative effect of a
   change in accounting principle                       33,990           5,407        (21,200)          3,590        21,787

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

Net income (loss)                                    $   3,570       $   5,407     $  (21,200)    $     3,590    $   (8,633)
                                                =============================================================================

Total assets                                         $ 645,989       $ 162,213     $   10,963     $   106,460    $  925,625
Real estate investments                                102,170               -              -               -       102,170

Capital expenditures, net                               20,444           5,290              -              73        25,807

</TABLE>



                                      F-52
<PAGE>


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


18. INDUSTRY SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                              INTERNET
 YEAR ENDED DECEMBER 31, 1999               COMMERCIAL      RESIDENTIAL      INITIATIVES          OTHER         TOTAL
                                        ------------------------------------------------------------------------------------
                                                                          (In thousands)
<S>                                     <C>                 <C>            <C>                <C>             <C>
 REVENUES:
    Real estate services                    $  497,770        $  76,672      $         -       $        -     $  574,442
    Property operations                          1,877                -                -                -          1,877
                                        ------------------------------------------------------------------------------------
                                               499,647           76,672                -                -        576,319
                                        ------------------------------------------------------------------------------------
 COSTS AND EXPENSES:
    Real estate services                       441,417           69,696                -                -        511,113
    Property operations                          1,589                -                -                -          1,589
    Internet-based businesses                        -                -            1,580                -          1,580
    Administrative                                   -                -                -           11,826         11,826
    Depreciation                                 4,714            1,080                -              117          5,911
    Property depreciation                          512                -                -                -            512
    Amortization of intangibles                 19,049            2,654                -                -         21,703
                                        ------------------------------------------------------------------------------------
                                               467,281          73,430             1,580          11,943         554,234
                                        ------------------------------------------------------------------------------------

    Operating income (loss)                     32,366            3,242           (1,580)         (11,943)        22,085

 OTHER INCOME AND EXPENSE:
    Merger related expenses                     (4,272)               -                -                -         (4,272)
    Interest and other income                    1,357                -                -            2,746          4,103
    Interest expense                            (1,419)             (31)               -           (5,598)        (7,048)
    Foreign currency transaction gains               -                -                -              827            827
    Equity earnings in real estate
    ventures                                     2,284                -                -                -          2,284
                                        ------------------------------------------------------------------------------------

 Income from continuing operations
 before income taxes                            30,316            3,211           (1,580)         (13,968)        17,979

    Provision (benefit) for income taxes        15,383            1,433             (709)          (5,852)        10,255
                                        ------------------------------------------------------------------------------------

 Income from continuing operations              14,933            1,778             (871)          (8,116)         7,724

 Discontinued operations:
    Income from discontinued operation,
    net of applicable taxes                          -            2,574                -                -          2,574
                                        ------------------------------------------------------------------------------------

 Net income (loss)                         $    14,933        $   4,352      $      (871)      $   (8,116)    $   10,298
                                        ====================================================================================

 Total assets                              $   573,095        $ 156,649      $    20,175       $   45,394     $  795,313
 Real estate investments                        76,298                -                -                -         76,298
 Capital expenditures, net                      20,706            4,247                -              446         25,399
</TABLE>



                                      F-53
<PAGE>


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


18. INDUSTRY SEGMENTS (CONTINUED)

Certain geographic information for the Company is as follows:

<TABLE>
<CAPTION>
                               YEAR ENDED                       YEAR ENDED                       YEAR ENDED
                           DECEMBER 31, 2001                 DECEMBER 31, 2000                DECEMBER 31, 1999
                   -------------------------------------------------------------------------------------------------------
                                         LONG-LIVED                       LONG-LIVED                           LONG-LIVED
                         REVENUES          ASSETS         REVENUES          ASSETS            REVENUES           ASSETS
                   -------------------------------------------------------------------------------------------------------
<S>                <C>             <C>                  <C>         <C>                   <C>            <C>
United States            $ 621,896       $ 239,324        $ 634,247        $ 274,652         $ 467,757         $ 299,267
United Kingdom             116,432         106,701          133,809           90,781           104,565           102,765
Other countries              3,421          21,403           13,155            3,639             3,997             1,093
                   -------------------------------------------------------------------------------------------------------
                         $ 741,749       $ 367,428        $ 781,211        $ 369,072         $ 576,319         $ 403,125
                   =======================================================================================================
</TABLE>


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

19. FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair value estimates of financial instruments are not necessarily indicative
of the amounts the Company might pay or receive in actual market transactions.
The carrying amount reported on the balance sheet for cash and cash equivalents
approximates its fair value. Receivables reported on the balance sheet generally
consist of property and lease commission receivables and various note
receivables. The property and note receivables approximate their fair values.
Lease commission receivables are carried at their discounted present value;
therefore the carrying amount and fair value amount are the same. The carrying
amounts for notes payable and real estate mortgage notes payable line
approximate their respective fair value because the interest rates generally
approximate current market interest rates for similar instruments



                                      F-54
<PAGE>


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


20. QUARTERLY FINANCIAL DATA  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      2001
                                                    --------------------------------------------------------------------------
                                                                      FOURTH          THIRD         SECOND         FIRST
                                                        TOTAL         QUARTER        QUARTER        QUARTER       QUARTER
                                                    --------------------------------------------------------------------------
                                                                      (In thousands, except per share data)
<S>                                                <C>             <C>              <C>           <C>           <C>
  Revenues                                          $   741,749    $   246,895       $ 147,026     $ 171,327    $  176,501
  Income from continuing operations                       5,721         12,648          (5,396)       (1,747)          216
  Discontinued operations                               (19,229)       (17,707)            926           302        (2,750)
  Net (loss) income                                     (13,508)        (5,059)         (4,470)       (1,445)       (2,534)

  PER SHARE AMOUNTS:
  Earnings per share - basic
     Income from continuing operations              $      0.21    $      0.55       $   (0.25)    $   (0.09)   $     0.00
     Discontinued operations                              (0.87)         (0.79)           0.04          0.01         (0.13)
     Net (loss) income                                    (0.66)         (0.24)          (0.21)        (0.08)        (0.13)

  Earnings per share - assuming dilution
     Income from continuing operations                     0.20           0.50           (0.25)        (0.09)         0.00

     Discontinued operations                              (0.82)         (0.70)           0.04          0.01         (0.13)
     Net (loss) income                                    (0.62)         (0.20)          (0.21)        (0.08)        (0.13)
</TABLE>


Fourth quarter earnings included a gain of approximately $10.4 million from the
sale of a real estate property in which the Company held a 17.5% profits
interest. In addition, the fourth quarter included impairment write-downs of
$4.6 million in remaining Internet investments and income of $3.2 million in
connection with the liquidation of EdificeRex.



                                      F-55
<PAGE>


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


20. QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)

<TABLE>
<CAPTION>
                                                                                      2000
                                                   ----------------------------------------------------------------------------
                                                                      Fourth           Third        Second           First
                                                       Total          Quarter         Quarter       Quarter         Quarter
                                                   ----------------------------------------------------------------------------
                                                                      (In thousands, except per share data)
<S>                                               <C>             <C>              <C>           <C>            <C>
Revenues                                            $   781,211    $   251,995      $  175,414    $  200,310      $  153,492
Income from continuing operations                        21,229          3,436          22,167        (1,419)         (2,955)
Discontinued operations                                     558             85           1,623           608          (1,758)
(Loss) income before cumulative effect of a
  change in accounting principle                         21,787          3,521          23,790          (811)         (4,713)
Cumulative effect of a change in accounting
  principle, net of applicable taxes                    (30,420)             -               -             -         (30,420)
Net (loss) income                                        (8,633)         3,521          23,790          (811)        (35,133)

PER SHARE AMOUNTS:
Earnings per share - basic
  Income from continuing operations                 $      0.96    $      0.15      $     1.03    $    (0.08)     $    (0.14)
  Discontinued operations                                  0.03           0.00            0.07          0.03           (0.09)
  Loss (income) before cumulative effect of a
    change in accounting principle                         0.99           0.15            1.10         (0.05)          (0.23)
  Cumulative effect of a change in accounting
principle, net of applicable taxes                        (1.44)             -               -             -           (1.46)
  Net (loss) income                                       (0.45)          0.15            1.10         (0.05)          (1.69)
Earnings per share - assuming dilution

  Income from continuing operations                        0.87           0.14            0.91         (0.08)          (0.14)
  Discontinued operations                                  0.02           0.00            0.07          0.03           (0.09)
  Loss (income) before cumulative effect of a
    change in accounting principle                         0.89           0.14            0.98         (0.05)          (0.23)
Cumulative effect of a change in accounting
    principle, net of applicable taxes                    (1.24)             -               -             -           (1.46)
  Net (loss) income                                       (0.35)          0.14            0.98         (0.05)          (1.69)
</TABLE>


Quarterly results for 2000 are restated to segregate Realty One as a
discontinued operation. First quarter results are reduced by the $30.4 million
cumulative effect of the accounting change for prior years. The third quarter
results of 2000 include income of $19.1 million from life insurance proceeds and
a $2.3 million impairment write-down on the Company's equity investment in an
Internet-based business. Fourth quarter results of 2000 include further
impairment write downs of $16.1 million in the Company's third party and
internally developed Internet-based business investments.


                                      F-56