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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 11-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to____________
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Commission File Number: 1-14373
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
INSIGNIA FINANCIAL GROUP, INC.
200 PARK AVENUE
NEW YORK, NEW YORK 10166
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INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
Financial Statements and Supplemental Schedule
December 31, 2002 and 2001
INDEX
PAGE
Independent Auditors' Report 1
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits as of December 31, 2002 and 2001 2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2002 3
Notes to Financial Statements 4
SUPPLEMENTAL SCHEDULE *
Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year) - December 31, 2002 8
* Schedules required by Form 5500 that are not applicable have not been included.
INDEX OF EXHIBITS
Exhibit 23.1 - Consent of Independent Auditors
Exhibit 99.1 - Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).
INDEPENDENT AUDITORS' REPORT
To the Benefits Committee of the
Insignia Financial Group, Inc.
401(k) Retirement Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of Insignia Financial Group, Inc. 401(k) Retirement Savings Plan as of December
31, 2002 and 2001, and the related statement of changes in net assets available
for benefits for the year ended December 31, 2002. These financial statements
are the responsibility of the Plan'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 of America. 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 net assets available for benefits as of December 31,
2002 and 2001, and the changes in net assets available for benefits for the year
ended December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule H, line 4(i) -
schedule of assets (held at end of year) - December 31, 2002, is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedule
is the responsibility of the Plan's management. The supplemental schedule has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/S/ KPMG LLP
New York, New York
June 26, 2003
1
INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
2002 2001
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Assets:
Cash and cash equivalents $ -- 43,202
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Investments at fair value (note 3):
Mutual funds 42,488,981 46,124,737
Collective trust funds 7,522,084 5,727,156
Common stock 1,349,142 1,840,761
Loans to participants 1,456,766 1,719,344
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Total investments 52,816,973 55,411,998
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Net assets available for benefits $52,816,973 55,455,200
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See accompanying notes to financial statements.
2
INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 2002
Additions to net assets attributed to:
Investment income (loss):
Net depreciation in fair value of investments (note 3) $(7,612,090)
Interest and dividends 1,228,316
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Total investment loss (6,383,774)
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Contributions:
Employer 1,246,751
Participants 8,613,831
Rollover 867,027
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Total contributions 10,727,609
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Total additions 4,343,835
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Deductions from net assets attributed to:
Benefits paid to participants 6,905,138
Administrative expenses 76,924
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Total deductions 6,982,062
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Net decrease (2,638,227)
Net assets available for benefits at:
Beginning of year 55,455,200
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End of year $52,816,973
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See accompanying notes to financial statements.
3
INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(1) DESCRIPTION OF THE PLAN
The following description of the Insignia Financial Group, Inc. 401(k)
Retirement Savings Plan (the Plan) provides only general information.
Participants should refer to the Summary Plan Description for a more
complete description of the Plan's provisions.
GENERAL
Effective September 15, 1998, Insignia/ESG Holdings, Inc. established the
Insignia/ESG Holdings, Inc. 401(k) Retirement Savings Plan for the
benefit of its eligible employees. Effective November 2, 1998, Insignia/
ESG Holdings, Inc. became Insignia Financial Group, Inc. (the Company)
and the Plan's name was changed to Insignia Financial Group, Inc. 401(k)
Retirement Savings Plan. The Plan is a defined contribution plan covering
all employees who have attained age 21. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
CONTRIBUTIONS
Effective January 1, 2002, amended for new catch-up contributions, the
Plan was amended such that, participants may contribute up to 50% (prior
to January 1, 2002 - 15%) of their pretax annual compensation, as defined
in the Plan, subject to certain limits imposed by the Internal Revenue
Service. Participants may also contribute amounts representing
distributions from other qualified defined benefit or defined
contribution plans. The Company, at the beginning of each plan year, will
determine the amount of any discretionary matching contributions to be
made to the Plan during that year. The Company elected to make a
contribution equal to 25% (prior to January 1, 2002 - 50%) of a
participant's contribution, up to a maximum of 6% of compensation that a
participant contributes to the Plan. Additional amounts may be
contributed at the option of the Company's board of directors.
PARTICIPANT ACCOUNTS AND FORFEITURES
Each participant's account is credited with the participant's
contributions and allocations of (a) the Company's contributions and (b)
plan earnings. Forfeited balances of terminated participants' nonvested
accounts are used to reduce the Plan's ordinary and necessary
administrative expenses or employer contributions. Total forfeitures for
the year ended December 31, 2002 were $160,444. The benefit to which a
participant is entitled is the benefit that can be provided from the
participant's vested account.
4
INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
VESTING
Participants are immediately vested in their contributions plus actual
earnings thereon. A participant who is an employee on or after the
effective date of the Plan shall become vested in the Company's matching
contributions, as determined by the following:
PERCENT
YEARS OF SERVICE VESTED
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Less than 2 0%
2 but less than 3 25%
3 but less than 4 50%
4 or more 100%
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $700 up to
a maximum equal to the lesser of $50,000 or 50% of their vested account.
Loan terms range from 1-5 years or up to 10 years for the purchase of a
primary residence. The loans are secured by the balance in the
participant's account and bear interest based on the prime interest rate
plus 1% as reported in The Wall Street Journal for the day on which the
loan application is approved. Principal and interest is paid ratably
through employee payroll deductions.
PAYMENT OF BENEFITS
Upon termination, death, disability, or retirement, a participant may
receive a lump-sum amount or in monthly, quarterly, or annual
installments over a fixed, reasonable period of time, not exceeding the
life expectancy of the participant or the joint life and last survivor
expectancy of the participant and the named beneficiary. In either case,
the participant may only receive the amount equal to the vested value of
his or her account.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements of the Plan have been prepared on
the accrual basis of accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. The shares of registered
investment companies are valued at quoted market prices which represent
the net asset values of shares held by the Plan at year-end. Securities
traded on a national securities exchange are valued at the last reported
sales price on the last business day of the Plan year.
Included in the investments of the Plan are shares of a unitized stock
fund consisting of cash and shares of Apartment Investment and Management
Company (AIMCO) common stock (Insignia Wasting Fund). The AIMCO common
stock originated when the predecessor Plan Sponsor merged with AIMCO and
the predecessor's Plan Sponsor's stock was converted to AIMCO shares. No
contributions are allowed into the Insignia Wasting Fund and the fund
will eventually be dissolved.
The participant loans are valued at cost. The difference between cost and
fair value is not significant.
Purchases and sales of securities are recorded on a trade-date basis.
Dividends are recorded on the ex-dividend date. Interest income is
recorded on the accrual basis.
5
INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and changes therein, and disclosure of
contingent assets and liabilities at the date of the financial statement.
Actual results could differ from those estimates and assumptions.
ADMINISTRATIVE EXPENSES
Most administrative expenses are paid by the Plan.
PAYMENT OF BENEFITS
Benefits payments to participants are recorded when paid.
(3) INVESTMENTS
Investments that represent 5% or more of the fair value of the Plan's net
assets are as follows:
DECEMBER 31
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2002 2001
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Fidelity Puritan Fund $5,281,150 6,455,539
Fidelity Magellan Fund 6,310,930 7,889,786
Fidelity Contrafund 9,580,153 11,153,779
Fidelity Equity Income Fund 6,550,536 8,449,213
Fidelity Growth and Income Fund 4,486,499 5,017,880
Fidelity Managed Income Portfolio 7,522,084 5,727,156
Fidelity Low Priced Stock Fund 3,595,441 --
Fidelity U.S. Bond Index Fund 3,897,077 --
During 2002, the Plan's investments (including investments purchased,
sold as well as held during the year) depreciated in fair value as
follows:
Common stock $ 552,484
Mutual funds 7,059,606
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Total $7,612,090
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6
INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
Notes to Financial Statements
December 31, 2002 and 2001
(4) RISKS AND UNCERTAINTIES
The Plan offers a number of investment options which include underlying
investment securities. Investment securities, in general, are exposed to
various risks, such as interest rate, credit, and overall market
volatility risk. Due to the level of risk associated with certain
investment securities, it is reasonable to expect that changes in the
values of investment securities will occur in the near term and that such
changes could materially affect participant account balances.
The Plan's exposure to a concentration of credit risk is limited by the
diversification of investments across all participant-directed fund
elections. Additionally, the investments within each participant-directed
fund election are further diversified into varied financial instruments,
with the exception of the Insignia Financial Group, Inc. Fund and
Insignia Wasting Fund.
(5) INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by a
letter dated August 27, 2002 that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code
(IRC). Although the Plan has been amended, the Plan administrator and the
Plan's tax counsel believe that the Plan (and related trust) is designed
and is currently being operated in compliance with the applicable
requirements of the IRC.
(6) TRANSACTIONS WITH PARTIES-IN-INTEREST
Certain fees incurred during the year for legal, accounting, and other
services were paid by the Company on behalf of the Plan. Certain Plan
investments are shares of mutual funds managed by an affiliate of
Fidelity Management Trust Company (Fidelity) and, therefore, these
transactions qualify as part-in-interest transactions.
(7) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants will become fully vested in their
accounts.
(8) SUBSEQUENT EVENT
Effective January 2, 2003, all plan assets were transferred from Fidelity
to Metropolitan Life Insurance Company, the new trustee.
On February 17, 2003, the Company entered into an agreement and plan of
merger with CBRE Holding, Inc., CB Richard Ellis Services, Inc. (CB), and
Apple Acquisition Corp., a wholly owned subsidiary of CB. Although
subject to various closing conditions, the Company anticipates the merger
to be consummated in July 2003.
7
INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
Schedule H, Line 4(i) - Schedule of Assets (Held at End of Year)
December 31, 2002
DESCRIPTION AND ISSUER NUMBER OF UNITS CURRENT VALUE
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Mutual Funds:
* Fidelity Puritan Fund 334,439 $ 5,281,150
* Fidelity Magellan Fund 79,926 6,310,930
* Fidelity Contrafund 248,165 9,580,153
* Fidelity Equity Income Fund 165,092 6,550,536
* Fidelity Growth and Income Fund 148,020 4,486,499
* Fidelity Low Priced Stock Fund 142,846 3,595,441
* Fidelity Diversified International Fund 113,585 1,949,171
* Fidelity U.S. Bond Index Fund 346,725 3,897,077
* Fidelity Value Fund 2,136 99,110
* Fidelity Real Estate Fund 18,438 339,074
* Fidelity Capital Appreciation Fund 2,820 45,623
* Fidelity Utilities Fund 733 7,107
* Fidelity Aggressive International Fund 3,931 42,175
* Fidelity Small Cap Independent Fund 4,239 56,385
* Fidelity Mid-Cap Stock 9,121 148,300
* Fidelity High Income Fund 13,191 100,250
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42,488,981
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Collective Trust Funds:
* Fidelity Managed Income Portfolio 7,522,084 7,522,084
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Common Stock:
* Insignia Wasting Fund 8,854 338,228
* Insignia Financial Group, Inc. Fund 135,953 1,010,914
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1,349,142
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* Loans to participants 262 loans to participants with
interest rates from 5.75% to 9.5% 1,456,766
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$52,816,973
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* Party-in-interest as defined by ERISA.
See accompanying independent auditors' report.
8
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
INSIGNIA FINANCIAL GROUP, INC.
401(k) RETIREMENT SAVINGS PLAN
By:
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Name: Adam B. Gilbert
Title: Member of Benefits Committee
and Executive Vice President
Date: June 30, 2003