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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                 FORM 10-K/A #1

(MARK ONE)

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001.

                                       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 1-12846

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

                                 PROLOGIS TRUST
             (Exact name of registrant as specified in its charter)


                                             
                  MARYLAND                                       74-2604728
       (State or other jurisdiction of                        (I.R.S. employer
      of incorporation or organization)                      identification no.)


                             14100 EAST 35TH PLACE
                             AURORA, COLORADO 80011
             (Address of principal executive offices and zip code)

                                 (303) 375-9292
              (Registrant's telephone number, including area code)

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



                                                                NAME OF EACH EXCHANGE
TITLE OF EACH CLASS                                              ON WHICH REGISTERED
-------------------                                             ---------------------
                                                            
Common Shares of Beneficial Interest, par value $0.01 per
  share                                                        New York Stock Exchange
Series D Cumulative Redeemable Preferred Shares of
  Beneficial Interest, par value $0.01 per share               New York Stock Exchange
Series E Cumulative Redeemable Preferred Shares of
  Beneficial Interest, par value $0.01 per share               New York Stock Exchange
Preferred Share Purchase Rights                                New York Stock Exchange


        Securities registered pursuant to Section 12(g) of the Act: NONE

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

     Based on the closing price of the registrant's shares on April 11, 2002,
the aggregate market value of the voting shares held by non-affiliates of the
registrant was $3,077,793,460.

     At April 11, 2002, there were outstanding approximately 177,526,876 common
shares of beneficial interest of the registrant.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                      None
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     The purpose of this Form 10-K/A is to amend certain disclosures in Items 7,
10, 11, 12, 13, and 14 to the Annual Report on Form 10-K.

                               TABLE OF CONTENTS



ITEM                           DESCRIPTION                            PAGE
----                           -----------                            ----
                                                                
                                  PART I
 1.    Business....................................................      1
         ProLogis Trust............................................      1
         2001 Financial Results....................................      2
         Business Strategy and Operating Segments..................      2
         ProLogis Operating System(R)..............................     12
         ProLogis Management.......................................     14
         Environmental Matters.....................................     18
         Insurance Coverage........................................     18
 2.    Properties..................................................     19
         Industrial Distribution Facilities........................     19
         Geographic Distribution...................................     19
         Facilities................................................     21
         Consolidated Entities.....................................     25
         Unconsolidated Entities...................................     27
 3.    Legal Proceedings...........................................     30
 4.    Submission of Matters to a Vote of Security Holders.........     31

                                 PART II
 5.    Market for the Registrant's Common Equity and Related
         Stockholder Matters.......................................     31
 6.    Selected Financial Data.....................................     34
 7.    Management's Discussion and Analysis of Financial Condition
         and Results of Operations.................................     37
         Critical Accounting Policies..............................     38
         Results of Operations.....................................     39
         Environmental Matters.....................................     48
         Liquidity and Capital Resources...........................     48
         New Tax Legislation.......................................     54
         Funds from Operations.....................................     54
         Risk Factors..............................................     56
 7A.   Quantitative and Qualitative Disclosure About Market Risk...     61
 8.    Financial Statements and Supplementary Data.................     63
 9.    Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure Matters..........................     63

                                 PART III
 10.   Directors and Executive Officers of the Registrant..........     63
 11.   Executive Compensation......................................     64
 12.   Security Ownership of Certain Beneficial Owners and
         Management................................................     71
 13.   Certain Relationships and Related Transactions..............     74

                                 PART IV
 14.   Exhibits, Financial Statement Schedules and Reports on Form
         8-K.......................................................     79



                                     PART I

ITEM 1. BUSINESS

PROLOGIS TRUST

     ProLogis Trust (collectively with its consolidated subsidiaries and
partnerships, "ProLogis") is a real estate investment trust ("REIT") that
operates a global network of industrial distribution facilities. ProLogis'
business strategy is designed to achieve long-term sustainable growth in cash
flow and increase the overall return on equity for its shareholders. ProLogis'
business is organized into two primary operating segments: property operations
and the corporate distribution facilities services business ("CDFS business").
In 2001, ProLogis began the initial steps to dispose of significant portions of
its investments in its third operating segment, temperature-controlled
distribution operations.

     The property operations segment includes the long-term ownership,
management and leasing of industrial distribution facilities. As of December 31,
2001, ProLogis' network consisted of 1,542 operating facilities aggregating
180.8 million square feet in North America (ProLogis' investments in North
America are located only in the United States and Mexico) and eight countries in
Europe. Of these, 1,208 operating facilities aggregating 123.4 million square
feet are owned directly by ProLogis and 334 operating facilities aggregating
57.4 million square feet are owned by six unconsolidated real estate funds (the
"Funds") in which ProLogis has ownership interests ranging from 20% to 50%. The
property operations segment generates income from rents and reimbursement of
property operating expenses from unaffiliated customers. Also, ProLogis' share
of the earnings of the Funds and the fee income that ProLogis receives for
managing the facilities owned by the Funds is included in the property
operations segment income. In addition to the property and asset management fees
earned, ProLogis also earns fees for leasing activities on behalf of the Funds.

     The CDFS business segment represents the development of industrial
distribution facilities that are either sold to unaffiliated customers or
contributed to real estate funds in which ProLogis maintains an ownership
interest and acts as manager. ProLogis' activities in this business segment in
the United Kingdom are performed by an unconsolidated entity of ProLogis', that
is accounted for under the equity method. Income from the CDFS business segment
is primarily generated through the profits realized from the sales or
contributions of developed facilities. ProLogis also earns fees from customers
for development activities performed on their behalf and realizes profits from
sales of land parcels when ProLogis' development plans no longer include these
parcels. As of December 31, 2001, ProLogis had 29 distribution facilities under
development aggregating 7.8 million square feet (including facilities being
developed by ProLogis' unconsolidated entity). The total investment in these
facilities upon completion is expected to be $516.7 million. These development
projects are located in the United States, in seven countries in Europe and in
Japan (ProLogis began development of its first project in Asia in 2001).
ProLogis' undeveloped land positions in North America and nine countries in
Europe aggregate 2,162 acres with the capacity for development of approximately
40.2 million square feet of distribution facilities (including land positions of
ProLogis' unconsolidated entity). Additionally, ProLogis controls (either
through contracts, options or letters of intent) 2,889 acres with the capacity
for development of approximately 45.8 million square feet of distribution
facilities in the United States, in seven countries in Europe and in Japan
(including land positions of ProLogis' unconsolidated entity). ProLogis intends
to use this land for the development of distribution facilities. Such facilities
will eventually be sold to third parties or contributed to real estate funds in
which ProLogis will maintain an ownership interest and which will be managed by
ProLogis.

     ProLogis' temperature-controlled distribution operations segment consists
of investments in two companies that operate temperature-controlled distribution
and logistics networks in the United States and in nine countries in Europe. As
of December 31, 2001, these entities owned or operated 332.8 million cubic feet
of facilities (including 35.5 million cubic feet of non-temperature-controlled
distribution space located in their facilities). ProLogis accounts for its
investments in these two entities under the equity method. These entities earn
revenues from unaffiliated customers for various services associated with the
temperature-controlled distribution environment. In 2001, substantially all of
the operating assets in Germany and all of the operating assets in the Czech
Republic of the European company in which ProLogis has invested were sold. In
March

                                        1


2002, all of the operating assets in Sweden, Denmark, Finland, Norway and the
Netherlands, as well as the remaining German operating assets of the European
company in which ProLogis has invested were sold. Negotiations are ongoing
related to the sale of substantially all of the operating assets of the company
operating in the United States and certain of the remaining operating assets of
the European company.

     ProLogis manages its business by utilizing the ProLogis Operating
System(R), an organizational structure and service delivery system that is built
around its customers. The ProLogis Operating System(R) is made up of the Market
Services Group, the Global Services Group, the Global Development Group and the
ProLogis Solutions Group. When combined with ProLogis' international network of
distribution facilities, the ProLogis Operating System(R) enables ProLogis to
meet its customers' distribution space needs on a global basis. ProLogis
believes that by integrating international scope and expertise with a strong
local presence in its markets, it has become an attractive choice for its
targeted customer base which is made up of the largest global users of
distribution facilities.

     ProLogis is organized under Maryland law and has elected to be taxed as a
REIT under the Internal Revenue Code of 1986, as amended (the "Code"). ProLogis'
world headquarters are located in Denver, Colorado, its European headquarters
are located in Luxembourg (with its European customer service headquarters
located in Amsterdam, Netherlands) and its Asian headquarters are located in
Tokyo, Japan.

     This report on Form 10-K includes certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on management's current expectations and are subject
to uncertainty and changes in circumstances. Actual results may differ
materially from these expectations due to changes in global economic, business,
competitive, market and regulatory factors. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Risk Factors."

2001 FINANCIAL RESULTS

     Net earnings attributable to Common Shares was $90.8 million in 2001 as
compared to $157.7 million in 2000. The decrease in 2001 is primarily the result
of charges of $42.8 million representing ProLogis' share of the write-down of
technology related investments of its unconsolidated entities and charges of
$88.4 million representing ProLogis' share of the write-down of the operating
assets and other impairment charges recognized by its unconsolidated entities
operating in the temperature-controlled distribution operations segment.

     ProLogis considers funds from operations to be a useful supplemental
measure of comparative period operating performance. Funds from operations was
$374.4 million in 2001 as compared to $376.7 million in 2000. See the definition
and calculation of funds from operation at "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Funds from
Operations." ProLogis' cash flow from operating activities for 2001 was $346.9
million as compared to $325.2 million for 2000. ProLogis distributed $1.38 per
common share of beneficial interest, $0.01 par value ("Common Share") in 2001,
as compared to the 2000 distribution level of $1.34 per Common Share. ProLogis'
Board of Trustees (the "Board") set the distribution level for 2002 at $1.42 per
Common Share, a 3.0% increase over 2001. See ProLogis' Consolidated Financial
Statements in Item 8.

BUSINESS STRATEGY AND OPERATING SEGMENTS

  Business Strategy

     ProLogis was originally formed in 1991 with the objective of building a
distribution and light manufacturing asset base at costs significantly below
replacement cost and acquiring a land inventory for the future development of
industrial distribution facilities by primarily utilizing direct public debt and
public equity capital. Additionally, ProLogis intended to create a national
operating company that would differentiate itself from its competition through
its ability to meet a corporate customer's distribution facility requirements on
a national, regional and local basis.

                                        2


     ProLogis built its asset base in the United States through the acquisition
of existing distribution facilities as well as through the internal development
of distribution facilities that were integrated into its property operations
segment on a long-term basis upon completion. In 1997, ProLogis expanded its
operations into Mexico and Europe to meet the needs of its targeted national and
international customers as they expanded and reconfigured their distribution
facility requirements globally. ProLogis' largest acquisition occurred in March
1999 when it merged with another publicly traded REIT adding 32.2 million square
feet of distribution facilities in the United States to its operating portfolio.
In another significant transaction, ProLogis acquired 5.2 million square feet of
distribution facilities in France when it acquired a private real estate
operating company in December 1998. At the end of the first quarter of 1999,
ProLogis' operating portfolio included 1,423 distribution facilities aggregating
146.1 million square feet in North America (the United States and Mexico) and in
three countries in Europe. At that time, ProLogis believed that its operating
portfolio had reached critical mass in many of the largest distribution markets
in the United States. Further, the public capital markets were becoming a more
costly method of raising capital. Consequently, ProLogis began to shift from the
utilization of direct public debt and public equity capital to fund its growth
in favor of raising capital from private sources. To effect this shift, ProLogis
had to change the primary focus of its development activities -- from the
development of distribution facilities for the property operations segment on a
long-term basis upon completion -- to the development of distribution facilities
that, upon completion, are disposed of, thereby generating additional capital
for future development activities and realizing profits from its development
activities in the short-term. This shift in focus was facilitated by the 1998
acquisition of an established CDFS business in the United Kingdom, Kingspark
Holding S.A. (collectively with its subsidiaries, "Kingspark S.A."), which held
strategic land positions and offered growth opportunities to ProLogis in a
country in which it had limited investments. ProLogis accounts for its
investment in Kingspark S.A. under the equity method.

     In order to maintain its customer driven operating model and to generate
continued income streams from its development activities, in 1999 ProLogis began
to form real estate funds with private investors. These real estate funds are
formed with the primary objective of acquiring ProLogis' developed facilities
with ProLogis maintaining an ownership interest (ranging from 20% to 50%) in
each. Additionally, ProLogis acts as the manager of the real estate funds,
earning fee income. The proceeds received from the disposition of distribution
facilities to the real estate funds are recycled into ProLogis' CDFS business
segment to finance its development activities. Over $2.1 billion of private debt
and private equity capital has been raised through these real estate funds,
which now total six (five in the United States and one in Europe). The net
operating income in the CDFS business segment has grown from $20.5 million in
1998 to $156.3 million in 2001 primarily due to ProLogis' contributions of
distribution facilities to the Funds. The fees generated from the Funds were
$16.5 million in 2001. ProLogis reflect this fee income in its property
operations segment.

     ProLogis expanded its service platform in 1997 and 1998 by acquiring an
international temperature-controlled distribution and logistics network. After
four years of operating in this particular segment of the global distribution
business, ProLogis has decided to dispose of significant portions of the
operating assets in this segment in favor of maintaining its focus on its core
business segments -- property operations and the CDFS business.

  Property Operations Segment

     Investments

     In the property operations segment, ProLogis owned and operated (including
assets held by the Funds which are accounted for under the equity method) 1,542
distribution facilities aggregating 180.8 million square feet as of December 31,
2001. ProLogis directly owned 1,208 distribution facilities aggregating 123.4
million square feet in this operating segment as of December 31, 2001. ProLogis'
investment strategy with respect to the property operations segment is to focus
primarily on generic industrial distribution facilities with an average office
finish level of less than 10%. ProLogis' facilities are adaptable for both
distribution and light manufacturing or assembly uses. ProLogis has invested in
selected distribution markets in North America and Europe where it believes the
distribution dynamics are strong and supply and demand factors generally have
allowed for high occupancy levels and increasing rental rates. In making its
investment
                                        3


decisions, ProLogis evaluates market conditions that would indicate favorable
distribution growth prospects. Such conditions include: (i) growth in imports
and exports; (ii) long-term cost and quality of labor advantages for domestic
and international manufacturers (such as markets benefiting from the U.S./Mexico
twin plant program); (iii) proximity to large regional and local population
centers with good access to transportation networks and (iv) an historically
high ratio of distribution space per capita.

     Property operations segment investment activities in 2001 included the
following:

     - ProLogis European Properties Fund acquired distribution facilities
       aggregating 8.8 million square feet and disposed of a 72,000 square foot
       distribution facility. Of the distribution facilities acquired in 2001,
       7.7 million square feet were acquired from ProLogis. On January 7, 2001,
       the remaining 49.9% of the common stock of ProLogis European Properties
       S.a.r.l. was contributed to ProLogis European Properties Fund by ProLogis
       for an additional equity interest. As of December 31, 2001, ProLogis'
       ownership interest in ProLogis European Properties Fund was 35.4%.

     - In North America, two new real estate funds were formed and ProLogis'
       three existing real estate funds grew in size in 2001. ProLogis
       California, ProLogis North American Properties Fund I and ProLogis North
       American Properties Fund II (formerly referred to as ProLogis Principal)
       all grew, primarily as the result of acquisitions of distribution
       facilities from ProLogis. ProLogis California's portfolio grew from 12.4
       million square feet at the end of 2000 to 13.1 million square feet
       (including one development completion) at the end of 2001. ProLogis North
       American Properties Fund I grew from 8.0 million square feet at the end
       of 2000 to 9.0 million square feet at the end of 2001 and ProLogis North
       American Properties Fund II grew from 0.4 million square feet at the end
       of 2000 to 4.5 million square feet at the end of 2001. The growth in
       ProLogis North American Properties Fund II was the result of a change in
       ownership, essentially forming a new real estate fund in March 2001 that
       then acquired 4.0 million square feet of additional facilities from
       ProLogis. The two real estate funds initially formed in 2001, ProLogis
       North American Properties Fund III and ProLogis North American Properties
       Fund IV, owned 4.4 million and 3.5 million square feet of distribution
       facilities as of December 31, 2001, respectively, all acquired from
       ProLogis.

     - ProLogis acquired 32 distribution facilities in 2001 aggregating 5.1
       million square feet. Substantially all of these facilities were acquired
       to complete tax-deferred exchange transactions. In 2001, ProLogis
       disposed of 43 distribution facilities from its property operations
       segment aggregating 6.7 million square feet.

     See "Item 2. Properties -- Facilities", "Item 2. Properties --
Unconsolidated Entities -- Property Operations" and Note 4 to ProLogis'
Consolidated Financial Statements in Item 8.

     Operations

     The property operations segment generated approximately 96% of ProLogis'
total income in 2001 (including amounts recognized under the equity method with
respect to ProLogis' ownership interests in the Funds and related fee income).
This operating segment generated approximately 81% and 85% of ProLogis' total
income in 2000 and 1999, respectively. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations -- Property Operations" and Notes 4 and 10 to ProLogis' Consolidated
Financial Statements in Item 8.

     Operational information about this operating segment for 2001 includes the
following:

     - ProLogis' stabilized operating portfolio of 173.9 million square feet
       (including facilities owned by the Funds) was 93.1% leased (92.5%
       occupied) as of December 31, 2001. Also, as of December 31, 2001,
       ProLogis' total operating portfolio of 182.4 million square feet
       (including facilities owned by the Funds) was 90.4% leased (89.6%
       occupied). Stabilized facilities are those in which capital improvements,
       repositioning, new management and new marketing programs for acquisitions
       (or development and marketing, in the case of newly developed facilities)
       have been in effect for a sufficient period of time (generally 12 months)
       to achieve stabilized occupancy (typically 93%, but ranging from 90% to
       95%, depending on the submarket and product type).
                                        4


     - ProLogis leased 38.0 million square feet of distribution space in 1,132
       leasing transactions in its facilities and the facilities owned by the
       Funds. In these transactions, rental rates on leases of previously leased
       space increased by 14.6% in 2001. ProLogis' weighted average customer
       retention rate was 63.4% in 2001.

     - ProLogis' "same store" portfolio of operating facilities (facilities
       owned by ProLogis and the Funds that were in operation throughout both
       2001 and 2000) aggregated 142.7 million square feet. The net operating
       income (rental revenues less net rental expenses) of the "same store"
       portfolio increased by 1.4% in 2001 over 2000.

     - ProLogis earned $16.5 million in property and asset management fees from
       the Funds.

     Market Presence

     As of December 31, 2001, the 1,208 facilities in the property operations
segment that are owned directly by ProLogis are located in 38 cities and regions
in 23 states and the District of Columbia in the United States, 4 cities in
Mexico and 5 cities and regions in 4 countries in Europe. ProLogis' largest
markets (based on investment in directly owned facilities) are Dallas/Fort
Worth, Chicago, Atlanta, San Francisco (both South Bay and East Bay markets) and
Houston. See "Item 2. Properties -- Facilities".

     The operating facilities owned by the Funds as of December 31, 2001 are as
follows:

     - ProLogis California:  79 facilities all located in the Los Angeles/Orange
       County market.

     - ProLogis North American Properties Fund I:  36 facilities located in 16
       cities and regions in 12 states in the United States.

     - ProLogis North American Properties Fund II:  27 facilities located in 13
       cities and regions in 10 states and the District of Columbia in the
       United States.

     - ProLogis North American Properties Fund III:  34 facilities located in 15
       cities and regions in 13 states and the District of Columbia in the
       United States.

     - ProLogis North American Properties Fund IV:  17 facilities located in 10
       cities and regions in 8 states in the United States.

     - ProLogis European Properties Fund:  141 facilities located in 24 cities
       and regions in 8 countries in Europe (including 56 facilities located in
       Paris, France).

     See "Item 2. Properties -- Unconsolidated Entities -- Property Operations".

     ProLogis has sought to achieve significant market presence through the
development and acquisition of distribution facilities and master-planned
distribution parks in its target market cities and selected submarkets of those
cities. The target market cities and submarkets are selected when ProLogis'
market research indicates that the long-term demand for distribution and light
manufacturing space is stable to strong. ProLogis defines market presence not
only in terms of square feet of distribution facilities and acres of development
land owned, but also by the extent ProLogis has developed relationships with
customers in such markets. ProLogis' operating strategy is designed to meet the
needs of today's distribution space users, which means providing functional,
cost-effective facilities and a comprehensive level of service. ProLogis
believes that by being a significant local owner and developer in a given market
it has the ability to reduce turnover by meeting its customers' needs to either
expand or contract. With its network of distribution facilities and land
positions, ProLogis is able to either relocate customers within its existing
inventory of distribution space or develop new facilities to meet the customer's
needs.

     Competition

     In general, there are numerous other industrial distribution facilities
located in close proximity to ProLogis' facilities. The amount of rentable
distribution space available in any market could have a material effect on
ProLogis' ability to rent space and on the rents that ProLogis can charge. In
addition, in many of

                                        5


ProLogis' submarkets, institutional investors and owners and developers of
industrial distribution facilities (including other REITs) compete for the
acquisition, development and leasing of distribution space. Many of these
entities have substantial resources and experience. Competition for acquisition
of existing distribution facilities and land, both from institutional capital
sources and from other REITs, has been strong over the past several years.

     Property Management

     ProLogis provides active and effective property management to directly
serve its customers at the local level, a strategy that ProLogis believes
enhances the long-term economic performance of its distribution facilities and
increases cash flow. ProLogis' property management group seeks to provide
exceptional customer service and attention to customer needs by developing and
implementing proprietary operating, recruiting and training systems to achieve
consistent levels of performance and professionalism throughout the ProLogis
network. Of the operating facilities owned by ProLogis and the six
unconsolidated real estate funds as of December 31, 2001, ProLogis' property
management group was managing 98.6% of the facilities in North America and 100%
of the facilities in Europe.

     Customers

     One of ProLogis' objectives is to develop a customer base in each market
that is diverse in terms of industry concentration and represents a broad
spectrum of international, national, regional and local distribution space
users. As of December 31, 2001, ProLogis and the Funds had over 3,500 customers
in 162.0 million square feet of occupied distribution space. ProLogis believes
that having a large number of customers with generic space requirements in each
submarket can reduce its exposure to overall occupancy declines. On an
annualized basis, the largest customer accounted for 1.7% of the total combined
2001 rental income of ProLogis and the Funds. The annualized base rent for the
25 largest customers of ProLogis and the Funds was 15.0% of their total combined
2001 rental income. When the customers in the facilities owned by the Funds are
excluded, the annualized base rent for ProLogis' largest customer represents
0.8% of ProLogis' total 2001 rental income and the annualized base rent for
ProLogis' 25 largest customers represents 13.8% of ProLogis' total 2001 rental
income.

     Employees

     ProLogis directly employs approximately 650 persons in North America, seven
countries in Europe and in Japan. Of the total, approximately 350 employees are
assigned directly to the property operations segment. ProLogis' other employees
may provide assistance in this operating segment. ProLogis believes its
relationship with its employees to be good. ProLogis' employees are not
represented by a collective bargaining agreement.

     Seasonal Nature of the Business

     The demand for industrial distribution space is not seasonal.

     Future Plans

     ProLogis believes that its current level of investment in the property
operations segment in North America enables it to serve its customers at a high
level and increase returns to shareholders. ProLogis' business plan for the
property operations segment in North America calls for the expansion of its
network of operating facilities as necessary to: (i) address the specific
expansion needs of its customers; (ii) enhance its market presence in specific
submarkets; or (iii) take advantage of opportunities where ProLogis believes it
has the ability to achieve favorable returns. In 2002, ProLogis intends to form
additional real estate funds that will acquire distribution facilities developed
within the CDFS business segment. ProLogis expects that the fee income earned
from the Funds and from other real estate funds that may be formed in the future
will increase in 2002 over 2001 levels.

     ProLogis' market research and customer feedback continue to reflect strong
demand for distribution space in Europe as cross-border trade continues to
increase and many companies continue to move toward
                                        6


consolidation and reconfiguration of their distribution networks. Consolidation
and the emergence of dominant regional distribution centers have provided, and
ProLogis believes will continue to provide, opportunities for ProLogis as a
single-source pan-European provider of distribution facilities. Consequently,
ProLogis' business plan for the property operations segment in Europe emphasizes
growth in key distribution markets, primarily from the development of facilities
within ProLogis' CDFS business segment that will be acquired by ProLogis
European Properties Fund or other real estate funds that may be formed and then
managed by ProLogis.

     ProLogis intends to self-fund its future investment activities in the
property operations segment in 2002 with operating cash flow within this
operating segment and the proceeds from dispositions of facilities from the CDFS
business segment as well as from this operating segment. See the discussion of
factors that could affect the future plans of ProLogis and the unconsolidated
real estate funds in the property operations segment at "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Risk
Factors".

  CDFS Business Segment

     Investments

     Within this operating segment, ProLogis (all of the activities in the
United Kingdom are performed by ProLogis' unconsolidated entity, Kingspark S.A.)
develops distribution facilities with the intent to dispose of the facilities to
third parties or real estate funds in which ProLogis will maintain an ownership
interest and act as manager. Also within this operating segment, ProLogis and
Kingspark S.A. develop distribution facilities for customers or third parties
for a development fee and dispose of land parcels that no longer fit into
ProLogis' development plans. Proceeds from the disposition of land parcels and
facilities developed in the CDFS business segment and the development fee income
earned are redeployed into land acquisitions and other development activities.
Within this operating segment, ProLogis addresses specific needs of customers
with respect to a specialized facility or the need for a customer to have a
facility in a market that ProLogis does not consider to have favorable dynamics
by developing the facility on a fee basis or through a pre-sale agreement.

     As of December 31, 2001, all of the development activities of ProLogis and
Kingspark S.A. were within the CDFS business segment (7.8 million square feet of
distribution facilities under development.) The total investment in these
facilities when completed is expected to be $516.7 million. Of the totals, 5.4
million square feet at an expected cost at completion of $254.5 million are
being developed directly by ProLogis and 2.4 million square feet at an expected
cost at completion of $262.2 million are being developed by Kingspark S.A. These
facilities are all being developed with the objective of disposing of them to a
third party or to a real estate fund in which ProLogis will maintain an
ownership interest and act as manager.

     To the extent the distribution facilities developed in this segment have
been acquired by the Funds, ProLogis' share of the income of the Funds along
with the fees earned for services provided to the Funds are included in its
income from the property operations segment (see "-- Property Operations
Segment").

     ProLogis and Kingspark S.A. have land positions including land controlled
through contracts (development rights agreements or contingent contracts),
options or letters of intent aggregating 5,051 acres with the capacity for
developing approximately 86.0 million square feet of distribution facilities.
Land positions in North America total 2,188 acres with the capacity for
developing approximately 36.7 million square feet of distribution facilities,
land positions in nine countries in Europe total 2,846 acres with the capacity
for developing approximately 48.0 million square feet of distribution facilities
and land positions in Japan total 17 acres with the capacity for developing
approximately 1.3 million square feet of distribution facilities. Of these land
positions, Kingspark S.A. owns 186 acres and has 1,595 acres under control with
the combined capacity for developing approximately 25.9 million square feet of
distribution facilities (all in the United Kingdom.)

     CDFS business segment investment activities (including activities of
ProLogis and Kingspark S.A.) in 2001 included the following:

     - Development starts aggregating 13.2 million square feet at an expected
       cost at completion of $798.0 million (including 3.2 million square feet
       at an expected cost at completion of $341.0 million by

                                        7


       Kingspark S.A.). Development starts in North America aggregated 4.5
       million square feet at a total expected cost at completion of $172.1
       million and development starts in Europe aggregated 8.5 million square
       feet at an expected cost at completion of $573.7 million. ProLogis'
       initial development project in Japan was started in 2001 at 0.2 million
       square feet and an expected cost at completion of $52.2 million. ProLogis
       did not start any development projects in North America in the fourth
       quarter of 2001 and ProLogis intends to emphasize its development
       activities outside of North America in 2002.

     - Development completions aggregating 14.8 million square feet at a cost of
       $744.5 million (including 2.3 million at a cost of $224.5 million by
       Kingspark S.A.). Development completions in North America aggregated 7.8
       million square feet at a total cost of $315.4 million and development
       completions in Europe aggregated 7.0 million square feet at a total cost
       of $429.1 million.

     - Land acquisitions aggregating 808 acres; 363 acres in the United States,
       442 acres in Europe (including 132 acres acquired by Kingspark S.A.) and
       3 acres in Japan. This land can be used for the development of
       approximately 14.5 million square feet of distribution facilities.

     Operations

     The CDFS business segment's income is primarily the profits from
dispositions of distribution facilities developed as well as from development
management fees earned. In 2001, the CDFS business generated $160.3 million of
ProLogis' total income as compared to 2000 and 1999 when the CDFS business
segment generated $121.9 million and $70.5 million of ProLogis' total income,
respectively. In 2001, 45% of the total income in this operating segment was
generated in North America with the remaining 55% generated in Europe. In 2000
and 1999, 49% and 41%, respectively, of the total income from this operating
segment was generated in North America with the remaining income generated in
Europe. See Note 10 to ProLogis' Consolidated Financial Statements in Item 8.

     ProLogis recognizes in excess of 99% of the earnings of Kingspark S.A.
under the equity method either directly, through its ownership of Kingspark
S.A.'s non-voting preferred stock, or indirectly, through its non-voting
ownership interest in the entity that owns Kingspark S.A.'s voting common stock.
Under the equity method, the income of Kingspark S.A. that is recognized by
ProLogis in the CDFS business segment is based on the net income of Kingspark
S.A. including all of its expenses. See Note 4 to ProLogis' Consolidated
Financial Statements in Item 8.

     Operational information about this operating segment for 2001 includes the
following:

     - ProLogis and Kingspark S.A. disposed of 17.2 million square feet of
       distribution facilities developed and land parcels generating net
       proceeds of over $1.0 billion.

     - ProLogis and Kingspark S.A. developed 4.0 million square feet of
       distribution facilities on behalf of customers under development
       management agreements generating $8.0 million of fees. Further, ProLogis
       and Kingspark S.A. earned $4.9 million of other fees and miscellaneous
       income from the CDFS business segment.

     See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations -- CDFS Business."

     Market Presence

     ProLogis' CDFS business has had development activity in substantially all
of ProLogis' property operations markets. As of December 31, 2001, ProLogis had
distribution facilities under development in 3 cities in the United States, 12
cities and regions in 7 countries in Europe (all facilities in the United
Kingdom are being developed by Kingspark S.A.) and in Tokyo, Japan. As of
December 31, 2001, the land positions owned by ProLogis were located in 28
cities and regions in 20 states in the United States, 4 cities in Mexico, 17
cities and regions in 9 countries in Europe (all land positions in the United
Kingdom are owned or controlled by Kingspark S.A.) and in Tokyo, Japan.

                                        8


     Competition

     There are a number of other national, regional and local developers engaged
in industrial distribution facility development in the North American markets
where ProLogis conducts business. ProLogis does compete with other developers
for land acquisitions. The disposition market in North America is competitive
and is driven by the supply of new developments, access to capital and interest
rate levels. A key to ProLogis' success will be its ability to develop and lease
distribution facilities that can be disposed of to generate profits and its
ability to raise private capital through real estate funds, such as the five
North American real estate funds already formed.

     ProLogis believes that there are no other REITs or pan-European real estate
operating companies in direct competition with its operations in Europe.
However, there are a number of local and regional developers in ProLogis' target
markets. As in North America, the disposition market in Europe is competitive
and driven by the supply of new developments, access to capital and interest
rate levels. However, the formation of ProLogis European Properties Fund has
provided ProLogis with a source of capital that allows it to dispose of the
distribution facilities developed in the CDFS business segment. The funding
commitments to the ProLogis European Properties Fund expire in September 2002.
To continue to generate profits in this operating segment after that date,
ProLogis must secure additional private equity commitments or the existing
commitments to the ProLogis European Properties Fund must be extended such that
capital will be available to acquire ProLogis' stabilized facilities as they
become available. As with the North American development pipeline, ProLogis'
ability to develop and lease distribution facilities to be disposed of is
critical to its success in Europe.

     Further, ProLogis believes that it has a significant competitive advantage
based upon the strategic locations of the extensive land positions owned or
under control. Also, as the only distribution facilities and services provider
operating on a national and pan-European basis, ProLogis believes it has
differentiated itself from many of its competitors.

     ProLogis' market research has identified a trend in Japan toward larger,
more efficient distribution centers due to vertical integration, continued
merger activity and the need to minimize costs in the supply chain. ProLogis
currently serves customers who operate in Japan. ProLogis believes its past
experience in serving these international customers (as with its entry into
Europe) will provide opportunities for ProLogis to continue to meet the
distribution space needs of the companies in Japan. ProLogis has not currently
identified any North American industrial development companies with who it is in
direct competition in Japan. Further, ProLogis believes that it has an advantage
over local industrial development companies in Japan as the result of its
experience in industrial development and because of the level of service it can
offer through the ProLogis Operating System(R). See "-- ProLogis Operating
System(R)".

     Customers

     ProLogis leverages off the existing customer relationships it has
developed, primarily within the property operations segment and utilizes the
ProLogis Operating System(R) in marketing its CDFS business. See "-- Property
Operations -- Customers" and "-- ProLogis Operating System(R)". In 2001,
approximately 66% of customers who leased facilities developed in the CDFS
business segment were repeat customers of ProLogis.

     Employees

     ProLogis directly employs approximately 650 persons in North America, seven
countries in Europe and in Japan. Of the total, approximately 70 employees are
assigned directly to the CDFS business segment. ProLogis' other employees may
provide assistance in this operating segment. ProLogis believes its relationship
with its employees to be good. ProLogis' employees are not represented by a
collective bargaining agreement.

     Kingspark S.A. employs approximately 50 persons and these employees do not
participate in a collective bargaining agreement. Kingspark S.A. believes its
relationship with its employees to be good.

                                        9


     Seasonal Nature of the Business

     The demand for the industrial distribution facilities that are developed in
the CDFS business segment is not impacted on a seasonal basis. However, the
development process can be impeded by weather, particularly during the winter
months in certain markets, which affects the scheduling of development
activities and can potentially delay construction completions.

     Future Plans

     ProLogis' objective is to utilize the capital generated in the CDFS
business segment to finance its future CDFS business activities in North
America, Europe and Japan. In addition, proceeds from the disposition of
facilities from the property operations segment can also be re-invested in new
development facilities within the CDFS business segment.

     ProLogis' success in this operating segment is dependent on its ability to
raise private capital. See "-- Competition" ProLogis believes that the
reconfiguration of supply chains, necessitated by the need for customers to add
efficiencies within their distribution networks, in North America, Europe and
Japan could favorably impact demand for the distribution facilities and
distribution-related services provided by ProLogis within its CDFS business
segment. Additionally, a limited supply of new state-of-the-art distribution
space in Europe and Japan could also provide opportunities within this operating
segment. See the discussion of factors that could affect the future plans of
ProLogis, in the CDFS business segment at "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Risk Factors".

  Temperature-Controlled Distribution Operations

     Investments

     ProLogis recognizes in excess of 99% of the earnings of ProLogis Logistics
Services Incorporated ("ProLogis Logistics") under the equity method either
directly, through its ownership of ProLogis Logistics' non-voting preferred
stock, or indirectly, through its non-voting ownership interest in the entity
that owns ProLogis Logistics' voting common stock. ProLogis Logistics owns CS
Integrated LLC ("CSI"), a temperature-controlled distribution company operating
in the United States. As of December 31, 2001, CSI owned or operated 59
temperature-controlled distribution facilities aggregating 178.4 million cubic
feet (including 35.5 million cubic feet of non-temperature-controlled
distribution space located in its facilities). Additionally, ProLogis recognizes
in excess of 99% of the earnings of Frigoscandia Holding S.A. ("Frigoscandia
S.A.") under the equity method either directly, through its ownership of
Frigoscandia S.A.'s non-voting preferred stock, or indirectly, through its
non-voting ownership interest in the entity that owns Frigoscandia S.A.'s voting
common stock. Frigoscandia S.A. owns, through a wholly owned subsidiary,
Frigoscandia Holding AB ("Frigoscandia"). As of December 31, 2001, Frigoscandia
owned or operated 75 temperature-controlled distribution facilities aggregating
154.4 million cubic feet in seven European countries and had transportation
operations in two other European countries. During 2001, Frigoscandia disposed
of substantially all of its operating assets in Germany and all of its operating
assets in the Czech Republic. In March 2002, all of Frigoscandia's operating
assets in Sweden, Denmark, Finland, Norway and the Netherlands, as well as the
remaining German operating assets (aggregating 37.8 million cubic feet), were
sold. Negotiations are ongoing related to the sale of substantially all of the
operating assets in the United States owned by CSI and 8.7 million cubic feet of
Frigoscandia's operating assets in Europe, including its operating assets in
Spain and Italy. Upon completion of these dispositions, ProLogis expects that
there will be approximately 118.0 million cubic feet of facilities owned by the
companies in this operating segment. No assurances can be given that any of
these transactions will be completed.

     In 2001, ProLogis Logistics and Frigoscandia S.A. recognized charges, of
which ProLogis' share was $53.3 million and $35.1 million, respectively, related
to the write-down of their respective operating companies' assets and other
impairment charges related to ProLogis Logistics' and Frigoscandia S.A.'s
investments in these the operating companies. See Note 4 to ProLogis'
Consolidated Financial Statements in Item 8.

                                        10


     Operations

     ProLogis recognizes its share of the net earnings of ProLogis Logistics and
Frigoscandia S.A. under the equity method as a component of its total income. In
2001, ProLogis' share of the net loss of ProLogis Logistics was a $58.5 million
(a $4.5 million loss before the charges related to the write-down of operating
assets and technology related investments of CSI and other impairment charges
related to ProLogis Logistics' investment in CSI). ProLogis' share of the income
of ProLogis Logistics was $12.0 million in 2000 and $10.8 million in 1999. In
each year, 1999 to 2001, Frigoscandia S.A. generated net losses with ProLogis'
share aggregating $53.0 million in 2001 (a $12.8 million loss before the charges
related to the write-down of operating assets and technology related investments
of Frigoscandia and other impairment charges related to Frigoscandia S.A.'s
investment in Frigoscandia), $20.3 million in 2000 and $4.4 million in 1999. See
"Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Results of Operations -- Temperature-Controlled
Distribution Operations", and Notes 4 and 10 to ProLogis' Consolidated Financial
Statements in Item 8.

     Market Presence

     Market presence in the temperature-controlled distribution industry is
generally defined by the volume available for storage of frozen and chilled
foods in addition to the transportation network in place to serve customers.
With 59 facilities aggregating 178.4 million cubic feet in operation (including
35.5 million cubic feet of dry distribution space operated in its facilities),
CSI believes it has the third largest network in the United States (based on
cubic feet in operation). CSI's largest markets (based on CSI's cubic feet in
operation) are Phoenix (16.7%), Southern California (16.1%), Southeastern
Pennsylvania (14.3%) and Atlanta (12.0%). Frigoscandia believes that it has the
largest temperature-controlled distribution company in Europe based on its 75
facilities aggregating 154.4 million cubic feet in operation in seven countries.
Frigoscandia's largest markets (based on Frigoscandia's cubic feet in operation)
are France (41.7%), the United Kingdom (28.2%) and Sweden (12.5%).

     Competition

     ProLogis believes that the temperature-controlled distribution industry has
significant barriers to entry due to its capital-intensive nature, which limits
competition. In the United States, CSI competes directly with several national
temperature-controlled distribution companies. However, CSI's primary
competition in many markets is from local, and considerably smaller, warehouse
operators. In Europe, Frigoscandia is one of a few European
temperature-controlled distribution companies that have operations in more than
one country (as compared to the nine countries in which Frigoscandia operates).
Like CSI, Frigoscandia's primary competition in many markets is from local, and
considerably smaller, warehouse operators.

     Customers

     CSI has approximately 1,300 customers including some of the nation's
leading supermarket retailers in the United States. Of CSI's total revenues,
approximately 73% were derived from its 25 largest customers and CSI's largest
customer accounted for approximately 35% of CSI's total revenues. Excluding the
fees generated by CSI's retail-dedicated operations (where CSI provides
warehouse logistics services in the distribution facilities that are owned by
the customer) the 25 largest customers accounted for approximately 59% of CSI's
total revenues with the largest customer accounting for approximately 11% of
CSI's total revenues. See "-- Investments".

     Frigoscandia has approximately 5,800 customers. Of Frigoscandia's total
revenues, approximately 63% were derived from its 25 largest customers and
Frigoscandia's largest customer accounted for approximately 6% of Frigoscandia's
total revenues.

     Employees

     CSI and Frigoscandia directly employ all employees in the
temperature-controlled distribution operations segment. CSI employs
approximately 3,800 persons in the United States, of whom approximately 56%
                                        11


participate in collective bargaining agreements. Frigoscandia employs
approximately 2,300 persons in nine European countries, of whom approximately
45% participate in collective bargaining agreements. Both CSI and Frigoscandia
believe their relationships with their employees to be good.

     Seasonal Nature of the Business

     Temperature-controlled distribution operations are seasonal, in that demand
for temperature-controlled distribution facilities is stronger during the third
quarter of the calendar year and is at its lowest level in the first quarter of
the calendar year. The seasonal nature of temperature-controlled distribution
operations coincides with the lower demand for frozen foods, such as ice cream,
during the winter months and the timing of the harvests of various food crops in
the third quarter of the year, which increases the demand for
temperature-controlled storage capacity during that time.

     Future Plans

     In 2002 the initial emphasis will be on completing the sales transactions
currently being negotiated that were announced in January 2002. In March 2002,
the sales of 37.8 million cubic feet of European operating assets were
completed. If the remaining pending sales transactions are completed in Europe
and in the United States, substantially all of the operating assets of the
companies in which ProLogis has investments in this operating segment will be
located in the United Kingdom and France at the end of 2002. Proceeds from the
dispositions of operating assets will be used to repay third party debt within
this operating segment with the remainder, if any, to be used to repay loans to
ProLogis or distributed to ProLogis based on its ownership interest.

     The focus in France and the United Kingdom in 2002 will continue to be on
operational issues to increase operating efficiencies and profitability. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Results of Operations -- Temperature-Controlled Distribution
Operations" for a discussion of operating performance of this business segment
and see the discussion of factors that could affect the future plans of
ProLogis, ProLogis Logistics and Frigoscandia S.A. at "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Risk
Factors".

PROLOGIS OPERATING SYSTEM(R)

     The cornerstone of ProLogis' business strategy is the ProLogis Operating
System(R), comprised of the Market Services Group, the Global Services Group,
the Global Development Group and the ProLogis Solutions Group. The ProLogis
Operating System(R) is a proprietary property management and customer service
delivery system that has been designed to integrate four groups of professionals
that provide a unique disciplined approach to serving existing and prospective
ProLogis customers. The customer focus of the ProLogis Operating System(R)
provides for a high-quality level of service and a single point of contact for
distribution solutions on a global basis, and positions ProLogis to build
customer relationships that will generate additional business opportunities.

  Market Services Group

     The Market Services Group is responsible for managing the facilities in
ProLogis' property operations segment. Members of the Market Services Group,
under the leadership of ProLogis' 22 Market Officers, are responsible for
understanding the needs of existing and prospective customers in their
respective markets. The Market Officers, along with their team of property
management and leasing professionals, provide ProLogis and its customers with
extensive knowledge of local market conditions. Market Officers also assist the
Global Services Group in identifying those ProLogis customers with multiple
market requirements and also assist in the marketing efforts directed at these
customers. The market officers' ability to serve customers in the local market
is enhanced by their access to both national and international ProLogis
resources. Market officers do not develop projects or borrow or commit capital.
Their focus is strictly on managing the facilities in their markets, creating
and maintaining relationships with distribution space users and industrial
brokers, marketing

                                        12


ProLogis products and identifying potential acquisition, development and leasing
opportunities in their target markets.

  Global Services Group

     The Global Services Group is dedicated to providing service to the largest
users of distribution space, a group of businesses that ProLogis has identified
as its targeted customers, with the primary focus to make ProLogis the preferred
provider of distribution space to these companies. The Global Services Group is
headquartered in Denver and Amsterdam and has regional offices in Atlanta,
Chicago and New Jersey. ProLogis' multi-market presence permits it to
accommodate the reconfiguration needs of its customers by relocating an existing
customer within a market or between markets in North America or Europe.
ProLogis' development program, land inventory and existing network of
distribution facilities allow the Global Services Group to assist existing and
prospective customers whose growing and changing business needs require them to
expand their distribution facilities or reconfigure their distribution networks.
The expansion can result in relocating the customer to larger ProLogis spaces or
in developing a facility specifically for the customer.

     Global Services Group professionals build long-term relationships with
ProLogis' customers and provide a single point of contact for multi-location
global users of distribution facilities to simplify and streamline the execution
of such customers' distribution space plans. ProLogis' experience to date
suggests that many major corporate customers are limiting the number of services
providers that they work with to meet their distribution facility requirements.
An ancillary benefit of this extensive contact with customers is the ability to
be on the forefront of international and national distribution and logistics
trends.

  Global Development Group

     The Global Development Group focuses substantial research and development
efforts on creating industry-leading distribution facilities and master-planned
distribution parks. Members of the Global Development Group have extensive
experience in the development and construction of generic facilities that appeal
to a wide variety of customers as well as the development of specialized
facilities that meet a specific customer's needs. ProLogis incorporates the
latest technology with respect to building design and systems and has developed
consistent standards and procedures that it strictly adheres to in the
development of all facilities.

     The Global Development Group is comprised principally of architects,
engineers and construction professionals who oversee every aspect of the land
planning and building design processes. These professionals also monitor the
construction process and oversee the performance of third-party general
contractors. The Global Development Group's development specialists and project
managers operate regionally to better serve their markets. The project managers
supervise each project with oversight from ProLogis' management, pursuant to
uniform standards, procedures and specifications that have been carefully
designed to achieve consistent quality.

     ProLogis believes the depth and breadth of experience within the Global
Development Group enhances the effectiveness of the Global Services Group and
provides the Market Officers in the Market Services Group with a distinct
competitive advantage for development opportunities in their respective markets.

  ProLogis Solutions Group

     The ProLogis Solutions Group coordinates a menu of value-added
distribution-related services to customers, including network optimization
tools, strategic site selection, business location services (including tax
incentive analysis and tax negotiation consulting) and design consulting
services. The ProLogis Solutions Group was formed to allow ProLogis to address
all areas of its customers' distribution needs. ProLogis believes that by
offering these additional services, it will be able to deepen its customer
relationships and increase cash flows with relatively small additional capital
requirements.

                                        13


PROLOGIS MANAGEMENT

     ProLogis' success depends upon its management's ability to provide
strategic and day-to-day management, research, investment analysis, acquisition
and due diligence, development, marketing, asset management, capital markets,
asset disposition, management information systems support and accounting and
legal services. ProLogis' management has demonstrated a strategic vision in
determining an operating and investment focus that has provided favorable
returns to its shareholders and has positioned ProLogis for long-term growth.
Through the ProLogis Operating System(R), ProLogis believes it is the first
international operating company that has been able to address and service a
corporate customer's distribution space requirements on an international,
national, regional and local basis. ProLogis has several senior executives with
the leadership, operational, investment and financial skills and experience to
oversee the entire operation of the company.

  Executive Officers and Trustees

     K. Dane Brooksher -- 63 -- Mr. Brooksher has served as a Trustee since
October 1993. Mr. Brooksher has been Chairman and Chief Executive Officer of
ProLogis since March 1999 and he was Co-Chairman and Chief Operating Officer of
ProLogis from November 1993 to March 1999 (through September 1997 he was
employed by ProLogis' former management company). Prior thereto, Mr. Brooksher
was Area Managing Partner and Chicago Office Managing Partner of KPMG Peat
Marwick (now KPMG LLP), independent public accountants, where he served on the
Board of Directors and Management Committee and as International Development
Partner for Belgium and the Netherlands. Mr. Brooksher is a Director of Vizional
Technologies, Inc. (an entity in which ProLogis has invested) and Butler
Manufacturing Company and he serves as an Advisory Board Member of the J.L.
Kellogg Graduate School of Management of Northwestern University. Mr.
Brooksher's term as Trustee expires in 2002.

     Irving F. Lyons, III -- 52 -- Mr. Lyons has served as a Trustee since March
1996. Mr. Lyons has been Vice Chairman of ProLogis since December 2001 and Chief
Investment Officer of ProLogis since March 1997. Mr. Lyons was President of
ProLogis from March 1999 to December 2001, Co-Chairman of ProLogis from March
1997 to March 1999 and Managing Director from December 1993 to March 1997
(through September 1997 he was employed by ProLogis' former management company).
Prior thereto, Mr. Lyons was the Managing Partner of King & Lyons, a San
Francisco Bay Area industrial real estate development and management company,
since its inception in 1979. Mr. Lyons' term as Trustee expires in 2003.

     C. Ronald Blankenship -- 52 -- Mr. Blankenship has served as a Trustee
since June 2000. Mr. Blankenship has been Director, Vice Chairman and Chief
Operating Officer of Security Capital Group Incorporated ("Security Capital"),
ProLogis' largest shareholder, since May 1998. Mr. Blankenship was Managing
Director of Security Capital from 1991 until 1998 and he was Chairman of
Archstone Communities Trust, (a REIT focused on apartment communities and a
former affiliate of Security Capital) until June 1997. Mr. Blankenship was a
Trustee of Archstone Communities Trust from March 2000 until February 2001. Mr.
Blankenship was Interim Chairman, Chief Executive Officer and Director of
Homestead Village Incorporated (an affiliate of Security Capital) from May 1999
to November 2001. Mr. Blankenship is a Director of BelmontCorp, InterPark
Holdings Inc., Macquarie Capital Partners LLC, Regency Centers Corporation and
Storage USA, Inc. (all affiliates of Security Capital). Mr. Blankenship's term
as Trustee expires in 2004.

     Stephen L. Feinberg -- 57 -- Mr. Feinberg has served as a Trustee since
January 1993. Mr. Feinberg has been Chairman of the Board and Chief Executive
Officer of Dorsar Investment Co., Inc., a diversified holding company with
interests in real estate and venture capital since 1970. Mr. Feinberg is also a
Director of Security Capital Preferred Growth (an affiliate of Security
Capital), Continental Transmission Corporation, The Harvill Press Limited,
MetaMetrics, Inc., St. John's College, The Santa Fe Institute and The Feinberg
Foundation, Inc. He was formerly Chairman of the Board of St. John's College and
a former Director of Farrar, Strauss and Giroux, Inc. (a private publishing
company), Molecular Informatics, Inc., Border Steel Mills, Inc., Springer
Building Materials Corporation, Circle K Corporation, EnerServ Products, Inc.
and Texas Commerce Bank-First State. Mr. Feinberg's term as Trustee expires in
2004.

                                        14


     George L. Fotiades -- 48 -- Mr. Fotiades was appointed as a Trustee in
December 2001. Mr. Fotiades is President and Chief Operating Officer of
Pharmaceutical Technologies and Services, a division of Cardinal Health, Inc., a
provider of services supporting the health-care industry. Prior thereto, Mr.
Fotiades was President of R. P. Scherer Corporation (which was merged into
Cardinal Health, Inc. in August 1998), Executive Vice President and Group
President from 1996 to 1998 and Group President of the Americas and Asia Pacific
from 1996 to 1998. Mr. Fotiades' term as Trustee expires in 2002.

     Donald P. Jacobs -- 74 -- Mr. Jacobs has served as a Trustee since February
1996. Mr. Jacobs has been a faculty member of the J.L. Kellogg Graduate School
of Management of Northwestern University since 1957, and he was Dean from 1975
to 2001. Mr. Jacobs retired as Dean in 2001 and is now Dean Emeritus. Mr. Jacobs
is a Director of Hartmarx Corporation, Terex Corporation and CDW Computer
Centers. Mr. Jacobs was formerly a Director of Commonwealth Edison and its
parent company, Unicom and he was formerly Chairman of the Public Review Board
of Andersen Worldwide. Mr. Jacobs was Chairman of the Advisory Committee of the
Oversight Board of the Resolution Trust Corporation for the third region from
1990 to 1992, Chairman of the Board of AMTRAK from 1975 to 1979, Co-Staff
Director of the Presidential Commission on Financial Structure and Regulation
from 1970 to 1971 and Senior Economist for the Banking and Currency Committee of
the U.S. House of Representatives from 1963 to 1964. Mr. Jacobs' term as Trustee
expires in 2004.

     Kenneth N. Stensby -- 62 -- Mr. Stensby has served as a Trustee since March
1999. Mr. Stensby was a Director of Meridian Industrial Trust Inc. ("Meridian")
from 1996 to March 1999 when it was merged with and into ProLogis. Mr. Stensby
was President and Chief Executive Officer of United Properties, a
Minneapolis-based diversified real estate company, from 1974 until his
retirement in January 1995. Mr. Stensby is past President of the National
Association of Industrial and Office Parks and was a Director of First Asset
Realty Advisors, a pension advisory subsidiary of First Bank of Minneapolis and
Corner House. Mr. Stensby's term as Trustee expires in 2002.

     J. Andre Teixeira -- 49 -- Mr. Teixeira has served as a Trustee since
February 1999. Mr. Teixeira is Senior Consultant with BBL Partners, LLC, Moscow,
Russia, a consulting and trading company specializing in the food and food
ingredient industry. Mr. Teixeira was the President of Coca-Cola for the Russia
and Ukraine region, General Manager of Coca-Cola Russia, Ukraine and Belarus and
Head of Representation for the Coca-Cola Export Corporation, Moscow from 2000 to
2001. Mr. Teixeira was General Manager/President of the Coca-Cola Ukraine and
Belarus region, Kiev from 1998 to 2000 and was with Coca-Cola in various
capacities since 1990. Mr. Teixeira's term as Trustee expires in 2004.

     Thomas G. Wattles -- 50 -- Mr. Wattles has served as a Trustee since
January 1993. Mr. Wattles is a Managing Director of Security Capital and has
been with Security Capital in various capacities since March 1991. Mr. Wattles
was a Director of ProLogis' predecessor from its formation in June 1991 until
January 1993. Mr. Wattles was Non-Executive Chairman of ProLogis from March 1997
to May 1998 and Co-Chairman and Chief Investment Officer of ProLogis from
November 1993 to March 1997 (through September 1997 he was employed by ProLogis'
former management company). Mr. Wattles is a Trustee of Urban Growth Property
Trust (an affiliate of Security Capital) and he is a Director of Interpark
Holdings Inc., Regency Centers Corporation and Security Capital -- European
Realty, (all affiliates of Security Capital). Mr. Wattles' term as Trustee
expires in 2002.

     William D. Zollars -- 54 -- Mr. Zollars was appointed as a Trustee in June
2001. Mr. Zollars has been Chairman, President and Chief Executive Officer of
Yellow Corporation, a holding company specializing in transportation of
industrial, commercial and retail goods since 2000. From 1996 to 2000, Mr.
Zollars was President of Yellow Freight System Inc., Yellow Corporation's
principal operating subsidiary. He was a Senior Vice President of Ryder
Integrated Logistics, Inc. from 1994 to 1996. Mr. Zollars is a Director of
Butler Manufacturing Co. and Rogers Group, Inc. Mr. Zollars' term as Trustee
expires in 2002.

  Senior Officers

     Jeffrey H. Schwartz -- 42 -- President (Asia) and Chief Operating Officer
for ProLogis' Asian operations since March 2002. Mr. Schwartz was President and
Chief Executive Officer of Vizional
                                        15


Technologies, Inc. (a company in which ProLogis has invested) from August 2000
to February 2002. Mr. Schwartz was with ProLogis from October 1994 to September
2000, most recently as Vice Chairman for International Operations (through
September 1997 he was employed by ProLogis' former management company). Prior to
joining ProLogis in October 1994, Mr. Schwartz was a founder and managing
partner of The Krauss/Schwartz Company, one of the largest industrial real
estate developers in Florida.

     John W. Seiple, Jr.  -- 43 -- President (North America) since December 2001
and Chief Operating Officer for ProLogis' North American operations since
December 1998. Mr. Seiple has been with ProLogis in varying capacities since
October 1993 (through September 1997 he was employed by ProLogis' former
management company). Prior to joining ProLogis, Mr. Seiple was a Senior Vice
President with Trammell Crow Company, a diversified commercial real estate
company in North America.

     Robert J. Watson -- 52 -- President (Europe) since December 2001 and Chief
Operating Officer for ProLogis' European operations since December 1998. Mr.
Watson has been with ProLogis in varying capacities since January 1993 (through
September 1997 he was employed by ProLogis' former management company). Prior to
joining ProLogis, Mr. Watson with was the Regional Partner for Southwest United
States Real Estate with Trammell Crow Company, a diversified commercial real
estate company in North America.

     Timothy M. Harvie -- 41 -- Managing Director and Chief Technology Officer
of ProLogis since November 2000, where he is responsible for ProLogis'
information technology operations. Prior to joining ProLogis, Mr. Harvie was
with USFreightways Corporation, a provider of comprehensive supply chain
management services from February 1989 to November 2000, most recently as Chief
Information Officer.

     Walter C. Rakowich -- 44 -- Managing Director and Chief Financial Officer
of ProLogis since December 1998, where he is responsible for worldwide corporate
finance. Mr. Rakowich has been with ProLogis in varying capacities since July
1994 (through September 1997 he was employed by ProLogis' former management
company). Prior to joining ProLogis, Mr. Rakowich was a consultant to ProLogis
in the area of due diligence and acquisitions and he was a Principal with
Trammell Crow Company, a diversified commercial real estate company in North
America.

     Ned K. Anderson -- 55 -- Managing Director of ProLogis since December 1998,
where he is responsible for the Market Services Group in the Pacific Region of
the United States. Mr. Anderson has been with ProLogis in varying capacities
since December 1993 (through September 1997 he was employed by ProLogis' former
management company). Prior to joining ProLogis, Mr. Anderson was a partner at
King & Lyons, a San Francisco Bay Area industrial real estate development and
management company.

     Paul C. Congleton -- 47 -- Managing Director of ProLogis since September
1999, where he is responsible for the Global Capital Group, which is responsible
for securing sources of private capital. Mr. Congleton has been with ProLogis in
varying capacities since January 1995 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining ProLogis, Mr. Congleton
was Managing Principal with Overland Company, an Arizona based property
management, leasing and consulting company.

     Steven K. Meyer -- 54 -- Managing Director of ProLogis since December 1998,
where he is responsible for the Market Services Group in the Central Region of
the United States and in Mexico. Mr. Meyer has been with ProLogis in varying
capacities since September 1994 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining ProLogis, Mr. Meyer was
an Executive Vice President with Trammell Crow Company, a diversified commercial
real estate company in North America.

     John R. Rizzo -- 52 -- Managing Director of ProLogis since December 2000,
where he is responsible for the Global Development Group in North America. Mr.
Rizzo has been with ProLogis in varying capacities since January 1999. Prior to
joining ProLogis, Mr. Rizzo was Senior Vice President and Chief Operating
Officer of Perini Management Services Incorporated, an affiliate of Perini
Corporation, a construction management and general contracting firm.

     Robin P. R. von Weiler -- 45 -- Managing Director of ProLogis since
December 1999, where he is responsible for the Market Services and Global
Development Groups in Northern and Central Europe.

                                        16


Mr. von Weiler has been with ProLogis in varying capacities since October 1997.
Prior to joining ProLogis, Mr. Von Weiler was with DTZ Zadelhoff V.O.F., part of
DTZ Debenham Tie Lung, in Rotterdam, the Netherlands, most recently as Vice
Managing Director, Real Estate Agent and Corporate Advisor.

     Gregory J. Arnold -- 47 -- Senior Vice President of ProLogis since December
2001, where he is a member of the Global Capital Group. Mr. Arnold has been with
ProLogis in varying capacities since May 1994 (through September 1997 he was
employed by ProLogis' former management company). Prior to joining ProLogis, Mr.
Arnold was an Equity Vice President with LaSalle Partners (now Jones Lang
LaSalle), a corporate real estate advisory firm.

     James D. Cochran -- 41 -- Senior Vice President of ProLogis since December
2001, where he is a member of the Global Capital Group, which is responsible for
securing sources of private capital. Mr. Cochran has been with ProLogis in
varying capacities since March 1994 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining ProLogis, Mr. Cochran was
a Vice President with TCW Realty Advisors, a real estate pension advisory firm.

     Frank H. Fallon -- 40 -- Senior Vice President of ProLogis since September
1999, where he is responsible for the Market Services Group in the Southeast
Region of the United States. Mr. Fallon has been with ProLogis in varying
capacities since January 1995 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining ProLogis, Mr. Fallon was
a Marketing Principal with Trammell Crow Company, a diversified commercial real
estate company in North America.

     Ranald A. Hahn -- 46 -- Senior Vice President of ProLogis since December
2000, where he is responsible for the Market Services and Global Development
Groups in Southern Europe. Mr. Hahn has been with ProLogis in varying capacities
since March 1999. Prior to joining ProLogis, Mr. Hahn was the International
Business Development Director of GSE, a French logistics construction company.

     Larry H. Harmsen -- 41 -- Senior Vice President of ProLogis since December
2001, where he is a member of the Market Services Group in the Pacific Region of
the United States. Mr. Harmsen has been with ProLogis in varying capacities
since February 1995 (through September 1997 he was employed by ProLogis' former
management company). Prior to joining ProLogis, Mr. Harmsen was a Vice President
and General Partner with Lincoln Property Company, a diversified national real
estate operating company.

     M. Gordon Keiser, Jr. -- 58 -- Senior Vice President of ProLogis since
October 1995 and Treasurer of ProLogis since December 1998, where he is
responsible for relationships with ProLogis' lenders. Mr. Keiser has been with
ProLogis in varying capacities since October 1995 (through September 1997 he was
employed by ProLogis' former management company). Prior to joining ProLogis, Mr.
Keiser was Senior Vice President of JMB Realty Corporation with responsibilities
for corporate finance and capital markets financing.

     Douglas A. Kiersey, Jr. -- 41 -- Senior Vice President of ProLogis since
December 2001, where he is responsible for the Market Services Group in the
Mid-Atlantic Region of the United States. Mr. Kiersey has been with ProLogis in
varying capacities since May 1994 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining ProLogis, Mr. Kiersey was
a member of the Industrial/Technology Group at Cushman & Wakefield of Oregon,
Inc., a real estate brokerage and services company.

     Luke A. Lands -- 45 -- Senior Vice President and Controller of ProLogis
since August 2000, where he supervises accounting, financial reporting and
financial forecasting. Mr. Lands has been with ProLogis in varying capacities
since January 1996 (through September 1997 he was employed by ProLogis' former
management company). Prior to joining ProLogis, Mr. Lands was Vice President of
SCG Realty Services (an affiliate of Security Capital) from February 1995 to
January 1996. Prior thereto, Mr. Lands was Vice President and Controller for
Lincoln Property Company, a diversified national real estate operating company.
Mr. Lands is a Certified Public Accountant.

     Debra A. McRight -- 42 -- Senior Vice President of ProLogis since December
1999, where she is responsible for North American property management
operations. Ms. McRight has been with ProLogis in varying capacities since
September 1995 (through September 1997 she was employed by ProLogis' former

                                        17


management company). Prior to joining ProLogis, Ms. McRight was with Paragon
Group, Inc., a full service real estate company, where she was responsible for
property management operations in St. Louis, Missouri.

     David S. Morze -- 41 -- Senior Vice President of ProLogis since March 1999,
where he is responsible for the Global Services Group. Mr. Morze has been with
ProLogis in varying capacities since March 1995 (through September 1997 he was
employed by ProLogis' former management company). Prior to joining ProLogis, Mr.
Morze was the Director of Marketing for Northern California for The SARES REGIS
Group, an industrial, residential and retail development company in California.

     Edward S. Nekritz -- 36 -- Senior Vice President and General Counsel of
ProLogis since December 1998 and Secretary of ProLogis since March 1999, where
he oversees the provision of all legal services for ProLogis. Mr. Nekritz is
also responsible for ProLogis' risk management function. Mr. Nekritz has been
with ProLogis in varying capacities since September 1995 (through September 1997
he was employed by ProLogis' former management company). Prior to joining
ProLogis, Mr. Nekritz was an attorney with Mayer, Brown & Platt (now Mayer,
Brown, Rowe & Maw).

     Charles E. Sullivan -- 44 -- Senior Vice President of ProLogis since
December 2001, where he is a member of the Market Services Group in the
Southeast Region of the United States. Mr. Sullivan has been with ProLogis in
varying capacities since October 1994 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining ProLogis, Mr. Sullivan
was an Industrial Broker with Cushman & Wakefield of Florida, a real estate
brokerage and services company.

ENVIRONMENTAL MATTERS

     Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of certain hazardous or toxic substances
at, on, under or in its property. The costs of removal or remediation of such
substances could be substantial. Such laws often impose liability without regard
to whether the owner or operator knew of, or was responsible for, the release or
presence of such hazardous substances. The presence of such substances may
adversely affect the owner's ability to sell such real estate or to borrow using
such real estate as collateral. ProLogis has not been notified by any
governmental authority of any non-compliance, liability or other claim in
connection with any of the properties owned or being acquired at December 31,
2001, and ProLogis is not aware of any environmental condition with respect to
any of its properties that is likely to be material. ProLogis or the predecessor
owners have subjected each of its properties to an environmental assessment
(which does not involve invasive procedures such as soil sampling or ground
water analysis) by independent consultants. While some of these assessments have
led to further investigation and sampling, none of the environmental assessments
has revealed, nor is ProLogis aware of, any environmental liability (including
asbestos-related liability) that ProLogis believes would have a material adverse
effect on its business, financial condition or results of operations. No
assurance can be given, however, that these assessments and investigations
reveal all potential environmental liabilities, that no prior owner or operator
created any material environmental condition not known to ProLogis or the
independent consultants or that future uses or conditions (including, without
limitation, customer actions or changes in applicable environmental laws and
regulations) will not result in unreimbursed costs relating to environmental
liabilities. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Business Risks".

INSURANCE COVERAGE

     ProLogis and its unconsolidated entities currently carry comprehensive
insurance coverage including property, liability, fire, flood, earthquake,
environmental, extended coverage and rental loss, as appropriate for the markets
where each entities' facilities and business operations are located. The
insurance coverage contains policy specifications and insured limits customarily
carried for similar facilities. ProLogis believes its facilities and the
facilities of its unconsolidated entities are adequately insured. However, an
uninsured loss could result in loss of capital investment and anticipated
profits. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Business Risks".

                                        18


ITEM 2. PROPERTIES

INDUSTRIAL DISTRIBUTION FACILITIES

     ProLogis has invested primarily in generic industrial distribution
facilities with an average office finish level of less than 10%. Due to the
costs associated with retrofitting customer spaces in service center product
this type of product has been acquired only on a very limited basis, generally
as part of portfolio acquisitions in which the majority of facilities being
acquired were bulk distribution. ProLogis' industrial distribution facilities
are typically used for storage, packaging, assembly, distribution and light
manufacturing of consumer and industrial products. As of December 31, 2001,
ProLogis' distribution facilities that are used for bulk distribution comprised
of 86.4% of its total operating portfolio (based on square footage); the
distribution facilities used for light manufacturing and assembly comprised
12.7% of its total operating portfolio (based on square footage) and the
distribution facilities used for service centers was 0.9% of its total operating
portfolio (based on square footage).

GEOGRAPHIC DISTRIBUTION

     ProLogis has direct ownership of 1,224 distribution facilities (operating
and under development) in North America, Europe and Japan as of December 31,
2001. In North America, ProLogis' directly owned facilities are located in 39
cities and regions in 23 states and the District of Columbia in the United
States and 4 cities in Mexico. ProLogis' directly-owned European facilities are
located in 13 cities and regions in 8 countries. In Japan, ProLogis' one
facility is located in Tokyo. The table below demonstrates the geographic
distribution of ProLogis' portfolio (operating facilities and facilities under
development). The table excludes land held for future development. The table
includes facilities owned by entities that are consolidated in ProLogis'
financial statements in which ProLogis does not own 100% (see "-- Consolidated
Entities") but does not include facilities that are owned by ProLogis'
unconsolidated entities which are discussed under "-- Unconsolidated Entities".



                                                                   DECEMBER 31,
                                           -------------------------------------------------------------
                                                       2001                             2000
                                           ----------------------------     ----------------------------
                                                          PERCENTAGE OF                    PERCENTAGE OF
                                           NUMBER OF      ASSETS BASED      NUMBER OF      ASSETS BASED
                                           FACILITIES      ON COST(1)       FACILITIES      ON COST(1)
                                           ----------     -------------     ----------     -------------
                                                                               
NORTH AMERICAN MARKETS:
United States:
  Atlanta, Georgia.......................       89             6.08%             97             6.46%
  Austin, Texas..........................       27             1.52              37             2.00
  Charlotte, North Carolina..............       31             2.78              32             2.57
  Chattanooga, Tennessee.................        5             0.35               5             0.33
  Chicago, Illinois......................       62             7.99              64             7.45
  Cincinnati, Ohio.......................       40             2.52              47             3.00
  Columbus, Ohio.........................       31             3.70              32             4.13
  Dallas/Ft. Worth, Texas................      126             9.83             116             8.53
  Denver, Colorado.......................       23             1.60              26             1.80
  El Paso, Texas.........................       18             1.45              19             1.49
  Ft. Lauderdale/Miami, Florida..........       12             1.14              17             1.73
  Houston, Texas.........................       85             5.07              82             4.67
  I-95 Corridor, New Jersey..............       26             2.70              31             4.89
  Indianapolis, Indiana..................       43             2.96              43             2.79
  Kansas City, Kansas/Missouri...........       29             1.36              29             1.28
  Las Vegas, Nevada......................       18             2.25              18             2.20
  Los Angeles/Orange County,
     California..........................        4             1.40               6             1.62
  Louisville, Kentucky...................        8             1.01               8             1.01
  Memphis, Tennessee.....................       43             3.69              40             3.25
  Nashville, Tennessee...................       31             1.96              29             1.63


                                        19




                                                                   DECEMBER 31,
                                           -------------------------------------------------------------
                                                       2001                             2000
                                           ----------------------------     ----------------------------
                                                          PERCENTAGE OF                    PERCENTAGE OF
                                           NUMBER OF      ASSETS BASED      NUMBER OF      ASSETS BASED
                                           FACILITIES      ON COST(1)       FACILITIES      ON COST(1)
                                           ----------     -------------     ----------     -------------
                                                                               
  Oklahoma City, Oklahoma................        6             0.25               6             0.24
  Orlando, Florida.......................       19             1.54              23             1.85
  Phoenix, Arizona.......................       30             1.52              31             1.67
  Portland, Oregon.......................       20             1.09              26             1.59
  Reno, Nevada...........................       25             2.85              20             1.48
  Salt Lake City, Utah...................        7             1.01               7             0.93
  San Antonio, Texas.....................       43             2.06              46             2.16
  San Francisco (East Bay), California...       52             4.89              54             4.79
  San Francisco (South Bay),
     California..........................       71             5.21              71             4.98
  Seattle, Washington....................       14             1.30              15             1.33
  St. Louis, Missouri....................       13             0.83              15             1.05
  Tampa, Florida.........................       62             3.04              58             2.67
  Tulsa, Oklahoma........................        9             0.28               9             0.26
  Washington D.C./Baltimore, Maryland....       39             3.17              48             4.13
  Other(2)...............................        5             1.37              23             1.41
Mexico:
  Juarez.................................       10             0.54               7             0.37
  Monterrey..............................       11             1.16              10             0.97
  Reynosa................................       15             1.21              15             1.01
  Tijuana................................        5             0.59               5             0.60
                                             -----           ------           -----           ------
       Subtotal North America............    1,207            95.27           1,267            96.32
                                             -----           ------           -----           ------
EUROPEAN MARKETS(3):
Belgium (Liege)..........................        1             0.15             --               --
France(4)................................        4             0.80               6             1.00
Germany(5)...............................        1             0.21               3             0.87
Hungary (Budapest).......................        1             0.23             --               --
Italy (Milan)............................        1             0.29               2             0.35
Netherlands(6)...........................        2             0.66               4             0.74
Poland(7)................................        3             0.36               3             0.72
Spain (8)................................        3             0.85             --               --
                                             -----           ------           -----           ------
       Subtotal Europe(3)................       16             3.55              18             3.68
                                             -----           ------           -----           ------
ASIAN MARKET:
Tokyo, Japan.............................        1             1.18             --               --
                                             -----           ------           -----           ------
       Subtotal Asia.....................        1             1.18             --               --
                                             -----           ------           -----           ------
       Total.............................    1,224(9)        100.00%          1,285(9)        100.00%
                                             =====           ======           =====           ======


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

(1) Facilities under development are reflected at the total expected cost at
    completion, rather than cost incurred as of the date presented.

(2) In 2001, includes one facility each in Akron, Ohio; Brownsville, Texas; and
    Norfolk, Virginia and two facilities in the I-81 Corridor (Pennsylvania). In
    2000, includes one facility each in Akron, Ohio; Detroit, Michigan and
    Norfolk, Virginia; six facilities in Birmingham, Alabama and 14 facilities
    in the Rio Grande Valley (Texas).

(3) ProLogis is committed to contribute all of its stabilized facilities
    developed in specified markets in Europe to ProLogis European Properties
    Fund, subject to meeting specified criteria, including leasing criteria.
    Generally upon completion, ProLogis holds distribution facilities in its
    operating portfolio in the property

                                        20


    operations segment until such leasing criteria are met and the facility is
    contributed to the ProLogis European Properties Fund.

(4) In 2001, includes one facility in Le Havre (0.26%), one facility in Lille
    (0.14%) and two facilities in Marseille (0.40%). In 2000, includes one
    facility in Le Havre (0.14%), one facility in Lille (0.06%), one facility in
    Marseille (0.14%) and three facilities in Paris (0.66%).

(5) In 2001, includes a facility in Dortmund. In 2000, includes one facility in
    Cologne (0.28%), one facility in Neustadt (0.28%) and one facility in Soest
    (0.31%).

(6) In 2001, includes one facility in Tilburg (0.28%) and one facility in Venlo
    (0.38%). In 2000, includes three facilities in Rotterdam (0.47%) and one
    facility in Tilburg (0.27%).

(7) In 2001, includes two facilities in Poznan (0.17%) and one facility in
    Warsaw (0.19%). In 2000, includes three facilities in Warsaw.

(8) In 2001, includes one facility in Barcelona (0.26%) and two facilities in
    Madrid (0.59%).

(9) Includes 16 facilities under development as of December 31, 2001 and 41
    facilities under development as of December 31, 2000.

FACILITIES

     The information in the following table is as of December 31, 2001 for the
facilities owned by ProLogis and its consolidated subsidiaries and partnerships.
No individual facility or group of facilities operated as a single business unit
amounted to 10% or more of ProLogis' consolidated total assets as of December
31, 2001 or generated income equal to 10% or more of ProLogis' consolidated
gross revenues for the year ended December 31, 2001. The table does not include
facilities that are owned by ProLogis' unconsolidated entities which are
discussed under "-- Unconsolidated Entities".



                                           PERCENTAGE    RENTABLE
                                  NO. OF   OCCUPANCY      SQUARE        INVESTMENT     ENCUMBRANCES
                                  BLDGS.      (1)         FOOTAGE          (2)             (3)
                                  ------   ----------   -----------   --------------   ------------
                                                                        
OPERATING FACILITIES DIRECTLY
  OWNED AS OF DECEMBER 31,
  2001(4):
  NORTH AMERICAN MARKETS:
  United States:
     Atlanta, Georgia...........     89       83.99%      9,026,973   $  269,314,552   $ 37,958,698
     Austin, Texas..............     27       96.12       1,759,309       67,422,951            --
     Charlotte, North
       Carolina.................     31       92.71       4,047,470      122,987,638     41,630,174
     Chattanooga, Tennessee.....      5      100.00       1,147,872       15,463,611            --
     Chicago, Illinois..........     59       81.81       7,703,210      310,365,869     45,116,644
     Cincinnati, Ohio...........     40       84.22       4,221,692      111,382,707     40,562,969
     Columbus, Ohio.............     31       87.06       5,038,799      163,923,531     30,622,616
     Dallas/Ft. Worth, Texas....    126       84.19      13,481,581      435,407,912     66,364,877
     Denver, Colorado...........     23       90.54       2,681,171       70,914,926            --
     El Paso, Texas.............     18       91.87       2,231,903       64,410,115      2,776,884
     Ft. Lauderdale/Miami,
       Florida..................     12       88.31         984,557       50,322,024      1,876,063
     Houston, Texas.............     85       95.97       7,500,012      224,617,787     47,093,262
     I-95 Corridor, New
       Jersey...................     26       92.52       3,455,097      119,373,970     28,323,597
     Indianapolis, Indiana......     43       77.25       4,187,721      131,087,594            --
     Kansas City,
       Kansas/Missouri..........     29       86.33       1,578,487       60,255,236     12,619,932
     Las Vegas, Nevada..........     17      100.00       2,061,291       95,201,188     17,242,603
     Los Angeles/Orange County,
       California...............      4        9.35       1,232,399       62,156,322            --
     Louisville, Kentucky.......      8       80.02       1,819,988       44,635,164      6,390,852
     Memphis, Tennessee.........     43       78.93       6,489,619      163,413,159     12,915,359


                                        21




                                           PERCENTAGE    RENTABLE
                                  NO. OF   OCCUPANCY      SQUARE        INVESTMENT     ENCUMBRANCES
                                  BLDGS.      (1)         FOOTAGE          (2)             (3)
                                  ------   ----------   -----------   --------------   ------------
                                                                        
     Nashville, Tennessee.......     31       81.97       3,450,080       86,851,732      7,123,813
     Oklahoma City, Oklahoma....      6       95.12         639,942       11,254,373            --
     Orlando, Florida...........     19       92.54       1,750,236       68,120,110      7,944,839
     Phoenix, Arizona...........     30       94.33       2,016,336       67,410,869            --
     Portland, Oregon...........     20       84.94       1,330,129       48,088,129        420,803
     Reno, Nevada...............     25       93.82       3,522,929      126,216,442     10,971,214
     Salt Lake City, Utah.......      7       85.82       1,643,468       44,812,541            --
     San Antonio, Texas.........     43       92.13       3,532,803       91,303,011            --
     San Francisco (East Bay),
       California...............     52       88.91       5,327,385      216,449,454     14,523,505
     San Francisco (South Bay),
       California...............     71       94.02       3,694,781      230,616,372     18,201,359
     Seattle, Washington........     14       83.26       1,272,827       57,403,549      4,783,642
     St. Louis, Missouri........     13       86.82       1,251,825       36,927,803      8,643,324
     Tampa, Florida.............     62       85.59       3,602,788      134,538,930     28,025,849
     Tulsa, Oklahoma............      9       97.30         523,623       12,475,643            --
     Washington D.C./Baltimore,
       Maryland.................     39       93.04       3,303,854      140,563,733     36,680,066
     Other(5)...................      4      100.00         495,598       22,522,210        411,241
  Mexico:
     Juarez.....................     10      100.00         685,603       24,013,913            --
     Monterrey..................     11       95.53       1,267,603       51,421,800            --
     Reynosa....................     15       76.41       1,501,147       53,770,344            --
     Tijuana....................      5       96.00         756,410       26,136,345            --
                                  -----      ------     -----------   --------------   ------------
       Subtotal North America...  1,202       86.90     122,218,518    4,133,553,559    529,224,185
                                  -----      ------     -----------   --------------   ------------
  EUROPEAN MARKETS(6):
  Belgium (Liege)...............      1         --          241,652        6,711,644            --
  France (Lille)................      1         --          192,977        6,293,530            --
  Poland(7).....................      3       49.85         429,268       15,675,940            --
  Spain (Barcelona).............      1       45.41         273,190       11,314,793            --
                                  -----      ------     -----------   --------------   ------------
       Subtotal Europe(6).......      6       29.73       1,137,087       39,995,907            --
                                  -----      ------     -----------   --------------   ------------
       TOTAL OPERATING
          FACILITIES DIRECTLY
          OWNED AS OF DECEMBER
          31, 2001(4)...........  1,208       86.37%    123,355,605   $4,173,549,466   $529,224,185
                                  =====      ======     ===========   ==============   ============




                                                       RENTABLE                         TOTAL
                                            NO. OF      SQUARE       INVESTMENT     EXPECTED COST
                                            BLDGS.     FOOTAGE          (2)              (8)
                                            ------    ----------    ------------    -------------
                                                                        
FACILITIES UNDER DEVELOPMENT AS OF
  DECEMBER 31, 2001(9)(10):
  NORTH AMERICAN MARKETS:
  United States:
     Chicago, Illinois....................     3         972,351    $ 21,665,177    $ 43,594,737
     I-81 Corridor, Pennsylvania..........     1       1,059,654      20,548,389      37,959,871
     Las Vegas, Nevada....................     1         120,000         968,182       4,492,806
                                              --      ----------    ------------    ------------
       Subtotal North America.............     5       2,152,005      43,181,748      86,047,414
                                              --      ----------    ------------    ------------


                                        22




                                                       RENTABLE                         TOTAL
                                            NO. OF      SQUARE       INVESTMENT     EXPECTED COST
                                            BLDGS.     FOOTAGE          (2)              (8)
                                            ------    ----------    ------------    -------------
                                                                        
  EUROPEAN MARKETS:
  France(11)..............................     3         925,316      12,928,623      29,107,823
  Germany (Dortmund)......................     1         176,487       3,889,163       9,280,056
  Hungary (Budapest)......................     1         231,426       2,954,806      10,176,277
  Italy (Milan)...........................     1         328,173       1,428,265      12,759,433
  Netherlands(12).........................     2         764,460      17,349,369      28,976,266
  Spain (Madrid)..........................     2         583,075       9,086,445      25,940,063
                                              --      ----------    ------------    ------------
       Subtotal Europe....................    10       3,008,937      47,636,671     116,239,918
                                              --      ----------    ------------    ------------
  ASIAN MARKET:
  Tokyo, Japan............................     1         196,476      40,726,363      52,212,717
                                              --      ----------    ------------    ------------
       Subtotal Asia......................     1         196,476      40,726,363      52,212,717
                                              --      ----------    ------------    ------------
       TOTAL FACILITIES UNDER DEVELOPMENT
          AS OF
       DECEMBER 31, 2001(9)(10)...........    16       5,357,418    $131,544,782    $254,500,049
                                              ==      ==========    ============    ============




                                                                      INVESTMENT    ENCUMBRANCES
                                                           ACREAGE       (2)            (3)
                                                           -------   ------------   ------------
                                                                           
LAND HELD FOR DEVELOPMENT AS OF DECEMBER 31, 2001(13):
  NORTH AMERICAN MARKETS:
  United States:
     Atlanta, Georgia....................................    201.4   $ 16,399,577    $       --
     Austin, Texas.......................................      7.2        763,323            --
     Baltimore, Maryland.................................      5.8      1,083,611            --
     Charlotte, North Carolina...........................     17.3      1,513,440            --
     Chicago, Illinois...................................    109.4     17,781,716            --
     Cincinnati, Ohio....................................    100.1      8,771,105            --
     Columbus, Ohio......................................     56.5      2,368,696            --
     Dallas/Ft. Worth, Texas.............................    147.4     11,624,808            --
     Denver, Colorado....................................      6.0        550,374            --
     El Paso, Texas......................................    106.9      6,534,545            --
     Ft. Lauderdale/Miami, Florida.......................     10.0      2,833,305            --
     Houston, Texas......................................     64.9      5,316,711            --
     I-95 Corridor, New Jersey...........................     25.4      2,096,018            --
     Indianapolis, Indiana...............................    123.4      8,564,040            --
     Kansas City, Kansas/Missouri........................     16.6      1,525,975            --
     Las Vegas, Nevada...................................     56.7      6,351,236       304,384
     Los Angeles/Orange County, California...............      9.2      1,623,022            --
     Louisville, Kentucky................................     42.4      4,059,823            --
     Memphis, Tennessee..................................    120.6      6,495,766            --
     Northern Virginia...................................     16.6      2,434,290            --
     Orlando, Florida....................................     28.1      2,841,892            --
     Portland, Oregon....................................     18.0      2,888,152            --
     Reno, Nevada........................................     30.2      4,178,309            --
     Salt Lake City, Utah................................     30.3      2,023,921            --
     San Antonio, Texas..................................     58.1      5,107,655            --
     San Francisco (East Bay) California.................     77.5      6,436,426     2,577,065
     Seattle Washington..................................     10.6      1,972,439            --
     Tampa, Florida......................................     51.1      3,543,063            --


                                        23




                                                                      INVESTMENT    ENCUMBRANCES
                                                           ACREAGE       (2)            (3)
                                                           -------   ------------   ------------
                                                                           
  Mexico:
     Juarez..............................................     17.0      3,092,150            --
     Monterrey...........................................     25.9      3,928,849            --
     Reynosa.............................................     82.6      8,213,965            --
     Tijuana.............................................      7.5      1,501,998            --
                                                           -------   ------------    ----------
       Subtotal North America............................  1,680.7    154,420,200     2,881,449
                                                           -------   ------------    ----------
  EUROPEAN MARKETS:
     Belgium(14).........................................     12.5        830,967            --
     France(15)..........................................    101.7      7,464,633            --
     Germany(16).........................................     25.5      4,769,815            --
     Hungary (Budapest)..................................     55.7      4,858,243            --
     Italy (Milan).......................................      4.6      1,329,027            --
     Netherlands (Rotterdam).............................      5.0      1,401,685            --
     Poland (Warsaw).....................................     44.3      8,610,513            --
     Spain(17)...........................................     46.5     17,051,923            --
                                                           -------   ------------    ----------
          Subtotal Europe................................    295.8     46,316,806            --
                                                           -------   ------------    ----------
            TOTAL LAND HELD FOR DEVELOPMENT AS OF
            DECEMBER 31, 2001(13)........................  1,976.5   $200,737,006    $2,881,449
                                                           =======   ============    ==========




                                                                                         TOTAL
                                                       RENTABLE                         EXPECTED
                                   NO. OF               SQUARE        INVESTMENT          COST       ENCUMBRANCES
                                   BLDGS.   ACREAGE     FOOTAGE          (2)              (9)            (3)
                                   ------   -------   -----------   --------------    ------------   ------------
                                                                                   
GRAND TOTALS AS OF DECEMBER 31,
  2001:
  Operating facilities(4)......... 1,208        n/a   123,355,605   $4,173,549,466             n/a   $529,224,185
  Facilities under development....    16        n/a     5,357,418      131,544,782    $254,500,049             --
  Land held for development.......   n/a    1,976.5           n/a      200,737,006             n/a      2,881,449
                                   -----    -------   -----------   --------------    ------------   ------------
      Totals...................... 1,224    1,976.5   128,713,023   $4,505,831,254(18) $254,500,049  $532,105,634
                                   =====    =======   ===========   ==============    ============   ============


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

 n/a Not Applicable

 (1) Percentage Occupancy is physical occupancy for the facility as of December
     31, 2001. Operating facilities as of December 31, 2001 include recently
     completed development facilities in initial lease-up (including 3.2 million
     square feet completed in the fourth quarter of 2001) which impacts the
     overall occupancy percentage as of December 31, 2001.

 (2) Investment is as of December 31, 2001 and represents ProLogis' historical
     cost.

 (3) Certain facilities are pledged as collateral under ProLogis' mortgage
     notes, securitized debt and assessment bonds as of December 31, 2001. See
     Schedule III -- Real Estate and Accumulated Depreciation to ProLogis'
     Consolidated Financial Statements in Item 8 for specific facilities
     pledged.

 (4) All assets are utilized in the property operations segment. Includes 69
     facilities aggregating 13.1 million square feet at an aggregate investment
     of $469.5 million that were developed in the CDFS business segment that are
     pending disposition or contribution to a real estate fund. See "Item
     1 -- Business -- Business Strategy and Operating Segments  -- CDFS Business
     Segment".

 (5) Includes one facility each in Akron, Ohio; the I-81 Corridor
     (Pennsylvania); Brownsville, Texas and Norcross, Virginia.

 (6) ProLogis is committed to contribute all of its stabilized facilities
     developed in specified markets in Europe to ProLogis European Properties
     Fund, subject to meeting specified criteria, including leasing criteria.
     Generally upon completion, ProLogis holds distribution facilities in its
     operating portfolio in the property operations segment until such leasing
     criteria are met and the facility is contributed to the ProLogis European
     Properties Fund.

                                        24


 (7) Includes two facilities in Poznan and one facility in Warsaw.

 (8) Represents the total expected cost at completion for facilities under
     development, which includes the cost of land, fees, permits, payments to
     contractors, architectural and engineering fees and interest and property
     taxes to be capitalized during construction, rather than costs incurred to
     date.

 (9) All of the facilities under development are expected to be utilized in the
     CDFS business segment. See "Item 1 -- Business -- ProLogis
     Trust -- Business Strategy and Operating Segments -- CDFS Business
     Segment".

(10) Includes 1.1 million square feet in the design and permitting stage.

(11) Includes one project in Le Havre and two projects in Marseille.

(12) Includes one project each in Tilburg and Venlo.

(13) All of the land held for future development is expected to be utilized in
     the CDFS business segment for the development of approximately 36.3 million
     square feet of distribution facilities. See "Item 1 -- Business -- Business
     Strategy and Operating Segments -- ProLogis Trust -- CDFS Business
     Segment". Does not include 1,294 acres of land controlled directly by
     ProLogis under option, letter of intent or contingent contract with the
     capacity of developing approximately 23.8 million square feet of
     distribution facilities.

(14) Includes land in Leige and Tongeren.

(15) Includes land in Le Havre and Lyon.

(16) Includes land in Dortmund and the Rhine/Ruhr region.

(17) Includes land in Barcelona and Madrid.

(18) See Schedule III -- Real Estate and Accumulated Depreciation to ProLogis'
     Consolidated Financial Statements in Item 8 for a reconciliation of this
     amount to ProLogis' total investment in real estate.

CONSOLIDATED ENTITIES

  Partnerships

     As of December 31, 2001, ProLogis held a majority interest in and
controlled five real estate partnerships (collectively, the "Partnerships"),
which are consolidated with the accounts of ProLogis.

     Generally, pursuant to the Partnership agreements, ProLogis or one of its
wholly owned subsidiaries is the sole controlling general partner and has full
responsibility for the management and control of the Partnerships. The limited
partners have no authority to transact business for, or participate in the
management decisions of, the Partnerships (except as noted below). However, any
decision to amend certain provisions of the applicable partnership agreement, to
dissolve a Partnership prior to the term set forth in the applicable partnership
agreement or to enter into certain extraordinary transactions would require the
consent of all limited partners. Pursuant to the partnership agreements,
ProLogis or its wholly owned subsidiary, as the case may be, may not voluntarily
withdraw from the applicable Partnership or transfer or assign its interests in
the Partnership without the consent of all of the limited partners thereto. The
limited partners may freely transfer their Partnership units to affiliates,
provided that such transfer does not cause a termination of the Partnership
under the Code and does not cause ProLogis to cease to comply with requirements
under the Code for qualification as a REIT. Each of the Partnership agreements
grants to the limited partners the right to exchange their Partnership units for
ProLogis Common Shares, subject to certain conditions.

     For financial reporting purposes, the assets, liabilities, results of
operations and cash flows of each of the Partnerships are included in ProLogis'
consolidated financial statements, and in the preceding real estate tables. The
interests of the limited partners are reflected as minority interest. See Note 6
to ProLogis' Consolidated Financial Statements in Item 8.

                                        25


     The Partnerships, whose assets are included in the property operations
segment and in the tables under "-- Facilities", are as follows as of December
31, 2001:



                                                     INVESTMENT                        LIMITED
                                       FORMATION   IN REAL ESTATE     PROLOGIS'   PARTNERSHIP UNITS
ENTITY                                   DATE      (IN MILLIONS)      OWNERSHIP      OUTSTANDING
------                                 ---------   --------------     ---------   -----------------
                                                                      
ProLogis Limited Partnership-I.......    1993          $213.1(1)(2)     68.65%        4,520,532(3)
ProLogis Limited Partnership-II......    1994          $ 60.1(4)        97.82%           90,213(3)
ProLogis Limited Partnership-III.....    1994          $ 35.9(5)        79.63%          350,964(3)
ProLogis Limited Partnership-IV(6)...    1994          $106.1(7)        98.49%           68,612(3)
Meridian Realty Partners Limited
  Partnership........................      (8)         $ 10.4(9)        87.00%           29,712(10)


---------------
  (1) These facilities cannot be sold, prior to the occurrence of certain
      events, without the consent of the limited partners thereto, other than in
      tax-deferred exchanges.

  (2) Facilities are located in the San Francisco (both South Bay and East Bay)
      and Tampa markets.

  (3) Each unit is convertible into one Common Share.

  (4) Facilities are located in the Charlotte, Dallas/Ft. Worth, Denver, El
      Paso, San Francisco (East Bay), St. Louis and Washington, D.C./Baltimore
      markets.

  (5) Facilities are located in the Chicago, Ft. Lauderdale/Miami, Norfolk,
      Orlando, San Antonio and Tampa markets.

  (6) ProLogis Limited Partnership-IV was formed through a cash contribution
      from a wholly owned subsidiary of ProLogis, ProLogis-IV, Inc., and the
      contribution of distribution facilities from the limited partner. ProLogis
      Limited Partnership-IV and ProLogis-IV, Inc. are legal entities separate
      and distinct from ProLogis, its affiliates and each other, and each has
      separate assets, liabilities, business functions and operations. The sole
      assets of ProLogis-IV, Inc. are its general partner advances to and its
      interest in ProLogis Limited Partnership-IV. As of December 31, 2001,
      ProLogis Limited Partnership-IV had outstanding borrowings from
      ProLogis-IV, Inc., of $0.3 million and ProLogis-IV, Inc. had outstanding
      borrowings from ProLogis and its affiliates of $0.3 million.

  (7) Facilities are located in the Akron, Cincinnati, Dallas/Ft. Worth, Ft.
      Lauderdale/Miami, I-95 Corridor (New Jersey), Orlando and Tampa markets.

  (8) Acquired in 1999 merger transaction. See Note 11 to ProLogis' Consolidated
      Financial Statements in Item 8.

  (9) Facility is located in the Los Angeles/Orange County market.

 (10) Each unit is convertible into 1.1 Common Shares, plus $2.00.

  ProLogis Development Services

     ProLogis Development Services Incorporated ("ProLogis Development
Services") is a subsidiary of ProLogis that operates in the CDFS business
segment. ProLogis owned only the non-voting preferred stock of ProLogis
Development Services, representing a 95% interest until October 2001 when
ProLogis also acquired the voting common stock. ProLogis has advanced mortgage
loans to fund ProLogis Development Services' acquisition, development and
construction activities since its inception. A charitable trust owned the voting
common stock of ProLogis Development Services prior to October 2001 but had no
substantive role in the decision-making process regarding the operations of
ProLogis Development Services. Accordingly, ProLogis consolidated ProLogis
Development Services in its financial statements. ProLogis Development Services'
real estate assets aggregated $396.1 million as of December 31, 2001 and
consisted of operating facilities that have been developed for future sale,
facilities under development and land positions. In October 2001, ProLogis
acquired the voting common stock from the charitable trust for $1.3 million. As
of December 31, 2001, ProLogis owned 100% of ProLogis Development Services and
continues to consolidate ProLogis Development

                                        26


Services in its financial statements. ProLogis Development Services is not a
qualified REIT subsidiary under the Code. Accordingly, provisions for federal
and state income taxes are recognized, as appropriate.

UNCONSOLIDATED ENTITIES

     As of December 31, 2001, ProLogis' investments in and advances to
unconsolidated entities totaled $1.31 billion. These investments were structured
to either allow ProLogis to comply with the requirements of the Code to qualify
as a REIT or to further ProLogis' objective of increasing cash flows without
raising additional capital through direct public debt and public equity
offerings.

     ProLogis' investments in and advances to the Funds discussed below under
"-- Property Operations" was $446.5 million as of December 31, 2001. These
entities were all formed to allow ProLogis to access private capital for future
development activities while still maintaining an ownership interest in the
facilities. All of ProLogis' unconsolidated entities are discussed in Note 4 to
ProLogis' Consolidated Financial Statements in Item 8. See also "Item
1 -- Business -- Business Strategy and Operating Segments".

     ProLogis' investments in and advances to the temperature-controlled
distribution operating companies was $358.0 million as of December 31, 2001.
ProLogis' investments in and advances to Kingspark S.A. was $500.0 million as of
December 31, 2001. These companies produce income that is not REIT qualifying
income (i.e., not rental income and mortgage interest income) under the Code;
therefore, ProLogis has made a taxable REIT subsidiary election with respect to
these investments. To maintain its qualification as a REIT, ProLogis can
collectively invest in these taxable REIT subsidiaries in amounts up to 20% of
the fair market value of ProLogis' total assets. ProLogis accounts for the
investments in Kingspark S.A., ProLogis Logistics and Frigoscandia S.A. under
the equity method.

     ProLogis' remaining investments in and advances to unconsolidated entities
aggregated $41.9 million as of December 31, 2001. These remaining unconsolidated
entities in which ProLogis has invested do not own real estate.

  Property Operations

     As of December 31, 2001, ProLogis had ownership interests ranging from 20%
to 50% in six real estate funds accounted for under the equity method. See "Item
1. Business -- Business Strategy and Operating Segments -- Property Operations
Segment" and Note 4 to ProLogis' Consolidated Financial Statements in Item 8.



                                                       RENTABLE      PERCENTAGE
                                           NO. OF       SQUARE       OCCUPANCY        INVESTMENT
                                           BLDGS.      FOOTAGE          (1)              (2)
                                           ------     ----------     ----------     --------------
                                                                        
NORTH AMERICA:
  PROLOGIS CALIFORNIA:
     Los Angeles/Orange County,
       California........................    79       13,052,402        94.54%        $607,313,418(3)
                                            ---       ----------       ------       --------------
  PROLOGIS NORTH AMERICAN PROPERTIES FUND
     I:
     Atlanta, Georgia....................     5        1,172,168        97.54%          40,975,465
     Chicago, Illinois...................     1          249,576       100.00           14,764,132
     Cincinnati, Ohio....................     2          297,720       100.00           15,041,736
     Columbus, Ohio......................     2          888,691       100.00           30,245,268
     Dallas/Ft. Worth, Texas.............     3        1,221,934       100.00           49,898,215
     Denver, Colorado....................     2          198,892       100.00            9,137,134
     El Paso, Texas......................     1          354,159       100.00           13,625,549
     Houston, Texas......................     2          238,450       100.00           10,880,017
     I-95 Corridor, New Jersey...........     5        1,100,320        77.83           58,898,886
     Indianapolis, Indiana...............     2          719,829       100.00           21,564,441
     Louisville, Kentucky................     3          905,800        93.38           33,619,576
     Nashville, Tennessee................     1          412,800       100.00           14,630,863
     Phoenix, Arizona....................     1          156,410       100.00            6,779,278


                                        27




                                                       RENTABLE      PERCENTAGE
                                           NO. OF       SQUARE       OCCUPANCY        INVESTMENT
                                           BLDGS.      FOOTAGE          (1)              (2)
                                           ------     ----------     ----------     --------------
                                                                        
     Salt Lake City, Utah................     3          396,600       100.00           17,024,016
     San Antonio, Texas..................     1          244,800       100.00            9,033,476
     San Francisco (East Bay),
       California........................     2          404,400       100.00           16,970,970
                                            ---       ----------       ------       --------------
       Total ProLogis North American
          Properties Fund I..............    36        8,962,549        96.29%         363,089,022(4)
                                            ---       ----------       ------       --------------
  PROLOGIS NORTH AMERICAN PROPERTIES FUND
     II:
     Austin, Texas.......................     4          324,800       100.00%          17,818,712
     Charlotte, North Carolina...........     2          178,000       100.00            7,778,773
     Bethlehem, Pennsylvania.............     1          528,670       100.00           25,408,173
     Chicago, Illinois...................     4          510,725        95.39           37,816,873
     Dallas/Ft. Worth, Texas.............     4          669,416       100.00           25,611,642
     Denver, Colorado....................     1          104,400       100.00            5,408,832
     El Paso, Texas......................     1          239,133       100.00           10,309,355
     Ft. Lauderdale/Miami, Florida.......     3          383,650        94.24           23,600,597
     I-95 Corridor, New Jersey...........     1          501,400       100.00           26,252,724
     Reno, Nevada........................     1          169,625       100.00            7,161,655
     San Antonio, Texas..................     1          160,000        95.00            6,737,467
     San Francisco (East Bay),
       California........................     1           89,626       100.00            4,308,250
     Washington D.C./Baltimore,
       Maryland..........................     3          617,225       100.00           35,369,212
                                            ---       ----------       ------       --------------
       Total ProLogis North American
          Properties Fund II.............    27        4,476,670        98.80%         233,582,265(5)
                                            ---       ----------       ------       --------------
  PROLOGIS NORTH AMERICAN PROPERTIES FUND
     III:
     Atlanta, Georgia....................     2          151,600        78.89%           6,941,181
     Austin, Texas.......................     6          282,100       100.00           15,263,908
     Charlotte, North Carolina...........     1          136,000       100.00            5,354,740
     Cincinnati, Ohio....................     5        1,044,390        97.55           44,952,875
     Columbus, Ohio......................     1          289,280        62.50            8,818,466
     Denver, Colorado....................     1          104,400        50.00            5,541,858
     Houston, Texas......................     1          140,000       100.00            5,472,330
     1-95 Corridor, New Jersey...........     1          204,000       100.00           10,539,450
     Las Vegas, Nevada...................     1          235,520       100.00            9,822,165
     Orlando, Florida....................     4          361,866        97.16           18,051,068
     Portland, Oregon....................     2          200,600       100.00           10,652,872
     San Francisco (East Bay),
       California........................     1          351,788       100.00           15,363,132
     Seattle, Washington.................     1          117,620       100.00            5,810,127
     St. Louis, Missouri.................     2          370,000       100.00           14,911,376
     Washington D.C./Baltimore,
       Maryland..........................     5          391,325        84.53           29,487,608
                                            ---       ----------       ------       --------------
       Total ProLogis North American
          Properties Fund III............    34        4,380,489        93.40%         206,983,156(5)
                                            ---       ----------       ------       --------------
  PROLOGIS NORTH AMERICAN PROPERTIES FUND
     IV:
     Atlanta, Georgia....................     3          252,800        96.54%          13,423,032
     Columbus, Ohio......................     1        1,014,592       100.00           27,981,682
     Dallas/Ft. Worth, Texas.............     1          180,440       100.00           10,968,907
     Denver, Colorado....................     2          357,400       100.00           15,001,861
     El Paso, Texas......................     1          153,034       100.00            5,706,949
     Ft. Lauderdale/Miami, Florida.......     1          421,101       100.00           17,188,237


                                        28




                                                       RENTABLE      PERCENTAGE
                                           NO. OF       SQUARE       OCCUPANCY        INVESTMENT
                                           BLDGS.      FOOTAGE          (1)              (2)
                                           ------     ----------     ----------     --------------
                                                                        
     I-95 Corridor, New Jersey...........     1          181,370       100.00            9,146,620
     Phoenix, Arizona....................     1          273,586       100.00            9,878,832
     Portland, Oregon....................     4          426,780        86.73           24,298,519
     San Antonio, Texas..................     2          213,800        81.29           10,025,535
                                            ---       ----------       ------       --------------
       Total ProLogis North American
          Properties Fund IV.............    17        3,474,903        96.97%         143,620,174(5)
                                            ---       ----------       ------       --------------
          Subtotal North America.........   193       34,347,013        95.65%       1,554,588,035
                                            ---       ----------       ------       --------------
EUROPE:
  PROLOGIS EUROPEAN PROPERTIES FUND(6):
     Belgium (Tongeren)..................     1          226,797       100.00%           8,182,346
     France:
       Lille.............................     2          376,492       100.00           12,041,250
       Lyon..............................     7        1,742,855       100.00           57,324,322
       Marseille.........................     4          646,336        99.93           27,905,770
       Metz..............................     1          193,042       100.00            6,456,808
       Orleans...........................     3          704,504       100.00           25,206,123
       Paris.............................    56        6,537,229        92.39          307,509,469
       Vatry.............................     2          675,312       100.00           22,868,192
     Germany(7)..........................     3          726,850       100.00           44,740,447
     Italy (Milan).......................     3          677,250       100.00           33,327,848
     Netherlands:
       Amsterdam.........................     5          804,565       100.00           54,312,262
       Haaften...........................     1          499,880       100.00           16,361,993
       Rotterdam.........................     9        1,750,236       100.00           83,064,149
       Tilburg...........................     1          307,614       100.00           17,204,525
       Veghel............................     1          210,974       100.00            8,985,189
       Venlo.............................     1          232,384       100.00           10,726,219
     Poland (Warsaw).....................     7        1,151,747        94.90           74,074,976
     Spain (Barcelona)...................     3          649,327       100.00           37,122,802
     United Kingdom(6):
       East Midlands.....................    10        2,137,307       100.00          187,034,420
       West Midlands.....................    12        1,569,827       100.00          155,133,048
       North.............................     1          129,047       100.00           11,135,046
       North East........................     1          120,000       100.00            9,330,661
       South East........................     7        1,059,957       100.00          151,056,603
                                            ---       ----------       ------       --------------
       Total ProLogis European Properties
          Fund...........................   141       23,129,532        97.59%       1,361,104,468(8)
                                            ---       ----------       ------       --------------
       TOTAL UNCONSOLIDATED ENTITIES.....   334       57,476,545        96.43%      $2,915,692,503
                                            ===       ==========       ======       ==============


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

  (1) Percentage Occupancy is physical occupancy for the facility as of December
      31, 2001.

  (2) Investment represents 100% of the entities' historical cost in the assets
      as of December 31, 2001.

  (3) ProLogis had a 50% ownership interest in ProLogis California as of
      December 31, 2001.

  (4) ProLogis had a 41.3% ownership interest in ProLogis North American
      Properties Fund I as of December 31, 2001.

  (5) As of December 31, 2001, ProLogis had a 20% ownership interest in each of
      ProLogis North American Properties Fund II, ProLogis North American
      Properties Fund III and ProLogis North American Properties Fund IV.

                                        29


  (6) ProLogis European Properties Fund's assets in the United Kingdom are all
      located in England. ProLogis manages the assets in England on a regional
      basis. Leicester and Northampton are located in the East Midlands region,
      Birmingham is located in the West Midlands region and London is located in
      the South East region.

  (7) Includes one facility each in Dortmund and the Rhine/Ruhr region.

  (8) ProLogis had a 35.4% ownership interest in ProLogis European Properties
      Fund as of December 31, 2001.

  CDFS Business

     ProLogis recognizes in excess of 99% of the earnings of Kingspark S.A.
under the equity method. As of December 31, 2001 Kingspark S.A. owned 16
operating facilities aggregating 1.6 million square feet at an investment of
140.5 million and 13 facilities under development aggregating 2.4 million square
feet with an expected cost at completion of $262.2 million. In addition,
Kingspark S.A. owned 185 acres and controlled 1,595 acres of land through
purchase option, letter of intent, development rights agreement or contingent
contract as of December 31, 2001. This land has the combined capacity for the
future development of approximately 25.9 million square feet of distribution
facilities. Kingspark S.A.'s facilities and land acreage are located in 6 cities
or regions in the United Kingdom. See "Item 1. Business -- Business Strategy and
Operating Segments -- CDFS Business Segment", "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Results of
Operations -- CDFS Business" and Note 4 to ProLogis' Consolidated Financial
Statements in Item 8.

  Temperature-Controlled Distribution Operations

     See "Item 1. Business -- Business Strategy and Operating
Segments -- Temperature-Controlled Distributions Operations Segment" and "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Temperature-Controlled Distribution
Operations" for a discussion of the facilities owned and leased by the companies
in which ProLogis has invested in this operating segment.

ITEM 3. LEGAL PROCEEDINGS

     ProLogis and its unconsolidated entities from time to time may be a party
to a variety of legal proceedings arising in the ordinary course of its
business. Such matters generally are not expected to have a material adverse
effect on ProLogis' business, financial position or results of operations.

                                        30


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

     Not applicable.

                                    PART II

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

     ProLogis' Common Shares are listed on the New York Stock Exchange ("NYSE")
under the symbol "PLD". The following table sets forth the high and low sale
prices of the Common Shares as reported in the NYSE Composite Tape, and
distributions per Common Share, for the periods indicated.



                                                                              PER
                                                                          COMMON SHARE
                                                     HIGH        LOW      DISTRIBUTION
                                                    -------    -------    ------------
                                                                 
2000:
  First Quarter...................................  $19.875    $17.563      $ 0.335(1)
  Second Quarter..................................   22.063     18.813        0.335
  Third Quarter...................................   24.688     21.250        0.335
  Fourth Quarter..................................   23.750     19.438        0.335
2001:
  First Quarter...................................  $22.937    $19.730      $ 0.345(2)
  Second Quarter..................................   22.950     19.650        0.345
  Third Quarter...................................   23.300     19.350        0.345
  Fourth Quarter..................................   22.800     19.600        0.345
2002:
  First Quarter...................................  $24.150    $20.960      $ 0.355(3)
  Second Quarter (through April 3, 2002)..........  $23.490    $23.030           --


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

(1) Declared in the fourth quarter of 1999 and paid in the first quarter of
    2000.

(2) Declared in the fourth quarter of 2000 and paid in the first quarter of
    2001.

(3) Declared in the fourth quarter of 2001 and paid on February 28, 2002.

     On April 3, 2002, ProLogis had approximately 177,427,212 Common Shares
outstanding, which were held of record by approximately 10,380 shareholders.

     In January 2001, ProLogis announced a Common Share repurchase program under
which it may repurchase up to $100.0 million of its Common Shares. The Common
Shares have been and will continue to be repurchased from time to time in the
open market and in privately negotiated transactions, depending on market prices
and other conditions. During 2001, 778,400 Common Shares were repurchased under
this program at a total cost of $16.0 million.

     ProLogis redeemed all of its outstanding Series B cumulative convertible
redeemable preferred shares of beneficial interest ("Series B Convertible
Preferred Shares") as of March 20, 2001. Prior to the call for redemption,
163,827 Series B Convertible Preferred Shares were converted into 210,026 Common
Shares. Subsequent to the call for redemption, 5,908,971 Series B Convertible
Preferred Shares were converted into 7,575,301 Common Shares. The remaining
183,302 Series B Convertible Preferred Shares outstanding on March 20, 2001 were
redeemed at a price of $25.00 per share, plus $0.442 in accrued and unpaid
dividends. The aggregate redemption cost (including accrued dividends) of the
Series B Convertible Preferred Shares was $4.7 million.

                                        31


     ProLogis redeemed all 5,400,000 of its outstanding Series A cumulative
redeemable preferred shares of beneficial interest ("Series A Preferred Shares")
as of May 8, 2001 at the price of $25.00 per share, plus $0.2481 in accrued and
unpaid dividends. The aggregate redemption cost (including accrued dividends) of
the Series A Preferred Shares was $136.3 million.

     In 2001, ProLogis issued 25,000 Common Shares, upon exchange of limited
partnership units in one or more of the Partnerships. See "Item 2.
Properties -- Facilities -- Consolidated Entities". The Common Shares were
issued in transactions exempt from registration under Section 4(2) of the
Securities Act.

  Distributions and Dividends

     In order to qualify as a REIT under the Code, ProLogis is required to make
distributions (other than capital gain distributions) to its shareholders in
amounts at least equal to (i) the sum of (a) 90% of its "REIT taxable income"
computed without regard to the dividends paid deduction and its net capital gain
and (b) 95% of the net income (after tax), if any, from foreclosure property,
minus (ii) the sum of certain items of noncash income. ProLogis' distribution
strategy is to distribute what it believes is a conservative percentage of its
cash flow, permitting ProLogis to retain funds for capital improvements,
investment activities and other cash needs.

     ProLogis announces the following year's projected annual Common Share
distribution level after the annual budget review and approval by the Board in
December of each year. At a meeting in December 2001, the Board announced a
projected increase in the annual distribution level for 2002 from $1.38 to $1.42
per Common Share. The payment of distributions is subject to the discretion of
the Board and is dependent upon the financial condition and operating results of
ProLogis and may be adjusted at the discretion of the Board during the year.
Also at the December meeting, the Board declared a distribution of $0.355 per
Common Share for the first quarter of 2002. This distribution was paid on
February 28, 2002 to holders of Common Shares on February 14, 2002.

     For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed ProLogis' current and accumulated earnings and profits
(calculated for tax purposes) constitute a return of capital rather than a
dividend and reduce the shareholder's basis in the Common Shares. To the extent
that a distribution exceeds both current and accumulated earnings and profits
and the shareholders basis in the Common Shares, it will generally be treated as
a gain from the sale or exchange of that shareholder's Common Shares. ProLogis
annually notifies shareholders of the taxability of distributions paid during
the preceding year. The following summarizes the taxability of distributions on
Common Shares (amounts for 2001 are estimated):



                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                              2001     2000     1999
                                                              -----    -----    -----
                                                                       
Per Common Share:
  Ordinary income...........................................  $1.09    $1.19    $0.84
  Capital gains.............................................   0.19     0.15     0.35
  Return of capital.........................................   0.10       --     0.11
                                                              -----    -----    -----
          Total.............................................  $1.38    $1.34    $1.30
                                                              =====    =====    =====


     On May 3, 1999, ProLogis paid a distribution to holders of the common stock
of Meridian Industrial Trust Inc., ("Meridian") which was merged with and into
ProLogis on March 30, 1999. The distribution was paid to holders of the common
stock as of March 19, 1999. This distribution, which was declared by the
Meridian Board of Directors prior to the closing of the merger, related to the
first quarter of 1999 and aggregated $11.1 million. This liability was assumed
by ProLogis in connection with the merger. See Note 11 to ProLogis' Consolidated
Financial Statements in Item 8.

                                        32


     Annual dividends per preferred share were as follows:



                                                              YEAR ENDED DECEMBER 31,
                                                           -----------------------------
                                                           2001(1)    2000(2)    1999(3)
                                                           -------    -------    -------
                                                                        
Series A Preferred Shares................................   $0.84(4)   $2.35      $2.35
Series B Convertible Preferred Shares....................   $0.44(4)   $1.75      $1.75
Series C Preferred Shares................................   $4.27      $4.27      $4.27
Series D Preferred Shares................................   $1.98      $1.98      $1.98
Series E Preferred Shares................................   $2.19      $2.19      $1.64(5)


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

(1) For federal income tax purposes, $0.71 of the Series A dividend, $0.38 of
    the Series B dividend, $3.63 of the Series C dividend, $1.68 of the Series D
    dividend and $1.86 of the Series E dividend are treated as ordinary income
    to the holders. The remaining portion of each dividend represents capital
    gains.

(2) For federal income tax purposes $2.08 of the Series A dividend, $1.55 of the
    Series B dividend, $3.78 of the Series C dividend, $1.75 of the Series D
    dividend and $1.94 of the Series E dividend are treated as ordinary income
    to the holders. The remaining portion of each dividend represents capital
    gains.

(3) For federal income tax purposes $1.65 of the Series a dividend, $1.23 of the
    Series B dividend, $3.00 of the Series C dividend, $1.39 of the Series D
    dividend and $1.15 of the Series E dividend are treated as ordinary income
    to the holders. The remaining portion of each dividend represents capital
    gains.

(4) The Series A Preferred Shares were redeemed as of May 8, 2001 and the Series
    B Convertible Preferred Shares were redeemed as of March 20, 2001.

(5) For the period from date of issuance to December 31, 1999.

     On April 30, 1999, ProLogis paid an aggregate dividend of $1.1 million
($0.5469 per share) on the Series E cumulative redeemable preferred shares of
beneficial interest ("Series E Preferred Shares"), of which $729,200 related to
Meridian's series D preferred stock that was accrued by Meridian and assumed by
ProLogis in connection with the merger. See Note 11 to ProLogis' Consolidated
Financial Statements in Item 8.

     Pursuant to the terms of its preferred shares, ProLogis is restricted from
declaring or paying any distribution with respect to the Common Shares unless
all cumulative dividends with respect to the preferred shares have been paid and
sufficient funds have been set aside for dividends for the then-current dividend
period with respect to the preferred shares.

     ProLogis' tax return for the year ended December 31, 2001 has not been
filed. The taxability information for 2001 is based upon the best available
data. ProLogis' tax returns for prior years have not been examined by the
Internal Revenue Service. Consequently, the taxability of distributions is
subject to change.

     Under federal income tax rules, ProLogis' earnings and profits are first
allocated to its preferred shares, which increases the portion of the Common
Shares distribution classified as return of capital. The portion of
distributions characterized as return of capital results primarily from the
excess of distributions over earnings and profits primarily because non-cash
charges such as depreciation are not considered in determining distribution
levels. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations."

  Common Share Plans

     ProLogis' holders of Common Shares may acquire additional Common Shares by
automatically reinvesting distributions under the 1999 Dividend Reinvestment and
Share Purchase Plan (the "1999 Common Share Plan"). Holders of Common Shares who
do not participate in the 1999 Common Share Plan continue to receive
distributions as declared. The 1999 Common Share Plan also allows both holders
of Common Shares and persons who are not holders of Common Shares to purchase a
limited number of additional Common Shares by making optional cash payments,
without payment of any brokerage commission or service charge. Common Shares are
acquired pursuant to the 1999 Common Share Plan at a price equal to

                                        33


98% of the market price of such Common Shares. During 2001, ProLogis generated
net proceeds of $67.1 million from the issuance of 3,261,000 Common Shares under
the 1999 Common Share Plan.

     In May 2001, ProLogis' shareholders approved the establishment of the
ProLogis Trust Employee Share Purchase Plan (the "Employee Share Plan"). Under
the terms of the Employee Share Plan, employees of ProLogis and its
participating entities may purchase Common Shares, through payroll deductions
only, at a discounted price of 85% of the fair market value of such Common
Shares. Subject to certain provisions, the aggregate number of Common Shares
which may be issued under the Plan may not exceed 5,000,000. ProLogis began
issuing Common Shares under the Employee Share Plan in January 2002.

ITEM 6. SELECTED FINANCIAL DATA

     The following tables set forth selected financial data relating to the
historical financial condition and results of operations of ProLogis for the
years indicated (amounts in thousands, except per share data). Such selected
financial data is qualified in its entirety by, and should be read in
conjunction with, "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation" and ProLogis' Consolidated Financial
Statements and notes thereto in Item 8.



                                                           YEAR ENDED DECEMBER 31,
                                       ---------------------------------------------------------------
                                          2001         2000         1999         1998          1997
                                       ----------   ----------   ----------   -----------   ----------
                                                                             
OPERATING DATA:
  Rental income......................  $  465,777   $  480,088   $  491,826   $   345,046   $  284,533
  Other real estate income...........     104,436       78,103       46,678        17,554       12,291
  Income (loss) from unconsolidated
     entities(1)(2)..................     (51,222)      78,063       22,519         2,755        3,278
  Total income(1)(2).................     523,125      643,521      567,392       368,107      302,494
  Rental expenses, net of
     recoveries......................      28,700       27,177       33,501        27,120       27,008
  REIT management fees paid to
     affiliate.......................         --           --           --            --        17,791
  General and administrative.........      50,274       44,954       38,284        22,893        6,770
  Interest expense...................     163,629      172,191      170,746        77,650       52,704
  Earnings before minority
     interest(1)(2)(3)...............     133,043      241,807      166,549       107,617       42,392
  Gain on disposition of real estate,
     net.............................      10,008        1,314       38,994         5,565        7,378
  Foreign currency hedge income
     (expense).......................         --           --           --          2,054       (6,028)
  Foreign currency exchange gains
     (losses), net...................      (3,721)     (17,927)     (16,818)        2,938         (348)
  Total income taxes.................       4,725        5,130        1,472         2,164           85
  Cumulative effect of accounting
     change(4).......................         --           --         1,440           --           --
  Preferred share dividends..........      37,309       56,763       56,835        49,098       35,318
  Net earnings attributable to Common
     Shares(1) (2)(3)(4).............      90,835      157,715      123,999        62,231        4,431
  Common Share cash distributions
     paid(5).........................  $  237,691   $  219,333   $  208,969   $   151,050   $  106,556

PER SHARE DATA:
  Basic net earnings attributable to
     Common Shares(1)(2)(3)(4).......  $     0.53   $     0.96   $     0.81   $      0.51   $     0.04
  Diluted net earnings attributable
     to Common Shares................        0.52         0.96         0.81          0.51         0.04
  Series A Preferred Share dividends
     paid............................        0.84         2.35         2.35          2.35         2.35
  Series B Convertible Preferred
     Share dividends paid............        0.44         1.75         1.75          1.75         1.75
  Series C Preferred Share dividends
     paid............................        4.27         4.27         4.27          4.27         4.27
  Series D Preferred Share dividends
     paid............................        1.98         1.98         1.98          1.42          --
  Series E Preferred Share dividends
     paid(6).........................        2.19         2.19         1.64           --           --


                                        34




                                                           YEAR ENDED DECEMBER 31,
                                       ---------------------------------------------------------------
                                          2001         2000         1999         1998          1997
                                       ----------   ----------   ----------   -----------   ----------
                                                                             
  Common Share distributions
     paid(6).........................  $     1.38   $     1.34   $     1.30   $      1.24   $     1.07
  Weighted average Common Shares
     outstanding:
          Basic......................     172,755      163,651      152,412       121,721      100,729
          Diluted....................     175,197      164,401      152,739       122,028      100,869
OTHER DATA:
  Reconciliation of net earnings to
     funds from
     operations(1)(2)(3)(4)(7):
  Net earnings attributable to Common
     Shares(1)(2)(3)(4)..............  $   90,835   $  157,715   $  123,999   $    62,231   $    4,431
  Add (Deduct):
     Real estate related depreciation
       and amortization..............     137,033      146,859      150,050        99,514       76,275
     Gain on disposition of non-CDFS
       business segment assets.......     (10,008)      (1,314)     (38,994)       (5,565)      (7,378)
     Foreign currency exchange
       (gains) losses, net...........       1,484       19,569       16,596        (3,227)         348
     Deferred income tax expense
       (benefit).....................       2,258        4,230          --          1,796          --
     Cumulative effect of accounting
       change........................         --           --         1,440           --           --
     ProLogis' share of reconciling
       items of unconsolidated
       entities:
       Real estate related
          depreciation and
          amortization...............      63,948       57,366       49,644        36,489        2,419
       Write-down of operating assets
          and other impairment
          charges(1).................      88,413          --           --            --           --
       (Gain) loss on disposition of
          non-CDFS business segment
          assets.....................       4,417         (744)         826           179          --
       Foreign currency exchange
          (gains) losses, net........       8,204       (2,773)      14,650        14,208          --
       Deferred income tax expense
          (benefit)..................     (12,171)      (4,190)         510        (2,929)         --
       Cumulative effect of
          accounting change..........         --           --         1,480           --           --
                                       ----------   ----------   ----------   -----------   ----------
Funds from operations attributable to
  Common Shares(1)(2)(3)(4)(7):......  $  374,413   $  376,718   $  320,201   $   202,696   $   76,095
                                       ==========   ==========   ==========   ===========   ==========
Weighted average Common Shares
  outstanding:
     Basic...........................     172,755      163,651      152,412       121,721      100,729
     Diluted(8)......................     180,284      178,166      167,421       137,153      106,059
Net cash provided by operating
  activities.........................  $  346,860   $  325,158   $  271,376   $   238,253   $  192,473
Net cash provided by (used in)
  investing activities...............     100,020     (381,513)     (34,350)   (1,264,722)    (571,061)
Net cash provided by (used in)
  financing activities...............  $ (476,761)  $   44,887   $ (230,828)  $ 1,064,600   $  398,827


                                        35




                                                                 DECEMBER 31,
                                        --------------------------------------------------------------
                                           2001         2000         1999         1998         1997
                                        ----------   ----------   ----------   ----------   ----------
                                                                             
FINANCIAL POSITION:
  Real estate owned, at cost..........  $4,387,456   $4,502,087   $4,811,255   $3,476,704   $2,846,591
  Land held for development...........     200,737      187,405      163,696      180,796      159,645
  Investments in and advances to
     unconsolidated entities..........   1,310,735    1,453,148      940,364      733,863       86,139
  Total assets........................   5,603,941    5,946,334    5,848,040    4,330,729    3,033,953
  Lines of credit and short-term
     borrowings(10)...................     375,875      439,822       98,700      494,300          --
  Senior unsecured debt...............   1,670,359    1,699,989    1,729,630    1,083,641      724,052
  Mortgage notes and other secured
     debt.............................     532,106      537,925      695,586      227,804      133,028
  Total liabilities...................   2,882,303    2,972,333    2,832,232    2,023,066    1,003,912
  Minority interest...................      45,639       46,630       62,072       51,295       53,304
  Total shareholders' equity..........  $2,675,999   $2,927,371   $2,953,736   $2,256,368   $1,976,737
  Number of Common Shares
     outstanding......................     175,888      165,287      161,825      123,416      117,364


---------------
 (1) Income (loss) from unconsolidated entities, total income, earnings before
     minority interest, net earnings attributable to Common Shares and funds
     from operations attributable to Common Shares for 2001 include charges of
     $88.4 million representing ProLogis' share of the write-downs of operating
     assets and other impairment charges of its unconsolidated entities
     operating in the temperature-controlled distribution operations segment and
     charges of $5.8 million representing ProLogis' share of the write-downs of
     technology related investments of these entities. The technology related
     charges are included in funds from operations attributable to Common
     Shares. See "Item 7 -- Management's Discussion and Analysis of Financial
     Condition and Results of Operations -- Results of
     Operations -- Temperature-Controlled Distribution Operations".

 (2) Income (loss) from unconsolidated entities, total income, earnings before
     minority interest, net earnings attributable to Common Shares and funds
     from operations attributable to Common Shares for 2001 include charges of
     $37.0 million representing ProLogis' share of the write-downs of technology
     related investments of two of ProLogis' unconsolidated entities. See "Item
     7 -- Management's Discussion and Analysis of Financial Condition and
     Results of Operations -- Other Income and Expense Items -- Income (Loss)
     from Unconsolidated Entities".

 (3) Earnings before minority interest, net earnings attributable to Common
     Shares and funds from operations attributable to Common Shares for 1999 and
     1998 reflect $0.9 million and $26.1 million, respectively, of mark to
     market expense associated with two interest rate hedge agreements that, due
     to changing market conditions, no longer qualified for hedge accounting
     treatment under generally accepted accounting principles ("GAAP"). Earnings
     before minority interest, net earnings attributable to Common Shares and
     funds from operations attributable to Common Shares for 1997 reflect the
     one-time, non-cash charge of $75.4 million associated with the costs
     incurred in acquiring ProLogis' management companies from Security Capital
     in September 1997.

 (4) For 1999, net earnings attributable to Common Shares includes a one-time
     expense of $1.4 million related to unamortized organization and start-up
     costs. See "Item 7. Management's Discussion and Analysis of Financial
     Condition and Results of Operation -- Other Income and Expense Items --
     Cumulative Effect of Accounting Change".

 (5) For 1999, includes $11.1 million paid to Meridian shareholders. See "Item
     5. Market for the Registrant's Common Equity and Related Stockholder
     Matters -- Distributions and Dividends".

 (6) Does not include dividends paid to Meridian shareholders. See "Item 5.
     Market for the Registrant's Common Equity and Related Stockholder
     Matters -- Distributions and Dividends".

 (7) Amounts presented for the years 1997 through 1999 have been restated from
     amounts previously presented in those years to reflect a change in the
     definition of funds from operations effective in 2000. Funds from
     operations is discussed and defined in "Item 7 -- Management's Discussion
     and Analysis of Financial Conditions and Results of Operations -- Funds
     from Operations". Funds from operations does not represent net income or
     cash from operating activities in accordance with GAAP and is not
     necessarily indicative of cash available to fund cash needs, which is
     presented in the Consolidated

                                        36


     Statement of Cash Flows in ProLogis' Consolidated Financial Statements in
     Item 8. Cash distributions paid to shareholders are presented above in the
     "Operating Data" section of this table. Funds from operations should not be
     considered as an alternative to net income as an indicator of ProLogis'
     operating performance or as an alternative to cash flows from operating,
     investing or financing activities as a measure of liquidity. Additionally,
     the funds from operations measure presented by ProLogis will not
     necessarily be comparable to similarly titled measures of other REITs.
     ProLogis considers funds from operations to be a useful supplemental
     measure of comparative period operating performance and as a supplemental
     measure to provide management, financial analysts, potential investors and
     shareholders with an indication of ProLogis' ability to fund its capital
     improvements, investment activities and other cash needs.

 (8) In calculating the weighted average Common Shares for funds from operations
     purposes, weighted average Series B Convertible Preferred Shares and
     weighted average limited partnership units are considered common stock
     equivalents. The weighted average Series B Convertible Preferred Shares
     included are 1,544,000, 8,417,000, 9,221,000 and 10,055,000 for 2001, 2000,
     1999 and 1998, respectively. The amount of dividends associated with the
     Series B Convertible Preferred Shares are $81,000, $11,358,000, $12,523,000
     and $13,668,000 and for 2001, 2000, 1999 and 1998, respectively. The effect
     of the Series B Convertible Preferred Shares in 1997 was anti-dilutive. The
     weighted average limited partnership units included are 5,087,000,
     5,348,000, 5,461,000, 5,070,000 and 5,190,000 for 2001, 2000, 1999, 1998
     and 1997, respectively. The minority interest share of earnings associated
     with these limited partnership units are $5,968,000, $5,586,000,
     $4,979,000, $4,681,000 and $3,560,000 for 2001, 2000, 1999, 1998 and 1997,
     respectively.

(10) As of April 3, 2002, ProLogis had $107.0 million of borrowings outstanding
     under its U.S. dollar denominated line of credit resulting in $448.5
     million of borrowing capacity available ($453.0 million reduced by $4.5
     million of letters of credit outstanding). As of April 3, 2002, ProLogis
     had the currency equivalent of approximately $226.8 million (based on
     currency exchange rates quoted by Reuters) outstanding on its
     multi-currency lines of credit resulting in the currency equivalent of
     $58.9 million (based on currency exchange rates quoted by Reuters) of
     borrowing capacity available. As of April 3, 2002, ProLogis had the
     currency equivalent of approximately $46.7 million (based on currency
     exchange rates quoted by Reuters) outstanding on its Japanese yen
     denominated line of credit resulting in the currency equivalent of
     approximately $137.9 million (based on currency exchange rates quoted by
     Reuters) of borrowing capacity available.

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

     The following discussion should be read in conjunction with ProLogis'
Consolidated Financial Statements and the notes thereto included in Item 8 of
this report.

     Some statements contained in this discussion are not historical facts but
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Because these forward-looking statements are
based on current expectations, estimates and projections about the industry and
markets in which ProLogis operates, management's beliefs, and assumptions made
by management, they involve uncertainties that could significantly impact
ProLogis financial results. Words such as "expects", "anticipates", "intends",
"plans", "believes", "seeks", "estimates", variations of such words and similar
expressions are intended to identify such forward-looking statements.
Forward-looking statements include discussions of strategy, plans or intentions
of management. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions that are difficult to
predict. Therefore, actual outcomes and results may differ materially from what
is expressed or forecasted in such forward-looking statements. Specifically, but
not limited to, comments concerning ProLogis' expectations with respect to the
North American economy, its ability to raise private capital and generate income
in the CDFS business segment and its plans for its investments in the
temperature-controlled distribution operations segment are forward-looking
statements. Factors which may affect outcomes and results include: (i) changes
in general economic conditions in ProLogis' markets that could adversely affect
demand for ProLogis' facilities and the creditworthiness of ProLogis' customers,
(ii) changes in financial markets, interest rates and foreign currency

                                        37


exchange rates that could adversely affect ProLogis' cost of capital and its
ability to meet its financial needs and obligations, (iii) increased or
unanticipated competition for distribution facilities in ProLogis' target market
cities; (iv) the availability of private capital to ProLogis and (v) those
factors discussed under "-- Risk Factors".

CRITICAL ACCOUNTING POLICIES

     A critical accounting policy is one that is both important to the portrayal
of an entity's financial condition and results of operations, and requires
judgment on the part of management. Generally, the judgment requires management
to make estimates about the effect of matters that are inherently uncertain. Of
the accounting policies discussed in Note 2 to ProLogis' Consolidated Financial
Statements in Item 8, those presented below have been identified by ProLogis as
critical accounting policies.

  Consolidation

     ProLogis' consolidated financial statements include the accounts of
ProLogis Trust and its wholly owned subsidiaries and its majority-owned and
controlled subsidiaries and partnerships. All subsidiaries in which ProLogis
owns a majority voting interest are consolidated. Investments in entities that
are not consolidated but in which ProLogis has the ability to exercise
significant influence over operating and financial policies, are accounted for
under the equity method. Management's judgments with respect to its level of
influence or control of each entity includes the consideration of factors
including the form of ProLogis' ownership interest, representation on the board
of directors, size of investment (including loans) and participation in policy
making decisions. Investments in entities that ProLogis does not control or for
which ProLogis does not exercise significant influence are carried at cost or
fair value, as appropriate. All material intercompany accounts and transactions,
including transactions with unconsolidated entities, are eliminated in ProLogis'
consolidated financial statements. Management's ability to make these judgements
affects the presentation of these investments in its financial statements and,
consequently, its financial position and results of operations which are used by
its shareholders, potential investors, industry analysts and lenders to evaluate
the company.

  Recoverability of Investments in Long-Lived Assets

     ProLogis' management periodically reviews long-lived assets (primarily real
estate and investments in unconsolidated entities) for impairment whenever
events or changes in circumstances indicate that the carrying value of such
assets may not be recoverable. The determination of the fair value of the
investment involves significant judgment. This judgment is based on management's
analysis of the future operating results and resulting cash flows of each
long-lived asset. Management's ability to accurately predict future cash flows
may impact the determination of fair value.

     In the event that a decline in fair value of a long-lived asset occurs,
ProLogis' management may be required to make a determination as to whether the
decline in fair value is other than temporary. Management's assessment as to the
nature of a decline in fair value is primarily based on estimates of future
operating results, the resulting cash flows and the intent to hold the
long-lived asset. If an investment is considered impaired and the decline in
value is considered to be other than temporary, a write-down is recognized.

  Revenue Recognition

     ProLogis recognizes gains or losses from the disposition of real estate
assets generally at the time the title to the asset is transferred and ProLogis
has no future involvement with the asset sold. In certain transactions, an
entity in which ProLogis has an ownership interest will acquire the real estate
assets from ProLogis. Management makes judgments based on the specific terms of
each transaction as to the amount of the total profit from the transaction that
ProLogis can recognize given its level of future involvement in the entities
that are acquiring the assets. Management's ability to accurately assess the
provisions of each disposition transaction under the accounting guidelines for
revenue recognition may impact its financial position and

                                        38


results of operations which are used by shareholders, potential investors,
industry analysts and lenders to evaluate the company.

  Depreciation and Useful Lives of Real Estate Assets

     ProLogis' management estimates the useful lives of its depreciable
long-lived assets (primarily real estate assets) in order to record depreciation
expense related to these assets. Management's ability to accurately estimate the
useful lives of its long-lived assets is critical to the determination of the
appropriate amount of depreciation expense recorded and the carrying value of
the underlying assets. Any change to the estimated depreciable lives of these
assets would have an impact on the depreciation expense recognized by ProLogis.

RESULTS OF OPERATIONS

     ProLogis' net earnings attributable to Common Shares were $90.8 million in
2001, $157.7 million in 2000 and $124.0 million in 1999. In 2001, basic and
diluted per share net earnings attributable to Common Shares were $0.53 and
$0.52 per share, respectively. Basic and diluted net earnings attributable to
Common Shares were $0.96 per share in 2000 and $0.81 per share in 1999.

     As ProLogis shifted the primary focus of its development activities to the
development of assets to be sold or contributed to real estate funds, the CDFS
business segment had an integral role in ProLogis' business strategy in 2001 and
2000. The CDFS business segment provided capital for ProLogis to fund its
development activities and generated profits that contributed to ProLogis' total
income. ProLogis' net operating income from this segment increased by $39.3
million in 2001 over 2000, and by $51.4 million in 2000 over 1999, primarily the
result of the volume of contributions of facilities developed by ProLogis and
Kingspark S.A. to real estate funds in which ProLogis maintains an ownership
interest, as well as dispositions to third parties. ProLogis' property
operations segment's net operating income decreased by $17.2 million in 2001
from 2000, and increased by $41.6 million in 2000 over 1999. The decrease in
2001 is primarily the result of dispositions of assets from this operating
segment. The increase in 2000 is primarily the result of the recognition of
income from the distribution facilities acquired in the 1999 merger transaction
for a full year. See Note 10 to ProLogis' Consolidated Financial Statements in
Item 8. This operating segment's net income includes rental income and net
rental expenses from facilities directly owned by ProLogis and also its share of
the income of the Funds and the management fees earned from the Funds. ProLogis'
share of the combined losses of its unconsolidated entities operating in the
temperature-controlled distribution operations segment increased by $103.1
million in 2001 over 2000 and increased by $14.8 million in 2000 over 1999,
primarily the result of write-downs of the operating assets of these companies
and other impairment charges in 2001 and poor operating performance in 2000. See
"-- Property Operations", "-- CDFS Business" and "-- Temperature-Controlled
Distribution Operations".

                                        39


  Property Operations

     ProLogis owned or had ownership interests in the following operating
facilities as of the dates indicated (square feet in thousands):



                                                                    DECEMBER 31,
                                               ------------------------------------------------------
                                                     2001               2000               1999
                                               ----------------   ----------------   ----------------
                                                        SQUARE             SQUARE             SQUARE
                                               NUMBER   FOOTAGE   NUMBER   FOOTAGE   NUMBER   FOOTAGE
                                               ------   -------   ------   -------   ------   -------
                                                                            
Direct ownership(1)..........................  1,208    123,356   1,244    126,275   1,328    133,688
ProLogis California(2).......................     79     13,052      77     12,395      78     11,500
ProLogis North American Properties Fund
  I(1)(3)....................................     36      8,963      33      8,031      --         --
ProLogis North American Properties Fund
  II(1)(4)...................................     27      4,477       3        440      --         --
ProLogis North American Properties Fund
  III(1)(5)..................................     34      4,380      --         --      --         --
ProLogis North American Properties Fund
  IV(1)(6)...................................     17      3,475      --         --      --         --
ProLogis European Properties Fund and
  ProLogis European Properties S.a.r.l.(7)...    141     23,130     104     14,385      18      3,359
                                               -----    -------   -----    -------   -----    -------
     Totals..................................  1,542    180,833   1,461    161,526   1,424    148,547
                                               =====    =======   =====    =======   =====    =======


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

(1) Includes operating facilities directly owned by ProLogis. See "Item 2.
    Properties -- Facilities" and "Item 2. Properties -- Consolidated Entities".
    The decrease in 2001 from 2000 is primarily the result of the formation of
    two of the Funds and the increase in the size of one other of the Funds in
    2001 whose entire portfolios consist of distribution facilities that were
    previously directly owned by ProLogis. The decrease in 2000 from 1999
    represents the growth of ProLogis European Properties Fund in 2000, a
    significant portion of which is a result of acquiring distribution
    facilities from ProLogis, and the formation of ProLogis North American
    Properties Fund I in 2000 whose entire portfolio consists of distribution
    facilities that were previously directly owned by ProLogis.

(2) ProLogis has had a 50% ownership interest in ProLogis California since its
    inception on August 26, 1999. See Note 4 to ProLogis' Consolidated Financial
    Statements in Item 8.

(3) ProLogis had a 41.3% and 20% ownership interest as of December 31, 2001 and
    2000, respectively. This entity was formed on June 30, 2000 with the
    acquisition of 33 distribution facilities from ProLogis. In January 2001,
    ProLogis contributed three additional distribution facilities to ProLogis
    North American Properties Fund I for an additional equity interest of $34.1
    million, increasing its ownership interest to 41.3% as of January 15, 2001.
    See Note 4 to ProLogis' Consolidated Financial Statements in Item 8.

(4) ProLogis has had a 20% ownership interest in ProLogis North American
    Properties Fund II since its inception on June 30, 2000. This entity
    originally acquired three distribution facilities from ProLogis in 2000. All
    of the 24 distribution facilities acquired by this entity in 2001 were
    previously owned by ProLogis. See Note 4 to ProLogis' Consolidated Financial
    Statements in Item 8.

(5) ProLogis has had a 20% ownership interest in ProLogis North American
    Properties Fund III since its inception on June 15, 2001. All of this
    entity's 34 distribution facilities were previously owned by ProLogis. See
    Note 4 to ProLogis' Consolidated Financial Statements in Item 8.

(6) ProLogis has had a 20% ownership interest in ProLogis North American
    Properties Fund IV since its inception on September 21, 2001. All of this
    entity's 17 distribution facilities were previously owned by ProLogis. See
    Note 4 to ProLogis' Consolidated Financial Statements in Item 8.

(7) ProLogis' ownership interest in ProLogis European Properties Fund was 35.4%,
    34.4% and 19.7% as of December 31, 2001, 2000 and 1999, respectively.
    ProLogis European Properties Fund began operations on September 23, 1999. As
    of December 31, 2000, includes 44 distribution facilities aggregating
    7,751,000 square feet owned directly by ProLogis European Properties Fund
    and 60 distribution facilities aggregating 6,634,000 square feet owned by
    ProLogis European Properties S.a.r.l, which was owned by

                                        40


    ProLogis European Properties Fund (50.1%) and ProLogis (49.9%) as of
    December 31, 2000. In 1999, ProLogis European Properties S.a.r.l. was 100%
    owned by ProLogis. In 2000 and 2001, ProLogis contributed 50.1% and 49.9%,
    respectively, of the common stock of ProLogis European Properties S.a.r.l.
    to ProLogis European Properties Fund for additional equity interests. As of
    December 31, 1999, all facilities were owned directly by ProLogis European
    Properties Fund. See Note 4 to ProLogis' Consolidated Financial Statements
    in Item 8.

     ProLogis' property operations segment net operating income consists of the:
(i) net operating income (rental income less net rental expenses) from the
distribution facilities that are owned by ProLogis directly and (ii) income
recognized by ProLogis under the equity method from its investments in the Funds
and fee income earned from these entities. The net operating income from
distribution facilities that are developed by ProLogis in its CDFS business
segment is included in the net operating income of the property operations
segment until the facilities are contributed to an entity in which ProLogis has
an ownership interest or sold to a third party. See Note 10 to ProLogis'
Consolidated Financial Statements in Item 8. The amounts recognized under the
equity method are based on the net earnings of each unconsolidated entity and
include (in addition to net operating income): interest income and interest
expense, depreciation and amortization expenses, general and administrative
expenses, income taxes and foreign currency exchange gains and losses (with
respect to ProLogis Garonor, ProLogis European Properties Fund and ProLogis
European Properties S.a.r.l.). ProLogis' net operating income from the property
operations segment was as follows for 2001, 2000 and 1999 (in thousands) (see
Note 10 to ProLogis' Consolidated Financial Statements in Item 8):



                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2001       2000       1999
                                                              --------   --------   --------
                                                                           
Facilities directly owned by ProLogis:
  Rental income(1)..........................................  $465,777   $480,088   $491,826
  Property operating expenses(2)............................    28,700     27,177     33,501
                                                              --------   --------   --------
     Net operating income...................................   437,077    452,911    458,325
                                                              --------   --------   --------
Income from ProLogis California.............................    13,147     13,178      3,917
Income from ProLogis North American Properties Fund I(3)....     4,648      1,806        --
Income from ProLogis North American Properties Fund II(3)...     2,328        612        --
Income from ProLogis North American Properties Fund
  III(4)....................................................     1,178        --         --
Income from ProLogis North American Properties Fund IV(5)...       598        --         --
Income from ProLogis European Properties Fund(6)............    15,798     15,648        820
Income from ProLogis European Properties S.a.r.l.(6)........       205      8,041        --
Loss from ProLogis Garonor(7)...............................       --         --     (12,423)
                                                              --------   --------   --------
  Total property operations segment.........................  $474,979   $492,196   $450,639
                                                              ========   ========   ========


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

(1) The decrease in rental income between the periods presented is due to the
    changes in the number and composition of the directly owned facilities in
    each year and to lower average occupancy levels of the directly owned
    facilities in 2001 as compared to 2000.

(2) The $1.5 million increase in property operating expenses in 2001 as compared
    to 2000 is a function of: (i) an increase in bad debt expense (bad debt
    expense was $2.4 million for 2001 and $1.6 million for 2000) and (ii) an
    overall increase in operating costs (rental expenses, excluding bad debt and
    before recoveries from tenants, were 26.2% of rental income in 2001 as
    compared to 24.4% of rental income for 2000) offset by (iii) a decrease in
    the number of directly owned facilities in 2001 as compared to 2000. The
    increase in bad debt expense and operating costs is primarily due to the
    downturn in general economic conditions in North America experienced in
    2001. Property operating expenses decreased by $6.3 million in 2000 from
    1999, primarily the result of a decrease in the number of directly owned
    facilities in 2000 over 1999, in addition to increased rental expense
    recoveries (as a percentage of total rental expenses) in 2000 as compared to
    1999. Total rental expense recoveries were 76.9%, 77.1% and 72.4% of total
    rental expenses in 2001, 2000 and 1999, respectively.

(3) ProLogis North American Properties Fund I and ProLogis North American
    Properties Fund II began operations on June 30, 2000.

                                        41


(4) ProLogis North American Properties Fund III began operations on June 15,
    2001.

(5) ProLogis North American Properties Fund IV began operations on September 21,
    2001.

(6) In 2001, ProLogis' share of the income of ProLogis European Properties Fund
    includes net foreign currency gains of $0.8 million. In 2000, ProLogis'
    share of the income of ProLogis European Properties Fund and ProLogis
    European Properties S.a.r.l. includes net foreign currency gains of $2.3
    million and $2.4 million, respectively. In 1999, ProLogis' share of the
    income of ProLogis European Properties Fund includes net foreign currency
    gains of $0.3 million. Excluding net foreign currency exchange gains,
    ProLogis' share of the income of ProLogis European Properties Fund would
    have been $15.2 million, $13.3 million and $0.5 million for 2001, 2000 and
    1999, respectively. Excluding net foreign currency exchange gains, ProLogis'
    share of the income of ProLogis European Properties S.a.r.l. would have been
    $5.6 million for 2000. The decrease in ProLogis' combined share of the
    income, excluding foreign currency gains, of ProLogis European Properties
    Fund and ProLogis European Properties S.a.r.l. in 2001 from 2000 is due to:
    (i) higher effective interest costs in 2001; (ii) changes in ProLogis'
    ownership interests between periods; and (iii) the effects of a decrease in
    the foreign currency exchange rates at which the income of these entities is
    translated to U. S. dollars. ProLogis recognized income under the equity
    method related to ProLogis European Properties S.a.r.l. in 2001 for only six
    days. See Note 4 to ProLogis' Consolidated Financial Statements in Item 8.

(7) As of December 31, 1998, ProLogis had a non-voting preferred stock
    investment in Garonor Holdings S.A. ("Garonor Holdings") that owned Garonor
    S.A. ("ProLogis Garonor"), an industrial real estate operating company in
    France. ProLogis recognized 95% of the earnings of ProLogis Garonor and
    Garonor Holdings for the period from its acquisition by ProLogis on December
    29, 1998 to June 29, 1999. On June 29, 1999, ProLogis Garonor became a
    wholly owned subsidiary of ProLogis when ProLogis acquired the voting common
    stock of Garonor Holdings S.A. ProLogis Garonor was directly owned by
    ProLogis during the period from June 29, 1999 to January 7, 2000 and its
    results of operations were consolidated in ProLogis' financial statements
    along with ProLogis' other majority owned and controlled subsidiaries and
    partnerships. ProLogis Garonor's assets are part of ProLogis European
    Properties S.a.r.l. ProLogis' share of ProLogis Garonor's loss in 1999
    includes the recognition of foreign currency exchange losses of $13.0
    million.

     ProLogis' stabilized operating facilities (facilities owned by ProLogis and
the Funds), were 92.4% occupied and 93.1% leased as of December 31, 2001.
ProLogis' stabilized occupancy levels have decreased as compared to 2000 (95.4%
occupied and 96.2% leased) and 1999 (96.0% occupied and 96.5% leased). The term
"stabilized" means that for acquisitions any necessary capital improvements,
repositioning, new management and new marketing programs and, in the case of
newly developed facilities, construction and marketing, have been in effect for
a sufficient period of time (generally 12 months) to achieve stabilized
occupancy (typically 93%, but ranging from 90% to 95%, depending on the
submarket and product type). ProLogis, utilizing its ProLogis Operating
System(R), has been successful in increasing occupancies on acquired and
developed facilities during their initial months of operation.

     ProLogis believes that the decrease in its stabilized occupancy levels in
2001 is the result of the current economic conditions in North America that have
led to a slowing in customer leasing decisions and in a slowing in the
absorption of new distribution facilities in the market. ProLogis does not
expect market conditions affected by the North American economy to improve for
the next several quarters and believes that occupancies could continue to
decline over the next few quarters. However, ProLogis believes that it's global
operating platform and the ProLogis Operating System(R) will partially mitigate
the effects of these occupancy decreases, as they have allowed ProLogis to build
strong local market presence and strong customer relationships across many
global markets. In Europe, leasing activity has remained constant throughout
2001, with 8.7 million square feet of leases signed during the year. ProLogis
believes the leasing activity in Europe is currently affected more by a shift in
distribution patterns of its customers and their need to reduce distribution
costs than it is by the effects of general economic conditions.

     The average increase in rental rates for both new and renewed leases on
previously leased space (38.0 million square feet) for all facilities including
those owned by the Funds during 2001 was 14.6% as

                                        42


compared to 15.5% in 2000 and 15.5% in 1999. During 2001, the net operating
income (rental income less net rental expenses) generated by ProLogis' "same
store" portfolio of operating facilities (facilities owned by ProLogis and its
consolidated and the unconsolidated real estate funds that were in operation
throughout both 2001 and 2000) increased by 1.4% over the same period in 2000
(as compared to an increase of 5.9% during 2000 as compared to 1999). The
decrease in the growth rate in same store net operating income is due to
increased bad debt expense in 2001 and to lower occupancy levels in the same
store portfolio in 2001 as compared to 2000. Although the average increase in
rental rates for new and renewed leases was 14.6% for ProLogis' same store
operating portfolio in 2001, only 23.1 million square feet of new or renewed
leases were signed during 2001. Therefore, rental rate growth only affected a
small subset of the same store portfolio.

  CDFS Business

     Net operating income from ProLogis' CDFS business segment consists
primarily of: (i) the profits from the disposition of land parcels and
distribution facilities that were developed by ProLogis and sold to third
parties or contributed to real estate funds in which ProLogis maintains an
ownership interest; (ii) development management fees earned by ProLogis; and
(iii) income recognized under the equity method from ProLogis' investment in
Kingspark S.A.

     ProLogis recognizes 99.75% of the earnings of Kingspark S.A. under the
equity method including (in addition to net operating income): interest income
and interest expense (net of capitalized amounts), general and administrative
expense (net of capitalized amounts), income taxes and foreign currency exchange
gains and losses. See Note 4 to ProLogis' Consolidated Financial Statements in
Item 8.

     Income from the CDFS business segment is dependent on ProLogis' ability to
develop and lease distribution facilities that can be disposed of to generate
profits and its ability to raise private capital through the formation of real
estate funds or other sources. There can be no assurance that ProLogis will be
able to maintain the level of profits in this business segment.

     The CDFS business segment operations and ProLogis' income from this segment
have increased each year. The CDFS business segment's net operating income is
comprised of the following (in thousands):



                                                          YEAR ENDED DECEMBER 31,
                                                      -------------------------------
                                                        2001        2000       1999
                                                      --------    --------    -------
                                                                     
Net gains on disposition of land parcels and
  facilities developed(1)...........................  $ 96,847    $ 71,284    $44,843
Development management fees.........................     2,723       3,954      1,790
Income from Kingspark S.A.(2).......................    55,839      43,795     23,855
Miscellaneous fees and other income.................     4,867       2,864         45
Other expenses(3)...................................    (3,983)     (4,863)    (4,920)
                                                      --------    --------    -------
                                                      $156,293    $117,034    $65,613
                                                      ========    ========    =======


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

(1) Represents gains from the disposition of land parcels and facilities
    developed as follows:

    - 2001: 229 acres; 14.5 million square feet; $714.0 million of proceeds;

    - 2000: 193 acres; 10.6 million square feet; $491.9 million of proceeds; and

    - 1999: 203 acres; 5.4 million square feet; $357.5 million of proceeds.

(2) Kingspark S.A.'s income includes, among other items:

    - Gains from the disposition of land parcels and facilities developed as
      follows:

      - 2001: 63 acres; 2.7 million square feet; $300.0 million of proceeds; net
        gains of $38.5 million;

      - 2000: 11 acres; 1.2 million square feet; $180.5 million of proceeds; net
        gains of $30.5 million; and

      - 1999: 97 acres; 1.1 million square feet; $155.4 million of proceeds; net
        gains of $23.4 million.

     - Development fees and other miscellaneous income of $11.4 million in 2001,
       $11.9 million in 2000 and $10.1 million in 1999;

                                        43


     - Deferred and current income tax benefits of $3.7 million in 2001 and
       deferred and current income tax expense of $2.6 million in 2000 and $7.7
       million in 1999; and

     - Foreign currency exchange losses of $4.6 million in 2001, foreign
       currency exchange gains of $0.3 million in 2000 and foreign currency
       exchange losses of $1.5 million in 1999.

(3) Includes land holding costs of $2.7 million, $2.1 million and $2.0 million,
    in 2001, 2000 and 1999, respectively and the write-off of previously
    capitalized pursuit costs related to potential CDFS business segment
    projects of $1.3 million, $2.8 million and $2.9 million in 2001, 2000 and
    1999, respectively.

     During 2001, ProLogis began to direct the focus of its CDFS business
segment operations from North America to Europe, given the deteriorating
economic conditions in North America. As of December 31, 2001, 73% of ProLogis'
CDFS business segment assets were located in Europe with 22% in North America,
and the remaining 5% located in Japan. ProLogis believes that the continuing
demand for state-of-the-art distribution facilities in Europe will continue to
provide it with opportunities to expand its CDFS business. Further to this
objective, with 2,846 acres of land owned or controlled in Europe including
1,780 acres of land owned and controlled in the United Kingdom by Kingspark
S.A., ProLogis believes it will not be affected by land entitlement constraints
that currently exist in Europe. ProLogis will continue to monitor leasing
activity and general economic conditions in North America as it pertains to its
CDFS business segment operations. In 2001, ProLogis began its first development
project in Japan. Like Europe, ProLogis believes that demand for
state-of-the-art distribution facilities in Japan will provide opportunities for
ProLogis to expand its CDFS business.

  Temperature-Controlled Distribution Operations

     ProLogis recognizes income from the temperature-controlled distribution
operations segment of its business under the equity method. Negotiations are
ongoing for the disposition of a significant portion of the operating assets
within the temperature-controlled distribution operations segment. In March
2002, the operating assets in Sweden, Denmark, Finland, Norway and the
Netherlands, as well as the remaining German operating assets owned by
Frigoscandia were sold. Negotiations related to the sale of substantially all of
the temperature-controlled distribution operating assets in the United States
owned by CSI and the operating assets in Spain and Italy owned by Frigoscandia
are continuing. ProLogis' share of the combined write-downs and other impairment
charges of ProLogis Logistics/CSI and Frigoscandia S.A./Frigoscandia was $88.4
million in 2001. See "Item 1. Business -- Business Strategy and Operating
Segments -- Temperature-Controlled Distribution Operations -- Operations".
ProLogis' share of the income or loss in this operating segment was as follows
(in thousands) (see Notes 4 and 10 to ProLogis' Consolidated Financial
Statements in Item 8):



                                                         YEAR ENDED DECEMBER 31,
                                                     --------------------------------
                                                       2001         2000       1999
                                                     ---------    --------    -------
                                                                     
Loss from CSI/Frigo LLC(1).........................  $  (5,975)   $    --     $   --
Income (loss) from ProLogis Logistics..............    (56,405)     11,950     10,791
Loss from Frigoscandia S.A.........................    (49,088)    (20,298)    (4,364)
                                                     ---------    --------    -------
  Total temperature-controlled distribution
     operations segment............................  $(111,468)   $ (8,348)   $ 6,427
                                                     =========    ========    =======


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

(1) CSI/Frigo LLC, a limited liability company, owns 100% of the voting common
    stock of ProLogis Logistics and Frigoscandia S. A. ProLogis owns 89% of the
    membership interests (all non-voting) in CSI/Frigo LLC and K. Dane
    Brooksher, ProLogis' chairman and chief executive officer, owns the
    remaining 11% of the membership interests (all voting). ProLogis has a note
    agreement with CSI/Frigo LLC that allows ProLogis to participate in its
    earnings such that ProLogis will recognize 95% of the earnings of CSI/Frigo
    LLC. Mr. Brooksher is the managing member. ProLogis' ownership in this
    entity does not result in ProLogis having control as its membership interest
    is non-voting. Therefore, this entity is not consolidated in ProLogis'
    financial statements.

                                        44


     Prior to January 5, 2001, the common stock of ProLogis Logistics was owned
     by unrelated third parties and the common stock of Frigoscandia S.A. was
     owned by a limited liability company in which unrelated parties owned 100%
     of the voting interests and Security Capital, ProLogis' largest
     shareholder, owned 100% of the non-voting interests. On January 5, 2001,
     the common stock of both ProLogis Logistics and Frigoscandia S.A. was
     acquired by CSI/Frigo LLC for an aggregate purchase price of $3.3 million.

     Amounts recognized by ProLogis under the equity method from CSI/Frigo LLC
include ProLogis' share of this entity's share of the income or losses from
ProLogis Logistics and Frigoscandia S.A. Amounts recognized by ProLogis under
the equity method from ProLogis Logistics and Frigoscandia S.A. include (in
addition to net operating income): interest income and interest expense,
depreciation and amortization expense, general and administrative expense,
income taxes, foreign currency exchange gains and losses (with respect to
Frigoscandia) and impairment charges. ProLogis recognized in excess of 99% of
the earnings of each entity in 2001 as compared to 95% in both 2000 and 1999.

     CSI's operating capacity was 178.4 million, 182.2 million and 167.6 million
cubic feet as of December 31, 2001, 2000 and 1999, respectively. The increase in
2000 from 1999, was primarily the result of development completions. ProLogis'
share of ProLogis Logistics/CSI's net earnings from 2000 to 2001 decreased by
$68.4 million. This decrease is primarily attributable to: (i) a $53.3 million
charge related to the write-down of operating assets and other impairment
charges; (ii) higher interest expense as a result of increasing external debt of
this entity in 2001 with the proceeds used to repay debt to ProLogis; and (iii)
a decrease in operating income as a result of lower occupancy levels in certain
markets in 2001. The increase in ProLogis' share of ProLogis Logistics/CSI's net
earnings of $1.2 million in 2000, from 1999, was primarily attributable to the
increase in cubic feet capacity in operation in 2000.

     Frigoscandia's operating capacity was 154.4 million, 187.7 million and
192.3 million cubic feet as of December 31, 2001, 2000 and 1999, respectively.
The decrease in 2001, from 2000, reflects the dispositions of substantially all
of the operating assets in Germany and all of the operating assets in the Czech
Republic in May 2001 and September 2001, respectively.

     ProLogis' share of Frigoscandia S.A./Frigoscandia's net losses includes net
foreign currency exchange losses of $3.5 million, $0.8 million and $1.3 million
in 2001, 2000 and 1999, respectively. Excluding these foreign exchange losses,
ProLogis recognized $26.1 million more loss under the equity method in 2001,
than it recognized in 2000 from its investment in Frigoscandia S.A. The increase
in ProLogis' share of Frigoscandia S.A./Frigoscandia's net loss in 2001 from
2000 is primarily attributable to: (i) a $35.1 million charge related to the
write-down of operating assets and other impairment charges; (ii) a net loss
recognized on the disposal of substantially all of Frigoscandia's operating
assets in Germany and all of Frigoscandia's operating assets in the Czech
Republic of approximately $4.4 million; offset by (iii) higher operating
revenues and lower general and administrative expense in 2001. Excluding foreign
currency exchange losses, ProLogis recognized $16.4 million more loss under the
equity method in 2000 than it recognized in 1999. The increase in Frigoscandia
S.A./Frigoscandia's net loss in 2000 from the loss recognized in 1999 is
primarily due to: (i) lower occupancy levels; (ii) a weak European vegetable
harvest; and (iii) increases in fuel prices and expenses incurred related to
trucker strikes in August and September.

  Other Income and Expense Items

     General and Administrative Expense

     General and administrative expense was $50.3 million in 2001, $45.0 million
in 2000 and $38.3 million in 1999. The increase in general and administrative
expense in each year is primarily attributable to new business initiatives in
North America, Europe and Japan.

     Depreciation and Amortization

     Depreciation and amortization expense was $143.5 million in 2001, $151.5
million in 2000 and $152.4 million in 1999. The fluctuations in this expense
between years is primarily attributable to the number of distribution facilities
directly owned by ProLogis in each year. See "-- Property Operations".

                                        45


     Interest Expense

     Interest expense is a function of the level of borrowings outstanding and
interest rates charged on borrowings, offset by interest capitalization with
respect to development activities. Interest expense, before capitalization, was
$187.9 million in 2001, $190.7 million in 2000 and $186.7 million in 1999. The
decrease in 2001 over 2000 is primarily due to lower average interest rates and
lower average borrowings outstanding on ProLogis' lines of credit. The increase
in 2000 over 1999 is primarily the result of the increased use of debt to
finance investment activities in each year, particularly in 1999 when ProLogis
increased its secured debt balances to $695.6 million as of December 31, 1999.

     Interest expense recognized on borrowings is offset by interest capitalized
with respect to ProLogis' development activities. Capitalized interest increased
by $5.8 million to $24.3 million in 2001 from $18.5 million in 2000 and
increased by $2.5 million to $18.5 million in 2000 from $16.0 million in 1999.
Capitalized interest levels are reflective of ProLogis' cost of funds and the
level of development activity in each year.

     Other Expenses

     Other expenses were $4.0 million in 2001, $5.9 million in 2000 and $5.9
million in 1999. Included as "Other Expenses" are land holding costs, the
write-off of previously capitalized pursuit costs and $1.0 million of expense
incurred in connection with an interest rate hedge that was terminated in 1999.

     Land holding costs were $2.7 million in 2001, $2.1 million in 2000 and $2.0
million in 1999. Pursuit cost write-offs were $1.3 million in 2001, $3.8 million
in 2000 and $2.9 million in 1999.

     Gain on Disposition of Real Estate

     Gain on disposition of real estate represents the net gains from the
disposition of distribution facilities that were acquired or developed for
long-term use in the property operations segment. Generally, ProLogis disposes
of facilities in the property operations segment because such facilities are
considered to be non-strategic facilities. Non-strategic facilities are assets
located in markets or submarkets that are no longer considered target markets as
well as assets that were acquired as part of previous portfolio acquisitions
that are not consistent with ProLogis' core portfolio based on the asset's size
or configuration. Also, ProLogis will contribute facilities from its operating
portfolio to complement the portfolio of developed distribution facilities that
are acquired by the real estate funds.

     Property operations segment dispositions were as follows:

     - 2001: 6.7 million square feet; $236.1 million of proceeds; net gain of
       $9.5 million; and a net gain of $0.5 million recognized upon the
       contribution of ProLogis' 49.9% ownership of ProLogis European Properties
       S.a.r.l. to ProLogis European Properties Fund in January 2001;

     - 2000: 3.5 million square feet; $133.7 million of proceeds; net gains of
       $1.3 million; and

     - 1999 (excluding ProLogis California): 2.6 million square feet; $99.5
       million of proceeds; net gains of $13.4 million.

     In August 1999, in connection with the formation of ProLogis California,
ProLogis disposed of 78 distribution facilities and two facilities under
development to ProLogis California. The net sales proceeds from this disposition
were $538.3 million and ProLogis recognized a gain of $25.6 million on the
transaction, which is net of $25.6 million that was deferred because it did not
qualify for income recognition due to ProLogis' continuing ownership in ProLogis
California. ProLogis received an equity interest in ProLogis California of
$148.2 million and ProLogis California assumed $199.3 million of ProLogis' debt.
The remaining proceeds were received in cash.

                                        46


     Income (Loss) from Unconsolidated Entities

     The combined income (loss) from unconsolidated entities that is not
directly attributable to any of ProLogis' three business segments was a loss of
$33.5 million for 2001 (see Note 10 to ProLogis' Consolidated Financial
Statements in Item 8). This amount consists primarily of losses recognized by
ProLogis under the equity method from its investments in two unconsolidated
entities whose sole purpose is to hold preferred stock in technology companies.
In 2001, these entities both recognized write-downs of their investments to
estimated fair value. ProLogis' share of these write-downs was $37.0 million
which was offset by fee income recognized by these entities in 2001 under
license fee agreements. For 2000, the total income of $3.3 million from these
entities is primarily ProLogis' share of the license fee income recognized by
these two unconsolidated entities. See Note 4 to ProLogis' Consolidated
Financial Statements in Item 8.

     Foreign Currency Exchange Losses, Net

     ProLogis recognized net foreign currency exchange losses of $3.7 million,
$17.9 million and $16.8 million for 2001, 2000 and 1999, respectively. Foreign
currency exchange gains and losses are primarily the result of the remeasurement
and settlement of intercompany and third party debt of ProLogis' foreign
subsidiaries. Fluctuations in the foreign currency exchange gains and losses
recognized in each period are a product of movements in certain foreign currency
exchange rates, primarily the euro, the pound sterling and the yen and the level
of intercompany and third party debt outstanding that is denominated in
currencies other than the U.S. dollar. During 2001, 2000 and 1999, the euro and
pound sterling depreciated against the U.S. dollar which is the primary cause of
the remeasurement losses recognized in these years. ProLogis began utilizing
foreign currency put options to hedge its foreign currency exchange risk in
September 1999. See "-- Liquidity and Capital Resources -- Derivative Financial
Instruments".

     Income Taxes

     ProLogis is taxed as a REIT for federal income tax purposes and is not
required to pay federal income taxes if minimum distribution and income, asset
and shareholder tests are met. Not all of ProLogis' consolidated subsidiaries in
the United States are qualified REIT subsidiaries for tax purposes. Also, the
foreign countries in which ProLogis operates do not recognize REITs under their
respective tax laws. Accordingly, ProLogis recognizes income taxes as
appropriate and in accordance with GAAP in the United States with respect to the
taxable earnings of certain of its taxable subsidiaries.

     Current income tax expense recognized in 2001, 2000 and 1999 was $2.5
million, $0.9 million and $1.5 million, respectively. Current income tax expense
is higher in 2001 primarily due to the level of income recognized by ProLogis'
taxable subsidiary operating in the CDFS business segment, ProLogis Development
Services. ProLogis recognized deferred income tax expense of $2.3 million in
2001 and $4.2 million in 2000 and ProLogis did not record deferred income taxes
in 1999. ProLogis' deferred income tax component of total income taxes is a
function of each year's temporary differences (items that are treated
differently for tax purposes than for book purposes) as well as the need for a
deferred tax valuation allowance to adjust certain deferred tax assets
(primarily deferred tax assets created by tax net operating losses) to their
estimated realizable value. In 1999, the effect of the current year's temporary
differences were entirely offset by adjustments to the valuation allowance
resulting in no net deferred tax expense being recognized.

     Cumulative Effect of Accounting Change

     Through 1998, ProLogis capitalized costs associated with start-up
activities and organization costs and amortized such costs over an appropriate
period, generally five years. Statement of Position 98-5 "Reporting on the Costs
of Start-Up Activities", which requires that costs associated with
organizational, pre-opening, and start-up activities be expensed as incurred,
was adopted by ProLogis on January 1, 1999. Accordingly, ProLogis expensed $1.4
million of unamortized organization and start-up costs as a cumulative effect of
accounting change in the first quarter of 1999. All such costs incurred since
1999 have been expensed.

                                        47


  Merger Transaction

     On March 30, 1999, Meridian, a publicly traded REIT that owned industrial
distribution facilities in the United States, was merged with and into ProLogis.
In accordance with the terms of the Agreement and Plan of Merger dated November
16, 1998, as amended, the approximately 33.8 million outstanding shares of
Meridian common stock were exchanged (on a 1.1 for one basis) into approximately
37.2 million ProLogis Common Shares. In addition, the holders of Meridian common
stock received $2.00 in cash per outstanding share, approximately $67.6 million
in total. The holders of Meridian's Series D cumulative redeemable preferred
stock received a new series of ProLogis cumulative redeemable preferred shares,
Series E preferred shares, on a one for one basis. The Series E preferred shares
have an 8.75% annual dividend rate ($2.1875 per share) and an aggregate
liquidation value of $50.0 million. The total purchase price of Meridian was
approximately $1.54 billion, which included the assumption of the outstanding
debt and liabilities of Meridian as of March 30, 1999 and the issuance of
approximately 1.0 million stock options, each to acquire 1.1 ProLogis Common
Shares, plus $2.00 in cash. The total assets acquired from Meridian aggregated
approximately $1.54 billion, including $1.42 billion of real estate assets and
an interest in a temperature-controlled distribution operations company of $28.7
million. The transaction was structured as a tax-free merger and was accounted
for under the purchase method. See Note 11 to ProLogis' Consolidated Financial
Statements in Item 8.

ENVIRONMENTAL MATTERS

     ProLogis has not experienced any environmental condition on its facilities
which materially adversely affected its results of operations or financial
position, nor is ProLogis aware of any environmental liability that ProLogis
believes would have a material adverse effect on its business, financial
condition or results of operations. See "-- Risk Factors".

LIQUIDITY AND CAPITAL RESOURCES

  Overview

     ProLogis considers its liquidity and ability to generate cash from
operations as well as its financing capabilities (including proceeds from the
disposition of distribution facilities) to be adequate and expects it to
continue to be adequate to meet its anticipated development, acquisition,
operating and debt service needs as well as its shareholder distribution
requirements.

     ProLogis' future investing activities are expected to consist of: (i) the
acquisition of land for future development and the development of distribution
facilities in the CDFS business segment for future disposition and (ii)
acquisitions of existing distribution facilities in key distribution markets in
the property operations segment. ProLogis' future investing activities are
expected to be funded with:

     - cash generated by operations;

     - the proceeds from the disposition of facilities developed by ProLogis to
       third parties;

     - the proceeds from the contribution of facilities to real estate funds in
       which ProLogis maintains an ownership interest;

     - the proceeds from the disposition of ProLogis' investment in the
       temperature-controlled distribution operations segment;

     - the proceeds from the sale of Common Shares under the Common Share plans;
       and

     - utilization of ProLogis' U.S. dollar denominated and multi-currency
       denominated revolving credit facilities.

     In the short-term, borrowings on and subsequent repayments of ProLogis'
revolving credit facilities will provide ProLogis with adequate liquidity and
financial flexibility to efficiently respond to market opportunities. As of
April 3, 2002, on a combined basis, ProLogis had approximately $380.5 million of
short-term borrowings outstanding resulting in additional short-term borrowing
capacity available of $645.3 million (see "-- Borrow-
                                        48


ing Capacity and Debt Maturities"). ProLogis has $608.0 million of
shelf-registered securities which can be issued in the form of debt securities,
preferred shares, Common Shares, rights to purchase Common Shares and preferred
share purchase rights on an as-needed basis, subject to ProLogis' ability to
effect an offering on satisfactory terms. ProLogis will continue to evaluate the
public debt markets with the objective of reducing its short-term borrowings and
extending debt maturities should favorable terms be available.

     Within ProLogis European Properties Fund, ProLogis has access to 456.0
million euros (the currency equivalent of approximately $402.1 million as of
December 31, 2001 based on currency exchange rates quoted by Reuters) of third
party equity capital in Europe that has been committed primarily by
institutional investors through September 2002. The capital is committed to fund
acquisitions of ProLogis' completed stabilized European developments and
acquisitions of facilities from third parties. ProLogis has entered into a
subscription agreement to make additional capital contributions of 58.9 million
euros (the currency equivalent of approximately $51.9 million as of December 31,
2001 based on currency exchange rates quoted by Reuters) through September 2002.

     Within ProLogis European Properties Fund, third party institutional
investors executed equity subscription agreements with ProLogis European
Properties Fund in the original amount of 1.06 billion euros (the currency
equivalent of approximately $1.07 billion at then-current currency exchange
rates quoted by Reuters), of which approximately 456 million euros (the currency
equivalent of approximately $402 million as of December 31, 2001 based on
currency exchange rates quoted by Reuters) remains unfunded at December 31,
2001. The subscription agreements expire in September 2002 and the proceeds are
committed to fund acquisitions of ProLogis' completed stabilized European
developments and acquisitions of facilities from third parties. By terms of an
agreement with ProLogis European Properties Fund, ProLogis is required to
contribute to ProLogis European Properties Fund, and ProLogis European
Properties Fund is required to acquire, any European distribution facilities
that meet specified criteria (primarily as to asset class, stabilization,
location and yield). Such contributions are made to ProLogis European Properties
Fund based on appraised values of the property. Although ProLogis is required to
contribute to ProLogis European Properties Fund all assets that meet the
specified criteria, there are no requirements that ProLogis acquire or develop
land or contribute a minimum amount of facilities. As a result, the third party
subscription agreements do not represent a committed source of financing to
ProLogis. ProLogis is a co-investor with the third party investors in ProLogis
European Properties Fund and entered into a subscription agreement in the
original amount of approximately 270 million euros (the currency equivalent of
approximately $280 million at then-current currency exchange rates quoted by
Reuters), of which approximately 58.9 million euros (the currency equivalent of
approximately $51.9 million as of December 31, 2001 based on currency exchange
rates quoted by Reuters) remains unfunded at December 31, 2001. ProLogis
believes that the funding sources itemized above are adequate to fund the
investment required in development facilities prior to their contribution to
ProLogis European Properties Fund and the contributions required by ProLogis'
subscription agreement with ProLogis European Properties Fund.

  Cash Operating Activities

     Net cash provided by operating activities was $346.9 million in 2001,
$325.2 million in 2000 and $271.4 million in 1999. The increases from year to
year are primarily the result of lower interest expense in 2001 as well as other
operational items discussed in "-- Results of Operations". Cash provided by
operating activities exceeded the cash distributions paid on Common Shares in
each year, 1999 to 2001.

  Cash Investing and Cash Financing Activities

     For 2001, ProLogis' investing activities provided net cash of $100.0
million. For 2000 and 1999, ProLogis used net cash of $381.5 million, and $34.4
million, respectively, in its investing activities. The shift from utilizing
cash in its investing activities to generating cash from its investing
activities is primarily the result of disposition activity. Investing activities
consisted primarily of investments in real estate (both acquisition and
development expenditures) as well as recurring capital expenditures, tenant
improvements and lease commissions on previously leased space and totalled
$840.2 million in 2001, $675.5 million in 2000 and $507.1 million in 1999.
ProLogis' unconsolidated entities generated net cash to ProLogis of $72.7
million in
                                        49


2001. However, ProLogis' additional investments in unconsolidated entities, net
of distributions received and debt repayments, required cash of $188.8 million
in 2000 and $141.0 million in 1999. Net cash generated from the dispositions of
facilities and land parcels was $856.0 million, $489.0 million and $564.8
million in 2001, 2000 and 1999, respectively.

     In 2001, ProLogis' financing activities utilized cash primarily for net
debt repayments (including short-term borrowings) of $109.4 million and the
redemption of preferred equity of $139.6 million. ProLogis' financing activities
in 2000 generated cash and consisted primarily of net short-term borrowings of
$341.1 million and $30.7 million of proceeds from Common Share transactions. In
1999, ProLogis' financing activities utilized cash and involved the completion
of secured and unsecured long-term debt transactions generating net cash of
$966.1 million. Proceeds from these debt transactions were the primary source of
the funds used to repay short-term borrowings of $724.0 million in 1999
(including $328.4 million repayment of short-term borrowings assumed in the 1999
merger transaction). See "-- Results of Operations -- Merger Transaction" and
Note 11 to ProLogis' Consolidated Financial Statements in Item 8.

     Common Share cash distributions were $237.7 million, $219.3 million and
$209.0 million (including $11.1 million paid to Meridian shareholders) in 2001,
2000 and 1999, respectively. Dividends paid on preferred shares were $37.3
million in 2001 and $56.8 million in both 2000 and 1999 (including $0.7 million
paid to Meridian shareholders in 1999). See "-- Distribution and Dividend
Requirements".

  Borrowing Capacity and Debt Maturities

     ProLogis has over $1.0 billion of short-term borrowing capacity under four
revolving lines of credit. These borrowings are available in four currencies and
are summarized below (dollar amounts in millions of U.S. dollars):



                         OUTSTANDING AS OF
  TOTAL         ------------------------------------      WEIGHTED AVERAGE
COMMITMENT      DECEMBER 31, 2001      APRIL 3, 2002      INTEREST RATE(1)      EXPIRATION
----------      -----------------      -------------      ----------------      ----------
                                                                    
 $  500.0            $203.5(2)            $107.0(2)               2.68%          06/06/03(3)
     60.0                --                   --                    --           06/06/02
    285.7(4)          156.4(4)             226.8(4)               4.24%          12/17/03
    184.6(5)           47.5(5)              46.7(5)               1.09%          09/13/04(3)
 --------            ------               ------              --------
 $1,030.3(6)         $407.4               $380.5                  3.09%
 ========            ======               ======              ========


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

(1) Represents the weighted average interest rate on borrowings outstanding as
    of December 31, 2001.

(2) Includes $31.5 million of direct borrowings by ProLogis Logistics under
    ProLogis' line of credit as of December 31, 2001. ProLogis has guaranteed
    these borrowings. No such borrowings were outstanding at April 3, 2002.

(3) Credit agreement may be extended from this date for one year at ProLogis'
    option.

(4) Borrowings can be denominated in either euros or pounds sterling (total
    commitment is 325.0 million euros). As of December 31, 2001, 174.1 million
    euros were outstanding. As of April 3, 2002, 258.0 million euros were
    outstanding.

(5) Borrowings are denominated in yen (total commitment is 24.5 billion yen). As
    of December 31, 2001, 6.2 billion yen were outstanding. As of April 3, 2002,
    6.2 billion yen were outstanding.

(6) Available borrowings as of April 3, 2002 are reduced by $4.5 million of
    letters of credit outstanding.

                                        50


     ProLogis has senior unsecured notes and secured debt (mortgage notes,
assessment bonds and securitized debt) outstanding as of December 31, 2001 with
annual principal payments during each of the years in the five-year period
ending December 31, 2006 and thereafter as follows (in thousands):


                                                        
2002....................................................   $   49,252
2003....................................................      185,214
2004....................................................      316,554
2005....................................................      111,579
2006....................................................      319,995
2007 and thereafter.....................................    1,222,012
                                                           ----------
          Total principal due...........................    2,204,606
Less: Original issue discount...........................       (2,141)
                                                           ----------
          Total carrying value..........................   $2,202,465
                                                           ==========


     See Note 5 to ProLogis' Consolidated Financial Statements in Item 8.

  Liquidity and Capital Resources of ProLogis' Unconsolidated Entities

     ProLogis has investments and advances to unconsolidated entities of $1.3
billion as of December 31, 2001. Summarized financial information for certain of
these unconsolidated entities is presented below (in millions of U.S. dollars).
The information presented is for the entire entity.


                                                                            PROLOGIS       PROLOGIS       PROLOGIS
                                                                             NORTH          NORTH           NORTH
                                                                            AMERICAN       AMERICAN       AMERICAN
                         PROLOGIS       FRIGOSCANDIA       PROLOGIS        PROPERTIES     PROPERTIES     PROPERTIES
                       LOGISTICS(1)       S.A.(1)        CALIFORNIA(2)     FUND I(3)      FUND II(4)     FUND III(4)
                       ------------     ------------     -------------     ----------     ----------     -----------
                                                                                       
Total assets.........     $328.9          $ 401.7           $591.1           $360.6         $235.3         $209.3
Total liabilities....     $165.5(7)       $ 515.0(8)        $301.0(9)        $238.7(10)     $169.0(11)     $152.6(12)
Minority interest....     $   --          $   0.2           $   --           $   --         $   --         $   --
Equity(16)...........     $163.4          $(113.5)          $290.1           $121.9         $ 66.3         $ 56.7


                        PROLOGIS
                         NORTH         PROLOGIS
                        AMERICAN       EUROPEAN
                       PROPERTIES     PROPERTIES    KINGSPARK
                       FUND IV(5)      FUND(6)       S.A.(1)
                       ----------     ----------    ---------
                                           
Total assets.........    $146.2        $1,477.3      $550.4
Total liabilities....    $104.7(13)    $  676.5(14)  $467.8(15)
Minority interest....    $   --        $     --          --
Equity(16)...........    $ 41.5        $  800.8      $ 82.6


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

 (1) ProLogis had an ownership interest in excess of 99% in each entity as of
     December 31, 2001.

 (2) ProLogis had a 50% ownership interest in this entity as of December 31,
     2001.

 (3) ProLogis and ProLogis Development Services had a combined 41.3% ownership
     interest in this entity as of December 31, 2001.

 (4) ProLogis and ProLogis Development Services had a combined 20% ownership
     interest in each entity as of December 31, 2001.

 (5) ProLogis had a 20% ownership interest in this entity as of December 31,
     2001.

 (6) ProLogis had a 35.4% ownership interest in this entity as of December 31,
     2001. Includes the ProLogis European Properties S.a.r.l. which is wholly
     owned by ProLogis European Properties Fund as of December 31, 2001.

 (7) Liabilities include amounts due to ProLogis and loans from third parties in
     the following amounts:

     - $10.9 million due to ProLogis;

     - $90.0 million due to a third party; due on June 6, 2002; all of which has
       been guaranteed by ProLogis;

     - $31.5 million borrowed under ProLogis' $500.0 million line of credit all
       of which has been guaranteed by ProLogis (see -- "Borrowing Capacity and
       Debt Maturities"); and

     - $2.6 million of other third party debt; none of which has been guaranteed
       by ProLogis.

 (8) Liabilities include amounts due to ProLogis and loans from third parties in
     the following amounts:

     - $290.0 million due to ProLogis;

     - $90.4 million due to a third party; due on June 28, 2002; all of which
       has been guaranteed by ProLogis (paid in full on March 28, 2002); and

                                        51


     - $6.8 million of other third party debt; none of which has been guaranteed
       by ProLogis.

 (9) Liabilities include amounts due to ProLogis and loans from third parties in
     the following amounts:

     - $17.2 million due to a third party; due May 31, 2005; none of which has
       been guaranteed by ProLogis;

     - $182.0 million due to a third party; due March 1, 2009; none of which has
       been guaranteed by ProLogis; and

     - $93.9 million due to a third party; due August 1, 2009; none of which has
       been guaranteed by ProLogis.

(10) Liabilities include amounts due to ProLogis and loans from third parties in
     the following amounts:

     - $1.1 million due to ProLogis;

     - $102.0 million due to a third party; due on March 10, 2011; none of which
       has been guaranteed by ProLogis; and

     - $130.6 million due to a third party; due on December 10, 2010; none of
       which has been guaranteed by ProLogis.

(11) Liabilities include amounts due to ProLogis and loans from third parties in
     the following amounts:

     - $0.3 million due to ProLogis and

     - $165.0 million due to a third party; due on June 1, 2007; none of which
       has been guaranteed by ProLogis.

(12) Liabilities include amounts due to ProLogis and loans from third parties in
     the following amounts:

     - $0.1 million due to ProLogis and

     - $150.0 million due to a third party; due on September 1, 2007; none of
       which has been guaranteed by ProLogis.

(13) Liabilities include amounts due to ProLogis and loans from third parties in
     the following amounts:

     - $0.1 million due to ProLogis and

     - $103.0 million due to a third party; due on January 2, 2008; none of
       which has been guaranteed by ProLogis.

(14) Liabilities include amounts due to ProLogis and loans from third parties in
     the following amounts:

     - $6.4 million due to ProLogis;

     - $121.8 million (eight mortgage issues) due to third parties due on
       various dates ranging from July 2006 through July 2008; none of which has
       been guaranteed by ProLogis;

     - $192.1 million due to a third party; due on May 1, 2011; none of which
       has been guaranteed by ProLogis;

     - $105.8 million due to a third party; due on August 14, 2002; none of
       which has been guaranteed by ProLogis; and

     - $178.4 million due to a third party; due on September 15, 2002; none of
       which has been guaranteed by ProLogis.

(15) Liabilities include $433.7 million due to ProLogis. ProLogis has guaranteed
     a 25.0 million pound sterling (the currency equivalent of approximately
     $36.1 million as of December 31, 2001 based on currency exchange rates
     quoted by Reuters) line of credit of a subsidiary of Kingspark S.A. As of
     December 31, 2001, there were no borrowings outstanding on the line of
     credit.

(16) ProLogis has entered into a subscription agreement to make additional
     capital contributions of 58.9 million euros (the currency equivalent of
     approximately $51.9 million as of December 31, 2001) through September
     2002.

  Distribution and Dividend Requirements

     ProLogis' current distribution policy is to pay quarterly distributions to
shareholders based upon what it considers to be a reasonable percentage of cash
flow and at the level that will allow ProLogis to continue to

                                        52


qualify as a REIT for tax purposes. Because depreciation is a non-cash expense,
cash flow typically will be greater than earnings from operations and net
earnings. Therefore, annual distributions are expected to be consistently higher
than annual earnings.

     Cash distributions paid in 2001, 2000 and 1999 were $1.38 per Common Share,
$1.34 per Common Share and $1.30 per Common Share, respectively. The Board set a
projected annual distribution rate for 2002 of $1.42 per Common Share. ProLogis
paid a distribution for the first quarter of 2002 of $0.355 per Common Share on
February 28, 2002 to holders of Common Shares as of February 14, 2002. The
payment of distributions is subject to the discretion of the Board and is
dependent upon the financial condition and operating results of ProLogis and may
be adjusted at the discretion of the Board during the year.

     As of December 31, 2001, ProLogis had three series of cumulative redeemable
preferred shares of beneficial interest outstanding. The annual dividend rates
on ProLogis' preferred shares are $4.27 per share (Series C), $1.98 per share
(Series D) and $2.19 per Series E Preferred Share.

     Pursuant to the terms of its preferred shares, ProLogis is restricted from
declaring or paying any distribution with respect to the Common Shares unless
and until all cumulative dividends with respect to the Preferred Shares have
been paid and sufficient funds have been set aside for dividends for the then
current dividend period with respect to the preferred shares.

  Other Commitments

     As of December 31, 2001, ProLogis had letters of intent or contingent
contracts, subject to ProLogis' final due diligence, for the acquisition of 3.1
million square feet of distribution facilities at an estimated acquisition cost
of $83.3 million. The foregoing transactions are subject to a number of
conditions, and ProLogis cannot predict with certainty that they will be
consummated. As of December 31, 2001, ProLogis had $65.0 million of funds
escrowed as the result of tax-deferred exchange transactions that can be used to
acquire these assets. In January 2002, ProLogis completed the acquisition of one
of these facilities aggregating 0.3 million square feet at a total acquisition
cost of $10.8 million. In addition, as of December 31, 2001, ProLogis had
facilities under development with an expected cost at completion of $250.5
million of which $132.2 million was unfunded.

     In January 2001, ProLogis announced a Common Share repurchase program under
which it may repurchase up to $100.0 million of its Common Shares. The Common
Shares have been and, to the extent these repurchases continue, will be
purchased from time to time in the open market and in privately negotiated
transactions, depending on market prices and other conditions. During 2001,
778,400 common shares were purchased under this program at a total cost of $16.0
million. ProLogis intends to fund the Common Share repurchase program through
borrowings on its unsecured revolving credit facilities.

  Derivative Financial Instruments

     ProLogis uses derivative financial instruments as hedges to manage
well-defined risk associated with interest and foreign currency rate
fluctuations on existing or anticipated obligations and transactions. ProLogis
does not use derivative financial instruments for trading purposes.

     The primary risks associated with derivative instruments are market risk
and credit risk. Market risk is defined as the potential for loss in the value
of the derivative due to adverse changes in market prices (interest rates or
foreign currency rates). The use of derivative financial instruments allows
ProLogis to manage the risks of increases in interest rates and fluctuations in
foreign currency exchange rates with respect to the effects these fluctuations
would have on ProLogis' income and cash flows.

     Credit risk is the risk that one of the parties to a derivative contract
fails to perform or meet their financial obligation under the contract. ProLogis
does not obtain collateral to support financial instruments subject to credit
risk but monitors the credit standing of counterparties, primarily global
commercial banks. ProLogis does not anticipate non-performance by any of the
counterparties to its derivative contracts. Should a counterparty fail to
perform, however, ProLogis would incur a financial loss to the extent of the
positive fair market value of the derivative instruments, if any.

                                        53


     As of December 31, 2001, ProLogis had foreign currency put option contracts
outstanding in the notional amount of 45.8 million euros and 17.4 million pounds
sterling (the currency equivalent of approximately $65.5 million based on
currency exchange rates quoted by Reuters) related to its operations in Europe.
The put option contracts were fully paid for at execution and provide ProLogis
with the option to exchange euros and pound sterling for U.S. dollars at a fixed
exchange rate such that, if the euro or pound sterling were to depreciate
against the U.S. dollar to predetermined levels (as set by the contract),
ProLogis could exercise its options and mitigate its foreign currency exchange
losses. The outstanding contracts do not qualify for hedge accounting treatment
and were marked to market through income as of December 31, 2001. In 2001,
ProLogis recognized aggregate expense of $1.0 million on various put option
contracts, including realized losses of $2.1 million and mark to market income
of $1.1 million.

  Conversion to the Euro

     Effective January 1, 1999, eleven of the fifteen member countries of the
European Monetary Union launched the new monetary unit, the euro, as the single
currency for the member countries of the European Monetary Union. During the
period from January 1, 1999 to January 1, 2002, a transition period was in
effect during which time the euro was available for non-cash transactions.
However, transactions could continue to be denominated in the old national
currencies. After January 1, 2002, all transactions must be denominated in the
euro. The targeted exchange rates of the old national currencies to the euro
were determined in May 1998. Conversion to the euro has not had, nor is
management aware of any future effects of the conversion to the euro that will
have, a material impact on its business operations or results of operations.

NEW TAX LEGISLATION

     Due to the previous limitations in the Code, certain of ProLogis' taxable
subsidiaries (those entities whose operations generated income that was
restricted under the REIT rules) were formed as entities in which ProLogis owned
100% of the non-voting preferred stock and a third party owned 100% of the
voting common stock. Accordingly, ProLogis accounted for these types of
investments under the equity method rather than consolidating the investments in
its balance sheet and results of operations as the non-voting ownership interest
did not result in ProLogis having control of the entities. The REIT
Modernization Act ("RMA"), which was effective on January 1, 2001, modified
certain provisions of the Code with respect to the taxation of REITs. Primarily,
the RMA allows for the creation of Taxable REIT Subsidiaries ("TRS") that allows
ProLogis and other REITs to own up to 100% of a TRS (previously limited to 10%
of the voting stock). However, certain state law restrictions have prevented
ProLogis from changing the ownership structures such that ProLogis owns 100% of
these entities. See "Item 2. Properties -- Unconsolidated Entities" and Note 4
to ProLogis' Consolidated Financial Statements in Item 8.

FUNDS FROM OPERATIONS

     Funds from operations attributable to Common Shares decreased $2.3 million
to $374.4 million for 2001 from $376.7 million for 2000. The decrease in 2001 is
primarily attributable to the recognition of ProLogis' share of aggregate
charges of $42.8 million related to the write-down of technology related
investments of certain of ProLogis' unconsolidated entities. Funds from
operation attributable to Common Shares increased $56.5 million from 1999 to
2000.

     Funds from operations does not represent net income or cash from operating
activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs, which is presented in the Consolidated Statement
of Cash Flows in ProLogis' Consolidated Financial Statements in Item 8. Funds
from operations should not be considered as an alternative to net income, as an
indicator of ProLogis' operating performance, or as an alternative to cash flows
from operating, investing or financing activities as a measure of liquidity.
Additionally, the funds from operations measure presented by ProLogis will not
necessarily be comparable to similarly titled measures of other REITs. ProLogis
considers funds from operations to be a useful supplemental measure of
comparative period operating performance and as a supplemental measure to
provide management, financial analysts, potential investors and shareholders
with an indication of ProLogis' ability to fund its capital expenditures and
investment activities and to fund other cash needs.
                                        54


     Funds from operations is defined by the National Association of Real Estate
Investment Trusts ("NAREIT") generally as net income (computed in accordance
with GAAP), excluding real estate related depreciation and amortization, gains
and losses from sales of properties except those gains and losses from sales of
properties upon completion or stabilization under pre-sale agreements, and after
adjustments for unconsolidated entities to reflect their funds from operations
on the same basis. ProLogis includes gains and losses from the disposition of
its CDFS business segment assets in funds from operations.

     Funds from operations, as presented by ProLogis, is modified from the
NAREIT definition. ProLogis' funds from operations measure does not include: (i)
charges related to the write-down of non-CDFS business segments assets; (ii)
deferred income tax benefits and deferred income tax expenses of ProLogis'
taxable subsidiaries; (iii) foreign currency exchange gains and losses resulting
from debt transactions between ProLogis and its consolidated and unconsolidated
entities; (iv) foreign currency exchange gains and losses from the remeasurement
(based on current foreign currency exchange rates) of third party debt of
ProLogis' foreign consolidated and unconsolidated entities; and (v) mark to
market adjustments related to derivative financial instruments utilized to
manage ProLogis' foreign currency risks. These adjustments to the NAREIT
definition are made to reflect ProLogis' funds from operations on a comparable
basis with the other REITs that do not engage in the types of transactions that
give rise to these items.

     Funds from operations is as follows (in thousands):



                                                             YEAR ENDED DECEMBER 31,
                                                          ------------------------------
                                                            2001       2000       1999
                                                          --------   --------   --------
                                                                       
Net earnings attributable to Common Shares..............  $ 90,835   $157,715   $123,999
  Add (Deduct):
     Real estate related depreciation and
       amortization.....................................   137,033    146,859    150,050
     Gain on disposition of non-CDFS business segment
       assets...........................................   (10,008)    (1,314)   (38,994)
     Foreign currency exchange losses, net(1)...........     1,484     19,569     16,596
     Deferred income tax expense (benefit)..............     2,258      4,230         --
     Cumulative effect of accounting change(2)..........        --         --      1,440
     ProLogis' share of reconciling items of
       unconsolidated entities:
       Real estate related depreciation and
          amortization..................................    63,948     57,366     49,644
       Write-down of operating assets and other
          impairment charges(3).........................    88,413         --         --
       (Gain) loss on disposition of non-CDFS business
          segment assets................................     4,417       (744)       826
       Foreign currency exchange (gains) losses, net....     8,204     (2,773)    14,650
       Deferred income tax expense (benefit)............   (12,171)    (4,190)       510
       Cumulative effect of accounting change(2)........        --         --      1,480
                                                          --------   --------   --------
  Funds from operations attributable to Common Shares...  $374,413   $376,718   $320,201
                                                          ========   ========   ========


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

(1) See "-- Results of Operations -- Other Income and Expense Items -- Foreign
    Currency Exchange Losses, Net".

(2) See "-- Results of Operations -- Other Income and Expense Items --
    Cumulative Effect of Accounting Change".

(3) See "-- Results of Operations -- Temperature-Controlled Distribution
    Operations".

                                        55


RISK FACTORS

     ProLogis' operations involve various risks that could adversely affect
ProLogis' financial condition, results of operations, cash flow, ability to pay
distributions on Common Shares and the market price of Common Shares. These
risks include, among others:

  General Real Estate Risks

     General Economic Conditions

     ProLogis is exposed to the general economic conditions and the local,
regional, national and international conditions that affect the markets in which
it owns industrial distribution facilities. ProLogis' operating performance
depends on the economic conditions of markets in which its distribution
facilities are concentrated. While ProLogis does not have in excess of 10% of
its total portfolio in any one market, it does have significant holdings in
Atlanta, Chicago, Dallas/Ft. Worth, Los Angeles, Paris, San Francisco and the
United Kingdom. ProLogis' operating performance could be adversely affected if
conditions in these larger markets, such as an oversupply of distribution space
or a reduction in demand for industrial distribution facilities, become less
favorable relative to other geographic areas. Any material oversupply of
distribution space or material reduction of demand for distribution space could
adversely affect ProLogis' operating income and the value of its Common Shares.

     Risks Particular To Real Estate

     Real property investments are subject to varying degrees of risk. While
ProLogis seeks to minimize these risks through our market research and property
management capabilities, these risks cannot be eliminated. The factors that can
affect real estate values include:

     - changes in the general economic climate;

     - local conditions, such as an oversupply of space or a reduction in demand
       for industrial real estate in an area;

     - the quality and philosophy of management;

     - the attractiveness of our facilities to potential customers;

     - competition from other available facilities;

     - the ability of ProLogis to provide adequate maintenance and insurance on
       its facilities;

     - the ability of ProLogis to control variable operating costs;

     - governmental regulations, including zoning, usage and tax laws and
       changes in these laws;

     - interest rate levels at which ProLogis may borrow funds and the
       availability of funds to ProLogis;

     - potential liability under, and changes in, environmental, zoning, and
       other laws.

     Risks Associated with Concentration of ProLogis' Investments in the
Industrial Sector

     ProLogis' property operations and CDFS business segments are concentrated
in the industrial distribution sector. This concentration may expose ProLogis to
the risk of economic downturns in this sector to a greater extent than if
ProLogis' business activities included other types of real estate investments.

     Risks Associated with ProLogis' Development Activities

     ProLogis has developed a significant number of distribution facilities
since its inception and intends to continue to pursue development activities as
opportunities arise. Such development activities generally require

                                        56


various government and other approvals. ProLogis may not receive such approvals.
ProLogis will be subject to risks associated with such development activities.
These risks include:

     - the risk that development opportunities explored by ProLogis may be
       abandoned with the related investment written off;

     - the risk that construction costs of a facility may exceed original
       estimates or may not be concluded on schedule (including the possibility
       of contract default, the effect of local weather conditions and local or
       national strikes, or shortages in materials, building supplies or energy
       and fuel for equipment) which could make the project less profitable than
       originally estimated; and

     - the risk that occupancy rates and rents of a completed project will not
       make the project as profitable as originally estimated.

     Risks Associated with the Disposition of ProLogis' Facilities

     ProLogis has disposed of or contributed to real estate funds a significant
number of distribution facilities in recent years and ProLogis intends to
continue to pursue disposition activities as opportunities arise, particularly
in its CDFS business segment. ProLogis' ability to dispose of facilities on
advantageous terms is dependent upon several factors, some of which are beyond
the control of ProLogis' management, primarily competition from other owners of
facilities that are also trying to dispose of their facilities. ProLogis'
ability to complete and lease developed facilities will impact its ability to
dispose of or contribute these facilities. Should ProLogis not have sufficient
facilities available that meet the investment criteria of future real estate
funds or of ProLogis European Properties Fund, then the dispositions could be
delayed resulting in adverse effects on ProLogis' liquidity and on its ability
to meet projected earnings levels in a particular reporting period. Failure to
meet its projected earnings levels could have an adverse effect on the market
price of Common Shares. Further, the inability of ProLogis to redeploy the
proceeds from its divestitures in accordance with its investment strategy could
have an adverse affect on ProLogis.

     Risks Associated with Acquisition of Facilities

     ProLogis acquires distribution facilities from time to time. The
acquisition of facilities involves risks including the risk that the acquired
facility will not perform as anticipated and the risks that the expected costs
for renovation and improvements identified in the pre-acquisition due diligence
process prove to be inaccurate. There is, and it is expected that there will
continue to be, significant competition for investment opportunities that meet
ProLogis' investment criteria as well as risks associated with obtaining
financing for acquisition activities, if necessary.

     Tenant Default

     ProLogis' income and distributable cash flow would be adversely affected if
a significant number of ProLogis' tenants are unable to meet their obligations
to ProLogis. In the event of default by a significant number of tenants,
ProLogis may experience delays and incur substantial costs in enforcing its
rights as landlords.

     Ability to Renew Leases or Re-let Space as Leases Expire

     ProLogis' income and distributable cash flow would be adversely affected if
ProLogis is unable to lease, on economically favorable terms, a significant
amount of space in its distribution facilities. ProLogis has 21.2 million square
feet (a total of 106.7 million square feet leased) of distribution space with
leases that expire in 2002 and the Funds have a combined 4.1 million square feet
(a total of 55.4 million square feet leased) of distribution space with leases
that expire in 2002. The number of distribution facilities in a market or
submarket could adversely affect both ProLogis' ability to lease distribution
space and the rental rates that can be obtained in new leases.

                                        57


     Real Estate Investments Are Not As Liquid As Other Types Of Assets

     Real estate investments are not as liquid as other types of assets and that
may tend to limit the ability of ProLogis to react promptly to changes in
economic or other conditions. In addition, significant expenditures associated
with real estate investments, such as mortgage payments, real estate taxes and
maintenance costs, are generally not reduced when circumstances cause a
reduction in income from the investments. Like other companies qualifying as
REITs under the Code, ProLogis must comply with the safe harbor rules relating
to the number of facilities disposed of in a year, their tax bases and the cost
of improvements made to the facilities, or meet other tests which enable a REIT
to avoid punitive taxation on the sale of assets. Thus, ProLogis' ability at any
time to sell assets, or contribute assets to real estate funds or other entities
in which ProLogis has an ownership interest may be restricted.

     ProLogis' Insurance Coverage Does Not Include All Potential Losses

     ProLogis and its unconsolidated entities currently carry comprehensive
insurance coverage including property, liability, fire, flood, earthquake,
environmental, extended coverage and rental loss as appropriate for the markets
where each entity's facilities and business operations are located. The
insurance coverage contains policy specifications and insured limits customarily
carried for similar facilities. ProLogis believes its facilities and the
facilities of its unconsolidated entities are adequately insured. However, there
are certain losses, including losses from floods and losses from earthquakes,
acts of war or riots, that are not generally insured against or that are not
generally fully insured against because it is not deemed to be economically
feasible or prudent to do so. Should an uninsured loss or a loss in excess of
insured limits occur with respect to one or more of ProLogis' facilities,
ProLogis could experience a significant loss of capital invested and potential
revenues in these properties and could potentially remain obligated under any
recourse debt associated with the facility.

     Potential Environmental Liability

     Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of hazardous or toxic substances at, on,
under or in its property. The costs of removal or remediation of such substances
could be substantial. Such laws often impose liability without regard to whether
the owner or operator knew of, or was responsible for, the release or presence
of such hazardous substances. ProLogis conducts Phase I environmental
assessments as part of its due diligence activities. ProLogis has not been
notified nor is ProLogis aware of any environmental condition with respect to
its real estate investments that are likely to be material to ProLogis'
financial condition. However, ProLogis cannot give any assurance that such
conditions do not exist or may not arise in the future. The presence of such
substances on ProLogis' real estate investments could adversely affect its
ability to sell such investments or to borrow using such investments as
collateral and may also have an adverse effect on ProLogis' cash flow and,
consequently, its ability to pay distributions to its shareholders.

  Financing and Capital Risks

     Access to Capital

     ProLogis, as a REIT, is required to distribute at least 90% of its taxable
income to its shareholders. Consequently, ProLogis is, as are all REITs,
dependent on external capital to funds its development and acquisition
activities. Due to the reduced availability of direct public debt and public
equity capital at favorable prices in the real estate industry during the last
several years, ProLogis has been accessing private debt and equity capital
through the establishment of real estate funds that acquire facilities from
ProLogis. ProLogis' ability to access private debt and equity capital on
favorable terms or at all is dependent upon a number of factors, including
general market conditions and competition from other real estate companies.
Further, ProLogis generates significant profits as a result of these
dispositions. To the extent that private capital is not available to acquire
facilities from ProLogis, these profits may not be realized which could result
in an earnings stream that is less predictable than some of its competitors and
result in ProLogis not meeting

                                        58


its projected earnings levels in a particular reporting period. Failure to meet
its projected earnings levels could have an adverse effect on the market price
of Common Shares.

     ProLogis is obligated to contribute all of the facilities it develops
within certain specified markets in Europe to ProLogis European Properties Fund,
subject to these facilities meeting specified investment criteria. ProLogis
European Properties Fund's investors have entered into subscription agreements
whereby they have committed to provide capital to ProLogis European Properties
Fund through September 2002. Should any of the investors in ProLogis European
Properties Fund default on this commitment or should ProLogis not secure funding
commitments after September 2002, the ability of ProLogis to dispose of its
development pipeline in Europe will be jeopardized and ProLogis' ability to meet
its projected earnings levels and generate cash flow would be adversely
affected.

     Limitations on Debt

     ProLogis currently has a policy of incurring debt only, if upon such
incurrence, ProLogis' debt-to-book capitalization ratio, as adjusted, would not
exceed 50%. The Board could alter or eliminate this policy without shareholder
approval and would do so if, for example, it were necessary in order for
ProLogis to continue to qualify as a REIT under the Code. If this policy were
changed, ProLogis could become more highly leveraged, resulting in an increase
in debt service that could adversely affect the cash available for distribution
to shareholders.

     Debt Financing

     ProLogis is subject to risks normally associated with debt financing,
including the risk that ProLogis' cash flow will be insufficient to meet
required payments of principal and interest and the risk that ProLogis will not
be able to refinance existing indebtedness or that the terms of such
refinancings will not be as favorable as the terms of the existing indebtedness.
There can be no assurance that ProLogis will be able to refinance any
indebtedness or otherwise obtain funds by selling assets or raising equity to
make required payments on maturing indebtedness.

     Currently, ProLogis utilizes its short-term borrowing capability (over $1.0
billion available) under four credit agreements in addition to operating cash
flow and proceeds from dispositions to fund its development, acquisition and
distribution requirements. ProLogis' four short-term credit agreements have
maturities during 2002 ($60.0 million), 2003 ($287.0 million), 2004 ($500.0
million) and 2005 ($188.0 million). The ability of ProLogis to refinance these
credit agreements in a timely manner and at favorable terms is dependent on
several factors including, general economic conditions and interest rate levels.
ProLogis' short-term credit agreements bear interest at variable rates.
Increases in interest rates would increase ProLogis' interest expense under
these agreements. If ProLogis is unable to refinance its indebtedness at
maturity or meet its payment obligations, the amount of cash available for
distribution may be adversely affected.

     Requirements of Credit Facilities

     The terms of ProLogis' indebtedness require ProLogis to comply with a
number of customary financial and other covenants, such as maintaining debt
service coverage and leverage ratios and maintaining insurance coverage. These
covenants may limit ProLogis' flexibility in its operations, and breaches of
these covenants could result in defaults under the instruments governing the
applicable indebtedness even if ProLogis has satisfied its payment obligations.
If ProLogis is unable to refinance its indebtedness at maturity or meet its
payment obligations, the amount of cash available for distribution may be
adversely affected.

  Federal Income Tax Risks

     Failure to Qualify as a REIT Could Adversely Affect Shareholders

     ProLogis has elected to be taxed as a REIT under the Code commencing with
its taxable year ended December 31, 1993. To maintain REIT status, ProLogis must
meet a number of highly technical requirements on a continuing basis. Those
requirements seek to ensure, among other things, that the gross income

                                        59


and investments of a REIT are largely real estate related, that a REIT
distributes substantially all its ordinary taxable income to shareholders on a
current basis and that the REIT's ownership is not overly concentrated. Due to
the complex nature of these rules, the available guidance concerning
interpretation of the rules, the importance of ongoing factual determinations
and the possibility of adverse changes in the law, administrative
interpretations of the law and developments at ProLogis, no assurance can be
given that ProLogis will qualify as a REIT for any particular year.

     If ProLogis fails to qualify as a REIT, it will be taxed as a regular
corporation, and distributions to shareholders will not be deductible in
computing ProLogis' taxable income. The resulting corporate income tax
liabilities could materially reduce the funds available for distribution to
ProLogis' shareholders or for reinvestment. Moreover, ProLogis might not be able
to elect to be treated as a REIT for the four taxable years after the year
during which ProLogis ceased to qualify as a REIT. In addition, if ProLogis
later requalified as a REIT, it might be required to pay a full corporate-level
tax on any unrealized gain in its assets as of the date of requalification and
to make distributions to shareholders equal to any earnings accumulated during
the period of non-REIT status. In the absence of REIT status, distributions to
shareholders would no longer be required.

     Potential Adverse Effect of REIT Distribution Requirements

     To maintain its qualification as a REIT under the Code, ProLogis must
annually distribute to ProLogis' shareholders at least 90% of its ordinary
taxable income, excluding net capital gains. This requirement limits ProLogis'
ability to accumulate capital. ProLogis may not have sufficient cash or other
liquid assets to meet the distribution requirements. Difficulties in meeting the
distribution requirements might arise due to competing demands for ProLogis'
funds or to timing differences between tax reporting and cash receipts and
disbursements, because income may have to be reported before cash is received,
because expenses may have to be paid before a deduction is allowed or because
deductions may be disallowed or limited. In those situations, ProLogis might be
required to borrow funds or sell facilities on adverse terms in order to meet
the distribution requirements. If ProLogis fails to make a required
distribution, it would cease to be a REIT.

     Prohibited Transaction Income Could Result From Certain Property Transfers

     ProLogis disposes of and contributes facilities from both its property
operations segment and from within its CDFS business to third parties and to
real estate funds. Some of these dispositions and contributions are made from
ProLogis' taxable subsidiaries. Under the Code, if the disposition or
contribution of facilities is deemed to be a prohibited transaction, a 100%
penalty tax on the resulting income could be assessed. The question of what
constitutes a prohibited transaction is based on the facts and circumstances
surrounding each transaction. The Internal Revenue Service could contend that
certain dispositions or contributions by ProLogis are prohibited transactions.
While ProLogis' management does not believe that the Internal Revenue Service
would prevail in such a dispute, if the matter was successfully argued by the
Internal Revenue Service the 100% penalty tax could be assessed against the
profits from these transactions. Additionally, any income from a prohibited
transaction may adversely affect ProLogis' ability to satisfy the income tests
for qualification as a REIT.

  Other Risks

     Influence of ProLogis' Principal Shareholder May Impact ProLogis'
Management and Operations

     ProLogis and Security Capital are parties to a Third Amended and Restated
Investor Agreement, dated as of September 9, 1997. Pursuant to the investor
agreement, Security Capital has the right, so long as it owns between 10% and
25% of the Common Shares, to nominate one person to the Board. So long as
Security Capital owns 25% or more of the Common Shares, Security Capital will be
entitled to nominate a proportionate number of persons to the Board subject to a
maximum of three nominees if the size of the Board does not increase above the
current size of ten trustees. Under the investor agreement, so long as it owns
at

                                        60


least 25% of the Common Shares, Security Capital also has the right of prior
approval with respect to the following matters:

     - the issuance of equity securities or securities convertible into equity
       securities, other than issuances in connection with option, dividend
       reinvestment and similar plans, for less than the fair market value of
       such securities;

     - the issuance of any preferred shares which would result in the fixed
       charge coverage ratio being less than 1.4 to 1.0;

     - adopting any employee benefit plans under which Common Shares may be
       issued;

     - the compensation of senior officers of ProLogis; and

     - the incurrence of additional indebtedness which would result in the
       interest expense coverage ratio being less than 2.0 to 1.0.

     ProLogis is Dependent on Key Personnel

     ProLogis' executive and senior officers have a significant role in
ProLogis' success. The ability of ProLogis to retain its management group or to
attract suitable replacements should any members of the management group leave
ProLogis is dependent on the competitive nature of the employment market. The
loss of services from key members of the management group or a limitation in
their availability could adversely effect ProLogis' financial condition and cash
flow. Further, such a loss could be negatively perceived in the capital markets
and have an adverse affect on the market price of Common Shares.

     Share Prices May Be Affected By Market Interest Rates

     The annual distribution rate on Common Shares as a percentage of its market
price may influence the trading price of such Common Shares. An increase in
market interest rates may lead investors to demand a higher annual distribution
rate, which could adversely affect the market price of such Common Shares. A
decrease in the market price of the Common Shares could reduce ProLogis' ability
to raise additional equity capital in the public markets.

     Foreign Currency Risk

     ProLogis has pursued and intends to continue to pursue growth opportunities
in international markets and often invests in countries where the U.S. dollar is
not the national currency. As a result, ProLogis is subject to foreign currency
risk due to potential fluctuations in exchange rates between foreign currencies
and the U.S. dollar. For example, a significant depreciation in the value of the
foreign currencies of one or more countries where ProLogis has a significant
investment may materially adversely affect ProLogis' performance. ProLogis
attempts to mitigate any such effects through the use of debt denominated in
foreign currencies and foreign currency put option contracts, although there can
be no assurance that such attempts will be successful.

     Government Regulations and Actions

     There are many laws and governmental regulations that are applicable to
ProLogis and its facilities. Changes in these laws and governmental regulations,
or their interpretation by agencies or the courts, could occur. Further,
economic and political factors, including civil unrest, governmental changes and
restrictions on the ability to transfer capital across borders in the United
States, but primarily in the foreign countries in which ProLogis has invested,
can have a major impact on a global company such as ProLogis.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     ProLogis is exposed to market risk from changes in interest rates and
foreign currency exchange rates. On a limited basis, ProLogis uses certain
derivative financial instruments, including interest rate swap agreements and
foreign currency option and forward contracts to reduce its market risk.
ProLogis does not use financial
                                        61


instruments for trading or speculative purposes and all financial instruments
are entered into in accordance with Board approved policies.

     ProLogis has estimated its market risk exposures using sensitivity
analysis. ProLogis has defined its market risk exposure as the potential loss in
future earnings and cash flow with respect to interest rate exposure and future
earnings with respect to foreign currency exchange exposure. ProLogis'
sensitivity analysis estimates the exposure to market risk sensitive instruments
assuming a hypothetical 10% adverse change in year end interest rates and
foreign currency exchange rates. The results of the sensitivity analysis are
summarized below. The sensitivity analysis is of limited predictive value. As a
result, ProLogis' ultimate realized gains or losses with respect to interest
rate and foreign currency exchange rate fluctuations will depend on the
exposures that arise during a future period, hedging strategies at the time, and
the prevailing interest and foreign currency exchange rates.

  Interest Rate Risk

     ProLogis' interest rate risk management objective is to limit the impact of
interest rate changes on earnings and cash flows. To achieve its objective,
ProLogis primarily borrows on a fixed rate basis. Therefore, ProLogis' primary
interest rate risk is created by its variable rate lines of credit. Although
ProLogis has no interest rate derivatives outstanding as of December 31, 2001,
ProLogis has in the past and may in the future, utilize derivative instruments
as hedges in anticipation of future debt transactions to manage its interest
rate exposure.

     During the year ended December 31, 2001, ProLogis had weighted average
outstanding borrowings of $314.6 million on its variable rate lines of credit.
Based on the results of the sensitivity analysis, which assumed a 10% adverse
change in interest rates, the estimated market risk exposure for interest
rate-related financial instruments was approximately $1.6 million on both future
earnings and cash flow for the year ended December 31, 2001. The sensitivity
analysis was based on the weighted average outstanding variable rate borrowings
for 2001 and assumed a flat yield curve.

  Foreign Currency Risk

     ProLogis uses foreign currency forward and option contracts to manage
foreign currency exchange rate risk related to projected net operating income
(operating income net of foreign denominated interest expense) from foreign
entities. In addition, ProLogis incurs foreign currency risk related to
third-party and intercompany loans of its foreign consolidated subsidiaries that
are not denominated in the functional currency of the entity. The remeasurement
of these loans results in foreign currency exchange gains or losses that are
recognized by ProLogis. However, ProLogis does not incur an actual cash gain or
loss until the loans are repaid. ProLogis' exposure to foreign currency exchange
rates exists with the following currencies versus the U.S. dollar: euro, British
pound sterling, Swedish krona and Japanese yen. Based on the results of a
sensitivity analysis, which assumed a 10% adverse change in foreign currency
exchange rates, the estimated 2001 year-end market risk exposure to future
earnings related to these loans was $65.6 million.

     ProLogis translates the income and expenses of its consolidated foreign
subsidiaries and its share of the income recognized under the equity method from
its unconsolidated entities. ProLogis hedges the foreign currency risk
associated with approximately 75% of the net income from its consolidated and
unconsolidated entities through foreign currency put option contracts. ProLogis'
sensitivity analysis, which assumed a 10% adverse change in foreign currency
exchange rates, estimated the 2001 year-end market risk exposure to future
earnings of ProLogis was $2.1 million. The effect of the assumed adverse change
in foreign currency exchange rates on translated income and expenses of
ProLogis' consolidated and unconsolidated entities has a high degree of inverse
correlation with the derivative instruments used to hedge it. However, since
ProLogis hedges approximately 75% of its projected net income from foreign
entities, approximately 25% of the impact to total net income from its foreign
entities of an adverse movement in foreign exchange rates would not be offset by
derivative instruments.

                                        62


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     ProLogis Consolidated Balance Sheets as of December 31, 2001 and 2000, its
Consolidated Statements of Earnings, Shareholders' Equity and Comprehensive
Income and Cash Flows for each of the three years in the period ended December
31, 2001, Notes to Consolidated Financial Statements and Schedule III -- Real
Estate and Accumulated Depreciation, together with the report of Arthur Andersen
LLP, independent public accountants, are included under Item 14 of this report
and are incorporated herein by reference. Selected quarterly financial data is
presented in Note 14 of Notes to Consolidated Financial Statements.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS

     Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

TRUSTEES AND OFFICERS

     For information regarding ProLogis' executive officers and Trustees, see
"Item 1. Business -- ProLogis Management -- Executive Officers and Trustees" and
"-- Senior Officers." Security Capital has the right to nominate up to three
Trustees, depending on its level of beneficial ownership of Common Shares. See
"Item 13. Certain Relationships and Transactions -- Amended and Restated
Investor Agreement." Messrs. Blankenship and Wattles are the nominees of
Security Capital. The Declaration of Trust requires that a majority of the
Trustees not be officers or employees of ProLogis.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires ProLogis'
Trustees and officers and beneficial owners of more than ten percent of the
outstanding Common Shares to file reports of ownership and changes in ownership
of the Common Shares with the Securities Exchange Commission and to send copies
of those reports to ProLogis. Based solely on a review of those reports and
amendments thereto furnished to ProLogis and on written representations of
certain of such persons that they were not required to file certain of those
reports, ProLogis believes that no such person failed to file any such report on
a timely basis during 2001, except that K. Dane Brooksher filed one late report
with respect to one transaction.

                                        63


ITEM 11. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

     The following table presents the compensation for 2001, 2000 and 1999 of
each of the Chairman and Chief Executive Officer, the Vice Chairman and the
three other most highly compensated executive officers in 2001 (the "Named
Executive Officers").



                                           ANNUAL COMPENSATION
                                      -----------------------------
                                                                      OTHER ANNUAL
NAME AND                                                              COMPENSATION
PRINCIPAL POSITION                    YEAR   SALARY($)    BONUS($)       ($)(1)
------------------                    ----   ---------    ---------   ------------
                                                          
K. Dane Brooksher...................  2001    884,551(6)  1,150,000          --
  Chairman and                        2000    500,000     1,000,000          --
  Chief Executive Officer             1999    400,000       900,000          --
Irving F. Lyons, III................  2001    425,000       625,000          --
  Vice Chairman and                   2000    400,000       550,000          --
  Chief Investment                    1999    350,000       550,000          --
  Officer
Walter C. Rakowich..................  2001    320,000       375,000          --
  Managing Director and               2000    300,000       325,000          --
  Chief Financial Officer             1999    300,000       300,000     101,370
John W. Seiple, Jr. ................  2001    320,000       375,000          --
  President and                       2000    300,000       325,000          --
  Chief Operating Officer             1999    250,000       300,000     110,860
  for North America
Robert J. Watson....................  2001    306,640(7)    325,000          --
  President and Chief                 2000    289,733(7)    300,000          --
  Operating Officer for               1999    277,177(7)    275,000     158,971
  Europe


                                                    LONG-TERM COMPENSATION AWARDS
                                      ----------------------------------------------------------
                                                        COMMON
                                       RESTRICTED       SHARES                       ALL OTHER
NAME AND                                 SHARE        UNDERLYING         LTIP       COMPENSATION
PRINCIPAL POSITION                    AWARDS($)(2)   OPTIONS(#)(3)   PAYOUT($)(4)      ($)(5)
------------------                    ------------   -------------   ------------   ------------
                                                                        
K. Dane Brooksher...................          --        168,483        860,400         20,940
  Chairman and                         3,726,875        174,529        934,500         16,645
  Chief Executive Officer                     --        162,700             --         15,743
Irving F. Lyons, III................          --        110,161        505,485         20,652
  Vice Chairman and                           --        101,808        556,250         16,645
  Chief Investment                            --         97,620             --         15,743
  Officer
Walter C. Rakowich..................          --         45,360        209,723         13,229
  Managing Director and                       --         41,814        244,750         11,023
  Chief Financial Officer                     --         40,675             --         10,452
John W. Seiple, Jr. ................          --         45,360        209,723         13,229
  President and                               --         41,814        244,750         11,023
  Chief Operating Officer                     --         40,675             --         10,452
  for North America
Robert J. Watson....................          --         45,360        209,723         14,392
  President and Chief                         --         41,814        222,500         12,086
  Operating Officer for                       --         40,675             --         11,446
  Europe


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

(1) Represents reimbursement of relocation costs.

(2) Represents a restricted share award made in 2000 under the 1997 Long-Term
    Incentive Plan. This award is comprised of units which will vest 25% on each
    December 31, beginning December 31, 2004. This award does not receive
    dividend equivalent units under the 1997 Long-Term Incentive Plan. See
    "-- Special Equity Agreement" and "-- 1997 Long-Term Incentive Plan". Prior
    to settlement of the restricted share units, dividends will be paid with
    respect to the restricted share units. The dollar amount shown is
    approximately equal to the number of shares earned multiplied by the closing
    price of Common Shares as reported by the New York Stock Exchange on the
    date of grant ($22.25 on December 31, 2000). The total number of shares, and
    the value, of restricted common shares held by Mr. Brooksher on December 31,
    2001 (based on the closing price of Common Shares as reported on the New
    York Stock Exchange on December 31, 2001 ($21.51)) is 167,500 shares
    ($3,602,925).

(3) The 1997 Long-Term Incentive Plan provides that participants who are awarded
    options in 2001, 2000, and 1999 will also receive dividend equivalent units
    with respect to the options awarded. See "-- 1997 Long-Term Incentive Plan".

(4) Represents restricted shares earned under the Performance Program (see
    "-- Performance-Based Long-Term Retention Awards") on December 31, 2000 as
    follows: Mr. Brooksher -- 42,000 shares, Mr. Lyons -- 25,000 shares, Mr.
    Rakowich -- 11,000 shares, Mr. Seiple -- 11,000 shares and Mr.
    Watson -- 10,000 shares; and on December 31, 2001 as follows: Mr.
    Brooksher -- 40,000 shares, Mr. Lyons -- 23,500 shares, Mr.
    Rakowich -- 9,750 shares, Mr. Seiple -- 9,750 shares, and Mr.
    Watson -- 9,750 shares. The restricted shares vest with respect to 100% of
    the shares on December 31, 2002 and December 31, 2003, respectively. Prior
    to vesting, the restricted shares will receive dividend equivalent units in
    lieu of a cash dividend. See "-- 1997 Long-Term Incentive Plan". The dollar
    amount shown is approximately equal to the number of shares earned
    multiplied by the closing price of Common Shares as reported by the New York
    Stock Exchange on the date of grant, $22.25 on December 31, 2000 and $21.51
    on December 31, 2001, respectively. The total number of shares, and the
                                        64


    values, of restricted common shares held by each Named Executive Officer as
    of December 31, 2001 (based on the closing price of Common Shares as
    reported on the New York Stock Exchange on December 31, 2001 ($21.51)) is as
    follows: Mr. Brooksher -- 82,000 shares ($1,763,820), Mr. Lyons -- 48,500
    shares ($1,043,235), Mr. Rakowich -- 20,750 shares ($446,333). Mr.
    Seiple -- 20,750 shares ($446,333), and Mr. Watson -- 19,750 shares
    ($424,823).

(5) Includes contributions made by ProLogis in 2001, 2000, and 1999 under its
    401(k) Plan to Mr. Brooksher of $5,100 in 2001, $5,100 in 2000, and $4,800
    in 1999; Mr. Lyons of $5,100 in 2001, $5,100 in 2000, and $4,800 in 1999;
    Mr. Rakowich of $5,100 in 2001, $5,100 in 2000, and $4,800 in 1999; Mr.
    Seiple of $5,100 in 2001, $5,100 in 2000, and $4,800 in 1999; Mr. Watson of
    $5,100 in 2001, $5,100 in 2000, and $4,800 in 1999. Beginning in 1998,
    ProLogis has matched up to 50% of the first 6% of compensation contributed
    by the employee under the 401(k) Plan. Also includes the dollar value of
    insurance premiums paid by ProLogis with respect to term life insurance for
    the benefit of the Named Executive Officer as follows: Mr. Brooksher $1,920
    in 2001, $225 in 2000 and $270 in 1999; Mr. Lyons $1,632 in 2001, $225 in
    2000 and $270 in 1999; Mr. Rakowich $1,142 in 2001, $225 in 2000, and $270
    in 1999; Mr. Seiple $1,142 in 2001, $225 in 2000, and $270 in 1999; Mr.
    Watson $928 in 2001, $179 in 2000, and $222 in 1999. Includes the dollar
    value of insurance premiums paid by ProLogis with respect to life insurance
    for the benefit of the Named Executive Officer as follows: Mr. Brooksher $54
    in 2001, $75 in 2000, and $90 in 1999; Mr. Lyons $54 in 2001, $75 in 2000,
    and $90 in 1999; Mr. Rakowich of $54 in 2001, $75 in 2000, and $90 in 1999;
    Mr. Seiple of $54 in 2001, $75 in 2000, and $90 in 1999; Mr. Watson of $45
    in 2001, $60 in 2000, and $74 in 1999. Also includes imputed interest
    income, if any, deemed incurred on loans from ProLogis having an interest
    rate lower than the rate mandated by the Internal Revenue Service. Mr.
    Brooksher received imputed interest payments of $13,866 in 2001, $11,245 in
    2000, and $10,583 in 1999. Mr. Lyons received imputed interest payments of
    $13,866 in 2001, $11,245 in 2000, and $10,583 in 1999. Mr. Rakowich received
    imputed interest payments of $6,933 in 2001, $5,623 in 2000, and $5,292 in
    1999. Mr. Seiple received imputed interest payments of $6,933 in 2001,
    $5,623 in 2000, and $5,292 in 1999. Mr. Watson received imputed interest
    payments of $8,319 in 2001, $6,747 in 2000, and $6,350 in 1999.

(6) Includes dividend payments made to Mr. Brooksher on his restricted share
    award (See "-- Special Equity Agreement") equal to the amount of ProLogis'
    quarterly dividend multiplied by the number of outstanding restricted share
    units on each applicable record date for the applicable dividend. The total
    amount received by Mr. Brooksher for 2001 was $234,551.

(7) Includes amounts paid as salary to offset additional tax charges resulting
    from Mr. Watson's residence in The Netherlands.

  Option Grants in 2001

     The following table sets forth certain information with respect to
individual grants of options during 2001 to each of the Named Executive
Officers.



                                                   INDIVIDUAL OPTION GRANTS
                             ---------------------------------------------------------------------
                                COMMON        PERCENT OF
                                SHARES       TOTAL OPTIONS    EXERCISE
                              UNDERLYING      GRANTED TO      OR BASE                  GRANT DATE
                                OPTIONS      EMPLOYEES IN      PRICE      EXPIRATION     PRESENT
NAME                         GRANTED(#)(1)      2001(2)      ($/SHARE)       DATE      VALUE($)(3)
----                         -------------   -------------   ----------   ----------   -----------
                                                                        
K. Dane Brooksher..........     168,483          9.35%        $20.675         (4)        403,315
Irving F. Lyons, III.......     110,161          6.11%        $20.675         (4)        263,703
Walter C. Rakowich.........      45,360          2.52%        $20.675         (4)        108,583
John W. Seiple, Jr. .......      45,360          2.52%        $20.675         (4)        108,583
Robert J. Watson...........      45,360          2.52%        $20.675         (5)        108,583


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

(1) All of the options granted to the Named Executive Officers in 2001 earn
    dividend equivalent units. See "1997 Long-Term Incentive Plan".

                                        65


(2) Percentages include options sold to preferred stock subsidiaries, Kingspark
    Holding S.A., ProLogis Logistics Services Incorporated and Frigoscandia S.A.

(3) The amounts shown are based on the Black-Scholes option pricing model. The
    material assumptions incorporated in the Black-Scholes model in estimating
    the value of the options include the following: an expected option life of
    6.25 years; a risk-free interest rate of 4.65%; an expected dividend yield
    of 6.19%; and expected volatility of 21.07%. The actual value, if any, an
    optionee will realize upon exercise of an option will depend on the excess
    of the market value of the Common Shares over the exercise price on the date
    the option is exercised. There can be no assurance that the value realized
    by an optionee will be at or near the value estimated by using the
    Black-Scholes model. The valuation and assumptions referenced in the
    foregoing do not include the valuation of dividend equivalent units.

(4) The options vest 25% on the first anniversary of the date of grant and an
    additional 25% on each of the second, third, and fourth anniversaries of the
    date of grant. However, such options may be exercised earlier in the event
    of the optionee's retirement, disability or death, or upon termination of an
    optionee's employment due to a change of control (as defined in the 1997
    Long-Term Incentive Plan) of ProLogis. Options expire on September 19, 2011.

(5) The options vest 100% on the fourth anniversary of the date of grant.
    However, such options may be exercised earlier in the event of the
    optionee's retirement, disability or death, or upon termination of an
    optionee's employment due to a change of control (as defined in the 1997
    Long-Term Incentive Plan) of ProLogis. Options expire on September 19, 2011.

     Performance-Based Long-Term Retention Awards

     In 1999, ProLogis instituted a Performance-Based Long-Term Retention
Program (the "Performance Program") under the 1997 Long-Term Incentive Plan (the
"1997 LTIP"). The Performance Program rewards the Named Executive Officers and
certain other officers of ProLogis with restricted Common Shares if specified
goals are met. In the opinion of the Compensation Committee, it is critical to
the long-term success of ProLogis that its executives be rewarded for
outstanding performance with long-term incentives that foster employee retention
and have ascertainable value.

     The following table summarizes each award to the Named Executive Officers
of restricted shares that are subject to performance-based conditions, in
addition to the lapse of time and continued employment with ProLogis.



                                                AWARDS GRANTED IN 2001 FOR THE PERFORMANCE PERIOD
                                                      BEGINNING JANUARY 1, 2002 AND ENDING
                                                                DECEMBER 31, 2002
                                                -------------------------------------------------
                                                NUMBER OF SHARES,
                                                  UNITS OR OTHER     PERFORMANCE OR OTHER PERIOD
NAME                                                RIGHTS(1)         UNTIL MATURATION OR PAYOUT
----                                            ------------------   ----------------------------
                                                               
K. Dane Brooksher.............................        62,877                      (1)
Irving F. Lyons, III..........................        41,112                      (1)
Walter C. Rakowich............................        16,928                      (1)
John W. Seiple, Jr. ..........................        16,928                      (1)
Robert J. Watson..............................        16,928                      (1)


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

(1) Units awarded represent restricted Common Shares which will be issued to the
    executive if the performance criteria are met at the end of the performance
    period. A greater or lesser number of shares may be awarded at the
    discretion of the Compensation Committee to the extent the executive exceeds
    or fails to meet the applicable performance criteria. Once restricted Common
    Shares are issued, such shares will not vest until the second anniversary of
    the end of the performance period, subject to accelerated vesting upon a
    change in control (as defined in the 1997 LTIP) of ProLogis. Such awards
    will be forfeited by the executive if the executive leaves the employ of
    ProLogis prior to vesting. The performance criteria with respect to each
    Named Executive Officer is established by the Compensation Committee and is
    based on ProLogis' performance in relation to two weighted performance
    measures.

                                        66


    The first measure, weighted 75%, consists of specified levels of funds from
    operations ("FFO") per share and return on invested capital attained by
    ProLogis during 2002. The second measure, weighted 25%, generally consists
    of various objective and subjective criteria applicable to the executive's
    area of responsibility.

     Option Exercises in 2001 and Year-End Option Values

     None of the Named Executive Officers exercised options for Common Shares or
shares of Security Capital Common Stock in 2001. The following table sets forth
certain information as to the year-end value of unexercised options owned by
those executive officers.


                                          PROLOGIS COMMON SHARES
                         ---------------------------------------------------------
                            SECURITIES UNDERLYING         VALUE OF UNEXERCISED
                           UNEXERCISED OPTIONS AT        IN-THE-MONEY OPTIONS AT
                                 YEAR-END(#)                 YEAR-END($)(1)
                         ---------------------------   ---------------------------
NAME                     EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                     -----------   -------------   -----------   -------------
                                                         
K. Dane Brooksher......    428,813        482,003        357,557        416,331
Irving F. Lyons, III...    347,644        326,452        246,248        267,944
Walter C. Rakowich.....    135,220        131,865         92,423        107,797
John W. Seiple, Jr. ...    135,220        131,865         92,423        107,797
Robert J. Watson.......         --        297,787             --        210,643


                             SHARES OF SECURITY CAPITAL CLASS A COMMON SHARES
                         ---------------------------------------------------------
                            SECURITIES UNDERLYING         VALUE OF UNEXERCISED
                           UNEXERCISED OPTIONS AT        IN-THE-MONEY OPTIONS AT
                                 YEAR-END(#)                 YEAR-END($)(2)
                         ---------------------------   ---------------------------
NAME                     EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                     -----------   -------------   -----------   -------------
                                                         
K. Dane Brooksher......     6,165           117         3,824,938           --
Irving F. Lyons, III...     1,385           101           215,626           --
Walter C. Rakowich.....     1,212           116           346,649       43,854
John W. Seiple, Jr. ...     1,126            52           226,736           --
Robert J. Watson.......     3,011            98         1,736,602       34,999


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

(1) Based on the December 31, 2001, NYSE closing price of $21.51 per Common
    Share.

(2) Based on the December 31, 2001, NYSE closing price of $1,266.70 per Class A
    Common Share.

     Employment Contracts, Termination of Employment and Change-in-Control
     Arrangements

     ProLogis has no employment contracts with any Named Executive Officer and,
except as described below, no plans or arrangements by which any such Named
Executive Officer will be compensated as a result of his resignation or
retirement or any other termination of his employment with ProLogis or in
connection with a change in control of ProLogis, except that in the event a
"Change in Control," as such term is defined in either the 1997 LTIP or the
Outside Trustees Plan, occurs, options to purchase Common Shares granted under
either of the plans become immediately exercisable and restrictions on purchased
Common Shares lapse.

     ProLogis has entered into agreements with 13 of its officers. The
agreements provide that if a change in control (as described below) occurs and
the officer is thereafter terminated, other than for cause, or as a result of
the officer's death or disability, or if the officer resigns as the result of,
among other matters, a material adverse change in the nature or scope of the
officer's duties, authority or compensation and such termination or action is
taken within a period of twenty-four months, then the officer will be entitled
to receive a lump-sum payment, depending upon the officer's level of
responsibility with ProLogis. A "change in control" is defined as the happening
of any of the following:

          - the consummation of a transaction (other than a transaction with an
            affiliate), approved by ProLogis' shareholders, relating to a
            merger, consolidation, sale or disposition of all or substantially
            all of ProLogis' assets or the adoption of a plan of liquidation, as
            a result of which 50% or more of the voting power of ProLogis is
            held by persons who were not ProLogis shareholders prior to the
            transaction;

          - the beneficial ownership of 50% or more of the combined voting power
            of ProLogis is acquired by any person or entity other than Security
            Capital or any of its affiliates;

          - at any time during any period of two consecutive years, individuals
            who at the beginning of such period were members of ProLogis' Board
            of Trustees cease for any reason to constitute at least a majority
            of the Board (unless the election, or the nomination for election by
            ProLogis' shareholders, of each new Trustee was approved by a vote
            of at least two-thirds of the Trustees

                                        67


         still in office at the time of such election or nomination who were
         trustees at the beginning of such period); or

          - Security Capital or any of its affiliates, in a single transaction
            or in a related series of transactions, transfers all or portion of
            its interests in ProLogis to a person or entity that is not an
            affiliate of Security Capital.

     For the two most senior Named Executive Officers, the severance payment
would be equal to three times the sum of the officer's base salary and target
bonus. For the other Named Executive Officers and Jeffrey H. Schwartz, the
severance payment would be equal to two times the sum of the officer's base
salary and target bonus and for the remaining seven officers, the severance
payment would be equal to the sum of the officer's base salary and target bonus.

     The following table sets forth the lump-sum amount that each of the Named
Executive Officers, and each of the other officers of ProLogis as a group, would
have been entitled to receive had a change in control occurred at December 31,
2001 and the Named Executive Officer been terminated as of that date:



                            NAME                                AMOUNT
                            ----                              -----------
                                                           
K. Dane Brooksher...........................................  $ 5,400,000
Irving F. Lyons, III .......................................    3,150,000
Walter C. Rakowich..........................................    1,390,000
John W. Seiple, Jr. ........................................    1,390,000
Robert J. Watson............................................    1,290,000
Other officers as a group (8 persons)(1)....................    3,980,000
                                                              -----------
          TOTAL.............................................  $16,600,000
                                                              ===========


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

 (1) Includes the information for Mr. Schwartz based on his salary and target
     bonus as of March 18, 2002, the date on which his employment with ProLogis
     commenced.

     In addition to the foregoing lump-sum payments, the officers would be
entitled to continue to receive medical insurance and life insurance coverage
for 36 months (in the case of Messrs. Brooksher and Lyons), 24 months (in the
case of Messrs. Rakowich, Seiple, Watson and Schwartz) or 12 months (in the case
of the other officers) after the date of termination.

     Each officer will also receive an amount equal to the officer's pro-rated
salary and target bonus for the year of termination and, if Messrs. Brooksher,
Lyons, Rakowich, Seiple, Watson or Schwartz is subject to the federal excise tax
on "excess parachute payments," he will receive a payment sufficient to make him
whole for that tax.

     Special Equity Agreement

     In December 2000, ProLogis and Mr. Brooksher entered into a Special Equity
Agreement. Pursuant to the agreement, the parties agreed that Mr. Brooksher
would continue his employment with ProLogis through December 31, 2003. In
connection with the agreement, ProLogis agreed that the expiration date of each
existing option held by Mr. Brooksher under the 1997 LTIP shall be no later than
the fifth anniversary of the first to occur of Mr. Brooksher's retirement,
disability or death but in no event later than the tenth anniversary of the date
on which the option was granted. ProLogis further agreed that the expiration
date of each option granted in the future to Mr. Brooksher under the 1997 LTIP
shall be no later than the fifth anniversary of the first to occur of Mr.
Brooksher's retirement, disability, or death but in no event later than the
tenth anniversary of the date on which the option was granted. Notwithstanding
the foregoing, any dividend equivalent units granted with respect to options
granted to or held by Mr. Brooksher will not be credited after the first
anniversary of the first to occur of Mr. Brooksher's retirement, disability or
death.

     Pursuant to the Special Equity Agreement, ProLogis also agreed to grant Mr.
Brooksher on December 31, 2000, 167,500 restricted share units under the 1997
LTIP. The restricted share units granted to

                                        68


Mr. Brooksher will vest in equal installments on December 31, 2004, 2005, 2006,
and 2007, subject to earlier vesting upon a change in control (as defined in the
1997 LTIP). Prior to settlement of the restricted share units, dividends will be
paid with respect to the restricted share units. The restricted share units will
be settled in Common Shares.

1997 LONG-TERM INCENTIVE PLAN

     General

     The number of Common Shares which may be awarded under the 1997 LTIP may
not exceed 14,600,000 Common Shares in the aggregate (190,000 of which are
allocated to the 401(k) Plan) and no individual may be granted awards with
respect to more than 500,000 Common Shares in any one-year period. At its 2002
annual meeting of shareholders, ProLogis intends to submit for shareholder
approval, a proposal to increase by 8,000,000 the number of shares available
under the 1997 LTIP. Common Shares issued under the 1997 LTIP may be authorized
and unissued shares, or treasury shares. In the event of certain transactions
affecting the type or number of outstanding shares, the number of shares subject
to the 1997 LTIP, the number or type of shares subject to outstanding awards and
the exercise price thereof will be appropriately adjusted. The 1997 LTIP
authorizes the establishment of one or more option programs and share purchase
programs and authorizes the award of share grants (any of which may be subject
to restrictions). All employees of ProLogis or any of its affiliates are
eligible to participate in the 1997 LTIP. The Compensation Committee administers
the 1997 LTIP.

     Subject to the terms of the 1997 LTIP, the Compensation Committee
determines which employees shall be eligible to receive awards under the 1997
LTIP, and the amount, price, timing and other terms and conditions applicable to
such awards. Non-employee trustees of ProLogis are not eligible to participate
in the 1997 LTIP. Options awarded under the 1997 LTIP may be either incentive
share options which are intended to satisfy the requirements of Section 422 of
the Code or non-qualified share options which are not intended to satisfy
Section 422 of the Code. Options become exercisable in accordance with the terms
established by the Compensation Committee, which may include conditions relating
to completion of a specified period of service or achievement of performance
standards or such other criteria as the Compensation Committee deems
appropriate.

     Options expire on the date determined by the Compensation Committee which
shall not be later than the earliest to occur of (i) the tenth anniversary of
the grant date, (ii) the first anniversary of the participant's termination of
employment by reason of death, disability or retirement, (iii) the three month
anniversary of the participant's termination of employment for reasons other
than retirement, death, disability or cause or (iv) on the participant's date of
termination for cause. Shares transferred to a participant pursuant to the
exercise of an option may be subject to such additional restrictions or
limitations as the Compensation Committee may determine. The 1997 LTIP provides
generally that participants who are awarded options will also receive dividend
equivalent units with respect to the options. The dividend equivalent units are
subject to the same vesting schedule as the options. Beginning on December 16,
2000, dividend equivalent units were payable when the underlying options are
exercised or upon 100% vesting of the underlying option, unless the participant
elected to defer receipt. Effective March 16, 2000, each participant will be
credited with dividend equivalent units at the end of each calendar year in an
amount equal to (i) the annual dividend for such calendar year, multiplied by
(ii) the number of Common Shares underlying the Participant's outstanding
options that were granted with dividend equivalent units and divided by (iii)
the average Common Share price for the year. Each dividend equivalent unit also
accumulates additional dividend equivalent units on an annual basis. All
dividend equivalent units are paid in the form of Common Shares at the rate of
one Common Share per dividend equivalent unit.

     Share Purchase Program

     The 1997 LTIP provides that the Compensation Committee may allow
participants to purchase shares, the purchase and distribution of which is
subject to the satisfaction of conditions established by the

                                        69


Compensation Committee. The number of shares and the conditions will be
established by the Compensation Committee at the time the award is made.

     Restricted Share Units

     The Compensation Committee also may award restricted share units. Each
restricted share unit awarded represents an interest in one Common Share as of
the date of the award. Outstanding restricted share units are generally awarded
dividend equivalent units at the end of each year. Effective March 16, 2000,
each recipient will be credited with dividend equivalent units at the end of
each calendar year in an amount equal to (i) the annual dividend for such
calendar year, multiplied by (ii) the number of Common Shares underlying the
recipient's outstanding award that were granted with dividend equivalent units
and divided by (iii) the average Common Share price for the year. Each dividend
equivalent unit also accumulates additional dividend equivalent units on an
annual basis. All dividend equivalent units are paid in the form of Common
Shares at the rate of one Common Share per dividend equivalent unit. Unless
determined otherwise by the Compensation Committee, the restricted share units
together with the applicable dividend equivalent units vest in equal portions on
each of the first four anniversaries of the award of the restricted share units
so long as the recipient remains an employee of ProLogis or one of its
affiliates. See "Special Equity Agreement" for a discussion of restricted share
units granted to Mr. Brooksher.

     Share Awards

     The 1997 LTIP provides that the Compensation Committee may award
participants shares, the distribution of which is subject to achievement of
conditions established by the Compensation Committee, such as performance
objectives or continued employment. The number of shares and the conditions
shall be established by the Compensation Committee at the time the award is
made, provided that any performance period shall be at least one year. The
Compensation Committee may, at its discretion, award dividend equivalent units
with share awards.

     Non-Qualified Options

     The Compensation Committee may grant non-qualified options to acquire
Common Shares. The Named Executive Officers, certain other officers and
employees of ProLogis have been granted options to purchase Common Shares at the
average of the highest and lowest sales price of Common Shares on the date such
options were granted. All options expire ten years after the date of grant. On
October 15, 1998, the Compensation Committee approved a new vesting schedule of
25% on the first anniversary of the grant date and an additional 25% on each of
the second, third, and fourth anniversaries of the date of grant, except the
options granted to U.S. participants based in The Netherlands, which vest 100%
on the fourth anniversary of the date of grant. The options expire ten years
after the date of grant. The participants have no rights as shareholders with
respect to the shares subject to his or her options until the option is
exercised. No income will be recognized by a participant at the time the options
or the dividend equivalent units are granted. The exercise of a non-qualified
stock option is generally a taxable event that requires the participant to
recognize, as ordinary income, the difference between the fair market value of
the shares at the time of exercise and the exercise price. Receipt of a dividend
equivalent unit by the participant is generally a taxable event that requires
the participant to recognize, as ordinary income, the fair market value of the
shares at the time of receipt. ProLogis ordinarily will be entitled to claim a
federal income tax deduction on account of the exercise of a non-qualified
option and payment of dividend equivalent units. The amount of the deduction is
equal to the ordinary income recognized by a participant. ProLogis has adopted
the provisions of Statement of Financial Accounting Standards No. 123
"Accounting for Stock Based Compensation." Under the provisions of this
statement, ProLogis will continue to account for its share options under the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations.

TRUSTEE COMPENSATION

     ProLogis pays an annual retainer of $25,000 to Trustees who were not
officers of ProLogis or employees of Security Capital ("Outside Trustees").
These fees are paid to the Outside Trustees in Common Shares
                                        70


(quarterly on each dividend payment date) based on the then current market price
of the Common Shares pursuant the pricing of the ProLogis' Dividend Reinvestment
and Share Purchase Plan (the "DRPP"). Outside Trustees also receive $1,000 for
each Board meeting attended, which is also paid in Common Shares. Members of the
Investment Committee who are Outside Trustees receive an additional annual
retainer of $4,000 and members of the Audit, Compensation, and Governance
Committees who are Outside Trustees receive an additional annual retainer of
$2,000, all of which retainers are paid in Common Shares. Unless payment is
deferred at the option of the Outside Trustee, both the retainer and meeting
fees payable to Outside Trustees are paid directly into the DRPP on behalf of
the Outside Trustees as optional cash payments, and the Common Shares purchased
remain in the DRPP. These Common Shares may not be sold or otherwise transferred
so long as the Outside Trustee remains a Trustee. The Board may grant an
individual Outside Trustee a waiver of the requirement that Outside Trustees'
fees be used to purchase Common Shares or that such Common Shares be held so
long as the Outside Trustee remains a Trustee.

     Each Outside Trustee may defer the payment of fees from the date such fees
were originally to be received for a minimum of two years or for so long as the
Outside Trustee remains a Trustee. During the period of deferral, ProLogis
credits the Outside Trustee with fees designated for payment and dividends which
would have been paid on the Common Shares previously credited as fees. However,
no payment is actually made, nor are any Common Shares or funds actually set
aside until the deferral period concludes.

     Outside Trustees are reimbursed for any out-of-town travel expenses
incurred in connection with attendance at Board meetings.

OUTSIDE TRUSTEES PLAN

     During 2001, ProLogis made awards to its Outside Trustees under the
ProLogis Share Option Plan for Outside Trustees and the ProLogis 2000 Share
Option Plan for Outside Trustees (the "Outside Trustee Plans"). A total of
500,000 Common Shares are authorized for issuance under the Outside Trustee
Plans. Effective in 1999, on the date of each annual meeting of shareholders of
ProLogis each Outside Trustee will be granted an option to purchase 5,000 Common
Shares at an exercise price equal to the closing price of the Common Shares on
the New York Stock Exchange ("NYSE") on the date of grant. The options vest at
the rate of 25% per year on each anniversary of the date of the award for the
four succeeding years after the award. In the event of changes in the
outstanding Common Shares, the administrator may make appropriate adjustments to
the aggregate number of Common Shares available under the Outside Trustee Plans
and the terms of the options for Common Shares subject to the Outside Trustee
Plans. The Secretary of ProLogis administers the Outside Trustee Plans.

     Also beginning in 1999, the Outside Trustees receive dividend equivalent
units with respect to the options awarded. Beginning on March 16, 2000, each
Outside Trustee was credited with dividend equivalent units at the end of each
calendar year in an amount equal to (i) the annual dividend for such calendar
year, multiplied by (ii) the number of Common Shares underlying the outstanding
option and divided by (iii) the average share price for such calendar year. Each
dividend equivalent unit accumulates additional dividend equivalent units. All
dividend equivalent units are paid in Common Shares at a rate of one Common
Share per dividend equivalent unit. The dividend equivalent units are subject to
the same vesting schedule as the underlying options. Beginning on December 16,
2000, dividend equivalent units were payable when the underlying options are
exercised or upon 100% vesting of the underlying option.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding ownership of
Common Shares as of April 3, 2002, by (i) each person known to ProLogis to have
been the beneficial owner of more than five percent of the outstanding Common
Shares on such date, (ii) each Trustee, (iii) the Named Executive Officers and
Jeffrey H. Schwartz, who was appointed President & Chief Operating
Officer -- Asia on March 18, 2002, and (iv) all Trustees and executive officers
as a group. Unless otherwise indicated in the footnotes, all of such interests
are owned directly and the indicated person or entity has sole voting and
dispositive power. The following table assumes that, for the purpose of
calculating the number and percent of Common Shares beneficially owned by

                                        71


a person all options or other convertible or exchangeable securities held by
that person which are exercisable within 60 days have been exercised, but that
no options or convertible or exchangeable securities held by other persons have
been exercised, converted or exchanged. Fractional Common Shares have been
rounded to the nearest whole Common Share in the table below.



                                                            NUMBER OF
                                                          COMMON SHARES       PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER                    BENEFICIALLY OWNED   COMMON SHARES
------------------------------------                    ------------------   -------------
                                                                       
Security Capital Group Incorporated...................      49,903,814(1)        28.12%
  125 Lincoln Avenue
  Santa Fe, New Mexico 87501
Cohen & Steers Capital Management, Inc. ..............      12,096,020(2)         6.81%
  757 Third Avenue
  New York, New York 10017
Stichting Pensioenfonds ABP...........................      10,656,400(3)         6.00%
  Oude Lindestraat, Postbus 2889
  6401 DL Heerlen
  The Netherlands
C. Ronald Blankenship.................................             936               *
  125 Lincoln Avenue
  Santa Fe, New Mexico 87501
K. Dane Brooksher.....................................         688,502(4)            *
  14100 East 35th Place
  Aurora, Colorado 80011
Stephen L. Feinberg...................................         303,449(5)            *
  4855 North Mesa, Suite 120
  El Paso, Texas 79912
George L. Fotiades....................................           5,000
  645 Martinsville Road
  Basking Ridge, New Jersey 07920
Donald P. Jacobs......................................          16,201(6)            *
  J.L. Kellogg Graduate School of Management
  Northwestern University
  2001 Sheridan Road
  Evanston, Illinois 60208-2003
Irving F. Lyons, III..................................         975,455(7)            *
  47775 Fremont Boulevard
  Fremont, California 94538
Walter C. Rakowich....................................         228,146(8)            *
  14100 East 35th Place
  Aurora, Colorado 80011
Jeffrey H. Schwartz...................................         398,961(9)            *
  207D Kelsey Lane
  Tampa, Florida 33619
John W. Seiple, Jr. ..................................         236,366(10)           *
  14100 East 35th Place
  Aurora, Colorado 80011
Kenneth N. Stensby....................................          37,329(11)           *
  7112 Shannon Drive
  Edina, Minnesota 55439
J. Andre Teixeira.....................................          11,649(12)           *
  Petrovski Boulevard 13, Office 10
  113035 Moscow Russia
  7-095-2000771


                                        72




                                                            NUMBER OF
                                                          COMMON SHARES       PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER                    BENEFICIALLY OWNED   COMMON SHARES
------------------------------------                    ------------------   -------------
                                                                       
Robert J. Watson......................................          66,663(13)           *
  Capronilaan 25-27
  1119 NP Schiphol -- Rijk
  Amsterdam, The Netherlands
Thomas G. Wattles.....................................          26,874(14)           *
  125 Lincoln Avenue
  Santa Fe, New Mexico 87501
William D. Zollars....................................               0               *
  10990 Roe Avenue
  Overland Park, Kansas 66211
All trustees and executive officers as a group (14
  persons)............................................       2,995,531            1.69%


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

  *  Less than 1%

 (1) These Common Shares are owned of record by Security Capital Warehouse
     Distribution Business Trust, an indirect subsidiary of Security Capital.

 (2) Information regarding beneficial ownership of Common Shares by Cohen &
     Steers Capital Management, Inc., is included herein in reliance on an
     amendment to Schedule 13G, filed with the Securities and Exchange
     Commission ("SEC") on February 13, 2002. Cohen & Steers Capital Management,
     Inc. has sole power to vote or to direct the vote with respect to
     10,448,820 of the shares reported and has sole power to dispose or to
     direct the disposition with respect to all of the shares reported. Cohen &
     Steers Capital Management, Inc. has represented that the shares reported
     were acquired in the ordinary course of business and were not acquired for
     the purpose of and do not have the effect of changing or influencing the
     control of ProLogis and were not acquired in connection with or as a
     participant in any transaction having such purpose or effect.

 (3) Information regarding beneficial ownership of Common Shares by Stichting
     Pensioenfonds ABP, is included herein in reliance on a Schedule 13D, filed
     with the Securities and Exchange Commission ("SEC") on April 4, 2002.
     Stichting Pensioenfonds ABP has sole power to vote or to direct the vote
     with respect to all of the share reported and has sole power to dispose or
     to direct the disposition with respect to all of the shares reported.

 (4) Includes 1,439 Common Shares held by Mr. Brooksher's wife of which Mr.
     Brooksher disclaims beneficial ownership. Includes 478,035 Common Shares
     and associated dividend equivalent units that are issuable upon exercise of
     options and 55,317 Common Shares and associated dividend equivalent units
     that are issuable upon the conversion of restricted share units (see
     "Executive Compensation -- 1997 Long-Term Incentive Plan") all of which
     were granted under the 1997 Long-Term Incentive Plan. Includes 1,259 Common
     Shares held through ProLogis' 401(k) Savings Plan and Trust (the "401(k)
     Plan") and 19,561 Common Shares held through ProLogis' Non-Qualified
     Savings Plan.

 (5) Dorsar Partners, L.P. beneficially owns 109,102 Common Shares, SWD Partners
     L.P. beneficially owns 12,820 Common Shares and Dorsar Investment Company
     beneficially owns 55,000 Common Shares. As a result of his position with
     Dorsar Partners, L.P., SWD Partners L.P., and Dorsar Investment Company,
     Mr. Feinberg may be deemed to share voting and dispositive power with
     respect to Common Shares owned by these entities. A trust of which Mr.
     Feinberg is beneficiary owns 16,000 of these Common Shares and another
     trust of which Mr. Feinberg is trustee and of which a relative of Mr.
     Feinberg is the beneficiary owns an additional 16,000 of these Common
     Shares. Includes 10,963 Common Shares and associated dividend equivalent
     units that are issuable upon the exercise of options granted under the
     Outside Trustees Plan. See "Executive Compensation -- Outside Trustees
     Plan".

 (6) Includes 300 Common Shares held in a trust for the benefit of Mr. Jacobs'
     children and 10,963 Common Shares and associated dividend equivalent units
     that are issuable upon the exercise of options granted under the Outside
     Trustees Plan.

                                        73


 (7) A trust of which Mr. Lyons is the trustee and of which Mr. Lyons and
     members of his family are beneficiaries own 8,039 of these Common Shares
     and 348 Common Shares are owned by Mr. Lyons' daughters. Includes 384,398
     Common Shares and associated dividend equivalent units issuable upon the
     exercise of options and 46,098 Common Shares and associated dividend
     equivalent units that are issuable upon the conversion of restricted share
     units all of which were granted under the 1997 Long-Term Incentive Plan. A
     total of 437,688 Common Shares are issuable upon exchange of units in
     ProLogis Limited Partnership -- I. Mr. Lyons is a partner of certain
     limited partners of such partnership. By virtue of such position, Mr. Lyons
     may be deemed to beneficially own these Common Shares. Includes 1,121
     Common Shares held through the 401(k) Plan.

 (8) Includes 549 Common Shares held in a family trust of which Mr. Rakowich is
     beneficiary and 504 Common Shares in a trust of which Mr. Rakowich is
     trustee as to which Mr. Rakowich disclaims beneficial ownership. Includes
     872 Common Shares held by Mr. Rakowich's children, 146,529 Common Shares
     and associated dividend equivalent units issuable upon the exercise of
     options and 25,174 Common Shares and associated dividend equivalent units
     issuable upon the conversion of restricted share units all of which were
     granted under the 1997 Long-Term Incentive Plan. Includes 1,261 Common
     Shares held through the 401(k) Plan.

 (9) Includes 78,678 Common Shares issuable upon exchange of units in ProLogis
     Limited Partnership -- III and 49,587 Common Shares issuable upon exchange
     of units in ProLogis Limited Partnership -- IV. Mr. Schwartz is a partner
     of certain limited partners of such partnerships. By virtue of such
     position, Mr. Schwartz may be deemed to beneficially own these Common
     Shares. Includes 175,300 Common Shares and associated dividend equivalent
     units issuable upon the exercise of options and 36,878 Common Shares and
     associated dividend equivalent units that are issuable upon the conversion
     of restricted share units all of which were granted under the 1997
     Long-Term Incentive Plan. Includes 767 Common Shares held through the
     401(k) Plan.

(10) Includes 959 Common Shares held by Mr. Seiple's children. Includes 146,529
     Common Shares and associated dividend equivalent units issuable upon the
     exercise of options and 36,878 Common Shares and associated dividend units
     issuable upon the conversion of restricted share units all of which were
     granted under the 1997 Long-Term Incentive Plan. Includes 1,154 Common
     Shares held through the 401(k) Plan.

(11) Includes 27,504 Common Shares that are issuable upon exercise of options
     granted under the Meridian Industrial Trust, Inc. ("Meridian") Employee and
     Director Incentive Stock Plan and 6,963 Common Shares and associated
     dividend equivalent units that are issuable upon the exercise of options
     granted under the Outside Trustees Plan.

(12) Includes 6,963 Common Shares and associated dividend equivalent units that
     are issuable upon the exercise of options granted under the Outside
     Trustees Plan.

(13) Includes 866 Common Shares held in trust accounts for Mr. Watson's
     children, 1,150 Common Shares held by the estate of Mr. Watson's late
     father, and 433 Common Shares held by Mr. Watson's wife. Includes 1,270
     Common Shares held through the 401(k) Plan.

(14) Includes 8,040 Common Shares held by Mr. Wattles' IRA and 2,574 Common
     Shares held by Mr. Wattles' children.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

AMENDED AND RESTATED INVESTOR AGREEMENT

     ProLogis and Security Capital are parties to a Third Amended and Restated
Investor Agreement, dated as of September 9, 1997 (the "Investor Agreement").
Pursuant to the Investor Agreement, Security Capital has the right, so long as
it owns between 10% and 25% of the Common Shares, to nominate one person to the
Board. So long as Security Capital owns 25% or more of the Common Shares,
Security Capital will be entitled to nominate a proportionate number of persons
to the Board subject to a maximum of three nominees if the size of the Board
does not increase above the current size of ten Trustees. In addition, ProLogis
is required to consult with Security Capital's nominees to the Board prior to
taking any action with respect to the following:

                                        74


(i) finalization of the annual budget and substantial deviations therefrom; (ii)
the acquisition or sale of assets in a single transaction or group of related
transactions where the price exceeds $25 million; (iii) any contract for
investment, property management or leasing services: and (iv) any service
contract providing for payments in excess of $1.0 million. ProLogis has no
obligation to follow the advice of Security Capital with respect to the
foregoing matters.

     Under the Investor Agreement, so long as it owns at least 25% of the Common
Shares, Security Capital also has the right of prior approval with respect to
the following matters: (i) the issuance of equity securities or securities
convertible into equity securities (other than issuances in connection with
option, dividend reinvestment and similar plans) for less than the fair market
value of such securities; (ii) the issuance of any preferred shares which would
result in the Fixed Charge Coverage Ratio (as defined therein) being less than
1.4 to 1.0; (iii) adopting any employee benefit plans under which Common Shares
may be issued; and (iv) the compensation of senior officers of ProLogis; (v) the
incurrence of additional indebtedness which would result in the Interest Expense
Coverage Ratio (as defined therein) being less than 2.0 to 1.0.

ADMINISTRATIVE SERVICES AGREEMENT

     ProLogis and a subsidiary of Security Capital entered into an
administrative services agreement (the "ASA"), pursuant to which Security
Capital provides ProLogis with certain administrative and other services with
respect to certain aspects of ProLogis' business, as selected from time to time
by ProLogis at its option. These services include, but are not limited to,
payroll and human resources, cash management, accounts payable, specified
information systems support, research and insurance services. These services are
provided in exchange for a fee based on negotiated rates for each service
provided. Total fees incurred under the ASA were $0.8 million in 2001. ProLogis
began transitioning these functions from Security Capital during 2000 and
ProLogis has assumed substantially all of the functions previously provided by
Security Capital. The ASA expired on December 31, 2000. ProLogis believes that
the terms and conditions of the administrative services agreement are as
favorable as those that could have been obtained from unaffiliated third
parties.

FINANCIAL ADVISORY FEES

     Macquarie Capital Partners LLC (formerly Security Capital Markets Group
Incorporated), an affiliate of Security Capital, has provided us with financial
advisory and investment banking services. During 2001, financial advisory fees
were paid to Macquarie Capital Partners in three separate transactions, in which
Macquarie Capital Partners provided financial advisory and investment banking
services in connection with the formation of three separate joint ventures and
the raising of over $555 million of third party equity and debt by ProLogis and
by entities in which ProLogis has an ownership interest. Macquarie Capital
Partners received fees of $1,707,910, $1,240,000 and $942,085 in connection with
the transactions. In March 2002, ProLogis paid financial advisory fees to
Macquarie Capital Partners LLC for a transaction in which Macquarie Capital
Partners provided financial advisory and investment banking services in
connection with the formation of a joint venture in which ProLogis has an
ownership interest. Macquarie Capital Partners LLC received a fees of $1,210,676
in connection with the transaction.

PARTNERSHIP AFFILIATIONS

     As part of its acquisition program of industrial distribution facilities,
ProLogis has consummated certain transactions pursuant to which it contributed
cash, and third party partnerships contributed a portfolio of facilities, to
ProLogis Limited Partnership -- I. Irving F. Lyons, III, Vice Chairman, Chief
Investment Officer and Trustee of ProLogis, is a partner in ProLogis Limited
Partnership -- I, holding an indirect 2.9% limited partnership interest (which
could increase to 3.3% if the partnership meets certain distribution levels)
valued at $8,906,323 based on the December 31, 2001 closing price of Common
Shares. Mr. Lyons also owns minority interests in a substantial amount of
undeveloped industrial land near ProLogis' industrial distribution parks in the
San Francisco Bay Area. ProLogis has purchased options and rights of first
refusal with respect to all sales of land and build-to-suit opportunities
involving this property. The ProLogis Limited Partnership -- I transaction and
the prices for such options (which are fixed or determined pursuant to formulas)
were negotiated at arm's length prior to Mr. Lyons' affiliation with ProLogis.
                                        75


     Additionally, Jeffrey H. Schwartz, President and Chief Operating
Officer -- Asia of ProLogis, is a partner in ProLogis Limited Partnership -- III
and ProLogis Limited Partnership -- IV, holding an indirect 4.57% limited
partnership interest in ProLogis Limited Partnership -- III valued at $1,692,357
and an indirect 1.09% limited partnership interest in ProLogis Limited
Partnership -- IV valued at $1,066,612, based on the December 31, 2001 closing
price of Common Shares. The transactions in which Mr. Schwartz acquired his
ownership interests were negotiated at arm's length prior to Mr. Schwartz's
affiliation with ProLogis.

PREFERRED STOCK SUBSIDIARIES

     ProLogis has invested in the non-voting preferred stock of certain entities
that have ownership interests in companies that produce income that is not REIT
qualifying income under the Code. The voting common stock of these companies was
held by four entities in which ProLogis did not have an ownership interest.
ProLogis' largest shareholder, Security Capital, had a non-controlling ownership
interest in two of these entities. During 2000, certain amendments to the
Internal Revenue Code of 1986, as amended (the "Code"), were passed that were to
be effective in January 2001. The Code, as amended in 2001, would allow for
ProLogis to have a voting ownership interest in these entities; however, many of
the states in which ProLogis operates had not amended their income tax laws
governing REITs to coincide with the amendments made to the Code. For ProLogis
to continue to qualify as a REIT under applicable state income tax laws, the
non-voting preferred stock ownership structure had to continue after the Code
amendments took effect in January 2001.

     In anticipation of the changes in the Code, ProLogis began negotiating
purchase agreements with the owners of the voting common stock in three of the
entities. Rather than postpone the completion of these purchases pending changes
to the state income tax laws governing REITs, the purchase of the voting common
stock of each entity was completed with the voting interest in these entities
acquired by Mr. K. Dane Brooksher, ProLogis' chairman and chief executive
officer. The transactions through which Mr. Brooksher became an owner in these
entities are further discussed below. The purchase of the voting common stock of
one of the entities, ProLogis Development Services, was not completed until
October 2001. As the state income tax laws governing REITs had been amended at
that time, ProLogis directly acquired the voting common stock of this entity.
ProLogis is currently evaluating the most effective manner in which it holds its
investment in these entities as a result of the changes to applicable state
income tax laws.

     On January 5, 2001, a newly formed limited liability company, Kingspark
LLC, of which Mr. Brooksher, ProLogis' chairman, is the voting member and
ProLogis is the non-voting member, acquired the ordinary shares of Kingspark
Holding S.A. (an entity in which ProLogis owns all of the non-voting preferred
stock) from Kingspark Holdings LLC (a limited liability company in which
unrelated third parties owned 100% of the voting interests and Security Capital
owned 100% of the non-voting interests) for approximately $8.1 million. The
entire purchase price of $8.1 million was funded by ProLogis either directly or
through loans to Kingspark LLC or Mr. Brooksher. The ProLogis loan to Kingspark
LLC was in the principal amount of $7.3 million, is due January 5, 2006 and
bears interest at an annual rate of 8%. ProLogis made a direct capital
contribution to Kingspark LLC in the amount of $770,973. Mr. Brooksher's $40,557
capital contribution to Kingspark LLC was loaned to Mr. Brooksher by ProLogis,
which recourse loan is payable on January 5, 2006 and bears interest at an
annual rate of 8%. ProLogis owns 95% of the membership interests (all
non-voting) and Mr. Brooksher owns 5% of the membership interests (all voting)
of Kingspark LLC and Mr. Brooksher is its managing member. Mr. Brooksher may
transfer his membership interest, subject to certain conditions, including the
approval of ProLogis. There are no provisions that give ProLogis the right to
acquire Mr. Brooksher's membership interest. Mr. Brooksher will not receive any
compensation in connection with being the managing member. His membership
interest entitles him to dividends equal to 5% of the net cash flow of Kingspark
LLC, as defined, if any. ProLogis structured the transaction in the manner
described above to enable ProLogis to continue to qualify as a REIT under
applicable state income tax laws.

     As the state income tax laws governing REITs were eventually changed in
2001 such that ProLogis would be able to own 100% of this entity, ProLogis is in
the process of evaluating the most effective manner to restructure its
investment in this entity.

                                        76


     Also on January 5, 2001, a newly formed limited liability company of which
Mr. Brooksher is the voting member and ProLogis is the non-voting member,
acquired the common shares of Frigoscandia S.A. and ProLogis Logistics Services
Incorporated (both entities in which ProLogis owns all of the non-voting
preferred stock) for an aggregate of approximately $3.3 million. The common
shares of Frigoscandia S.A. were owned by a limited liability company in which
unrelated third parties owned 100% of the voting interests and Security Capital
owned 100% of the non-voting interests. The common shares of ProLogis Logistics
Services Incorporated were owned by a limited liability company in which
unrelated third parties owned all of the membership interest. Mr. Brooksher
contributed $50,000 to the capital of the newly formed limited liability
company. ProLogis loaned CSI/Frigo LLC $2.9 million, which loan is due January
5, 2011 and bears interest at an annual rate of 8%. ProLogis also made a capital
contribution to CSI/Frigo LLC in the amount of $404,545. ProLogis owns 89% of
the membership interests (all non-voting) and Mr. Brooksher owns 11% of the
membership interests (all voting) of CSI/Frigo LLC. Mr. Brooksher is the
managing member of CSI/ Frigo LLC. Additionally, ProLogis has a note agreement
with CSI/Frigo LLC that allows ProLogis to participate in its earnings such that
ProLogis will recognize 95% of the earnings of CSI/Frigo LLC. Mr. Brooksher may
transfer his membership interest, subject to certain conditions, including the
approval of ProLogis. There are no provisions that give ProLogis the right to
acquire Mr. Brooksher's membership interest. Mr. Brooksher will not receive any
compensation in connection with being the managing member. Mr. Brooksher's
membership interest and the provisions of the participating note entitle him to
dividends equal to 5% of the net cash flow of CSI/Frigo LLC, as defined, if any.
ProLogis structured the transaction in the manner described above to enable
ProLogis to continue to qualify as a REIT under applicable state income tax
laws. As the state income tax laws governing REITs were eventually changed in
2001 such that ProLogis would be able to own 100% of this entity, ProLogis is in
the process of evaluating the most effective manner to hold its investments in
these entities given it's long-term objectives with respect to investments in
this business segment and given that it does not control these entities.

     As a result of the foregoing transactions, Mr. Brooksher has an effective
0.04% interest in the earnings of ProLogis Logistics Services Incorporated, an
effective 0.25% interest in the earnings of Frigoscandia S.A. and an effective
0.25% interest in the earnings of Kingspark Holding S.A. Mr. Brooksher receives
no compensation in connection with his interest in these companies.

LEASING TRANSACTIONS

     ProLogis leases space to Security Capital and certain of its affiliates on
market terms that management believes are no less favorable to ProLogis than
those that could be obtained with unaffiliated third parties.

     ProLogis' rental income related to these leases were $534,000, $757,000,
and $756,000 for the years ended December 31, 2001, 2000, and 1999,
respectively. As of December 31, 2001, 60,103 square feet were leased to related
parties. The annualized rental revenue for these leases is $472,000.

LOANS TO EXECUTIVE OFFICERS

     In 1997, ProLogis made the following loans to the Named Executive Officers
and Jeffrey H. Schwartz for the purchase price of Common Shares pursuant to the
share purchase program which loans remain outstanding (balances as of March 31,
2002): Mr. Brooksher, $1,847,295; Mr. Lyons, $1,847,295; Mr. Rakowich, $923,647;
Mr. Seiple, $923,647, Mr. Watson, $1,108,364 and Mr. Schwartz, $1,108,364. Each
loan is full recourse to the executive officer and is secured by the purchased
Common Shares. The loans bear interest at the lower of ProLogis' annual dividend
yield on Common Shares or 6.0% per annum, and have a ten-year term. The loans
will become due and payable (i) immediately upon the sale of the purchased
Common Shares or ProLogis' termination of the executive officer's employment for
cause, (ii) 180 days after ProLogis' termination of the executive officer's
employment following a change in control, (iii) 365 days after termination of
the executive officer's employment by reason of death, disability or retirement
or (iv) 90 days after termination of the executive officer's employment for any
other reason.

     In 2001, ProLogis entered into a loan with K. Dane Brooksher. The proceeds
of the loan were used by Mr. Brooksher to repay a loan from Security Capital
which was made by Security Capital while

                                        77


Mr. Brooksher was an employee of Security Capital. Under the terms of the
promissory note, ProLogis lent Mr. Brooksher $474,997.50, which amount was due
on January 31, 2002. A payment of $237,500 on the principal amount was paid to
ProLogis in January 2001 from the proceeds of Mr. Brooksher's target bonus for
2000. The balance was repaid by Mr. Brooksher from the proceeds of Mr.
Brooksher's target bonus for 2001 in January 2002. Interest on the unpaid
principal amount outstanding accrues at a floating rate per annum equal to
ProLogis' line of credit rate charged by Bank of America (LIBOR plus 75 basis
points). Accrued interest is due and payable semi-annually during the term of
the loan beginning on January 4, 2001 and thereafter on each July 4 and January
4 until payment in full.

     In 2001, ProLogis entered into a loan with Robert J. Watson. The proceeds
of the loan were used by Mr. Watson to repay a loan from Security Capital which
was made by Security Capital while Mr. Watson was an employee of Security
Capital. Under the terms of the promissory note, ProLogis lent Mr. Watson
$90,000, which amount is due on September 1, 2003. Interest on the unpaid
principal amount outstanding accrues at a floating rate per annum equal to
ProLogis' line of credit rate charged by Bank of America (LIBOR plus 75 basis
points). Accrued interest is due and payable annually during the term of the
loan beginning on January 31, 2001 and thereafter on each January 31 until
payment in full.

                                        78


                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

          (a) Financial Statements and Schedules:

           1. Financial Statements:

           See Index to Consolidated Financial Statements and Schedule III on
           page 80 of this report, which is incorporated herein by reference.

           2. Financial Statement Schedules:

           Schedule III -- Real Estate and Accumulated Depreciation

           All other schedules have been omitted since the required information
           is presented in the consolidated financial statements and the related
           notes or is not applicable.

           3. Exhibits:

           See Index to Exhibits on pages 148 to 153 of this report, which is
           incorporated herein by reference.

          (b) Reports on Form 8-K: The following reports on Form 8-K were filed
     during the last quarter of the period covered by this report:



        ITEM     FINANCIAL
DATE  REPORTED   STATEMENTS
----  --------   ----------
           
None


          (c) Exhibits: The Exhibits required by Item 601 of Regulation S-K are
     listed in the Index to Exhibits on pages 148 to 153 of this report, which
     is incorporated herein by reference.

                                        79


          INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE III



                                                              PAGE
                                                              ----
                                                           
ProLogis Trust:
  Report of Independent Public Accountants..................   81
  Consolidated Balance Sheets...............................   82
  Consolidated Statements of Earnings.......................   83
  Consolidated Statements of Shareholders' Equity and
     Comprehensive Income...................................   84
  Consolidated Statements of Cash Flows.....................   85
  Notes to Consolidated Financial Statements................   86
  Report of Independent Public Accountants..................  128
  Schedule III -- Real Estate and Accumulated
     Depreciation...........................................  129


                                        80


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Trustees and Shareholders of
  ProLogis Trust

     We have audited the accompanying consolidated balance sheets of ProLogis
Trust and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of earnings, shareholders' equity and comprehensive
income, and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
Frigoscandia Holding AB and CS Integrated LLC accounted for under the equity
method of accounting, in which the Trust has investments in and advances to
amounting to $416.6 million and $397.7 million as of December 31, 2001 and 2000,
respectively, and earnings (loss) from unconsolidated entities of $(71.3)
million, $(12.0) million and $6.3 million in 2001, 2000 and 1999, respectively.
Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to the amounts included
for these entities is based solely on the reports of the other auditors.

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

     In our opinion, based on our audits and the reports of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of ProLogis Trust and subsidiaries as of
December 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Chicago, Illinois
April 3, 2002

                                        81


                                 PROLOGIS TRUST

                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS



                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2001         2000
                                                              ----------   ----------
                                                                     
Real estate.................................................  $4,588,193   $4,689,492
  Less accumulated depreciation.............................     574,871      476,982
                                                              ----------   ----------
                                                               4,013,322    4,212,510
Investments in and advances to unconsolidated entities......   1,310,735    1,453,148
Cash and cash equivalents...................................      27,989       57,870
Accounts and notes receivable...............................      23,829       34,989
Other assets................................................     228,066      187,817
                                                              ----------   ----------
         Total assets.......................................  $5,603,941   $5,946,334
                                                              ==========   ==========
                        LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
  Lines of credit...........................................  $  375,875   $  439,822
  Senior unsecured debt.....................................   1,670,359    1,699,989
  Mortgage notes and other secured debt.....................     532,106      537,925
  Accounts payable and accrued expenses.....................     133,242      106,097
  Construction payable......................................      19,805       40,925
  Distributions and dividends payable.......................      63,169       57,739
  Other liabilities.........................................      87,747       89,836
                                                              ----------   ----------
         Total liabilities..................................   2,882,303    2,972,333
                                                              ----------   ----------
Minority interest...........................................      45,639       46,630
Shareholders' equity:
  Series A Preferred Shares; $0.01 par value; 5,400,000
    shares issued and outstanding at December 31, 2000;
    stated liquidation preference of $25.00 per share.......          --      135,000
  Series B Convertible Preferred Shares; $0.01 par value;
    6,256,100 shares issued and outstanding at December 31,
    2000; stated liquidation preference of $25.00 per
    share...................................................          --      156,403
  Series C Preferred Shares; $0.01 par value; 2,000,000
    shares issued and outstanding at December 31, 2001 and
    2000; stated liquidation preference of $50.00 per
    share...................................................     100,000      100,000
  Series D Preferred Shares; $0.01 par value; 10,000,000
    shares issued and outstanding at December 31, 2001 and
    2000; stated liquidation preference of $25.00 per
    share...................................................     250,000      250,000
  Series E Preferred Shares; $0.01 par value; 2,000,000
    shares issued and outstanding at December 31, 2001 and
    2000; stated liquidation preference of $25.00 per
    share...................................................      50,000       50,000
  Common shares of beneficial interest; $0.01 par value;
    175,888,391 shares issued and outstanding at December
    31, 2001 and 165,287,358 shares issued and outstanding
    at December 31, 2000....................................       1,759        1,653
Additional paid-in capital..................................   2,958,613    2,740,136
Employee share purchase notes...............................     (14,810)     (18,556)
Accumulated other comprehensive income......................     (63,780)     (33,768)
Distributions in excess of net earnings.....................    (605,783)    (453,497)
                                                              ----------   ----------
         Total shareholders' equity.........................   2,675,999    2,927,371
                                                              ----------   ----------
         Total liabilities and shareholders' equity.........  $5,603,941   $5,946,334
                                                              ==========   ==========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        82


                                 PROLOGIS TRUST

                      CONSOLIDATED STATEMENTS OF EARNINGS
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)



                                                                2001       2000       1999
                                                              --------   --------   --------
                                                                           
Income:
  Rental income.............................................  $465,777   $480,088   $491,826
  Other real estate income..................................   104,436     78,103     46,678
  Income (loss) from unconsolidated entities................   (51,222)    78,063     22,519
  Interest income...........................................     4,134      7,267      6,369
                                                              --------   --------   --------
          Total income......................................   523,125    643,521    567,392
                                                              --------   --------   --------
Expenses:
  Rental expenses, net of recoveries of $95,813 in 2001,
     $91,706 in 2000 and $87,907 in 1999 and including
     amounts paid to affiliate of $89 in 2001, $1,188 in
     2000 and $1,314 in 1999................................    28,700     27,177     33,501
  General and administrative, including amounts paid to
     affiliate of $681 in 2001, $958 in 2000 and $1,582 in
     1999...................................................    50,274     44,954     38,284
  Depreciation and amortization.............................   143,465    151,483    152,447
  Interest..................................................   163,629    172,191    170,746
  Other.....................................................     4,014      5,909      5,865
                                                              --------   --------   --------
          Total expenses....................................   390,082    401,714    400,843
                                                              --------   --------   --------
Earnings before minority interest...........................   133,043    241,807    166,549
Minority interest share in earnings.........................     6,461      5,586      4,979
                                                              --------   --------   --------
Earnings before gain on disposition of real estate and
  foreign currency exchange losses..........................   126,582    236,221    161,570
Gain on disposition of real estate, net.....................    10,008      1,314     38,994
Foreign currency exchange losses, net.......................    (3,721)   (17,927)   (16,818)
                                                              --------   --------   --------
Earnings before income taxes................................   132,869    219,608    183,746
Income taxes:
  Current income tax expense................................     2,467        900      1,472
  Deferred income tax expense...............................     2,258      4,230         --
                                                              --------   --------   --------
          Total income taxes................................     4,725      5,130      1,472
                                                              --------   --------   --------
Earnings before cumulative effect of accounting change......   128,144    214,478    182,274
Cumulative effect of accounting change......................        --         --      1,440
                                                              --------   --------   --------
Net earnings................................................   128,144    214,478    180,834
Less preferred share dividends..............................    37,309     56,763     56,835
                                                              --------   --------   --------
Net earnings attributable to Common Shares..................  $ 90,835   $157,715   $123,999
                                                              ========   ========   ========
Weighted average Common Shares outstanding -- Basic.........   172,755    163,651    152,412
                                                              ========   ========   ========
Weighted average Common Shares outstanding -- Diluted.......   175,197    164,401    152,739
                                                              ========   ========   ========
Basic per share net earnings attributable to Common Shares:
  Earnings before cumulative effect of accounting change....  $   0.53   $   0.96   $   0.82
  Cumulative effect of accounting change....................        --         --      (0.01)
                                                              --------   --------   --------
          Net earnings attributable to Common Shares........  $   0.53   $   0.96   $   0.81
                                                              ========   ========   ========
Diluted per share net earnings attributable to Common
  Shares:
  Earnings before cumulative effect of accounting change....  $   0.52   $   0.96   $   0.82
  Cumulative effect of accounting change....................        --         --      (0.01)
                                                              --------   --------   --------
          Net earnings attributable to Common Shares........  $   0.52   $   0.96   $   0.81
                                                              ========   ========   ========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        83


                                 PROLOGIS TRUST

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                                 (IN THOUSANDS)



                                                                 2001         2000         1999
                                                              ----------   ----------   ----------
                                                                               
Common Shares -- Number of shares at beginning of year......     165,287      161,825      123,416
  Issuance of Common Shares under Common Share plans........       3,502        1,642          344
  Repurchase of Common Shares...............................        (778)          --           --
  Conversion of limited partnership units...................          25          238           14
  Redemption or conversion of Series B Preferred Shares.....       7,785          980          663
  Issuance of Common Shares in merger transaction...........          --           --       37,388
  Issuance of Common Shares in acquisition of unconsolidated
    entity..................................................          67          602           --
                                                              ----------   ----------   ----------
Common Shares -- Number of shares at end of year............     175,888      165,287      161,825
                                                              ==========   ==========   ==========
Common Shares (par value) at beginning of year..............  $  1,652.9   $  1,618.3   $  1,234.2
  Issuance of Common Shares under Common Share plans........        35.0         16.4          3.4
  Repurchase of Common Shares...............................        (7.8)          --           --
  Conversion of limited partnership units...................         0.2          2.4          0.2
  Redemption or conversion of Series B Preferred Shares.....        77.9          9.8          6.6
  Issuance of Common Shares in merger transaction...........          --           --        373.9
  Issuance of Common Shares in acquisition of unconsolidated
    entity..................................................         0.7          6.0           --
                                                              ----------   ----------   ----------
Common Shares (par value) at end of year....................  $  1,758.9   $  1,652.9   $  1,618.3
                                                              ==========   ==========   ==========
Preferred Shares at beginning of year.......................  $  691,403   $  710,518   $  673,440
  Redemption or conversion of Series B Preferred Shares.....    (156,403)     (19,115)     (12,922)
  Redemption of Series A Preferred Shares...................    (135,000)          --           --
  Issuance of Series E Preferred Shares in merger
    transaction.............................................          --           --       50,000
                                                              ----------   ----------   ----------
Preferred Shares at end of year.............................  $  400,000   $  691,403   $  710,518
                                                              ==========   ==========   ==========
Additional paid-in capital at beginning of year.............  $2,740,136   $2,663,350   $1,907,232
  Issuance of Common Shares under Common Share plans........      70,850       30,251        6,327
  Repurchase of Common Shares...............................     (15,992)          --           --
  Conversion of limited partnership units...................         216        8,167          205
  Redemption or conversion of Series B Preferred Shares.....     151,742       19,105       12,916
  Issuance of Common Shares in merger transaction...........          --           --      733,307
  Issuance of Common Shares in acquisition of unconsolidated
    entity..................................................       1,452       11,872           --
  Sale of stock options to unconsolidated entities..........       1,091        2,153        1,226
  Stock-based compensation costs............................       9,118        5,238        2,137
                                                              ----------   ----------   ----------
Additional paid-in capital at end of year...................  $2,958,613   $2,740,136   $2,663,350
                                                              ==========   ==========   ==========
Employee share purchase notes at beginning of year..........  $  (18,556)  $  (22,906)  $  (25,247)
  Principal payments on employee share purchase notes.......       3,746        4,350        2,341
                                                              ----------   ----------   ----------
Employee share purchase notes at end of year................  $  (14,810)  $  (18,556)  $  (22,906)
                                                              ==========   ==========   ==========
Accumulated other comprehensive income at beginning of
  year......................................................  $  (33,768)  $   (9,765)  $       23
    Foreign currency translation adjustments................     (30,012)     (24,003)      (9,788)
                                                              ----------   ----------   ----------
Accumulated other comprehensive income at end of year.......  $  (63,780)  $  (33,768)  $   (9,765)
                                                              ==========   ==========   ==========
Distributions in excess of net earnings at beginning of
  year......................................................  $ (453,497)  $ (389,079)  $ (300,314)
  Net earnings..............................................     128,144      214,478      180,834
  Preferred Share dividends.................................     (37,309)     (56,763)     (56,835)
  Common Share distributions paid...........................    (180,681)    (165,123)    (158,554)
  Common Share distributions accrued........................     (62,440)     (57,010)     (54,210)
                                                              ----------   ----------   ----------
Distributions in excess of net earnings at end of year......  $ (605,783)  $ (453,497)  $ (389,079)
                                                              ==========   ==========   ==========
Total shareholders' equity at end of year...................  $2,675,999   $2,927,371   $2,953,736
                                                              ==========   ==========   ==========
Comprehensive income:
    Net earnings............................................  $  128,144   $  214,478   $  180,834
  Preferred Share dividends.................................     (37,309)     (56,763)     (56,835)
  Foreign currency translation adjustments..................     (30,012)     (24,003)      (9,788)
                                                              ----------   ----------   ----------
Comprehensive income........................................  $   60,823   $  133,712   $  114,211
                                                              ==========   ==========   ==========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        84


                                 PROLOGIS TRUST

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                                 (IN THOUSANDS)



                                                                 2001         2000          1999
                                                              ----------   -----------   -----------
                                                                                
Operating activities:
  Net earnings..............................................  $  128,144   $   214,478   $   180,834
  Adjustments to reconcile net earnings to net cash provided
    by operating activities:
    Minority interest share in earnings.....................       6,461         5,586         4,979
    Depreciation and amortization...........................     143,465       151,483       152,447
    Gain on disposition of real estate......................     (10,008)       (1,314)      (38,994)
    Straight-lined rents....................................      (6,215)       (6,716)       (9,889)
    Amortization of deferred loan costs.....................       5,233         4,597         4,440
    Stock-based compensation................................       7,194         3,811         1,657
    (Income) loss from unconsolidated entities..............      68,129       (64,239)      (20,948)
    Deferred income tax expense.............................       2,258         4,230            --
    Foreign currency exchange (gains) losses, net...........      (4,780)       20,956        11,344
    Interest rate hedge expense.............................          --            --           945
    Cumulative effect of accounting change..................          --            --         1,440
  Increase in accounts receivable and other assets..........     (45,200)      (43,123)      (37,359)
  Increase in accounts payable, accrued expenses and other
    liabilities.............................................      52,179        35,409        20,480
                                                              ----------   -----------   -----------
        Net cash provided by operating activities...........     346,860       325,158       271,376
                                                              ----------   -----------   -----------
Investing activities:
  Real estate investments...................................    (789,488)     (631,968)     (459,252)
  Tenant improvements and lease commissions on previously
    leased space............................................     (21,672)      (19,623)      (19,751)
  Recurring capital expenditures............................     (29,081)      (23,895)      (28,114)
  Proceeds from dispositions of real estate.................     855,993       489,020       564,827
  Net (advances to) amounts received from unconsolidated
    entities................................................      72,677      (188,750)     (141,037)
  Proceeds from repayment of note receivable................      11,591        11,671            15
  Adjustments to cash balances resulting from mergers and
    contributions...........................................                   (17,968)       48,962
                                                              ----------   -----------   -----------
        Net cash provided by (used in) investing
          activities........................................     100,020      (381,513)      (34,350)
                                                              ----------   -----------   -----------
Financing activities:
  Net proceeds from Common Share plans......................      71,229        30,734         6,331
  Repurchase of Common Shares, net of costs.................     (16,000)           --            --
  Redemption of Series A Preferred Shares...................    (135,000)           --            --
  Redemption of Series B Convertible Preferred Shares.......      (4,583)           --            --
  Proceeds from financing transactions......................          --            --       966,075
  Debt issuance and other transaction costs incurred........      (1,815)       (4,598)      (58,248)
  Distributions paid on Common Shares (includes $11,132 paid
    in 1999 in merger transaction)..........................    (237,691)     (219,333)     (208,969)
  Distributions paid to minority interest holders...........      (7,116)       (7,123)       (7,251)
  Dividends paid on preferred shares (includes $729 paid in
    1999 in merger transaction).............................     (37,309)      (56,763)      (56,835)
  Principal payments on senior unsecured debt...............     (30,000)      (30,000)      (12,500)
  Principal payments received on employee share purchase
    notes...................................................       3,746         4,350         2,341
  Payments on the purchase of derivative financial
    instruments.............................................      (2,931)       (1,371)      (27,715)
  Proceeds from settlement of derivative financial
    instruments.............................................         106         2,179            --
  Proceeds from lines of credit and short-term borrowings...     642,188     1,075,473     1,939,845
  Payments on lines of credit and short-term borrowings.....    (706,135)     (734,351)   (2,335,445)
  Payments in merger transaction............................          --            --      (395,981)
  Regularly scheduled principal payments on secured debt....      (7,906)       (7,100)       (6,560)
  Principal payments on secured debt at maturity and
    prepayments.............................................      (7,544)       (7,210)      (35,916)
                                                              ----------   -----------   -----------
        Net cash provided by (used in) financing
          activities........................................    (476,761)       44,887      (230,828)
                                                              ----------   -----------   -----------
Net increase (decrease) in cash and cash equivalents........     (29,881)      (11,468)        6,198
Cash and cash equivalents, beginning of year................      57,870        69,338        63,140
                                                              ----------   -----------   -----------
Cash and cash equivalents, end of year......................  $   27,989   $    57,870   $    69,338
                                                              ==========   ===========   ===========


     See Note 12 for information on non-cash investing and financing activities.

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        85


                                 PROLOGIS TRUST

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2001

1. DESCRIPTION OF BUSINESS:

     ProLogis Trust (collectively with its consolidated subsidiaries and
partnerships "ProLogis") is a publicly held real estate investment trust
("REIT") that owns, operates and develops industrial distribution facilities in
North America (United States and Mexico), Europe and Asia (Japan). The ProLogis
Operating System(R), comprised of the Market Services Group, the Global Services
Group, the Global Development Group and the ProLogis Solutions Group, utilizes
ProLogis' international network of distribution facilities to meet its
customers' distribution space needs globally. ProLogis' business consists of
three reportable business segments: property operations, corporate distribution
facilities services business ("CDFS business") and temperature-controlled
distribution operations. See Note 10.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

  Principles of Financial Presentation

     The accounts of ProLogis, its wholly owned subsidiaries and its majority
owned and controlled subsidiaries and partnerships are consolidated in the
accompanying financial statements. All material intercompany transactions,
including transactions with unconsolidated entities, have been eliminated.

     ProLogis Development Services Incorporated ("ProLogis Development
Services") is a subsidiary of ProLogis that operates in the CDFS business
segment. See Note 10. ProLogis owned only the non-voting preferred stock of
ProLogis Development Services, representing a 95% interest until October 2001
when ProLogis also acquired the voting common stock. ProLogis has advanced
mortgage loans to fund ProLogis Development Services' acquisition, development
and construction activities since its inception. A charitable trust owned the
voting common stock of ProLogis Development Services prior to October 2001 but
had no substantive role in the decision-making process regarding the operations
of ProLogis Development Services. Accordingly, ProLogis consolidated ProLogis
Development Services in its financial statements. In October 2001, ProLogis
acquired the voting common stock from the charitable trust for $1.3 million. As
of December 31, 2001, ProLogis owned 100% of ProLogis Development Services and
continues to consolidate ProLogis Development Services in its financial
statements. ProLogis Development Services is not a qualified REIT subsidiary
under the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly,
provisions for federal and state income taxes are recognized, as appropriate.

     The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") in the United States requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

     Certain amounts included in the consolidated financial statements for prior
years have been reclassified to conform to the 2001 financial statement
presentation.

  REIT Organization Status

     In January 1993, ProLogis was formed as a Maryland REIT and has elected to
be taxed as a REIT under the Code.

     REITs are not generally required to pay federal income taxes if minimum
distribution, income, asset and shareholder tests are met. During 2001, 2000 and
1999, ProLogis was in compliance with the REIT requirements. Thus, no federal
income tax provision has been reflected in the accompanying consolidated
financial statements for ProLogis and its wholly owned subsidiaries which are
qualified REIT subsidiaries. ProLogis recognizes income taxes in accordance with
Statement of Financial Accounting Standards

                                        86

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

("SFAS") No. 109, "Accounting for Income Taxes" for its subsidiaries that are
not qualified REIT subsidiaries. Additionally, the foreign countries that
ProLogis operates in do not recognize REITs under their respective tax laws.
Accordingly, ProLogis has recognized foreign country income taxes, as
applicable.

  Long-Lived Assets

     Real estate is carried at cost, which is not in excess of estimated fair
market value. Costs directly associated with the successful acquisition,
renovation or development of real estate are capitalized. Direct costs
associated with unsuccessful acquisitions are expensed at the time the pursuit
is abandoned. Renovations and improvements to real estate assets are
capitalized. Repairs and maintenance costs are expensed as incurred to the
extent they are not acquisition-related renovation costs identified during
ProLogis' pre-acquisition due diligence.

     General and administrative costs incurred for pre-acquisition and
development activities (including land acquisitions), renovation and leasing
activities that are incremental and identifiable to a specific activity are
capitalized to the specific real estate assets. ProLogis capitalizes interest
costs incurred during the land development and construction periods of
qualifying projects. Costs capitalized related to leasing activities are
included with other assets.

     Depreciation of real estate assets is computed over the estimated useful
lives of depreciable property on a straight-line basis: seven years for capital
improvements, 10 years for tenant improvements, 30 years for acquired facilities
and 40 years for facilities developed by ProLogis. Capitalized lease costs are
amortized over the lease term. ProLogis' average lease term is between six and
seven years.

     ProLogis acquired certain real estate through the formation of partnerships
wherein ProLogis, the general partner, contributed cash and the limited partners
contributed real estate in exchange for partnership units which are ultimately
exchangeable for ProLogis' common shares of beneficial interest, ("Common
Shares"). In consolidating the partnerships' assets, real estate cost includes
the estimated fair value attributable to the limited partners' interests as of
the acquisition dates. See Note 6.

     ProLogis' investments in certain entities are accounted for under the
equity method. Accordingly, these investments are recognized at ProLogis' cost
as adjusted for ProLogis' proportionate share of the earnings or losses of the
companies, distributions received and other basis adjustments, as appropriate.
ProLogis' proportionate share of the earnings or losses of these companies is
recognized in income. See Note 4.

     ProLogis' management periodically reviews long-lived assets (primarily real
estate and investments in unconsolidated entities) that it owns for impairment
whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable in accordance with the provisions of SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." In management's opinion, long-lived assets and
certain identifiable intangibles, primarily real estate assets and investments
in unconsolidated entities, are not carried at amounts in excess of their fair
values. Long-lived assets and certain identifiable intangibles, primarily real
estate and investments in unconsolidated entities, to be disposed of, if any,
are reported at the lower of their carrying amount or fair value less cost to
sell. In 2001, ProLogis' share of the aggregate impairment adjustments
recognized by its unconsolidated entities was $131.2 million. See Note 4.

     Recently issued accounting pronouncements that address long-lived assets
are:

     - SFAS No. 142, "Goodwill and Other Intangible Assets" -- provides that
       goodwill is no longer subject to amortization over its estimated useful
       life. Rather, goodwill will be subject to at least an annual assessment
       for impairment by applying a fair-value-based-test (the impairment
       guidance in existing rules for equity method goodwill will continue to
       apply). SFAS No. 142 also changes the rules for

                                        87

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       recognition of acquired intangible assets other than goodwill but
       continues to require that intangible assets be amortized over their
       useful lives.

     - SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
       Assets" -- establishes a single accounting model for long-lived assets to
       be disposed of by sale and provides implementation guidance with respect
       to accounting for impairment of long-lived assets. SFAS No. 144 requires
       that discontinued operations be measured on the same basis as other
       long-lived assets (the lower of the carrying amount or fair value less
       cost to sell) rather than at the net realizable value as previously
       required. Additionally, future operating losses of discontinued
       operations are no longer recognized before they occur.

     SFAS Nos. 142 and 144 are effective for ProLogis' fiscal year ending
December 31, 2002. Management is still evaluating the effects these standards
will have, if any, on ProLogis' consolidated financial position, results of
operations or financial statement disclosures. For the years ended December 31,
2001, 2000 and 1999, ProLogis recognized amortization expense related to
recognized goodwill of $0.1 million, $2.1 million and $0.5 million,
respectively, as a component of "Depreciation and amortization" in its
Consolidated Statements of Earnings. For the years ended December 31, 2001, 2000
and 1999, ProLogis' share of the goodwill amortization of its unconsolidated
entities recognized under the equity method was $10.0 million, $10.1 million and
$9.8 million, respectively. These amounts are included as a component of "Income
(loss) from unconsolidated entities" in ProLogis' Consolidated Statements of
Earnings.

  Cash and Cash Equivalents

     ProLogis considers all cash on hand, demand deposits with financial
institutions and short-term, highly liquid investments with original maturities
of three months or less to be cash equivalents.

  Minority Interest

     ProLogis acquired a controlling interest in five partnerships that owned
real estate (the "Partnerships"), which are consolidated in ProLogis' financial
statements. The Partnerships are ProLogis Limited Partnership - I, ProLogis
Limited Partnership - II, ProLogis Limited Partnership - III, ProLogis Limited
Partnership - IV and Meridian Realty Partners Limited Partnership. The
acquisition of the controlling interest resulted in a step-up to fair value of
the real estate owned by the Partnerships. Therefore, the minority interest in
the Partnerships has been stated at each holders' respective share of the fair
value of the real estate at the date of acquisitions, as adjusted for subsequent
earnings, contributions and distributions. Common Shares issued upon exchange of
the limited partner interests are accounted for at the carrying value of the
minority interest surrendered.

  Costs of Raising Capital

     Costs incurred in connection with the issuance of shares are deducted from
shareholders' equity. Costs incurred in connection with the incurrence or
renewal of debt are capitalized, included with other assets, and amortized over
the term of the related loan or the renewal term.

  Financial Instruments

     ProLogis adopted SFAS No. 133, "Accounting for Derivative Instruments and
for Hedging Activities," as amended, on January 1, 2001. SFAS No. 133 provides
comprehensive guidelines for the recognition and measurement of derivatives and
hedging activities and, specifically, requires all derivatives to be recorded on
the balance sheet at fair value as an asset or liability, with an offset to
accumulated other comprehensive income or income.

                                        88

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In the normal course of business, ProLogis uses certain derivative
financial instruments for the purpose of foreign currency exchange rate and
interest rate risk management. To qualify for hedge accounting, the derivative
instruments used for risk management purposes must effectively reduce the risk
exposure that they are designed to hedge. For instruments associated with the
hedge of anticipated transactions, hedge effectiveness criteria also require
that the occurrence of the underlying transactions be probable. Instruments
meeting these hedging criteria are formally designated as hedges at the
inception of the contract. Those risk management instruments not meeting these
criteria are accounted for at fair value with changes in fair value recognized
immediately in net income.

     In assessing the fair value of its financial instruments, both derivative
and non-derivative, ProLogis uses a variety of methods and assumptions that are
based on market conditions and risks existing at each balance sheet date.
Primarily, ProLogis uses quoted market prices or quotes from brokers or dealers
for the same or similar instruments. These values represent a general
approximation of possible value and may never actually be realized.

     ProLogis' financial instruments, including derivative instruments are
further discussed in Note 16.

  Foreign Operations

     The U.S. dollar is the functional currency for ProLogis' consolidated and
unconsolidated entities operating in the United States and Mexico. The
functional currency for ProLogis' consolidated and unconsolidated entities
operating outside North America is the local currency of the country in which
the entity is located (euro for members of the European Union, krona for Sweden,
pound sterling for the United Kingdom, zloty for Poland and yen for Japan).

     ProLogis' consolidated subsidiaries whose functional currency is not the
U.S. dollar translate their financial statements into U.S. dollars. Assets and
liabilities are translated at the exchange rate in effect as of the financial
statement date. Income statement accounts are translated using the average
exchange rate for the period. Income statement accounts that represent
significant, nonrecurring transactions are translated at the rate in effect as
of the date of the transaction. Gains and losses resulting from the translation
are included in accumulated other comprehensive income as a separate component
of shareholders' equity. ProLogis translates its share of the income of its
unconsolidated entities whose functional currency is not the U.S. dollar at the
average exchange rate for the period. ProLogis and its foreign entities have
certain transactions denominated in currencies other than their functional
currency. In these instances, nonmonetary assets and liabilities are reflected
at the historical exchange rate, monetary assets and liabilities are remeasured
at the exchange rate in effect at the end of the period, and income statement
accounts are remeasured at the average exchange rate for the period. Gains and
losses from remeasurement are included in ProLogis' results of operations. In
addition, gains or losses are recorded in the income statement when a
transaction with a third party, denominated in a currency other than the
functional currency, is settled and the functional currency cash flows realized
are more or less than expected based upon the exchange rate in effect when the
transaction was initiated.

                                        89

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The net foreign currency exchange gains and losses recognized in ProLogis'
results of operations were as follows for the periods indicated (in thousands of
U.S. dollars):



                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         2001       2000       1999
                                                        -------   --------   --------
                                                                    
Losses from the remeasurement and settlement of third
  party and intercompany debt, net....................  $(2,509)  $(18,762)  $(16,549)
Mark to market gains (losses) on foreign currency put
  option contracts(1).................................    1,122       (854)       (47)
Gains (losses) from the settlement of foreign currency
  put option contracts, net(1)........................   (2,149)     1,481        (45)
Other gains (losses), net.............................     (185)       208       (177)
                                                        -------   --------   --------
Total.................................................  $(3,721)  $(17,927)  $(16,818)
                                                        =======   ========   ========


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

(1) ProLogis entered into foreign currency put option contracts related to its
    operations in Europe for 2001, 2000 and 1999. These put option contracts do
    not qualify for hedge accounting treatment; therefore, ProLogis marks these
    contracts to market as of the end of the applicable accounting period. Upon
    settlement, the mark to market adjustments are reversed and the total
    realized gain or loss is recognized. See Note 16.

  Revenue Recognition

     ProLogis leases its operating facilities under operating leases and
recognizes the total minimum lease payments provided for under the leases on a
straight-line basis over the lease term. A provision for possible loss is made
when collection of receivables is considered doubtful.

     Gains or losses on the disposition of real estate are recorded when the
recognition criteria set forth under SFAS No. 66, "Accounting for Sales of Real
Estate" have been met, generally at the time title is transferred and ProLogis
has no future involvement with the asset sold. When ProLogis sells assets to
entities in which it has an ownership interest, ProLogis does not recognize the
portion of any gain resulting from the sale to the extent of its ownership
interest in the entity acquiring the assets. Further, under certain
circumstances, ProLogis defers portions of the gains on sales of assets to the
extent that a portion of the sales proceeds consists of non-monetary
consideration. ProLogis adjusts its share of the earnings recognized under the
equity method from these entities to reflect depreciation expense based on its
lower basis with respect to the assets that were acquired from ProLogis. Gains
and losses resulting from the disposition of assets in the CDFS business segment
are recognized as "Other real estate income" in ProLogis' Consolidated
Statements of Earnings. See Note 10.

  Rental Expenses

     Rental expenses primarily includes the cost of on-site and property
management personnel, utilities, repairs and maintenance, property insurance and
real estate taxes. Under the terms of the respective leases, some or all of
ProLogis' rental expenses are recovered from its tenants. Amounts recovered from
tenants reduce the rental expenses recognized.

  Stock-Based Compensation

     ProLogis adopted SFAS No. 123, "Accounting for Stock-Based Compensation,"
which allows ProLogis to continue to account for its various stock-based
compensation plans using Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. Under
APB No. 25, if the exercise price of the stock options issued equals or exceeds
the market price of the

                                        90

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

underlying stock on the date of grant, no compensation expense is recognized.
Under SFAS, No. 123, the fair value of the stock options issued is recognized as
compensation expense. ProLogis generally issues stock options to employees and
members of its Board of Trustees (the "Board") with an exercise price equal to
the average of the high and low market prices on the day the options are issued.
Therefore, no compensation expense is recognized. Generally, any changes to the
terms of options or other instruments awarded will result in the use of variable
accounting under SFAS No. 123 and the recognition of compensation expense.
Certain pro forma earnings per share disclosures required by SFAS No. 123 are
presented in Note 13.

  Cost of Start-Up Activities

     Statement of Position ("SOP") 98-5 "Reporting on the Costs of Start-Up
Activities," which requires that costs associated with organization,
pre-opening, and start-up activities be expensed as incurred was adopted by
ProLogis on January 1, 1999. Through December 31, 1998, ProLogis capitalized
costs associated with start-up activities and amortized such costs over an
appropriate period, generally five years. ProLogis expensed all unamortized
organization and start-up costs, approximating $1.4 million, as a cumulative
effect of an accounting change as of January 1, 1999. Subsequent to that date,
such costs incurred have been expensed.

3. REAL ESTATE

  Real Estate Investments

     Real estate investments directly owned by ProLogis consisting of income
producing industrial distribution facilities, facilities under development and
land held for future development, at cost, are summarized as follows (in
thousands):



                                                                  DECEMBER 31,
                                                           ---------------------------
                                                              2001             2000
                                                           ----------       ----------
                                                                      
Operating facilities:
  Improved land..........................................  $  645,343(1)    $  648,950(1)
  Buildings and improvements.............................   3,536,638(1)     3,619,543(1)
                                                           ----------       ----------
                                                            4,181,981        4,268,493
                                                           ----------       ----------
Facilities under development (including cost of land)....     131,545(2)(3)    186,020(2)
Land held for development................................     200,737(4)       187,405(4)
Capitalized preacquisition costs.........................      73,930(5)        47,574(5)
                                                           ----------       ----------
          Total real estate..............................   4,588,193        4,689,492
Less accumulated depreciation............................     574,871          476,982
                                                           ----------       ----------
          Net real estate................................  $4,013,322       $4,212,510
                                                           ==========       ==========


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

(1) As of December 31, 2001 and December 31, 2000, ProLogis had 1,208 and 1,244
    operating facilities, respectively, consisting of 123,356,000 and
    126,275,000 square feet, respectively.

(2) Facilities under development consist of 16 buildings aggregating 5,357,000
    square feet as of December 31, 2001 and 41 buildings aggregating 8,711,000
    square feet as of December 31, 2000.

(3) In addition to the December 31, 2001 construction payable of $19.8 million,
    ProLogis had unfunded commitments on its contracts for facilities under
    construction totaling $132.2 million.

(4) Land held for future development consisted of 1,976 acres as of December 31,
    2001 and 2,047 acres as of December 31, 2000.

(5) Capitalized preacquisition costs include $65.0 million and $32.5 million of
    funds on deposit with title companies as of December 31, 2001 and December
    31, 2000, respectively.

                                        91

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     ProLogis' operating facilities, facilities under development and land held
for future development are located in North America (the United States and
Mexico), eight countries in Europe and in Japan. No individual market represents
more than 10% of ProLogis' real estate assets.

  Operating Lease Agreements

     ProLogis leases its facilities to customers under agreements, which are
classified as operating leases. As of December 31, 2001, minimum lease payments
on leases with lease periods greater than one year for space in ProLogis'
directly owned facilities during each of the years in the five-year period
ending December 31, 2006 and thereafter are as follows (in thousands):


                                                        
2002.....................................................  $  400,344
2003.....................................................     321,303
2004.....................................................     236,003
2005.....................................................     166,751
2006.....................................................     106,130
2007 and thereafter......................................     205,714
                                                           ----------
                                                           $1,436,245
                                                           ==========


     ProLogis' largest customer (based on rental income) in its directly owned
facilities accounted for 0.82% of ProLogis' rental income (on an annualized
basis) for the year ended December 31, 2001. The annualized base rent for
ProLogis' 25 largest customers (based on rental income) accounted for 13.2% of
ProLogis' rental income (on an annualized basis) for the year ended December 31,
2001.

                                        92

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. UNCONSOLIDATED ENTITIES:

  Investments In and Advances To Unconsolidated Entities

     Investments in and advances to unconsolidated entities are as follows (in
thousands):



                                                                   DECEMBER 31,
                                                              -----------------------
                                                                 2001         2000
                                                              ----------   ----------
                                                                     
Temperature-controlled distribution companies:
  CSI/Frigo LLC(1)..........................................  $   (2,492)  $       --
  ProLogis Logistics(2).....................................     174,295      231,053
  Frigoscandia S.A.(3)......................................     186,168      191,981
                                                              ----------   ----------
                                                                 357,971      423,034
                                                              ----------   ----------
Distribution real estate entities:
  ProLogis California(4)....................................     118,846      132,243
  ProLogis North American Properties Fund I(5)..............      45,331       10,369
  ProLogis North American Properties Fund II(6).............       8,210       13,408
  ProLogis North American Properties Fund III(7)............       6,273           --
  ProLogis North American Properties Fund IV(8).............       4,747           --
  ProLogis European Properties Fund(9)......................     263,114      147,938
  ProLogis European Properties S.a.r.l.(9)..................          --       84,767
                                                              ----------   ----------
                                                                 446,521      388,725
                                                              ----------   ----------
CDFS business:
  Kingspark LLC.............................................       9,937           --
  Kingspark S. A.(10).......................................     490,074      570,582
                                                              ----------   ----------
                                                                 500,011      570,582
                                                              ----------   ----------
Insight(11).................................................       2,479        2,470
ProLogis Equipment Services(12).............................       1,680          450
GoProLogis(13)..............................................       2,073       56,315
ProLogis PhatPipe(14).......................................          --       11,572
                                                              ----------   ----------
Total.......................................................  $1,310,735   $1,453,148
                                                              ==========   ==========


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

 (1) CSI/Frigo LLC, a limited liability company, owns 100% of the voting common
     stock of both ProLogis Logistics Services Incorporated ("ProLogis
     Logistics") and Frigoscandia Holding S. A. ("Frigoscandia S.A."). ProLogis
     directly owns all of the non-voting preferred stock of both ProLogis
     Logistics and Frigoscandia S.A. representing a 95% interest in the earnings
     of these entities. ProLogis owns 89% of the membership interests (all
     non-voting) of CSI/Frigo LLC and K. Dane Brooksher, ProLogis' chairman and
     chief executive officer, owns the remaining 11% of the membership interests
     (all voting) and is the managing member. ProLogis has a note agreement with
     CSI/Frigo LLC that allows ProLogis to participate in its earnings such that
     ProLogis recognizes 95% of the earnings of CSI/Frigo LLC. Mr. Brooksher may
     transfer his membership interest, subject to certain conditions, including
     the approval of ProLogis. There are no provisions that give ProLogis the
     right to acquire Mr. Brooksher's membership interests. Mr. Brooksher does
     not receive compensation in connection with being the managing member. Mr.
     Brooksher invested $50,000 in CSI/Frigo LLC. Mr. Brooksher's membership
     interest and the terms of the participating note entitle him to receive
     dividends equal to 5% of the net cash flow, as defined, if any. ProLogis'
     interests in CSI/Frigo LLC, ProLogis Logistics Services and Frigoscandia
     S.A. do not result in ProLogis having ownership of or control of the voting
     common stock or voting membership interests of these entities; therefore,
     they are not consolidated in ProLogis' financial statements. See Note 15.

                                        93

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Prior to January 5, 2001, the common stock of ProLogis Logistics was owned
     by unrelated third parties and the common stock of Frigoscandia S.A. was
     owned by a limited liability company in which unrelated parties owned 100%
     of the voting interests and Security Capital Group Incorporated ("Security
     Capital"), ProLogis' largest shareholder, owned 100% of the non-voting
     interests. On January 5, 2001, the common stock of both ProLogis Logistics
     and Frigoscandia S.A. was acquired by CSI/Frigo LLC for an aggregate
     purchase price of $3.3 million.

 (2) ProLogis Logistics owns 100% of CS Integrated LLC ("CSI"), a
     temperature-controlled distribution company operating in the United States.
     As of December 31, 2001, CSI owned or operated facilities aggregating 178.4
     million cubic feet (including 35.5 million cubic feet of dry distribution
     space located in its facilities). In January 2002, negotiations commenced
     for the sale of substantially all of the operating assets of CSI and,
     accordingly, these assets were classified as assets held for sale by CSI in
     January 2002. Through its investment in ProLogis Logistics, ProLogis' share
     of the write-downs and other impairment charges recorded by ProLogis
     Logistics was $53.3 million. This amount reflects ProLogis' share of a
     charge of $32.0 million from the write-down of operating assets recorded by
     CSI under SFAS No. 121 and ProLogis' share of charges totalling $21.3
     million from the impairment of ProLogis Logistics' investment in CSI
     recorded by ProLogis Logistics under SFAS No. 121 in 2001. As a result of
     these charges, the carrying value of ProLogis' investment in ProLogis
     Logistics as of December 31, 2001 is reported at the lower of cost or
     estimated fair value.

 (3) Frigoscandia S.A., through a wholly owned subsidiary, owns 100% of
     Frigoscandia Holding AB ("Frigoscandia"), which owns temperature-controlled
     distribution companies operating in nine countries in Europe. As of
     December 31, 2001, these companies owned or operated facilities aggregating
     154.4 million cubic feet. During 2001, Frigoscandia disposed of
     substantially all of the operating assets in Germany and all of the
     operating assets in the Czech Republic (aggregating 27.0 million cubic
     feet) for a net loss of $4.4 million. As of December 31, 2001, negotiations
     were ongoing to sell 46.6 million cubic feet of Frigoscandia's operating
     assets. These assets, located in five countries, were classified by
     Frigoscandia as assets held for sale as of December 31, 2001. Through its
     investment in Frigoscandia S.A., ProLogis' share of the write-downs and
     other impairment charges recorded by Frigoscandia S.A. was $35.1 million
     reflecting ProLogis' share of a $31.2 million charge from the write-down of
     operating assets that Frigoscandia held for sale and other impairment
     charges recorded by Frigoscandia under SFAS No. 121 and ProLogis' share of
     a charge of $3.9 million from the impairment of Frigoscandia S.A.'s
     investment in Frigoscandia recorded by Frigoscandia S.A. under SFAS No. 121
     in 2001. As a result of these charges, the carrying value of Prologis'
     investment in Frigoscandia S.A. as of December 31, 2001 is reported at the
     lower of cost or estimated fair value.

 (4) Represents ProLogis' investment in the membership interests of ProLogis
     California I LLC ("ProLogis California"), a limited liability company that
     began operations on August 26, 1999, including acquisition costs, as
     adjusted for ProLogis' cumulative share of the earnings or losses of
     ProLogis California, distributions from ProLogis California and for the
     portion of the gain resulting from the disposition of ProLogis' properties
     to ProLogis California that does not qualify for income recognition by
     ProLogis due to its continuing ownership in ProLogis California. ProLogis
     California's members are ProLogis and New York State Common Retirement
     Fund. ProLogis California owns 79 operating facilities aggregating 13.1
     million square feet, all located in the Los Angeles/Orange County market.
     ProLogis has had a 50% ownership interest in this entity since its
     inception.

 (5) Represents ProLogis' and ProLogis Development Services' investment in the
     membership interests of ProLogis North American Properties Fund I LLC, a
     limited liability company that began operations on June 30, 2000, including
     acquisition costs, as adjusted for ProLogis' and ProLogis Development
     Services' cumulative share of the earnings or losses of ProLogis North
     American Properties Fund I, distributions from ProLogis North American
     Properties Fund I and the portion of the gain resulting from the
     disposition of ProLogis' and ProLogis Development Services' facilities to
     ProLogis North

                                        94

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     American Properties Fund I that does not qualify for income recognition by
     ProLogis or ProLogis Development Services due to their continuing ownership
     in ProLogis North American Properties Fund I. ProLogis North American
     Properties Fund I's members are ProLogis, ProLogis Development Services and
     the State Teachers Retirement Board of Ohio. As of December 31, 2001,
     ProLogis North American Properties Fund I owns 36 operating facilities
     aggregating 9.0 million square feet in 16 United States markets (including
     three operating facilities contributed to ProLogis North American
     Properties Fund I for an additional equity interest of $34.1 million in
     January 2001). The combined ownership interests of ProLogis and ProLogis
     Development Services in this entity was 20% from its inception until
     January 15, 2001 and has been 41.3% after that date.

 (6) This entity was originally formed on June 30, 2000 as a limited liability
     company whose members were ProLogis and Principal Financial Group. This
     entity owned three operating facilities, all acquired from ProLogis,
     aggregating 440,000 square feet. On March 27, 2001, First Islamic
     Investment Bank E.C. acquired the membership interest held by Principal
     Financial Group and, under the name ProLogis First US Properties LP
     ("ProLogis North American Properties Fund II"), acquired 24 additional
     operating facilities aggregating 4.0 million square feet from ProLogis and
     ProLogis Development Services. This acquisition brought the total portfolio
     to 27 operating facilities aggregating 4.5 million square feet in 13 United
     States markets, also the balances as of December 31, 2001. The investment
     represents ProLogis' and ProLogis Development Services' investment in the
     membership interests of ProLogis North American Properties Fund II,
     including acquisition costs, as adjusted for ProLogis' and ProLogis
     Development Services' share of the cumulative earnings or losses of
     ProLogis North American Properties Fund II, distributions from ProLogis
     North American Properties Fund II and the portion of the gain resulting
     from the disposition of ProLogis' and ProLogis Development Services'
     facilities to ProLogis North American Properties Fund II that does not
     qualify for income recognition by ProLogis or ProLogis Development Services
     due to their continuing ownership in ProLogis North American Properties
     Fund II. ProLogis and ProLogis Development Services have had a combined 20%
     ownership interest in this entity since its inception.

 (7) ProLogis Second US Properties LP ("ProLogis North American Properties Fund
     III") was formed on June 15, 2001 as a limited liability company whose
     members are ProLogis and ProLogis Development Services and First Islamic
     Investment Bank E.C. In June 2001, this entity acquired 34 operating
     facilities aggregating 4.4 million square feet in 15 United States markets
     from ProLogis and ProLogis Development Services, also the balances as of
     December 31, 2001. Investment represents ProLogis' and ProLogis Development
     Services' investment in the membership interests of ProLogis North American
     Properties Fund III, including acquisition costs, as adjusted for ProLogis'
     and ProLogis Development Services' share of the cumulative earnings or
     losses of ProLogis North American Properties Fund III, distributions from
     ProLogis North American Properties Fund III and the portion of the gain
     resulting from the disposition of ProLogis' and ProLogis Development
     Services' facilities to ProLogis North American Properties Fund III that
     does not qualify for income recognition by ProLogis or ProLogis Development
     Services due to their continuing ownership in ProLogis North American
     Properties Fund III. ProLogis and ProLogis Development Services have had a
     combined 20% ownership interest in this entity since its inception.

 (8) ProLogis Third US Properties LP ("ProLogis North American Properties Fund
     IV") was formed on September 21, 2001 as a limited liability company whose
     members are ProLogis and First Islamic Investment Bank E.C. In September
     2001, this entity acquired 17 operating facilities aggregating 3.5 million
     square feet in 10 United States markets from ProLogis, also the balances as
     of December 31, 2001. Investment represents ProLogis' investment in the
     membership interests of ProLogis North American Properties Fund IV,
     including acquisition costs, as adjusted for ProLogis' share of the
     cumulative net earnings or losses of ProLogis North American Properties
     Fund IV, distributions from ProLogis North American Properties Fund IV and
     the portion of the gain resulting from the disposition

                                        95

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     of ProLogis' facilities to ProLogis North American Properties Fund IV that
     does not qualify for income recognition by ProLogis due to its continuing
     ownership in ProLogis North American Properties Fund IV. ProLogis has had a
     20% ownership interest in this entity since its inception.

 (9) Represents ProLogis' investment in the common units of ProLogis European
     Properties Fund which began operations on September 23, 1999, including
     acquisition costs, as adjusted for ProLogis' share of the cumulative
     earnings or losses of ProLogis European Properties Fund, distributions from
     ProLogis European Properties Fund, the portion of the gain resulting from
     the disposition of ProLogis' facilities to ProLogis European Properties
     Fund that does not qualify for income recognition by ProLogis due to its
     continuing ownership in ProLogis European Properties Fund and cumulative
     translation account adjustments, as appropriate. As of December 31, 2001,
     ProLogis European Properties Fund owns 141 operating facilities aggregating
     23.1 million square feet in 24 European markets, including facilities owned
     by ProLogis European Properties S.a.r.l. ProLogis European Properties
     S.a.r.l. was previously 100% owned by ProLogis. In 2000 and 2001, ProLogis
     contributed 50.1% and 49.9%, respectively, of the common stock of ProLogis
     European Properties S.a.r.l. to ProLogis European Properties Fund for an
     additional equity interest. ProLogis European Properties Fund owned 100% of
     ProLogis European Properties S.a.r.l. as of December 31, 2001. As of
     December 31, 2001 and 2000, ProLogis owned 35.4% and 34.4%, respectively,
     of ProLogis European Properties Fund.

(10) ProLogis owns all of the non-voting preferred stock of Kingspark S.A.,
     representing a 95% interest in its earnings. Kingspark LLC, a limited
     liability company, owns all of the voting common stock of Kingspark S.A.
     ProLogis owns 95% of the membership interests (all non-voting) of Kingspark
     LLC and K. Dane Brooksher, ProLogis' chairman and chief executive officer,
     owns the remaining 5% of the membership interests (all voting) and is the
     managing member. Mr. Brooksher may transfer his membership interests
     subject to certain conditions, including the approval of ProLogis. There
     are no provisions that give ProLogis the right to acquire Mr. Brooksher's
     membership interest. Mr. Brooksher does not receive compensation in
     connection with being the managing member. Mr. Brooksher invested $40,557
     in Kingspark LLC which was loaned to him by ProLogis. The recourse loan is
     payable on January 5, 2006 and bears interest at an annual rate of 8.0%.
     Mr. Brooksher's membership interests entitle him to receive dividends equal
     to 5% of the net cash flow of Kingspark LLC, as defined, if any. Neither
     ProLogis' ownership interests in Kingspark LLC and Kingspark S.A., nor its
     loan to Mr. Brooksher, result in ProLogis having ownership of or control of
     the voting common stock or voting membership interests of these entities;
     therefore, they are not consolidated in ProLogis' financial statements. See
     Note 15.

     Prior to January 5, 2001, the common stock of Kingspark S.A. was owned by a
     limited liability company in which unrelated third parties owned 100% of
     the voting interests and Security Capital, ProLogis' largest shareholder,
     owned 100% of the non-voting interests. On January 5, 2001, the common
     stock of Kingspark S.A. was acquired by Kingspark LLC for an aggregate
     purchase price of $8.1 million.

(11) Represents ProLogis Development Services' equity investment in the common
     stock of Insight, Inc. ("Insight"), a privately owned logistics
     optimization consulting company, as adjusted for ProLogis Development
     Services' cumulative share of Insight's earnings or losses. ProLogis
     Development Services had a 33.3% ownership interest in Insight as of
     December 31, 2001 and 2000.

(12) Investment represents ProLogis Development Services' (through a wholly
     owned subsidiary) investment in the membership interests of ProLogis
     Equipment Services LLC, a limited liability company whose other member is a
     subsidiary of Dana Commercial Credit Corporation, as adjusted for ProLogis
     Development Services' cumulative share of ProLogis Equipment Services'
     earnings or losses. ProLogis Equipment Services began operations on April
     26, 2000 for the purpose of acquiring, leasing and selling material
     handling equipment and providing asset management services for such
     equipment. ProLogis Development Services has had a 50% ownership interest
     in ProLogis Equipment Services since its inception.

                                        96

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(13) ProLogis owns 100% of the non-voting preferred stock ($25.0 million of cash
     invested and $30.4 million of preferred stock received under a license fee
     agreement) of GoProLogis Incorporated ("GoProLogis"), that has invested
     $25.0 million in the non-cumulative preferred stock of Vizional
     Technologies, Inc. (formerly GoWarehouse.com, Inc.) ("Vizional
     Technologies"), a provider of integrated global logistics network
     technology services. GoProLogis also received $30.4 million of
     non-cumulative preferred stock of Vizional Technologies under a license
     agreement for the non-exclusive use of the ProLogis Operating System(R)
     over a five-year period. This investment was made on July 21, 2000. The
     income related to the license agreement was deferred at the inception of
     the agreement in 2000 and was being recognized over the five-year term of
     the agreement. As of December 31, 2000, ProLogis' net investment in
     GoProLogis was $28.6 million ($55.4 million of non-cumulative preferred
     stock and $0.9 million of additional costs offset by $27.7 million of
     deferred income). During 2001, ProLogis recognized its share of deferred
     license fee income increasing its net investment by $3.0 million to $31.6
     million before recognizing its share of an impairment adjustment ($29.5
     million) in the fourth quarter of 2001. This impairment adjustment reduces
     GoProLogis' investment in the non-cumulative preferred stock of Vizional
     Technologies to its estimated fair value of $2.1 million. GoProLogis never
     received any dividends from its investment in Vizional Technologies since
     the investment was made in 2000. ProLogis' investment in the non-voting
     preferred stock of GoProLogis represents a 98% interest in the earnings of
     GoProLogis. The voting interest in GoProLogis, representing a 2% interest
     in the earnings, is held by K. Dane Brooksher, ProLogis' chairman and chief
     executive officer, and entitles him to receive dividends equal to 2% of the
     net cash flow of GoProLogis, as defined, if any. Mr. Brooksher contributed
     a $1.1 million recourse promissory note to GoProLogis in exchange for his
     interest in the entity, which note is payable on July 18, 2005 and bears
     interest at an annual rate of 8.0%. Mr. Brooksher is not restricted from
     transferring his ownership interest in GoProLogis but ProLogis does have an
     option to acquire Mr. Brooksher's ownership interest at a price equal to
     the principal amount plus accrued interest under the promissory note. See
     Note 15.

(14) ProLogis owns 100% of the non-voting preferred stock ($6.0 million of cash
     invested and $6.0 million of preferred stock received under a license
     agreement) of ProLogis Broadband (1) Incorporated ("ProLogis PhatPipe"),
     that has invested $6.0 million in the non-cumulative preferred stock of
     PhatPipe, Inc. ("PhatPipe"), a real estate technology company. ProLogis
     PhatPipe also received $6.0 million of non-cumulative preferred stock of
     PhatPipe and a receivable of $2.0 million, both under a license agreement
     for the non-exclusive use of the ProLogis Operating System(R) over a
     three-year period. This investment was made on September 20, 2000. The
     income related to the license agreement was deferred at the inception of
     the agreement in 2000 and was being recognized over the three-year term of
     the agreement. As of December 31, 2000, ProLogis' net equity investment in
     ProLogis PhatPipe was $4.3 million ($7.0 million of non-cumulative
     preferred stock owned at that time, a $4.5 million receivable and $42,000
     of additional costs offset by $7.3 million of deferred income). During
     2001, ProLogis acquired an additional $2.5 million of non-cumulative
     preferred stock for cash, received $2.5 million of its original receivable
     in additional non-cumulative preferred stock and recognized $0.7 million of
     deferred license fee income increasing its net investment by $3.0 million
     to $7.5 million before recognizing its share of an impairment adjustment
     recorded by ProLogis PhatPipe related to its investment in PhatPipe in the
     second quarter of 2001. This impairment adjustment reflects a write-down of
     ProLogis PhatPipe's entire $7.5 million net investment in PhatPipe.
     ProLogis PhatPipe has not received any dividends from its preferred stock
     investment in PhatPipe since the investment was made in 2000. ProLogis'
     investment in the non-voting preferred stock of ProLogis PhatPipe
     represents a 98% interest in the earnings of ProLogis PhatPipe. ProLogis
     recognized its share of the impairment charge in June 2001. The voting
     interest in ProLogis PhatPipe, representing a 2% interest in the earnings,
     is held by K. Dane Brooksher, ProLogis' chairman and chief executive
     officer, and entitles him to receive dividends equal to 2% of the net cash
     flow of ProLogis PhatPipe, as defined, if any. Mr. Brooksher contributed
     $122,449 of recourse promissory notes to ProLogis PhatPipe in exchange for
     his interest in the entity. A promissory note with

                                        97

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     the principal amount of $71,429 is due September 20, 2005 and a promissory
     note with the principal amount of $51,020 is due January 4, 2006. Both
     notes bear interest at an annual rate of 8.0%. Mr. Brooksher is not
     restricted from transferring his interest in ProLogis PhatPipe but ProLogis
     does have an option to acquire Mr. Brookshers' interest at a price equal to
     the aggregate principal amount of the promissory notes plus accrued
     interest under the promissory notes. See Note 15.

  Income (Loss) from Unconsolidated Entities

     ProLogis recognized income (loss) from its investments in unconsolidated
entities as follows (in thousands):



                                                          YEAR ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2001       2000       1999
                                                       --------   --------   --------
                                                                    
Temperature-controlled distribution companies:
  CSI/Frigo LLC(1)...................................  $ (5,975)  $     --   $     --
  ProLogis Logistics(2)..............................   (56,405)    11,950     10,791
  Frigoscandia S.A.(2)...............................   (49,088)   (20,298)    (4,364)
                                                       --------   --------   --------
                                                       (111,468)    (8,348)     6,427
                                                       --------   --------   --------
Distribution real estate entities:
  ProLogis California(3).............................    13,147     13,178      3,917
  ProLogis North American Properties Fund I(4).......     4,648      1,806         --
  ProLogis North American Properties Fund II(5)......     2,328        612         --
  ProLogis North American Properties Fund III(6).....     1,178         --         --
  ProLogis North American Properties Fund IV(7)......       598         --         --
  ProLogis European Properties Fund(8)...............    15,798     15,648        820
  ProLogis European Properties S.a.r.l.(9)...........       205      8,041         --
                                                       --------   --------   --------
                                                         37,902     39,285      4,737
                                                       --------   --------   --------
Kingspark S.A.(10)...................................    55,839     43,795     23,855
Insight..............................................         9         27        (77)
ProLogis Equipment Services..........................      (209)      (130)        --
GoProLogis(11).......................................   (26,506)     2,693         --
ProLogis PhatPipe(11)................................    (6,789)       741         --
ProLogis Garonor(12).................................        --         --    (12,423)
                                                       --------   --------   --------
                                                       $(51,222)  $ 78,063   $ 22,519
                                                       ========   ========   ========


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

 (1) CSI/Frigo LLC recognizes its share of the income or losses of ProLogis
     Logistics and Frigoscandia S. A. under the equity method. Amounts represent
     ProLogis' share of the income or losses of CSI/Frigo LLC for the periods
     presented and interest income on outstanding notes.

 (2) Represents ProLogis' direct share of the income or losses of ProLogis
     Logistics and Frigoscandia S.A. recognized under the equity method based on
     its ownership of the non-voting preferred stock of each entity and interest
     income on outstanding notes. During 2001, ProLogis Logistics recognized a
     charge of $53.3 million and Frigoscandia S.A. recognized a charge of $35.1
     million, both related to the write-down of the operating assets of their
     operating companies and other impairment charges related to their
     investments in these companies. In 2001, also includes an aggregate charge
     of $5.7 million representing the write-off of certain technology
     investments of the operating companies.

                                        98

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

 (3) Income includes management, leasing and development fees of $3,093,000,
     $2,655,000 and $930,000 for 2001, 2000 and 1999, respectively. ProLogis has
     had a 50% ownership interest in ProLogis California since its inception.

 (4) ProLogis North American Properties Fund I was formed on June 30, 2000.
     Income includes property and asset management and other fees of $2,192,000
     and $668,000 for 2001 and 2000, respectively. ProLogis and ProLogis
     Development Services had a combined 20% ownership interest in ProLogis
     North American Properties Fund I from its inception on June 30, 2000 to
     January 14, 2001, and a combined 41.3% ownership interest from January 15,
     2001 to December 31, 2001.

 (5) ProLogis North American Properties Fund II was originally formed on June
     30, 2000. Income includes property and asset management and other fees of
     $1,603,000 and $52,000 for 2001 and 2000, respectively. ProLogis (together
     with ProLogis Development Services since March 27, 2001) has had a 20%
     ownership interest in ProLogis North American Properties Fund II since its
     inception.

 (6) ProLogis North American Properties Fund III was formed on June 15, 2001.
     Income includes property and asset management and other fees of $1,010,000
     for 2001. ProLogis and ProLogis Development Services have had a combined
     20% ownership interest in ProLogis North American Properties Fund III since
     its inception.

 (7) ProLogis North American Properties Fund IV was formed on September 21,
     2001. Income includes property and asset management and other fees of
     $315,000 for 2001. ProLogis has had a 20% ownership interest in ProLogis
     North American Properties Fund IV since its inception.

 (8) Income includes property and asset management fees of $8,285,000,
     $5,272,000 and $269,000 for 2001, 2000 and 1999, respectively. ProLogis
     recognizes its share of the earnings or loss of ProLogis European
     Properties Fund based on its average ownership interest during the period.
     ProLogis' ownership interest in ProLogis European Properties Fund was 35.4%
     and 34.4% as of December 31, 2001 and 2000, respectively.

 (9) Represents income from ProLogis' investment in 49.9% of the common stock of
     ProLogis European Properties S.a.r.l. in 2000 for the period from January
     7, 2000 to December 31, 2000 and in 2001 for the period from January 1,
     2001 to January 6, 2001. As of January 7, 2001, ProLogis European
     Properties S.a.r.l. was 100% owned by ProLogis European Properties Fund.

(10) ProLogis acquired Kingspark S.A. on August 14, 1998. ProLogis' share of
     Kingspark S.A.'s earnings or loss includes net gains from the disposition
     of facilities developed by Kingspark S.A. to ProLogis European Properties
     Fund of $23.0 million in 2001, $4.3 million in 2000 and $4.5 million in
     1999. These gains are net of $12.8 million in 2001, $2.5 million in 2000
     and $1.1 million in 1999 that did not qualify for income recognition by
     Kingspark S.A. due to ProLogis' continuing ownership in ProLogis European
     Properties Fund.

(11) Represents ProLogis' share of the earnings of each company. Loss for each
     company includes the write-down of their respective preferred stock
     investments in Vizional Technologies ($29.5 million) and PhatPipe ($7.5
     million) offset by license fees earned for the non-exclusive use of the
     ProLogis Operating System(R) under licensing agreements entered into in
     2000. GoProLogis and ProLogis PhatPipe ceased recognizing income under the
     agreements with PhatPipe and Vizional Technologies in the first and second
     quarters of 2001, respectively.

(12) On December 29, 1998, ProLogis invested in Garonor Holdings S.A. ("Garonor
     Holdings") by acquiring 100% of its non-voting preferred stock. Garonor
     Holdings, a Luxembourg company, owned Garonor S.A. ("ProLogis Garonor"), a
     real estate operating company in France. Security Capital owned 100% of the
     voting common stock of Garonor Holdings. On June 29, 1999, ProLogis
     acquired the common stock of Garonor Holdings from Security Capital,
     resulting in ProLogis owning all of the outstanding common and preferred
     stock of Garonor Holdings. Accordingly, as of that date the accounts of
     Garonor Holdings were consolidated in ProLogis' financial statements along
     with ProLogis' other

                                        99

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     majority owned and controlled subsidiaries and partnerships. The results of
     operations of Garonor Holdings for the period from December 29, 1998
     through June 29, 1999 are reflected by ProLogis under the equity method.
     ProLogis Garonor was transferred to ProLogis European Properties S.a.r.l.
     prior to ProLogis contributing 50.1% of the common stock of ProLogis
     European Properties S.a.r.l. to ProLogis European Properties Fund on
     January 7, 2000 for an additional equity interest. On January 7, 2001,
     ProLogis contributed the remaining 49.9% of the common stock of ProLogis
     European Properties S.a.r.l. to ProLogis European Properties Fund for an
     additional equity interest.

  Temperature-Controlled Distribution Companies

     ProLogis' total investment in its temperature-controlled distribution
companies as of December 31, 2001 consisted of (in millions of U.S. dollars):



                                                             CSI/FRIGO     PROLOGIS     FRIGOSCANDIA
                                                              LLC(1)     LOGISTICS(2)     S.A.(3)
                                                             ---------   ------------   ------------
                                                                               
Equity interest............................................    $ 0.4      $   231.9      $    22.6
ProLogis' share of the earnings of the entity..............     (6.2)         (68.5)        (124.0)
                                                               -----      ---------      ---------
       Subtotal............................................     (5.8)         163.4         (101.4)
Other (including acquisition costs), net...................      0.1             --           (2.4)
                                                               -----      ---------      ---------
       Subtotal............................................     (5.7)         163.4         (103.8)
Notes and other receivables................................      3.2           10.9(4)       290.0(5)
                                                               -----      ---------      ---------
          Total............................................    $(2.5)     $   174.3      $   186.2
                                                               =====      =========      =========


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

(1) ProLogis owns 89% of the membership interests (all non-voting) and Mr.
    Brooksher owns 11% of the membership interests (all voting) of CSI/Frigo
    LLC. Additionally, ProLogis has a note agreement with CSI/Frigo LLC that
    allows ProLogis to participate in its earnings such that ProLogis recognizes
    95% of the earnings of CSI/Frigo LLC. ProLogis does not have control of
    ProLogis Logistics or Frigoscandia S.A., therefore, ProLogis accounts for
    its investments in this entity under the equity method.

(2) ProLogis directly owns all of the non-voting preferred stock of ProLogis
    Logistics, representing a 99.23% interest in the earnings of ProLogis
    Logistics. ProLogis Logistics owns 100% of CSI, a temperature-controlled
    distribution company operating in the United States. The common stock of
    ProLogis Logistics was owned by an unrelated party until January 5, 2001,
    when it was purchased by CSI/Frigo LLC.

     In January 2001, ProLogis Logistics borrowed $125.0 million under ProLogis'
     $500.0 million credit agreement as a designated subsidiary borrower. See
     Note 5. The proceeds from this borrowing were used to repay $125.0 million
     of the outstanding notes and accrued interest due to ProLogis in January
     2001. The remaining amounts due to ProLogis were converted to preferred
     stock on January 5, 2001. As of December 31, 2001, ProLogis Logistics had
     $31.5 million of borrowings outstanding under ProLogis' credit agreement.
     Additionally, ProLogis Logistics had $90.0 million of direct borrowings
     outstanding under a credit agreement as of December 31, 2001 that are
     guaranteed by ProLogis.

(3) ProLogis directly owns all of the non-voting stock of Frigoscandia S.A.,
    representing a 95% interest in the earnings of Frigoscandia S.A., a
    Luxembourg company that owns, through wholly owned subsidiaries,
    temperature-controlled distribution companies operating in nine countries in
    Europe. The voting common stock of Frigoscandia S.A. was owned by a limited
    liability company in which Security Capital owned 100% of the non-voting
    interests and unrelated third parties owned 100% of the voting interests
    until January 5, 2001 when it was acquired by CSI/Frigo LLC.

     Frigoscandia S.A., through its wholly owned subsidiary, Frigo S.a.r.l., has
     a credit agreement with Bank of America N.A. ("Bank of America") as agent
     for a bank group, under which borrowings of

                                       100

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     102.5 million euros (the currency equivalent of approximately $90.4 million
     as of December 31, 2001) were outstanding as of December 31, 2001. All of
     the borrowings outstanding have been guaranteed by ProLogis. The credit
     agreement expires on June 28, 2002.

(4) Represents other receivables only.

(5) In addition to other receivables (primarily interest on notes receivable)
    the balance includes:

     - 776.6 million Swedish krona (the currency equivalent of approximately
       $72.5 million as of December 31, 2001) unsecured note from Frigoscandia;
       interest at 5.0% per annum; due on demand;

     - 12.8 million euro (the currency equivalent of approximately $11.3 million
       as of December 31, 2001) unsecured note from Frigoscandia; interest at
       5.0% per annum; due on demand;

     - $115.5 million unsecured note from Frigoscandia S.A.,; interest at 5.0%
       per annum; $80.0 million due July 15, 2008 with the remainder due on
       demand; and

     - 57.3 million euro (the currency equivalent of approximately $50.5 million
       as of December 31, 2001) unsecured note from Frigo S.a.r.l.; interest at
       5% per annum; due on demand.

  Distribution Real Estate Entities

     ProLogis' total investment in its distribution real estate entities as of
December 31, 2001 consisted of (in millions of U.S. dollars):



                                                      PROLOGIS     PROLOGIS     PROLOGIS     PROLOGIS
                                                       NORTH        NORTH        NORTH        NORTH       PROLOGIS
                                                      AMERICAN     AMERICAN     AMERICAN     AMERICAN     EUROPEAN
                                         PROLOGIS    PROPERTIES   PROPERTIES   PROPERTIES   PROPERTIES   PROPERTIES
                                        CALIFORNIA     FUND I      FUND II      FUND III     FUND IV      FUND(1)
                                        ----------   ----------   ----------   ----------   ----------   ----------
                                                                                       
Equity interest.......................    $161.1       $54.4        $14.3        $12.1         $8.4        $319.3
Distributions.........................     (38.0)       (5.4)        (1.6)        (1.1)        (0.2)        (17.2)
ProLogis' share of the earnings of the
  entity, excluding fees earned.......      22.0         2.7          0.4          0.1          0.3          17.9
                                          ------       -----        -----        -----         ----        ------
       Subtotal.......................     145.1        51.7         13.1         11.1          8.5         320.0
Adjustments to carrying value(2)......     (27.8)       (9.5)        (6.5)        (5.9)        (4.6)        (48.8)
Other, net(3).........................       1.5         2.0          1.3          1.0          0.7         (14.5)
                                          ------       -----        -----        -----         ----        ------
       Subtotal.......................     118.8        44.2          7.9          6.2          4.6         256.7
Other receivables.....................        --         1.1          0.3          0.1          0.1           6.4
                                          ------       -----        -----        -----         ----        ------
          Total.......................    $118.8       $45.3        $ 8.2        $ 6.3         $4.7        $263.1
                                          ======       =====        =====        =====         ====        ======


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

(1) Third parties (21 institutional investors) have invested 604.3 million euros
    (the currency equivalent of approximately $532.9 million as of December 31,
    2001) in ProLogis European Properties Fund and have committed to fund an
    additional 456.0 million euros (the currency equivalent of approximately
    $402.1 million as of December 31, 2001) through September 2002. ProLogis has
    also entered into a subscription agreement to make additional capital
    contributions of 58.9 million euros (the currency equivalent of
    approximately $51.9 million as of December 31, 2001) through September 2002.

(2) Reflects the reduction in carrying value for amount of net gain on the
    disposition of facilities to each entity that does not qualify for current
    income recognition by ProLogis due to ProLogis' continuing ownership in each
    entity.

(3) Includes acquisition costs for all entities in addition to ProLogis' share
    of the cumulative translation adjustments of ProLogis European Properties
    Fund.

                                       101

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Kingspark S.A.

     On August 14, 1998, Kingspark S.A., a Luxembourg company, acquired an
industrial distribution facility development company operating in the United
Kingdom, Kingspark Group Holdings Limited ("ProLogis Kingspark"). ProLogis had
the following investments in Kingspark S.A. and Kingspark LLC accounted under
the equity method as of December 31, 2001:

     - Investment in all of the non-voting preferred stock of Kingspark S.A. and
       in the non-voting membership interests of Kingspark LLC. Kingspark LLC
       owns the voting common stock of Kingspark S.A. These combined investments
       entitle ProLogis to recognize 99.75% of the combined earnings of these
       entities.

     - 59.0 million pound sterling (the currency equivalent of approximately
       $85.3 million as of December 31, 2001) outstanding on an unsecured
       revolving loan facility from ProLogis to Kingspark S.A.; interest at 6.0%
       per annum; due on demand;

     - $108.8 million unsecured note from Kingspark S.A.; interest at 5.0% per
       annum; due on demand; and

     - 153.2 million pound sterling (the currency equivalent of approximately
       $221.3 million as of December 31, 2001) mortgage note from Kingspark
       S.A.; secured by land parcels; interest at 6.0% per annum; due on demand.

     As of December 31, 2001, Kingspark S.A. had 1.6 million square feet of
operating facilities at an investment of $140.5 million and 2.4 million square
feet of facilities under development with a total budgeted cost of $262.2
million. Additionally, as of December 31, 2001, Kingspark S.A. owned 185 acres
of land and controlled 1,595 acres of land through purchase options, letters of
intent or contingent contracts. The land owned and controlled by Kingspark S.A.
has the capacity for the future development of approximately 25.9 million square
feet of facilities.

     ProLogis Kingspark has a line of credit agreement with a bank in the United
Kingdom. The line of credit agreement provides for borrowings of up to 25.0
million pounds sterling (the currency equivalent of approximately $36.1 million
as of December 31, 2001) and has been guaranteed by ProLogis. As of December 31,
2001, no borrowings were outstanding on the line of credit. However, as of
December 31, 2001, ProLogis Kingspark had the currency equivalent of
approximately $5.5 million of letters of credit outstanding that reduce the
amount of available borrowings on the line of credit.

  Summarized Financial Information

     Summarized financial information for ProLogis' unconsolidated entities as
of December 31, 2001 is presented below (in millions of U.S. dollars). The
information presented is for the entire entity.


                                                                       PROLOGIS     PROLOGIS     PROLOGIS      PROLOGIS
                                                                        NORTH        NORTH         NORTH        NORTH
                                                                       AMERICAN     AMERICAN     AMERICAN      AMERICAN
                          PROLOGIS     FRIGOSCANDIA     PROLOGIS      PROPERTIES   PROPERTIES   PROPERTIES    PROPERTIES
                        LOGISTICS(1)     S.A.(1)      CALIFORNIA(2)   FUND I(3)    FUND II(4)   FUND III(4)   FUND IV(5)
                        ------------   ------------   -------------   ----------   ----------   -----------   ----------
                                                                                         
Total assets..........     $328.9        $ 401.7         $591.1         $360.6       $235.3       $209.3        $146.2
Total
  liabilities(7)(8)...     $165.5        $ 515.0         $301.0         $238.7       $169.0       $152.6        $104.7
Minority interest.....     $   --        $   0.2         $   --         $   --       $   --       $   --        $   --
Equity(9).............     $163.4        $(113.5)        $290.1         $121.9       $ 66.3       $ 56.7        $ 41.5
Revenues..............     $314.1        $ 369.1         $ 67.0         $ 42.3       $ 21.7       $ 12.6        $  4.6
Net earnings
  (loss)(10)..........     $(56.2)       $ (57.5)        $ 18.8         $  5.7       $  1.9       $  0.6        $  1.4



                         PROLOGIS
                         EUROPEAN
                        PROPERTIES   KINGSPARK
                         FUND(6)      S.A.(1)
                        ----------   ---------
                               
Total assets..........   $1,477.3     $550.4
Total
  liabilities(7)(8)...   $  676.5     $467.8
Minority interest.....   $     --     $   --
Equity(9).............   $  800.8     $ 82.6
Revenues..............   $   87.2     $ 62.9
Net earnings
  (loss)(10)..........   $   23.8     $ 41.1


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

 (1) ProLogis had an ownership interest in excess of 99% in each entity as of
     December 31, 2001.

 (2) ProLogis had a 50% ownership interest in this entity as of December 31,
     2001.

                                       102

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

 (3) ProLogis and ProLogis Development Services had a combined 41.3% ownership
     interest in this entity as of December 31, 2001.

 (4) ProLogis and ProLogis Development Services had a combined 20% ownership
     interest in each entity as of December 31, 2001.

 (5) ProLogis had a 20% ownership interest in this entity as of December 31,
     2001.

 (6) ProLogis had a 35.4% ownership interest in this entity as of December 31,
     2001. Includes the ProLogis European Properties S.a.r.l. which is wholly
     owned by ProLogis European Properties Fund as of December 31, 2001.

 (7) Includes amounts due to ProLogis of $10.9 million from ProLogis Logistics,
     $290.0 million from Frigoscandia S.A., $1.1 million from ProLogis North
     American Properties Fund I, $0.3 million for ProLogis North American
     Properties Fund II, $0.1 million from ProLogis North American Properties
     Fund III, $0.1 million from ProLogis North American Properties Fund IV,
     $6.4 million from ProLogis European Properties Fund and $433.7 million due
     from Kingspark S.A.

 (8) Includes loans due to third parties of $124.1 million for ProLogis
     Logistics ($121.5 million guaranteed by ProLogis), $97.2 million for
     Frigoscandia S.A. ($90.4 million guaranteed by ProLogis), $293.1 million
     for ProLogis California, $232.6 million for ProLogis North American
     Properties Fund I, $165.0 million for ProLogis North American Properties
     Fund II, $150.0 million for ProLogis North American Properties Fund III,
     $103.0 million for ProLogis North American Properties Fund IV and $598.2
     million for ProLogis European Properties Fund.

 (9) ProLogis has entered into a subscription agreement to make additional
     capital contributions of 58.9 million euros (the currency equivalent of
     approximately $51.9 million as of December 31, 2001) through September
     2002.

(10) ProLogis' share of the net earnings (loss) of the respective entities and
     interest income on notes and mortgage notes due to ProLogis are recognized
     in the Consolidated Statements of Earnings as "Income (loss) from
     unconsolidated entities." The net earnings (loss) of each entity includes
     interest expense on amounts due to ProLogis, as applicable. Includes net
     foreign currency exchange losses of $3.5 million for Frigoscandia S.A. and
     net foreign currency gains of $1.9 million and $4.6 million for ProLogis
     European Properties Fund and Kingspark S.A., respectively.

5. BORROWINGS:

  Lines of Credit

     ProLogis has a credit agreement with Bank of America, Commerzbank AG and JP
Morgan Chase Bank, formerly Chase Manhattan Bank, as agents for a 12 member bank
group that provides for a $500.0 million revolving line of credit. ProLogis
Logistics may also borrow under the credit agreement with such borrowings
guaranteed by ProLogis. ProLogis' borrowings under the agreement generally bear
interest at the London Interbank Offering Rate ("LIBOR") plus an applicable
margin. The margin is based upon ProLogis' current senior debt ratings.
ProLogis' borrowings in 2001 were primarily at the 30-day LIBOR rate plus 0.75%.
Borrowings outstanding as of December 31, 2001 were at a weighted average
interest rate of 2.68%. Additionally, the credit agreement provides for a
facility fee of 0.15% per annum. The credit agreement matures on June 6, 2003
and may be extended for an additional year at ProLogis' option. As of December
31, 2001, ProLogis had $172.0 million of borrowings outstanding on the line of
credit (all of which were borrowed directly by ProLogis Development Services
Incorporated, a consolidated entity of ProLogis) and ProLogis was in compliance
with all covenants contained in the credit agreement. Also, as of December 31,
2001, ProLogis Logistics had borrowed $31.5 million under the credit agreement.

     ProLogis has a $60.0 million discretionary line of credit with Bank of
America that matures on June 6, 2002. In addition to borrowing in U.S. dollars,
ProLogis my borrow in euros, pound sterling or Japanese yen.

                                       103

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 2001, ProLogis' borrowing ability under the discretionary
line of credit was reduced by $6.3 million, the amount of ProLogis' outstanding
letters of credit issued by Bank of America. By agreement between ProLogis and
Bank of America, the rate of interest on and the maturity date of each advance
are determined at the time of each advance. There were no borrowings outstanding
on the discretionary line of credit as of December 31, 2001.

     ProLogis has a credit agreement with ABN AMRO Bank N.V. as agent, that
provides for a 325.0 million euro revolving line of credit (the currency
equivalent of approximately $286.6 million as of December 31, 2001) through a
group of 18 banks. ProLogis' borrowings under the agreement (which can be
denominated in euro or pound sterling) generally bear interest at the rate of
the Banking Federation of the European Union ("EURIBOR") plus 0.75% or Sterling
LIBOR plus 0.75%. Borrowings outstanding as of December 31, 2001 were at a
weighted average interest rate of 4.24%. Additionally, the credit agreement
provides for an unused commitment fee of 0.375% per annum. The credit agreement
matures on December 17, 2003. As of December 31, 2001, the currency equivalent
of approximately $156.4 million of borrowings were outstanding on the line of
credit and ProLogis was in compliance with all covenants contained in the credit
agreement.

     ProLogis has a credit agreement with Sumitomo Mitsui Banking Corporation as
agent, that provides for a 24.5 billion yen revolving line of credit (the
currency equivalent of $187.6 million as of December 31, 2001) through a group
of 11 banks. ProLogis' borrowings under the agreement generally bear interest at
the Tokyo Interbank Offering Rate ("TIBOR") plus 1.00%. Borrowings outstanding
as of December 31, 2001 were at a weighted average interest rate of 1.09%.
Additionally, the credit agreement provides for an unused commitment fee of
0.25% per annum. The credit agreement matures on September 13, 2004 and may be
extended for an additional year at ProLogis' option. As of December 31, 2001,
the currency equivalent of approximately $47.5 million of borrowings were
outstanding on the line of credit and ProLogis was in compliance with all
covenants contained in the agreement.

     A summary of ProLogis' unsecured lines of credit borrowings is as follows
(in thousands of U.S. dollars):



                                                         YEAR ENDED DECEMBER 31,
                                                    ----------------------------------
                                                       2001         2000        1999
                                                    ----------    --------    --------
                                                                     
Weighted average daily interest rate(1)...........        4.95%       6.33%       6.13%
Borrowings outstanding as of December 31(1).......  $  375,875    $439,822    $ 98,700
Weighted average daily borrowings(1)..............  $  314,582    $251,528    $232,821
Maximum borrowings outstanding at any month
  end(1)..........................................  $  429,402    $439,822    $440,100
Total borrowing capacity on all lines of credit as
  of December 31(2)...............................  $1,002,651    $832,317    $902,340


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

(1) Excludes $31.5 million of direct borrowings by ProLogis Logistics in 2001.
    See Note 4.

(2) Total borrowing capacity as of December 31, 2001 has been reduced by $31.5
    million of outstanding borrowings of ProLogis Logistics. See Note 4.

                                       104

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Senior Unsecured Notes

     ProLogis has issued senior unsecured notes that bear interest at fixed
rates to be paid on a semi-annual basis (the "Notes"). The Notes outstanding as
of December 31, 2001 are summarized as follows (in thousands):



                                                                              PRINCIPAL
                                            COUPON   MATURITY   PRINCIPAL      PAYMENT
DATE OF ISSUANCE               PAR VALUE     RATE      DATE     BALANCE(1)   REQUIREMENT
----------------               ----------   ------   --------   ----------   -----------
                                                              
May 17, 1996.................  $   12,500   7.250%   05/15/02   $   12,498       (2)
October 9, 1998..............     125,000   7.000%   10/01/03      125,000       (2)
April 26, 1999...............     250,000   6.700%   04/15/04      249,791       (2)
July 20, 1998................     250,000   7.050%   07/15/06      249,689       (2)
November 20, 1997............     135,000   7.250%   11/20/07      134,215       (2)
April 26, 1999...............     250,000   7.100%   04/15/08      249,949       (2)
May 17, 1996.................     100,000   7.950%   05/15/08       99,905       (3)
March 2, 1995................     150,000   8.720%   03/01/09      150,000       (4)
May 16, 1995.................      75,000   7.875%   05/15/09       74,829       (5)
November 20, 1997............      25,000   7.300%   11/20/09       24,804       (2)
February 4, 1997.............     100,000   7.810%   02/01/15      100,000       (6)
March 2, 1995................      50,000   9.340%   03/01/15       50,000       (7)
May 17, 1996.................      50,000   8.650%   05/15/16       49,881       (8)
July 11, 1997................     100,000   7.625%   07/01/17       99,798       (2)
                               ----------                       ----------
                               $1,672,500                       $1,670,359
                               ==========                       ==========


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

(1) Amounts are net of applicable unamortized original issue discount.

(2) Principal due at maturity.

(3) Annual principal payments of $25.0 million from May 15, 2005 to May 15,
    2008.

(4) Annual principal payments of $18.75 million from March 1, 2002 to March 1,
    2009.

(5) Annual principal payments of $9.375 million from May 15, 2002 to May 15,
    2009.

(6) Annual principal payments ranging from $10.0 million to $20.0 million from
    February 1, 2010 to February 1, 2015.

(7) Annual principal payments ranging from $5.0 million to $12.5 million from
    March 1, 2010 to March 1, 2015.

(8) Annual principal payments ranging from $5.0 million to $12.5 million from
    May 15, 2010 to May 15, 2016.

     The Notes rank equally with all other unsecured and unsubordinated
indebtedness of ProLogis outstanding from time to time. The Notes are redeemable
at any time at ProLogis' option. Such redemption and other terms are governed by
the provisions of an indenture agreement or, with respect to the $160.0 million
of Notes issued on November 20, 1997, note purchase agreements. Under the terms
of the indenture agreement and the note purchase agreements, ProLogis must meet
certain financial covenants. ProLogis was in compliance with all such covenants
as of December 31, 2001.

                                       105

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Secured Debt

     Secured debt as of December 31, 2001 consisted of the following (in
thousands):



                                                                                   BALLOON
                                                            PERIODIC               PAYMENT
                                      INTEREST   MATURITY   PAYMENT    PRINCIPAL    DUE AT
DESCRIPTION                           RATE(1)      DATE       DATE      BALANCE    MATURITY
-----------                           --------   --------   --------   ---------   --------
                                                                    
Mortgage notes:
  Prudential Insurance(3)...........    8.59%    04/01/03     (2)      $ 24,580    $ 23,505
  Sullivan 75 Distribution Center
     #1.............................    9.96     04/01/04     (2)         1,739       1,663
  Charter American Mortgage(3)......    8.75     08/01/04     (2)         6,651       5,818
  West One Business Center #3.......    9.00     09/01/04     (2)         4,144       3,847
  Raines Distribution Center........    9.50     01/01/05     (2)         2,941       1,128
  Prudential Insurance(3)(4)........    6.85     04/01/05     (5)        51,923      48,850
  Consulate Distribution Center
     #300(4)........................    6.97     02/01/06     (2)         3,575       3,585
  Plano Distribution Center #7(4)...    7.02     04/15/06     (2)         3,623       3,015
  Interchange Distribution Ctr. #8 &
     #9.............................    8.14     06/01/06     (2)         7,124       6,651
  Connecticut General Life
     Insurance(3)...................    7.08     03/01/07     (2)       145,458     134,431
  Vista Del Sol Industrial Center #1
     & 2............................    9.68     08/01/07     (6)         2,777          --
  State Farm Insurance(3)(4)........    7.10     11/01/08     (2)        15,158      13,065
  Placid Street Distribution Center
     #1(4)..........................    7.18     12/01/09     (2)         7,426       6,529
  Earth City Industrial Center #4...    8.50     07/01/10     (6)         1,886          --
  GMAC Commercial Mortgage(3).......    7.75     10/01/10     (6)         6,758          --
  Executive Park Distribution Center
     #3.............................    8.19     03/01/11     (6)           929          --
  Cameron Business Center #1(4).....    7.23     07/01/11     (2)         5,912       4,526
  Platte Valley Industrial Center
     #9.............................    8.10     04/01/17     (6)         3,061          --
  Platte Valley Industrial Center
     #4.............................   10.10     11/01/21     (6)         1,978          --
  Morgan Guaranty Trust(3)..........    7.58     04/01/24     (7)       200,000     127,187
                                                                       --------
                                                                       $497,643
                                                                       ========
Assessment bonds:
  City of Fremont...................    7.00%    03/01/11     (6)      $  8,145          --
  Various(8)........................   (8)         (8)        (6)         1,185          --
  City of Tracy.....................    7.20     09/01/24     (6)         2,577          --
                                                                       --------
                                                                       $ 11,907
                                                                       ========
Securitized debt:
  Tranche A.........................    7.74%    02/01/04     (2)      $ 14,925    $ 13,405
  Tranche B.........................    9.94     02/01/04     (2)         7,631       7,215
                                                                       --------
                                                                       $ 22,556
                                                                       ========
     Total secured debt.............                                   $532,106
                                                                       ========


                                       106

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

(1) The weighted average interest rates for mortgage notes, assessment bonds and
    securitized debt were 7.46%, 7.13% and 8.48%, respectively as of December
    31, 2001. The total weighted average interest rate for ProLogis' secured
    borrowings is 7.50%.

(2) Monthly amortization with a balloon payment due at maturity.

(3) Secured by various distribution facilities.

(4) Mortgage note was assumed by ProLogis in connection with the 1999 merger
    transaction. See Note 11. Under purchase accounting, the mortgage note was
    recorded at its fair value. Accordingly, a premium or discount was
    recognized, as applicable. Balloon payments due at maturity are not adjusted
    for recorded premiums or discounts.

(5) Carrying value includes premium. Terms are interest only with stated
    principal amount of $48.9 million due at maturity.

(6) Fully amortizing.

(7) Monthly interest only payments through May 2005, monthly principal and
    interest payments from June 2005 to April 2024 with a balloon payment due at
    maturity.

(8) Includes ten issues of assessment bonds with four municipalities. Interest
    rates range from 5.50% per annum to 8.75% per annum. Maturity dates range
    from August 2004 to March 2021.

     Mortgage notes, assessment bonds and securitized debt are secured by real
estate with an aggregate undepreciated cost of $934.3 million, $234.1 million
and $61.4 million, respectively, as of December 31, 2001.

  Long-Term Debt Maturities

     Approximate principal payments due on senior unsecured notes and secured
debt (mortgage notes, assessment bonds and securitized debt) during each of the
years in the five-year period ending December 31, 2006 and thereafter are as
follows (in thousands):


                                                        
2002....................................................   $   49,252
2003....................................................      185,214
2004....................................................      316,554
2005....................................................      111,579
2006....................................................      319,995
2007 and thereafter.....................................    1,222,012
                                                           ----------
          Total principal due...........................    2,204,606
Less: Original issue discount...........................       (2,141)
                                                           ----------
          Total carrying value..........................   $2,202,465
                                                           ==========


  Interest Expense

     For 2001, 2000 and 1999, interest expense was $163.6 million, $172.2
million and $170.7 million, respectively, which is net of capitalized interest
of $24.3 million, $18.5 million and $16.0 million, respectively. Amortization of
deferred loan costs included in interest expense was $5.2 million, $4.6 million
and $4.4 million for 2001, 2000 and 1999, respectively. The total interest paid
in cash on all outstanding debt was $183.3 million, $178.4 million and $169.8
million during 2001, 2000 and 1999, respectively.

6. MINORITY INTEREST:

     Of the total minority interest as of December 31, 2001, $45.6 million
represents the limited partners' interests in the Partnerships controlled by
ProLogis. With respect to each of the Partnerships either ProLogis or a
subsidiary of ProLogis is the sole general partner with all management powers
over the business and

                                       107

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

affairs of the Partnership. The limited partners of each Partnership generally
do not have the right to participate in or exercise management control over the
business and affairs of the Partnership. With respect to each partnership the
general partner may not, without the written consent of all of the limited
partners, take any action that would prevent such Partnership from conducting
its business, possess the property of the partnership, admit an additional
partner or subject a limited partner to the liability of a general partner.

     As of December 31, 2001, ProLogis or a consolidated subsidiary of ProLogis
is the controlling general partner in the Partnerships. In each of the
Partnerships, the limited partners are entitled to exchange partnership units
for Common Shares. Additionally, the limited partners are entitled to receive
preferential cumulative quarterly distributions per unit equal to the quarterly
distributions in respect of Common Shares. The Partnerships as of December 31,
2001 are as follows:



                                                  INVESTMENT IN                     LIMITED
                                      FORMATION    REAL ESTATE     PROLOGIS'   PARTNERSHIP UNITS
ENTITY                                  DATE      (IN MILLIONS)    OWNERSHIP      OUTSTANDING
------                                ---------   --------------   ---------   -----------------
                                                                   
ProLogis Limited Partnership-I......    1993          $213.1(1)      68.65%         4,520,532(2)
ProLogis Limited Partnership-II.....    1994          $ 60.1         97.82%            90,213(2)
ProLogis Limited Partnership-III....    1994          $ 35.9         79.63%           350,964(2)
ProLogis Limited
  Partnership-IV(3).................    1994          $106.1         98.49%            68,612(2)
Meridian Realty Partners Limited
  Partnership.......................      (4)         $ 10.4         87.00%            29,712(5)


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

(1) These facilities cannot be sold, prior to the occurrence of certain events,
    without the consent of the limited partners thereto, other than in
    tax-deferred exchanges.

(2) Each unit is convertible into one Common Share.

(3) ProLogis Limited Partnership-IV was formed through a cash contribution from
    a wholly owned subsidiary of ProLogis, ProLogis-IV, Inc. and the
    contribution of distribution facilities from the limited partner. ProLogis
    Limited Partnership-IV and ProLogis-IV, Inc. are legal entities separate and
    distinct from ProLogis, its affiliates and each other, and each has separate
    assets, liabilities, business functions and operations. The sole assets of
    ProLogis-IV, Inc. are its general partner advances to and its interest in
    ProLogis Limited Partnership-IV. As of December 31, 2001, ProLogis Limited
    Partnership-IV had outstanding borrowings from ProLogis-IV, Inc., of $0.3
    million and ProLogis-IV, Inc. had outstanding borrowings from ProLogis and
    its affiliates of $0.3 million.

(4) Acquired in 1999 merger transaction. See Note 11.

(5) Each unit is convertible into 1.1 Common Shares, plus $2.00.

7. SHAREHOLDERS' EQUITY:

  Shares Authorized

     As of December 31, 2001, 275,000,000 shares were authorized. The Board may
increase the number of authorized shares and may classify or reclassify any
unissued shares of ProLogis stock from time to time by setting or changing the
preferences, conversion or other rights, voting powers, restrictions,
limitations as of distributions, qualifications and terms or conditions of
redemption of such shares.

  Common Shares

     ProLogis had 175,888,391 and 165,287,358 Common Shares outstanding as of
December 31, 2001 and 2000. Common Shares have a par value of $0.01 per share.

                                       108

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     ProLogis' holders of Common Shares may acquire additional Common Shares by
automatically reinvesting distributions under the 1999 Dividend Reinvestment and
Share Purchase Plan (the "1999 Common Share Plan"). Holders of Common Shares who
do not participate in the 1999 Common Share Plan continue to receive
distributions as declared. The 1999 Common Share Plan also allows both holders
of Common Shares and persons who are not holders of Common Shares to purchase a
limited number of additional Common Shares by making optional cash payments,
without payment of any brokerage commission or service charge. Common Shares are
acquired pursuant to the 1999 Common Share Plan at a price equal to 98% of the
market price of such Common Shares. During 2001, ProLogis generated net proceeds
of $67.1 million from the issuance of 3,261,000 Common Shares under the 1999
Common Share Plan.

     In January 2001, ProLogis announced a Common Share repurchase program under
which it may repurchase up to $100.0 million of its Common Shares. The Common
Shares have been and, to the extent these repurchases continue, they will be
repurchased in the open market and in privately negotiated transactions,
depending on market prices and other conditions. During 2001, 778,400 Common
Shares were purchased under this program at a total cost of $16.0 million.

     ProLogis' employees participate in various long-term compensation plans as
discussed in Note 13. Compensation under these plans is generally in the form of
Common Shares. In 2001, ProLogis issued 241,000 Common Shares under these plans
generating net proceeds of $3.8 million. Also in 2001, 25,000 Common Shares were
issued upon conversion of limited partnership units. See Note 6.

     In May 2001, ProLogis' shareholders approved the establishment of the
ProLogis Trust Employee Share Purchase Plan (the "Employee Share Plan"). Under
the terms of the Employee Share Plan, employees of ProLogis and its
participating entities may purchase Common Shares, through payroll deductions
only, at a discounted price of 85% of the fair market value of such Common
Shares. Subject to certain provisions, the aggregate number of Common Shares
which may be issued under the Plan may not exceed 5,000,000. ProLogis began
issuing Common Shares under the Employee Share Plan in January 2002.

  Preferred Shares

     As of December 31, 2001, ProLogis had three series of cumulative redeemable
preferred shares of beneficial interest outstanding ("Series C Preferred
Shares", "Series D Preferred Shares" and "Series E Preferred Shares"). Holders
of each series of preferred shares have, subject to certain conditions, limited
voting rights. The holders of the preferred shares are entitled to receive
cumulative preferential dividends based upon each series' respective liquidation
preference. Such dividends are payable quarterly in arrears on the last day of
March, June, September and December for Series C Preferred Shares and Series D
Preferred Shares and are payable quarterly in arrears on the last day of
January, April, July and October for Series E Preferred Shares, when, and if,
declared by the Board, out of funds legally available for payment of dividends.
After the respective redemption dates, each series can be redeemed at ProLogis'
option for a cash redemption price which (other than the portion consisting of
accrued and unpaid dividends) is payable solely out of the cumulative sales
proceeds of other capital shares of ProLogis, which may include shares of other
series of preferred shares. With respect to payment of dividends, each series of
preferred shares ranks on parity with ProLogis' other series of preferred
shares.

     ProLogis redeemed all of its outstanding Series B cumulative convertible
redeemable preferred shares of beneficial interest ("Series B Convertible
Preferred Shares") as of March 20, 2001. Prior to the call for redemption,
163,827 Series B Convertible Preferred Shares were converted into 210,026 Common
Shares. Subsequent to the call for redemption, 5,908,971 Series B Convertible
Preferred Shares were converted into 7,575,301 Common Shares. The remaining
183,302 Series B Convertible Preferred Shares outstanding on March 20, 2001 were
redeemed at a price of $25.00 per share, plus $0.442 in accrued and unpaid
dividends. The aggregate redemption cost (including accrued dividends) of the
Series B Convertible Preferred Shares was $4.7 million.
                                       109

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     ProLogis redeemed all 5,400,000 of its outstanding Series A cumulative
preferred shares of beneficial interest ("Series A Preferred Shares") as of May
8, 2001 at the price of $25.00 per share, plus $0.2481 in accrued and unpaid
dividends. The aggregate redemption cost (including accrued dividends) of the
Series A Preferred Shares was $136.3 million.

     ProLogis' preferred shares as of December 31, 2001 are summarized as
follows:



                                                                        DIVIDEND
                                             STATED                 EQUIVALENT BASED    OPTIONAL
                        NUMBER OF SHARES   LIQUIDATION   DIVIDEND    ON LIQUIDATION    REDEMPTION
                          OUTSTANDING      PREFERENCE      RATE        PREFERENCE         DATE
                        ----------------   -----------   --------   ----------------   ----------
                                                                        
Series C Preferred
  Shares..............      2,000,000        $50.00        8.54%    $4.27 per share     11/13/26
Series D Preferred
  Shares..............     10,000,000        $25.00        7.92%    $1.98 per share     04/13/03
Series E Preferred
  Shares..............      2,000,000        $25.00        8.75%    $2.19 per share     06/30/03


  Shelf Registration

     ProLogis has a shelf registration statement on file with the Securities and
Exchange Commission that allows ProLogis to issue securities in the form of debt
securities, preferred shares, Common Shares, rights to purchase Common Shares
and preferred share purchase rights on an as-needed basis. These $608.0 million
of shelf-registered securities are available for issuance, subject to ProLogis'
ability to effect an offering on satisfactory terms.

  Ownership Restrictions and Significant Shareholder

     For ProLogis to qualify as a REIT under the Code, not more than 50% in
value of its outstanding shares of stock may be owned by five or fewer
individuals at any time during the last half of ProLogis' taxable year.
Therefore, ProLogis' Declaration of Trust restricts beneficial ownership (or
ownership generally attributed to a person under the REIT tax rules) of
ProLogis' outstanding shares by a single person, or persons acting as a group,
to 9.8% of ProLogis' outstanding shares. This provision assists ProLogis in
protecting and preserving its REIT status and protects the interest of
shareholders in takeover transactions by preventing the acquisition of a
substantial block of shares.

     Shares owned by a person or group of persons in excess of these limits are
subject to redemption by ProLogis. The provision does not apply where a majority
of the Board, in its sole and absolute discretion, waives such limit after
determining that the status of ProLogis as a REIT for federal income tax
purposes will not be jeopardized or the disqualification of ProLogis as a REIT
is advantageous to the shareholders.

     Security Capital, ProLogis' largest shareholder with 28.4% of ProLogis'
outstanding Common Shares as of December 31, 2001, is exempt from the ownership
restrictions described above. For tax purposes, Security Capital's ownership is
attributed to its shareholders. In December 2001, Security Capital announced
that it had entered into a definitive agreement for General Electric Capital
Corporation ("GE Capital") to acquire the outstanding shares of Security Capital
Class B common stock for a price of $26.00 per share. The merger agreement, if
approved by the shareholders of Security Capital and GE Capital, will give GE
Capital the option of combining the ProLogis Common Shares owned by Security
Capital with cash to acquire the Security Capital Class B stock outstanding. GE
Capital has announced that it intends to retain ownership of 9.8% of the Common
Shares outstanding but has reserved the right to distribute more, or less, of
the Common Shares owned by Security Capital to Security Capital's shareholders
in the merger.

                                       110

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Shareholder Purchase Rights

     On December 7, 1993, the Board declared a dividend of one preferred share
purchase right ("Right") for each outstanding Common Share to be distributed to
all holders of record of the Common Shares on December 31, 1993. Each Right
entitles the registered holder to purchase one-hundredth of a Participating
Preferred Share for an exercise price of $40.00 per one-hundredth of a
Participating Preferred Share, subject to adjustment as provided in the Rights
Agreement. The Rights will generally be exercisable only if a person or group
(other than certain affiliates of ProLogis) acquires 20% or more of the Common
Shares or announces a tender offer for 25% or more of the Common Shares. Under
certain circumstances, upon a shareholder acquisition of 20% or more of the
Common Shares (other than certain affiliates of ProLogis), each Right will
entitle the holder to purchase, at the Right's then-current exercise price, a
number of Common Shares having a market value of twice the Right's exercise
price. The acquisition of ProLogis pursuant to certain mergers or other business
transactions will entitle each holder of a Right to purchase, at the Right's
then-current exercise price, a number of the acquiring company's common shares
having a market value at that time equal to twice the Right's exercise price.
The Rights held by certain 20% shareholders will not be exercisable. The Rights
will expire on December 7, 2003, unless the expiration date of the Rights is
extended, and the Rights are subject to redemption at a price of $0.01 per Right
under certain circumstances.

8. DISTRIBUTIONS AND DIVIDENDS:

  Common Share Distributions

     ProLogis' annual distribution per Common Share for 2001, 2000 and 1999 and
the taxability of cash distributions paid on Common Shares for Federal income
tax purposes (estimated taxability for 2001) are as follows:



                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                               2001     2000     1999
                                                              ------   ------   ------
                                                                       
Per Common Share:
  Ordinary income...........................................  $1.09    $1.19    $0.84
  Capital gains.............................................   0.19     0.15     0.35
  Return of capital.........................................   0.10       --     0.11
                                                              -----    -----    -----
          Total.............................................  $1.38    $1.34    $1.30
                                                              =====    =====    =====


     The distribution level for 2002 was set at $1.42 per Common Share by the
Board on December 14, 2001. Also on that date, ProLogis declared a distribution
of $0.355 per Common Share payable on February 28, 2002 to holders of Common
Shares on February 14, 2002.

  Preferred Share Dividends

     Annual dividends per preferred share were as follows:



                                                               YEAR ENDED DECEMBER 31,
                                                             ---------------------------
                                                             2001(1)   2000(2)   1999(3)
                                                             -------   -------   -------
                                                                        
Series A Preferred Shares..................................   $0.84(4)  $2.35     $2.35
Series B Convertible Preferred Shares......................    0.44(4)   1.75      1.75
Series C Preferred Shares..................................    4.27      4.27      4.27
Series D Preferred Shares..................................    1.98      1.98      1.98
Series E Preferred Shares..................................    2.19      2.19      1.64(5)


                                       111

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

(1) For federal income tax purpose $0.71 of the Series A dividend, $0.38 of the
    Series B dividend, $3.63 of Series C dividend, $1.68 of the Series D
    dividend and $1.86 of the Series E dividend are treated as ordinary income
    to the holders. The remaining portion of each dividend represents capital
    gains.

(2) For federal income tax purposes $2.08 of the Series A dividend, $1.55 of the
    Series B dividend, $3.78 of the Series C dividend, $1.75 of the Series D
    dividend and $1.94 of the Series E dividend are treated as ordinary income
    to the holders. The remaining portion of each dividend represents capital
    gains.

(3) For federal income tax purposes $1.65 of the Series A dividend, $1.23 of the
    Series B dividend, $3.00 of the Series C dividend, $1.39 of the Series D
    dividend and $1.15 of the Series E dividend are treated as ordinary income
    to the holders. The remaining portion of each dividend represents capital
    gains.

(4) The Series A Preferred Shares were redeemed as of May 8, 2001 and the Series
    B Convertible Preferred Shares were redeemed as of March 20, 2001.

(5) For the period from date of issuance to December 31, 1999.

     Pursuant to the terms of its preferred shares, ProLogis is restricted from
declaring or paying any distribution with respect to the Common Shares unless
all cumulative dividends with respect to the preferred shares have been paid and
sufficient funds have been set aside for dividends that have been declared for
the then-current dividend period with respect to the preferred shares.

     ProLogis' tax return for the year ended December 31, 2001 has not been
filed. The taxability information for 2001 is based upon the best available
data. ProLogis' tax returns for prior years have not been examined by the
Internal Revenue Service. Consequently, the taxability of distributions is
subject to change.

9. EARNINGS PER COMMON SHARE:

     A reconciliation of the denominator used to calculate basic net earnings
per Common Share to the denominator used to calculate diluted net earnings per
Common Share for the years indicated (in thousands, except per share amounts) is
as follows:



                                                          YEAR ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2001       2000       1999
                                                       --------   --------   --------
                                                                    
Net earnings attributable to Common Shares...........  $ 90,835   $157,715   $123,999
Series B Convertible Preferred Share dividends.......        81         --         --
                                                       --------   --------   --------
Adjusted net earnings attributable to Common
  Shares.............................................  $ 90,916   $157,715   $123,999
                                                       ========   ========   ========
Weighted average Common Shares outstanding --
  Basic..............................................   172,755    163,651    152,412
Weighted average conversion of Series B Convertible
  Preferred Shares...................................     1,544         --         --
Incremental weighted average effect of common share
  equivalents and contingently issuable Common Shares
  (see Note 13)......................................       898        750        327
                                                       --------   --------   --------
Adjusted weighted average Common Shares outstanding--
  Diluted............................................   175,197    164,401    152,739
                                                       ========   ========   ========
Basic per share net earnings attributable to Common
  Shares.............................................  $   0.53   $   0.96   $   0.81
                                                       ========   ========   ========
Diluted per share net earnings attributable to Common
  Shares.............................................  $   0.52   $   0.96   $   0.81
                                                       ========   ========   ========


     For the year ended December 31, 1999, basic and diluted per share net
earnings attributable to Common Shares before the cumulative effect of
accounting change were $0.82. The following convertible securities are

                                       112

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

not included in the calculation of diluted per share net earnings attributable
to Common Shares as the effect, on an as-converted basis, is antidilutive (in
thousands):



                                                               YEAR ENDED DECEMBER 31,
                                                              -------------------------
                                                               2001     2000     1999
                                                              ------   ------   -------
                                                                       
Series B Convertible Preferred Shares.......................     --    8,417     9,221
                                                              =====    =====    ======
Limited partnership units...................................  5,087    5,348     5,461
                                                              =====    =====    ======


10. BUSINESS SEGMENTS:

     ProLogis has three reportable business segments:

     - Property operations represents the long-term ownership (either directly
       or through investments in unconsolidated entities), management and
       leasing of industrial distribution facilities in the United States,
       Mexico and Europe. Each operating facility is considered to be an
       individual operating segment having similar economic characteristics that
       are combined within the reportable segment based upon geographic
       location. See Note 4.

     - CDFS business represents the development of industrial distribution
       facilities by ProLogis and Kingspark S.A. (which is not consolidated in
       ProLogis' financial statements) in the United States, Mexico, Europe and
       Japan that are often sold to third parties or contributed to entities in
       which ProLogis maintains an ownership interest and acts as manager.
       Additionally, in the United States, Mexico and Europe, ProLogis and
       Kingspark S.A. earn fees for development activities on behalf of
       customers and realizes profits from the sale of land parcels when their
       development plans no longer include these parcels. The activities in this
       segment are considered to be individual operating segments having similar
       economic characteristics that are combined within the reportable segment
       based upon geographic location.

     - Temperature-controlled distribution operations represents the operation
       of a temperature-controlled distribution and logistics network through
       investments in unconsolidated entities in the United States (ProLogis
       Logistics) and Europe (Frigoscandia S.A.). The operations of these
       entities are considered to be one operating segment. See Note 4.

                                       113

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Reconciliations of the three reportable segments': (i) income from external
customers to ProLogis' total income; (ii) net operating income from external
customers to ProLogis' earnings before minority interest (ProLogis' chief
operating decision makers rely primarily on net operating income and related
measures to make decisions about allocating resources and assessing segment
performance); and (iii) assets to ProLogis' total assets are as follows (in
thousands):



                                                         YEAR ENDED DECEMBER 31,
                                                    ---------------------------------
                                                      2001        2000        1999
                                                    ---------   ---------   ---------
                                                                   
Income:
  Property operations:
     United States(1).............................  $ 463,673   $ 476,098   $ 457,592
     Mexico.......................................     19,370      15,504      10,503
     Europe(2)....................................     20,636      27,771      16,045
                                                    ---------   ---------   ---------
          Total property operations segment.......    503,679     519,373     484,140
                                                    ---------   ---------   ---------
  CDFS business:
     United States(3).............................     71,979      58,812      28,861
     Mexico.......................................        (10)      1,517          --
     Europe(4)(5).................................     88,306      61,569      41,672
                                                    ---------   ---------   ---------
          Total CDFS business segment.............    160,275     121,898      70,533
                                                    ---------   ---------   ---------
  Temperature-controlled distribution operations:
     United States(6).............................    (58,496)     11,950      10,791
     Europe(7)....................................    (52,972)    (20,298)     (4,364)
                                                    ---------   ---------   ---------
          Total temperature-controlled
            distribution operations segment.......   (111,468)     (8,348)      6,427
                                                    ---------   ---------   ---------
  Reconciling items:
     Income (loss) from unconsolidated entities...    (33,495)      3,331         (77)
     Interest income..............................      4,134       7,267       6,369
                                                    ---------   ---------   ---------
          Total reconciling items.................    (29,361)     10,598       6,292
                                                    ---------   ---------   ---------
          Total income............................  $ 523,125   $ 643,521   $ 567,392
                                                    =========   =========   =========
Net operating income:
  Property operations:
     United States(1).............................  $ 435,804   $ 448,074   $ 424,633
     Mexico.......................................     19,546      15,093      10,569
     Europe(2)....................................     19,629      29,029      15,437
                                                    ---------   ---------   ---------
          Total property operations segment.......    474,979     492,196     450,639
                                                    ---------   ---------   ---------
  CDFS business:
     United States(3).............................     68,163      54,051      24,265
     Mexico.......................................        (73)      1,472         (30)
     Europe(4)(5).................................     88,203      61,511      41,378
                                                    ---------   ---------   ---------
          Total CDFS business segment.............    156,293     117,034      65,613
                                                    ---------   ---------   ---------
  Temperature-controlled distribution operations:
     United States(6).............................    (58,496)     11,950      10,791
     Europe(7)....................................    (52,972)    (20,298)     (4,364)
                                                    ---------   ---------   ---------
          Total temperature-controlled
            distribution operations segment.......   (111,468)     (8,348)      6,427
                                                    ---------   ---------   ---------


                                       114

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



                                                         YEAR ENDED DECEMBER 31,
                                                    ---------------------------------
                                                      2001        2000        1999
                                                    ---------   ---------   ---------
                                                                   
  Reconciling items:
     Income (loss) from unconsolidated entities...    (33,495)      3,331         (77)
     Interest income..............................      4,134       7,267       6,369
     General and administrative expense...........    (50,274)    (44,954)    (38,284)
     Depreciation and amortization................   (143,465)   (151,483)   (152,447)
     Interest expense.............................   (163,629)   (172,191)   (170,746)
     Other expense................................        (32)     (1,045)       (945)
                                                    ---------   ---------   ---------
          Total reconciling items.................   (386,761)   (359,075)   (356,130)
                                                    ---------   ---------   ---------
          Earnings before minority interest.......  $ 133,043   $ 241,807   $ 166,549
                                                    =========   =========   =========




                                                               DECEMBER 31,
                                                   ------------------------------------
                                                      2001         2000         1999
                                                   ----------   ----------   ----------
                                                                    
Assets:
Property operations:
  United States(8)...............................  $3,754,960   $3,887,601   $4,017,702
  Mexico.........................................     149,225      113,538      178,253
  Europe(8)......................................     316,025      308,457      387,362
                                                   ----------   ----------   ----------
          Total property operations segment......   4,220,210    4,309,596    4,583,317
                                                   ----------   ----------   ----------
CDFS business:
  United States..................................     189,752      304,697      210,088
  Mexico.........................................      17,390       26,288       13,249
  Europe(8)......................................     672,843      637,207      432,455
  Japan..........................................      43,030           --           --
                                                   ----------   ----------   ----------
          Total CDFS business segment............     923,015      968,192      655,792
                                                   ----------   ----------   ----------
Temperature controlled distribution operations:
  United States(8)...............................     174,244      231,053      192,607
  Europe(8)......................................     183,727      191,981      214,008
                                                   ----------   ----------   ----------
     Total temperature controlled distribution
       operations segment........................     357,971      423,034      406,615
                                                   ----------   ----------   ----------
Reconciling items:
  Investments in and advances to unconsolidated
     entities....................................       6,232       70,807        2,442
  Cash...........................................      27,989       57,870       69,338
  Accounts and notes receivable..................       1,879       43,040       31,084
  Other assets...................................      66,645       73,795       99,452
                                                   ----------   ----------   ----------
          Total reconciling items................     102,745      245,512      202,316
                                                   ----------   ----------   ----------
          Total assets...........................  $5,603,941   $5,946,334   $5,848,040
                                                   ==========   ==========   ==========


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

(1) In addition to the operations of ProLogis that are reported on a
    consolidated basis, includes amounts recognized under the equity method
    related to ProLogis' investment in unconsolidated distribution real estate
    entities. See Note 4 for summarized financial information of these
    unconsolidated entities.

(2) In addition to the operations of ProLogis that are reported on a
    consolidated basis, includes amounts recognized under the equity method
    related to ProLogis' investment in unconsolidated distribution real estate
    entities (including net foreign currency exchange gains of $0.8 million,
    $4.7 million and

                                       115

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    $0.3 million in 2001, 2000 and 1999, respectively). In 1999, also includes
    ProLogis' investment in Garonor Holdings (including a $13.0 million net
    foreign currency exchange loss). See Note 4 for summarized financial
    information of these unconsolidated entities.

(3) In 2001 and 2000, includes $56.2 million and $29.4 million, respectively, of
    net gains recognized by ProLogis related to the disposition of facilities to
    unconsolidated distribution real estate entities.

(4) Includes amounts recognized under the equity method related to ProLogis'
    investment in Kingspark S.A. (including $4.6 million of net foreign currency
    losses in 2001, $0.3 million of net foreign currency exchange gains in 2000,
    and $1.5 million of net foreign exchange losses in 1999). See Note 4.

(5) Includes $29.5 million, $13.7 million and $17.3 million of net gains
    recognized by ProLogis related to the disposition of facilities to ProLogis
    European Properties Fund in 2001, 2000 and 1999, respectively. In addition,
    includes $23.0 million, $4.3 million and $4.5 million of net gains
    recognized under the equity method related to the disposition of facilities
    to ProLogis European Properties Fund by Kingspark S.A. in 2001, 2000 and
    1999. See Note 4.

(6) Represents amounts recognized under the equity method related to ProLogis'
    investments in ProLogis Logistics in 2001, 2000 and 1999 and in CSI/Frigo
    LLC in 2001. CSI/Frigo LLC recognizes income under the equity method based
    on its common stock investment in ProLogis Logistics. See Note 4 for
    summarized financial information of these entities.

(7) Represents amounts recognized under the equity method related to ProLogis'
    investments in Frigoscandia S.A. in 2001, 2000 and 1999 (including $3.5
    million, $0.8 million and $1.3 million of net foreign exchange losses in
    2001, 2000 and 1999, respectively) and CSI/Frigo LLC in 2001. CSI/Frigo LLC
    recognizes income under the equity method based on its common stock
    investment in Frigoscandia S.A. See Note 4 for summarized financial
    information of these entities.

(8) Amounts include investments in unconsolidated entities accounted for under
    the equity method. See Note 4 for summarized financial information of these
    unconsolidated entities.

11. MERGER TRANSACTION

     On March 30, 1999, Meridian Industrial Trust, Inc. ("Meridian"), a publicly
traded REIT that owned industrial distribution facilities in the United States,
was merged with and into ProLogis. In accordance with the terms of the Agreement
and Plan of Merger dated November 16, 1998, as amended (the "Merger Agreement"),
the approximately 33.8 million outstanding shares of Meridian common stock were
exchanged (on a 1.1 for one basis) into approximately 37.2 million ProLogis
Common Shares. In addition, the holders of Meridian common stock received $2.00
in cash per outstanding share, approximately $67.6 million in total. The holders
of Meridian's Series D cumulative redeemable preferred stock received a new
series of ProLogis cumulative redeemable preferred shares, Series E preferred
shares, on a one for one basis. The Series E preferred shares have an 8.75%
annual dividend rate ($2.1875 per share) and an aggregate liquidation value of
$50.0 million. The total purchase price of Meridian was approximately $1.54
billion, which included the assumption of the outstanding debt and liabilities
of Meridian as of March 30, 1999 and the issuance of approximately 1.0 million
stock options, each to acquire 1.1 ProLogis Common Shares and $2.00 in cash. The
assets acquired from Meridian included approximately $1.42 billion of real
estate assets, an interest in a temperature-controlled distribution operations
company of $28.7 million and cash and other assets aggregating $72.3 million.
ProLogis retired $328.4 million of short-term debt of Meridian. The transaction
was structured as a tax-free merger and was accounted for under the purchase
method.

                                       116

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following summarized pro forma unaudited information represents the
combined historical operating results of ProLogis and Meridian for the year
ended December 31, 1999, with the appropriate purchase accounting adjustments,
assuming the merger with Meridian had occurred on January 1, 1999. The pro forma
financial information presented is not necessarily indicative of what ProLogis'
actual operating results would have been had ProLogis and Meridian constituted a
single entity during the same period (in thousands, except per share amounts):


                                                            
Rental income...............................................   $525,340
Earnings before minority interest...........................   $170,681
Earnings attributable to Common Shares before cumulative
  effect of accounting change...............................   $136,461
Net earnings attributable to Common Shares..................   $135,021
Weighted average Common Shares outstanding:
  Basic.....................................................    160,705
  Diluted...................................................    161,044
Basic per share net earnings attributable to Common Shares
  before cumulative effect of accounting change.............   $   0.85
Cumulative effect of accounting change......................      (0.01)
                                                               --------
Basic per share net earnings attributable to Common
  Shares....................................................   $   0.84
                                                               ========
Diluted per share net earnings attributable to Common Shares
  before cumulative effect of accounting change.............   $   0.85
Cumulative effect of accounting change......................      (0.01)
                                                               --------
Diluted per share net earnings attributable to Common
  Shares....................................................   $   0.84
                                                               ========


12. SUPPLEMENTAL CASH FLOW INFORMATION

     Non-cash investing and financing activities for the years ended December
31, 2001, 2000 and 1999 are as follows:

     - ProLogis received $92.6 million, $44.4 million and $171.6 million of the
       proceeds from the disposition of facilities to unconsolidated
       distribution real estate entities in the form of an equity interest in
       these entities during 2001, 2000 and 1999, respectively.

     - ProLogis received $2.3 million, $7.7 million and $5.2 million of the
       proceeds from its disposition of facilities to third parties in the form
       of notes receivable in 2001, 2000 and 1999, respectively.

     - In connection with the acquisition of a facility and the incurrence of
       assessment bonds, ProLogis assumed $10.3 million of secured debt in 2001.

     - In connection with the original agreement for the acquisition of the
       Kingspark S.A., ProLogis issued 67,000 Common Shares valued at $1.5
       million and 602,000 Common Shares valued at $11.9 million in 2001 and
       2000, respectively.

     - Series B Convertible Preferred Shares aggregating $151.8 million, $19.1
       million and $12.9 million were converted into Common Shares in 2001, 2000
       and 1999, respectively.

     - Net foreign currency translation adjustments of $(30.0) million, $(24.0)
       million and $(9.8) million were recognized in 2001, 2000 and 1999,
       respectively.

                                       117

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     - Limited partnership units aggregating $0.2 million, $8.2 million (total
       minority interest of $13.9 million less $5.7 million representing amounts
       due to ProLogis by the holder of the units) and $0.2 million were
       converted into Common Shares in 2001, 2000 and 1999, respectively.

     - ProLogis received $13.2 million of the proceeds from the disposition of
       facilities to North American Properties Fund II in the form of notes
       receivable from this entity during 2000. The note was repaid in 2001.

     - In 2001, ProLogis contributed its 49.9% of the common stock of ProLogis
       European Properties S.a.r.l. to ProLogis European Properties Fund for an
       additional equity interest in ProLogis European Properties Fund of $83.0
       million. In 2000, in connection with ProLogis' initial contribution of
       50.1% of the common stock of ProLogis European Properties S.a.r.l. to
       ProLogis European Properties Fund, ProLogis received an equity interest
       in ProLogis European Properties Fund of approximately $78.0 million.
       ProLogis European Properties S.a.r.l. had total assets of $403.9 million
       and total liabilities of $248.1 million. ProLogis recognized its
       investment in the remaining 49.9% of the common stock under the equity
       method from January 7, 2000 through January 6, 2001. See Note 4.

     - In connection with the 1999 merger transaction discussed in Note 11,
       ProLogis issued approximately 37.2 million Common Shares and 2.0 million
       Series E Preferred Shares, assumed approximately 1.0 million stock
       options and assumed outstanding debt and liabilities of Meridian for an
       aggregate purchase price of approximately $1.54 billion in exchange for
       the assets of Meridian (including cash balances acquired of $49.0
       million).

13. LONG-TERM COMPENSATION

  Long-Term Incentive Plan and Share Option Plan for Outside Trustees

     ProLogis has a long-term incentive plan (the "Incentive Plan"), which
includes an employee share purchase plan, a share option plan, a restricted
share unit plan and a performance share plan. No more than 14,600,000 Common
Shares in the aggregate may be awarded under the Incentive Plan and no
individual may be granted awards with respect to more than 500,000 Common Shares
in any one-year period. The Incentive Plan has a 10-year term. Additionally,
ProLogis has 500,000 Common Shares authorized for issuance under its Share
Option Plan for Outside Trustees (the "Outside Trustees Plan"). As of December
31, 2001, 2,556,000 Common Shares remain to be issued under the Incentive Plan
and 372,000 Common Shares remain to be issued under the Outside Trustees Plan.

     Employee Share Purchase Plan

     Under the employee share purchase plan certain employees of ProLogis
purchased 1,356,834 Common Shares on September 8, 1997 at a price of $21.21875
per share. ProLogis financed 95% of the total purchase price through ten-year,
recourse notes to the participants aggregating $27.3 million. The loans, which
have been recognized as a deduction from shareholders' equity, bear interest at
the lower of ProLogis' annual dividend yield on Common Shares or 6% per annum.
The loans are secured by the Common Shares purchased. For each Common Share
purchased, participants were granted two options to purchase Common Shares at a
price of $21.21875. As of December 31, 2001, there were 770,000 Common Shares
securing the employee share purchase notes. The outstanding notes receivable at
December 31, 2001 of $14,810,000 include $13,397,000 due from officers of
ProLogis.

                                       118

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Share Options

     ProLogis has granted share options under the Incentive Plan and the Outside
Trustees Plan. Share options outstanding as of December 31, 2001 are as follows:



                                                                                WEIGHTED
                                                                                 AVERAGE
                                 NUMBER OF                         EXPIRATION   REMAINING
                                  OPTIONS     EXERCISE PRICE(1)       DATE        LIFE
                                 ---------   -------------------   ----------   ---------
                                                                    
Outside Trustees Plan(2).......     98,000      $19.75-$25.00      2002-2011    6.0 years
Employee share purchase
  plan(3)......................  1,794,754             $21.21875     2007       5.7 years
Share option plan(2)(3):
  1997 awards..................    221,811   $21.21875-$23.96875     2007       5.7 years
  1998 awards..................  1,147,556    $20.9375-$224.625      2008       6.8 years
  1999 awards..................  1,153,041    $17.1875-$19.71875     2009       7.7 years
  2000 awards..................  1,186,194    $20.0625-$24.25        2010       8.6 years
  2001 awards..................  1,570,167     $20.675-$22.02        2011       9.7 years
Meridian options(4)............    309,346     $16.375-$23.9375      2004       2.2 years
Options sold to unconsolidated
  entities(2)..................  1,609,991     $18.625-$24.5625    2008-2011    7.9 years
                                 ---------
          Total................  9,090,860
                                 =========


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

(1) Exercise price is equal to the average of the high and low market prices on
    the date of grant.

(2) The holders of options awarded before 2001 are awarded dividend equivalent
    units ("DEUs") each year of the plan, except for holders of 24,000 options
    issued under the Outside Trustees Plan prior to 1999 which do not earn DEUs.
    The holders of options awarded after 2000 earn DEUs only through the vesting
    period of the underlying stock option.

(3) Graded vesting at various rates over periods from one to 10 years, subject
    to certain conditions.

(4) Options are fully exercisable. ProLogis share options issued to holders of
    Meridian options are exercisable into 1.1 Common Shares, plus $2.00. See
    Note 11.

     The weighted average fair value of the share options issued under the
Incentive Plan to ProLogis' employees, issued under the Outside Trustees Plan
and sold to unconsolidated entities during 2001 was $2.38 per option (excluding
the value of the DEUs to be earned). The activity with respect to ProLogis'
share options for the years ended December 31, 2001, 2000 and 1999 is presented
below.



                                                                   WEIGHTED
                                                                   AVERAGE     NUMBER OF
                                                       NUMBER OF   EXERCISE     OPTIONS
                                                        OPTIONS     PRICE     EXERCISABLE
                                                       ---------   --------   -----------
                                                                     
Balance at December 31, 1998.........................  4,863,210    $21.19     2,757,559
  Granted/Sold.......................................  2,066,133     20.41       899,551
  Issued in 1999 merger transaction (Note 11)........  1,025,850     20.13     1,025,850
  Exercised..........................................     (4,000)    15.50        (4,000)
  Forfeited..........................................   (487,985)    21.02            --
                                                       ---------    ------     ---------
Balance at December 31, 1999.........................  7,463,208     20.37     4,678,960
  Granted/Sold.......................................  1,702,028     23.94       483,163
  Exercised..........................................   (744,171)    19.80      (744,171)
  Forfeited..........................................   (700,459)    20.55            --
                                                       ---------    ------     ---------


                                       119

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



                                                                   WEIGHTED
                                                                   AVERAGE     NUMBER OF
                                                       NUMBER OF   EXERCISE     OPTIONS
                                                        OPTIONS     PRICE     EXERCISABLE
                                                       ---------   --------   -----------
                                                                     
Balance at December 31, 2000.........................  7,720,606     21.11     4,417,952
  Granted/Sold.......................................  1,832,538     20.69        10,000
  Exercised..........................................   (237,229)    22.35      (237,229)
  Forfeited..........................................   (225,055)    21.44            --
                                                       ---------    ------     ---------
Balance at December 31, 2001.........................  9,090,860     21.04     4,190,723
                                                       =========    ======     =========


     ProLogis did not recognize compensation expense in 2001, 2000 or 1999
related to share options granted as the exercise price of all options granted
was equal to the average of the high and low market prices on the date of grant.
Had compensation expense for these plans been determined using an option
valuation model as provided in SFAS No. 123, ProLogis' net earnings attributable
to Common Shares and net earnings per Common Share would change as follows:



                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         2001       2000       1999
                                                        -------   --------   --------
                                                                    
Net earnings attributable to Common Shares:
  As reported.........................................  $90,835   $157,715   $123,999
  Pro forma...........................................   86,808    154,857    121,767
Basic and diluted per share net earnings attributable
  to Common Shares:
  As reported -- basic................................  $  0.53   $   0.96   $   0.81
  As reported -- diluted..............................     0.52       0.96       0.81
  Pro forma -- basic..................................     0.50       0.95       0.80
  Pro forma -- diluted................................     0.49       0.94       0.80


     Since share options vest over several years and additional grants are
likely to be made in future years, the pro forma compensation cost may not be
representative of compensation cost to be expected in future years.

     The pro forma amounts above were calculated using the Black-Scholes model
and the following assumptions:



                                                          YEAR ENDED DECEMBER 31,
                                                    ------------------------------------
                                                       2001         2000         1999
                                                    ----------   ----------   ----------
                                                                     
Risk-free interest rate...........................     4.65%        4.99%        6.58%
Forecasted dividend yield.........................     6.19%        5.65%        6.10%
Volatility........................................    21.07%       22.28%       23.01%
Weighted average option life......................  6.25 years   6.25 years   6.25 years


     Restricted Share Units

     Restricted share units ("RSUs") in the form of Common Shares are awarded at
a rate of one Common Share per RSU from time to time to employees of ProLogis.
The RSUs are valued on the award date based upon the market price of the Common
Shares on that date. ProLogis recognizes the value of the RSUs awarded over the
applicable vesting period as compensation expense. As of December 31, 2001,
there were 587,500 RSUs outstanding at a total value of $12.6 million. As of
December 31, 2001, 243,125 of the

                                       120

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

outstanding RSUs are vested at a total value of $6.2 million, which has been
expensed. The remaining RSUs will vest as follows:



                                                              NUMBER OF      RELATED
                                                                UNITS        EXPENSES
                                                              ---------   --------------
                                                                          (IN THOUSANDS)
                                                                    
2002........................................................   116,875        $1,991
2003........................................................    46,300           619
2004........................................................    41,875           885
2005........................................................    55,575         1,158
2006........................................................    41,875           885
2007........................................................    41,875           885
                                                               -------        ------
          Total.............................................   344,375        $6,423
                                                               =======        ======


     Performance Share Plan

     Under the performance share plan, certain employees are awarded performance
share awards ("PSAs") in the form of Common Shares if certain performance
criteria is met. Employees who have earned PSAs must be employed by ProLogis for
two years after the award is made to receive any of the underlying Common
Shares. The PSAs carry no voting rights during this two-year waiting period but
do earn DEUs, which are awarded at the end of the two-year waiting period.

     As of December 31, 2001, there were 341,733 PSAs outstanding at a total
value of $7.5 million, of which $2.0 million has been expensed. The two-year
waiting period on 171,975 PSAs ($3.8 million) expires on December 31, 2002 while
the two-year waiting period on all of the remaining PSAs expires on December 31,
2003.

     Dividend Equivalent Units

     DEUs in the form of Common Shares are awarded at a rate of one Common Share
per DEU on December 31st of each year that the underlying share options, RSUs or
PSAs that earn DEUs are outstanding. The DEUs vest to the same extent the
underlying award vests. The DEUs are valued on the award date (December 31st)
based upon the market price of the Common Shares on that date and ProLogis
recognizes that value as compensation expense over the underlying vesting period
of the underlying award. Of the total RSUs outstanding, 167,500 RSUs do not earn
DEUs but rather earn dividends at ProLogis' current Common Share distribution
rate. As of December 31, 2001, there were 724,381 DEUs outstanding, of which
418,910 were vested. The DEUs outstanding have a total value of $15.5 million,
of which $8.5 million has been expensed as of December 31, 2001. The remaining
DEUS will vest as follows:



                                                              NUMBER OF      RELATED
                                                                UNITS        EXPENSES
                                                              ---------   --------------
                                                                          (IN THOUSANDS)
                                                                    
2002........................................................   181,094        $4,366
2003........................................................    84,370         1,763
2004........................................................    33,300           720
2005........................................................     6,707           144
                                                               -------        ------
          Total.............................................   305,471        $6,993
                                                               =======        ======


  401(k) Savings Plan and Trust

     ProLogis has a 401(k) Savings Plan and Trust ("401(k) Plan"), that provides
for matching employer contributions in Common Shares of 50 cents for every
dollar contributed by an employee, up to 6% of the

                                       121

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employees' annual compensation (within the statutory compensation limit). A
total of 190,000 Common Shares have been authorized for issuance under the
401(k) Plan. The vesting of contributed Common Shares is based on the employees'
years of service, with 20% vesting each year of service, over a five-year
period. Through December 31, 2001, no Common Shares have been issued under the
401(k) Plan as all matching contributions have been made with Common Shares
purchased in the public market.

  Nonqualified Savings Plan

     ProLogis has a Nonqualified Savings Plan to provide benefits for certain
employees. The purpose of this plan is to allow highly compensated employees the
opportunity to defer the receipt and income taxation of a certain portion of
their compensation in excess of the amount permitted under the 401(k) Plan.
ProLogis will match the lesser of (a) 50% of the sum of deferrals under both the
401(k) Plan and this plan, and (b) 3% of total compensation up to certain
levels. The matching account will vest in the same manner as the 401(k) Plan.

14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

     Selected quarterly financial data (in thousands, except for per share
amounts) for 2001 and 2000 is as follows:



                                                  THREE MONTHS ENDED,
                                  ---------------------------------------------------
                                  MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,    TOTAL
                                  ---------   --------   -------------   ------------   --------
                                                                         
2001:
  Rental income.................  $119,244    $117,147     $115,947        $113,439     $465,777
                                  ========    ========     ========        ========     ========
  Earnings (loss) before
     minority interest..........  $ 57,845    $ 58,979     $ 61,304        $(45,085)    $133,043
  Minority interest share in
     earnings...................     1,376       1,458        1,470           2,157        6,461
  Gain (loss) on disposition of
     real estate, net...........    (1,198)     (1,427)       3,488           9,145       10,008
  Foreign currency exchange
     gains (losses), net........     2,657       1,652       (6,545)         (1,485)      (3,721)
  Total income taxes............     2,489       3,675         (313)         (1,126)       4,725
                                  --------    --------     --------        --------     --------
  Net earnings (loss)...........    55,439      54,071       57,090         (38,456)     128,144
  Less preferred share
     dividends..................    11,432       9,519        8,179           8,179       37,309
                                  --------    --------     --------        --------     --------
  Net earnings (loss)
     attributable to Common
     Shares.....................  $ 44,007    $ 44,552     $ 48,911        $(46,635)    $ 90,835
                                  ========    ========     ========        ========     ========
     Basic per share net
       earnings (loss)
       attributable to Common
       Shares...................  $   0.26    $   0.26     $   0.28        $  (0.27)    $   0.53
                                  ========    ========     ========        ========     ========
     Diluted per share net
       earnings (loss)
       attributable to Common
       Shares...................  $   0.25    $   0.26     $   0.28        $  (0.27)    $   0.52
                                  ========    ========     ========        ========     ========


     ProLogis' Quarterly Reports on Form 10-Q for the periods ended March 31,
2001, June 30, 2001 and September 30, 2001 originally filed on May 10, 2001,
August 10, 2001 and November 13, 2001, respectively, included the financial
position and results of operations of ProLogis' subsidiary, Kingspark S.A., in
its unaudited consolidated condensed financial statements on a consolidated
basis. Until January 5, 2001, ProLogis owned only the non-voting preferred stock
of Kingspark S.A. and reported its investment in Kingspark S.A. under the equity
method. On that date, ProLogis acquired 95% of the membership interest (all
non-voting) in Kingspark LLC, which acquired the voting common stock of
Kingspark S.A. After the

                                       122

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

change in the ownership structure, ProLogis believed it had control of Kingspark
S.A. and began consolidating it in its financial statements along with its other
majority-owned and controlled subsidiaries and partnerships. After
reconsideration of the facts underlying its ownership position, ProLogis
determined it did not have control of Kingspark S.A., as it held no voting
interest, and therefore, consolidation was deemed inappropriate. Therefore,
ProLogis has amended its unaudited consolidated condensed financial statements
for each of the three quarterly periods in 2001 to reflect its investment in
Kingspark S.A. under the equity method, consistent with its reporting of this
investment prior to January 5, 2001. Further, ProLogis has amended its unaudited
consolidated condensed financial statements for each of the three quarterly
periods in 2001 to reflect its investments in GoProLogis and ProLogis PhatPipe,
whose sole purpose is to hold preferred stock in technology companies, under the
equity method. ProLogis began consolidating these entities in 2001, but as with
Kingspark S.A., subsequently determined that its ownership interest did not give
it control. These changes in reporting had no effect on ProLogis' originally
reported shareholders equity, net earnings attributable to Common Shares, net
earnings attributable to common shares per share or comprehensive income for any
of the three quarterly periods in 2001.



                                                  THREE MONTHS ENDED,
                                  ---------------------------------------------------
                                  MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,    TOTAL
                                  ---------   --------   -------------   ------------   --------
                                                                         
2000:
  Rental income.................  $120,809    $119,696     $121,519        $118,064     $480,088
                                  ========    ========     ========        ========     ========
  Earnings before minority
     interest...................  $ 62,526    $ 52,612     $ 67,194        $ 59,475     $241,807
  Minority interest share in
     earnings...................     1,654       1,435        1,228           1,269        5,586
  Gain (loss) on disposition of
     real estate, net...........     5,108      (4,801)         702             305        1,314
  Foreign currency exchange
     gains (losses), net........    (6,520)    (11,929)      (1,929)          2,451      (17,927)
  Total income taxes............       117         708        2,000           2,305        5,130
                                  --------    --------     --------        --------     --------
  Net earnings..................    59,343      33,739       62,739          58,657      214,478
  Less preferred share
     dividends..................    14,405      14,150       14,120          14,088       56,763
                                  --------    --------     --------        --------     --------
  Net earnings attributable to
     Common Shares..............  $ 44,938    $ 19,589     $ 48,619        $ 44,569     $157,715
                                  ========    ========     ========        ========     ========
  Basic per share net earnings
     attributable to Common
     Shares.....................  $   0.28    $   0.12     $   0.30        $   0.27     $   0.96
                                  ========    ========     ========        ========     ========
  Diluted per share net earnings
     attributable to Common
     Shares.....................  $   0.28    $   0.12     $   0.29        $   0.27     $   0.96
                                  ========    ========     ========        ========     ========


15. RELATED PARTY TRANSACTIONS:

  Transactions with Security Capital

     ProLogis leases distribution space to Security Capital, its largest
shareholder, and certain of its affiliates on market terms that management
believes are no less favorable to ProLogis than those that could be obtained
with unaffiliated third parties. ProLogis' base rental income related to these
leases were $534,000, $757,000 and $756,000 for the years ended December 31,
2001, 2000 and 1999, respectively. As of December 31, 2001, 60,103 square feet
were leased to related parties with annualized base rental revenues for these
leases of $472,000.

     Previously, ProLogis and Security Capital, its largest shareholder, were
parties to an administrative services agreement (the "ASA") under which Security
Capital provided ProLogis with certain administrative and other services as
determined by ProLogis. Substantially all of the services originally provided
under the ASA have been transferred to ProLogis. ProLogis' fees under the ASA
were $0.8 million, $2.5 million and

                                       123

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$3.5 million for 2001, 2000 and 1999, respectively. Of these fees, $0.05
million, $0.4 million and $0.6 million were capitalized in 2001, 2000 and 1999,
respectively. ProLogis recognized the ASA fees related to property management
activities as a component of rental expenses.

     ProLogis paid other fees to Security Capital, its largest shareholder, or
its affiliates as follows:

     - $2.8 million related to capital raised in ProLogis North American
       Properties Funds II, III and IV in 2001 (an additional $1.1 million was
       directly paid by ProLogis North American Properties Funds II, III and
       IV). See Note 4.

     - $0.1 million related to capital raised in ProLogis California in 2000.
       See Note 4.

     - $15.6 million related to capital raised in ProLogis California and
       ProLogis European Properties Fund and in connection with the 1999 merger
       transaction. See Notes 4 and 11.

  Transactions with Chairman and Chief Executive Officer

Investments

     ProLogis has invested in the non-voting preferred stock of certain entities
that have ownership interests in companies that produce income that is not REIT
qualifying income (i.e., rental income and mortgage interest income) under the
Code. Therefore, the voting common stock of these companies was held by third
parties including entities in which Security Capital, ProLogis' largest
shareholder, held non-voting interests. The Code, as amended in 2001, allows for
ProLogis to have a voting ownership interest in these entities. ProLogis began
negotiations to acquire the voting ownership interests in these entities in
2000. Before the acquisitions were completed it was determined that the state
income tax laws governing REITs were not all going to be changed to coincide
with the amendments to the Code. Therefore, K. Dane Brooksher, ProLogis'
chairman and chief executive officer, acquired the voting ownership interests in
Frigoscandia S.A., ProLogis Logistics and Kingspark S.A. from the third parties
and Security Capital.

     Mr. Brooksher's voting ownership interests in the entities in which
ProLogis has only non-voting ownership interests are:

     - Kingspark LLC, a limited liability company formed on January 5, 2001,
       acquired the voting common stock interest of Kingspark S.A. (an entity in
       which ProLogis owns all of the non-voting preferred stock) for $8.1
       million. ProLogis funded the entire purchase price either directly or
       through loans to Kingspark LLC or Mr. Brooksher. The ProLogis loan to
       Kingspark LLC is in the principal amount of $7.3 million, is due January
       5, 2006 and bears interest at an annual rate of 8.0%. ProLogis made a
       direct capital contribution to Kingspark LLC in the amount of $770,973.
       Mr. Brooksher's $40,557 capital contribution to Kingspark LLC was loaned
       to him by ProLogis, which recourse loan is payable on January 5, 2006 and
       bears interest at an annual rate of 8.0%. Mr. Brooksher's membership
       interest entitles him to receive dividends equal to 5% of the net cash
       flow of Kingspark LLC, as defined, if any. Mr. Brooksher is the managing
       member and he may transfer his membership interests, subject to certain
       conditions, including the approval of ProLogis. There are no provisions
       that give ProLogis the right to acquire Mr. Brooksher's membership
       interests. Mr. Brooksher does not receive compensation in connection with
       being the managing member. See Note 4.

     - CSI/Frigo LLC, a limited liability company formed on January 5, 2001,
       acquired the voting common stock interests of Frigoscandia S.A. and
       ProLogis Logistics (both entities in which ProLogis owns all of the
       non-voting preferred stock) for an aggregate of approximately $3.3
       million. ProLogis loaned CSI/ Frigo LLC $2.9 million, which loan is due
       January 5, 2011 and bears interest at an annual rate of 8%. ProLogis also
       made a capital contribution to CSI/Frigo LLC in the amount of $404,545
       and Mr. Brooksher made a $50,000 capital contribution to CSI/Frigo LLC.
       Mr. Brooksher's membership interests (after considering the terms of the
       participating note from CSI/Frigo LLC to ProLogis)

                                       124

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

       entitles him to receive dividends equal to 5% of the net cash flow of
       CSI/Frigo LLC, as defined, if any. Mr. Brooksher is the managing member
       and he may transfer his membership interests, subject to certain
       conditions, including the approval of ProLogis. There are no provisions
       that give ProLogis the right to acquire Mr. Brooksher's membership
       interests. Mr. Brooksher does not receive compensation in connection with
       being the managing member.

     As a result of the foregoing transactions, Mr. Brooksher has an effective
0.04% interest in the earnings of ProLogis Logistics, an effective 0.25%
interest in the earnings of Frigoscandia S.A. and an effective 0.25% interest in
the earnings of Kingspark S.A. See Note 4.

     In 2000, ProLogis invested in GoProLogis and ProLogis PhatPipe, whose
income is not REIT qualifying income under the Code (amendments to the Code and
state income tax laws governing REITs were not in effect at this time). These
investments were structured whereby ProLogis would have only a non-voting
preferred stock ownership interest. To complete the transactions, Mr. Brooksher
acquired the voting ownership interest in each entity as noted below.

     - GoProLogis owns preferred stock in Vizional Technologies. Mr. Brooksher
       owns all of the voting common stock of GoProLogis, representing a 2%
       interest in the earnings of GoProLogis and he is entitled to receive
       dividends equal to 2% of the net cash flow of GoProLogis, as defined, if
       any. ProLogis owns all of the non-voting preferred stock of GoProLogis,
       representing a 98% interest in the earnings of GoProLogis and ProLogis is
       entitled to receive dividends equal to the remaining 98% of net cash
       flow, as defined, if any. Mr. Brooksher contributed a $1.1 million
       recourse promissory note to GoProLogis in exchange for his interest in
       the entity, which note is payable on July 18, 2005 and bears interest at
       an annual rate of 8.0%. Mr. Brooksher is not restricted from transferring
       his ownership interest in GoProLogis and ProLogis has the right to
       acquire Mr. Brooksher's ownership interest beginning in 2001 for a price
       equal to the outstanding principal amount of the promissory note plus
       accrued and unpaid interest. See Note 4.

     - ProLogis PhatPipe owns preferred stock in PhatPipe. Mr. Brooksher owns
       all of the voting common stock of ProLogis PhatPipe, representing a 2%
       interest in the earnings of ProLogis PhatPipe and he is entitled to
       receive dividends equal to 2% of the net cash flow of ProLogis PhatPipe,
       as defined, if any. ProLogis owns all of the non-voting preferred stock
       of ProLogis PhatPipe, representing a 98% interest in the earnings of
       ProLogis PhatPipe and ProLogis is entitled to receive dividends equal to
       the remaining 98% of net cash flow, as defined, if any. Mr. Brooksher
       contributed recourse promissory notes with the aggregate principal amount
       of $122,449 to ProLogis PhatPipe in exchange for his interest in the
       entity, which note is payable on September 20, 2005 ($71,429 principal
       amount) and January 4, 2006 ($51,020 principal amount). Both notes bear
       interest at an annual rate of 8%. Mr. Brooksher is not restricted from
       transferring his ownership interest in ProLogis PhatPipe and ProLogis has
       the right to acquire Mr. Brooksher's ownership interest beginning in 2001
       for a price equal to the outstanding aggregate principal amount of the
       promissory notes plus accrued and unpaid interest. See Note 4.

Loans

     As of December 31, 2001, ProLogis had other loans outstanding from Mr.
Brooksher with an aggregate principal amount of $2,091,000. Of these, a loan for
$237,500 was repaid in January 2002 and the remainder was loaned under ProLogis'
employee share purchase plan, the terms of which are discussed in Note 13.

                                       125

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. FINANCIAL INSTRUMENTS:

  Fair Value of Financial Instruments

     The following estimates of the fair value of financial instruments have
been determined by ProLogis using available market information and valuation
methodologies believed to be appropriate for these purposes. Considerable
judgment and a high degree of subjectivity are involved in developing these
estimates and, accordingly, they are not necessarily indicative of amounts
ProLogis would realize upon disposition.

     As of December 31, 2001 and 2000, the carrying amounts of certain financial
instruments employed by ProLogis, including cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses were representative of their
fair values because of the short-term maturity of these instruments. Similarly,
the carrying values of the lines of credit balances approximate fair value as of
those dates since the interest rate fluctuates based on published market rates.
As of December 31, 2001 and 2000, the fair values of the senior unsecured debt
and the secured debt (including mortgage notes, assessment bonds and securitized
debt) have been estimated based upon quoted market prices for the same or
similar issues or by discounting the future cash flows using rates currently
available for debt with similar terms and maturities. The differences in the
fair value of ProLogis' senior unsecured debt and secured debt from the carrying
value in the table below are the result of differences in the interest rates
available to ProLogis as of December 31, 2001 and 2000, from the interest rates
in effect as of the dates the debt was issued. The senior unsecured debt and
many of the secured debt issues contain pre-payment penalties or yield
maintenance provisions which would make the cost of refinancing exceed the
benefit of refinancing at the lower rates.

     As of December 31, 2001 and 2000, the fair value of ProLogis' derivative
financial instruments are the amounts at which they could be settled, based on
quoted market prices or estimates obtained from brokers or dealers.

     The following table reflects the carrying amount and estimated fair value
of ProLogis' financial instruments (in thousands):



                                                         DECEMBER 31,
                                       -------------------------------------------------
                                                2001                      2000
                                       -----------------------   -----------------------
                                        CARRYING                  CARRYING
                                         AMOUNT     FAIR VALUE     AMOUNT     FAIR VALUE
                                       ----------   ----------   ----------   ----------
                                                                  
Balance sheet financial instruments:
  Senior unsecured debt..............  $1,670,359   $1,718,919   $1,699,989   $1,703,737
  Secured debt.......................  $  532,106   $  568,389   $  537,925   $  543,967
Derivative financial instruments:
  Foreign currency put option
     contracts.......................  $    2,686   $    2,686   $      446   $      446


  Derivative Financial Instruments

     ProLogis uses derivative financial instruments as hedges to manage
well-defined risk associated with interest and foreign currency rate
fluctuations on existing or anticipated obligations and transactions. ProLogis
does not use derivative financial instruments for trading purposes.

     The primary risks associated with derivative instruments are market risk
and credit risk. Market risk is defined as the potential for loss in the value
of the derivative due to adverse changes in market prices (interest rates or
foreign currency rates). The use of derivative financial instruments allows
ProLogis to manage the risks of increases in interest rates and fluctuations in
foreign currency exchange rates with respect to the effects these fluctuations
would have on ProLogis' income and cash flows.

     Credit risk is the risk that one of the parties to a derivative contract
fails to perform or meet their financial obligation under the contract. ProLogis
does not obtain collateral to support financial instruments subject to

                                       126

                                 PROLOGIS TRUST

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

credit risk but monitors the credit standing of counterparties. ProLogis does
not anticipate non-performance by any of the counterparties to its derivative
contracts. Should a counterparty fail to perform, however, ProLogis would incur
a financial loss to the extent of the positive fair market value of the
derivative instruments, if any.

     The following table summarizes the activity in derivative financial
instruments for the years ended December 31, 2001 and 2000 (in millions):



                                                               INTEREST       FOREIGN
                                                              RATE SWAP     CURRENCY PUT
                                                              AGREEMENTS     OPTIONS(1)
                                                              ----------    ------------
                                                                      
Notional amounts as of December 31, 1999....................   $ 169.9         $ 23.2
New contracts...............................................        --           55.5
Matured or expired contracts................................        --          (34.9)
Contracts transferred.......................................    (169.9)(2)         --
                                                               -------         ------
Notional amounts as of December 31, 2000....................        --           43.8
New contracts...............................................        --           65.5
Matured or expired contracts................................        --          (43.8)
                                                               -------         ------
Notional amounts as of December 31, 2001....................   $    --         $ 65.5
                                                               =======         ======


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

(1)  ProLogis entered into foreign currency put option contracts during 2001 and
     2000 related to its operations in Europe. The put option contracts provide
     ProLogis with the option to exchange foreign currencies for U.S. dollars at
     a fixed exchange rate such that if the foreign currency were to depreciate
     against the U.S. dollar to predetermined levels as set by the contracts,
     ProLogis could exercise its options and mitigate its foreign currency
     exchange losses. The notional amounts of the put option contracts represent
     the U.S. dollar equivalent related to the put option contracts with
     notional amounts of 45.8 million euros and 17.4 million pounds sterling as
     of December 31, 2001 and 47.1 million euros as of December 31, 2000. These
     contracts do not qualify for hedge accounting treatment and have been
     marked to market through income. ProLogis recognized aggregate expense of
     $1,027,000 in 2001, aggregate income of $627,000 in 2000 and an aggregate
     loss of $92,000 in 1999 on the put option contracts. These amounts include
     mark to market income of $1,122,000 in 2001, mark to market expense of
     $854,000 in 2000 and mark to market expense of $47,000 in 1999. See Note 1.

(2)  Represents interest rate swap agreements related to debt of ProLogis
     European Properties S.a.r.l. See Note 4.

17. COMMITMENTS AND CONTINGENCIES:

  Environmental Matters

     All of the facilities acquired by ProLogis have been subjected to
environmental reviews by ProLogis or predecessor owners. While some of these
assessments have led to further investigation and sampling, none of the
environmental assessments has revealed, nor is ProLogis aware of any
environmental liability (including asbestos related liability) that ProLogis
believes would have a material adverse effect on ProLogis' business, financial
condition or results of operations.

                                       127


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Trustees and Shareholders of
  ProLogis Trust:

     We have audited, in accordance with auditing standards generally accepted
in the United States, the financial statements of ProLogis Trust included in
this Form 10-K, and have issued our report thereon dated April 3, 2002. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The supplemental Schedule III -- Real Estate and Accumulated
Depreciation ("Schedule III") is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The Schedule III has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

Arthur Andersen, LLP

Chicago, Illinois
April 3, 2002

                                       128


                                 PROLOGIS TRUST

            SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 2001
                         (DOLLAR AMOUNTS IN THOUSANDS)



                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                  NO. OF   ENCUM-               BUILDING &       SUBSEQUENT
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS    TO ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
OPERATING PROPERTIES
Atlanta, Georgia
  Atlanta Airport Distribution
    Center......................      3             $  1,758    $       --       $    5,249
  Atlanta NE Distribution
    Center......................      8      (d)       5,582         3,047           24,467
  Atlanta West Distribution
    Center......................     20                6,771        34,785           13,156
  Breckenridge Distribution
    Center......................      1                1,440            --            4,196
  Carter-Pacific Business
    Center......................      3                  556         3,151              837
  Cedars Distribution Center....      1                1,366         7,739            2,435
  Cobb Place Distribution
    Center......................      2                1,579            --            9,742
  Greenwood Industrial Center...      1                2,497            --           11,396
  International Airport
    Industrial Center...........      9      (e)       2,939        14,146            5,430
  LaGrange Distribution
    Center......................      1                  174           986              553
  Northeast Industrial Center...      4                1,109         6,283            1,755
  Northmont Industrial Center...      1                  566         3,209              351
  Oakcliff Industrial Center....      3                  608         3,446              502
  Olympic Industrial Center.....      2                  698         3,956            1,646
  Peachtree Commerce Business
    Center......................      4      (e)         707         4,004              935
  Piedmont Court Distribution
    Center......................      2                  885         5,013            1,775
  Plaza Industrial Center.......      1                   66           372               95
  Pleasantdale Industrial
    Center......................      2                  541         3,184              635
  Riverside Distribution
    Center......................      3                2,533        13,336            1,696
  Sullivan 75 Distribution
    Center......................      3      (f)         728         2,786            2,821
  Tradeport Distribution
    Center......................      3                1,464         4,563            6,089
  Weaver Distribution Center....      2                  935         5,182              888
  Westfork Industrial Center....     10                2,483        14,115            1,378
Austin, Texas
  Corridor Park Corporate
    Center......................      6                1,652         1,681           13,923
  Montopolis Distribution
    Center......................      1                  580         3,384              854


                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------
                                                                            ACCUMULATED           DATE OF
                                                BUILDING &                  DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS   TOTAL(a,b)        (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
OPERATING PROPERTIES
Atlanta, Georgia
  Atlanta Airport Distribution
    Center......................  $    1,765    $    5,242    $    7,007     $  (1,014)             1996
  Atlanta NE Distribution
    Center......................       6,276        26,820        33,096        (4,869)          1996, 1997
  Atlanta West Distribution
    Center......................       6,774        47,938        54,712       (11,144)          1994, 1996
  Breckenridge Distribution
    Center......................       1,440         4,196         5,636            --              2001
  Carter-Pacific Business
    Center......................         556         3,988         4,544          (939)             1995
  Cedars Distribution Center....       1,692         9,848        11,540          (916)             1999
  Cobb Place Distribution
    Center......................       2,106         9,215        11,321          (587)             1999
  Greenwood Industrial Center...       2,497        11,396        13,893            --              2001
  International Airport
    Industrial Center...........       2,972        19,543        22,515        (4,649)          1994, 1995
  LaGrange Distribution
    Center......................         174         1,539         1,713          (315)             1994
  Northeast Industrial Center...       1,050         8,097         9,147        (1,705)             1996
  Northmont Industrial Center...         566         3,560         4,126          (863)             1994
  Oakcliff Industrial Center....         608         3,948         4,556          (917)             1995
  Olympic Industrial Center.....         757         5,543         6,300        (1,219)             1996
  Peachtree Commerce Business
    Center......................         707         4,939         5,646        (1,281)             1994
  Piedmont Court Distribution
    Center......................         885         6,788         7,673        (1,219)             1997
  Plaza Industrial Center.......          66           467           533          (118)             1995
  Pleasantdale Industrial
    Center......................         541         3,819         4,360          (933)             1995
  Riverside Distribution
    Center......................       2,556        15,009        17,565        (1,376)             1999
  Sullivan 75 Distribution
    Center......................         728         5,607         6,335        (1,513)          1994, 1995
  Tradeport Distribution
    Center......................       1,479        10,637        12,116        (2,251)          1994, 1996
  Weaver Distribution Center....         935         6,070         7,005        (1,446)             1995
  Westfork Industrial Center....       2,483        15,493        17,976        (3,412)             1995
Austin, Texas
  Corridor Park Corporate
    Center......................       2,113        15,143        17,256        (3,119)          1995, 1996
  Montopolis Distribution
    Center......................         580         4,238         4,818        (1,222)             1994


                                       129



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
  Rutland Distribution Center...      2                  460         2,617              472
  Southpark Corporate Center....      7                1,946            --           15,174
  Walnut Creek Corporate
    Center......................     11                2,366         2,920           19,393
Barcelona, Spain
  Sant Boi Distribution
    Center......................      1                5,497            --            5,818
Charlotte, North Carolina
  Barringer Industrial Center...      3                  308         1,746              594
  Bond Distribution Center......      2                  905         5,126            1,017
  Carowinds Distribution
    Center......................      1                3,600        20,400               --
  Charlotte Commerce Center.....     10      (d)       4,341        24,954            5,352
  Charlotte Distribution
    Center......................      9      (d)       4,578            --           24,553
  Charlotte Distribution Center
    South.......................      1                  309            --            4,253
  Interstate North Business
    Park........................      2                  535         3,030              367
  Northpark Distribution
    Center......................      2      (d)       1,183         6,707              858
  Ridge Creek Distribution
    Center......................      1                1,240         7,027                5
Chattanooga, Tennessee
  Stone Fort Distribution
    Center......................      4                2,063        11,688              552
  Tiftonia Distribution
    Center......................      1                  146           829              186
Chicago, Illinois
  Addison Distribution Center...      1                  646         3,662              454
  Alsip Distribution Center.....      2      (f)       2,093        11,859            7,030
  Bedford Park Distribution
    Center......................      1                  360         2,806               --
  Bensenville Distribution
    Center......................      2                1,668         9,448            3,783
  Bloomingdale 100 Business
    Center......................      1                  359            --            5,893
  Bolingbrook Distribution
    Center......................      2                4,565        25,864              753
  Bridgeview Distribution
    Center......................      4                1,302         7,378            1,405
  Des Plaines Distribution
    Center......................      3                2,158        12,232            2,216
  Elk Grove Distribution
    Center......................     20    (e)(f)      7,689        43,568            6,532
  Elmhurst Distribution
    Center......................      1                  713         4,043              342
  Glendale Heights Distribution
    Center......................      3                3,903        22,119              592
  Glenview Distribution
    Center......................      2    (e)(f)      1,156         6,550              834
  Itasca Distribution Center....      3                1,613         9,143              799
  Lombard Distribution Center...      1      (f)       1,170         6,630               74
  Mitchell Distribution
    Center......................      1      (e)       1,236         7,004            1,235
  North Avenue Distribution
    Center......................      2                3,201            --            8,989


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
  Rutland Distribution Center...         462         3,087         3,549          (807)             1993
  Southpark Corporate Center....       1,946        15,174        17,120        (3,455)       1994, 1995, 1996
  Walnut Creek Corporate
    Center......................       2,425        22,254        24,679        (4,471)       1994, 1995, 1996
Barcelona, Spain
  Sant Boi Distribution
    Center......................       5,497         5,818        11,315            --              2001
Charlotte, North Carolina
  Barringer Industrial Center...         308         2,340         2,648          (633)             1994
  Bond Distribution Center......         905         6,143         7,048        (1,573)             1994
  Carowinds Distribution
    Center......................       3,600        20,400        24,000        (1,842)             1999
  Charlotte Commerce Center.....       4,342        30,305        34,647        (7,662)             1994
  Charlotte Distribution
    Center......................       6,096        23,035        29,131        (4,461)    1995, 1996, 1997, 1998
  Charlotte Distribution Center
    South.......................       1,082         3,480         4,562            --              2001
  Interstate North Business
    Park........................         535         3,397         3,932          (604)             1997
  Northpark Distribution
    Center......................       1,184         7,564         8,748        (1,260)          1994, 1998
  Ridge Creek Distribution
    Center......................       1,240         7,032         8,272           (49)             2001
Chattanooga, Tennessee
  Stone Fort Distribution
    Center......................       2,063        12,240        14,303        (2,977)             1994
  Tiftonia Distribution
    Center......................         146         1,015         1,161          (229)             1995
Chicago, Illinois
  Addison Distribution Center...         640         4,122         4,762          (831)             1997
  Alsip Distribution Center.....       2,549        18,433        20,982        (2,788)          1997, 1999
  Bedford Park Distribution
    Center......................         360         2,806         3,166          (496)             1996
  Bensenville Distribution
    Center......................       1,667        13,232        14,899        (2,629)             1997
  Bloomingdale 100 Business
    Center......................       1,601         4,651         6,252            --              2001
  Bolingbrook Distribution
    Center......................       4,564        26,618        31,182        (2,450)             1999
  Bridgeview Distribution
    Center......................       1,303         8,782        10,085        (1,662)             1996
  Des Plaines Distribution
    Center......................       2,159        14,447        16,606        (2,819)          1995, 1996
  Elk Grove Distribution
    Center......................       7,689        50,100        57,789        (7,651)      1995, 1996, 1997,
                                                                                                 1998, 1999
  Elmhurst Distribution
    Center......................         713         4,385         5,098          (679)             1997
  Glendale Heights Distribution
    Center......................       3,903        22,711        26,614        (2,102)             1999
  Glenview Distribution
    Center......................       1,156         7,384         8,540          (903)          1996, 1999
  Itasca Distribution Center....       1,613         9,942        11,555        (1,356)       1996, 1997, 1998
  Lombard Distribution Center...       1,170         6,704         7,874          (616)             1999
  Mitchell Distribution
    Center......................       1,236         8,239         9,475        (1,688)             1996
  North Avenue Distribution
    Center......................       2,047        10,143        12,190        (1,383)          1997, 1998


                                       130



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
  Northlake Distribution
    Center......................      1                  372         2,106              264
  O'Hare Cargo Distribution
    Center......................      2                3,566            --           16,574
  Pleasant Prairie Distribution
    Center......................      1                1,314         7,450               --
  Remington Lakes Distribution
    Center......................      1                2,761            --           11,106
  Romeoville Distribution
    Center......................      2                1,104         6,258               15
  South Holland Distribution
    Center......................      2      (f)       1,156         6,550              817
  Woodale Distribution Center...      1                  263         1,490              131
Cincinnati, Ohio
  Airpark Distribution Center...      3      (d)       1,692            --           21,589
  Capital Distribution Center
    I...........................      4      (d)       1,750         9,922            1,535
  Capital Distribution Center
    II..........................      5      (d)       1,953        11,067            2,508
  Capital Industrial Center I...     10      (d)       1,039         5,885            2,412
  Constitution Distribution
    Center......................      1                1,465         8,301                6
  Empire Distribution Center....      3      (d)         529         2,995              827
  Kentucky Drive Business
    Center......................      4                  553         3,134            1,053
  Production Distribution
    Center......................      2      (g)         717         2,717            2,697
  Sharonville Distribution
    Center......................      3      (d)       1,761            --           11,418
  Springdale Commerce Center....      3                  421         2,384            1,320
  Union Center Business Park....      2                  979            --            6,754
Columbus, Ohio
  Alum Creek Distribution
    Center......................      1                1,118         6,284               --
  Canal Pointe Distribution
    Center......................      1                1,237         7,013                1
  Capital Park South
    Distribution Center.........      6      (d)       2,551            --           36,436
  Charter Street Distribution
    Center......................      1      (f)       1,245         7,055                7
  Columbus West Industrial
    Center......................      3      (d)         645         3,655            1,221
  Corporate Park West...........      2      (d)         679         3,849              343
  Fisher Distribution Center....      1                1,197         6,785            1,684
  Foreign Trade Center I........      5                6,527        36,989            3,320
  International Street
    Commerce....................      2                  455            --            6,704
  McCormick Distribution
    Center......................      5                1,664         9,429            2,538
  New World Distribution
    Center......................      1                  207         1,173            1,202
  South Park Distribution
    Center......................      1                1,086         6,151               10
  Westbelt Business Center......      2      (d)         465         2,635              364
Dallas/Fort Worth, Texas
  Arlington Corporate Center....      2                2,135            --            8,412
  Carter Industrial Center......      1                  334            --            2,359


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
  Northlake Distribution
    Center......................         372         2,370         2,742          (422)             1996
  O'Hare Cargo Distribution
    Center......................       5,924        14,216        20,140        (1,385)             1997
  Pleasant Prairie Distribution
    Center......................       1,315         7,449         8,764          (673)             1999
  Remington Lakes Distribution
    Center......................       2,761        11,106        13,867            --              2001
  Romeoville Distribution
    Center......................       1,104         6,273         7,377          (566)             1999
  South Holland Distribution
    Center......................       1,156         7,367         8,523          (655)             1999
  Woodale Distribution Center...         263         1,621         1,884          (263)             1997
Cincinnati, Ohio
  Airpark Distribution Center...       4,060        19,221        23,281        (2,255)          1996, 2000
  Capital Distribution Center
    I...........................       1,751        11,456        13,207        (2,758)             1994
  Capital Distribution Center
    II..........................       1,953        13,575        15,528        (3,395)             1994
  Capital Industrial Center I...       1,105         8,231         9,336        (2,056)          1994, 1995
  Constitution Distribution
    Center......................       1,465         8,307         9,772          (750)             1999
  Empire Distribution Center....         529         3,822         4,351          (864)             1995
  Kentucky Drive Business
    Center......................         553         4,187         4,740          (894)             1997
  Production Distribution
    Center......................         824         5,307         6,131          (859)          1994, 1998
  Sharonville Distribution
    Center......................       2,424        10,755        13,179        (1,166)          1997, 1998
  Springdale Commerce Center....         421         3,704         4,125          (849)             1996
  Union Center Business Park....         979         6,754         7,733            (6)             2001
Columbus, Ohio
  Alum Creek Distribution
    Center......................       1,118         6,284         7,402           (26)             2001
  Canal Pointe Distribution
    Center......................       1,238         7,013         8,251          (633)             1999
  Capital Park South
    Distribution Center.........       2,892        36,095        38,987        (4,864)    1996, 1998, 1999, 2000
  Charter Street Distribution
    Center......................       1,245         7,062         8,307          (638)             1999
  Columbus West Industrial
    Center......................         645         4,876         5,521        (1,096)             1995
  Corporate Park West...........         679         4,192         4,871          (828)             1996
  Fisher Distribution Center....       1,197         8,469         9,666        (2,073)             1995
  Foreign Trade Center I........       6,992        39,844        46,836        (3,614)             1999
  International Street
    Commerce....................         483         6,676         7,159          (533)          1997, 1999
  McCormick Distribution
    Center......................       1,664        11,967        13,631        (2,809)             1994
  New World Distribution
    Center......................         207         2,375         2,582          (599)             1994
  South Park Distribution
    Center......................       1,085         6,162         7,247          (557)             1999
  Westbelt Business Center......         465         2,999         3,464          (366)             1998
Dallas/Fort Worth, Texas
  Arlington Corporate Center....       2,135         8,412        10,547            (2)             2001
  Carter Industrial Center......         334         2,359         2,693          (496)             1996


                                       131



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
  Centerport Distribution
    Center......................      2      (f)       1,558         8,830              239
  Dallas Corporate Center.......     11      (e)       5,714            --           33,496
  Enterprise Distribution
    Center......................      3                2,719        15,410               --
  Freeport Distribution
    Center......................      4                1,393         5,549            4,180
  Freeport Corporation Center...      1                1,142            --           11,930
  Great Southwest Distribution
    Center......................     36    (e)(f)     16,580        81,174            8,971
  Great Southwest Industrial
    Center I....................      2      (e)         234         1,326              937
  Lone Star Distribution
    Center......................      1                  512         2,896              193
  Northgate Distribution
    Center......................     13      (f)       4,722        26,367            8,208
  Northpark Business Center.....      1                  197         1,117              294
  Pinnacle Park Distribution
    Center......................      2                5,058            --           22,371
  Plano Distribution Center.....      7      (f)       3,915        22,186              244
  Redbird Distribution Center...      2                1,095         6,212              329
  Royal Commerce Center.........      4      (e)       1,975        11,190            1,677
  Royal Distribution Center.....      1                  811         4,598                1
  Stemmons Distribution
    Center......................      1                  272         1,544              450
  Stemmons Industrial Center....     14                2,216        12,559            3,113
  Trinity Mills Distribution
    Center......................      7      (e)       4,453        27,346                1
  Valwood Business Center.......      4                1,884        10,676                7
  Valwood Distribution Center...      7      (f)       4,430        25,101              566
Denver, Colorado
  Denver Business Center........      6                2,015         7,486           11,331
  Downing Distribution Center...      1                   --         3,877               71
  Havana Distribution Center....      1                  401         2,281              691
  Moline Distribution Center....      1                  327         1,850              241
  Moncrieff Distribution
    Center......................      1                  314         2,493              561
  Pagosa Distribution Center....      1                  406         2,322              511
  Upland Distribution Center
    I...........................      6                  821         5,710            8,543
  Upland Distribution Center
    II..........................      6                2,456        13,946            2,261
El Paso, Texas
  Billy the Kid Distribution
    Center......................      1                  273         1,547              568
  Goodyear Distribution
    Center......................      1                  511         2,899              257


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
  Centerport Distribution
    Center......................       1,558         9,069        10,627          (811)             1999
  Dallas Corporate Center.......       6,012        33,198        39,210        (4,760)    1996, 1997, 1998, 1999
  Enterprise Distribution
    Center......................       2,719        15,410        18,129        (1,391)             1999
  Freeport Distribution
    Center......................       1,440         9,682        11,122        (1,435)       1996, 1997, 1998
  Freeport Corporation Center...       2,250        10,822        13,072            (4)             2000
  Great Southwest Distribution
    Center......................      16,071        90,654       106,725       (10,738)      1994, 1995, 1996,
                                                                                           1997, 1999, 2000, 2001
  Great Southwest Industrial
    Center I....................         308         2,189         2,497          (473)             1995
  Lone Star Distribution
    Center......................         511         3,090         3,601          (605)             1996
  Northgate Distribution
    Center......................       4,722        34,575        39,297        (4,388)    1994, 1996, 1999, 2001
  Northpark Business Center.....         197         1,411         1,608          (318)             1995
  Pinnacle Park Distribution
    Center......................       5,058        22,371        27,429            (4)             2001
  Plano Distribution Center.....       3,915        22,430        26,345        (2,040)             1999
  Redbird Distribution Center...       1,096         6,540         7,636          (822)          1994, 1999
  Royal Commerce Center.........       1,975        12,867        14,842        (1,901)             1997
  Royal Distribution Center.....         811         4,599         5,410           (32)             2001
  Stemmons Distribution
    Center......................         272         1,994         2,266          (454)             1995
  Stemmons Industrial Center....       2,566        15,322        17,888        (2,926)    1994, 1995, 1996, 1999
  Trinity Mills Distribution
    Center......................       4,453        27,347        31,800        (3,198)       1996, 1999, 2001
  Valwood Business Center.......       1,884        10,683        12,567           (74)             2001
  Valwood Distribution Center...       4,430        25,667        30,097        (2,359)             1999
Denver, Colorado
  Denver Business Center........       2,015        18,817        20,832        (3,954)    1992, 1994, 1996, 2001
  Downing Distribution Center...          --         3,948         3,948          (322)             1999
  Havana Distribution Center....         401         2,972         3,373          (817)             1993
  Moline Distribution Center....         327         2,091         2,418          (555)             1994
  Moncrieff Distribution
    Center......................         314         3,054         3,368          (926)             1992
  Pagosa Distribution Center....         406         2,833         3,239          (908)             1993
  Upland Distribution Center
    I...........................         821        14,253        15,074        (3,870)       1992, 1994, 1995
  Upland Distribution Center
    II..........................       2,489        16,174        18,663        (4,514)          1993, 1994
El Paso, Texas
  Billy the Kid Distribution
    Center......................         273         2,115         2,388          (548)             1994
  Goodyear Distribution
    Center......................         511         3,156         3,667          (761)             1991


                                       132



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
  Northwestern Corporate
    Center......................      7                1,552            --           21,554
  Vista Corporate Center........      4                1,945            --           11,259
  Vista Del Sol Industrial
    Center......................      5      (f)       1,245            --           20,799
Fort Lauderdale/Miami, Florida
  Airport West Distribution
    Center......................      2                1,253         3,825            3,455
  CenterPort Distribution
    Center......................      5                4,309        11,806            8,458
  Copans Distribution Center....      2                  504         2,857              366
  North Andrews Distribution
    Center......................      1      (g)         698         3,956               97
  Port Lauderdale Distribution
    Center......................      2                  896            --            7,842
Houston, Texas
  Brittmore Distribution
    Center......................      2                1,838        10,417              710
  Crosstimbers Distribution
    Center......................      1                  359         2,035              518
  Hempstead Distribution
    Center......................      3                1,013         5,740            1,111
  I-10 Central Distribution
    Center......................      2                  181         1,023              303
  I-10 Central Service Center...      1                   58           330              130
  Jersey Village Corporate
    Center......................      1                1,536            --           11,734
  Kempwood Business Center......      4                1,746         9,894               60
  Perimeter Distribution
    Center......................      2                  813         4,604              159
  Pine Forest Business Center...     18      (e)       4,859        27,557            3,765
  Pine North Distribution
    Center......................      2                  847         4,800              377
  Pine Timbers Distribution
    Center......................      2                2,956        16,750            1,475
  Pinemont Distribution
    Center......................      2                  642         3,636              284
  Post Oak Business Center......     15      (e)       3,005        15,378            4,334
  Post Oak Distribution
    Center......................      7      (e)       2,115        12,017            4,021
  South Loop Distribution
    Center......................      5                1,051         5,964            1,970
  Southwest Freeway Industrial
    Center......................      1                   84           476              173
  West by Northwest Industrial
    Center......................     16                4,368         8,382           33,556
  White Street Distribution
    Center......................      1                  469         2,656              339
I-95 Corridor, New Jersey
  Bellmawr Distribution
    Center......................      1                  212         1,197               63
  Brunswick Distribution
    Center......................      2                  870         4,928            1,665
  Clearview Distribution
    Center......................      1                2,232        12,648              411
  Cranbury Business Park........      1                2,012            --           10,814
  Kilmer Distribution Center....      4      (d)       2,526        14,313              895


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
  Northwestern Corporate
    Center......................       2,365        20,741        23,106        (3,248)      1992, 1993, 1994,
                                                                                              1997, 1998, 2000
  Vista Corporate Center........       2,029        11,175        13,204        (2,389)       1994, 1995, 1996
  Vista Del Sol Industrial
    Center......................       2,636        19,408        22,044        (3,407)       1995, 1997, 1998
Fort Lauderdale/Miami, Florida
  Airport West Distribution
    Center......................       1,974         6,559         8,533        (1,008)          1995, 1998
  CenterPort Distribution
    Center......................       4,522        20,051        24,573        (1,409)          1999, 2001
  Copans Distribution Center....         504         3,223         3,727          (588)          1997,1998
  North Andrews Distribution
    Center......................         698         4,053         4,751          (969)             1994
  Port Lauderdale Distribution
    Center......................       2,205         6,533         8,738          (730)             1997
Houston, Texas
  Brittmore Distribution
    Center......................       1,838        11,127        12,965        (1,161)             1999
  Crosstimbers Distribution
    Center......................         359         2,553         2,912          (655)             1994
  Hempstead Distribution
    Center......................       1,013         6,851         7,864        (1,783)             1994
  I-10 Central Distribution
    Center......................         181         1,326         1,507          (374)             1994
  I-10 Central Service Center...          58           460           518          (138)             1994
  Jersey Village Corporate
    Center......................       2,063        11,207        13,270           (39)             1999
  Kempwood Business Center......       1,746         9,954        11,700          (181)             2001
  Perimeter Distribution
    Center......................         813         4,763         5,576          (437)             1999
  Pine Forest Business Center...       4,859        31,322        36,181        (7,410)       1993, 1994, 1995
  Pine North Distribution
    Center......................         847         5,177         6,024          (537)             1999
  Pine Timbers Distribution
    Center......................       2,956        18,225        21,181        (1,915)             1999
  Pinemont Distribution
    Center......................         642         3,920         4,562          (409)             1999
  Post Oak Business Center......       3,005        19,712        22,717        (5,367)       1993, 1994, 1996
  Post Oak Distribution
    Center......................       2,115        16,038        18,153        (4,617)          1993, 1994
  South Loop Distribution
    Center......................       1,052         7,933         8,985        (2,156)             1994
  Southwest Freeway Industrial
    Center......................          84           649           733          (187)             1994
  West by Northwest Industrial
    Center......................       4,368        41,938        46,306        (8,061)      1993, 1994, 1995,
                                                                                              1996, 1997, 1998
  White Street Distribution
    Center......................         469         2,995         3,464          (704)             1995
I-95 Corridor, New Jersey
  Bellmawr Distribution
    Center......................         211         1,261         1,472          (122)             1999
  Brunswick Distribution
    Center......................         870         6,593         7,463        (1,543)             1997
  Clearview Distribution
    Center......................       2,232        13,059        15,291        (2,335)             1996
  Cranbury Business Park........       2,012        10,814        12,826            (2)             2001
  Kilmer Distribution Center....       2,526        15,208        17,734        (2,839)             1996


                                       133



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
  Meadowland Industrial
    Center......................      8      (d)       5,676        32,167           13,123
  Mt. Laurel Distribution
    Center......................      3                  826         4,679              224
  National Distribution
    Center......................      2                  513         2,908            1,080
  Pennsauken Distribution
    Center......................      4                  490         2,778              124
Indianapolis, Indiana
  Airport Business Center.......      2                  600         3,406            4,561
  Eastside Distribution
    Center......................      3                1,447         8,197              674
  North by Northeast
    Distribution Center.........      1                1,058            --            6,373
  Park 100 Industrial Center....     25               10,751        60,928            7,547
  Park Fletcher Distribution
    Center......................      9                2,687        15,224            3,832
  Shadeland Industrial Center...      3                  428         2,431              944
Juarez, Mexico
  Salvacar Industrial Center....      7                3,144            --           13,572
  Rio Bravo Industrial Center...      1                  349         1,979              282
  Ramon Rivera Industrial
    Center......................      1                  445            --            3,173
  Los Aztecas Industrial
    Center......................      1                  148           837               85
Kansas City, Kansas/Missouri
  44th Street Business Center...      1                  143           813              471
  Congleton Distribution
    Center......................      3                  518         2,937              609
  Executive Park Distribution
    Center......................      1      (f)         258         1,463              243
  Lamar Distribution Center.....      1                  323         1,829              804
  Macon Bedford Distribution
    Center......................      1                  304         1,725              512
  Platte Valley Industrial
    Center......................     11      (f)       3,867        20,017            8,471
  Riverside Distribution
    Center......................      5      (f)         533         3,024            1,063
  Riverside Industrial Center...      5      (f)       1,012         5,736            1,078
  Terrace & Lackman Distribution
    Center......................      1                  285         1,615              602
Las Vegas, Nevada
  Black Mountain Distribution
    Center......................      2                1,108            --            7,716
  Cameron Business Center.......      1      (f)       1,634         9,256               91
  Hughes Airport Center.........      1                  876            --            3,340
  Las Vegas Corporate Center....      7      (h)       4,677            --           21,978
  Placid Street Distribution
    Center......................      1      (f)       2,620        14,848               33
  South Arville Center..........      1                1,440         8,160               35
  West One Business Center......      4      (f)       2,468        13,985              935


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
  Meadowland Industrial
    Center......................       5,677        45,289        50,966        (9,957)       1996, 1997, 1998
  Mt. Laurel Distribution
    Center......................         826         4,903         5,729          (444)             1999
  National Distribution
    Center......................         513         3,988         4,501          (745)             1998
  Pennsauken Distribution
    Center......................         490         2,902         3,392          (256)             1999
Indianapolis, Indiana
  Airport Business Center.......         934         7,633         8,567          (573)             1999
  Eastside Distribution
    Center......................       1,448         8,870        10,318        (1,133)          1995, 1999
  North by Northeast
    Distribution Center.........       1,059         6,372         7,431        (1,638)             1995
  Park 100 Industrial Center....      10,646        68,580        79,226       (14,710)       1994, 1995, 1999
  Park Fletcher Distribution
    Center......................       2,785        18,958        21,743        (3,936)       1994, 1995, 1996
  Shadeland Industrial Center...         429         3,374         3,803          (774)             1995
Juarez, Mexico
  Salvacar Industrial Center....       3,955        12,761        16,716        (1,014)    1998, 1999, 2000, 2001
  Rio Bravo Industrial Center...         410         2,200         2,610           (22)             2001
  Ramon Rivera Industrial
    Center......................       2,246         1,372         3,618           (51)             2000
  Los Aztecas Industrial
    Center......................           0         1,070         1,070           (72)             1999
Kansas City, Kansas/Missouri
  44th Street Business Center...         143         1,284         1,427          (257)             1996
  Congleton Distribution
    Center......................         518         3,546         4,064          (898)             1994
  Executive Park Distribution
    Center......................         258         1,706         1,964          (185)             1998
  Lamar Distribution Center.....         323         2,633         2,956          (760)             1994
  Macon Bedford Distribution
    Center......................         304         2,237         2,541          (519)             1996
  Platte Valley Industrial
    Center......................       4,002        28,353        32,355        (6,318)          1994, 1997
  Riverside Distribution
    Center......................         534         4,086         4,620        (1,144)             1994
  Riverside Industrial Center...       1,012         6,814         7,826        (1,694)             1994
  Terrace & Lackman Distribution
    Center......................         285         2,217         2,502          (582)             1994
Las Vegas, Nevada
  Black Mountain Distribution
    Center......................       1,206         7,618         8,824          (987)             1997
  Cameron Business Center.......       1,634         9,347        10,981          (845)             1999
  Hughes Airport Center.........         910         3,306         4,216          (865)             1994
  Las Vegas Corporate Center....       4,775        21,880        26,655        (4,387)    1994, 1995, 1996, 1997
  Placid Street Distribution
    Center......................       2,620        14,881        17,501        (1,342)             1999
  South Arville Center..........       1,440         8,195         9,635          (742)             1999
  West One Business Center......       2,468        14,920        17,388        (2,759)             1996


                                       134



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
Liege, Belgium
  Liege Distribution Center.....      1                  496            --            6,216
Lille, France
  Lille Distribution Center.....      1                  963            --            5,331
Los Angeles/Orange County,
  California
  Inland Empire Distribution
    Center......................      1                  889         5,037            4,508
  Torrance Distribution
    Center......................      3               25,181            --           26,541
Louisville, Kentucky
  Airpark Commerce Center.......      4                1,583         8,971            3,079
  Louisville Distribution
    Center......................      2                  680         3,402            4,561
  New Cut Road Distribution
    Center......................      1                2,090            --            9,815
  Riverport Distribution
    Center......................      1      (f)       1,515         8,585              354
Memphis, Tennessee
  Airport Distribution Center...     20                7,160        40,573            7,361
  Centerpointe Distribution
    Center......................      3                2,497        14,151              315
  Delp Distribution Center......     10      (f)       4,886        27,687            4,553
  Fred Jones Distribution
    Center......................      1                  125           707              177
  Memphis Industrial Center.....      1                1,597            --            8,817
  Olive Branch Distribution
    Center......................      2      (f)       2,892        16,389              154
  Raines Distribution Center....      1      (f)       1,635         9,264            3,342
  Southwide Industrial Center...      4                  725         4,105              179
  Willow Lake Distribution
    Center......................      1      (f)         613         3,474               35
Monterrey, Mexico
  Monterrey Industrial Park.....      9                5,220         3,785           29,908
  Ojo de Agua Industrial
    Center......................      2                  983            --           11,526
Nashville, Tennessee
  Bakertown Distribution
    Center......................      2                  463         2,626              422
  I-40 Industrial Center........      4                1,711         9,698              688
  Interchange City Distribution
    Center......................      7                3,524        12,585           10,700
  Nashville/I-24 Distribution
    Center......................      3      (f)       1,712         8,196            6,290
  Space Park South Distribution
    Center......................     15                3,499        19,830            4,908
Oklahoma City, Oklahoma
  Melcat Distribution Center....      1                  240         1,363              862
  Meridian Business Center......      2                  195         1,109              685


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
Liege, Belgium
  Liege Distribution Center.....         496         6,216         6,712            --              2001
Lille, France
  Lille Distribution Center.....         963         5,331         6,294            --              2001
Los Angeles/Orange County,
  California
  Inland Empire Distribution
    Center......................       1,546         8,888        10,434          (812)             1999
  Torrance Distribution
    Center......................      25,181        26,541        51,722            (3)             2001
Louisville, Kentucky
  Airpark Commerce Center.......       1,583        12,050        13,633        (2,031)             1998
  Louisville Distribution
    Center......................         689         7,954         8,643        (1,247)          1995, 1998
  New Cut Road Distribution
    Center......................       2,090         9,815        11,905            (1)             2001
  Riverport Distribution
    Center......................       1,515         8,939        10,454          (775)             1999
Memphis, Tennessee
  Airport Distribution Center...       7,160        47,934        55,094        (8,802)       1995, 1996, 1999
  Centerpointe Distribution
    Center......................       2,497        14,466        16,963          (468)             2001
  Delp Distribution Center......       4,886        32,240        37,126        (5,599)       1995, 1997, 1999
  Fred Jones Distribution
    Center......................         125           884         1,009          (222)             1994
  Memphis Industrial Center.....       1,597         8,817        10,414            (7)             2001
  Olive Branch Distribution
    Center......................       2,892        16,543        19,435        (1,517)             1999
  Raines Distribution Center....       1,635        12,606        14,241        (2,362)             1998
  Southwide Industrial Center...         724         4,285         5,009          (402)             1999
  Willow Lake Distribution
    Center......................         613         3,509         4,122          (317)             1999
Monterrey, Mexico
  Monterrey Industrial Park.....       9,036        29,877        38,913        (2,986)    1997, 1998, 1999, 2000
  Ojo de Agua Industrial
    Center......................       1,881        10,628        12,509          (634)          1998, 2001
Nashville, Tennessee
  Bakertown Distribution
    Center......................         463         3,048         3,511          (652)             1995
  I-40 Industrial Center........       1,712        10,385        12,097        (1,550)       1995, 1996, 1999
  Interchange City Distribution
    Center......................       4,279        22,530        26,809        (4,080)         1994, 1995,
                                                                                               1996,1997,1998
  Nashville/I-24 Distribution
    Center......................       2,670        13,528        16,198          (157)          2000, 2001
  Space Park South Distribution
    Center......................       3,499        24,738        28,237        (6,185)             1994
Oklahoma City, Oklahoma
  Melcat Distribution Center....         240         2,225         2,465          (535)             1994
  Meridian Business Center......         196         1,793         1,989          (462)             1994


                                       135



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
  Oklahoma Distribution
    Center......................      3                  893         5,082              825
Orlando, Florida
  33rd Street Industrial
    Center......................      9      (g)       1,980        11,237            1,710
  Chancellor Distribution
    Center......................      1                  380         2,156            1,152
  Consulate Distribution
    Center......................      3      (f)       4,148        23,617               --
  La Quinta Distribution
    Center......................      1                  354         2,006              679
  Orlando Central Park..........      3                1,378            --            9,298
  Princeton Oaks Distribution
    Center......................      1      (f)         900         5,100               --
  Titusville Industrial
    Center......................      1                  283         1,603              139
Phoenix, Arizona
  24th Street Industrial
    Center......................      2                  503         2,852              837
  Alameda Distribution Center...      2                  820         4,977              998
  Black Canyon Business
    Center......................      3                  717         4,062              354
  Hohokam 10 Industrial
    Center......................      6                4,258         7,467           11,288
  I-10 West Business Center.....      3                  263         1,525              341
  Kyrene Commons Distribution
    Center......................      3                2,369         5,475               28
  Kyrene Commons South
    Distribution Center.........      2                1,096            --            5,036
  Martin Van Buren Distribution
    Center......................      6                  572         3,285              871
  Papago Distribution Center....      1                  420         2,383              195
  Pima Distribution Center......      1                  306         1,742              428
  Watkins Distribution Center...      1                  242         1,375              325
Portland, Oregon
  Argyle Distribution Center....      3                  946         5,388              650
  Columbia Distribution
    Center......................      2                  550         3,121              345
  PDX Corporate Center East.....      2      (h)       1,785            --            6,998
  PDX Corporate Center North....      7      (h)       2,405            --           10,775
  Wilsonville Corporate
    Center......................      6      (h)       2,963            --           12,163
Poznan, Poland
  Poznan Distribution Center....      2                  819            --            6,661
Reno, Nevada
  Golden Valley Distribution
    Center......................      2                  560            --           10,247
  Meredith Kleppe Business
    Center......................      5                1,573         8,949            1,530
  Pacific Industrial Center.....     10      (f)       9,566        40,036           11,178
  Packer Way Business Center....      3                  458         2,604              748


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
  Oklahoma Distribution
    Center......................         893         5,907         6,800        (1,739)             1993
Orlando, Florida
  33rd Street Industrial
    Center......................       1,980        12,947        14,927        (2,834)       1994, 1995, 1996
  Chancellor Distribution
    Center......................         380         3,308         3,688          (713)             1994
  Consulate Distribution
    Center......................       4,148        23,617        27,765        (2,142)             1999
  La Quinta Distribution
    Center......................         354         2,685         3,039          (586)             1994
  Orlando Central Park..........       1,871         8,805        10,676        (1,116)          1997, 1998
  Princeton Oaks Distribution
    Center......................         900         5,100         6,000          (460)             1999
  Titusville Industrial
    Center......................         283         1,742         2,025          (408)             1994
Phoenix, Arizona
  24th Street Industrial
    Center......................         506         3,686         4,192          (972)             1994
  Alameda Distribution Center...         820         5,975         6,795        (1,398)          1992, 1998
  Black Canyon Business
    Center......................         717         4,416         5,133          (416)             1999
  Hohokam 10 Industrial
    Center......................       4,258        18,755        23,013        (3,147)          1996, 1999
  I-10 West Business Center.....         263         1,866         2,129          (548)             1993
  Kyrene Commons Distribution
    Center......................       1,093         6,779         7,872        (1,353)       1992, 1998, 1999
  Kyrene Commons South
    Distribution Center.........       1,163         4,969         6,132          (634)             1998
  Martin Van Buren Distribution
    Center......................         572         4,156         4,728        (1,160)          1993, 1994
  Papago Distribution Center....         420         2,578         2,998          (675)             1994
  Pima Distribution Center......         306         2,170         2,476          (566)             1993
  Watkins Distribution Center...         243         1,699         1,942          (390)             1995
Portland, Oregon
  Argyle Distribution Center....         946         6,038         6,984        (1,681)             1993
  Columbia Distribution
    Center......................         551         3,465         4,016          (847)             1994
  PDX Corporate Center East.....       2,100         6,683         8,783        (1,020)             1997
  PDX Corporate Center North....       2,542        10,638        13,180        (2,397)          1995, 1996
  Wilsonville Corporate
    Center......................       2,964        12,162        15,126        (2,692)          1995, 1996
Poznan, Poland
  Poznan Distribution Center....         820         6,660         7,480            --              2001
Reno, Nevada
  Golden Valley Distribution
    Center......................       2,035         8,772        10,807        (1,449)          1996, 1998
  Meredith Kleppe Business
    Center......................       1,573        10,479        12,052        (2,901)             1993
  Pacific Industrial Center.....       9,566        51,214        60,780        (2,869)       1994, 1995, 2001
  Packer Way Business Center....         458         3,352         3,810          (963)             1993


                                       136



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
  Packer Way Distribution
    Center......................      2                  506         2,879            1,046
  Damonte Ranch Dist Ctr........      2                4,579            --           25,718
  Spice Island Distribution
    Center......................      1                  435         2,466            1,138
Reynosa, Mexico
  Colonial Industrial Center....      2                  943         1,574            3,956
  Del Norte Industrial Center...      2                  809            --            6,406
  Del Norte Industrial Center
    II..........................      1                  675            --            6,383
  Reynosa Industrial Center
    III.........................      4                2,149            --           13,409
  Reynosa Industrial Center.....      6                2,035         1,038           14,394
Salt Lake City, Utah
  Centennial Distribution
    Center......................      2                1,149            --            8,464
  Clearfield Distribution
    Center......................      2                2,500        14,165              995
  Crossroads Corporate Center...      1                  642            --            4,266
  Salt Lake International
    Distribution Center.........      2                1,367         2,792            8,472
San Antonio, Texas
  10711 Distribution Center.....      2                  582         3,301              766
  Coliseum Distribution
    Center......................      2                1,102         2,380           10,784
  Distribution Drive Center.....      1                  473         2,680              858
  Downtown Distribution
    Center......................      1                  241         1,364              321
  I-10 Central Distribution
    Center......................      1                  223         1,275              240
  I-35 Business Center..........      4                  663         3,773            1,121
  Landmark One Distribution
    Center......................      1                  341         1,933              377
  Macro Distribution Center.....      1                  225         1,282              438
  Perrin Creek Corporate
    Center......................      6                1,547            --           10,089
  San Antonio Distribution
    Center I....................     13                2,154        12,247            4,769
  San Antonio Distribution
    Center II...................      3                  945            --            6,295
  San Antonio Distribution
    Center III..................      6                1,709         9,684            2,946
  Woodlake Distribution
    Center......................      2                  248         1,405              522
San Francisco (East Bay),
  California
  Barrington Business Center....      3                1,741         9,863              353
  Central Valley Distribution
    Center......................      3                5,180        29,357               63
  Central Valley Industrial
    Center......................      2                3,694        20,938            3,096
  East Bay Industrial Center....      1                  531         3,009              431
  Eigenbrodt Way Distribution
    Center......................      1      (f)         393         2,228              282
  Hayward Commerce Center.......      4                1,933        10,955              745
  Hayward Commerce Park.........      9                2,764        15,661            3,036


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
  Packer Way Distribution
    Center......................         506         3,925         4,431        (1,068)             1993
  Damonte Ranch Dist Ctr........       6,555        23,742        30,297           (57)          2000, 2001
  Spice Island Distribution
    Center......................         435         3,604         4,039          (619)             1996
Reynosa, Mexico
  Colonial Industrial Center....         670         5,803         6,473          (135)          1999, 2000
  Del Norte Industrial Center...       1,065         6,150         7,215          (781)             1998
  Del Norte Industrial Center
    II..........................       1,274         5,784         7,058            --              2000
  Reynosa Industrial Center
    III.........................       2,228        13,330        15,558          (222)          2000, 2001
  Reynosa Industrial Center.....       2,313        15,154        17,467        (1,842)       1997, 1998, 1999
Salt Lake City, Utah
  Centennial Distribution
    Center......................       1,149         8,464         9,613        (1,766)             1995
  Clearfield Distribution
    Center......................       2,481        15,179        17,660        (3,168)             1995
  Crossroads Corporate Center...         719         4,189         4,908            (3)             2000
  Salt Lake International
    Distribution Center.........       1,364        11,267        12,631        (2,332)          1994, 1996
San Antonio, Texas
  10711 Distribution Center.....         582         4,067         4,649        (1,120)             1994
  Coliseum Distribution
    Center......................       1,613        12,653        14,266        (3,120)          1994, 1995
  Distribution Drive Center.....         473         3,538         4,011        (1,133)             1992
  Downtown Distribution
    Center......................         241         1,685         1,926          (471)             1994
  I-10 Central Distribution
    Center......................         240         1,498         1,738          (501)             1992
  I-35 Business Center..........         663         4,894         5,557        (1,459)             1993
  Landmark One Distribution
    Center......................         341         2,310         2,651          (594)             1994
  Macro Distribution Center.....         225         1,720         1,945          (493)             1993
  Perrin Creek Corporate
    Center......................       1,634        10,002        11,636        (1,862)          1995, 1996
  San Antonio Distribution
    Center I....................       2,154        17,016        19,170        (5,286)       1992, 1993, 1994
  San Antonio Distribution
    Center II...................         885         6,355         7,240        (1,595)             1994
  San Antonio Distribution
    Center III..................       1,841        12,498        14,339        (2,621)             1996
  Woodlake Distribution
    Center......................         248         1,927         2,175          (457)             1994
San Francisco (East Bay),
  California
  Barrington Business Center....       1,741        10,216        11,957          (958)             1999
  Central Valley Distribution
    Center......................       5,181        29,419        34,600        (2,652)             1999
  Central Valley Industrial
    Center......................       4,147        23,581        27,728        (2,133)             1999
  East Bay Industrial Center....         531         3,440         3,971          (888)             1994
  Eigenbrodt Way Distribution
    Center......................         393         2,510         2,903          (668)             1993
  Hayward Commerce Center.......       1,933        11,700        13,633        (3,168)             1993
  Hayward Commerce Park.........       2,764        18,697        21,461        (5,010)             1994


                                       137



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
  Hayward Distribution Center...      6                2,906        19,165            2,477
  Hayward Industrial Center.....     13      (f)       4,481        25,393            2,221
  Patterson Pass Business
    Center......................      7                4,064         4,885           24,530
  San Leandro Distribution
    Center......................      3                1,387         7,862              825
San Francisco (South Bay),
  California
  Bayside Business Center.......      2      (h)       2,088            --            4,555
  Bayside Corporate Center......      7      (h)       4,365            --           16,215
  Bayside Plaza I...............     12      (h)       5,212        18,008            1,436
  Bayside Plaza II..............      2      (h)         634            --            2,915
  Gateway Corporate Center......     11    (f)(h)      7,575        24,746            4,765
  Mowry Business Center.........      4                5,933            --           18,083
  Overlook Distribution
    Center......................      1                1,573         8,915               29
  Shoreline Business Center.....      8      (h)       4,328        16,101              679
  Shoreline Business Center
    II..........................      2      (h)         922            --            4,806
  Spinnaker Business Center.....     12      (h)       7,043        25,220            1,730
  Thornton Business Center......      5      (f)       3,988        11,706            6,325
  Trimble Distribution Center...      5                2,836        16,067            1,818
Seattle, Washington
  Andover East Business
    Center......................      2                  535         3,033              306
  Fife Corporate Center.........      3                4,059            --           10,618
  Kent Corporate Center.........      2      (h)       2,882         1,987            9,066
  Park at Woodinville A.........      5      (f)       1,937        10,976              652
  Van Doren's Distribution
    Center......................      2      (h)       2,473            --            8,880
St. Louis, Missouri
  Earth City Industrial
    Center......................      8      (f)       3,375        19,144            3,170
  Hazelwood Distribution
    Center......................      2      (f)         847         4,802              192
  Westport Distribution
    Center......................      3      (f)         761         4,310              327
Tampa, Florida
  Adamo Distribution Center.....      6                2,105        11,930              433
  Commerce Park Distribution
    Center......................      4                  811         4,597            1,156
  Eastwood Distribution
    Center......................      1      (g)         122           690               95
  Joe's Creek Distribution
    Center......................      2      (g)         161           909              136
  Lakeland Distribution
    Center......................      1                  938         5,313              622
  Orchid Lake Industrial
    Center......................      1                   41           235               23
  Plant City Distribution
    Center......................      1      (g)         206         1,169              132
  Sabal Park Distribution
    Center......................      7      (d)       2,341         5,610           12,600


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
  Hayward Distribution Center...       3,327        21,221        24,548        (5,573)             1993
  Hayward Industrial Center.....       4,481        27,614        32,095        (7,530)             1993
  Patterson Pass Business
    Center......................       5,625        27,854        33,479        (2,457)    1993, 1997, 1998, 2000
  San Leandro Distribution
    Center......................       1,387         8,687        10,074        (2,310)             1993
San Francisco (South Bay),
  California
  Bayside Business Center.......       2,088         4,555         6,643        (1,004)             1996
  Bayside Corporate Center......       4,365        16,215        20,580        (4,432)          1995, 1996
  Bayside Plaza I...............       5,216        19,440        24,656        (5,235)             1993
  Bayside Plaza II..............         634         2,915         3,549        (1,163)             1994
  Gateway Corporate Center......       7,575        29,511        37,086        (8,501)          1993, 1996
  Mowry Business Center.........       7,815        16,201        24,016        (2,177)          1997, 1998
  Overlook Distribution
    Center......................       1,573         8,944        10,517          (811)             1999
  Shoreline Business Center.....       4,328        16,780        21,108        (4,556)             1993
  Shoreline Business Center
    II..........................         922         4,806         5,728        (1,516)             1995
  Spinnaker Business Center.....       7,043        26,950        33,993        (7,365)             1993
  Thornton Business Center......       3,989        18,030        22,019        (4,225)          1993, 1996
  Trimble Distribution Center...       2,836        17,885        20,721        (4,728)             1994
Seattle, Washington
  Andover East Business
    Center......................         535         3,339         3,874          (851)             1994
  Fife Corporate Center.........       4,209        10,468        14,677        (1,847)             1996
  Kent Corporate Center.........       3,216        10,719        13,935        (2,523)             1995
  Park at Woodinville A.........       1,937        11,628        13,565        (1,104)             1999
  Van Doren's Distribution
    Center......................       2,860         8,493        11,353        (1,584)          1995, 1997
St. Louis, Missouri
  Earth City Industrial
    Center......................       3,375        22,314        25,689        (3,746)          1997, 1998
  Hazelwood Distribution
    Center......................         847         4,994         5,841          (546)          1997, 1999
  Westport Distribution
    Center......................         761         4,637         5,398          (718)             1997
Tampa, Florida
  Adamo Distribution Center.....       2,105        12,363        14,468          (344)          1995, 2001
  Commerce Park Distribution
    Center......................         811         5,753         6,564        (1,389)             1994
  Eastwood Distribution
    Center......................         122           785           907          (203)             1994
  Joe's Creek Distribution
    Center......................         160         1,046         1,206          (267)             1994
  Lakeland Distribution
    Center......................         938         5,935         6,873        (1,484)             1994
  Orchid Lake Industrial
    Center......................          41           258           299           (61)             1994
  Plant City Distribution
    Center......................         206         1,301         1,507          (313)             1994
  Sabal Park Distribution
    Center......................       2,678        17,873        20,551        (2,286)       1996, 1997, 1998


                                       138



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
  Silo Bend Distribution
    Center......................      4      (g)       2,887        16,358            1,427
  Silo Bend Industrial Center...      1      (g)         525         2,975              357
  St. Petersburg Service
    Center......................      1                   35           197               21
  Tampa East Distribution
    Center......................     10      (g)       2,700        15,302            1,823
  Tampa East Industrial
    Center......................      2      (g)         332         1,880              288
  Tampa West Distribution
    Center......................     15      (g)       3,273        18,659            3,424
  Tampa West Industrial
    Center......................      4      (g)         437           471            5,616
  Tampa West Service Center.....      2      (g)         422         2,569              186
Tijuana, Mexico
  Tijuana Industrial Center.....      5                3,816            --           22,321
Tulsa, Oklahoma
  52nd Street Distribution
    Center......................      1                  340         1,924              249
  70th East Distribution
    Center......................      1                  129           733              350
  Expressway Distribution
    Center......................      4                  573         3,280            1,219
  Henshaw Distribution Center...      3                  500         2,829              350
Warsaw, Poland
  Blonie Industrial Park........      1                1,378            --            6,818
Washington D.C./Baltimore,
  Maryland
  Airport Commons Distribution
    Center......................      2      (d)       2,320            --            9,280
  Ardmore Distribution Center...      3                1,431         8,110              924
  Ardmore Industrial Center.....      2                  984         5,581              870
  Concorde Industrial Center....      4      (d)       1,538         8,717            1,130
  De Soto Business Park.........      5                1,774        10,055            3,888
  Eisenhower Industrial
    Center......................      3      (d)       1,240         7,025            1,519
  Fleet Distribution Center.....      8      (d)       3,198        18,121            1,904
  Gateway Distribution Center...      3                  774            --            7,836
  Hampton Central Distribution
    Center......................      2                1,769            --            9,771
  Meadowridge Distribution
    Center......................      1      (d)       1,757            --            5,777
  Patapsco Distribution
    Center......................      1                  270         1,528            1,152
  Sunnyside Industrial Center...      3                1,541         8,733            1,667
  Troy Hill Distribution
    Center......................      2                2,105            --            6,275
Other...........................      4      (g)       2,962        15,475            4,085
                                  -----             --------    ----------       ----------
        Total Operating
          Properties............  1,208              600,690     2,184,741        1,388,119
                                  -----             --------    ----------       ----------


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
  Silo Bend Distribution
    Center......................       2,887        17,785        20,672        (4,127)             1994
  Silo Bend Industrial Center...         525         3,332         3,857          (823)             1994
  St. Petersburg Service
    Center......................          35           218           253           (51)             1994
  Tampa East Distribution
    Center......................       2,541        17,284        19,825        (4,227)             1994
  Tampa East Industrial
    Center......................         332         2,168         2,500          (544)             1994
  Tampa West Distribution
    Center......................       3,319        22,037        25,356        (5,198)          1994, 1995
  Tampa West Industrial
    Center......................         717         5,807         6,524        (1,005)       1994, 1996, 1998
  Tampa West Service Center.....         423         2,754         3,177          (643)             1994
Tijuana, Mexico
  Tijuana Industrial Center.....       8,672        17,465        26,137          (648)       1999, 2000, 2001
Tulsa, Oklahoma
  52nd Street Distribution
    Center......................         340         2,173         2,513          (578)             1994
  70th East Distribution
    Center......................         129         1,083         1,212          (262)             1994
  Expressway Distribution
    Center......................         573         4,499         5,072        (1,329)             1993
  Henshaw Distribution Center...         499         3,180         3,679          (785)             1994
Warsaw, Poland
  Blonie Industrial Park........       1,079         7,117         8,196            --              2000
Washington D.C./Baltimore,
  Maryland
  Airport Commons Distribution
    Center......................       2,360         9,240        11,600        (1,563)             1997
  Ardmore Distribution Center...       1,431         9,034        10,465        (2,168)             1994
  Ardmore Industrial Center.....         985         6,450         7,435        (1,592)             1994
  Concorde Industrial Center....       1,538         9,847        11,385        (2,247)             1995
  De Soto Business Park.........       1,774        13,943        15,717        (3,448)             1996
  Eisenhower Industrial
    Center......................       1,240         8,544         9,784        (2,228)             1994
  Fleet Distribution Center.....       3,115        20,108        23,223        (4,205)             1996
  Gateway Distribution Center...       1,414         7,196         8,610          (642)             1998
  Hampton Central Distribution
    Center......................       2,251         9,289        11,540        (1,466)          1996, 1997
  Meadowridge Distribution
    Center......................       1,902         5,632         7,534          (622)             1998
  Patapsco Distribution
    Center......................         270         2,680         2,950          (622)             1995
  Sunnyside Industrial Center...       1,541        10,400        11,941        (2,514)             1994
  Troy Hill Distribution
    Center......................       2,105         6,275         8,380            --              2001
Other...........................       3,108        19,414        22,522        (2,131)          1994, 1999
                                  ----------    ----------    ----------     ---------
        Total Operating
          Properties............     645,344     3,528,206     4,173,550      (574,871)
                                  ----------    ----------    ----------     ---------


                                       139



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
FACILITIES UNDER DEVELOPMENT
Budapest, Hungary
  Budapest Park.................                       1,178            --            1,777
Carlisle, Pennsylvania
  Carlisle Distribution
    Center......................                       5,135            --           15,414
Chicago, Illinois
  I-55 Distribution Center......                       3,029            --            3,791
  O'Hare Cargo Distribution
    Center......................                       3,376            --           11,469
Dortmund, Germany
  Krefeld Distribution Center...                       1,868            --            2,021
Las Vegas, Nevada
  Las Vegas Corporate Center....                         368            --              600
Le Havre, France
  Le Havre......................                         737            --            8,428
Madrid, Spain
  Alcala........................                       7,772            --            1,314
Marseille, France
  Clesud Grans Miramas
    Distribution Center.........                       1,591            --            2,172
Milan, Italy
  Piacenza Distribution
    Center......................                         358            --            1,070
Tilburg, Netherlands
  Tilburg Distribution Center...                       1,483            --            7,048
Tokyo, Japan
  Toyko Distribution Center.....                      32,863            --            7,863
Venlo, Netherlands
  Trade Port West...............                       3,106            --            5,713
                                                    --------    ----------       ----------
        Total Facilities Under
          Development...........                      62,864            --           68,680
                                                    --------    ----------       ----------
LAND HELD FOR DEVELOPMENT
Atlanta, Georgia
  Atlanta West Distribution
    Center......................                         561            --              193
  Breckenridge Distribution
    Center......................                       2,504            --            1,961
  Greenwood Ind Park............                       8,272            --            2,909


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
FACILITIES UNDER DEVELOPMENT
Budapest, Hungary
  Budapest Park.................       2,955            --         2,955            --              2001
Carlisle, Pennsylvania
  Carlisle Distribution
    Center......................      20,549            --        20,549            --              2001
Chicago, Illinois
  I-55 Distribution Center......       6,820            --         6,820            --              2001
  O'Hare Cargo Distribution
    Center......................      14,845            --        14,845            --              2001
Dortmund, Germany
  Krefeld Distribution Center...       3,889            --         3,889            --              2001
Las Vegas, Nevada
  Las Vegas Corporate Center....         968            --           968            --              2001
Le Havre, France
  Le Havre......................       9,165            --         9,165            --              2001
Madrid, Spain
  Alcala........................       9,086            --         9,086            --              2001
Marseille, France
  Clesud Grans Miramas
    Distribution Center.........       3,763            --         3,763            --              2001
Milan, Italy
  Piacenza Distribution
    Center......................       1,428            --         1,428            --              2001
Tilburg, Netherlands
  Tilburg Distribution Center...       8,531            --         8,531            --              2001
Tokyo, Japan
  Toyko Distribution Center.....      40,726            --        40,726            --              2001
Venlo, Netherlands
  Trade Port West...............       8,819            --         8,819            --              2001
                                  ----------    ----------    ----------     ---------
        Total Facilities Under
          Development...........     131,544            --       131,544            --
                                  ----------    ----------    ----------     ---------
LAND HELD FOR DEVELOPMENT
Atlanta, Georgia
  Atlanta West Distribution
    Center......................         754            --           754            --              1994
  Breckenridge Distribution
    Center......................       4,465            --         4,465            --           1997, 1998
  Greenwood Ind Park............      11,181            --        11,181            --              2000


                                       140



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
Austin, Texas
  Southpark Corporate Center....                         524            --               64
  Walnut Creek Corporate
    Center......................                         135            --               40
Baltimore, Maryland
  Meadowridge Distribution
    Center......................                         760            --              324
Barcelona, Spain
  Sant Boi Park.................                       2,995            --            6,080
Budapest, Hungary
  Budapest Park.................                       3,558            --            1,300
Charlotte, North Carolina
  Charlotte Distribution Center
    South.......................                         352            --              810
  Interstate North Business
    Park........................                         342            --                9
Chicago, Illinois
  I-55 Distribution Center......                       8,590            --            2,757
  O'Hare Cargo Distribution
    Center......................                       3,927            --            2,508
Cincinnati, Ohio
  Airpark West Distribution
    Center......................                       2,212            --            1,020
  West Chester Com Park I.......                       4,502            --            1,037
Columbus, Ohio
  Capital Park South
    Distribution Center.........                       2,040            --              220
  International Street Commerce
    Center......................                         101            --                8
Dallas/Fort Worth, Texas
  Freeport Corporate Center.....                       1,373            --            2,587
  Lewisville Distribution
    Center......................                       5,188            --            1,311
  Plano Distribution Center.....                       1,166            --               --
Denver, Colorado
  Upland Distribution Center
    I...........................                         519            --               31
Dortmund, Germany
  Krefeld Park..................                       2,584            --              101
Dulles, Virginia
  ProLogis Park -- Dulles.......                       1,165            --            1,269


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
Austin, Texas
  Southpark Corporate Center....         588            --           588            --              1996
  Walnut Creek Corporate
    Center......................         175            --           175            --              1994
Baltimore, Maryland
  Meadowridge Distribution
    Center......................       1,084            --         1,084            --              1996
Barcelona, Spain
  Sant Boi Park.................       9,075            --         9,075            --              2000
Budapest, Hungary
  Budapest Park.................       4,858            --         4,858            --              2001
Charlotte, North Carolina
  Charlotte Distribution Center
    South.......................       1,162            --         1,162            --              1997
  Interstate North Business
    Park........................         351            --           351            --              1997
Chicago, Illinois
  I-55 Distribution Center......      11,347            --        11,347            --              2000
  O'Hare Cargo Distribution
    Center......................       6,435            --         6,435            --           1996, 1997
Cincinnati, Ohio
  Airpark West Distribution
    Center......................       3,232            --         3,232            --              2000
  West Chester Com Park I.......       5,539            --         5,539            --        1997, 2000, 2001
Columbus, Ohio
  Capital Park South
    Distribution Center.........       2,260            --         2,260            --     1994, 1998, 1999, 2000
  International Street Commerce
    Center......................         109            --           109            --              1996
Dallas/Fort Worth, Texas
  Freeport Corporate Center.....       3,960            --         3,960            --              1999
  Lewisville Distribution
    Center......................       6,499            --         6,499            --           2000, 2001
  Plano Distribution Center.....       1,166            --         1,166            --              1999
Denver, Colorado
  Upland Distribution Center
    I...........................         550            --           550            --              1997
Dortmund, Germany
  Krefeld Park..................       2,685            --         2,685            --              2001
Dulles, Virginia
  ProLogis Park -- Dulles.......       2,434            --         2,434            --              2000


                                       141



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
El Paso, Texas
  Goodyear Distribution
    Center......................                         555            --               18
  Northwestern Corporate
    Center......................                       1,086            --            2,095
  Vista Del Sol Industrial
    Center......................                         324            --               12
  Vista Del Sol Industrial
    Center II...................                       1,268            --              398
  Vista Del Sol Industrial
    Center III..................                         306            --              473
Fort Lauderdale/Miami, Florida
  Port Lauderdale Distribution
    Center......................                       2,522            --              311
Houston, Texas
  Jersey Village Corporate
    Center......................                       3,217            --            1,065
  West by Northwest Industrial
    Center......................                         898            --              137
I-95 Corridor, New Jersey
  Cranbury Bus Park.............                         650            --              176
  Rancocas Distribution
    Center......................                       1,270            --               --
Indianapolis, Indiana
  Airport Business Center.......                       2,214            --               --
  Lebanon Commerce Park Land....                         827            --              945
  North Plainfield Park
    Distribution Center.........                       2,928            --                5
  Plainfield Park Distribution
    Center......................                       1,082            --              563
Juarez, Mexico
  Libramiento Aeropuerto........                       1,403            --              502
  Los Aztecas Industrial
    Center......................                         669            --               48
  Ramon Rivera Industrial
    Center......................                         445            --               25
Kansas City, Kansas/Missouri
  Executive Park................                       1,267            --              259
Las Vegas, Nevada
  Black Mountain Distribution
    Center......................                       1,242            --              115
  Hughes Airport Center.........                         262            --               11
  Las Vegas Corporate Center....             (h)       3,547            --            1,174
Le Havre, France
  Le Havre......................                       2,171            --               --
Liege, Belgium
  Liege Park....................                         651            --               --


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
El Paso, Texas
  Goodyear Distribution
    Center......................         573            --           573            --              2001
  Northwestern Corporate
    Center......................       3,181            --         3,181            --              1991
  Vista Del Sol Industrial
    Center......................         336            --           336            --              1994
  Vista Del Sol Industrial
    Center II...................       1,666            --         1,666            --           1995, 1996
  Vista Del Sol Industrial
    Center III..................         779            --           779            --              1999
Fort Lauderdale/Miami, Florida
  Port Lauderdale Distribution
    Center......................       2,833            --         2,833            --              2001
Houston, Texas
  Jersey Village Corporate
    Center......................       4,282            --         4,282            --              1997
  West by Northwest Industrial
    Center......................       1,035            --         1,035            --              1993
I-95 Corridor, New Jersey
  Cranbury Bus Park.............         826            --           826            --              1997
  Rancocas Distribution
    Center......................       1,270            --         1,270            --              2001
Indianapolis, Indiana
  Airport Business Center.......       2,214            --         2,214            --              1999
  Lebanon Commerce Park Land....       1,772            --         1,772            --              1998
  North Plainfield Park
    Distribution Center.........       2,933            --         2,933            --              2001
  Plainfield Park Distribution
    Center......................       1,645            --         1,645            --              1996
Juarez, Mexico
  Libramiento Aeropuerto........       1,905            --         1,905            --              1997
  Los Aztecas Industrial
    Center......................         717            --           717            --              2000
  Ramon Rivera Industrial
    Center......................         470            --           470            --              2000
Kansas City, Kansas/Missouri
  Executive Park................       1,526            --         1,526            --              1998
Las Vegas, Nevada
  Black Mountain Distribution
    Center......................       1,357            --         1,357            --              1995
  Hughes Airport Center.........         273            --           273            --              1997
  Las Vegas Corporate Center....       4,721            --         4,721            --           1995, 1997
Le Havre, France
  Le Havre......................       2,171            --         2,171            --              1998
Liege, Belgium
  Liege Park....................         651            --           651            --              2001


                                       142



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
Los Angeles/Orange County,
  California
  Ontario Distribution Center...                       1,623            --               --
Louisville, Kentucky
  I-65 Meyer Distribution
    Center......................                       2,911            --              513
  Riverport Distribution
    Center......................                         600            --               36
Lyon, France
  Isle d'Abeau Distribution
    Center......................                       5,294            --               --
Madrid, Spain
  Alcala........................                       4,023            --            3,954
Memphis, Tennessee
  Distriplex Distribution
    Center......................                       1,919            --               28
  Memphis Industrial Park.......                         299            --              262
  Stateline Distribution
    Center......................                       2,682            --            1,306
Milan, Italy
  Piacenza Distribution
    Center......................                         136            --            1,193
Monterrey Mexico
  Monterrey Industrial Park.....                       3,798            --              131
Orlando, Florida
  Orlando Central Park..........                       2,152            --              690
Portland, Oregon
  Clackmas Distribution
    Center......................                       2,139            --              749
Reno, Nevada
  Damonte Ranch.................                       2,454            --              841
  Golden Valley Distribution
    Center......................                         347            --              536
Reynosa, Mexico
  Del Norte Industrial Center
    II..........................                       1,391            --              432
  Pharr Bridge Industrial
    Center......................                       3,912            --            1,906
  Reynosa Industrial Center
    III.........................                         149            --               33
  Reynosa Industrial Park.......                         362            --               28
Rhine/Ruhr Region, Germany
  Cologne Eifeltor Distribution
    Center......................                         615            --            1,470
Rotterdam, Netherlands
  Moerdijk Distribution
    Center......................                       1,402            --               --


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
Los Angeles/Orange County,
  California
  Ontario Distribution Center...       1,623            --         1,623            --              1999
Louisville, Kentucky
  I-65 Meyer Distribution
    Center......................       3,424            --         3,424            --              2001
  Riverport Distribution
    Center......................         636            --           636            --              1999
Lyon, France
  Isle d'Abeau Distribution
    Center......................       5,294            --         5,294            --              2001
Madrid, Spain
  Alcala........................       7,977            --         7,977            --              2001
Memphis, Tennessee
  Distriplex Distribution
    Center......................       1,947            --         1,947            --              2000
  Memphis Industrial Park.......         561            --           561            --              1997
  Stateline Distribution
    Center......................       3,988            --         3,988            --              2001
Milan, Italy
  Piacenza Distribution
    Center......................       1,329            --         1,329            --              1999
Monterrey Mexico
  Monterrey Industrial Park.....       3,929            --         3,929            --           1998, 2000
Orlando, Florida
  Orlando Central Park..........       2,842            --         2,842            --              1996
Portland, Oregon
  Clackmas Distribution
    Center......................       2,888            --         2,888            --              1997
Reno, Nevada
  Damonte Ranch.................       3,295            --         3,295            --              1998
  Golden Valley Distribution
    Center......................         883            --           883            --              1995
Reynosa, Mexico
  Del Norte Industrial Center
    II..........................       1,823            --         1,823            --              1998
  Pharr Bridge Industrial
    Center......................       5,818            --         5,818            --              2000
  Reynosa Industrial Center
    III.........................         182            --           182            --              1998
  Reynosa Industrial Park.......         390            --           390            --              1997
Rhine/Ruhr Region, Germany
  Cologne Eifeltor Distribution
    Center......................       2,085            --         2,085            --              2000
Rotterdam, Netherlands
  Moerdijk Distribution
    Center......................       1,402            --         1,402            --              2001


                                       143



PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

                                                        INITIAL COST TO
                                                           PROLOGIS
                                                    -----------------------         COSTS
                                                                                 CAPITALIZED
                                                                                 SUBSEQUENT
                                  NO. OF   ENCUM-               BUILDING &           TO
DESCRIPTION                       BLDGS.   BRANCES    LAND     IMPROVEMENTS      ACQUISITION
-----------                       ------   -------  --------   ------------   -----------------
                                                               
Salt Lake City, Utah
  Centennial Distribution
    Center......................                         824            --              100
  Clearfield Industrial
    Center......................                         125            --               21
  Salt Lake International
    Distribution Center.........                         878            --               76
San Antonio, Texas
  Coliseum Distribution
    Center......................                         611            --              335
  Perrin Creek Corporate
    Center......................                       2,637            --              196
  San Antonio Distribution
    Center III..................                         458            --               72
  Tri-County Distribution
    Center......................                         773            --               26
San Francisco (East Bay),
  California
  Patterson Pass Business
    Center......................                         887            --              135
  Tracy Industrial Park.........             (h)       4,684            --              730
Seattle, Washington
  Port of Tacoma................                       1,543            --              429
Tampa, Florida
  Sabal Park Distribution
    Center......................                       1,178            --               44
  Tampa East Distribution
    Center......................                         233            --               --
  Tampa East Industrial
    Center......................                       1,783            --               39
  Tampa West Distribution
    Center......................                         113            --              153
Tijuana, Mexico
  Tijuana Industrial Center.....                       1,474            --               28
Tongeren, Belgium
  Lille Bus Park................                         144            --               36
Warsaw, Poland
  Blonie Industrial Park........                       1,085            --              652
  Poznan Park...................                         797            --            1,035
  Teresin Distribution Center...                       1,472            --            3,570
                                                    --------    ----------       ----------
        Total Land Held for
          Development...........                     144,081            --           56,656
                                                    --------    ----------       ----------
        GRAND TOTAL.............                    $807,635    $2,184,741       $1,513,455
                                                    ========    ==========       ==========


PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND   SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
                                          GROSS AMOUNTS AT WHICH
                                                  CARRIED
                                          AS OF DECEMBER 31, 2001
                                  ---------------------------------------

                                                                            ACCUMULATED           DATE OF
                                                BUILDING &       TOTAL      DEPRECIATION       CONSTRUCTION/
DESCRIPTION                          LAND      IMPROVEMENTS      (a,b)          (c)             ACQUISITION
-----------                       ----------   ------------   -----------   ------------   ----------------------
                                                                            
Salt Lake City, Utah
  Centennial Distribution
    Center......................         924            --           924            --              1996
  Clearfield Industrial
    Center......................         146            --           146            --              1995
  Salt Lake International
    Distribution Center.........         954            --           954            --           1994, 1995
San Antonio, Texas
  Coliseum Distribution
    Center......................         946            --           946            --              1994
  Perrin Creek Corporate
    Center......................       2,833            --         2,833            --              1996
  San Antonio Distribution
    Center III..................         530            --           530            --              1996
  Tri-County Distribution
    Center......................         799            --           799            --              2000
San Francisco (East Bay),
  California
  Patterson Pass Business
    Center......................       1,022            --         1,022            --              1999
  Tracy Industrial Park.........       5,414            --         5,414            --              2000
Seattle, Washington
  Port of Tacoma................       1,972            --         1,972            --              1998
Tampa, Florida
  Sabal Park Distribution
    Center......................       1,222            --         1,222            --              1995
  Tampa East Distribution
    Center......................         233            --           233            --              1994
  Tampa East Industrial
    Center......................       1,822            --         1,822            --              1994
  Tampa West Distribution
    Center......................         266            --           266            --              1994
Tijuana, Mexico
  Tijuana Industrial Center.....       1,502            --         1,502            --              1998
Tongeren, Belgium
  Lille Bus Park................         180            --           180            --              2000
Warsaw, Poland
  Blonie Industrial Park........       1,737            --         1,737            --              1998
  Poznan Park...................       1,832            --         1,832            --              2001
  Teresin Distribution Center...       5,042            --         5,042            --              2000
                                  ----------    ----------    ----------     ---------
        Total Land Held for
          Development...........     200,737            --       200,737            --
                                  ----------    ----------    ----------     ---------
        GRAND TOTAL.............  $  977,625    $3,528,206    $4,505,831     $(574,871)
                                  ==========    ==========    ==========     =========


                                       144


                                 PROLOGIS TRUST

    SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)

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

(a)  Reconciliation of real estate investments per Schedule III to the
     Consolidated Balance Sheet as of December 31, 2001 (in thousands):


                                                           
Total per Schedule III......................................  $4,505,831
Minority interest in real estate company....................       8,432
Capitalized preacquisition costs............................      73,930
                                                              ----------
  Total per Consolidated Balance Sheet......................  $4,588,193(i)
                                                              ==========


(b)  The aggregate cost for federal income tax purposes was approximately
     $4,337,555,635.

(c)  Buildings are depreciated over their estimated useful lives (7 years for
     capital improvements, 10 years for tenant improvements, 30 years for
     facilities acquired and 40 years for facilities developed).

(d)  $344,344,000 of these facilities will secure $200,000,000 of mortgage
     notes.

(e)  $216,305,000 of these facilities secure $145,459,000 of mortgage notes.

(f)  $373,655,000 of these facilities secure $152,184,000 of mortgage notes.

(g)  $61,405,000 of these facilities secure $22,556,000 of securitized debt.

(h)  $234,110,000 of these facilities secure $11,907,000 of assessment bonds.

(i)  A summary of activity for real estate and accumulated depreciation as
     follows (in thousands):


                                                            
Real estate investments:
  Balance at December 31, 2000..............................   $4,689,492
  Acquisitions, completions and improvements to operating
     facilities.............................................      658,879
  Dispositions..............................................     (832,732)
  Change in facilities under development balance............       46,198
  Change in capitalized preacquisition costs balance........       26,356
                                                               ----------
  Balance at December 31, 2001..............................   $4,588,193
                                                               ==========



                                                            
Accumulated depreciation:
  Balance at December 31, 2000..............................   $  476,982
  Depreciation expense......................................      120,899
  Accumulated depreciation associated with dispositions.....      (23,010)
                                                               ----------
  Balance at December 31, 2001..............................   $  574,871
                                                               ==========


                                       145


                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, that each of ProLogis Trust, a Maryland
real estate investment trust, and the undersigned Trustees and officers of
ProLogis Trust, hereby constitutes and appoints K. Dane Brooksher, Walter C.
Rakowich, Luke A. Lands and Edward S. Nekritz, or his true and lawful attorneys
in fact and agents, for it or him and in its or his name, place and stead, in
any and all capacities, with full power to act alone, to sign any and all
amendments to this report, and to file each such amendment to this report, with
all exhibits, thereto, and any and all documents, in connection therewith, with
the Securities and Exchange Commission, hereby granting unto and
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform any and all acts and things requisite and necessary to be done in an
about the premises, as fully to all intents and purposes as it or he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them may lawfully do or cause to be done
by virtue hereof.

                                       146


                                   SIGNATURES

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

                                            PROLOGIS TRUST

                                            By:    /s/ K. DANE BROOKSHER
                                              ----------------------------------
                                                     K. Dane Brooksher
                                             Chairman, Chief Executive Officer

Date: April 15, 2002

                                       147


                               INDEX TO EXHIBITS

     Certain of the following documents are filed herewith. Certain other of the
following documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.



        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
                      
          3.1            -- Articles of Amendment and Restatement of Declaration of
                            Trust of ProLogis (incorporated by reference to exhibit
                            4.1 to ProLogis' quarterly report on Form 10-Q for the
                            quarter ended June 30, 1999).
          3.2            -- Amended and Restated Bylaws of ProLogis (incorporated by
                            reference to exhibit 3.2 to ProLogis' quarterly report on
                            Form 10-Q for the quarter ended June 30, 1999).
          4.1            -- Rights Agreement, dated as of December 31, 1993, between
                            ProLogis and State Street Bank and Trust Company, as
                            Rights Agent, including form of Rights Certificate
                            (incorporated by reference to exhibit 4.4 to ProLogis'
                            registration statement No. 33-78080).
          4.2            -- First Amendment to Rights Amendment, dated as of February
                            15, 1995, between ProLogis, State Street Bank and Trust
                            Company and The First National Bank of Boston, as
                            successor Rights Agent (incorporated by reference to
                            exhibit 3.1 to ProLogis' Form 10-Q for the quarter ended
                            September 30, 1995).
          4.3            -- Second Amendment to Rights agreement, dated as of June
                            22, 1995, between ProLogis, State Street Bank and Trust
                            Company and The First National Bank of Boston
                            (incorporated by reference to Exhibit 3.1 to ProLogis'
                            Form 10-Q for the quarter ended September 30, 1995).
          4.4            -- Third Amendment to Rights Agreement, dated as of October
                            11, 2001, among ProLogis, Fleet National Bank and
                            Equiserve Trust Company, N.A. (incorporated by reference
                            to exhibit 4.1 to ProLogis' Form 10-Q for the quarter
                            ended September 30, 2001).
          4.5            -- Form of share certificate for Common Shares of Beneficial
                            Interest of ProLogis (incorporated by reference to
                            exhibit 4.4 to ProLogis' registration statement No. 33-
                            73382).
          4.6            -- ProLogis Trust Employee Share Purchase plan, as amended
                            and restated (incorporated by reference to exhibit 4.7 to
                            ProLogis' Form S-8, dated September 27, 2001).
          4.7            -- 8.72% Note due March 1, 2009 (incorporated by reference
                            to exhibit 4.7 to ProLogis' Form 10-K for the year ended
                            December 31, 1994).
          4.8            -- Form of share certificate for Series C Cumulative
                            Redeemable Preferred Shares of Beneficial Interest of
                            ProLogis (incorporated by reference to exhibit 4.8 to
                            ProLogis' Form 10-K for the year ended December 31,
                            1996).
          4.9            -- 9.34% Note due March 1, 2015 (incorporated by reference
                            to exhibit 4.8 to ProLogis' Form 10-K for the year ended
                            December 31, 1994).
          4.10           -- 7.875% Note due May 15, 2009 (incorporated by reference
                            to exhibit 4.4 to ProLogis' Form 8-K dated May 9, 1995).
          4.11           -- 7.25% Note due May 15, 2002 (incorporated by reference to
                            exhibit 4.1 to ProLogis' Form 10-Q for the quarter ended
                            June 30, 1996).
          4.12           -- 7.95% Note due May 15, 2008 (incorporated by reference to
                            exhibit 4.2 to ProLogis' Form 10-Q for the quarter ended
                            June 30, 1996).


                                       148




        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
                      
          4.13           -- 8.65% Note due May 15, 2016 (incorporated by reference to
                            exhibit 4.3 to ProLogis' Form 10-Q for the quarter ended
                            June 30, 1996).
          4.14           -- 7.81% Medium-Term Notes, Series A, due February 1, 2015
                            (incorporated by reference to exhibit 4.17 to ProLogis'
                            Form 10-K for the year ended December 31, 1996).
          4.15           -- Indenture, dated as of March 1, 1995, between ProLogis
                            and State Street Bank and Trust Company, as Trustee
                            (incorporated by reference to exhibit 4.9 to ProLogis'
                            Form 10-K for the year ended December 31, 1994).
          4.16           -- Collateral Trust Indenture, dated as of July 22, 1993,
                            between Krauss/Schwartz Properties, Ltd. and NationsBank
                            of Virginia, N.A., as Trustee (incorporated by reference
                            to exhibit 4.10 to ProLogis' Form 10-K for the year ended
                            December 31, 1994).
          4.17           -- First Supplement Collateral Trust Indenture, dated as of
                            October 28, 1994, among ProLogis Limited Partnership-IV,
                            Krauss/Schwartz Properties, Ltd., and NationsBank of
                            Virginia, N.A., as Trustee (incorporated by reference to
                            exhibit 10.6 to ProLogis' Form 10-Q for the quarter ended
                            September 30, 1994).
          4.18           -- Form of share certificate for Series D Cumulative
                            Redeemable Preferred Shares of Beneficial Interest of
                            ProLogis (incorporated by reference to exhibit 4.21 of
                            ProLogis' Registration Statement No. 69001).
          4.19           -- Form of share certificate for Series E Cumulative
                            Redeemable Preferred Shares of Beneficial Interest of
                            ProLogis (incorporated by reference to exhibit 4.22 of
                            ProLogis' Registration Statement No. 69001).
          4.20           -- 7.625% Note due July 1, 2017 (incorporated by reference
                            to exhibit 4 to ProLogis' Form 8-K dated July 11, 1997).
          4.21           -- Form of 7.05% Promissory Note due July 15, 2006
                            (incorporated by reference to exhibit 4.24 to ProLogis'
                            Form 10-K for the year ended December 31, 1999).
          4.22           -- 7.00% Promissory Note due October 1, 2003 (incorporated
                            by reference to exhibit 4.25 to ProLogis' Form 10-K for
                            the year ended December 31, 1999).
          4.23           -- Form of 6.70% Promissory Note due April 15, 2004
                            (incorporated by reference to exhibit 4.26 to ProLogis'
                            Form 10-K for the year ended December 31, 1999).
          4.24           -- Form of 7.10% Promissory Note due April 15, 2008
                            (incorporated by reference to exhibit 4.27 to ProLogis'
                            Form 10-K for the year ended December 31, 1999).
         10.1            -- Agreement of Limited Partnership of ProLogis Limited
                            Partnership-I, dated as of December 22, 1993, by and
                            among ProLogis, as general partner, and the limited
                            partners set forth therein (incorporated by reference to
                            exhibit 10.4 to ProLogis' Registration Statement No.
                            33-73382).
         10.2            -- Amended and Restated Agreement of Limited Partnership of
                            ProLogis Limited Partnership-II, dated as of February 15,
                            1994, among ProLogis as general partner, and the limited
                            partners set forth therein (incorporated by reference to
                            exhibit 10.12 to ProLogis' Registration Statement No.
                            33-78080).
         10.3            -- Third Amended and Restated Investor Agreement, dated as
                            of September 9, 1997, between ProLogis and SC Group
                            Incorporated (incorporated by reference to exhibit 10.3
                            to Security Capital Group Incorporated's Form 10-Q for
                            the quarter ended September 30, 1997).
         10.4            -- Form of Indemnification Agreement entered into between
                            ProLogis and its Trustees and executive officers
                            (incorporated by reference to exhibit 10.16 to ProLogis'
                            Registration Statement No. 33-73382).


                                       149




        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
                      
         10.5            -- Indemnification Agreement between ProLogis and each of
                            its independent Trustees (incorporated by reference to
                            exhibit 10.16 to ProLogis' Form 10-K for the year ended
                            December 31, 1995).
         10.6            -- Declaration of Trust for the benefit of ProLogis'
                            independent Trustees (incorporated by reference to
                            exhibit 10.17 to ProLogis' Form 10-K for the year ended
                            December 31, 1995).
         10.7            -- Share Option Plan for Outside Trustees (incorporated by
                            reference to exhibit 10.18 to ProLogis' Form 10-Q for the
                            quarter ended June 30, 1994).
         10.8            -- 1999 Dividend Reinvestment and Share Purchase Plan
                            (incorporated by reference to the Prospectus contained in
                            Registration Statement No. 333-75893).
         10.9            -- Amended and Restated Agreement of Limited Partnership of
                            ProLogis Limited Partnership-III, dated as of October 28,
                            1994, by and among ProLogis, as general partner, and the
                            limited partners set forth therein (incorporated by
                            reference to exhibit 10.3 to ProLogis' Form 10-Q for the
                            quarter ended September 30, 1994).
         10.10           -- Amended and Restated Agreement of Limited Partnership of
                            ProLogis Limited Partnership-IV, dated as of October 28,
                            1994, by and among ProLogis IV, Inc., as general partner,
                            and the limited partners set forth therein (incorporated
                            by reference to exhibit 10.4 to ProLogis' Form 10-Q for
                            the quarter ended September 30, 1994).
         10.11           -- Option Agreement and Consent, dated October 24, 1994, by
                            and between ProLogis and Farm Bureau Life Insurance
                            Company (incorporated by reference to exhibit 10.7 to
                            ProLogis' Form 10-Q for the quarter ended September 30,
                            1994).
         10.12           -- Form of Secured Promissory Note and Pledge Agreement
                            relating to Share Purchase Program (incorporated by
                            reference to exhibit 10.17 to ProLogis' Form 10-K for the
                            year ended December 31, 1998).
         10.13           -- Loan Agreement, dated as of December 23, 1998, between
                            ProLogis and Connecticut General Life Insurance Company
                            (incorporated by reference to exhibit 10.19 to ProLogis'
                            Form 10-K for the year ended December 31, 1998).
         10.14           -- Tranche A Promissory Note, dated as of February 22, 1999,
                            between ProLogis and Teachers Insurance and Annuity
                            Association of America (incorporated by reference to
                            exhibit 10.20 to ProLogis' Form 10-K for the year ended
                            December 31, 1998).
         10.15           -- Tranche B Promissory Note, dated as of February 22, 1999,
                            between ProLogis and Teachers Insurance and Annuity
                            Association of America (incorporated by reference to
                            exhibit 10.21 to ProLogis' Form 10-K for the year ended
                            December 31, 1998).
         10.16           -- Stock Purchase Agreement among Meridian, Harris Trust &
                            Savings Bank, as Trustee for Ameritech Pension Trust, and
                            OTR, on behalf of and as nominee for the State Teachers
                            Retirement Board of Ohio, dated as of December 29, 1995
                            (incorporated by reference to Meridian's Registration
                            Statement No. 333-00018).
         10.17           -- Amended and Restated Loan Administration Agreement
                            between The Prudential Insurance Company of America and
                            Meridian, IndTennco Limited Partnership, Metro-Sierra
                            Limited Partnership, and Progress Center/Alabama Limited
                            Partnership, dated as of February 23, 1996 (incorporated
                            by reference to exhibit 10.24 to Meridian's Form 10-K for
                            the year ended December 31, 1996).


                                       150




        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
                      
         10.18           -- Note Purchase Agreement among Meridian and The Travelers
                            Insurance Company (I/N/TRAL & CO.), United Services
                            Automobile Association (I/N/O SALKELD & CO.), The
                            Variable Annuity Life Insurance Company, The United
                            States Life Insurance Company in the City of New York,
                            All American Life Insurance Company, The Old Line Life
                            Insurance Company of America, The Lincoln National Life
                            Insurance Company, Lincoln Life & Annuity Company of New
                            York, First Penn-Pacific Life Insurance Company (I/N/O
                            CUDD & CO), Lincoln National Health & Casualty Insurance
                            Company, Allied Life Insurance Company "B" (I/N/O GERLACH
                            & CO), sons of Norway (I/N/O VAR & CO), Aid Association
                            for Lutherans (I/N/O NIMER & CO), Metropolitan Life
                            Insurance Company, National Life Insurance Company, Life
                            Insurance Company of the Southwest, Keyport Life
                            Insurance Company (I/N/O BOST & CO), Union Central Life
                            Insurance Company (I/N/O HARE & CO), and Pan-American
                            Life Insurance Company, dated November 15, 1997
                            (incorporated by reference to exhibit 10.66 to Meridian's
                            Form 10-K for the year ended December 31, 1997).
         10.19           -- Credit Agreement among ProLogis Trust, NationsBank, N.A.,
                            Commerzbank Aktien Gesellschaft, New York Branch, Chase
                            Bank of Texas, National Association and Lenders Named
                            Herein, dated as of March 29, 1999 (incorporated by
                            reference to exhibit 10.1 to ProLogis' Form 8-K dated
                            April 16, 1999).
         10.20           -- Credit Agreement among ProLogis Trust, as Borrower and
                            Guarantor, ProLogis Logistics Services Incorporated, as
                            Borrower, ProLogis Development Services Incorporated, as
                            Borrower, Bank of America N.A., as Administrative Agent,
                            Commerzbank Aktiengellschaft, New York Branch, as
                            Syndication Agent, Chase Bank of Texas, National
                            Association, as Documentation Agent, First Union National
                            Bank and Societe Generale, Southwest Agency, as Managing
                            Agents and the Lenders Named Herein as Lenders, as of
                            June 6, 2000 (incorporated by reference to exhibit 10.2
                            to ProLogis' Form 10-Q for the quarter ended June 30,
                            2000).
         10.21           -- Mortgage Noted dated as of March 29, 1999 between
                            ProLogis Trust and Pro-Industrial Funding Company, Inc.
                            (incorporated by reference to exhibit 10.1 to ProLogis'
                            Form 8-K dated May 17, 1999).
         10.22           -- Agreement of Limited Partnership of Meridian Realty
                            Partners, L.P. (incorporated by reference to exhibit 99.1
                            to ProLogis' Registration Statement No. 333-86081).
         10.23           -- ProLogis Trust 1997 Long-Term Incentive Plan (as Amended
                            and Restated Effective as of May 18, 2000 (incorporated
                            by reference to exhibit 10.1 to ProLogis' Form 10-Q for
                            the quarter ended June 30, 2000).
         10.24           -- Multi-Currency Revolving Credit Facility Agreement among
                            PLD Europe Finance B.V. and PLD U.K. Finance B.V. as
                            Original Borrowers, ProLogis Trust as guarantor, ABN AMRO
                            Bank N.V. as Arranger and Societe Generale as
                            Co-Arranger, ABN AMRO Bank N.S. as Agent and Issuing bank
                            as Banks as defined herein, dated December 17, 1999
                            (incorporated by reference to exhibit 10.24 to ProLogis'
                            Form 10-K for the year ended December 31, 1999).
         10.25           -- Form of Executive Protection Agreements entered into
                            between ProLogis and K. Dane Brooksher and Irving F.
                            Lyons III, dated as of June 24, 1999. (incorporated by
                            reference to exhibit 10.25 to ProLogis' Form 10-K for the
                            year ended December 31, 1999).


                                       151




        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
                      
         10.26           -- Form of Executive Protection Agreements entered into
                            between ProLogis and Walter C. Rakowich, Jeffrey H.
                            Schwartz, Robert J. Watson and John W. Seiple, dated as
                            of June 24, 1999 (incorporated by reference to exhibit
                            10.26 to ProLogis' Form 10-K for the year ended December
                            31, 1999).
         10.27           -- Special Equity Agreement between ProLogis and K. Dane
                            Brooksher (incorporated by reference to exhibit 10.27 to
                            ProLogis' Form 10-K/A#1 for the year ended December 31,
                            2000).
         10.28           -- Amendment No. 1, dated December 10, 2001 to Third Amended
                            and Restated Investor Agreement (incorporated by
                            reference to exhibit 2 to Amendment No. 12 to Security
                            Capital Group Incorporated's Report on Schedule 13D dated
                            December 10, 2001).
         10.29           -- Stabilised Property Contribution Agreement, dated
                            September 15, 1999, between ProLogis Management S.a.r.l.,
                            ProLogis Developments S.a.r.l., ProLogis France
                            Developments, Inc., Kingspark Holding S.A. and ProLogis.
         12.1*           -- Statement re: Computation of Ratio of Earnings to Fixed
                            Charges.
         12.2*           -- Statement re: Computation of Ratio of Earnings to
                            Combined Fixed Charges and Preferred Share Dividends.
         21.1*           -- Subsidiaries of ProLogis.
         23.1            -- Consent of Arthur Andersen LLP.
         23.2            -- Consent of KPMG -- Stockholm, Sweden.
         23.3*           -- Report of KPMG -- Stockholm, Sweden.
         23.4            -- Consent of KPMG -- New York, New York.
         23.5*           -- Report of KPMG -- New York, New York.
         24.1            -- Power of Attorney (included at page 146).
         99.1            -- Limited Liability Company Agreement of Kingspark LLC
                            dated as of January 2, 2001 (incorporated by reference to
                            exhibit 99.1 to ProLogis' Form 10-K/A#1 for the year
                            ended December 31, 2000).
         99.2            -- Promissory Note from Kingspark LLC dated January 5, 2001
                            (incorporated by reference to exhibit 99.2 to ProLogis'
                            Form 10-K/A#1 for the year ended December 31, 2000).
         99.3            -- Promissory Note from K. Dane Brooksher dated January 5,
                            2001 (incorporated by reference to exhibit 99.3 to
                            ProLogis' Form 10-K/A#1 for the year ended December 31,
                            2000).
         99.4            -- Purchase and Sale Agreement, dated January 2, 2001, among
                            Kingspark Holding S.A., Kingspark Holdings LLC and
                            Kingspark LLC (incorporated by reference to exhibit 99.4
                            to ProLogis' Form 10-K/A#1 for the year ended December
                            31, 2000).
         99.5            -- Limited Liability Company Agreement of CSI/Frigo LLC
                            dated as of January 2, 2001 (incorporated by reference to
                            exhibit 99.5 to ProLogis' Form 10-K/A#1 for the year
                            ended December 31, 2000).
         99.6            -- Promissory Note from CSI/Frigo LLC dated January 5, 2001
                            (incorporated by reference to exhibit 99.6 to ProLogis'
                            Form 10-K/A#1 for the year ended December 31, 2000).
         99.7            -- Purchase and Sale Agreement, dated January 2, 2001 among
                            ProLogis Logistics Services Incorporated, SCI Logistics
                            Holdings LLC and CSI/Frigo LLC (incorporated by reference
                            to exhibit 99.7 to ProLogis' Form 10-K/A#1 for the year
                            ended December 31, 2000).


                                       152




        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
                      
         99.8            -- Promissory Note from K. Dane Brooksher dated July 18,
                            2000 to GoProLogis Incorporated (incorporated by
                            reference to exhibit 99.8 to ProLogis' Form 10-K/A#1 for
                            the year ended December 31, 2000).
         99.9            -- Option agreement dated July 18, 2000 among GoProLogis
                            Incorporated, K. Dane Brooksher and ProLogis
                            (incorporated by reference to exhibit 99.9 to ProLogis'
                            Form 10-K/A#1 for the year ended December 31, 2000).
         99.10           -- Promissory Note from K. Dane Brooksher dated September
                            20, 2000 to ProLogis Broadband(1) Incorporated
                            (incorporated by reference to exhibit 99.10 to ProLogis'
                            Form 10-K/A#1 for the year ended December 31, 2000).
         99.11           -- Promissory Note from K. Dane Brooksher dated January 4,
                            2001 to ProLogis Broadband(1) Incorporated (incorporated
                            by reference to exhibit 99.11 to ProLogis' Form 10-K/A#1
                            for the year ended December 31, 2000).
         99.12           -- Option Agreement dated September 20, 2000 among ProLogis
                            Broadband(1) Incorporated, K. Dane Brooksher and ProLogis
                            (incorporated by reference to exhibit 99.12 to ProLogis'
                            Form 10-K/A#1 for the year ended December 31, 2000).
         99.13*          -- Letter dated April 3, 2002 to the United States
                            Securities and Exchange Commission related to audit
                            performed by Arthur Andersen LLP.


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

* Previously filed.

                                       153