JONES LANG LASALLE INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

OR

[ ] 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 1-13145

JONES LANG LASALLE INCORPORATED
-----------------------------------------------------
(Exact name of registrant as specified in its charter)

Maryland 36-4150422
------------------------- ---------------------------------
(State or other jurisdic- (IRS Employer Identification No.)
tion of incorporation or
organization)

200 East Randolph Drive, Chicago, IL 60601
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312/782-5800

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

Outstanding at
Class October 31, 2003
----- ------------------

Common Stock ($0.01 par value) 31,610,908

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements . . . . . . . . . . . . . . . 3

Consolidated Balance Sheets as of
September 30, 2003 and December 31, 2002 . . . . . 3

Consolidated Statements of Earnings and
Comprehensive Income for the three and
nine months ended September 30, 2003 and 2002. . . 5

Consolidated Statement of Stockholders' Equity
as of September 30, 2003 . . . . . . . . . . . . . 7

Consolidated Statement of Cash Flows for the
nine months ended September 30, 2003 . . . . . . . 9

Notes to Consolidated Financial Statements . . . . 11

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . 41

Item 3. Quantitative and Qualitative Disclosures
about Market Risk. . . . . . . . . . . . . . . . . 60

Item 4. Controls and Procedures. . . . . . . . . . . . . . 61

PART II OTHER INFORMATION

Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 61

Item 5. Other Information. . . . . . . . . . . . . . . . . 62

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 62

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
($ in thousands, except share data)

SEPTEMBER 30,
2003 DECEMBER 31,
(Unaudited) 2002
------------ -----------
ASSETS
- ------

Current assets:
Cash and cash equivalents . . . . . . . $ 13,601 13,654
Trade receivables, net of allowances
of $5,598 and $4,992 in 2003
and 2002, respectively. . . . . . . . 182,764 227,579
Notes receivable. . . . . . . . . . . . 2,733 4,165
Other receivables . . . . . . . . . . . 8,528 7,623
Prepaid expenses. . . . . . . . . . . . 18,351 15,142
Deferred tax assets . . . . . . . . . . 31,428 27,382
Other assets. . . . . . . . . . . . . . 10,411 10,760
---------- ---------
Total current assets. . . . . . 267,816 306,305

Property and equipment, at cost, less
accumulated depreciation of $132,198
and $116,214 in 2003 and 2002,
respectively. . . . . . . . . . . . . . 69,487 81,652
Goodwill, with indefinite useful lives,
at cost, less accumulated amortization
of $37,275 and $36,398 in 2003
and 2002, respectively. . . . . . . . . 324,806 315,477
Identified intangibles, with definite
useful lives, at cost, less accumulated
amortization of $33,291 and $28,928
in 2003 and 2002, respectively. . . . . 15,048 18,344
Investments in and loans to real estate
ventures. . . . . . . . . . . . . . . . 66,918 74,994
Long-term receivables, net. . . . . . . . 12,722 15,248
Prepaid pension asset . . . . . . . . . . -- 9,646
Deferred tax assets . . . . . . . . . . . 23,441 18,839
Debt issuance costs, net. . . . . . . . . 4,333 4,343
Other assets, net . . . . . . . . . . . . 7,965 7,668
--------- ----------

$ 792,536 852,516
========= ==========

JONES LANG LASALLE INCORPORATED
CONSOLIDATED BALANCE SHEETS - CONTINUED

SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
($ in thousands, except share data)

SEPTEMBER 30,
2003 DECEMBER 31,
(Unaudited) 2002
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------

Current liabilities:
Accounts payable and accrued
liabilities . . . . . . . . . . . . . $ 86,988 92,389
Accrued compensation. . . . . . . . . . 80,113 139,513
Short-term borrowings . . . . . . . . . 10,052 15,863
Deferred tax liabilities. . . . . . . . 687 20
Other liabilities . . . . . . . . . . . 29,243 21,411
--------- ----------
Total current liabilities . . . 207,083 269,196

Long-term liabilities:
Credit facilities . . . . . . . . . . . 6,000 26,077
9% Senior Euro Notes, due 2007. . . . . 192,323 173,068
Deferred tax liabilities. . . . . . . . 838 146
Minimum pension liability . . . . . . . 6,396 --
Other . . . . . . . . . . . . . . . . . 13,429 17,071
--------- ----------
Total liabilities . . . . . . . 426,069 485,558

Commitments and contingencies

Stockholders' equity:
Common stock, $.01 par value per share,
100,000,000 shares authorized;
31,556,318 and 30,896,333 shares
issued and outstanding as of
September 30, 2003 and December 31,
2002, respectively. . . . . . . . . . 316 309
Additional paid-in capital. . . . . . . 502,023 494,283
Deferred stock compensation . . . . . . (14,450) (17,321)
Retained deficit. . . . . . . . . . . . (96,662) (95,411)
Stock held by subsidiary. . . . . . . . (4,659) (4,659)
Stock held in trust . . . . . . . . . . (460) (460)
Accumulated other comprehensive loss. . (19,641) (9,783)
--------- ----------
Total stockholders' equity. . . 366,467 366,958
--------- ----------
$ 792,536 852,516
========= ==========

See accompanying notes to consolidated financial statements.

JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
($ in thousands, except share data)
(UNAUDITED)

JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2003
($ in thousands, except share data)
(UNAUDITED)

JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
($ in thousands)
(UNAUDITED)

2003 2002
---------- ----------
Cash flows from operating activities:
Cash flows from earnings:
Net income (loss) . . . . . . . . . . . $ (1,251) 9,640
Reconciliation of net income (loss) to
net cash provided by earnings:
Cumulative effect of change in
accounting principle. . . . . . . . -- (846)
Minority interest . . . . . . . . . . -- 1,313
Depreciation and amortization . . . . 28,058 28,239
Equity in earnings and gain on sale
from unconsolidated ventures. . . . 282 (2,405)
Operating distributions from real
estate ventures . . . . . . . . . . 3,118 3,670
Provision for loss on receivables and
other assets. . . . . . . . . . . . 6,468 3,397
Stock compensation expense. . . . . . -- 139
Amortization of deferred compensation 8,660 6,141
Amortization of debt issuance costs . 1,126 973
---------- ----------
Net cash provided by earnings . . . 46,461 50,261

Cash flows from changes in
working capital:
Receivables . . . . . . . . . . . . . 44,915 43,783
Prepaid expenses and other assets . . (4,783) 3,733
Deferred tax assets . . . . . . . . . (2,334) 1,448
Accounts payable, accrued liabilities
and accrued compensation. . . . . . (48,918) (79,002)
---------- ----------
Net cash flows from changes in
working capital . . . . . . . . . (11,120) (30,038)
---------- ----------
Net cash provided by
operating activities. . . . . . . 35,341 20,223

Cash flows used in investing activities:
Net capital additions - property and
equipment . . . . . . . . . . . . . . (12,444) (10,149)
Other acquisitions and investments,
net of cash balances assumed. . . . . (1,100) (287)
Investments in real estate ventures:
Capital contributions and advances to
real estate ventures. . . . . . . . (4,282) (28,051)
Distributions, repayments of advances
and sale of investments . . . . . . 10,187 17,763
---------- ----------
Net cash used in
investing activities. . . . . . (7,639) (20,724)

JONES LANG LASALLE INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
($ in thousands)
(UNAUDITED)

2003 2002
---------- ----------
Cash flows used in financing activities:
Proceeds from borrowings under credit
facilities. . . . . . . . . . . . . . . 276,634 284,627
Repayments of borrowings under credit
facilities. . . . . . . . . . . . . . . (303,584) (284,104)
Shares repurchased for payment of
taxes on stock awards . . . . . . . . . (3,330) (4,189)
Common stock issued under stock option
plan and stock purchase programs. . . . 2,525 3,054
---------- ----------
Net cash used in
financing activities. . . . . . . (27,755) (612)
---------- ----------
Net decrease in cash and
cash equivalents. . . . . . . . . (53) (1,113)

Cash and cash equivalents,
beginning of period . . . . . . . . . . . 13,654 10,446
---------- ----------
Cash and cash equivalents, end of period. . $ 13,601 9,333
========== ==========

Supplemental disclosure of cash flow
information:

Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . $ 10,972 10,821
Taxes, net of refunds . . . . . . . . . 7,707 7,580

See accompanying notes to consolidated financial statements.

JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Readers of this quarterly report should refer to the audited financial
statements of Jones Lang LaSalle Incorporated ("Jones Lang LaSalle", which
may also be referred to as the "Company" or as "we," "us" or "our") for the
year ended December 31, 2002, which are included in Jones Lang LaSalle's
2002 Form 10-K, filed with the United States of America Securities and
Exchange Commission and also available on our website (www.joneslang
lasalle.com), since we have omitted from this report certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements. You should also refer to the "Summary of
Critical Accounting Policies and Estimates" section within Item 2.,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," contained herein, for further discussion of our accounting
policies and estimates.

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM INFORMATION

Our consolidated financial statements as of September 30, 2003 and
for the three and nine months ended September 30, 2003 and 2002 are
unaudited; however, in the opinion of management, all adjustments
(consisting solely of normal recurring adjustments) necessary for a
fair presentation of the consolidated financial statements for these
interim periods have been included. Historically, our revenue,
operating income and net earnings in the first three calendar
quarters are substantially lower than in the fourth quarter. Other
than for the Investment Management segment, this seasonality is due
to a calendar-year-end focus on the completion of real estate
transactions, which is consistent with the real estate industry
generally. The Investment Management segment earns performance fees
on clients' returns on their real estate investments. Such
performance fees are generally earned when assets are sold, the
timing of which we do not have complete discretion over. As such,
the results for the periods ended September 30, 2003 and 2002 are not
necessarily indicative of the results to be obtained for the full
fiscal year.

RECLASSIFICATIONS

We have reclassified certain amounts described below to conform with
the current presentation. These reclassifications have no impact on
operating income (loss), net income (loss) or cash flows for any of
the periods affected.

Beginning in December 2002, pursuant to the Financial Accounting
Standards Board's ("FASB") Emerging Issues Task Force ("EITF") No.
01-14, "Income Statement Characterization of Reimbursements Received
for 'Out-of-Pocket' Expenses Incurred", we have reclassified
reimbursements received for out-of-pocket expenses to revenues in the
income statement, as opposed to being shown as a reduction of
expenses. Out-of-pocket expenses include, but are not limited to,
expenses related to airfare, mileage, hotel stays, out-of-town meals,
photocopies and telecommunications and facsimile charges. These out
of-pocket expenses amounted to $1.3 million and $1.1 million for the
three months ended September 30, 2003 and 2002, respectively, and
$3.9 million and $3.0 million for the nine months ended September 30,
2003 and 2002, respectively.

Beginning in December 2002, we reclassified as revenue our recovery
of indirect costs related to our management services business, as
opposed to being classified as a reduction of expenses in the income
statement. This recovery of indirect costs amounted to $10.7 million
and $8.3 million for the three months ended September 30, 2003 and
2002, respectively, and $27.6 million and $22.8 million for the nine
months ended September 30, 2003 and 2002, respectively.

EARNINGS PER SHARE

For the three months ended September 30, 2003, we calculated basic
earnings per share based on basic weighted average shares outstanding
of 31.2 million; and diluted earnings per share based on diluted
weighted average shares outstanding of 32.4 million. The increase of
1.2 million in weighted average shares outstanding reflects the
dilutive effect of common stock equivalents, which include shares to
be issued under our employee stock compensation programs and
outstanding stock options whose exercise price was less than the
average market price of our stock during this period. For the nine
months ended September 30, 2003, we calculated the basic and diluted
loss per common share according to basic weighted average shares
outstanding of 30.9 million. As a result of the net loss incurred in
the nine months ended September 30, 2003, diluted weighted average
shares outstanding do not give effect to common stock equivalents, as
to do so would be anti-dilutive. We did not include in the weighted
average shares outstanding for the three or nine months ended
September 30, 2003 the 300,000 shares that have been repurchased and
are held by one of our subsidiaries.

For the three and nine months ended September 30, 2002, we calculated
basic earnings per share based on basic weighted average shares
outstanding of 30.8 million and 30.4 million, respectively; and
diluted earnings per share based on diluted weighted average shares
outstanding of 32.0 million and 31.9 million, respectively. The
respective increases of 1.2 million and 1.5 million in weighted
average shares outstanding reflect the dilutive effect of common
stock equivalents, which include shares to be issued under our
employee stock compensation programs and outstanding stock options
whose exercise price was less than the average market price of our
stock during these periods.

STATEMENT OF CASH FLOWS

We show the effects of foreign currency translation on cash balances
in cash flows from operating activities on the Consolidated
Statements of Cash Flows.

INCOME TAX PROVISION

We provide for the effects of income taxes on interim financial
statements based on our estimate of the effective tax rate for the
full year. We continuously seek to develop and implement potential
strategies and/or actions that would reduce our overall effective tax
rate. We reflect the benefit from tax planning actions when we
believe it is probable that they will be successful, which usually
requires that certain actions have been initiated. Based on our 2003
forecasted results and strategies implemented in the third quarter,
we have lowered our estimated effective tax rate from 34% to 32% for
2003. While there can be no assurance that we will achieve an
effective tax rate of 32% in 2003, we believe that this is an
achievable rate due to the impact of tax planning, particularly
planning to (i) reduce the impact of losses in jurisdictions where we
cannot recognize tax benefits, (ii) reduce the incidence of double
taxation of earnings and other tax inefficiencies and (iii) reduce
the effective rate of taxation on international earnings. The
estimated effective tax rate on recurring operations for the nine
months ended September 30, 2002 was 36%. Due to the impact of tax
planning we ultimately achieved an effective tax rate of 34% on
recurring operations for the full year of 2002. The estimated tax
rate of 36% applied in the third quarter of 2002 excludes a tax
benefit of $1.8 million related to certain costs incurred in
restructuring actions taken in 2001. These costs were not originally
expected to be deductible for tax purposes. However, as a result of
actions undertaken in the third quarter of 2002, these costs were
considered deductible.

STOCK-BASED COMPENSATION

The Jones Lang LaSalle Amended and Restated Stock Award and Incentive
Plan ("SAIP"), adopted in 1997 and amended and restated in 2002,
provides for the granting of options to purchase a specified number
of shares of common stock and other stock awards to eligible
employees of Jones Lang LaSalle. As a result of a change in
compensation strategy, other than as an inducement to certain new
employees and annual awards to non-employee members of our Board of
Directors, we do not generally utilize stock option grants as part of
our employee compensation program. We account for our stock option
and stock compensation plans under the provisions of FASB Statement
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), as
amended by FASB Statement No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" ("SFAS 148"). These
provisions allow entities to continue to apply the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), using the intrinsic value based
method, and provide pro forma net income and net income per share as
if the fair value based method, defined in SFAS 123, as amended, had
been applied. We have elected to apply the provisions of APB 25 in
accounting for stock options and other stock awards. Therefore,
pursuant to APB 25, no compensation expense has been recognized with
respect to options granted at the market value of our common stock on
the date of grant. We have recognized other stock awards, which we
granted at prices below the market value of our common stock on the
date of grant, as compensation expense over the vesting period of
those awards pursuant to APB 25. The following table provides net
income (loss) and pro forma net income (loss) per common share as if
the fair value based method had been applied to all awards ($ in
thousands, except share data):

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net income (loss),
as reported. . . . . $ 7,411 10,169 (1,251) 9,640
Add: Stock-based
employee compensation
expense included in
reported net income
(loss), net of related
tax effects . . . . 1,740 1,380 5,493 3,725
Deduct: Total stock-
based employee compen-
sation expense deter-
mined under fair value
based method for all
awards, net of related
tax effects . . . . (2,132) (2,167) (6,802) (5,060)
-------- -------- -------- --------
Pro forma net income
(loss) . . . . . . . $ 7,019 9,382 (2,560) 8,305
======== ======== ======== ========
Net earnings (loss)
per share:
Basic - as reported. $ 0.24 0.33 (0.04) 0.32
======== ======== ======== ========
Basic - pro forma. . $ 0.23 0.30 (0.08) 0.27
======== ======== ======== ========

Diluted
- as reported. . . $ 0.23 0.32 (0.04) 0.31
======== ======== ======== ========
Diluted
- pro forma. . . . $ 0.22 0.29 (0.08) 0.26
======== ======== ======== ========

DERIVATIVES AND HEDGING ACTIVITIES

We apply FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), as amended by FASB
Statement No. 138, "Accounting For Certain Derivative Instruments and
Certain Hedging Activities", when accounting for derivatives and
hedging activities.

As a firm, we do not enter into derivative financial instruments for
trading or speculative purposes. However, in the normal course of
business we do use derivative financial instruments in the form of
forward foreign currency exchange contracts to manage foreign
currency risk. At September 30, 2003, we had forward exchange
contracts in effect with a gross notional value of $190.6 million
($112.9 million on a net basis) and a market and carrying gain of
approximately $2.1 million.

In the past, we have used interest rate swap agreements to limit the
impact of changes in interest rates on earnings and cash flows. We
did not use any interest rate swap agreements in 2002 or in the first
nine months of 2003 and there were no such agreements outstanding as
of September 30, 2003.

We require that hedging derivative instruments be effective in
reducing the exposure that they are designated to hedge. This
effectiveness is essential to qualify for hedge accounting treatment.
Any derivative instrument used for risk management that does not meet
the hedging criteria is marked-to-market each period with changes in
unrealized gains or losses recognized currently in earnings.

We hedge any foreign currency exchange risk resulting from
intercompany loans through the use of foreign currency forward
contracts. SFAS 133 requires that unrealized gains and losses on
these derivatives be recognized currently in earnings. The gain or
loss on the re-measurement of the foreign currency transactions being
hedged is also recognized in earnings. The net impact on our
earnings during the three and nine months ended September 30, 2003 of
the unrealized gain on foreign currency contracts, offset by the loss
resulting from re-measurement of foreign currency transactions, was
not significant.

In connection with a previous investment in an unconsolidated real
estate venture, we were granted certain residual "Common Share
Purchase Rights" that give us the ability to purchase shares in a
publicly traded real estate investment trust at a fixed price. These
rights, which extend through April of 2008, are a non-hedging
derivative instrument and should have been recorded at fair value as
part of the adoption of SFAS 133 effective January 1, 2001, with
subsequent changes in fair value reflected in equity earnings. The
initial accounting for these common share purchase rights through
June 30, 2003 was not in accordance with the rules of SFAS 133 due to
an inadvertent error as a result of the complexity of this unique
derivative. We determine fair value through the use of the Black
Scholes option pricing model. The fair value of these rights at
January 1, 2001 was $954,000 and the fair value has ranged from
$200,000 to $1.4 million in the periods since that time due to stock
market fluctuation. At September 30, 2003, the fair value of these
rights was $1.3 million which we included in the investments in
unconsolidated real estate ventures on the Consolidated Balance
Sheet. We recorded a gain of $1.3 million in equity earnings for the
three and nine months ended September 30, 2003, of which
approximately $800,000 represented the impact of correcting this
error. We do not believe that the correction of this error is
material to the 2001 or 2002 consolidated financial statements, nor
will it be material to the 2003 consolidated financial statements.
Additionally, we do not believe that the correction of this error is
material to consolidated earnings trends. We do not own any other
instruments of this nature.

REVENUE RECOGNITION

In certain of our businesses, primarily those involving management
services, our clients reimburse us for expenses we incur on their
behalf. We base the treatment of reimbursable expenses for financial
reporting purposes upon the fee structure of the underlying contract.
We report on a gross basis contracts that provide a fixed
fee/billing, fully inclusive of all personnel or other recoverable
expenses that we incur, and not separately scheduled as such. This
means that our reported revenues include the full billing to our
client and our reported expenses include all costs associated with
the client. When the fee structure is comprised of at least two
distinct elements, namely (i) the fixed management fee and (ii) a
separate component which allows for scheduled reimbursable personnel
or other expenses to be billed directly to the client, we will
account for the contract on a net basis. This means we include the
fixed management fee in reported revenues and we net the
reimbursement against expenses. This characterization is based on the
following factors which define us as an agent rather than a
principal: (i) the property owner generally has the authority over
hiring practices and the approval of payroll prior to payment by
Jones Lang LaSalle; (ii) Jones Lang LaSalle is the primary obligor
with respect to the property personnel, but bears little or no credit
risk under the terms of the management contract; (iii) reimbursement
to Jones Lang LaSalle is generally completed simultaneously with
payment of payroll or soon thereafter; and (iv) Jones Lang LaSalle
generally earns no margin in the arrangement, obtaining reimbursement
only for actual costs incurred. The majority of our service contracts
utilize the latter structure and are accounted for on a net basis. We
have always presented the above reimbursable contract costs on a net
basis in accordance with accounting principles generally accepted in
the United States of America. Such costs aggregated $94.5 million and
$97.6 million for the three months ended September 30, 2003 and 2002,
respectively. Such costs aggregated $285.4 million and $283.3
million for the nine months ended September 30, 2003 and 2002,
respectively. This treatment has no impact on operating income
(loss), net income (loss) or cash flows.

LEGAL PROCEEDINGS

The Company has contingent liabilities from various pending claims
and litigation matters arising in the ordinary course of business,
some of which involve claims for damages that are substantial in
amount. Many of these matters are covered by insurance. Although the
ultimate liability for these matters cannot be determined, based upon
information currently available, we believe the ultimate resolution
of such claims and litigation will not have a material adverse effect
on our financial position, results of operations or liquidity.

On November 8, 2002, Bank One N.A. ("Bank One") filed suit against
the Company and certain of its subsidiaries in the Circuit Court of
Cook County, Illinois with regard to three different agreements
relating to facility management, project development and broker
services. The suit alleges negligence, breach of contract and breach
of fiduciary duty on the part of Jones Lang LaSalle and seeks to
recover a total of $40 million in compensatory damages and $80
million in punitive damages. The Company is aggressively defending
the suit and on December 16, 2002 filed a counterclaim for breach of
contract seeking payment of approximately $1.2 million for fees due
for services provided under the agreements. While there can be no
assurance as to the outcome, the Company believes that the complaint
is without merit and, as such, will not have a material adverse
effect on our financial position, results of operations or liquidity.
The suits are in their early stages. As of the date of this report,
we are in the process of discovery and no trial date has been set. As
such, the outcome of Bank One's suit cannot be predicted with any
certainty and management is unable to estimate an amount or range of
potential loss that could result if an improbable unfavorable outcome
did occur.

(2) BUSINESS SEGMENTS

We manage our business along a combination of geographic and
functional lines. We report operations as four business segments:
the three geographic regions of Owner and Occupier Services ("OOS"),
(i) Americas, (ii) Europe and (iii) Asia Pacific, each of which
offers our full range of Corporate Solutions, Investor Services and
Capital Markets Services; and (iv) Investment Management, which
offers investment management services on a global basis. The OOS
business consists primarily of tenant representation and agency
leasing, capital markets and valuation services (collectively,
"implementation services") and property management, corporate
property services and project and development management services
(collectively, "management services"). The Investment Management
segment provides real estate investment management services to
institutional investors, corporations, and high-net-worth
individuals.

Total revenue by segment includes revenue derived from services
provided to other segments. Operating income represents total
revenue less direct and indirect allocable expenses. We allocate all
expenses, other than interest and income taxes since nearly all
expenses incurred benefit one or more of the segments. Allocated
expenses primarily consist of corporate global overhead, including
certain globally managed stock programs. We allocate these corporate
global overhead expenses to the business segments based on the
relative revenue of each segment.

Our measure of segment operating results excludes non-recurring and
restructuring charges. See Note 3 for a detailed discussion of these
non-recurring and restructuring charges. We have determined that it
is not meaningful to investors to allocate these non-recurring and
restructuring charges to our segments. In addition, the Chief
Operating Decision Maker of Jones Lang LaSalle measures the segment
results without these charges allocated and assesses performance for
incentive compensation purposes before the impact of these charges.
We define the Chief Operating Decision Maker collectively as our
Executive Committee.

We have reclassified certain prior year amounts to conform with the
current presentation. A summary of these reclassifications can be
found in Note 1.

The following table summarizes unaudited financial information by
business segment for the three and nine months ended September 30,
2003 and 2002 ($ in thousands):

SEGMENT OPERATING RESULTS
------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
OWNER AND OCCUPIER SERVICES -
AMERICAS
Revenue:
Implementation services $ 25,503 31,594 70,882 78,657
Management services . . 41,389 38,519 119,709 106,589
Equity losses . . . . . -- -- -- (10)
Other services. . . . . 1,308 1,013 3,495 2,955
Intersegment revenue. . 93 173 432 375
-------- -------- -------- --------
68,293 71,299 194,518 188,566

SEGMENT OPERATING RESULTS
------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
Operating expenses:
Compensation, operating
and administrative
expenses. . . . . . . 55,951 60,414 171,822 166,611
Depreciation and
amortization. . . . . 4,508 4,591 13,717 14,223
-------- -------- -------- --------
Operating income. . $ 7,834 6,294 8,979 7,732
======== ======== ======== ========

EUROPE
Revenue:
Implementation services $ 57,854 52,080 162,742 155,419
Management services . . 20,678 19,826 65,594 58,973
Other services. . . . . 3,352 2,796 6,862 4,638
-------- -------- -------- --------
81,884 74,702 235,198 219,030

Operating expenses:
Compensation, operating
and administrative
expenses. . . . . . . 76,539 70,973 223,345 204,050
Depreciation and
amortization. . . . . 2,785 2,866 8,331 8,134
-------- -------- -------- --------
Operating income. . $ 2,560 863 3,522 6,846
======== ======== ======== ========

ASIA PACIFIC
Revenue:
Implementation services $ 23,316 18,363 60,383 52,940
Management services . . 18,509 16,946 54,443 48,906
Other services. . . . . 306 386 1,110 1,044
-------- -------- -------- --------
42,131 35,695 115,936 102,890
Operating expenses:
Compensation, operating
and administrative
expenses. . . . . . . 41,084 33,998 116,179 99,620
Depreciation and
amortization. . . . . 1,519 1,639 5,098 4,945
-------- -------- -------- --------
Operating income
(loss). . . . . . $ (472) 58 (5,341) (1,675)
======== ======== ======== ========

SEGMENT OPERATING RESULTS
------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
INVESTMENT MANAGEMENT -
Revenue:
Implementation and
other services. . . . $ 996 1,177 3,324 2,352
Advisory fees . . . . . 23,585 22,037 69,348 59,652
Incentive fees. . . . . 1,356 10,804 1,934 11,757
Equity earnings (losses) (77) 987 (282) 2,415
-------- -------- -------- --------
25,860 35,005 74,324 76,176
Operating expenses:
Compensation, operating
and administrative
expenses. . . . . . . 20,971 23,618 65,985 60,672
Depreciation and
amortization. . . . . 270 322 912 937
-------- -------- -------- --------
Operating income. . $ 4,619 11,065 7,427 14,567
======== ======== ======== ========

Total segment revenue . . . $218,168 216,701 619,976 586,662
Intersegment revenue
eliminations. . . . . . . (93) (173) (432) (375)
-------- -------- -------- --------
Total revenue . . . $218,075 216,528 619,544 586,287
======== ======== ======== ========

Total segment operating
expenses. . . . . . . . . $203,627 198,421 605,389 559,192
Intersegment operating
expense eliminations. . . (93) (173) (432) (375)
-------- -------- -------- --------
Total operating
expenses before
non-recurring
charges . . . . . $203,534 198,248 604,957 558,817
======== ======== ======== ========
Non-recurring
charges . . . . . $ (1,451) 472 2,702 1,523
======== ======== ======== ========

Operating income. . $ 15,992 17,808 11,885 25,947
======== ======== ======== ========

(3) NON-RECURRING AND RESTRUCTURING CHARGES

For the three and nine months ended September 30, 2003, we recorded a
credit of $1.5 million and a charge of $2.7 million to non-recurring
and restructuring expense, respectively. For the three and nine
months ended September 30, 2002, non-recurring and restructuring
charges totalled $472,000 and $1.5 million, respectively. The
charges consist of the following elements ($ in thousands):

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
Non-Recurring & Restructuring
- -----------------------------
Land Investment and
Development Group
Impairment Charges. . . . $ -- 1,087 -- 2,004

Insolvent Insurance
Providers . . . . . . . . -- -- (606) --

Abandonment of Property
Management Accounting
System:
Compensation & Benefits . -- -- 113 --
Operating, Administrative
& Other . . . . . . . . 97 -- 4,919 --

2001 Global Restructuring
Program:
Compensation & Benefits . 15 (615) 97 (481)
Operating, Administrative
& Other . . . . . . . . -- -- -- --

2002 Global Restructuring
Program:
Compensation & Benefits . (1,491) -- (2,273) --
Operating, Administrative
& Other . . . . . . . . (72) -- 452 --
-------- -------- -------- --------
Total Non-Recurring &
Restructuring . . . . . . $ (1,451) 472 2,702 1,523
======== ======== ======== ========

LAND INVESTMENT AND DEVELOPMENT GROUP IMPAIRMENT

As part of our broad based business restructuring in the second half
of 2001, we closed the non-strategic residential land investment
business in the Americas region of our Investment Management segment.
In the third quarter of 2003 we sold one of the remaining assets in
the Land Investment portfolio for no gain or loss. We include in
investment in and loans to real estate ventures the book value of the
four remaining investments of $2.1 million, net of impairment charges
of $4.4 million recorded in prior years. We included in non-
recurring expense for the three and nine months ended September 30,
2002 equity losses of $325,000 and $546,000, respectively.
Additionally, for the three and nine months ended September 30, 2002,
we recorded an impairment charge of $1.3 million. There were no
similar charges for the three and nine months ended September 30,
2003. We have provided guarantees associated with this investment
portfolio of $1.2 million, which we currently do not expect to fund.
We currently expect to have liquidated the Land Investment Group
investments by the end of 2006.

Additionally, as part of the 2001 restructuring program, we disposed
of our Americas Development Group, although we retained an interest
in certain investments the group had originated. We included in non-
recurring expense for the three and nine months ended September 30,
2002 a net gain of $675,000 as the result of the disposal of one of
these investments. We also included in non-recurring expense for the
three and nine months ended September 30, 2002 equity losses of
$107,000 and $331,000, respectively. Additionally for the nine months

ended September 30, 2002, we recorded an impairment charge of
$472,000. There were no similar charges for the three and nine
months ended September 30, 2003. We include in investments in and
loans to real estate ventures the book value of the one remaining
Development Group investment of $224,000. We currently expect to
have liquidated this investment by the middle of 2004.

INSOLVENT INSURANCE PROVIDERS

In 2001 we recorded $1.9 million against our exposure to insolvent
insurance providers, of which $1.6 million related to approximately
30 claims that were covered by an insolvent Australian insurance
provider, HIH Insurance Limited ("HIH"). As of September 30, 2003,
we have settled approximately 25 of these claims. However, we have
been notified of additional claims subsequent to the insolvency of
HIH and approximately 22 claims remain outstanding with a reserve of
approximately $0.6 million. As a result of favorable developments
related to the loss reserves, we recorded a credit of $0.6 million to
the non-recurring operating, administrative and other expense in the
second quarter of 2003. We believe the remaining reserve is adequate
to cover the remaining claims and expenses to be paid as a result of
the HIH insolvency. We expect to have fully utilized this reserve by
the end of 2006.

ABANDONMENT OF PROPERTY MANAGEMENT ACCOUNTING SYSTEM

In the second quarter of 2003, we completed a feasibility analysis of
a property management accounting system that was in the process of
being implemented in Australia. As a result of the review, we
concluded that the potential benefits from successfully correcting
deficiencies in the system that would allow it to be implemented
throughout Australia were not justified by the costs that would have
to be incurred to do so. As a result of this decision, we recorded a
charge of $4.9 million to non-recurring expense in the second quarter
of 2003. The charge of $4.9 million includes $113,000 for severance
costs of personnel who worked exclusively on the system and $158,000
for professional fees associated with pursuing litigation against the
consulting firm that was responsible for the design and
implementation of this system. In the third quarter of 2003 we
recorded an additional $97,000 to non-recurring expense for legal
expenses incurred in connection with this litigation. We anticipate
incurring additional litigation expenses over the balance of the
year. We implemented a transition plan to an existing alternative
system and have used this system from July 1, 2003.

BUSINESS RESTRUCTURING

Business restructuring charges include severance, professional fees
and costs related to excess lease space associated with the
realignment of our business. The actual costs incurred with respect
to previous restructurings are closely monitored for changes relative
to original assumptions and adjusted accordingly. The actual costs
incurred with respect to our 2002 and 2001 restructurings have varied
from our original estimates for a variety of reasons, including the
identification of additional facts and circumstances, the complexity
of international labor law, developments in the underlying business
resulting in the unforeseen reallocation of resources and better or
worse than expected settlement discussions with employees and/or
landlords. These events have led to our recording a credit to non-
recurring compensation and benefits expense of $1.5 million and $2.3
million for the three and nine months ended September 30, 2003,
respectively. This credit primarily relates to our Americas OOS
business where a combination of new client wins and expanded
assignments for existing clients has resulted in a permanent
reevaluation of planned headcount reductions. In addition, we have
recorded a credit of $72,000 and a charge of $452,000 to the
nonrecurring operating administrative and other expense for the three

and nine months ended September 30, 2003, respectively, primarily
related to the additional costs of excess leased space as we have
finalized underlying lease modifications. We recorded credits of
$615,000 and $481,000 to the nonrecurring compensation and benefits
expense for the three and nine months ended September 30, 2002.

The 2002 restructuring program included $12.7 million (adjusted down
to $10.6 million for reasons stated above) related to severance and
certain professional fees, of which $8.2 million had been paid as of
September 30, 2003. The majority of the remaining $2.4 million will
be paid over the next six months. The 2001 restructuring program
included $43.9 million (adjusted down to $42.6 million for reasons
stated above) in severance and related costs, of which $41.1 million
had been paid as of September 30, 2003. The remaining $1.5 million
will be paid over the next several years as required by local labor
laws.

The following table displays the net charges (credits) by segment for
the three and nine months ended September 30, 2003 and 2002 ($ in
thousands):

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
Non-Recurring & Restructuring
- -----------------------------
Owner and Occupier Services:
Americas. . . . . . . . . $ (1,772) (568) (1,772) 128
Europe. . . . . . . . . . 76 -- (220) --
Asia Pacific. . . . . . . (51) (515) 4,398 (515)
Investment Management . . . 353 1,455 353 1,676
Corporate . . . . . . . . . (57) 100 (57) 234
-------- -------- -------- --------
Total Non-Recurring
& Restructuring . . . . . $ (1,451) 472 2,702 1,523
======== ======== ======== ========

(4) ACCOUNTING FOR BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE
ASSETS

We apply FASB Statement No. 141, "Business Combinations" ("SFAS
141"), when accounting for business combinations. SFAS 141 requires
that we use purchase method of accounting for all business
combinations completed after June 30, 2001. SFAS 141 also specifies
that intangible assets acquired in a purchase method business
combination must meet certain criteria to be recognized and reported
apart from goodwill. We followed the provisions of SFAS 141 in
accounting for the acquisition of the minority interest in our
Skandia joint venture which was at a discount to the fair value of
the net assets acquired. As a result, we recorded an after-tax gain
of $341,000 as an extraordinary item in the fourth quarter of 2002.

We apply FASB Statement No. 142, "Goodwill and Other Intangible
Assets" ("SFAS 142"), when accounting for goodwill and other
intangible assets. SFAS 142 requires an annual impairment evaluation
of intangibles with indefinite useful lives. To accomplish this
annual evaluation we determine the carrying value of each reporting
unit by assigning assets and liabilities, including the existing
goodwill and intangible assets, to those reporting units as of the
date of evaluation. For purposes of evaluating SFAS 142, we define
reporting units as Investment Management, Americas OOS, Australia
OOS, Asia OOS, and by country groupings in Europe OOS. The result of

the 2002 evaluation was that the fair value of each reporting unit
exceeded its carrying amount, and therefore we did not recognize an
impairment loss. We completed the 2003 evaluation in the third
quarter and concluded that the fair value of each reporting unit
exceeded its carrying amount and therefore we did not recognize an
impairment loss.

We have $339.9 million of unamortized intangibles and goodwill as of
September 30, 2003, that are subject to the provisions of SFAS 142.
A significant portion of these unamortized intangibles and goodwill
are denominated in currencies other than US dollars, which means that
a portion of the movements in the reported book value of these
balances are attributable to movements in foreign currency exchange
rates. The tables below set forth further details on the foreign
exchange impact on intangible and goodwill balances. Of the $339.9
million of unamortized intangibles and goodwill, $324.8 million
represents goodwill with indefinite useful lives, which we ceased
amortizing January 1, 2002. As a result of adopting SFAS 142 on
January 1, 2002, we credited $846,000 to the income statement, as the
cumulative effect of a change in accounting principle, which
represented our negative goodwill balance at January 1, 2002. The
gross carrying amount of this negative goodwill (which related to the
Americas OOS reporting segment) at January 1, 2002 was $1.4 million
with accumulated amortization of $565,000. The remaining $15.0
million of identified intangibles (principally representing
management contracts acquired) will be amortized over their remaining
definite useful lives (with a maximum of three years remaining).
Other than the prospective non-amortization of goodwill, which
results in a non-cash improvement in our operating results, the
adoption of SFAS 142 did not have a material effect on our revenue,
operating results or liquidity.

In accordance with SFAS 142, the effect of this accounting change is
applied prospectively. Supplemental comparative disclosure, as if
the change had been retroactively applied to the prior period, is as
follows ($ in thousands, except share data):

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
Reported net income
(loss) . . . . . . . . . . $ 7,411 10,169 (1,251) 9,640
Add back: Cumulative effect
of change in accounting
principle. . . . . . . . . -- -- -- (846)
-------- -------- -------- --------
Adjusted net income (loss). $ 7,411 10,169 (1,251) 8,794
======== ======== ======== ========

Basic earnings (loss)
per common share . . . . . $ 0.24 0.33 (0.04) 0.32
Cumulative effect of change
in accounting principle. . -- -- -- (0.03)
-------- -------- -------- --------
Adjusted basic earnings
(loss) per common share. . $ 0.24 0.33 (0.04) 0.29
======== ======== ======== ========

Diluted earnings (loss)
per common share . . . . . $ 0.23 0.32 (0.04) 0.31
Cumulative effect of
change in accounting
principle. . . . . . . . . -- -- -- (0.03)
-------- -------- -------- --------
Adjusted diluted earnings
(loss) per common share. . $ 0.23 0.32 (0.04) 0.28
======== ======== ======== ========

The following table sets forth, by reporting segment, the current
year movements in the gross carrying amount and accumulated
amortization of our goodwill with indefinite useful lives ($ in
thousands):
Owner and Occupier Services Invest-
----------------------------- ment
Asia Manage- Consol-
Americas Europe Pacific ment idated
-------- -------- -------- -------- --------
Gross Carrying
Amount
- --------------
Balance as of
January 1, 2003 . .$179,335 58,145 82,755 31,640 351,875

Impact of exchange
rate movements. . . 14 2,460 6,895 837 10,206
-------- -------- -------- -------- --------
Balance as of
September 30,
2003. . . . . . . .$179,349 60,605 89,650 32,477 362,081

Accumulated
Amortization
- ------------
Balance as of
January 1, 2003 . .$(15,531) (4,704) (5,835) (10,328) (36,398)

Impact of exchange
rate movements. . . 6 (231) (499) (153) (877)
-------- -------- -------- -------- --------
Balance as of
September 30,
2003. . . . . . . .$(15,525) (4,935) (6,334) (10,481) (37,275)

Net book value as
of September 30,
2003. . . . . . . .$163,824 55,670 83,316 21,996 324,806
======== ======== ======== ======== ========

In the third quarter of 2003 an intangible asset of $400,000 was
established to record the unrecognized prior service cost related to
our Ireland defined benefit pension plan. The following table sets
forth, by reporting segment, the current year movements in the gross
carrying amount and accumulated amortization of our intangibles with
definite useful lives as well as estimated future amortization
expense ($ in thousands, unless otherwise noted).

Owner and Occupier Services Invest-
----------------------------- ment
Asia Manage- Consol-
Americas Europe Pacific ment idated
-------- -------- -------- -------- --------
Gross Carrying
Amount
- --------------
Balance as of
January 1, 2003. . .$ 39,377 819 2,296 4,780 47,272

Unrecognized prior
service cost of
Ireland pension plan -- 400 -- -- 400

Impact of exchange
rate movements . . . -- 29 469 169 667
-------- -------- -------- -------- --------
Balance as of
September 30,
2003 . . . . . . . .$ 39,377 1,248 2,765 4,949 48,339

Owner and Occupier Services Invest-
----------------------------- ment
Asia Manage- Consol-
Americas Europe Pacific ment idated
-------- -------- -------- -------- --------
Accumulated
Amortization
- ------------
Balance as of
January 1, 2003. . .$(22,494) (435) (1,219) (4,780) (28,928)

Amortization expense
- Q1 . . . . . . . . (1,192) (26) (75) -- (1,293)
Amortization expense
- Q2 . . . . . . . . (1,197) (25) (82) -- (1,304)
Amortization expense
- Q3 . . . . . . . . (1,177) (25) (70) -- (1,272)
Impact of exchange
rate movements . . . (24) (19) (282) (169) (494)
-------- -------- -------- -------- --------
Balance as of
September 30,
2003 . . . . . . . .$(26,084) (530) (1,728) (4,949) (33,291)

Net book value as
of September 30,
2003 . . . . . . . .$ 13,293 718 1,037 -- 15,048
======== ======== ======== ======== ========

ESTIMATED ANNUAL AMORTIZATION EXPENSE
Remaining 2003 Amortization $1.3 million
For Year Ended 12/31/04 $5.2 million
For Year Ended 12/31/05 $4.7 million
For Year Ended 12/31/06 $3.2 million
For Year Ended 12/31/07 None

(5) NEW ACCOUNTING STANDARDS

ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS

We adopted the provisions of FASB Statement No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS 143"), as of January 1, 2003.
SFAS 143 addresses financial accounting and reporting obligations
associated with the retirement of tangible long-lived assets and the
associated retirement costs. The standard applies to legal
obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and/or normal
use of the asset.

SFAS 143 requires that the fair value of the liability for an asset
retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The fair
value of the liability is added to the carrying amount of the
associated asset and this additional carrying amount is depreciated
over the life of the asset. The liability is accreted at the end of
each period through charges to operating expense. If the obligation
is settled for other than the carrying amount of the liability, we
will recognize a gain or loss on settlement. Operating leases for
space we occupy in certain of our Asian markets contain obligations
that would require us, on termination of the lease, to reinstate the
space to its original condition. We have assessed our liability
under such obligations as required by the adoption of SFAS 143. This
has not had a material impact on our financial statements.

ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

As of January 1, 2003, we adopted FASB Statement No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities" ("SFAS 146").
SFAS 146 requires that a liability for costs associated with an exit
or disposal activity be recognized when the liability is incurred
rather than when a company commits to such an activity and also
establishes fair value as the objective for initial measurement of
the liability. SFAS 146 is effective for exit or disposal activities
that are initiated after December 31, 2002. The adoption has not had
a material impact on our financial statements.

For the three and nine months ended September 30, 2003 we recorded a
credit of $90,000 and a charge of $434,000, respectively, to the
non-recurring operating, administrative and other expense for
additional lease costs of excess space. We are evaluating the
exposure related to the early exit of certain leased space currently
occupied that was identified as excess as part of the 2002
restructuring program. In accordance with SFAS 146, any costs
related to the early exit of the lease would be recorded at the time
we cease use of the leased space. We anticipate that we will cease
to use this space in 2004, at which point we would expect to incur a
charge which could be significant depending on the underlying market
conditions at that time.

ACCOUNTING AND DISCLOSURE BY GUARANTORS

We apply FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others" ("FIN 45"), which addresses the disclosure
to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees. The Company has
not entered into, or modified guarantees pursuant to the recognition
provisions of FIN 45 that have had a significant impact on the
financial statements during the nine months ended September 30, 2003.
Guarantees covered by the disclosure provisions of FIN 45 are
discussed in the "Liquidity and Capital Resources" section within
Item 2., "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained herein.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities, an Interpretation of
ARB No. 51" ("FIN 46"). FIN 46 addresses the consolidation by
business enterprises of variable interest entities as defined. FIN 46
applies immediately to variable interests in variable interest
entities created after January 31, 2003. We have not invested in any
variable interest entities created after January 31, 2003. For
public enterprises with a variable interest entity created before
February 1, 2003, the FASB has modified the application date of FIN
46 to no later than the end of the interim or annual period ending
after December 15, 2003 as it prepares to issue additional guidance.
After analyzing the requirements of FIN 46 we have concluded that we
have no variable interest entities created prior to February 1, 2003
that would be subject to the provisions of FIN 46.

ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF
BOTH LIABILITIES AND EQUITY

In May 2003, the FASB issued Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity" ("SFAS 150"). SFAS 150 establishes standards
for how an issuer classifies and measures in its statement of
financial position certain financial instruments with characteristics
of both liabilities and equity. SFAS 150 requires issuers to
classify as liabilities (or assets in some circumstances) three
classes of freestanding financial instruments that embody obligations
for the issuer; specifically, (i) a mandatorily redeemable financial
instrument, (ii) an obligation to repurchase the issuer's equity,
(iii) certain obligations to issue a variable number of shares.
SFAS 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003.
The FASB is in the process of providing additional guidance related
to SFAS 150. At this time we do not believe that we have any
financial instruments that are subject to the standards of SFAS 150.

(6) RETIREMENT PLANS

We maintain a contributory defined benefit pension plan in the United
Kingdom to provide retirement benefits to eligible employees. On
January 1, 2003 we curtailed the United Kingdom defined benefit plan
and implemented a defined contribution plan. No gain or loss was
required to be recognized as a result of the curtailment. The table
below shows the impact of the curtailment on the accumulated benefit
obligation, the projected benefit obligation and the fair value of
the plan assets ($ in millions):

At At
December 31, January 1,
2002 2003
------------ ----------

Projected benefit obligation . . . $ 104.2 $ 92.7
------- -------

Accumulated benefit obligation . . $ 82.2 $ 90.1
Fair value of plan assets. . . . . $ 85.3 $ 85.3
Surplus/(Shortfall) of
plan assets to accumulated
benefit obligation . . . . . . . $ 3.1 $ (4.8)

As part of the curtailment we were statutorily required to provide a
minimum level of future benefit increase, which caused our
accumulated benefit obligation to increase by $7.9 million at January
1, 2003, as compared to December 31, 2002. Given that after the
curtailment the accumulated benefit obligation exceeds the fair value
of plan assets, we were required under accounting principles
generally accepted in the United States of America to record a
minimum pension liability through other comprehensive income in
stockholders' equity. The minimum pension liability is equal to the
excess accumulated benefit obligation of $4.8 million plus the value
of the prepaid pension asset relating to the United Kingdom defined
benefit plan, which was $8.1 million at January 1, 2003. The
adjustment to reflect the required minimum pension liability of $12.9
million, net of associated tax benefit of $3.9 million, was recorded
through other comprehensive income in the three months ended March
31, 2003. Under local laws and regulations we are not currently
required to fund the plan. However, we are working with the plan
trustees to develop a funding plan and would expect to begin making
contributions to the plan by the end of 2003.

We maintain a contributory defined benefit plan in Ireland to provide
retirement benefits to eligible employees. In the third quarter of
2003 we identified that the accumulated benefit obligation of this
plan exceeded the fair value of the plan assets by $0.7 million. The
minimum pension liability is equal to the excess accumulated benefit
obligation of $0.7 million plus the value of the prepaid pension
asset of $1.6 million, net of an intangible asset of $400,000
established to record the unrecognized prior service cost. The
adjustment to reflect the required minimum pension liability of $1.9
million, net of associated tax benefit of $290,000, was recorded
through other comprehensive income in the three and nine months ended
September 30, 2003.

(7) INVESTMENTS IN REAL ESTATE VENTURES

We invest in certain real estate ventures that own and operate
commercial real estate. These investments include non-controlling
ownership interests generally ranging from less than 1% to 47.85% of
the respective ventures. We generally account for these interests
under the equity method of accounting in the accompanying
Consolidated Financial Statements due to the nature of the non-
controlling ownership. We apply the provisions of FASB Statement No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
("SFAS 144"), when evaluating these investments for impairment,
including impairment evaluations of the individual assets held by the
investment funds. We have recorded impairment charges to equity
earnings of $2.6 million and $3.7 million for the three and nine
months ended September 30, 2003, respectively, representing our
equity share of the impairment charge against individual assets held
by these funds. Impairment charges recorded for the three and nine
months ended September 30, 2002 related to the exiting of our Land
Investment and Development groups and were recorded to non-recurring
expense. For a further discussion of these non-recurring charges see
Note 3.

(8) SHARE REPURCHASE

On October 30, 2002, we announced that our Board of Directors had
approved a share repurchase program and this approval was reaffirmed
by our Board of Directors in September 2003. Under the program, we
may repurchase up to one million shares of our outstanding common
stock in the open market and in privately negotiated transactions
from time to time, depending upon market prices and other conditions.
In the fourth quarter of 2002, we repurchased 300,000 shares at an
average price of $15.56 per share. We did not repurchase any shares
in the first nine months of 2003. We anticipate purchasing up to
400,000 shares in the fourth quarter of 2003. Given that shares
repurchased under this program are not cancelled, but are held by one
of our subsidiaries, we include them in our equity account. However,
these shares are excluded from our share count for the purposes of
calculating earnings per share.

(9) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

On July 26, 2000, Jones Lang LaSalle Finance B.V. ("JLL Finance"), a
wholly-owned subsidiary of Jones Lang LaSalle, issued 9% Senior Euro
Notes with an aggregate principal amount of euro 165 million, due
2007 (the "Euro Notes"). The payment obligations under the Euro
Notes are fully and unconditionally guaranteed by Jones Lang LaSalle
Incorporated and certain of its wholly-owned subsidiaries: Jones
Lang LaSalle Americas, Inc.; LaSalle Investment Management, Inc.;
Jones Lang LaSalle International, Inc.; Jones Lang LaSalle
Co-Investment, Inc.; and Jones Lang LaSalle Ltd. (the "Guarantor
Subsidiaries"). All of Jones Lang LaSalle Incorporated's remaining
subsidiaries (the "Non-Guarantor Subsidiaries") are owned by the
Guarantor Subsidiaries. The following supplemental Condensed
Consolidating Balance Sheets as of September 30, 2003 and
December 31, 2002, Condensed Consolidating Statement of Earnings for
the three and nine months ended September 30, 2003 and 2002, and
Condensed Consolidating Statement of Cash Flows for the nine months
ended September 30, 2003 and 2002 present financial information for
(i) Jones Lang LaSalle Incorporated (carrying any investment in
subsidiaries under the equity method), (ii) Jones Lang LaSalle
Finance B.V. (the issuer of the Euro Notes), (iii) on a combined
basis the Guarantor Subsidiaries (carrying any investment in Non-
Guarantor subsidiaries under the equity method) and (iv) on a
combined basis the Non-Guarantor Subsidiaries (carrying their
investment in JLL Finance under the equity method). Separate
financial statements of the Guarantor Subsidiaries are not presented
because the guarantors are jointly, severally, and unconditionally
liable under the guarantees, and we believe that separate financial
statements and other disclosures regarding the Guarantor Subsidiaries
are not material to investors. In general, historically, we have
entered into third party borrowings, financing our subsidiaries via
intercompany accounts that are then converted into equity, or
long-term notes, on a periodic basis. Certain Guarantor and
Non-Guarantor Subsidiaries also enter into third party borrowings on
a limited basis. All intercompany activity has been included as
subsidiary activity in investing activities in the Condensed
Consolidating Statements of Cash Flows. We manage cash on a
consolidated basis and there is a right of offset between bank
accounts in the different groupings of legal entities in the
condensed consolidating financial information. Therefore, in certain
cases, negative cash balances have not been reallocated to payables
asthey legally offset positive cash balances elsewhere in Jones Lang
LaSalle Incorporated. In certain cases, we have calculated taxes on
the basis of a group position that includes both Guarantor and Non-
Guarantor Subsidiaries. In such cases, the taxes have been allocated
to individual legal entities on the basis of that legal entity's pre-
tax income. For periodic reporting purposes, the adjustment for the
global effective tax rate is made in the parent organization. In
addition to the reclassifications listed in Note 1, in the first
quarter of 2003, $17 million of goodwill related to the merger with
Jones Lang Wootton was reclassified from the guarantor subsidiary
Jones Lang LaSalle, Ltd. to various non-guarantor subsidiaries. We
have reclassified the December 31, 2002 comparative balance sheet to
reflect this movement.

JONES LANG LASALLE INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

CONDENSED CONSOLIDATING BALANCE SHEET

As of September 30, 2003
($ in thousands)

CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2002
($ in thousands)

JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Three Months Ended September 30, 2003
($ in thousands)

JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Nine Months Ended September 30, 2003
($ in thousands)

JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS

For the Three Months Ended September 30, 2002
($ in thousands)

JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS

For the Nine Months Ended September 30, 2002
($ in thousands)

JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 2003
($ in thousands)

JONES LANG LASALLE INCORPORATED
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2002
($ in thousands)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto for the three and nine
months ended September 30, 2003, included herein, and Jones Lang LaSalle's
audited consolidated financial statements and notes thereto for the fiscal
year ended December 31, 2002, which have been filed with the United States
of America Securities and Exchange Commission as part of our 2002 Annual
Report on Form 10-K and are also available on our website (www.joneslang
lasalle.com).

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

An understanding of our accounting policies is necessary for a
complete analysis of our results, financial position, liquidity and trends.
The preparation of our financial statements requires management to make
certain critical accounting estimates that impact the stated amount of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amount of revenues
and expenses during the reporting periods. These accounting estimates are
based on management's judgment and are considered to be critical because of
their significance to the financial statements and the possibility that
future events may differ from current judgments, or that the use of
different assumptions could result in materially different estimates. We
review these estimates on a periodic basis to ensure reasonableness.
However, the amounts we may ultimately realize could differ from such
estimated amounts.

REVENUE RECOGNITION - We recognize advisory and management fees in the
period in which we perform the service. Transaction commissions are
recognized as income when we provide the service unless future contin-
gencies exist. If future contingencies exist, we defer recognition of this
revenue until the respective contingencies have been satisfied.
Development management fees are generally recognized as billed, which we
believe approximates the percentage of completion method of accounting.
Incentive fees are generally tied to some form of contractual milestone and
are recorded in accordance with the specific terms of the underlying
compensation agreement. The Securities and Exchange Commission's Staff
Accounting Bulletin No. 101, "Revenue Recognition" ("SAB 101"), provides
guidance on the application of accounting principles generally accepted in
the United States of America to selected revenue recognition issues. We
believe that our revenue recognition policy is appropriate and in
accordance with accounting principles generally accepted in the United
States of America and SAB 101.

In certain of our businesses, primarily those involving management
services, our clients reimburse us for expenses we incur on their behalf.
We base the treatment of reimbursable expenses for financial reporting
purposes upon the fee structure of the underlying contract. A contract
that provides a fixed fee/billing, fully inclusive of all personnel or
other recoverable expenses that we incur, and not separately scheduled as
such, is reported on a gross basis. This means that our reported revenues
include the full billing to our client and our reported expenses include
all costs associated with the client. When the fee structure is comprised
of at least two distinct elements, namely (i) the fixed management fee and
(ii) a separate component which allows for scheduled reimbursable personnel
or other expenses to be billed directly to the client, we will account for
the contract on a net basis. This means we include the fixed management
fee in reported revenues and we net the reimbursement against expenses. We
base this characterization on the following factors which define us as an
agent rather than a principal: (i) the property owner generally has the
authority over hiring practices and the approval of payroll prior to
payment by Jones Lang LaSalle; (ii) Jones Lang LaSalle is the primary
obligor with respect to the property personnel, but bears little or no
credit risk under the terms of the management contract; (iii) reimbursement
to Jones Lang LaSalle is generally completed simultaneously with payment of

payroll or soon thereafter; and (iv) Jones Lang LaSalle generally earns no
margin in the arrangement, obtaining reimbursement only for actual costs
incurred. The majority of our service contracts utilize the latter
structure and are accounted for on a net basis. We have always presented
the above reimbursable contract costs on a net basis in accordance with
accounting principles generally accepted in the United States of America.
Such costs aggregated $94.5 million and $97.6 million for the three months
ended September 30, 2003 and 2002, respectively, and $285.4 million and
$283.3 million for the nine months ended September 30, 2003 and 2002,
respectively. This treatment has no impact on operating income (loss), net
income (loss) or cash flows.

Beginning in December 2002, pursuant to the Financial Accounting and
Standards Board's ("FASB") Emerging Issues Task Force ("EITF") No. 01-14,
"Income Statement Characterization of Reimbursements Received for 'Out-of-
Pocket' Expenses Incurred", we have reclassified reimbursements received
for out-of-pocket expenses to revenues in the income statement, as opposed
to being shown as a reduction of expenses. Out-of-pocket expenses include,
but are not limited to, expenses related to airfare, mileage, hotel stays,
out-of-town meals, photocopies and telecommunications and facsimile
charges. These out-of-pocket expenses amounted to $1.3 million and $1.1
million for the three months ended September 30, 2003 and 2002,
respectively, and $3.9 million and $3.0 million for the nine months ended
September 30, 2003 and 2002, respectively. This reclassification has no
impact on reported operating income (loss), net income (loss) or cash
flows.

Beginning in December 2002, we reclassified as revenue our recovery of
indirect costs related to our management services business, as opposed to
being classified as a reduction of expenses in the income statement. This
recovery of indirect costs amounted to $10.7 million and $8.3 million for
the three months ended September 30, 2003 and 2002, respectively, and $27.6
million and $22.8 million for the nine months ended September 30, 2003 and
2002, respectively. This reclassification has no impact on reported
operating income (loss), net income (loss) or cash flows.

ACCOUNTS RECEIVABLE - We estimate the allowance necessary to provide
for uncollectible accounts receivable. This estimate includes specific
accounts for which payment has become unlikely. We also base this estimate
on historical experience, combined with a careful review of current
developments, with a strong focus on credit quality. The process by which
we calculate the allowance begins in the individual business units where
specific problem accounts are identified and reserved as part of an overall
reserve that is formulaic and driven by the age profile of the receivables.
These reserves are then reviewed on a quarterly basis by regional and
global management to ensure that they are appropriate. As part of this
review, we develop a range of potential reserves on a consistent formulaic
basis. Over the last two years we have placed considerable focus on working
capital management and in particular, collecting our receivables on a more
timely basis. As we are successful in doing this, the range of potential
reserves is narrowing. We would normally expect that the allowance would
fall within this range. The table below sets out certain information
regarding our accounts receivable, allowance for uncollectible accounts
receivable, range of possible allowance and the bad debt expense we
incurred for the nine months ended September 30, 2003 and 2002 ($ in
millions).

Allowance
Accounts for Year-
Receivable Uncollec- to-Date
Gross More Than tible Bad
Accounts 90 Days Accounts Maximum Minimum Debt
Receivable Past Due Receivable Allowance Allowance Expense
-------------------- ---------- --------- --------- -------
Septem-
ber 30,
2003 . . $ 188.4 8.5 5.6 7.5 3.7 1.8

Septem-
ber 30,
2002 . . $ 181.8 8.8 7.6 7.9 3.9 1.2

PERIODIC ACCOUNTING FOR INCENTIVE COMPENSATION - An important part of
our overall compensation package is incentive compensation, which we
typically pay out to employees in the first quarter of the year after it is
earned. In our interim financial statements we accrue for incentive
compensation based on the percentage of revenue and compensation costs
recorded to date relative to forecasted revenue and compensation costs for
the full year, as substantially all incentive compensation pools are based
upon revenues and profits. The impact of this incentive compensation
accrual methodology is that we accrue very little incentive compensation in
the first six months of the year, with the majority of our incentive
compensation accrued in the second half of the year, particularly in the
fourth quarter. We adjust the incentive compensation accrual in those
unusual cases where earned incentive compensation has been paid to
employees. In addition, we exclude from the standard accrual methodology
incentive compensation pools that are not subject to the normal performance
criteria. These pools are accrued for on a straight-line basis. We
continue to refine our global incentive compensation program to provide our
employees an increased "line of sight" between their performance and
incentive compensation. As a result of this, we are currently evaluating
the methodology used in recognizing periodic incentive compensation. Any
change would become effective January 1, 2004 and is not expected to impact
annual incentive compensation expense but may impact the quarterly
recognition pattern.

We have a stock ownership program for certain of our senior employees
pursuant to which they receive a portion of their annual incentive
compensation in the form of restricted stock units of our common stock.
These restricted shares vest in two parts: 50% at 18 months and 50% at 30
months from the date of grant (January of the following year to which the
restricted stock units relate). The related compensation cost is amortized
to expense over the service period. The service period consists of the 12
months of the year to which payment of the restricted stock units relate,
plus the periods over which the shares vest. Given that individual
incentive compensation awards are not finalized until after year-end, we
must estimate the portion of the overall incentive compensation pool that
will qualify for this program. This estimation factors in the performance
of the Company and individual business units, together with the target
bonuses for qualified individuals.

We determine, announce and pay incentive compensation in the first
quarter of the year following that to which the incentive compensation
relates, at which point we true-up the estimated stock ownership program
deferral and related amortization. We believe our methodology in estimating
this deferral produces satisfactory results. The table below sets forth
the deferral estimated at year-end and the adjustment made in the first
quarter of the following year to true-up the deferral and related
amortization ($ in millions):

December 31, December 31,
2002 2001
------------ ------------
Deferral net of related
amortization expense. . . . . . . . . . $5.0 2.9

Increase (decrease) to deferred
compensation in the first quarter
of the following year . . . . . . . . . (0.4) 0.2

Previously we accounted for the current year impact of this program in
the fourth quarter (namely, the enhancement, the deferral and the related
amortization) because of the uncertainty around the terms and conditions of
the stock ownership program and because the majority of our incentive
compensation is accrued in the fourth quarter. Due to the maturity of the
program and the commitment to its terms and conditions by the Company and
the Compensation Committee of the Board of Directors, we have decided to
begin accounting for the earned portion of this compensation program on a
quarterly basis, starting in the third quarter of 2003. We recognize the
benefit of the stock ownership program in a manner consistent with the
accrual of the underlying incentive compensation expense. As such, we have
recorded a credit of $2.1 million to the income statement in the third
quarter, reflecting the earned portion of the stock ownership program for
the first nine months of 2003.

The table below sets out the amortization expense related to the stock
ownership program for the three and nine months ended September 30, 2003
and 2002 (in thousands):

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
2003 2002 2003 2002
------ ------ ------ ------
Current compensation
expense amortization for
prior year programs . . $1,691 1,319 4,944 3,984

Current deferral net of
related amortization. . ($2,074) -- (2,074) --

ASSET IMPAIRMENT - We apply FASB Statement No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), to recognize
and measure impairment of long-lived assets. We review long-lived assets,
including investments in real estate ventures, intangibles and property and
equipment for impairment on an annual basis, or whenever events or
circumstances indicate that the carrying value of an asset group may not be
recoverable. The review of recoverability is based on an estimate of the
future undiscounted cash flows expected to be generated by the asset group.

If impairment exists due to the inability to recover the carrying value of
an asset group, we record an impairment loss to the extent that the
carrying value exceeds estimated fair value.

We invest in certain real estate ventures that own and operate
commercial real estate. These investments include non-controlling ownership
interests generally ranging from less than 1% to 47.85% of the respective
ventures. We generally account for these interests under the equity method
of accounting in the accompanying Consolidated Financial Statements due to
the nature of the non-controlling ownership. We apply the provisions of
SFAS 144 when evaluating these investments for impairment, including an
impairment evaluation of the individual assets held by the investment
funds. We have recorded impairment charges in equity earnings of $2.6
million and $3.7 million for the three and nine months ended September 30,
2003, respectively, representing our equity share of the impairment charge
against individual assets held by these funds. Impairment charges recorded
for the three and nine months ended September 30, 2002 related to the
exiting of our Land Investment and Development groups and were recorded to
non-recurring expense. For a further discussion of these non-recurring
charges see Note 3 of Notes to Consolidated Financial Statements.

We apply FASB Statement No. 142, "Goodwill and Other Intangible
Assets" ("SFAS 142"), when we account for goodwill and other intangible
assets. SFAS 142 requires an annual impairment evaluation of intangibles
with indefinite useful lives. To accomplish this annual evaluation, we
determine the carrying value of each reporting unit by assigning assets and
liabilities, including the existing goodwill and intangible assets, to
those reporting units as of the date of evaluation. For purposes of
evaluating SFAS 142, we define reporting units as Investment Management,
Americas OOS, Australia OOS, Asia OOS, and by country groups in Europe OOS.
We determine the fair value of each reporting unit on the basis of a
discounted cash flow methodology and compare it to the reporting unit's
carrying value. The result of the 2002 evaluation was that the fair value
of each reporting unit exceeded its carrying amount, and therefore no
impairment loss was recognized. The result of the 2003 evaluation
performed in the third quarter was that the fair value of each reporting
unit exceeded its carrying amount and therefore no impairment loss was
recognized.

Although the Land Investment Group was closed down in 2001, we have
retained certain investments originated by this group. Included in
investments in and loans to real estate ventures is the book value of the
four remaining Land Investment Group investments of $2.1 million, net of
impairment charges of $4.4 million recorded in prior years. We continue to
monitor this portfolio very carefully and have not recorded an impairment
charge in the three or nine months ended September 30, 2003. In the third
quarter of 2003 we sold one of the remaining assets in the Land Investment
portfolio for no gain or loss. We have provided guarantees associated with
this investment portfolio of $1.2 million, which we currently do not expect
to fund. We expect to have liquidated the Land Investment Group
investments by the end of 2006.

Although we sold the Development Group in 2001, we have retained
certain investments originated by this group. Included in investments in
and loans to real estate ventures is the book value of the one remaining
Development Group investment of $224,000. We continue to monitor this
investment very carefully and have not recorded an impairment charge in the
three or nine months ended September 30, 2003. We expect to have
liquidated this investment by the middle of 2004.

INCOME TAXES - We account for income taxes under the asset and
liability method. Because of the global and cross border nature of our
business, our corporate tax position is complex. We generally provide for
taxes in each tax jurisdiction in which we operate based on local tax
regulations and rules. Such taxes are provided for on net earnings and
include the provision for taxes on substantively all differences between
accounting principles generally accepted in the United States of America
and tax accounting, excluding certain non-deductible items and permanent
differences.

We provide for the effects of income taxes on interim financial
statements based on our estimate of the effective tax rate for the full
year. We continuously seek to develop and implement potential strategies
and/or actions that would reduce our overall effective tax rate. Based on
our 2003 forecasted results and strategies implemented in the third
quarter, we have lowered our estimated effective tax rate from 34% to 32%
for 2003. While there can be no assurance that we will achieve an effective
tax rate of 32% in 2003, we believe that this is an achievable tax rate due
to the impact of tax planning, particularly planning to (i) reduce the
impact of losses in jurisdictions where we cannot recognize tax benefits,
(ii) reduce the incidence of double taxation of earnings and other tax
inefficiencies and (iii) reduce the effective rate of taxation on
international earnings. The estimated effective tax rate on recurring
operations for the nine months ended September 30, 2002 was 36%. Due to
the impact of tax planning we ultimately achieved an effective tax rate of
34% on recurring operations for the full year of 2002. The estimated tax
rate of 36% applied in the third quarter of 2002 excludes a tax benefit of
$1.8 million related to certain costs incurred in restructuring actions
taken in 2001. These costs were not originally expected to be deductible
for tax purposes. However, as a result of actions undertaken in the third
quarter of 2002, these costs were considered deductible.

Our global effective tax rate is also sensitive to changes in the mix
of our geographic profitability as local statutory tax rates range from 10%
to 42% in the countries in which we have significant operations. As we
continuously seek to develop and implement strategies and/or actions that
would reduce our overall effective tax rate, we reflect the benefit from
tax planning actions when we believe it is probable that they will be
successful, which usually requires that certain actions have been
initiated.

ACCOUNTING FOR SELF-INSURANCE PROGRAMS - In our Americas business, in
common with many other American companies, we have chosen to retain certain
risks regarding health insurance and workers' compensation rather than
purchase third-party insurance. Estimating our exposure to such risks
involves subjective judgments about future developments. We engage the
services of an independent actuary on an annual basis to assist us in
quantifying our potential exposure.

.. HEALTH INSURANCE - Beginning in January 2002, we chose to self-insure
our health benefits for all employees based in the United States of
America, although we did purchase stop loss coverage to limit our
exposure. We engage an actuary who specializes in health insurance to
estimate our likely full-year cost at the beginning of the year and
expense this cost on a straight-line basis throughout the year. In
the fourth quarter, we employ the same actuary to estimate the
required reserve for unpaid health costs for the current year that we
would need at year-end. With regard to the year-end reserve, the
actuary provides us with a point estimate, which we accrue;
additionally we accrue a provision for adverse deviation. Given the
nature of medical claims, it may take up to 24 months for claims to
be processed and recorded. During the third quarter, our external
benefit administrator completed its analysis of the development of
the 2002 reserve estimate from year-end. As a result of this
analysis, we determined that we were over-reserved for 2002 exposures
by $780,000 and we credited this to expense in the third quarter of
2003 as a change in estimate. The reserve balance for the 2002
program, after this adjustment, is $383,000 at September 30, 2003.
The reserve balance for the 2003 program at September 30, 2003 is
$5.2 million. The table below sets out certain information related
to the cost of this program for the three and nine months ended
September 30, 2003 and 2002 ($ in millions):

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
Expense to Company. . . $ 3.2 3.1 9.4 9.2
Employee contributions. 0.8 0.6 2.2 1.8
Adjustment to prior
year reserve. . . . . (0.8) -- (0.8) --
-------- -------- -------- --------
Total program cost. . . $ 3.2 3.7 10.8 11.0
======== ======== ======== ========

.. WORKERS' COMPENSATION INSURANCE - We have been self-insured for
workers' compensation insurance for a number of years. We have stop
loss insurance in place which limits our exposure in certain cases.
On a periodic basis we accrue using the various state rates based on
job classifications, engaging on an annual basis in the third
quarter, an independent actuary who specializes in workers'
compensation to estimate our exposure based on actual experience. In
prior years, we have recorded an adjustment to revenues for the
difference between the actuarial estimate and our reserve after the
receipt of the actuary's report (usually in the third quarter).
Given our considerable experience in this area, in the first quarter
of 2003 we determined that we would accrue for the estimated
adjustment to revenues on a periodic basis. The credit taken to
revenue through the three and nine months ended September 30, 2003
was $1.6 million and $2.5 million, respectively. The credit recorded
in the third quarter of 2003 reflects the adjustment to bring our
reserve in line with the actuarial estimate. The credit to revenue in
2002 to bring our reserve in line with the actuarial estimate was
$2.7 million and was fully recorded in the third quarter of 2002.

.. CAPTIVE INSURANCE COMPANY - In order to better manage our global
insurance program, we use a captive insurance company to provide
professional indemnity insurance coverage on a "claims made" basis to
certain of our international operations in addition to our
traditional insurance coverage. The maximum risk retained by this
captive insurance company in any one year is pound sterling 1 million
(approximately $1.7 million). Given the nature of these types of
claims, it may take several years for there to be a resolution of the
underlying claims and to finalize the expense. We are required to
estimate the ultimate cost of these claims. This estimate includes
specific claim reserves that are developed on the basis of a review
of the circumstances of the individual claim. Given that the
timeframe for these reviews may be lengthy, we also provide a reserve
against the current year exposures on the basis of our historic loss
ratio. The table below provides the reserve balance, which can relate
to multiple years, that we have established as of ($ in millions):

September 30, 2003 $2.4
September 30, 2002 $2.6

COMMITMENTS AND CONTINGENCIES - We are subject to various claims and
contingencies related to lawsuits, taxes and environmental matters as well
as commitments under contractual obligations. We recognize the liability
associated with commitments and contingencies when a loss is probable and
estimable. Our contractual obligations relate to the provision of services
by us in the normal course of our business. Please see Part II "Other
Information" Item 1., "Legal Proceedings" for a discussion of certain legal
proceedings.

RESULTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2002

ITEMS AFFECTING COMPARABILITY

LASALLE INVESTMENT MANAGEMENT REVENUES

Our Investment Management business is in part compensated through the
receipt of incentive fees when investment performance exceeds agreed
benchmark levels. Depending upon performance, these fees can be significant
and will generally be recognized when agreed events or milestones are
reached. The timing of recognition may impact comparability between
quarters, in any one year, or compared to a prior year. The comparability
of incentive fee revenue can be seen in Note 2 to Notes to Consolidated
Financial Statements and is discussed further in Segment Operating Results
included herein.

ACQUISITION

In December 2002, Jones Lang LaSalle acquired the 45% minority
interest in the joint venture company Jones Lang LaSalle Asset Management
Services, which since 2000 has exclusively provided asset management
services for all Skandia Life properties in Sweden. The purchase price of
the minority interest was approximately $1 million, a discount to the fair
value of the net assets acquired. Because the acquisition occurred in
December of 2002, this joint venture was accounted for as a minority
interest in the first nine months of 2002. The nine months ended
September 30, 2002 included $1.3 million of minority interest earnings.
The nine months ended September 30, 2003 included no minority interest
earnings or losses as this venture is now fully consolidated in our
results.

FOREIGN CURRENCY

We operate in a variety of currencies in 34 countries, but report our
results in U.S. dollars. This means that our reported results may be
positively or negatively impacted by the volatility of currencies against
the U.S. dollar. This volatility makes it more difficult to perform
period-to-period comparisons of the reported results of operations. As an
example, the euro, the pound sterling and the Australian dollar, each a
currency used in a significant portion of our operations, gradually
strengthened over the last nine months of 2002 and first half of 2003, and
remained strong in the three months ended September 30, 2003. This means
that for those businesses located in jurisdictions that utilize these
currencies, the reported U.S. dollar revenues and expenses in the three and
nine months ended September 30, 2003 demonstrate an apparent growth rate
that is not consistent with the real underlying growth rate in the local
operations. In order to provide more meaningful period-to-period
comparisons of the reported results of operations in our discussion and
analysis of financial condition and results of operations, we have provided
information about the impact of foreign currencies where we believe that it
is necessary. In addition, we set out below guidance as to the key
currencies in which the Company does business and their significance to
reported revenues and operating results. The operating results sourced in
pound sterling and U.S. dollars understates the profitability of the
businesses in the United Kingdom and America because they include the
locally incurred expenses of our global offices in London and Chicago,
respectively, as well as the European regional office in London. The
revenues and operating income of the global investment management business
are allocated to their underlying currency, which means that this analysis
may not be consistent with the performance of the geographic OOS segments.
In particular, as incentive fees are earned by this business, there may be
significant shifts in the geographic mix of revenues and operating income.
The following table sets forth revenues derived from our most significant
currencies ($ in millions, except for exchange rates).

Austra-
Pound lian US
Sterling Euro Dollar Dollar Other Total
-------- ------- ------- ------- ------- -------
REVENUES
Q1, 2003 . . $ 37.7 37.2 13.7 70.0 29.3 187.9
Q2, 2003 . . $ 43.9 36.5 18.7 75.9 38.6 213.6
Q3, 2003 . . $ 50.7 36.7 19.6 84.0 27.1 218.1
------- ------- ------- ------- ------- -------
$132.3 110.4 52.0 229.9 95.0 619.6
======= ======= ======= ======= ======= =======

Q1, 2002 . . $ 34.9 32.7 12.4 63.3 26.6 169.9
Q2, 2002 . . $ 47.1 32.2 16.5 70.2 33.8 199.8
Q3, 2002 . . $ 43.6 35.7 17.1 89.7 30.4 216.5
------- ------- ------- ------- ------- -------
$ 125.6 100.6 46.0 223.2 90.8 586.2
======= ======= ======= ======= ======= =======

OPERATING
INCOME
(LOSS)
Q1, 2003 . . $ (2.6) 2.9 (1.4) (2.4) (3.4) (6.9)
Q2, 2003 . . $ (0.4) 0.1 (4.1) 1.9 5.3 2.8
Q3, 2003 . . $ 4.8 1.9 0.7 7.4 1.2 16.0
------- ------- ------- ------- ------- -------
$ 1.8 4.9 (4.8) 6.9 3.1 11.9
======= ======= ======= ======= ======= =======

Q1, 2002 . . $ (2.5) 3.8 (2.5) (1.0) (1.9) (4.1)
Q2, 2002 . . $ 7.2 (0.2) (0.3) 2.9 2.7 12.3
Q3, 2002 . . $ 1.8 2.6 0.4 13.8 (0.8) 17.8
------- ------- ------- ------- ------- -------
$ 6.5 6.2 (2.4) 15.7 0.0 26.0
======= ======= ======= ======= ======= =======

AVERAGE
EXCHANGE
RATES
Q1, 2003 . . 1.600 1.075 0.595 N/A N/A N/A
Q2, 2003 . . 1.624 1.140 0.644 N/A N/A N/A
Q3, 2003 . . 1.617 1.130 0.656 N/A N/A N/A

Q1, 2002 . . 1.426 0.877 0.520 N/A N/A N/A
Q2, 2002 . . 1.464 0.924 0.553 N/A N/A N/A
Q3, 2002 . . 1.551 0.985 0.548 N/A N/A N/A

REVENUE

Total revenue increased $1.6 million, or 0.7%, to $218.1 million for
the three months ended September 30, 2003 from $216.5 million for the three
months ended September 30, 2002. For the nine months ended September 30,
2003, revenue increased $33.2 million, or 5.7%, to $619.5 million from
$586.3 million for the same period in 2002. These increases reflect the
general strengthening of our key currencies against the U.S. dollar.
Excluding the impact of movements in foreign currency exchange rates,
reported U.S. dollar revenues decreased 3.9% and 1.5% for the three and
nine months ended September 30, 2003, respectively, when compared to the
same periods of 2002. This was a result of the timing of incentive fees in
our Investment Management business as 2002 included a significant incentive
fee where there was no similar sized transaction in 2003. The decrease in
revenue year-to-date reflects this decrease in Investment Management
together with strength in the Americas and Asia Pacific, offset by
continued revenue weakness in Europe.

OPERATING EXPENSES

Total operating expenses increased $3.4 million, or 1.7%, to $202.1
million for the three months ended September 30, 2003 from $198.7 million
for the three months ended September 30, 2002. For the nine months ended
September 30, 2003, total operating expenses increased $47.4 million, or
8.5%, to $607.7 million from $560.3 million for the same period in 2002.
Excluding the impact of the strengthening of our key currencies against the
U.S. dollar, operating expenses decreased 3.2% for the three months ended
September 30, 2003 and increased 1.4% for the nine months ended
September 30, 2003, when compared to the same periods of 2002.

Compensation and benefits expense decreased $168,000 and increased
$32.9 million for the three and nine months ended September 30, 2003,
respectively, when compared to the same periods of 2002. The strengthening
of our key foreign currencies have increased the reported U.S. dollar
compensation and benefits expense by $7.0 million and $26.3 million for the
three and nine months ended September 30, 2003, respectively. The balance
of the increase in compensation and benefits expense for the nine months
ended September 30, 2003 is primarily attributable to an increase in
salaries and related payroll and social taxes as we implement a strategic
growth plan in our Asia Pacific region, and also an increase in staffing to
support new fund activity and products in our Investment Management
business. Offsetting the impact of foreign currency exchange rates on the
reported U.S. dollar compensation and benefits expense for the three months
ended September 30, 2003 is the timing of incentive compensation
recognition. See the Periodic Accounting for Incentive Compensation
section of Critical Accounting Policies and Estimates, included herein, for
a further discussion of the timing of incentive compensation recognition.

Operating, administrative and other expenses increased $5.8 million,
or 11.3%, to $57.2 million for the three months ended September 30, 2003
from $51.4 million for the three months ended September 30, 2002. For the
nine months ended September 30, 2003, operating, administrative and other
expenses increased $13.3 million, or 8.5%, to $169.8 million from $156.5
million for the same period in 2002. The impact of movements in foreign
currency exchange rates is attributable for $2.5 million and $11.0 million
of the increase in U.S. dollar reported operating, administrative and other
expense for the three and nine months ended September 30, 2003,
respectively. The three and nine months ended September 30, 2002 included
a credit of $2 million relating to the reversal of a specific bad debt
reserve originally established in 1995. In addition, the increase in
expenses for the first nine months of 2003 is impacted by an increase in
insurance cost of $2.5 million reflecting the market tightening in
insurance cost and availability. Excluding these two items and the impact
of movements in foreign currency exchange rates, operating, administrative
and other expenses are slightly higher for the three months and have
declined more than 1% for the nine months ended September 30, 2003, when
compared to the same periods of 2002.

The non-recurring and restructuring expense for the three and nine
months ended September 30, 2003 include credits of $1.5 million and $2.3
million, respectively, related to our 2002 global restructuring program as
actual costs incurred have differed from our original estimates. This
credit primarily relates to our Americas OOS business where a combination
of new client wins and expanded assignments for existing clients has
resulted in a permanent reevaluation of planned headcount reductions. The
most significant component of non-recurring and restructuring expense for
the nine months ended September 30, 2003 is a charge of $5.0 million
related to the abandonment of a property management accounting system that
was in the process of being implemented in Australia. We completed a
feasibility analysis of the system in the second quarter of 2003 and
concluded that the potential benefits from successfully correcting
deficiencies in the system that would allow it to be implemented throughout
Australia were not justified by the costs that would have to be incurred to
do so. A further discussion of non-recurring and restructuring charges can
be found in Note 3 to Notes to Consolidated Financial Statements.

OPERATING INCOME

We reported operating income of $16.0 million for the three months
ended September 30, 2003, as compared to $17.8 million for the three months
ended September 30, 2002. For the nine months ended September 30, 2003, we
reported operating income of $11.9 million, as compared to an operating
income of $25.9 million for the nine months ended September 30, 2002.

INTEREST

Reported U.S. dollar interest expense, net of interest income,
remained flat at $4.7 million for the quarter. For the nine months ended
September 30, 2003, interest expense, net of interest income, increased
$759,000, to $13.7 million, when compared to the same period of 2002.
Reported U.S. dollar interest expense was negatively impacted by the
strengthening euro which increased the interest expense on the Euro Notes
by approximately $540,000 and $2.1 million for the three and nine months
ended September 30, 2003, respectively, when compared to the same periods
of 2002. In addition, as a result of the early renewal and reduction of our
credit facility, we accelerated the expensing of approximately $150,000 of
capitalized debt issuance costs in the second quarter of 2003.

PROVISION/(BENEFIT) FOR INCOME TAXES

For the three and nine months ended September 30, 2003 we recorded an
income tax provision of $3.9 million and a benefit of $590,000,
respectively. For the three and nine months ended September 30, 2002 we
recorded a provision of $2.9 million. Our estimated effective tax rate for
the first nine months of 2003 was 32%, as compared to 36% for the first
nine months of 2002. The estimated tax rate of 36% applied in the third
quarter of 2002 excludes a tax benefit of $1.8 million related to certain
costs incurred in restructuring actions taken in 2001. These costs were not
originally expected to be deductible for tax purposes. However, as a result
of actions undertaken in the third quarter of 2002, these costs were
considered deductible. See the Income Tax Provision section of Note 1 to
Notes to Consolidated Financial Statements and the Summary of Critical
Accounting Policies and Estimates included herein for a further discussion
of our estimated effective tax rate.

NET INCOME/(LOSS)

We reported net income of $7.4 million for the three months ended
September 30, 2003, as compared to net income of $10.2 million for the
three months ended September 30, 2002. For the nine months ended
September 30, 2003, we reported a net loss of $1.3 million, as compared to
net income before cumulative effect of a change in accounting principle of
$8.8 million for the same period of 2002. Including the cumulative effect
of a change in accounting principle (a net benefit of $846,000) related to
the adoption of SFAS 142 in 2002, which is discussed in detail in Note 4 to
Notes to Consolidated Financial Statements, our net income for the nine
months ended September 30, 2002 was $9.6 million.

SEGMENT OPERATING RESULTS

See Note 2 to Notes to Consolidated Financial Statements for a
discussion of our segment reporting. Our measure of segment operating
results excludes non-recurring and restructuring charges. We have
determined that it is not meaningful to investors to allocate these non-
recurring and restructuring charges to our segments. In addition, the Chief
Operating Decision Maker of Jones Lang LaSalle (defined collectively as our
Executive Committee) measures the segment results without these charges
allocated and performance for incentive compensation purposes is assessed
before the impact of these charges. As such, these costs are not included
in the discussions below. See Note 3 to Notes to Consolidated Financial
Statements for a detailed discussion of the non-recurring and restructuring
charges.

We have reclassified certain prior year amounts to conform with the
current presentation. A summary of these reclassifications can be found in
Note 1 to Notes to Consolidated Financial Statements.

OWNER AND OCCUPIER SERVICES

AMERICAS

Revenue for the Americas region decreased $3.0 million, or 4.2% to
$68.3 million for the three months ended September 30, 2003 from $71.3
million for the three months ended September 30, 2002. For the nine months
ended September 30, 2003, revenue increased $5.9 million, or 3.1%, to
$194.5 million from $188.6 million for the same period of 2002. Continued
positive performance in the Project and Development Services unit was
offset by declines in; (i) our Capital Markets unit in the U.S., as certain
transactions have slipped to the fourth quarter, (ii) our Capital Markets
unit in Mexico, and (iii) our New York operations where difficult economic
conditions continued to impact leasing activity.

Operating expenses for the Americas region decreased $4.5 million, or
6.9%, to $60.5 million for the three months ended September 30, 2003, as
compared to $65.0 million for the three months ended September 30, 2002.
For the nine months ended September 30, 2003, operating expenses increased
$4.7 million, or 2.6%, to $185.5 million from $180.8 million for the same
period of 2002. The increase in operating expenses year-to-date is
primarily due to the timing of incentive compensation recognition. In
addition, in 2003 there is a greater dollar value of incentive compensation
that is not subject to normal performance criteria and is therefore
accounted for on a straight-line basis. The decrease in operating expense
in the third quarter is primarily due to the timing of incentive
compensation recognition. See the Periodic Accounting for Incentive
Compensation section of Critical Accounting Policies and Estimates,
included herein, for a further discussion of the timing of incentive
compensation recognition. Operating, administrative and other expenses
remained flat year-over-year as there was continued focus on cost control.

EUROPE

Revenues for the Europe region increased $7.2 million, or 9.6%, to
$81.9 million for the three months ended September 30, 2003 from $74.7
million for the three months ended September 30, 2002. For the nine months
ended September 30, 2003, revenues increased $16.2 million, or 7.4%, to
$235.2 million from $219.0 million for the same period of 2002. This
increase in reported U.S. dollar revenues reflects the general
strengthening of the euro and pound sterling against the U.S. dollar when
compared to last year. Excluding the impact of movements in foreign
currency exchange rates, reported U.S. dollar revenues increased 0.2% and
decreased 6.2% for the three and nine months ended September 30, 2003,
respectively, when compared to the same periods of 2002. The third quarter
of 2002 was when we first began to see the full impact of the difficult
economic conditions on our revenues in key European markets. Partially
contributing to the year-over-year decrease was a large incentive fee
related to our Skandia joint venture recorded in the second quarter of 2002
where there was no similar incentive fee in 2003. A positive performance
in England for the third quarter of 2003 reflected the impact of certain
Capital Markets transactions which had slipped from the second quarter.
This positive performance was offset by continued weakness in Germany and
certain cross-border capital markets transactions slipping into the fourth
quarter. Continued strength in Italy, Spain, Portugal and Central Europe
for the first nine months of 2003 was offset by weakness in the core
European businesses of Germany, France and Benelux.

Operating expenses for the Europe region increased $5.5 million, or
7.5%, to $79.3 million for the three months ended September 30, 2003 from
$73.8 million for the three months ended September 30, 2002. For the nine
months ended September 30, 2003, operating expenses increased $19.5
million, or 9.2%, to $231.7 million from $212.2 million for the same period
of 2002. Excluding the impact of movements in foreign currency exchange
rates, operating expenses decreased 1.5% for the three months ended
September 30, 2003, when compared to the same period of 2002, reflecting
our continued focus on cost controls. Excluding the impact of foreign
currency exchange rates, operating expenses decreased 3.5% for the nine
months ended September 30, 2003, when compared to the same period in 2002,
reflective of the strong cost control focus and the impact of weaker
performance on the timing of incentive compensation recognition. See the
Periodic Accounting for Incentive Compensation section of Critical
Accounting Policies and Estimates, included herein, for a further
discussion of the timing of incentive compensation recognition.

ASIA PACIFIC

Revenue for the Asia Pacific region increased $6.4 million, or 17.9%,
to $42.1 million for the three months ended September 30, 2003 from $35.7
million for the three months ended September 30, 2002. For the nine months
ended September 30, 2003, revenues increased $13.0 million, or 12.6%, to
$115.9 million from $102.9 million for the same period of 2002. Excluding
the impact of movements in foreign currency exchange rates, reported U.S.
dollar revenues increased 9.8% and 5.3% for the three and nine months ended
September 30, 2003, respectively, when compared to the same periods of
2002. The increase in revenue was driven by strong performance in our
strategic growth markets of Japan, Korea, India and China. These increases
were achieved despite the SARS epidemic, which caused a slowdown in
activity across much of the region, but particularly in Mainland China,
Singapore, Taiwan and Hong Kong.

Operating expense for the Asia Pacific region increased $7.0 million,
or 19.7%, to $42.6 million for the three months ended September 30, 2003
from $35.6 million for the three months ended September 30, 2002. For the
nine months ended September 30, 2003, operating expenses increased $16.7
million, or 16.0%, to $121.3 million from $104.6 million for the same
period of 2002. Excluding the impact of movements in foreign currency
exchange rates, operating expenses increased 11.5% and 8.1% for the three
and nine months ended September 30, 2003, respectively, when compared to
the same periods of 2002. The increase in expenses is primarily
attributable to compensation and benefits, together with an investment in
training and marketing expense as this region implements its strategic
growth plan with a strong focus on the markets of North Asia and India, and
work to stabilize Australia.

INVESTMENT MANAGEMENT

Investment Management revenue decreased $9.1 million, or 26.0%, to
$25.9 million for the three months ended September 30, 2003 from $35.0
million for the three months ended September 30, 2002. For the nine months
ended September 30, 2003, revenue decreased $1.9 million, or 2.5%, to $74.3
million from $76.2 million for the same period of 2002. Excluding the
impact of movements in foreign currency exchange rates, Investment
Management revenue decreased 27.8% and 6.9% for the three and nine months
ended September 30, 2003, respectively, when compared to the same periods
of 2002. The most significant driver of the third quarter revenue
reduction was that the third quarter of 2002 included a significant
incentive fee related to the performance of an investment portfolio in
which we have a co-investment. There were no similar sized transactions in
2003. In addition, we have recorded impairment charges in the equity
earnings line of the income statement of $2.6 million and $3.7 million for
the three and nine months ended September 30, 2003, respectively,
representing our equity share of the impairment charge against individual
assets held by our investment funds. While we are recognizing impairment
charges related to individual assets in these funds in the current period,
we do not recognize gains on other individual assets within these funds
until they are realized. Overall these funds are not impaired and we
believe they are performing at generally expected return levels. A further
discussion of this charge can be found in the Asset Impairment section of
Critical Accounting Policies and Estimates, included herein. This
impairment charge was offset in part by the recognition in the third
quarter of 2003 of $1.3 million relating to the fair value of certain
common share purchase rights we hold in a publicly traded real estate
investment trust. See Note 1 to Notes to Consolidated Financial Statements
for a further discussion of these common share purchase rights.

Operating expenses for Investment Management decreased $2.7 million,
or 11.3%, to $21.2 million for the three months ended September 30, 2003
from $23.9 million for the three months ended September 30, 2002. For the
nine months ended September 30, 2003, operating expenses increased $5.3
million, or 8.6%, to $66.9 million from $61.6 million for the same period
of 2002. Excluding the impact of movements in foreign currency exchange
rates, operating expenses decreased 14.5% and increased 2.5% for the three
and nine months ended September 30, 2003, respectively, when compared to
the same periods of 2002. The decrease in operating expense for the three
months ended September 30, 2003 can be primarily attributed to reduced
incentive compensation as 2002 included incentive compensation tied to
specific co-investment incentive fees. See the Periodic Accounting for
Incentive Compensation section of Critical Accounting Policies and
Estimates, included herein, for a further discussion of the timing of
incentive compensation recognition. The decrease in operating expenses was
partially offset by a $2 million credit in the third quarter of 2002
related to the reduction of a bad debt reserve originally established in
1995 for Diverse Real Estate Holdings Limited Partnership ("Diverse"). For
a more detailed discussion of Diverse See Note 14 to Notes to Consolidated
Financial Statements in our most recent Form 10-K filing for the year ended
December 31, 2002. The year-to-date increase in expense is primarily
attributable to the costs related to the introduction of additional
investments and products.

PERFORMANCE OUTLOOK

Consistent with previous guidance, the firm remains committed to
exceeding its prior year adjusted performance, excluding the one time
charge for the write-off of a property management system in Australia.
Full year guidance is to meet or exceed $1.00 per share on a GAAP basis,
which includes the $.11 charge for the referenced property management
system. The Firm continues to remain cautious as to transaction timing and
the continuing economic challenges of Europe as the majority of its profits
are achieved in the fourth quarter of the year.

CONSOLIDATED CASH FLOWS

CASH FLOWS PROVIDED BY OPERATING ACTIVITIES

During the nine months ended September 30, 2003 cash flows provided
by operating activities totaled $35.3 million, as compared to $20.2 million
during the nine months ended September 30, 2002. The cash flows provided by
operating activities for the nine months ended September 30, 2003 can be
further divided into cash generated from operations of $46.5 million
(compared to $50.3 million generated in 2002) and cash used in balance
sheet movements (primarily working capital management) of $11.1 million
(compared to a use of $30.0 million in 2002).

CASH FLOWS USED IN INVESTING ACTIVITIES

We used $7.6 million for investing activities during the nine months
ended September 30, 2003, as compared to $20.7 million used during the nine
months ended September 30, 2002. This decrease in investing activity is a
result of the timing of our co-investment cash flows, which are dependent
upon the underlying fund's investment decisions.

CASH FLOWS USED IN FINANCING ACTIVITIES

Cash flows used in financing activities were $27.8 million during the
nine months ended September 30, 2003, as compared to $612,000 for the nine
months ended September 30, 2002. The increase in cash flows used in
financing activities of $27.2 million is primarily due to our continued
focus on paying down debt.

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have financed our operations, acquisitions and co-
investment activities with internally generated funds, our common stock and
borrowings under our credit facilities. In the second quarter of 2003 we
renegotiated our unsecured revolving credit facility agreement, reducing
the facility from $275 million to $225 million and extending the term from
2004 to 2006. As of June 26, 2003, this replaced the previous $275 million
revolving credit facility agreement and will continue to be utilized for
working capital needs, investments and acquisitions. Under the terms of
the revolving credit facility, we have the authorization to borrow up to an
additional $60.0 million under local facilities. In addition, the facility
size may be increased by up to $100 million if we retire our 9% Senior Euro
Notes (the "Euro Notes"). We have outstanding euro 165 million in
aggregate principal amount of Euro Notes, all of which matures on June 15,
2007. Beginning June 15, 2004, the Euro Notes can be redeemed, at our
option, at the following redemption prices: during the twelve-month period
commencing June 15, 2004 at 104.50% of principal; during the twelve-month
period commencing June 15, 2005 at 102.25% of principal; and commencing
June 15, 2006 and thereafter at 100.00% of principal. If the market
conditions prove favorable, we intend to call the Euro Notes in June 2004
using the revolving credit facility or other sources to refinance this
debt. The Euro Notes carry a 9% interest rate while our credit facility is
priced at approximately LIBOR plus 200 basis points. If we were to call the
Euro Notes in June 2004, we would incur approximately $11 million
(dependent upon prevailing exchange rates) of expense related to the
acceleration of debt issuance cost amortization and the premiums paid to
redeem the Euro Notes.

As of September 30, 2003, there was $6.0 million outstanding under the
revolving credit facility, euro 165 million ($192.3 million) of borrowings
outstanding under the Euro Notes and short-term borrowings (including
capital lease obligations) of $10.1 million. The short-term borrowings are
primarily borrowings by subsidiaries on various interest-bearing overdraft
facilities. As of September 30, 2003, $9.7 million of the total short-term
borrowings were attributable to local overdraft facilities. The increase
in the reported US dollar book value of the Euro Notes of $19.3 million in
the first nine months of 2003 was solely as a result of the strengthening
euro. No additional Euro Notes have been issued.

Jones Lang LaSalle and certain of our subsidiaries guarantee the
revolving credit facility and the Euro Notes (the "Facilities"), as well as
local overdraft facilities of certain subsidiaries. Third-party lenders
request these guarantees to ensure payment by the Company in the event that
one of our subsidiaries fails to repay its borrowing on an overdraft
facility. The guarantees typically have one-year or two-year maturities. We
apply FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others" ("FIN 45"), to recognize and measure the provisions of
guarantees. The guarantees of the revolving credit facility, Euro Notes
and local overdraft facilities do not meet the recognition provisions, but
do meet the disclosure requirements of FIN 45. We have local overdraft
facilities totaling $42.1 million, of which $9.7 million was outstanding as
of September 30, 2003. We have provided guarantees of $28.7 million related
to the local overdraft facilities, as well as guarantees related to the
$225 million revolving credit facility and the euro 165 million Euro Notes,
which in total represent the maximum future payments that Jones Lang
LaSalle could be required to make under the guarantees provided for
subsidiaries' third-party debt.

With respect to the revolving credit facility, we must maintain
consolidated net worth of at least $300 million and a leverage ratio not to
exceed 3.0 to 1. We must also maintain a minimum interest coverage ratio of
2.5 to 1 and a minimum fixed charge coverage ratio of 1.1 to 1. As part of
the renegotiation of the revolving credit facility, the ratios for the
funded debt to EBITDA and minimum interest coverage were revised to provide
more operating flexibility under these covenants. Our covenants exclude
the impact of certain of the non-cash charges related to the non-cash
abandonment of a property management system in Australia and certain of the
charges taken in 2002 related to the Land Investment Group. We were in
compliance with all covenants as of September 30, 2003. Additionally, we
are restricted from, among other things, incurring certain levels of
indebtedness to lenders outside of the Facilities and disposing of a
significant portion of our assets. Lender approval is required for certain
levels of co-investment. The revolving credit facility bears variable rates
of interest based on market rates. We are authorized to use interest rate
swaps to convert a portion of the floating rate indebtedness to a fixed
rate, however, none were used in 2002 or in the first nine months of 2003
and none were outstanding as of September 30, 2003. The effective interest
rate on the Facilities was 8.1% for the nine months ended September 30,
2003 (versus an effective rate of 7.3% for the same period in 2002). The
increase in the effective interest rate is due to the mix of our borrowings
being more heavily weighted toward the higher coupon Euro Notes.

We believe that the revolving credit facility, together with the Euro
Notes, local borrowing facilities and cash flow generated from operations,
will provide adequate liquidity and financial flexibility to meet our needs
to fund working capital, capital expenditures, co-investment activity and
share repurchases.

We expect to continue to pursue co-investment opportunities with our
investment management clients in the Americas, Europe and Asia Pacific. Co-
investment remains important to the continued growth of Investment
Management. As of September 30, 2003, we had total investments and loans
of $66.9 million in approximately 20 separate property or fund co-
investments, with additional capital commitments of $142.5 million for
future fundings of co-investments. With respect to certain co-investment
indebtedness, we also had repayment guarantees outstanding at September 30,
2003 of $5.1 million. The $142.5 million capital commitment is a commitment
to LaSalle Investment Limited Partnership, referred to as LaSalle
Investment Company ("LIC"). We expect that LIC will draw down on our
commitment over the next five to seven years as it enters into new
commitments. LIC is a series of four parallel limited partnerships and is
intended to be our co-investment vehicle for substantially all new co-
investments. We have an effective 47.85% ownership interest in LIC.
Primarily institutional real estate investors, including a significant
shareholder in Jones Lang LaSalle, hold the remaining 52.15% interest in
LIC. In addition, our Chairman and another Director of Jones Lang LaSalle
are investors in LIC on equivalent terms to other investors. Our
investment in LIC is accounted for under the equity method of accounting in
the accompanying Consolidated Financial Statements. At September 30, 2003,
LIC has unfunded capital commitments of $69.0 million, of which our 47.85%
share is $33.0 million, for future fundings of co-investments. In the
third quarter of 2003, LIC entered into a euro 35 million ($40.8 million)
revolving credit facility for its working capital needs. As of
September 30, 2003, $4.8 million had been drawn on this facility.

Net co-investment for the nine months ended September 30, 2003 (gross
co-investment funding less return of capital from liquidated co-
investments) has been a return of capital of $5.9 million. Given current
market conditions and the increased demand for higher quality institutional
real estate, we have accelerated the pace of dispositions in order to
respond to capital markets trends and lock in gains on behalf of ourselves
and our clients. Our planned new co-investment for 2003 is anticipated to
be offset by the profitable sale and return of capital from the disposition
of existing co-investments, resulting in a net return of capital for the
year.

Capital expenditures are anticipated to be approximately $20 million
for 2003, primarily for ongoing improvements to computer hardware and
information systems.

On October 30, 2002, we announced that our Board of Directors had
approved a share repurchase program and this approval was reaffirmed by our
Board of Directors in September 2003. Under the program, Jones Lang
LaSalle may repurchase up to one million shares in the open market and in
privately negotiated transactions from time to time, depending upon market
prices and other conditions. In the fourth quarter of 2002, we repurchased
300,000 shares at an average price of $15.56 per share. No shares have
been repurchased in the first nine months of 2003. We anticipate
purchasing up to 400,000 shares in the fourth quarter of 2003. Given that
shares repurchased under this program are not cancelled, but are held by
one of our subsidiaries, we include them in our equity account. However,
these shares are excluded from our share count for the purposes of
calculating earnings per share.

SEASONALITY

Historically, our revenue, operating income and net earnings in the
first three calendar quarters are substantially lower than in the fourth
quarter. Other than for the Investment Management segment, this
seasonality is due to a calendar-year-end focus on the completion of real
estate transactions, which is consistent with the real estate industry
generally. The Investment Management segment earns performance fees on
clients' returns on their real estate investments. Such performance fees
are generally earned when assets are sold, the timing of which we do not
have complete discretion over. Non-variable operating expenses, which are
treated as expenses when they are incurred during the year, are relatively
constant on a quarterly basis.

OTHER MATTERS

NEW ACCOUNTING STANDARDS

ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS

We adopted the provisions of FASB Statement No. 143, "Accounting for
Asset Retirement Obligations" ("SFAS 143"), as of January 1, 2003. SFAS 143
addresses financial accounting and reporting obligations associated with
the retirement of tangible long-lived assets and the associated retirement
costs. The standard applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition,
construction, development and/or normal use of the asset.

SFAS 143 requires that the fair value of the liability for an asset
retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The fair value of the
liability is added to the carrying amount of the associated asset and this
additional carrying amount is depreciated over the life of the asset. The
liability is accreted at the end of each period through charges to
operating expense. If the obligation is settled for other than the carrying
amount of the liability, the Company will recognize a gain or loss on
settlement. Operating leases for space we occupy in certain of our Asian
markets contain obligations that would require us, on termination of the
lease, to reinstate the space to its original condition. We have assessed
our liability under such obligations as required by the adoption of
SFAS 143. This has not had a material impact on our financial statements.

ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

As of January 1, 2003, we adopted SFAS Statement No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities" ("SFAS 146") SFAS
146 requires that a liability for costs associated with an exit or disposal
activity he recognized when the liability is incurred rather than when a
company commits to such an activity and also establishes fair value as the
objective for initial measurement of the liability. SFAS 146 is effective
for exit or disposal activities that are initiated after December 31, 2002.
The adoption has not had a material impact on our financial statements.

For the three and nine months ended September 30, 2003 we recorded a
credit of $90,000 and a charge of $434,000, respectively, to the non-
recurring operating, administrative and other expense for additional lease
costs of excess space. We are evaluating the exposure related to the early
exit of certain leased space currently occupied that was identified as
excess as part of the 2002 restructuring program. In accordance with SFAS
146, any costs related to the early exit of the lease would be recorded at
the time we cease use of the leased space. We anticipate that we will cease
to use this space in 2004, at which point we would expect to incur a charge
which could be significant depending on the underlying market conditions at
that time.

ACCOUNTING AND DISCLOSURE BY GUARANTORS

We apply FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"), which addresses the disclosure to be
made by a guarantor in its interim and annual financial statements about
its obligations under guarantees. The Company has not entered into, or
modified guarantees pursuant to the recognition provisions of FIN 45 that
have had a significant impact on the financial statements during the nine
months ended September 30, 2003. Guarantees covered by the disclosure
provisions of FIN 45 are discussed in the "Liquidity and Capital Resources"
section within Item 2., "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained herein.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

In January 2003, the FASB issued Interpretation No. 46,
"Consolidation of Variable Interest Entities, an Interpretation of ARB
No. 51" ("FIN 46") . FIN 46 addresses the consolidation by business
enterprises of variable interest entities as defined. FIN 46 applies
immediately to variable interests in variable interest entities created
after January 31, 2003. We have not invested in any variable interest
entities created after January 31, 2003. For public enterprises with a
variable interest entity created before February 1, 2003, the FASB has
modified the application date of FIN 46 to no later than the end of the
interim or annual period ending after December 15, 2003 as it prepares to
issue additional guidance. After analyzing the requirements of FIN 46 we
have concluded that we have no variable interest entities created prior to
February 1, 2003 that would be subject to the provisions of FIN 46.

ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF
BOTH LIABILITIES AND EQUITY

In May 2003, the FASB issued Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity" ("SFAS 150"). SFAS 150 establishes standards for how an issuer
classifies and measures in its statement of financial position certain
financial instruments with characteristics of both liabilities and equity.
SFAS 150 requires issuers to classify as liabilities (or assets in some
circumstances) three classes of freestanding financial instruments that
embody obligations for the issuer; specifically, i) a mandatorily
redeemable financial instrument, ii) an obligation to repurchase the
issuer's equity, iii) certain obligations to issue a variable number of
shares. SFAS 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. The FASB is in the
process of providing additional guidance related to SFAS 150. At this time
we do not believe that we have any financial instruments that are subject
to the standards of SFAS 150.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET AND OTHER RISK FACTORS

MARKET RISK

The principal market risks (namely, the risk of loss arising from
adverse changes in market rates and prices) to which we are exposed are:

. Interest rates on borrowings; and

. Foreign exchange risks.

In the normal course of business we manage these risks through a
variety of strategies, including the use of hedging transactions using
various derivative financial instruments such as interest rate swap
agreements and forward exchange contracts. We do not enter into derivative
financial instruments for trading or speculative purposes.

INTEREST RATES

We centrally manage our debt, taking into account investment
opportunities and risks, tax consequences and overall financing strategies.
We are primarily exposed to interest rate risk on the $225.0 million
revolving multi-currency credit facility, due in June 2006, that is
available for working capital, investments, capital expenditures and
acquisitions. This facility bears a variable rate of interest based on
market rates. The interest rate risk management objective is to limit the
impact of interest rate changes on earnings and cash flows and to lower the
overall borrowing costs. To achieve this objective, in the past we have
entered into derivative financial instruments such as interest rate swap
agreements when appropriate and may do so in the future. We entered into
no such agreements in 2002 or the first nine months of 2003, and none were
outstanding as of September 30, 2003.

The effective interest rate on our debt for the three months ended
September 30, 2003 was 8.1% as compared to a rate of 7.3% for the same
period of 2002. The increase in the effective interest rate is due to the
mix of our borrowings being more heavily weighted toward the higher coupon
Euro Notes.

FOREIGN EXCHANGE

Revenues outside of the United States were 62.9% of our total revenues
for the nine months ended September 30, 2003. Operating in international
markets means that we are exposed to movements in foreign currency exchange
rates, primarily the British pound (21.4% of revenues for the nine months
ended September 30, 2003), the euro (17.8% of revenues for the nine months
ended September 30, 2003) and the Australian dollar (8.4% of revenues for
the nine months ended September 30, 2003). Changes in these foreign
currency exchange rates would have the largest impact on translating the
operating profit of our international operations into US dollars.

The British pound expenses incurred as a result of both the worldwide
operational headquarters and the Europe regional headquarters being located
in London act as a partial operational hedge against our translation
exposure to the British pound.

The interest on the euro 165 million of notes acts as a partial hedge
against our translation exposure on our euro denominated earnings. We
enter into forward foreign currency exchange contracts to manage currency
risks associated with intercompany loans. At September 30, 2003, we had
forward exchange contracts in effect with a gross notional value of $190.6
million ($112.9 million on a net basis) and a market and carrying gain of
approximately $2.1 million. The net impact on our earnings during the nine
months ended September 30, 2003 of the unrealized gain on foreign currency
contracts, offset by the loss resulting from re-measurement of foreign
currency transactions, was not significant.

DISCLOSURE OF LIMITATIONS

Since the information presented above includes only those exposures
that exist as of September 30, 2003, it does not consider those exposures
or positions which could arise after that date. The information
represented herein has limited predictive value. As a result, the ultimate
realized gain or loss with respect to interest rate and foreign currency
fluctuations will depend on the exposures that arise during the period, the
hedging strategies at the time, and interest and foreign currency rates.

ITEM 4. CONTROLS AND PROCEDURES

Senior Management of the Company, including the Chief Executive
Officer and Chief Financial Officer, have conducted an evaluation of the
effectiveness of disclosure controls and procedures, pursuant to Exchange
Act Rule 13a-15(b), as of September 30, 2003. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective in ensuring that all
material information required to be filed in this quarterly report has been
made known to them in a timely fashion and no changes are required at this
time.

In connection with the evaluation by Senior Management, including the
Chief Executive Officer and Chief Financial Officer, of our internal
control over financial reporting, pursuant to Exchange Act Rule 13a-15(d),
no changes during the quarter ended September 30, 2003 were identified that
have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company has contingent liabilities from various pending claims and
litigation matters arising in the ordinary course of business, some of
which involve claims for damages that are substantial in amount. Many of
these matters are covered by insurance. Although the ultimate liability for
these matters cannot be determined, based upon information currently
available, we believe the ultimate resolution of such claims and litigation
will not have a material adverse effect on our financial position, results
of operations or liquidity.

On November 8, 2002, Bank One N.A. ("Bank One") filed suit against the
Company and certain of its subsidiaries in the Circuit Court of Cook
County, Illinois with regard to services provided in 1999 and 2000 pursuant
to three different agreements relating to facility management, project
development and broker services. The suit alleges negligence, breach of
contract and breach of fiduciary duty on the part of Jones Lang LaSalle and
seeks to recover a total of $40 million in compensatory damages and $80
million in punitive damages. The Company is aggressively defending the suit
and on December 16, 2002 filed a counterclaim for breach of contract
seeking payment of approximately $1.2 million for fees due for services
provided under the agreements. While there can be no assurance as to the
outcome, the Company believes that the complaint is without merit and, as
such, will not have a material adverse effect on our financial position,
results of operations or liquidity. The suits are in their early stages. As
of the date of this report, we are in the process of discovery and no trial
date has been set. As such, the outcome of Bank One's suit cannot be
predicted with any certainty and management is unable to estimate an amount
or range of potential loss that could result if an improbable unfavorable
outcome did occur.

In the third quarter of 2001 we established a reserve of $1.6 million
which we believe is adequate to cover our exposures resulting from the
insolvency of HIH Insurance Ltd. ("HIH"), one of our former insurance
providers. HIH provided public liability coverage to the Australian
operations of the Company for the years from 1994 to 1997, which coverage
would typically provide protection against, among other things, personal
injury claims arising out of accidents occurring at properties for which we
had property management responsibilities. As discussed in Note 3 to Notes
to Consolidated Financial Statements, we reduced the reserve by $0.6
million in the second quarter of 2003. As of September 30, 2003, $0.6
million of the reserve established remained to cover claims which would
have been covered by the insurance provided by HIH. Although there can be
no assurance, we believe this reserve is adequate to cover any remaining
claims and expenses resulting from the HIH insolvency. Due to the nature of
the claims covered by this insurance, it is possible that future claims may
be made.

ITEM 5. OTHER INFORMATION

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this filing and elsewhere (such as in reports,
other filings with the Securities and Exchange Commission, press releases,
presentations and communications by Jones Lang LaSalle or its management
and written and oral statements) may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause Jones Lang LaSalle's
actual results, performance, achievements, plans and objectives to be
materially different from any future results, performance, achievements,
plans and objectives expressed or implied by such forward-looking
statements. Such factors are discussed in our Annual Report on Form 10-K
for the year ended December 31, 2002 in Item 1. "Business," Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Item 7A. "Quantitative and Qualitative Disclosures About
Market Risk," and elsewhere, in this Quarterly Report on Form 10-Q in
Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations", Item 3. "Quantitative and Qualitative Disclosure
about Market Risk" and elsewhere, and in other reports filed with the
Securities and Exchange Commission. Jones Lang LaSalle expressly disclaims
any obligation or undertaking to update or revise any forward-looking
statements to reflect any changes in events or circumstances or in its
expectations or results.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) A list of exhibits is set forth in the Exhibit Index which
immediately precedes the exhibits and which is incorporated by reference
herein.

(b) Reports on Form 8-K

On November 5, 2003, Jones Lang LaSalle filed a Report on
Form 8-K incorporated a press release announcing earnings for
the quarterly period ended September 30, 2003.

SIGNATURE

Pursuant to the requirements 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.

JONES LANG LASALLE INCORPORATED

Dated: October 31, 2003 BY: /S/ LAURALEE E. MARTIN
------------------------------
Lauralee E. Martin
Executive Vice President and
Chief Financial Officer
(Authorized Officer and
Principal Financial Officer)

EXHIBIT INDEX

Exhibit
Number Description
- ------- -----------

31.1 Certification of Christopher A. Peacock pursuant to
Securities Exchange Act Rules 13a-14(a) or 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

31.2 Certification of Lauralee E. Martin pursuant to
Securities Exchange Act Rules 13a-14(a) or 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.

32.1 Certification of Christopher A. Peacock and Lauralee E.
Martin pursuant to Securities Exchange Act Rules
13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63
of Title 18 of the United States Code, pursuant to
section 906 of the Sarbanes-Oxley Act of 2002.