content: <PAGE>
  
                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549
  
  
                                     FORM 8-K
  
  
                                  CURRENT REPORT
                      PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
  
          Date of Report (Date of earliest event reported):  July 20, 2001
  
                                 CBRE HOLDING, INC.
             --------------------------------------------------------
              (Exact Name of Registrant as Specified in its Charter)
  
  
    DELAWARE                      000-32983                      94-3391143
  ---------------           ------------------------         -------------------
  (State or Other           (Commission File Number)         (IRS Employer
  Jurisdiction of                                            Identification No.)
  Incorporation)
  
  
        200 North Sepulveda Boulevard, El Segundo, California        90245
        -----------------------------------------------------      ----------
            (Address of Principal Executive Offices)               (Zip Code)
  
                                  (310) 563-8600
                 --------------------------------------------------
                 Registrant's Telephone Number, Including Area Code
  
                                        NA
           -------------------------------------------------------------
           (Former Name or Former Address, if Changed Since Last Report)
  <PAGE>
  
       This Current Report on Form 8-K (this "Form 8-K") is filed by CBRE Holding,
  Inc. (the "Company"), a Delaware corporation, in connection with the matters
  described herein.
  
  Item 2.   Acquisition or Disposition of Assets.
  
            On July 20, 2001, pursuant to an Amended and Restated Agreement and
  Plan of Merger dated as of May 31, 2001 (the "Merger Agreement"), among CB
  Richard Ellis Services, Inc. (the "Services"), the Company and BLUM CB Corp., a
  Delaware corporation and a wholly-owned subsidiary of the Company
  ("Acquisition"), Acquisition was merged with and into Services (the "Merger").
  Services was the surviving corporation in the Merger and at the effective time
  of the Merger became a wholly-owned subsidiary of the Company.  Pursuant to the
  terms of the Merger Agreement, at the effective time of the Merger each issued
  and outstanding share of Common Stock, par value $.01 per share (the "Common
  Stock"), of Services was converted into the right to receive $16.00 in cash,
  other than (i) shares of Common Stock owned by the Company and Acquisition,
  which totaled 7,967,274 shares at such time, which were cancelled, (ii) treasury
  shares and shares of Common Stock owned by any of Services' subsidiaries, which
  were cancelled, and (iii) shares held by stockholders who perfect appraisal
  rights for such shares in accordance with Delaware law.  Following the Merger,
  the Common Stock was delisted from the New York Stock Exchange.
  
            Pursuant to an Amended and Restated Contribution and Voting Agreement,
  dated as of May 31, 2001 and as amended on July 19, 2001 (the "Contribution
  Agreement"), among (i) RCBA Strategic Partners, L.P., a Delaware limited
  partnership ("Strategic"), FS Equity Partners III, L.P., a Delaware limited
  partnership ("FSEP III"), FS Equity Partners International, L.P., a Delaware
  limited partnership ("FSEP International"), The Koll Holding Company, a
  California corporation ("Koll Holding"), Frederic V. Malek, a former director of
  Services ("Malek"), Raymond E. Wirta, the Chief Executive Officer and a director
  of Services ("Wirta"), and W. Brett White, the Chairman of the Americas and a
  director of Services ("White") (collectively, the "Continuing Stockholders");
  (ii) the Company; and (iii) Acquisition, among other things, immediately prior
  to the effective time of the Merger, the Continuing Stockholders and their
  affiliates contributed 7,967,274 shares of Common Stock to the Company (the
  "Share Contribution") in consideration for the issuance to them of an equal
  number of shares of Class B Common Stock, par value $.01 per share, of the
  Company (the "Class B Common Stock").  Such shares of Common Stock contributed
  to the Company were cancelled at the effective time of the Merger.  Also
  pursuant to the Contribution Agreement, Strategic contributed $25,522,992.00 to
  the Company and the Company issued 1,595,187 shares of Class B Common Stock to
  Strategic and Blum Strategic Partners II, L.P. ("Blum") contributed
  $45,439,472.00 to the Company and the Company issued 2,839,967 shares of Class B
  Common Stock to Blum (the foregoing, collectively, the "Cash Contribution," and
  together with the Share Contribution, the "Contributions").
  
            In connection with the completion of the Merger, a Securityholders'
  Agreement, dated as of July 20, 2001 (the "Securityholders' Agreement"), was
  entered into among Strategic, Blum, FSEP III, FSEP International, Koll Holding,
  California Public Employees' Retirement System ("CalPERS"), Malek, DLJ
  Investment Funding, Inc., Credit Suisse First Boston Corporation, Wirta, White,
  Services and the Company, which sets forth certain agreements among the parties
  thereto with respect to the Company's Class A Common Stock and Class B
  <PAGE>
  
  Common Stock. Immediately prior to the Merger and the related transactions, the
  Company was wholly-owned and controlled by Strategic. As a result of the
  provisions set forth in the Securityholders' Agreement, after the Merger, the
  Company remains controlled by Strategic and its affiliates, which have the right
  to designate a majority of the Company's directors.
  
            The funding to complete the Merger, as well as the refinancing of
  substantially all of the outstanding indebtedness of Services, was obtained
  through (i) the Contributions, (ii) the offering by the Company of shares of its
  Class A Common Stock, par value $.01 per share, of the Company (the "Class A
  Common Stock") to employees of Services, (iii) the sale of 625,000 shares of
  Class A Common Stock to CalPERS for $16.00 per share, (iv) the issuance and sale
  by the Company of units for $65 million, which units consist in the aggregate of
  $65 million aggregate principal amount of 16% Senior Notes due 2001 and 339,820
  shares of Class A Common Stock, (v) the issuance and sale by Acquisition of $229
  million aggregate principal amount of 11 1/4% Senior Subordinated Notes due 2011
  for $225.6 million (which Senior Subordinated Notes were assumed by Services in
  connection with the Merger) and (vi) borrowings by Services under a new credit
  agreement with Credit Suisse First Boston and other lenders of approximately
  $285 million.
  
            The Merger Agreement is hereby incorporated herein by reference to
  Exhibit 2.1, the Contribution Agreement, as amended, is hereby incorporated
  herein by reference to Exhibits 2.2 and 2.3, the Securityholders' Agreement is
  hereby incorporated herein by reference to Exhibit 99.1 and Services' press
  release announcing the effectiveness of the Merger is incorporated herein by
  reference to Exhibit 99.2.  The foregoing descriptions of such documents are
  qualified in their entirety by reference to such exhibits.
  
  Item 7.   Financial Statements, Pro Forma Financial Information and Exhibits.
  
        (a) Financial Statements of Business Acquired.
  
            Audited financial statements for Services as of December 31, 2000 and
  1999 and for the years ended December 31, 2000, 1999 and 1998 are set forth
  below.  Unaudited financial statements for Services as of March 31, 2001 and for
  the three months ended March 31, 2001 and 2000 are also set forth below.
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                            CONSOLIDATED BALANCE SHEETS
              (Dollars in thousands, except share and per share data)
  
  <TABLE>
  <CAPTION>
                                                           March 31,  December 31,
                                                             2001         2000
                                                          ----------- ------------
                                                          (Unaudited)
                          ASSETS
                          ------
  <S>                                                     <C>         <C>
  Current Assets:
   Cash and cash equivalents............................   $ 20,339     $ 20,854
   Receivables, less allowance for doubtful accounts of
    $11,959 and $12,631 at March 31, 2001 and
    December 31, 2000 ..................................    141,792      176,908
   Prepaid expenses.....................................      9,819        8,017
   Deferred taxes, net..................................     13,105       11,139
   Other current assets.................................      8,716        6,127
                                                           --------     --------
   Total current assets.................................    193,771      223,045
  Property and equipment, net...........................     75,048       75,992
  Goodwill, net of accumulated amortization of $59,738
   and $56,417 at March 31, 2001 and December 31, 2000..    415,299      423,975
  Other intangible assets, net of accumulated
   amortization of $290,679 and $289,038 at March 31,
   2001 and December 31, 2000...........................     44,169       46,432
  Cash surrender value of insurance policies, deferred
   compensation plan....................................     61,267       53,203
  Investment in and advances to unconsolidated
   subsidiaries.........................................     38,187       41,325
  Deferred taxes, net...................................     35,316       32,327
  Prepaid pension costs.................................     24,126       25,235
  Other assets..........................................     44,113       41,571
                                                           --------     --------
   Total assets.........................................   $931,296     $963,105
                                                           ========     ========
  
  <CAPTION>
           LIABILITIES AND STOCKHOLDERS' EQUITY
           ------------------------------------
  <S>                                                     <C>         <C>
  Current Liabilities:
   Accounts payable and accrued expenses................   $ 77,803     $ 83,673
   Compensation and employee benefits payable...........     63,790       79,801
   Accrued bonus and profit sharing.....................     20,807      107,878
   Income taxes payable.................................     14,696       28,260
   Short-term borrowings................................      8,418        9,215
   Current maturities of long-term debt.................      1,161        1,378
                                                           --------     --------
   Total current liabilities............................    186,675      310,205
  Long-term debt:
   Senior subordinated notes, less unamortized discount
    of $1,604 and $1,664 at March 31, 2001 and December
    31, 2000............................................    173,396      173,336
   Revolving credit facility............................    218,000      110,000
   Other long-term debt.................................     18,257       20,235
                                                           --------     --------
   Total long-term debt.................................    409,653      303,571
  Deferred compensation liability.......................     79,980       80,503
  Other liabilities.....................................     27,729       29,739
                                                           --------     --------
   Total liabilities....................................    704,037      724,018
  Minority interest.....................................      2,967        3,748
  Commitments and contingencies
  Stockholders' Equity:
   Preferred stock, $0.01 par value; 8,000,000 shares
    authorized; no shares issued or outstanding.........        --           --
   Common stock, $0.01 par value; 100,000,000 shares
    authorized; 20,636,051 and 20,605,023 shares
    outstanding at March 31, 2001 and December 31,
    2000................................................        217          217
   Additional paid-in capital...........................    365,420      364,168
   Notes receivable from sale of stock..................    (11,661)     (11,847)
   Accumulated deficit..................................    (91,943)     (89,097)
   Accumulated other comprehensive loss.................    (21,897)     (12,258)
   Treasury stock at cost, 1,072,155 shares at March 31,
    2001 and December 31, 2000..........................    (15,844)     (15,844)
                                                           --------     --------
   Total stockholders' equity...........................    224,292      235,339
                                                           --------     --------
   Total liabilities and stockholders' equity...........   $931,296     $963,105
                                                           ========     ========
  </TABLE>
  
    The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         4
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
              (Dollars in thousands, except share and per share data)
  
  <TABLE>
  <CAPTION>
                                                           Three Months Ended
                                                                March 31,
                                                          ----------------------
                                                             2001        2000
                                                          ----------  ----------
  <S>                                                     <C>         <C>
  Revenue:
    Leases............................................... $  103,166  $   99,753
    Sales................................................     73,843      74,281
    Property and facilities management fees..............     27,872      25,285
    Consulting and referral fees.........................     16,367      16,314
    Appraisal fees.......................................     18,836      16,284
    Loan origination and servicing fees..................     14,812       9,263
    Investment management fees...........................      8,549       7,337
    Other................................................      9,053      12,402
                                                          ----------  ----------
      Total revenue......................................    272,498     260,919
  Costs and Expenses:
    Commissions, fees and other incentives...............    124,398     113,963
    Operating, administrative and other..................    134,079     127,148
    Depreciation and amortization........................     11,696      10,569
                                                          ----------  ----------
  Operating income.......................................      2,325       9,239
  Interest income........................................        800         489
  Interest expense.......................................      9,055       9,685
                                                          ----------  ----------
  (Loss) income before (benefit) provision for income
   tax...................................................     (5,930)         43
  (Benefit) provision for income tax.....................     (3,084)         23
                                                          ----------  ----------
  Net (loss) income...................................... $   (2,846) $       20
                                                          ==========  ==========
  Basic (loss) earnings per share........................ $    (0.13) $      --
                                                          ==========  ==========
  Weighted average shares outstanding for basic (loss)
   earnings per share.................................... 21,309,550  20,819,268
                                                          ==========  ==========
  Diluted (loss) earnings per share...................... $    (0.13) $      --
                                                          ==========  ==========
  Weighted average shares outstanding for diluted (loss)
   earnings per share.................................... 21,309,550  20,851,184
                                                          ==========  ==========
  </TABLE>
  
    The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         5
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                               (Dollars in thousands)
  
  <TABLE>
  <CAPTION>
                                                            Three Months Ended
                                                                March 31,
                                                            -------------------
                                                              2001       2000
                                                            ---------  --------
  <S>                                                       <C>        <C>
  Cash flows from operating activities:
  Net (loss) income........................................ $  (2,846) $     20
  Adjustments to reconcile net (loss) income to net cash used in
   operating activities:
   Depreciation and amortization excluding deferred
    financing costs........................................    11,696    10,569
   Gain on sale of properties, businesses and servicing
    rights.................................................    (6,279)   (4,735)
   Deferred compensation deferrals.........................    11,113     8,513
   Equity interest in earnings of unconsolidated
    subsidiaries...........................................    (1,042)   (1,742)
   Provision for doubtful accounts.........................     1,173       987
  Decrease in receivables..................................    27,920    20,973
  Increase in cash surrender value of insurance policies,
   deferred compensation plan..............................    (8,064)  (10,751)
  Decrease in compensation and employee benefits payable
   and accrued bonus and profit sharing....................  (100,714)  (87,165)
  Decrease in accounts payable and accrued expenses........    (4,505)   (6,783)
  Decrease in income taxes payable.........................   (17,632)   (5,463)
  (Decrease) increase in other liabilities.................   (11,664)    1,777
  Other....................................................    (3,419)    6,278
                                                            ---------  --------
    Net cash used in operating activities..................  (104,263)  (67,522)
                                                            ---------  --------
  
  Cash flows from investing activities:
  Purchases of property and equipment......................    (6,639)   (4,538)
  Proceeds from sale of properties, businesses and
   servicing rights........................................     6,105    11,304
  Distributions from (contributions to) investments in and
   advances to unconsolidated subsidiaries, net............     3,276      (711)
  Other investing activities, net..........................    (3,278)      259
                                                            ---------  --------
    Net cash (used in) provided by investing activities....      (536)    6,314
                                                            ---------  --------
  
  Cash flows from financing activities:
  Proceeds from revolving credit facility..................   142,000    88,000
  Repayment of revolving credit facility...................   (34,000)  (27,000)
  Repayment of senior notes and other loans, net...........    (2,786)   (1,168)
  Other financing activities, net..........................      (274)   (1,038)
                                                            ---------  --------
    Net cash provided by financing activities..............   104,940    58,794
                                                            ---------  --------
  Net increase (decrease) in cash and cash equivalents.....       141    (2,414)
  Cash and cash equivalents, at beginning of period........    20,854    27,844
  Effect of exchange rate changes on cash..................      (656)     (639)
                                                            ---------  --------
  Cash and cash equivalents, at end of period.............. $  20,339  $ 24,791
                                                            =========  ========
  Supplemental data:
  Cash paid during the period for:
   Interest (none capitalized)............................. $   3,733  $  6,074
   Income taxes, net....................................... $  14,575  $  5,376
  </TABLE>
  
    The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         6
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (Unaudited)
  
  1. Organization
  
     CB Richard Ellis Services, Inc. (the Company), was founded in 1906. It is a
  holding company that conducts its worldwide operations through approximately 75
  direct and indirect subsidiaries. Approximately 77% of the Company's revenues
  are from the United States and 23% from the rest of the world. On February 24,
  2001, the Company announced that it had entered into an Agreement and Plan of
  Merger with CBRE Holding, Inc. and Blum CB Corporation, which was amended and
  restated as of April 24, 2001, whereby members of senior management, Ray Wirta,
  CEO, and Brett White, Chairman, The Americas, together with director, Fred
  Malek and directors, Richard Blum, Bradford Freeman and Donald Koll and their
  respective affiliates will acquire all of the Company's outstanding shares
  which they do not own at a price of $16.00 per share. The acquisition, which is
  expected to close in July of 2001, remains subject to certain conditions,
  including, among others, the receipt of debt financing by CBRE Holding, Inc.
  and the Company, the approval of the merger by the holders of two-thirds of the
  outstanding shares of the Company not owned by the buying group, the expiration
  or termination of waiting periods under applicable antitrust laws and a
  successful tender offer for at least 51% of the Company's outstanding 8 7/8%
  Senior Subordinated Notes. The Company will pay a termination fee of $7.5
  million and reimburse up to $3.0 million of the buying group's expenses if it
  wishes to accept a superior acquisition proposal.
  
  2. Basis of Preparation
  
     The accompanying unaudited consolidated financial statements include all
  information and footnotes required for interim financial statement
  presentation. In the Company's opinion, all adjustments (consisting of normal
  recurring adjustments) considered necessary for a fair presentation have been
  included. The preparation of financial statements in conformity with accounting
  principles generally accepted in the United States requires management to make
  estimates and assumptions that affect reported amounts of assets and
  liabilities and disclosure of contingent assets and liabilities at the date of
  the financial statements and the reported amounts of revenue and expenses
  during the reporting periods. Actual results could differ materially from those
  estimates. All significant intercompany transactions and balances have been
  eliminated and certain reclassifications have been made to prior periods'
  consolidated financial statements to conform to current period presentation.
  The results of operations for the three months ended March 31, 2001 are not
  necessarily indicative of the results of operations to be expected for the year
  ending December 31, 2001.
  
  3. Investments in and Advances to Unconsolidated Subsidiaries
  
     Condensed Statement of Operations (unaudited) for the unconsolidated
  subsidiaries accounted for using the equity method is as follows (in
  thousands):
  
  <TABLE>
  <CAPTION>
                                                                   Three Months
                                                                  Ended March 31,
                                                                  ---------------
                                                                   2001    2000
                                                                  ------- -------
     <S>                                                          <C>     <C>
     Revenues.................................................... $69,649 $48,496
     Income from operations......................................  12,689  13,219
     Net income..................................................   7,846   8,957
  </TABLE>
  
  4. Debt
  
     The Company has a revolving credit facility of $270.0 million, which is
  subject to a mandatory reduction of $70.0 million on December 31, 2001 and
  expires on May 20, 2003. The amount outstanding under this facility totaled
  $218.0 million at March 31, 2001. Interest rate alternatives include Bank of
  America's reference
  
                                         7
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                    (Unaudited)
  
  rate plus 1.00% and LIBOR plus 2.00%. The weighted average interest rate on
  amounts outstanding at March 31, 2001 and December 31, 2000 was 7.69% and
  8.79%, respectively.
  
     The revolving credit facility contains numerous restrictive covenants that,
  among other things, limit the Company's ability to incur or repay other
  indebtedness, make advances or loans to subsidiaries and other entities, make
  capital expenditures, incur liens, enter into mergers or effect other
  fundamental corporate transactions, sell its assets, or declare dividends. In
  addition, the Company is required to meet certain ratios relating to its
  adjusted net worth, level of indebtedness, fixed charges and interest coverage.
  
     The Company has outstanding 8 7/8% Senior Subordinated Notes due on June 1,
  2006. The 8 7/8% Senior Subordinated Notes are redeemable in whole or in part
  after June 1, 2002 at 104.438% of par on that date and at declining prices
  thereafter. On or before June 1, 2001, up to 35.0% of the issued amount may be
  redeemed at 108.875% of par plus accrued interest solely with the proceeds from
  an equity offering. The amount included in the accompanying Consolidated
  Balance Sheet less unamortized discount was $173.4 million at March 31, 2001.
  
     The Company has short-term borrowings of $8.4 million and $9.2 million with
  related weighted average interest rates of 7.0% and 7.3% as of March 31, 2001
  and December 31, 2000, respectively.
  
     The Company has a credit agreement with Residential Funding Corporation
  (RFC). The credit agreement provides for a revolving line of credit of up to
  $100.0 million, and bears interest at 1.00% per annum over LIBOR. The agreement
  expires on August 31, 2001. During the quarter, the Company had a maximum of
  $91.6 million revolving line of credit principal outstanding. At March 31,
  2001, the Company had $0.6 million revolving line of credit principal
  outstanding.
  
  5. Commitments and Contingencies
  
     Between November 12, and December 6, 2000, five putative class actions were
  filed in the Court of Chancery of the State of Delaware in and for New Castle
  County by various of the Company's stockholders against the Company, its
  directors and the group which has proposed to take the Company private. A
  similar action was also filed on November 17, 2000 in the Superior Court of the
  State of California in and for the County of Los Angeles. These actions all
  alleged that the offering price for the going private transaction was unfair
  and inadequate and sought injunctive relief or rescission of the merger
  transactions and, in the alternative, money damages.
  
     The five Delaware actions have been consolidated. As of February 23, 2001,
  the parties to the Delaware litigation entered into a memorandum of
  understanding in which they agreed in principle to a settlement. The memorandum
  provides, among other things:
  
    . that the defendants admit no liability or wrongdoing whatsoever;
  
    . that the members of the going private group acknowledge that the pendency
      and prosecution of the Delaware litigation were positive contributing
      factors to its decision to increase the merger consideration;
  
    . for the certification of a settlement class and the entry of a final
      judgment granting a full release of the defendants; and
  
    . for attorneys' fees in an amount not to exceed $380,000.
  
     There are numerous conditions to the settlement proposed by the memorandum
  including the closing of the merger.
  
                                         8
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                    (Unaudited)
  
  
     The parties may not be able to complete a mutually acceptable stipulation of
  settlement, and, if so, the litigation will continue. In addition, no
  agreements have been reached with respect to any settlement of the California
  action.
  
     In December 1996, GMH Associates, Inc. (GMH) filed a lawsuit against
  Prudential Realty Group (Prudential) and the Company in Superior Court of
  Pennsylvania, Franklin County, alleging various contractual and tort claims
  against Prudential, the seller of a large office complex, and the Company, its
  agent in the sale, contending that Prudential breached its agreement to sell
  the property to GMH, breached its duty to negotiate in good faith, conspired
  with the Company to conceal from GMH that Prudential was negotiating to sell
  the property to another purchaser and that Prudential and the Company
  misrepresented that there were no other negotiations for the sale of the
  property. Following a non-jury trial, the court rendered a decision in favor of
  GMH and against Prudential and the Company, awarding GMH $20.3 million in
  compensatory damages, against Prudential and the Company jointly and severally,
  and $10.0 million in punitive damages, allocating the punitive damage award
  $7.0 million as against Prudential and $3.0 million as against the Company.
  Following the denial of motions by Prudential and the Company for a new trial,
  a judgment was entered on December 3, 1998. Prudential and the Company filed an
  appeal of the judgment. On March 3, 2000, the appellate court in Pennsylvania
  reversed all of the trial courts' decisions finding that liability was not
  supported on any theory claimed by GMH and directed that a judgment be entered
  in favor of the defendants including the Company. The plaintiff filed an appeal
  with the Pennsylvania Supreme Court which was denied. The plaintiff has
  exhausted all appeal possibilities and judgment has been entered in favor of
  all defendants.
  
     In August 1993, a former commissioned sales person of the Company filed a
  lawsuit against the Company in the Superior Court of New Jersey, Bergen County,
  alleging gender discrimination and wrongful termination by the Company. On
  November 20, 1996, a jury returned a verdict against the Company, awarding $1.5
  million in general damages and $5.0 million in punitive damages to the
  plaintiff. Subsequently, the trial court awarded the plaintiff $0.6 million in
  attorneys' fees and costs. Following denial by the trial court of the Company's
  motions for a new trial, reversal of the verdict and reduction of damages, the
  Company filed an appeal of the verdict and requested a reduction of damages. On
  March 9, 1999 the appellate court ruled in the Company's favor, reversed the
  trial court's decision and ordered a new trial. On February 16, 2000, the
  Supreme Court of New Jersey reversed the decision of the appellate court,
  concluded that the general damage award in the trial court should be sustained
  and returned the case to the appellate court for a determination as to whether
  a new trial should be ordered on the issue of punitive damages. In April 2000,
  the Company settled the compensatory damages claim, including interest, and all
  claims to date with respect to attorneys fees by paying to the plaintiff the
  sum of $2.75 million leaving only the punitive damage claim for resolution. The
  plaintiff also agreed, with very limited exceptions, that no matter what the
  outcome of the punitive damage claim the Company would not be responsible for
  more than 50% of the plaintiff's future attorney fees. In February 2001, the
  Company settled all remaining claims for the sum of $2.0 million and received a
  comprehensive release.
  
     The Company is a party to a number of pending or threatened lawsuits arising
  out of, or incident to, its ordinary course of business. Based on available
  cash and anticipated cash flows, the Company believes that the ultimate outcome
  will not have an impact on the Company's ability to carry on its operations.
  Management believes that any liability that may result from disposition of
  these lawsuits will not have a material effect on the Company's consolidated
  financial position or results of operations.
  
     An important part of the strategy for the Company's investment management
  business involves investing its own capital in certain real estate investments
  with its clients. As of March 31, 2001, the Company had committed $40.6 million
  to fund future co-investments.
  
  
                                         9
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                    (Unaudited)
  
  6. Comprehensive Loss
  
     Comprehensive loss consists of net income (loss) and other comprehensive
  loss. Accumulated other comprehensive loss consists of foreign currency
  translation adjustments. For the three months ended March 31, 2001, total
  comprehensive loss was $12.5 million, which consists of foreign currency
  translation loss of $9.6 million. For the three months ended March 31, 2000,
  total comprehensive loss was $3.2 million, which consists of foreign currency
  translation loss.
  
  7. Per Share Information
  
     Basic (loss) earnings per share was computed by dividing net (loss) income
  by the weighted average number of common shares outstanding of 21,309,550 and
  20,819,268 for the three months ended March 31, 2001 and 2000, respectively. As
  a result of operating losses incurred for the three months ended March 31,
  2001, diluted weighted average shares outstanding do not give effect to common
  stock equivalents, as to do so would be anti-dilutive. At March 31, 2000, the
  computation of diluted earnings per share further assumes the dilutive effect
  of 31,916 common stock equivalents, which consisted principally of stock
  options.
  
  8. Industry Segments
  
     The Company reports its operations through three business segments:
  Transaction Management, Financial Services and Management Services. The Company
  has a number of lines of business which are aggregated, reported and managed
  through these three segments. The Transaction Management segment is the
  Company's largest generator of revenue and includes Brokerage Services,
  Corporate Services and Investment Property activities. Brokerage Services
  includes activities that provide sales, leasing and consulting services in
  connection with commercial real estate and is the Company's primary revenue
  source. Corporate Services focuses on building relationships with large
  corporate clients which generate recurring revenue. Investment Property
  activities provide brokerage services for commercial real property marketed for
  sale to institutional and private investors. The Financial Services segment
  provides commercial mortgage, valuation, investment management and consulting
  and research services. The current year results of Financial Services include a
  nonrecurring pre-tax gain of $5.6 million from the sale of mortgage fund
  management contracts. The Management Services segment provides facility
  management services to corporate real estate users and property management and
  related services to owners. Prior year quarter includes a $4.7 million
  nonrecurring pre-tax gain on the sale of certain non-strategic assets.
  
                                         10
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                    (Unaudited)
  
     The following unaudited table summarizes the revenue, cost and expenses, and
  operating (loss) income by operating segment for the three months ended March
  31, 2001 and 2000:
  
  <TABLE>
  <CAPTION>
                                                                 Three Months
                                                                Ended March 31
                                                               ------------------
                                                                 2001      2000
                                                               --------  --------
                                                                  (Dollars in
                                                                  thousands)
  <S>                                                          <C>       <C>
  Revenue
    Transaction Management.................................... $179,981  $178,459
    Financial Services........................................   55,919    41,397
    Management Services.......................................   36,598    41,063
                                                               --------  --------
                                                               $272,498  $260,919
                                                               ========  ========
  Operating (loss) income
    Transaction Management.................................... $ (4,130) $  4,631
    Financial Services........................................    6,849       805
    Management Services.......................................     (394)    3,803
                                                               --------  --------
                                                                  2,325     9,239
  Interest income.............................................      800       489
  Interest expense............................................    9,055     9,685
                                                               --------  --------
  (Loss) income before (benefit) provision for income tax..... $ (5,930) $     43
                                                               ========  ========
  Geographic Information
  
  Revenue
    Americas
      United States........................................... $211,009  $198,500
      Canada, South and Central America.......................   11,504     9,199
                                                               --------  --------
                                                                222,513   207,699
    Pacific...................................................    7,690     8,014
    Asia......................................................    9,015     9,733
    Europe, Middle East and Africa............................   33,280    35,473
                                                               --------  --------
                                                               $272,498  $260,919
                                                               ========  ========
  </TABLE>
  
  
                                         11
  <PAGE>
  
                      REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
  
  To the Stockholders and Board of Directors of CB Richard Ellis Services, Inc.:
  
     We have audited the accompanying consolidated balance sheets of CB Richard
  Ellis Services, Inc. (a Delaware corporation) as of December 31, 2000, and
  1999, and the related consolidated statements of operations, stockholders'
  equity, comprehensive income and cash flows for each of the three years in the
  period ended December 31, 2000. These financial statements and the schedule
  referred to below are the responsibility of the Company's management. Our
  responsibility is to express an opinion on these financial statements and
  schedule based on our audits.
  
     We conducted our audits in accordance with auditing standards generally
  accepted in the United States. Those standards require that we plan and perform
  the audits to obtain reasonable assurance about whether the financial
  statements are free of material misstatement. An audit includes examining, on a
  test basis, evidence supporting the amounts and disclosures in the financial
  statements. An audit also includes assessing the accounting principles used and
  significant estimates made by management, as well as evaluating the overall
  financial statement presentation. We believe that our audits provide a
  reasonable basis for our opinion.
  
     In our opinion, the financial statements referred to above present fairly,
  in all material respects, the financial position of CB Richard Ellis Services,
  Inc. as of December 31, 2000, and 1999, and the results of their operations and
  their cash flows for each of the three years in the period ended December 31,
  2000, in conformity with accounting principles generally accepted in the United
  States.
  
     Our audits were made for the purpose of forming an opinion on the basic
  financial statements taken as a whole. The schedule listed in the index to
  consolidated financial statements is presented for purposes of complying with
  the Securities and Exchange Commission's rules and is not a required part of
  the basic financial statements. This schedule has been subjected to the
  auditing procedures applied in our audits of the basic financial statements
  and, in our opinion, is fairly stated in all material respects in relation to
  the basic financial statements taken as a whole.
  
  Arthur Andersen LLP
  
  Los Angeles, California
  February 24, 2001
  
                                         12
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                            CONSOLIDATED BALANCE SHEETS
              (Dollars in thousands, except share and per share data)
  <TABLE>
  <CAPTION>
                                                                December 31
                                                             -------------------
                                                               2000      1999
                                                             --------  ---------
  <S>                                                        <C>       <C>
                           ASSETS
                           ------
  Current Assets:
    Cash and cash equivalents..............................  $ 20,854  $  27,844
    Receivables, less allowance for doubtful accounts of
     $12,631 and $15,560 at December 31, 2000 and 1999.....   176,908    168,276
    Prepaid expenses.......................................     8,017      8,370
    Deferred taxes, net....................................    11,139     11,758
    Other current assets...................................     6,127     10,596
                                                             --------  ---------
     Total current assets..................................   223,045    226,844
  Property and equipment, net..............................    75,992     70,149
  Goodwill, net of accumulated amortization of $56,417 and
   $41,008 at December 31, 2000 and 1999...................   423,975    445,010
  Other intangible assets, net of accumulated amortization
   of $289,038 and $279,156 at December 31, 2000 and 1999..    46,432     57,524
  Cash surrender value of insurance policies, deferred
   compensation plan.......................................    53,203     20,442
  Investment in and advances to unconsolidated
   subsidiaries............................................    41,325     38,514
  Deferred taxes, net......................................    32,327     28,190
  Prepaid pension costs....................................    25,235     26,323
  Other assets.............................................    41,571     16,487
                                                             --------  ---------
     Total assets..........................................  $963,105  $ 929,483
                                                             ========  =========
            LIABILITIES AND STOCKHOLDERS' EQUITY
            ------------------------------------
  Current Liabilities:
    Accounts payable and accrued expenses..................  $ 83,673  $  81,068
    Compensation and employee benefits.....................    79,801     84,357
    Accrued bonus and profit sharing.......................   107,878     81,394
    Income taxes payable...................................    28,260     18,429
    Current maturities of long-term debt...................    10,593      6,765
                                                             --------  ---------
     Total current liabilities.............................   310,205    272,013
  Long-term debt:
    Senior subordinated notes, less unamortized discount of
     $1,664 and $1,892 at December 31, 2000 and 1999.......   173,336    173,108
    Revolving credit facility..............................   110,000    160,000
    Other long-term debt...................................    20,235     24,764
                                                             --------  ---------
     Total long-term debt..................................   303,571    357,872
  Deferred compensation liability..........................    80,503     47,202
  Other liabilities........................................    29,739     38,787
                                                             --------  ---------
     Total liabilities.....................................   724,018    715,874
  Minority interest........................................     3,748      3,872
  
  Commitments and contingencies
  
  Stockholders' Equity:
    Preferred stock, $0.01 par value; 8,000,000 shares
     authorized; no shares issued or outstanding...........       --         --
    Common stock, $0.01 par value; 100,000,000 shares
     authorized; 20,605,023 and 20,435,692 shares issued
     and outstanding at December 31, 2000 and 1999.........       217        213
    Additional paid-in capital.............................   364,168    355,893
    Notes receivable from sale of stock....................   (11,847)    (8,087)
    Accumulated deficit....................................   (89,097)  (122,485)
    Accumulated other comprehensive loss...................   (12,258)    (1,928)
    Treasury stock at cost, 1,072,155 and 885,100 shares at
     December 31, 2000 and 1999............................   (15,844)   (13,869)
                                                             --------  ---------
     Total stockholders' equity............................   235,339    209,737
                                                             --------  ---------
     Total liabilities and stockholders' equity............  $963,105  $ 929,483
                                                             ========  =========
  </TABLE>
  
    The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         13
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                       CONSOLIDATED STATEMENTS OF OPERATIONS
              (Dollars in thousands, except share and per share data)
  
  <TABLE>
  <CAPTION>
                                                    Year Ended December 31
                                               --------------------------------
                                                  2000       1999       1998
                                               ---------- ---------- ----------
  <S>                                          <C>        <C>        <C>
  Revenue:
    Leases.................................... $  539,419 $  448,091 $  371,300
    Sales.....................................    389,745    394,718    357,718
    Property and facilities management fees...    110,654    110,111     86,379
    Consulting and referral fees..............     78,714     73,569     72,586
    Appraisal fees............................     75,055     71,050     48,082
    Loan origination and servicing fees.......     58,190     45,940     39,402
    Investment management fees................     42,475     28,929     33,145
    Other.....................................     29,352     40,631     25,891
                                               ---------- ---------- ----------
      Total revenue...........................  1,323,604  1,213,039  1,034,503
  Costs and Expenses:
    Commissions, fees and other incentives....    634,639    559,289    458,463
    Operating, administrative and other.......    538,481    536,381    448,794
    Merger-related and other nonrecurring
     charges..................................        --         --      16,585
    Depreciation and amortization.............     43,199     40,470     32,185
                                               ---------- ---------- ----------
  Operating income............................    107,285     76,899     78,476
  Interest income.............................      2,554      1,930      3,054
  Interest expense............................     41,700     39,368     31,047
                                               ---------- ---------- ----------
  Income before provision for income tax......     68,139     39,461     50,483
  Provision for income tax....................     34,751     16,179     25,926
                                               ---------- ---------- ----------
  Net income.................................. $   33,388 $   23,282 $   24,557
                                               ========== ========== ==========
  Deemed dividend on preferred stock.......... $      --  $      --  $   32,273
                                               ========== ========== ==========
  Net income (loss) applicable to common
   stockholders............................... $   33,388 $   23,282 $   (7,716)
                                               ========== ========== ==========
  Basic earnings (loss) per share............. $     1.60 $     1.11 $    (0.38)
                                               ========== ========== ==========
  Weighted average shares outstanding for
   basic earnings (loss) per share............ 20,931,111 20,998,097 20,136,117
                                               ========== ========== ==========
  Diluted earnings (loss) per share........... $     1.58 $     1.10 $    (0.38)
                                               ========== ========== ==========
  Weighted average shares outstanding for
   diluted earnings (loss) per share.......... 21,097,240 21,072,436 20,136,117
                                               ========== ========== ==========
  </TABLE>
  
  
    The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         14
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
  
  <TABLE>
  <CAPTION>
                                                     Year Ended December 31
                                                  -------------------------------
                                                    2000       1999       1998
                                                  ---------  ---------  ---------
  <S>                                             <C>        <C>        <C>
  Cash flows from operating activities:
  Net income....................................  $  33,388  $  23,282  $  24,557
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation and amortization excluding
     deferred financing costs...................     43,199     40,470     32,185
    Amortization of deferred financing costs....      2,069      1,696      1,184
    Deferred compensation deferrals.............     43,557     25,932     14,738
    (Gain) loss on sale of properties,
     businesses and servicing rights............    (10,184)    (9,865)     2,058
    Equity interest in earnings of
     unconsolidated subsidiaries................     (7,112)    (7,528)    (3,443)
    Minority interest...........................        607      2,016        730
    Provision for litigation, doubtful accounts
     and other..................................      5,125      4,724      5,185
    Deferred income tax (benefit) provision.....     (4,083)   (12,688)    14,394
  Increase in receivables.......................    (12,545)   (37,640)   (24,846)
  Increase in cash surrender value of insurance
   policies, deferred compensation plan.........    (32,761)   (20,442)       --
  Increase in compensation and employee benefits
   payable and accrued bonus and profit share...     24,418     37,339      7,782
  (Decrease) increase in accounts payable and
   accrued expenses.............................     (3,201)     1,346      2,615
  Increase in income taxes payable..............     11,074     16,696      8,913
  (Decrease) increase in other liabilities......     (9,553)     7,583     (9,536)
     Net change in other operating assets and
      liabilities...............................        114      1,090         98
                                                  ---------  ---------  ---------
     Net cash provided by operating activities..     84,112     74,011     76,614
                                                  ---------  ---------  ---------
  Cash flows from investing activities:
  Purchases of property and equipment...........    (26,921)   (35,130)   (29,715)
  Proceeds from sale of inventoried property....        --       7,355        --
  Proceeds from sale of properties, businesses
   and servicing rights.........................     17,495     12,072        --
  Purchase of investments.......................    (23,413)    (1,019)       --
  Increase in intangible assets and goodwill....     (3,119)    (5,331)   (14,595)
  Acquisition of businesses including net assets
   acquire intangibles and goodwill.............     (3,442)    (8,931)  (189,895)
  Other investing activities, net...............      3,678      4,217     10,685
                                                  ---------  ---------  ---------
     Net cash used in investing activities......    (35,722)   (26,767)  (223,520)
                                                  ---------  ---------  ---------
  Cash flows from financing activities:
  Proceeds from revolving credit facility.......    179,000    165,000    315,000
  Repayment of revolving credit facility........   (229,000)  (172,000)  (268,000)
  Proceeds from senior subordinated term loan...        --         --     172,788
  Repayment of inventoried property loan........        --      (7,093)      (377)
  Proceeds from (repayment of) senior notes and
   other loans, net.............................        588    (12,402)   (14,324)
  Payment of dividends payable..................        --         --      (5,000)
  Repurchase of preferred stock.................        --         --     (72,331)
  Repurchase of common stock....................     (2,018)    (4,986)    (8,883)
  Repayment of capital leases...................     (1,373)    (1,340)    (1,655)
  Minority interest payments....................     (2,180)    (3,801)    (2,902)
  Other financing activities, net...............      1,460     (1,099)     5,122
                                                  ---------  ---------  ---------
     Net cash (used in) provided by financing
      activities................................    (53,523)   (37,721)   119,438
                                                  ---------  ---------  ---------
  Net (decrease) increase in cash and cash
   equivalents..................................     (5,133)     9,523    (27,468)
  Cash and cash equivalents, at beginning of
   period.......................................     27,844     19,551     47,181
  Effect of exchange rate changes on cash.......     (1,857)    (1,230)      (162)
                                                  ---------  ---------  ---------
  Cash and cash equivalents, at end of period...  $  20,854  $  27,844  $  19,551
                                                  =========  =========  =========
  Supplemental data:
  Cash paid during the period for:
    Interest (none capitalized).................  $  38,352  $  36,997  $  27,528
    Income taxes, net...........................  $  27,607  $  12,689  $   3,395
  </TABLE>
  
    The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         15
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                               (Dollars in thousands)
  
  <TABLE>
  <CAPTION>
                                                         Notes                 Accumulated
                                            Additional receivable                 other
                           Preferred Common  Paid-in   from sale  Accumulated comprehensive Treasury
                             Stock   Stock   capital    of stock    deficit   income (loss)  stock     Total
                           --------- ------ ---------- ---------- ----------- ------------- --------  --------
  <S>                      <C>       <C>    <C>        <C>        <C>         <C>           <C>       <C>
  Balance, December 31,
   1997...................   $ 40     $188   $333,981   $ (5,956)  $(170,324)   $   (158)   $    --   $157,771
  Net income..............     --      --         --         --       24,557         --          --     24,557
  Common stock issued for
   incentive plans........     --        1        962       (962)        --          --          --          1
  Contributions, deferred
   compensation plan......     --      --       5,361        --          --          --          --      5,361
  Collection on, net of
   cancellation of notes
   receivable from
   employee stock
   incentive plan.........     --      --        (646)     1,264         --          --          --        618
  Common stock issued for
   REI and HP
   acquisitions...........     --       15     58,486        --          --          --          --     58,501
  Shares issued for
   Capital Accumulation
   Plan...................     --      --       2,889        --          --          --          --      2,889
  Common stock options
   exercised..............     --        7      8,835        --          --          --          --      8,842
  Amortization of cheap
   stock..................     --      --         312        --          --          --          --        312
  Tax deduction from
   issuance of stock......     --      --      11,907        --          --          --          --     11,907
  Foreign currency
   translation gain.......     --      --         --         --          --        1,297         --      1,297
  Purchase of preferred
   stock..................    (40)     --     (72,291)       --          --          --          --    (72,331)
  Purchase of common
   stock..................     --      --         --         --          --          --       (8,883)   (8,883)
                             ----     ----   --------   --------   ---------    --------    --------  --------
  Balance, December 31,
   1998...................     --      211    349,796     (5,654)   (145,767)      1,139      (8,883)  190,842
  Net income..............     --      --         --         --       23,282         --          --     23,282
  Common stock issued for
   incentive plans........     --        2      2,534     (2,534)        --          --          --          2
  Contributions, deferred
   compensation plan......     --      --       2,094        --          --          --          --      2,094
  Collection on, net of
   cancellation of notes
   receivable from
   employee stock
   incentive plan.........     --      --         --         101         --          --          --        101
  Common stock options
   exercised..............     --      --         449        --          --          --          --        449
  Amortization of cheap
   stock..................     --      --         312        --          --          --          --        312
  Tax deduction from
   issuance of stock......     --      --         708        --          --          --          --        708
  Foreign currency
   translation loss.......     --      --         --         --          --       (3,067)        --     (3,067)
  Purchase of common
   stock..................     --      --         --         --          --          --       (4,986)   (4,986)
                             ----     ----   --------   --------   ---------    --------    --------  --------
  Balance, December 31,
   1999...................     --      213    355,893     (8,087)   (122,485)     (1,928)    (13,869)  209,737
  Net income..............     --      --         --         --       33,388         --          --     33,388
  Common stock issued for
   incentive plans........     --        4      4,310     (4,310)        --          --          --          4
  Contributions, deferred
   compensation plan......     --      --       2,729        --          --          --          --      2,729
  Deferred compensation
   plan co-match..........     --      --         907        --          --          --          --        907
  Collection on, net of
   cancellation of notes
   receivable from
   employee stock
   incentive plan.........     --      --        (550)       550         --          --          --        --
  Amortization of cheap
   and restricted stock...     --      --         342        --          --          --          --        342
  Tax deduction from
   issuance of stock......     --      --         580        --          --          --          --        580
  Foreign currency
   translation loss.......     --      --         --         --          --      (10,330)        --    (10,330)
  Purchase of common
   stock..................     --      --         (43)       --          --          --       (1,975)   (2,018)
                             ----     ----   --------   --------   ---------    --------    --------  --------
  Balance, December 31,
   2000...................   $ --     $217   $364,168   $(11,847)  $ (89,097)   $(12,258)   $(15,844) $235,339
                             ====     ====   ========   ========   =========    ========    ========  ========
  </TABLE>
  
    The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         16
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                               (Dollars in thousands)
  
  <TABLE>
  <CAPTION>
                                                        Year Ended December 31
                                                       --------------------------
                                                         2000     1999     1998
                                                       --------  -------  -------
  <S>                                                  <C>       <C>      <C>
  Net income.......................................... $ 33,388  $23,282  $24,557
  Other comprehensive (loss) income net of tax........  (10,330)  (3,067)   1,297
                                                       --------  -------  -------
  Comprehensive income................................ $ 23,058  $20,215  $25,854
                                                       ========  =======  =======
  </TABLE>
  
  
  
    The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         17
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  1. Summary of Significant Accounting Policies
  
   Principles of Consolidation
  
     The accompanying consolidated financial statements include the accounts of
  CB Richard Ellis Services, Inc. (the Company) and majority owned and controlled
  subsidiaries. The equity attributable to minority shareholders' interests in
  subsidiaries is shown separately in the balance sheets. All significant
  intercompany accounts and transactions have been eliminated in consolidation.
  
     The Company's investments in unconsolidated subsidiaries in which it has the
  ability to exercise significant influence over operating and financial
  policies, but does not control, are accounted for by using the equity method.
  Accordingly, the Company's share of the earnings of these equity basis
  companies is included in consolidated net income. All other investments held on
  a long-term basis are valued at cost less any permanent impairment in value.
  
   Cash and Cash Equivalents
  
     Cash and cash equivalents consist of cash and highly liquid investments with
  an original maturity of less than three months. The Company controls certain
  cash and cash equivalents as agent for its investment and property management
  clients. These amounts are not included in the consolidated balance sheets.
  
   Goodwill and Other Intangible Assets
  
     Goodwill represents the excess of the purchase price of an acquisition over
  the Company's interest in the fair value of the net identifiable assets
  acquired. Goodwill is carried at cost less accumulated amortization and
  amortized on a straight-line basis. Net goodwill at December 31, 2000 consisted
  of $405.7 million related to the 1995 through 2000 acquisitions which is being
  amortized over an estimated useful life of 30 years and $18.3 million related
  to the Company's original acquisition in 1989 which is being amortized over an
  estimated useful life of 40 years.
  
     Net other intangible assets at December 31, 2000 included $6.0 million of
  deferred financing costs and $40.4 million of intangibles stemming from the
  1995 through 2000 acquisitions. These are amortized on a straight-line basis
  over the estimated useful lives of the assets up to 12 years.
  
     The Company periodically evaluates the recoverability of the carrying amount
  of goodwill and other intangible assets. In this assessment, the Company
  considers macro market conditions and trends in the Company's relative market
  position, its capital structure, lender relationships and the estimated
  undiscounted future cash flows associated with these assets. If any of the
  significant assumptions inherent in this assessment materially change due to
  market, economic and/or other factors, the recoverability is assessed based on
  the revised assumptions and resultant undiscounted cash flows. If the analysis
  indicates impairment, it would be recorded in the period the changes occur
  based on the fair value of the goodwill and other intangible assets.
  
   Property, Plant and Equipment
  
     The Company capitalizes expenditures that materially increase the life of
  the related assets and charges the cost of maintenance and repairs to expense.
  Upon sale or retirement, the capitalized costs and related accumulated
  depreciation or amortization are eliminated from the respective accounts, and
  the resulting gain or loss is included in operating income.
  
     Depreciation is computed primarily using the straight line method over
  estimated useful lives ranging from 3 to 10 years. Leasehold improvements are
  amortized over the term of the respective leases, excluding options
  
                                         18
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  to renew. Equipment under capital leases is depreciated over the related term
  of the leases. The Company periodically reviews property, plant and equipment
  for impairment whenever events or changes in circumstances indicate that the
  carrying amount of an asset may not be recoverable. If any of the significant
  assumptions inherent in this assesment materially change due to market,
  economics, and/or other factors, the recoverability is assessed based on the
  revised assumptions. If this analysis indicates that such assets are considered
  to be impaired, the impairment is recognized in the period the changes occur
  and is measured by the amount in which the carrying value exceeds the fair
  value of the asset.
  
   Income Recognition
  
     Real estate commissions on sales are recorded as income upon close of escrow
  or upon transfer of title. Real estate commissions on leases are generally
  recorded as income once the Company satisfies all obligations under the
  commission agreement, which generally occurs upon the earlier of the date of
  occupancy or cash receipt, if cash is received prior to occupancy. The
  existence of any significant future contingencies will result in the delay of
  recognition of income until such contingency is satisfied. If, for example, the
  tenant has a free rent period, lease revenue is not recorded until the first
  month's rent is paid. Investment management fees and management fees are
  recognized when earned under the provisions of the related agreements.
  Appraisal fees are recorded after services have been rendered. Loan origination
  fees are recognized at the time the loan closes and the Company has no
  significant remaining obligations for performance in connection with the loan
  transaction, while loan servicing fees are recorded as principal and interest
  payments are collected from mortgagors. Other commissions and fees are recorded
  as income at the time the related services have been performed unless
  significant future contingencies exist. The adoption of Staff Accounting
  Bulletin No. 101, "Revenue Recognition in Financial Statements," did not have a
  material effect on our operations or financial position.
  
   Foreign Currencies
  
     The financial statements of subsidiaries located outside the United States
  (US) are generally measured using the local currency as the functional
  currency. The assets and liabilities of these subsidiaries are translated at
  the rates of exchange at the balance sheet date and income and expenses are
  translated at the average monthly rate. The currency effects of translating the
  financial statements of these non-US operations of the Company are included in
  the "Accumulated other comprehensive income (loss)" component of stockholders'
  equity. Gains and losses resulting from foreign currency transactions are
  included in the results of operations. The aggregate transaction gains and
  losses included in the consolidated statements of operations are a $3.1 million
  loss, $1.1 million gain and $0.2 million loss for 2000, 1999 and 1998,
  respectively.
  
   Comprehensive Income
  
     Comprehensive income consists of net income and other comprehensive income
  (loss). Accumulated other comprehensive income (loss) consists of foreign
  currency translation adjustments.
  
   Accounting for Transfers and Servicing
  
     The Company follows Statement of Financial Accounting Standards (SFAS) No.
  125, Accounting for Transfers and Servicing of Financial Assets and
  Extinguishments in accounting for loan sales and acquisition of servicing
  rights. Under SFAS No. 125, the Company is required to recognize, at fair
  value, financial and servicing assets it has acquired control over and related
  liabilities it has incurred and amortize them over the period of estimated net
  servicing income or loss. Write-off of the asset is required when control is
  surrendered. The fair value of these servicing rights resulted in a gain, which
  is reflected in the Consolidated Statements of Operations, with a corresponding
  servicing asset of approximately $0.7 million and $0.8 million, at December 31,
  2000 and 1999, respectively, which is reflected in the Consolidated Balance
  Sheets.
  
                                         19
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
   Use of Estimates
  
     The preparation of financial statements in conformity with generally
  accepted accounting principles in the US requires management to make estimates
  and assumptions that affect the reported amounts of certain assets and
  liabilities and disclosure of contingent assets and liabilities at the date of
  the financial statements and the reported amounts of certain revenues and
  expenses during the reporting periods. Actual results could differ from those
  estimates. Management believes that these estimates provide a reasonable basis
  for the fair presentation of its financial condition and results of operations.
  
   Stock Based Compensation
  
     The Company has elected to apply the provisions of Accounting Principles
  Board (APB) Opinion No. 25 and provide the pro forma disclosure requirements of
  SFAS No. 123, Accounting for Stock Based Compensation in the footnotes to its
  consolidated financial statements. SFAS No. 123 requires pro forma disclosure
  of net income and, if presented, earnings per share, as if the fair-value based
  method of accounting defined in this statement had been applied. APB Opinion
  No. 25 and related interpretations require accounting for stock compensation
  awards based on their intrinsic value as of the grant date.
  
   Income Taxes
  
     Income taxes are accounted for under the asset and liability method in
  accordance with SFAS 109, Accounting for Income Taxes. Deferred tax assets and
  liabilities are determined based on temporary differences between financial
  reporting and tax basis of assets and liabilities and operating loss and tax
  credit carryforwards. Deferred tax assets and liabilities are measured by
  applying enacted tax rates and laws to taxable income in the years in which the
  temporary differences are expected to be recovered or settled. The effect on
  deferred tax assets and liabilities of a change in tax rates is recognized in
  income in the period that includes the enactment date.
  
   New Accounting Pronouncements
  
     In September 2000, the Financial Accounting Standards Board (FASB) issued
  Statement of Financial Accounting Standards (SFAS) 140, Accounting for
  Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
  SFAS 140 revises the standards for accounting for securitizations and other
  transfers of financial assets and collateral established by SFAS 125. In
  addition, this statement is effective for recognition and reclassification of
  collateral and for disclosures relating to securitization transactions and
  collateral for fiscal years ending after December 15, 2000. The Company does
  not perform these types of transactions. This statement is effective for all
  transfers and servicing of financial assets and extinguishments of liabilities
  occurring after March 31, 2001. The Company is evaluating the impact of SFAS
  140 on its results of operation and financial position for these types of
  transactions.
  
     In June 2000, the Financial Accounting Standards Board (FASB) issued
  Statement of Financial Accounting Standards (SFAS) No. 138, Accounting for
  Certain Derivative Instruments and Certain Hedging Activities--an Amendment of
  FASB Statement No. 133. SFAS No. 138 amends the accounting and reporting for
  certain derivative instruments and hedging activities and is effective for all
  fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 138 is
  not expected to have a material impact on earnings or other components of
  comprehensive income of the Company.
  
     In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative
  Instruments and Hedging Activities--Deferral of the Effective Date of FASB
  Statement No. 133, which deferred the effective date of SFAS No. 133 for one
  year. SFAS No. 137 is effective for all fiscal quarters of all fiscal years
  beginning after
  
                                         20
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  June 15, 2000. SFAS No. 137 is not anticipated to have a material impact on
  earnings or other components of comprehensive income as the Company had no
  derivatives outstanding at December 31, 2000.
  
     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
  Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
  reporting standards requiring that every derivative instrument (including
  certain derivative instruments embedded in other contracts) be recorded in the
  balance sheet as either an asset or liability measured at its fair value. SFAS
  No. 133 requires that changes in the derivative's fair value be recognized
  currently in earnings unless specific hedge accounting criteria are met.
  Special accounting for qualifying hedges allows a derivative's gains and losses
  to offset related results on the hedged item in the income statement, and
  requires that a company must formally document, designate, and assess the
  effectiveness of transactions that receive hedge accounting. SFAS No. 133 is
  not expected to have a material impact on earnings or other components of
  comprehensive income as the Company had no derivatives outstanding at December
  31, 2000.
  
   Reclassifications
  
     Some reclassifications, which do not have an effect on net income, have been
  made to the 1999 and 1998 financial statements to conform to the 2000
  presentation.
  
  2. Acquisitions and Dispositions
  
     During 2000, the Company acquired five companies with an aggregate purchase
  price of approximately $3.4 million in cash, $0.7 million in notes, plus
  additional payments over the next five years based on acquisition earnout
  agreements. These payments will supplement the purchase price and be recorded
  as additional goodwill. The most significant acquisition in 2000 was the
  purchase of Boston Mortgage Capital Corporation (Boston Mortgage), through L.J.
  Melody, for approximately $2.1 million, plus supplemental payments based on an
  acquisition earnout agreement. Boston Mortgage provides further mortgage
  banking penetration into the northeast. It services approximately $1.8 billion
  in loans covering roughly 175 commercial properties throughout New England, New
  York and New Jersey.
  
     In February 2000, the Company sold certain non-strategic assets for cash
  proceeds of $8.4 million, resulting in a pre-tax gain of $4.7 million.
  
     During 1999, the Company acquired four companies with an aggregate purchase
  price of approximately $13.8 million. The two significant acquisitions were
  Eberhardt Company which was acquired in September 1999 through L.J. Melody for
  approximately $7.0 million and Profi Nordic which was acquired in February 1999
  through CBRE Profi Acquisition Corp. (formerly Koll Tender III) for
  approximately $5.5 million.
  
     During 1999, the Company sold five of its smaller non-strategic offices
  (Bakersfield and Fresno, California; Albuquerque, New Mexico; Reno, Nevada; and
  Salt Lake City, Utah) for a total of approximately $7.0 million received in
  cash and notes. It also sold an insurance operation which was used to help
  property management and other clients with complex insurance problems for $3.0
  million in receivables. These sales resulted in a pre-tax gain of $8.7 million.
  
     On October 20, 1998 the Company, through L.J. Melody, purchased Carey,
  Brumbaugh, Starman, Phillips, and Associates, Inc., a regional mortgage banking
  firm for approximately $5.6 million in cash and approximately $2.4 million in
  notes bearing interest at 9.0% with three annual payments which began in
  October 1999. Approximately $0.2 million of the $2.4 million notes was
  accounted for as deferred cash compensation to select key executives. The
  acquisition was accounted for as a purchase. The purchase price has
  
                                         21
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  largely been allocated to intangibles and goodwill which are amortized on a
  straight line basis over their estimated useful lives of 7 and 30 years,
  respectively.
  
     On October 1, 1998 the Company purchased the remaining ownership interests
  that it did not already own in the Richard Ellis Australia and New Zealand
  businesses. The costs for the remaining interest was $20.0 million in cash.
  Virtually all of the revenue of these locations is derived from brokerage and
  appraisal services. The acquisition was accounted for as a purchase. The
  purchase price has largely been allocated to intangibles and goodwill which are
  amortized on a straight line basis over their estimated useful lives ranging up
  to 30 years.
  
     On September 22, 1998 the Company purchased the approximately 73.0% interest
  that it did not already own in CB Commercial Real Estate Group of Canada, Inc.
  The Company acquired the remaining interest for approximately $14.3 million in
  cash. The acquisition was accounted for as a purchase. The purchase price has
  been largely allocated to intangibles and goodwill which are amortized on a
  straight line basis over their estimated useful lives ranging up to 30 years.
  
     On July 7, 1998 the Company acquired the business of Hillier Parker May and
  Rowden, now known as CB Hillier Parker Limited (HP), a commercial property
  services partnership operating in the United Kingdom (UK). The acquisition was
  accounted for as a purchase. The purchase price for HP included approximately
  $63.6 million in cash and $7.1 million in shares of the Company's common stock.
  In addition, the Company assumed a contingent payout plan for key HP employees
  with a potential payout over three years of approximately $13.9 million and
  assumed various annuity obligations of approximately $15.0 million. The
  purchase price has largely been allocated to goodwill which is amortized on a
  straight line basis over its estimated useful life of 30 years.
  
     On July 1, 1998 the Company increased its ownership percentage in CB
  Commercial/Arnheim & Neely, an existing partnership formed in September 1996,
  which then combined with the Galbreath Company Mid-Atlantic to form CB Richard
  Ellis/Pittsburgh, LP. The total purchase price of the Company's 50% interest in
  the combined enterprise is $5.7 million.
  
     On May 31, 1998 the Company acquired Mathews Click and Associates, a
  property sales, leasing, and management firm, for approximately $10.0 million
  in cash and potential supplemental payments of $1.9 million which were
  contingent upon operating results, payable to the sellers over a period of two
  years. The acquisition was accounted for as a purchase. The total purchase
  price including potential supplemental payments was allocated to intangibles
  and goodwill which are amortized on a straight line basis over their estimated
  useful lives of 7 and 30 years, respectively.
  
     Effective May 1, 1998 the Company, through L.J. Melody, acquired Shoptaw-
  James, Inc. (Shoptaw-James), a regional mortgage banking firm, for
  approximately $6.3 million in cash and approximately $2.7 million in notes
  bearing interest at 9.0% with three annual payments which began in May 1999.
  The acquisition was accounted for as a purchase. Approximately $0.3 million of
  the $2.7 million notes are being accounted for as compensation over the term of
  the notes as the payment of these notes are contingent upon select key
  executives' and producers' continued employment with the Company. Approximately
  $2.4 million of the $2.7 million is being accounted for as supplemental
  payments to the sellers over a period of three years. The purchase price and
  supplemental payments have largely been allocated to intangibles and goodwill
  which are amortized on a straight line basis over their estimated useful lives
  of 7 and 30 years, respectively.
  
     On April 17, 1998 the Company purchased all of the outstanding shares of CB
  Commercial Limited, formerly known as REI Limited (REI), an international
  commercial real estate services firm operating under the name Richard Ellis in
  major commercial real estate markets worldwide (excluding the UK). The
  acquisition
  
                                         22
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  was accounted for as a purchase. The purchase price has largely been allocated
  to goodwill, which is amortized on a straight line basis over an estimated
  useful life of 30 years. The purchase price for REI was approximately $104.8
  million of which approximately $53.3 million was paid in cash and notes and
  approximately $51.5 million was paid in shares of the Company's common stock.
  In addition, the Company assumed approximately $14.4 million of long-term debt
  and minority interest. The Company incurred a one-time charge of $3.8 million
  associated with the integration of REI's operations and systems into the
  Company's.
  
     On February 1, 1998 the Company, through L.J. Melody, acquired all of the
  issued and outstanding stock of Cauble and Company of Carolina, a regional
  mortgage banking firm for approximately $2.2 million, including cash payments
  of approximately $1.8 million and a note payable of approximately $0.4 million
  bearing interest at 9.0% with principal payments starting in April 1998. The
  acquisition was accounted for as a purchase. The purchase price has been
  largely allocated to intangibles and goodwill, which are amortized on a
  straight line basis over their estimated useful lives of 7 and 30 years,
  respectively.
  
     On January 31, 1998 the Company, through L.J. Melody, acquired certain
  assets of North Coast Mortgage Company, a regional mortgage banking firm for
  cash payments of approximately $3.0 million and approximately $0.9 million in
  notes. Approximately $0.3 million of the $0.9 million notes have been accounted
  for as supplemental payments to the sellers and approximately $0.6 million as
  deferred compensation to certain key executives and producers payable in three
  annual installments which began in February 1999. The acquisition was accounted
  for as a purchase. The purchase price and supplemental payments have largely
  been allocated to intangibles and goodwill, which are amortized on a straight
  line basis over their estimated useful lives of 7 and 30 years, respectively.
  The $0.6 million of deferred cash compensation is being accounted for as
  compensation over the term of the agreements as the payment of the compensation
  is contingent upon select key executives' and producers' continued employment
  with the Company.
  
     The assets and liabilities of certain acquired companies, along with the
  related goodwill, intangibles and indebtedness, are reflected in the
  accompanying consolidated financial statements at December 31, 2000. The
  results of operations of the acquired companies are included in the
  consolidated results from the dates they were acquired. The unaudited pro forma
  results of operations of the Company for the year ended December 31, 1998,
  assuming the REI acquisition had occurred on January 1, 1998, would have been
  as follows (amounts in thousands, except per share data):
  
  <TABLE>
  <CAPTION>
                                                                       Year Ended
                                                                      December 31,
                                                                          1998
                                                                      ------------
       <S>                                                            <C>
       Revenue.......................................................  $1,051,114
       Net income....................................................      15,586
       Net loss applicable to common stockholders....................     (16,687)
       Loss per share
         Basic.......................................................       (0.81)
         Diluted.....................................................       (0.81)
  </TABLE>
  
     For the year ended December 31, 1998, net loss applicable to common
  stockholders includes a deemed dividend of $32.3 million on the repurchase of
  the Company's preferred stock. The pro forma results do not necessarily
  represent results which would have occurred if the acquisitions had taken place
  on the date assumed above, nor are they indicative of the results of future
  combined operations. The amounts are based upon certain assumptions and
  estimates, and do not reflect any benefit from economies which might be
  achieved from combined operations. Further, REI historical results for the
  first three months of 1998 include certain nonrecurring adjustments.
  
                                         23
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
  3. Property and Equipment
  
     Property and equipment is stated at cost and consists of the following (in
  thousands):
  
  <TABLE>
  <CAPTION>
                                                                  December 31
                                                               ------------------
                                                                 2000      1999
                                                               --------  --------
       <S>                                                     <C>       <C>
       Buildings and improvements............................. $ 17,354  $ 19,273
       Furniture and equipment................................  128,678   111,840
       Equipment under capital leases.........................   28,765    29,800
                                                               --------  --------
                                                                174,797   160,913
       Accumulated depreciation and amortization..............  (98,805)  (90,764)
                                                               --------  --------
       Property and equipment, net............................ $ 75,992  $ 70,149
                                                               ========  ========
  </TABLE>
  
     The Company sold its headquarters building in downtown Los Angeles,
  California, in September 1999 and a small office building in Phoenix, Arizona
  in October 1999, both at a minimal loss. Depreciation expense was $19.2
  million, $17.1 million and $14.8 million during 2000, 1999 and 1998,
  respectively.
  
  4. Investments in and Advances to Unconsolidated Subsidiaries
  
     Investments in and advances to unconsolidated subsidiaries as of December
  31, 2000 and 1999 are as follows (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                    December 31
                                                                  ---------------
                                                         Interest  2000    1999
                                                         -------- ------- -------
       <S>                                               <C>      <C>     <C>
       CB Commercial/Whittier Partners, LP..............   50.0%  $10,173 $ 9,646
       CBRE Pittsburgh..................................   50.0%    6,261   5,853
       Ikoma CB Richard Ellis K.K.......................   20.0%    3,695   2,523
       Strategic Partners (CBRE Investors)..............    3.4%    3,659     --
       Building Technology Engineers....................   49.9%    2,595     --
       CBRE Corp Partners, LLC..........................    9.1%    2,510   1,453
       Other............................................     *     12,432  19,039
                                                                  ------- -------
                                                                  $41,325 $38,514
                                                                  ======= =======
  </TABLE>
  --------
  * Various interests with varying ownership rates.
  
     Unaudited combined condensed financial information for the entities
  accounted for using the equity method is as follows (in thousands):
  
                  Consolidated Statement of Operations Information
  
  <TABLE>
  <CAPTION>
                                                         Year Ended December 31
                                                        -------------------------
                                                          2000     1999    1998
                                                        -------- -------- -------
                                                               (Unaudited)
       <S>                                              <C>      <C>      <C>
       Net revenue..................................... $241,902 $172,365 $72,911
       Income from operations..........................   59,936   43,088  27,921
       Net income......................................   50,183   32,795  23,678
  </TABLE>
  
                                         24
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
     Condensed Balance Sheet Information:
  
  <TABLE>
  <CAPTION>
                                                                   December 31
                                                                -----------------
                                                                  2000     1999
                                                                -------- --------
                                                                   (Unaudited)
       <S>                                                      <C>      <C>
       Current assets.......................................... $153,942 $ 62,579
       Noncurrent assets.......................................  777,718  689,286
       Current liabilities.....................................   94,507   34,076
       Noncurrent liabilities..................................  302,530  249,546
       Minority interest.......................................      519    1,115
  </TABLE>
  
  5. Employee Benefit Plans
  
     Option Plans. In conjunction with the North Coast Mortgage Company
  acquisition, options for 25,000 shares were granted with an exercise price
  representing the fair market value at date of grant of $32.50 per share. On
  December 15, 1998, the option holders elected to change the exercise price to
  $20.00 per share, which was above market value on the date of election, and
  simultaneously reduce the number of shares by 20%. The options vest over five
  years at a rate of 20% per year, expiring in February 2008. Options for
  20,000 shares under the North Coast Mortgage Company acquisition were
  outstanding at December 31, 2000.
  
     In conjunction with the Shoptaw-James acquisition, options for 25,000 shares
  were granted with an exercise price representing a fair market value of $37.32
  per share on the date of grant. On December 15, 1998 the option holders elected
  to change the exercise price to $20.00 per share, which was above market value
  on the date of election, and simultaneously reduce the number of shares by 20%.
  The options vest over five years at a rate of 20% per year, expiring in May
  2008. Options for 20,000 shares under the Shoptaw-James acquisition were
  outstanding at December 31, 2000.
  
     In October 1998, in conjunction with the Carey, Brumbaugh acquisition,
  options for 25,000 shares were granted with an exercise price representing a
  fair market of $19.44 per share on the grant date. The options vest over five
  years at a rate of 20% per year, expiring in September 2008. Options for 25,000
  shares under the Carey, Brumbaugh acquisition were outstanding at December 31,
  2000.
  
     In April 1998, in conjunction with the REI acquisition, the Company approved
  the assumption of the options outstanding under the REI Limited Stock Option
  Plan. These options for 46,115 shares of common stock were issued and exercised
  immediately at $14.95 per share in exchange for existing REI options. Also in
  conjunction with the REI acquisition, the Company granted options for 475,677
  shares at an exercise price equal to fair market value at date of grant of
  $33.76 per share. On December 15, 1998 select holders of stock options elected
  to change the exercise price of their options to $20.00 per share, which was
  above market value on the date of election, and simultaneously reduce the
  number of shares by 20%. During 2000, the Company granted options for 58,000
  shares of common stock at an exercise price of $12.88 per share. All options
  were granted at an exercise price equal to fair market value at date of grant.
  The vesting periods of these options range from three to five years and they
  expire at various dates through August 2010. Options for 492,984 shares were
  outstanding under the REI Limited Stock Option Plan at December 31, 2000.
  
     A total of 700,000 shares of common stock have been reserved for issuance
  under the Company's 1997 Employee Stock Option Plan. On December 15, 1998,
  select holders of stock options with an exercise price in excess of $20.00 per
  share elected to change the exercise price of their options to $20.00 per
  share, which was above market value on the date of election and simultaneously
  reduce the number of shares by 20%. During 2000, the Company granted options
  for 105,000 shares of common stock at exercise prices ranging from $10.38 to
  $12.85 per share. All options were granted at an exercise price equal to fair
  market value at date of grant.
  
                                         25
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  The vesting periods for these options range from approximately four to five
  years and they expire at various dates through August 2010. Options for 692,060
  shares were outstanding under the 1997 Employee Stock Option Plan at December
  31, 2000.
  
     In August 1997, in conjunction with the Koll acquisition, the Company
  approved the assumption of the options outstanding under the KMS Holding
  Company Amended 1994 Stock Option Plan (now known as the CBC Substitute Option
  Plan (CBCSP)) and the Koll Acquisition Stock Option Plan (KASOP). Under the
  CBCSP, 407,087 stock options were issued with exercise prices ranging from
  $12.89 to $18.04 per share in exchange for existing Koll options. These options
  were immediately exercisable and expire at various dates through April 2006.
  All options were granted at an exercise price equal to fair market value at
  date of grant. At December 31, 2000, 231,941 options were outstanding. Under
  the KASOP, options for 550,000 shares were approved for issuance to former
  senior executives of Koll who became employees or directors of the Company.
  These options have exercise prices ranging from $14.25 to $36.75 per share and
  vesting periods ranging from immediate to three years. During 2000, the Company
  granted options for 20,000 shares of common stock under the KASOP at an
  exercise price of $12.88 per share. These options expire at various dates
  through August 2010. Options for 550,000 shares were outstanding for the KASOP
  at December 31, 2000.
  
     In August 1997, in conjunction with the Koll acquisition, the Company
  approved the issuance of warrants to purchase 599,967 shares. Of the
  outstanding warrants, 42,646 are attached to common stock obtainable under the
  CBC Substitute Option Plan and 555,741 are attached to shares of outstanding
  common stock. Each warrant is exercisable into one share of common stock at an
  exercise price of $30.00 commencing in August 2000 and expiring in August 2004.
  At December 31, 2000, 598,387 warrants issued were outstanding.
  
     A total of 90,750 shares of common stock have been reserved for issuance
  under the L.J. Melody Acquisition Stock Option Plan, which was adopted by the
  Board of Directors in September 1996 as part of the July 1996 acquisition of
  L.J. Melody. Options for all these shares have been issued at an exercise price
  of $10.00 per share and vest over a period of five years at the rate of 5% per
  quarter and these options expire in June 2006. Options for 90,750 shares of
  common stock under the L.J. Melody Acquisition Stock Option Plan were
  outstanding at December 31, 2000.
  
     A total of 600,000 shares of common stock have been reserved for issuance
  under the Company's 1991 Service Providers Stock Option Plan. In various years,
  options were granted below market price to select directors as partial payment
  for director fees. On December 15, 1998 select holders of stock options with an
  exercise price in excess of $20.00 per share elected to change the exercise
  price of their options to $20.00 per share, which was above market value on the
  date of election and simultaneously reduce the number of shares by 20%. During
  2000, options for 39,000 shares were granted to select directors and executive
  officers at an exercise price equal to fair market value at date of grant
  ranging from $11.81 to $12.88 per share. These options vest from a zero to a
  five year period and expire at various dates through August 2010. Options for
  583,888 shares were outstanding under the 1991 Service Providers Stock Option
  Plan at December 31, 2000.
  
     A total of 1,000,000 shares of common stock have been reserved for issuance
  under the Company's 1990 Stock Option Plan. All options vest over a four year
  period, expiring at various dates through November 2006. Options for 35,000
  shares under the 1990 Stock Option Plan were outstanding at December 31, 2000.
  
     The Company completed the 1999 stock repurchase program on January 5, 2000.
  A total of 397,450 shares of common stock were purchased for a total of $5.0
  million. In 1998, a total of 488,900 shares of common stock were purchased for
  $8.8 million. The shares purchased in 1999 and 1998 will be used to minimize
  the dilution caused by the exercise of stock options and the grant of stock
  purchase rights.
  
                                         26
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
     A summary of the status of the Company's option plans at December 31, 2000,
  1999 and 1998 and changes during the years then ended is presented in the table
  and narrative below:
  
  <TABLE>
  <CAPTION>
                                   2000                1999                1998
                            ------------------- ------------------- --------------------
                                       Weighted            Weighted             Weighted
                                       Average             Average              Average
  Stock Options and                    Exercise            Exercise             Exercise
  Warrants                   Shares     Price    Shares     Price     Shares     Price
  -----------------         ---------  -------- ---------  -------- ----------  --------
  <S>                       <C>        <C>      <C>        <C>      <C>         <C>
  Outstanding beginning of
   the year...............  3,075,356   $20.71  2,937,085   $23.18   3,284,381   $22.43
  Granted.................    487,710    24.81    628,611    15.17   1,885,944    25.94
  Exercised...............        --       --     (58,000)   10.00    (824,385)   10.73
  Forfeited/Expired.......   (223,056)   19.84   (432,340)   31.64  (1,408,855)   32.42
                            ---------   ------  ---------   ------  ----------   ------
  Outstanding end of
   year...................  3,340,010   $21.25  3,075,356    20.71   2,937,085   $23.18
                            ---------   ------  ---------   ------  ----------   ------
  Exercisable at end of
   year...................  1,824,665   $23.90    770,756   $21.86     830,289   $21.94
  Weighted average fair
   value of options
   granted during the
   year...................              $ 6.72              $ 8.84               $12.27
  </TABLE>
  
     Significant option and warrant groups outstanding at December 31, 2000 and
  related weighted average price and life information is presented below:
  
  <TABLE>
  <CAPTION>
                                                                      Exercisable Options
                                  Outstanding Options and Warrants        and Warrants
                                ------------------------------------- --------------------
                                                             Weighted             Weighted
                                            Weighted Average Average              Average
                                  Number       Remaining     Exercise   Number    Exercise
     Range of Exercise Prices   Outstanding Contractual Life  Price   Exercisable  Price
     ------------------------   ----------- ---------------- -------- ----------- --------
     <S>                        <C>         <C>              <C>      <C>         <C>
      $00.38-$10.38..........      167,594     5.32 yrs.      $ 7.44     143,519   $ 6.97
      $11.81-$19.44..........      985,941     7.69 yrs.       14.48     327,141    14.48
      $20.00-$23.75..........    1,273,754     6.84 yrs.       20.52     488,218    20.79
      $30.00-$36.75..........      912,721     4.64 yrs.       32.11     865,787    32.02
                                 ---------                    ------   ---------   ------
                                 3,340,010                    $21.25   1,824,665   $23.90
                                 =========                    ======   =========   ======
  </TABLE>
  
     Deferred Compensation Plan (the DCP). In 1994, the Company implemented the
  DCP. Under the DCP, a select group of management and highly compensated
  employees can defer the payment of all or a portion of their compensation
  (including any bonus). The DCP permits participating employees to make an
  irrevocable election at the beginning of each year to receive amounts deferred
  at a future date either in cash, which is an unsecured long-term liability of
  the Company, or in shares of common stock of the Company which elections are
  recorded as additions to stockholders' equity. In May 2000, the Company began
  repurchasing stock from the open market in order to minimize the dilutive
  effect of issuing stock pursuant to the DCP. As of December 31, 2000, the
  Company has repurchased 185,800 shares of common stock for $2.0 million, which
  is reported as an increase in treasury stock. In 1999, the Company revised the
  DCP to add insurance products which function like mutual funds as an investment
  alternative and to fund the Company's obligation for deferrals invested in
  these insurance products. Prior to July 1, 2000, cash payments to purchase
  additional insurance products were made on the third business day of the month
  following the related DCP participant deferral. Currently, payments are made
  twice a month. For the year ended December 31, 2000, $43.6 million was deferred
  and mainly allocated to the other investment products. The accumulated non-
  stock liability at December 31, 2000 was $80.5 million and the assets (in the
  form of insurance proceeds) set aside to cover the liability was $53.2 million.
  The total liability of $92.0 million, including $11.5 million deferred in
  stock, was charged to expense in the period of deferral and classified as
  deferred compensation plan liability, except for
  
                                         27
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  stock which is included in stockholders' equity. On July 17, 2000, the Company
  announced a match of the stock portion of the DCP for the Plan Year 1999 in the
  amount of $4.5 million, equivalent to 437,880 shares of common stock at a
  market price of $10.38 per share. The vesting period is over five years with
  20% vesting each year at December 31, 2000 through 2004. The related
  compensation expense will be amortized over the vesting period. The Company
  charged to compensation expense a total of $0.9 million for the year ended
  December 31, 2000. The weighted average fair value of the shares granted during
  the year is $5.90. In October 2000, the Company added the "Retention Program"
  and the "Recruitment Program" to the DCP, with the awards being effective
  January 2001. Under the Retention Program, the 125 best sales professionals
  were credited with 5,700, 4,500 or 3,000 stock units under the DCP (each unit
  is the equivalent of one share of stock). The stock units do not vest for four
  years and in the case of those sales professionals who were credited with 5,700
  or 4,500 stock units, there was a requirement to execute a long-term covenant
  not to compete. Under the Recruitment Program, the Company credited either
  stock units or cash to experienced new hires for sales professional jobs. The
  share awards ranged from 750 to 4,500 and the cash awards ranged from
  $30 thousand to $100 thousand.
  
     As allowed under the provisions of SFAS No. 123, Accounting for Stock-Based
  Compensation, the Company has elected to follow Accounting Principles Board
  (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related
  interpretations in accounting for its employee stock based compensation plans.
  Under this method the Company does not recognize compensation expense for
  options that were granted at or above the market price of the underlying stock
  on the date of grant. Had compensation expense been determined consistent with
  SFAS No. 123, the Company's net income and per share information would have
  been reduced to the following pro forma amounts (in thousands except per share
  data):
  
  <TABLE>
  <CAPTION>
                                                           2000    1999    1998
                                                          ------- ------- -------
     <S>                                                  <C>     <C>     <C>
     Net Income:
       As Reported....................................... $33,388 $23,282 $24,557
       Pro Forma.........................................  30,393  19,039  20,396
     Basic EPS:
       As Reported.......................................    1.60    1.11   (0.38)
       Pro Forma.........................................    1.45    0.91   (0.59)
     Diluted EPS:
       As Reported.......................................    1.58    1.10   (0.38)
       Pro Forma.........................................    1.44    0.91   (0.59)
  </TABLE>
  
     Because the SFAS 123 method of accounting has not been applied to options
  granted prior to January 1, 1995, the resulting pro forma compensation cost may
  not be representative of that to be expected in future years.
  
     The fair value of each option grant and DCP company match is estimated on
  the date of grant using the Black-Scholes option pricing model with the
  following weighted average assumptions used for grants:
  
  <TABLE>
  <CAPTION>
                                                     2000       1999       1998
                                                  ---------- ---------- ----------
     <S>                                          <C>        <C>        <C>
     Risk free interest rate.....................    6.52%      5.55%      4.95%
     Expected volatility.........................   58.06%     61.83%     48.16%
     Expected life............................... 5.00 years 5.00 years 5.00 years
  </TABLE>
  
     Dividend yield is excluded from the calculation since it is the present
  intention of the Company to retain all earnings.
  
     The Black-Scholes option valuation model was developed for use in estimating
  the fair value of traded options which have no vesting restrictions and are
  fully transferable. In addition, option valuation models
  
                                         28
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  require the input of highly subjective assumptions including the expected stock
  price volatility. Because the Company's employee stock options have
  characteristics significantly different from those of traded options, and
  because changes in the subjective input assumptions can materially affect the
  fair value estimate, the Company believes the Black-Scholes model does not
  necessarily provide a reliable single measure of the fair value of its employee
  stock options.
  
     Stock Purchase Plans. The Company has restricted stock purchase plans
  covering select key executives including senior management. A total of 500,000
  and 550,000 shares of common stock have been reserved for issuance under the
  Company's 1999 and 1996 Equity Incentive Plans, respectively. The shares may be
  issued to senior executives for a purchase price equal to the greater of $18.00
  and $10.00 per share or fair market value, respectively. Under the 1999 and
  1996 Equity Incentive Plans, the Company issued 285,000 and 50,000 shares in
  2000, and 415,833 and 441,937 shares were outstanding at December 31, 2000,
  respectively. The purchase price for these shares must be paid either in cash
  or by delivery of a full recourse promissory note. The related promissory notes
  are also included in the Consolidated Statements of Stockholders' Equity.
  
     In October 1998, the Company offered all employees under the 1990 Stock
  Option Plan who held options that expired in April 1999 a loan equal to 100% of
  the total exercise price plus 40% of the difference between the current market
  value of the shares and the exercise price. Loan proceeds were applied towards
  the total exercise price and payroll withholding taxes. The loans are evidenced
  by full recourse promissory notes having a maturity of five years at an
  interest rate of 6.0%. Interest is due annually, while the principal is due the
  earlier of five years or upon sale of the shares. The shares issued under this
  offering may not be sold until after 18 months from the date of issuance. A
  total of 415,000 shares were issued under this offering. The related promissory
  notes of $4.7 million and $4.9 million are included in other assets in the
  Consolidated Balance Sheets at December 31, 2000 and 1999, respectively.
  
     Bonuses. The Company has bonus programs covering select key employees,
  including senior management. Awards are based on the position and performance
  of the employee and the achievement of pre-established financial, operating and
  strategic objectives. The amounts charged to expense for bonuses were $49.8
  million, $44.3 million and $33.7 million for the years ended December 31, 2000,
  1999, and 1998, respectively.
  
     Capital Accumulation Plan (the Cap Plan). The Cap Plan is a defined
  contribution profit sharing plan under Section 401(k) of the Internal Revenue
  Code and is the Company's only such plan. Under the Cap Plan, each
  participating employee may elect to defer a portion of his or her earnings and
  the Company may make additional contributions from the Company's current or
  accumulated net profits to the Cap Plan in these amounts as determined by the
  Board of Directors. The Company expensed, in connection with the Cap Plan, $2.2
  million and $1.6 million for the years ended December 31, 2000 and 1999. No
  expense, in connection with the Cap Plan, was incurred for the year ended
  December 31, 1998.
  
     Employee Stock Purchase Plan. In May 2000, the Company amended and restated,
  effective July 1, 2000, its 1998 employee stock purchase plan designed
  exclusively for employees who earn less than $100,000 in total annual
  compensation. Under the plan, the eligible employees may purchase common stock
  by means of contributions to the Company at a price equal to 90% of the fair
  market value of the share on the last trading day of the purchase period. The
  plan provides for purchases by employees up to an aggregate of 150,000 shares
  each year for 2000, 2001 and 2002. This program was discontinued effective
  October 2000.
  
     Pension Plan. The Company, through the acquisition of Hillier Parker,
  maintains a contributory defined benefit pension plan to provide retirement
  benefits to existing and former Hillier Parker employees participating in the
  plan. It is the Company's policy to fund the minimum annual contributions
  required by applicable regulations. Pension expense totaled $0.9 million, $1.9
  million and $0.9 million in 2000, 1999 and 1998, respectively.
  
                                         29
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
     The following sets forth a reconciliation of benefit obligation, plan
  assets, plan's funded status and amounts recognized in the accompanying
  Consolidated Balance Sheets:
  
  <TABLE>
  <CAPTION>
                                                                 Year Ended
                                                                 December 31
                                                              ------------------
                                                                2000      1999
                                                              --------  --------
                                                               (in thousands)
     <S>                                                      <C>       <C>
     Change in benefit obligation
     Benefit obligation at beginning of year................. $ 72,146  $ 73,190
     Service cost............................................    5,728     5,350
     Interest cost...........................................    4,026     4,175
     Plan participants' contributions........................      671       804
     Actuarial gain..........................................   (4,680)   (7,495)
     Benefits paid...........................................   (1,343)   (1,760)
     Currency gain...........................................   (5,472)   (2,118)
                                                              --------  --------
     Benefit obligation at end of year....................... $ 71,076  $ 72,146
                                                              ========  ========
  
     Change in plan assets
     Fair value of plan assets at beginning of year.......... $115,039  $ 95,731
     Actual return on plan assets............................   (3,340)   22,666
     Company contributions...................................    1,257       786
     Plan participants' contributions........................      671       419
     Benefits paid...........................................   (1,343)   (1,760)
     Currency loss...........................................   (8,596)   (2,803)
                                                              --------  --------
     Fair value of plan assets at end of year................ $103,688  $115,039
                                                              ========  ========
     Funded status........................................... $ 32,612  $ 42,893
     Unrecognized net actuarial gain.........................   (7,941)  (16,570)
     Company contributions in the post-measurement period....      564       --
                                                              --------  --------
     Prepaid benefit cost.................................... $ 25,235  $ 26,323
                                                              ========  ========
  </TABLE>
  
     Weighted-average assumptions used in developing the projected benefit
  obligation were as follows:
  
  <TABLE>
  <CAPTION>
                                                                   December 31
                                                                 ----------------
                                                                  2000     1999
                                                                 -------  -------
     <S>                                                         <C>      <C>
     Discount rate..............................................  6.00%    5.75%
     Expected return on plan assets.............................  7.75%    7.75%
     Rate of compensation increase..............................  5.00%    5.00%
  
     Net periodic pension cost consisted of the following:
  
  <CAPTION>
                                                                   Year Ended
                                                                   December 31
                                                                 ----------------
                                                                  2000     1999
                                                                 -------  -------
                                                                 (in thousands)
     <S>                                                         <C>      <C>
     Employer service cost...................................... $ 5,728  $ 5,350
     Interest cost on projected benefit obligation..............   4,026    4,175
     Expected return on plan assets.............................  (8,395)  (7,636)
     Unrecognized net gain......................................    (425)     --
                                                                 -------  -------
     Net periodic benefit cost.................................. $   934  $ 1,889
                                                                 =======  =======
  </TABLE>
  
                                         30
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
  6. Long-term Debt
  
     Long-term debt consists of the following (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                   December 31
                                                                -----------------
                                                                  2000     1999
                                                                -------- --------
     <S>                                                        <C>      <C>
     Senior Subordinated Notes, less unamortized discount of
      $1.7 million and $1.9 million at December 31, 2000 and
      1999, respectively, with fixed interest at 8.9% due in
      2006....................................................  $173,336 $173,108
     Revolving Credit Facility, with interest ranging from
      8.5% to 9.0%, due in 2003...............................   110,000  160,000
     Westmark Senior Notes, with interest ranging from 9.0% to
      10.0% through December 31, 2004 and at variable rates
      depending on the Company's credit facility rate
      thereafter, due from 2001 through 2010..................    15,502   16,502
     Euro cash pool loan, with interest at 6.91% and no stated
      maturity date...........................................     6,946      --
     REI Senior Notes, with variable interest rates based on
      Sterling LIBOR minus 1.5%, due in 2002..................     2,742    2,965
     Shoptaw-James Senior Notes, with fixed interest at 9.0%,
      due in 2001.............................................       810    1,620
     Carey, Brumbaugh Senior Notes, with fixed interest at
      9.0%, due in 2001.......................................       720    1,440
     Eberhardt Acquisition Obligations, with fixed interest at
      8.0%, due from 2001 through 2002........................       600      900
     Capital lease obligations, mainly for autos and telephone
      equipment, with interest ranging from 6.8% to 8.9%, due
      through 2004............................................     2,302    3,554
     Other....................................................     1,206    4,548
                                                                -------- --------
     Total....................................................   314,164  364,637
     Less current maturities..................................    10,593    6,765
                                                                -------- --------
       Total long-term debt...................................  $303,571 $357,872
                                                                ======== ========
  </TABLE>
  
     Annual aggregate maturities of long-term debt at December 31, 2000 are as
  follows (in thousands): 2001--$10,593; 2002--$4,536; 2003--$110,512; 2004--
  $128; 2005--$20; and $188,375 thereafter.
  
     In October 1999, the Company executed an amendment to the revolving credit
  facility, eliminating the mandatory reduction on December 31, 1999, and
  revising some of the restrictive covenants. The new amendment is also subject
  to mandatory reductions of the facility by $80.0 million and $70.0 million on
  December 31, 2000 and 2001, respectively. This reduced the facility from $350.0
  million to $270.0 million at December 31, 2000. The amount outstanding under
  this facility was $110.0 million at December 31, 2000. Interest rate
  alternatives include Bank of America's reference rate plus 1.00% and LIBOR plus
  2.00%. The weighted average rate on amounts outstanding at December 31, 2000
  was 8.79%.
  
     The revolving credit facility contains numerous restrictive covenants that,
  among other things, limit the Company's ability to incur or repay other
  indebtedness, make advances or loans to subsidiaries and other entities, make
  capital expenditures, incur liens, enter into mergers or effect other
  fundamental corporate transactions, sell its assets, or declare dividends. In
  addition, the Company is required to meet certain ratios relating to its
  adjusted net worth, level of indebtedness, fixed charges and interest coverage.
  
     The Company has outstanding Senior Subordinated Notes (Subordinated Notes)
  due on June 1, 2006. The Subordinated Notes are redeemable in whole or in part
  after June 1, 2002 at 104.438% of par on that date and at declining prices
  thereafter. On or before June 1, 2001, up to 35.0% of the issued amount may be
  redeemed at 108.875% of par plus accrued interest solely with the proceeds from
  an equity offering.
  
  
                                         31
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
     The Company has a credit agreement with Residential Funding Corporation
  (RFC). The credit agreement provides for a revolving line of credit, which
  bears interest at 1.25% per annum over LIBOR. On July 19, 2000, the Company
  executed an amendment to the revolving line of credit, increasing the line of
  credit from $50.0 million to $100.0 million, decreasing the interest rate from
  1.25% to 1.00% per annum over LIBOR and extending the expiration date from
  August 31, 2000 to August 31, 2001. In addition, on November 8, 2000, the
  Company obtained a temporary line of credit increase of $52.0 million,
  resulting in a total line of credit equaling $152.0 million. This temporary
  line of credit increase expired on November 30, 2000. During the year, the
  Company had a maximum of $151.3 million revolving line of credit principal
  outstanding. At December 31, 2000, the Company had $0.4 million revolving line
  of credit principal outstanding.
  
  7. Commitments and Contingencies
  
     In December 1996, GMH Associates, Inc. (GMH) filed a lawsuit against
  Prudential Realty Group (Prudential) and the Company in the Superior Court of
  Pennsylvania, Franklin County, alleging various contractual and tort claims
  against Prudential, the seller of a large office complex, and the Company, its
  agent in the sale, contending that Prudential breached its agreement to sell
  the property to GMH, breached its duty to negotiate in good faith, conspired
  with the Company to conceal from GMH that Prudential was negotiating to sell
  the property to another purchaser and that Prudential and the Company
  misrepresented that there were no other negotiations for the sale of the
  property. Following a non-jury trial, the court rendered a decision in favor of
  GMH and against Prudential and the Company, awarding GMH $20.3 million in
  compensatory damages, against Prudential and the Company jointly and severally,
  and $10.0 million in punitive damages, allocating the punitive damage award
  $7.0 million as against Prudential and $3.0 million as against the Company.
  Following the denial of motions by Prudential and the Company for a new trial,
  a judgment was entered on December 3, 1998. Prudential and the Company filed an
  appeal of the judgment. On March 3, 2000, the appellate court in Pennsylvania
  reversed all of the trial courts' decisions finding that liability was not
  supported on any theory claimed by GMH and directed that a judgment be entered
  in favor of the defendants including the Company. The plaintiff filed an appeal
  with the Pennsylvania Supreme Court which was denied. The plaintiff has
  exhausted all appeal possibilities and judgment is expected to be entered
  shortly in favor of all defendants.
  
     In August 1993, a former commissioned sales person of the Company filed a
  lawsuit against the Company in the Superior Court of New Jersey, Bergen County,
  alleging gender discrimination and wrongful termination by the Company. On
  November 20, 1996, a jury returned a verdict against the Company, awarding $1.5
  million in general damages and $5.0 million in punitive damages to the
  plaintiff. Subsequently, the trial court awarded the plaintiff $0.6 million in
  attorneys' fees and costs. Following denial by the trial court of the Company's
  motions for new trial, reversal of the verdict and reduction of damages, the
  Company filed an appeal of the verdict and requested a reduction of damages. On
  March 9, 1999, the appellate court ruled in the Company's favor, reversed the
  trial court decision and ordered a new trial. On February 16, 2000, the Supreme
  Court of New Jersey reversed the decision of the appellate court, concluded
  that the general damage award in the trial court should be sustained and
  returned the case to the appellate court for a determination as to whether a
  new trial should be ordered on the issue of punitive damages. In April 2000,
  the Company settled the compensatory damages claim (including interest) and all
  claims to date with respect to attorneys fees by paying to the plaintiff the
  sum of $2.75 million leaving only the punitive damage claim for resolution (the
  plaintiff also agreed, with very limited exceptions, that no matter what the
  outcome of the punitive damage claim the Company would not be responsible for
  more than 50% of the plaintiff's future attorney fees). In February 2001, the
  Company settled all remaining claims for the sum of $2.0 million and received a
  comprehensive release.
  
     The Company is a party to a number of pending or threatened lawsuits arising
  out of, or incident to, its ordinary course of business. Based on available
  cash and anticipated cash flows, the Company believes that the ultimate outcome
  will not have an impact on the Company's ability to carry on its operations.
  Management
  
                                         32
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  believes that any liability to the Company that may result from disposition of
  these lawsuits will not have a material effect on the consolidated financial
  position or results of operations of the Company.
  
     The following is a schedule by years of future minimum lease payments for
  noncancelable leases as of December 31, 2000 (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                 Capital Operating
                                                                 Leases   Leases
                                                                 ------- ---------
     <S>                                                         <C>     <C>
     2001....................................................... $1,167  $ 48,299
     2002.......................................................    895    40,686
     2003.......................................................    518    33,316
     2004.......................................................     10    25,967
     2005.......................................................    --     22,195
     Thereafter.................................................    --     97,674
                                                                 ------  --------
       Total minimum payments required.......................... $2,590  $268,137
                                                                 ======  ========
  </TABLE>
  
     The interest portion of capital lease payments represents the amount
  necessary to reduce net minimum lease payments to present value calculated at
  the Company's incremental borrowing rate at the inception of the leases. This
  totaled $0.3 million at December 31, 2000, resulting in a present value of net
  minimum lease payments of $2.3 million. At December 31, 2000, $0.9 million and
  $1.4 million are included in the current portion of long-term debt and long-
  term debt, respectively. In addition, the total minimum payments for
  noncancelable operating leases have not been reduced by the minimum sublease
  rental income of $42.9 million due in the future under noncancelable subleases.
  
     Substantially all leases require the Company to pay maintenance costs,
  insurance and property taxes, and generally may be renewed for five year
  periods. The composition of total rental expense under noncancelable operating
  leases consisted of the following (in thousands):
  
  <TABLE>
  <CAPTION>
                                                             December 31,
                                                        -------------------------
                                                         2000     1999     1998
                                                        -------  -------  -------
     <S>                                                <C>      <C>      <C>
     Minimum rentals................................... $56,243  $51,467  $33,126
     Less sublease rentals.............................  (1,387)    (928)    (706)
                                                        -------  -------  -------
                                                        $54,856  $50,539  $32,420
                                                        =======  =======  =======
  </TABLE>
  
     In 1999, the Company entered into an agreement with Fannie Mae in which the
  Company agreed to fund the purchase of a $103.6 million loan portfolio from
  proceeds from its RFC line of credit, which was temporarily increased to $140.0
  million in 2000. In December 2000, the Company entered into an agreement with
  Fannie Mae in which the Company agreed to fund the purchase of an additional
  $7.5 million loan from proceeds from its RFC line of credit. A 100%
  participation in both the original and additional loan portfolio was
  subsequently sold to Fannie Mae with the Company retaining the credit risk on
  the first 2% of loss incurred on the underlying commercial mortgage loans. The
  Company has collateralized a portion of its obligation to cover the first 2% of
  losses for both the $103.6 million loan portfolio and the additional
  $7.5 million loan portfolio by increasing a letter of credit in favor of Fannie
  Mae to total $1.1 million.
  
     The Company has a participation agreement with RFC whereby RFC agrees to
  purchase a 99% participation interest in any eligible multifamily mortgage
  loans owned by the Company and outstanding at quarter-end. This participation
  agreement, which originally expired on August 31, 2000, has been extended to
  August 31, 2001.
  
                                         33
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
     An important part of the strategy for the Company's investment management
  business involves investing the Company's own capital in certain real estate
  investments with its clients. As of December 31, 2000, the Company had
  committed an additional $37.7 million to fund future co-investments.
  
  8. Income Taxes
  
     The tax provision (benefit) for the years ended December 31, 2000, 1999 and
  1998 consisted of the following (in thousands):
  
  <TABLE>
  <CAPTION>
                                                        Year Ended December 31
                                                        -------------------------
                                                         2000     1999     1998
                                                        -------  -------  -------
     <S>                                                <C>      <C>      <C>
     Federal:
       Current......................................... $24,924  $14,403  $ 4,265
       Deferred tax....................................     921   (1,417)  14,469
       Reduction of valuation allowances...............  (3,000)  (6,347)     --
                                                        -------  -------  -------
                                                         22,845    6,639   18,734
     State:
       Current.........................................   6,895    5,627    3,470
       Deferred tax....................................  (1,243)  (1,411)     (75)
                                                        -------  -------  -------
                                                          5,652    4,216    3,395
     Foreign:
       Current.........................................   7,015    8,837    3,797
       Deferred tax....................................    (761)  (3,513)     --
                                                        -------  -------  -------
                                                          6,254    5,324    3,797
                                                        -------  -------  -------
                                                        $34,751  $16,179  $25,926
                                                        =======  =======  =======
  </TABLE>
  
     The following is a reconciliation, stated as a percentage of pre-tax income,
  of the US statutory federal income tax rate to the Company's effective tax rate
  on income from operations:
  
  <TABLE>
  <CAPTION>
                                                  Year Ended December 31
                                                  ---------------------------
                                                   2000      1999      1998
                                                  -------   -------   -------
     <S>                                          <C>       <C>       <C>
     Federal statutory tax rate..................      35%       35%       35%
     Permanent differences, including goodwill,
      meals, entertainment and other.............      11        15         8
     State taxes, net of federal benefit.........       6         9         4
     Foreign income taxes........................       4         4         4
     Reduction of valuation allowances...........      (5)      (22)       --
                                                  -------   -------   -------
     Effective tax rate..........................      51%       41%       51%
                                                  =======   =======   =======
  </TABLE>
  
     The domestic component of income before provision for income tax included in
  the consolidated statement of operations was $63.2 million, $32.0 million and
  $45.6 million, for 2000, 1999 and 1998, respectively. The international
  component of income before provision for income tax was $4.9 million, $7.4
  million and $4.9 million, for 2000, 1999 and 1998, respectively.
  
                                         34
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
     Cumulative tax effects of temporary differences are shown below at December
  31, 2000 and 1999 (in thousands):
  
  <TABLE>
  <CAPTION>
                                                                December 31
                                                             ------------------
                                                               2000      1999
                                                             --------  --------
     <S>                                                     <C>       <C>
     Asset (Liability)
     Property and equipment................................. $ 11,910  $  5,820
     Bad debts and other reserves...........................   12,832    15,940
     Intangible amortization................................  (15,736)  (16,533)
     Bonus, unexercised restricted stock, deferred
      compensation..........................................   35,343    23,990
     Partnership income.....................................    6,950     7,092
     Net operating loss (NOL) and alternative minimum tax
      credit carryforwards..................................    6,134    23,086
     Unconsolidated affiliates..............................    1,010    (1,167)
     All other, net.........................................    1,853     2,040
                                                             --------  --------
     Net deferred tax asset before valuation allowances.....   60,296    60,268
     Valuation allowances...................................  (16,830)  (20,320)
                                                             --------  --------
       Net deferred tax asset............................... $ 43,466  $ 39,948
                                                             ========  ========
  </TABLE>
  
     The Company had federal income tax NOLs of approximately $16.3 million at
  December 31, 2000, corresponding to $5.7 million of the Company's $60.3 million
  in net deferred tax assets before valuation allowances.
  
     The ability of the Company to utilize NOLs was limited in 1998 and will be
  in subsequent years as a result of the Company's 1996 public offering, the 1997
  Koll acquisition and the 1998 repurchase of preferred stock which cumulatively
  caused a more than 50.0% change of ownership within a three year period. As a
  result of the limitation, the Company's ability to utilize its existing NOLs is
  limited to $26.0 million on an annual basis. It is anticipated that the Company
  will utilize the remaining NOLs in 2001.
  
     A deferred US tax liability has not been provided on the unremitted earnings
  of foreign subsidiaries because it is the intent of the Company to permanently
  reinvest these earnings. Undistributed earnings of foreign subsidiaries, which
  have been or are intended to be permanently invested in accordance with APB
  No. 23, Accounting for Income Taxes--Special Areas, aggregated $27.7 million at
  December 31, 2000.
  
  9. Earnings Per Share Information
  
     Basic earnings (loss) per share was computed by dividing net income (loss),
  less preferred dividend requirements as applicable, by the weighted average
  number of common shares outstanding during each period. The computation of
  diluted earnings (loss) per share further assumes the dilutive effect of stock
  options, stock warrants and other stock-based compensation programs, as well as
  the conversion of the preferred stock during periods when preferred stock was
  outstanding and was dilutive.
  
     In January 1998, the Company repurchased all 4.0 million shares of its
  outstanding convertible preferred stock. The portion of the purchase price in
  excess of the carrying value represents the deemed dividend charge to net
  income applicable to common shareholders when computing basic and diluted
  earnings (loss) per share for the year ended December 31, 1998.
  
                                         35
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
     The following is a calculation of earnings (loss) per share for the years
  ended December 31 (in thousands, except share and per share data):
  
  <TABLE>
  <CAPTION>
                                     2000                      1999                       1998
                           ------------------------- ------------------------- ---------------------------
                                               Per-                      Per-                        Per-
                                              Share                     Share                       Share
                           Income    Shares   Amount Income    Shares   Amount  Income     Shares   Amount
                           ------- ---------- ------ ------- ---------- ------ --------  ---------- ------
  <S>                      <C>     <C>        <C>    <C>     <C>        <C>    <C>       <C>        <C>
  Basic earnings (loss)
   per share:
   Net income............. $33,388                   $23,282                   $ 24,557
   Deemed dividend on
    preferred stock
    repurchase............     --                        --                     (32,273)
                           ------- ---------- -----  ------- ---------- -----  --------  ---------- ------
   Net income (loss)
    applicable to common
    stockholders.......... $33,388 20,931,111 $1.60  $23,282 20,998,097 $1.11  $ (7,716) 20,136,117 $(0.38)
                           ======= ========== =====  ======= ========== =====  ========  ========== ======
  Diluted earnings (loss)
   per share:
   Net income (loss)
    applicable to common
    stockholders.......... $33,388 20,931,111        $23,282 20,998,097        $ (7,716) 20,136,117
   Diluted effect of
    exercise of options
    outstanding...........             35,594                    74,339                         --
   Diluted effect of
    stock-based
    compensation
    programs..............            130,535                       --                          --
                           ------- ----------        ------- ----------        --------  ----------
   Net income (loss)
    applicable to common
    stockholders.......... $33,388 21,097,240 $1.58  $23,282 21,072,436 $1.10  $ (7,716) 20,136,117 $(0.38)
                           ======= ========== =====  ======= ========== =====  ========  ========== ======
  </TABLE>
  
     The following items were not included in the computation of diluted earnings
  per share because their effect in the aggregate was anti-dilutive for the years
  ended December 31,
  
  <TABLE>
  <CAPTION>
                                          2000           1999           1998
                                     -------------- -------------- ---------------
     <S>                             <C>            <C>            <C>
     Stock options
       Outstanding..................   2,574,029      2,008,659       2,337,118
       Price ranges................. $11.81-$36.75  $16.38-$36.75   $0.30-$37.31
       Expiration ranges............ 6/8/04-8/31/10 6/8/04-5/31/09 4/18/99-7/22/08
     Stock warrants
       Outstanding..................    598,387        599,967         599,967
       Price........................     $30.00         $30.00         $30.00
       Expiration date..............    8/28/04        8/28/04         8/28/04
  </TABLE>
  
  10. Disclosures About Fair Value of Financial Instruments
  
     Long-term Debt. Based on dealer's quote, the estimated fair value of the
  Company's $173.3 million Senior Subordinated Note, discussed in Note 6, is
  $155.8 million.
  
     Estimated fair values for the Revolving Credit Facilities and the remaining
  long-term debts are not presented because the Company believes that it is not
  materially different from book value, primarily because the majority of the
  Company's debt is based on variable rates.
  
                                         36
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
  11. Industry Segments
  
     In July 1999, the Company undertook a reorganization to streamline its US
  operations which resulted in a change in its segment reporting from four to
  three segments. The Company has a number of lines of business which are
  aggregated, reported and managed through these three segments: Transaction
  Management, Financial Services and Management Services. The Transaction
  Management segment is our largest generator of revenue and operating income and
  includes Brokerage Services, Corporate Services and Investment Property
  activities. Brokerage Services includes activities that provide sales, leasing
  and consulting services in connection with commercial real estate and is the
  Company's primary revenue source. Corporate Services focuses on building
  relationships with large corporate clients which generate recurring revenue.
  Investment Property activities provide brokerage services for commercial real
  property marketed for sale to institutional and private investors. The
  Financial Services segment provides commercial mortgage, valuation, investment
  management and consulting and research services. The Management Services
  segment provides facility management services to corporate real estate users
  and property management and related services to owners. The following table
  summarizes the revenue, cost and expenses, and operating income (loss) by
  operating segment for the year ended December 31, 2000, 1999 and 1998 (in
  thousands):
  
  <TABLE>
  <CAPTION>
                                                    Year Ended December 31
                                               --------------------------------
                                                  2000       1999       1998
                                               ---------- ---------- ----------
  <S>                                          <C>        <C>        <C>
  Revenue:
  Transaction Management
    Leases.................................... $  510,287 $  426,108 $  352,811
    Sales.....................................    378,486    383,726    330,206
    Other consulting and referral fees(1).....     61,479     71,095     79,934
                                               ---------- ---------- ----------
      Total revenue...........................    950,252    880,929    762,951
  Financial Services
    Appraisal fees............................     72,861     69,007     48,090
    Loan origination and servicing fees.......     58,188     45,938     39,402
    Investment management fees................     40,433     27,323     32,591
    Other(1)..................................     42,622     35,059     25,167
                                               ---------- ---------- ----------
      Total revenue...........................    214,104    177,327    145,250
  Management Services
    Property management fees..................     83,251     79,994     67,300
    Facilities management fees................     23,069     25,597     17,219
    Other(1)..................................     52,928     49,192     41,783
                                               ---------- ---------- ----------
      Total revenue...........................    159,248    154,783    126,302
                                               ---------- ---------- ----------
  Consolidated revenues....................... $1,323,604 $1,213,039 $1,034,503
                                               ========== ========== ==========
  Operating income (loss)
  Transaction Management...................... $   83,305 $   68,382 $   81,232
  Financial Services..........................     17,712      7,113      6,849
  Management Services.........................      6,268      1,404      6,980
  Merger-related and other nonrecurring
   charges....................................        --         --     (16,585)
                                               ---------- ---------- ----------
                                                  107,285     76,899     78,476
  Interest income.............................      2,554      1,930      3,054
  Interest expense............................     41,700     39,368     31,047
                                               ---------- ---------- ----------
  Income before provision for income taxes.... $   68,139 $   39,461 $   50,483
                                               ========== ========== ==========
  </TABLE>
  
                                         37
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  <TABLE>
  <CAPTION>
                                                          Year Ended December 31
                                                          -----------------------
                                                           2000    1999    1998
                                                          ------- ------- -------
  <S>                                                     <C>     <C>     <C>
  Depreciation and amortization
  Transaction Management................................. $21,342 $20,676 $13,722
  Financial Services.....................................  12,001  10,719  11,025
  Management Services....................................   9,856   9,075   7,438
                                                          ------- ------- -------
                                                          $43,199 $40,470 $32,185
                                                          ======= ======= =======
  </TABLE>
  
  <TABLE>
  <CAPTION>
                                                          Year Ended December 31
                                                          -----------------------
                                                           2000    1999    1998
                                                          ------- ------- -------
  <S>                                                     <C>     <C>     <C>
  Capital expenditures
  Transaction Management................................  $15,435 $15,830 $12,669
  Financial Services....................................    6,674  11,030  10,179
  Management Services...................................    4,812   8,270   6,867
                                                          ------- ------- -------
                                                          $26,921 $35,130 $29,715
                                                          ======= ======= =======
  Equity interest in earnings of unconsolidated subsidi-
   aries
  Transaction Management................................  $ 3,930 $ 2,542 $   315
  Financial Services....................................    1,162   4,030     706
  Management Services...................................    2,020     956   2,422
                                                          ------- ------- -------
                                                          $ 7,112 $ 7,528 $ 3,443
                                                          ======= ======= =======
  </TABLE>
  --------
  (1) Revenue is allocated by material line of business specific to each segment.
      "Other" includes types of revenue that have not been broken out separately
      due to their immaterial balances and/or nonrecurring nature within each
      segment. Certain revenue types disclosed on the consolidated statements of
      operations may not be derived directly from amounts shown in this table.
  
  <TABLE>
  <CAPTION>
                                                                   December 31
                                                                -----------------
                                                                  2000     1999
                                                                -------- --------
     <S>                                                        <C>      <C>
     Identifiable assets
       Transaction Management.................................. $477,268 $444,422
       Financial Services......................................  261,682  246,151
       Management Services.....................................  159,835  171,118
       Corporate...............................................   64,320   67,792
                                                                -------- --------
                                                                $963,105 $929,483
                                                                ======== ========
  
     Identifiable assets by industry segment are those assets used in the Company
  operations in each segment. Corporate identified assets are principally made up
  of cash and cash equivalents and deferred taxes.
  
  <CAPTION>
                                                                   December 31
                                                                -----------------
                                                                  2000     1999
                                                                -------- --------
     <S>                                                        <C>      <C>
     Investment in and advances to unconsolidated subsidiaries
       Transaction Management.................................. $ 14,208 $ 11,352
       Financial Services......................................   15,199   18,587
       Management Services.....................................   11,918    8,575
                                                                -------- --------
                                                                 $41,325 $ 38,514
                                                                ======== ========
  </TABLE>
  
                                         38
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  
  Geographic Information:
  
  <TABLE>
  <CAPTION>
                                                      Year Ended December 31
                                                 --------------------------------
                                                    2000       1999       1998
                                                 ---------- ---------- ----------
     <S>                                         <C>        <C>        <C>
     Revenue
       Americas
         United States.......................... $1,027,359 $  940,341 $  884,304
         Canada, South and Central America......     46,721     42,112     16,473
                                                 ---------- ---------- ----------
                                                  1,074,080    982,453    900,777
       Asia Pacific.............................     84,985     79,420     46,528
       Europe, Middle East and Africa...........    164,539    151,166     87,198
                                                 ---------- ---------- ----------
                                                 $1,323,604 $1,213,039 $1,034,503
                                                 ========== ========== ==========
  </TABLE>
  
  <TABLE>
  <CAPTION>
                                                                     December 31
                                                                   ---------------
                                                                    2000    1999
                                                                   ------- -------
     <S>                                                           <C>     <C>
     Long-Lived assets
       United States.............................................. $55,100 $51,064
       All other countries........................................  20,892  19,085
                                                                   ------- -------
                                                                   $75,992 $70,149
                                                                   ======= =======
  </TABLE>
  
     Long lived assets include property, plant and equipment.
  
  12. Subsequent Event
  
     On February 24, 2001, the Company announced that it had entered into a
  merger agreement providing for the acquisition of the Company by Blum CB
  Corporation (Blum CB) for $16.00 per share in cash. Blum CB is an affiliate of
  Blum Capital Partners, Freeman Spogli & Co. and certain directors and executive
  officers of the Company.
  
     The agreement provides that the Company employees will have the option to
  roll over their existing shares in the Company's deferred compensation plan and
  a portion of the Company shares held in their 401(k) accounts. Employees will
  also be provided the opportunity to make a direct equity investment in the
  surviving company.
  
     The acquisition, which is expected to close early in the third quarter,
  remains subject to certain conditions, including the receipt of Blum CB's debt
  financing, the approval of the merger by the holders of two-thirds of the
  outstanding shares of the Company not owned by the buying group, the expiration
  or termination of waiting periods under applicable antitrust laws and a
  successful tender offer for at least 51% of the Company's outstanding 8 7/8%
  Senior Subordinated Notes. The Company will pay a termination fee of
  $7.5 million and reimburse up to $3.0 million of the buying group's expenses if
  the Company wishes to accept a superior acquisition proposal.
  
                                         39
  <PAGE>
  
                          CB RICHARD ELLIS SERVICES, INC.
  
              QUARTERLY RESULTS OF OPERATIONS AND OTHER FINANCIAL DATA
                                    (Unaudited)
  
     The following table sets forth the Company's unaudited quarterly results of
  operations. The unaudited quarterly information should be read in conjunction
  with the audited consolidated financial statements of the Company and the notes
  thereto. The operating results for any quarter are not necessarily indicative
  of the results for any future period.
  
  <TABLE>
  <CAPTION>
                                               2000                                            1999
                            ----------------------------------------------  ----------------------------------------------
                             Dec. 31     Sept. 30    June 30     March 31    Dec. 31     Sept. 30    June 30     March 31
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                                            (Dollars in thousands)
  <S>                       <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
  Results of Operation:
  
  Revenue.................  $  418,280  $  326,521  $  317,884  $  260,919  $  395,653  $  307,018  $  277,167  $  233,201
  
  Operating income........  $   50,617  $   24,884  $   22,545  $    9,239  $   35,197  $   20,046  $   16,580  $    5,076
  
  Interest expense, net...  $    9,018  $   10,039  $   10,893  $    9,196  $    9,629  $    9,503  $    9,667  $    8,639
  
  Net income (loss).......  $   20,914  $    6,977  $    5,477  $       20  $   17,031  $    4,648  $    3,356  $   (1,753)
  
  Basic EPS(1)............  $     0.99  $     0.34  $     0.26  $      --   $     0.81  $     0.22  $     0.16  $    (0.08)
  
  Weighted average shares
   outstanding for basic
   EPS(1).................  21,217,685  20,086,651  20,879,218  20,819,268  20,928,615  21,098,757  21,032,324  20,640,438
  
  Diluted EPS(1)..........  $     0.97  $     0.33  $     0.26  $      --   $     0.81  $     0.22  $     0.16  $    (0.08)
  
  Weighted average shares
   outstanding for diluted
   EPS(1).................  21,554,942  20,881,092  20,906,117  20,851,184  20,964,066  21,162,334  21,125,074  20,640,438
  
  Other Financial Data:
  
  EBITDA, excluding
   merger-related and
   other nonrecurring
   charges................  $   61,682  $   35,718  $   33,276  $   19,808  $   45,704  $   30,047  $   26,548  $   15,070
  
  Net cash provided by
   (used in) operating
   activities.............  $   86,601  $   48,528  $   16,505  $  (67,522) $   71,174  $   47,062  $   10,122  $  (54,347)
  
  Net cash (used in)
   provided by investing
   activities.............  $   (7,350) $  (16,255) $  (18,431) $    6,314  $   (5,417) $   (6,863) $  (16,327) $    1,840
  
  Net cash (used in)
   provided by financing
   activities.............  $  (80,037) $  (28,824) $   (3,456) $   58,794  $  (62,330) $  (27,820) $    2,389  $   50,040
  
  Balance Sheet Data:
  
  Cash and cash
   equivalents............  $   20,854  $   20,724  $   19,195  $   24,791  $   27,844  $   25,122  $   12,553  $   17,425
  
  Total assets............  $  963,105  $  930,029  $  904,925  $  897,756  $  929,483  $  871,159  $  841,311  $  824,757
  
  Total long-term debt....  $  303,571  $  390,624  $  418,231  $  416,531  $  357,872  $  413,227  $  435,419  $  431,135
  
  Total liabilities.......  $  724,018  $  717,618  $  693,416  $  687,765  $  715,874  $  670,685  $  648,801  $  634,707
  
  Total stockholders
   equity.................  $  235,339  $  209,569  $  208,276  $  206,711  $  209,737  $  196,324  $  187,819  $  185,259
  
  Number of shares
   outstanding............  20,605,023  20,246,122  20,270,560  20,408,692  20,435,692  20,686,995  20,794,165  20,640,865
  
  Ratios:
  
  Debt/equity.............        1.33        1.88        2.03        2.04        1.74        2.13        2.35        2.37
  
  EBITDA, excluding
   merger-related and
   other nonrecurring
   charges net interest
   expense................        6.84        3.56        3.05        2.15        4.75        3.16        2.75        1.74
  
  EBITDA, excluding
   merger-related and
   other nonrecurring
   charges as a percentage
   of revenue.............        14.7%       10.9%       10.5%        7.6%       11.6%        9.8%        9.6%        6.5 %
  
  Net income as a
   percentage of revenue..         5.0%        2.1%        1.7%        --          4.3%        1.5%        1.2%       (0.8)%
  
  International revenue as
   a percentage of
   consolidated revenue...        21.6%       21.8%       22.7%       23.9%       22.5%       22.5%       22.3%       22.6 %
  </TABLE>
  
  --------
  (1) EPS is defined as earnings (loss) per share
  
                                         40
  <PAGE>
  
       (b)  Pro Forma Financial Information.
  
            The pro forma financial information required by Item 7(b) is not
  included in this filing.  The Company intends to file such information as an
  amendment to this Form 8-K not later than October 2, 2001.
  
       (c)  Exhibits.
  
  2.1       Amended and Restated Agreement and Plan of Merger dated as of May 31,
            2001 by and among CB Richard Ellis Services, Inc., CBRE Holding, Inc.,
            and BLUM CB Corp. (incorporated by reference from Exhibit 2.1 of
            Amendment No. 1 to the Registration Statement on Form S-1, filed by
            CBRE Holding, Inc. on June 12, 2001, File No. 333-59440).
  
  2.2       Amended and Restated Contribution and Voting Agreement, dated as of
            May 31, 2001, by and among CBRE Holding, Inc., BLUM CB Corp., RCBA
            Strategic Partners, L.P., FS Equity Partners III, L.P., FS Equity
            Partners International, L.P., Raymond E. Wirta, W. Brett White,
            Frederic V. Malek and The Koll Holding Company (incorporated by
            reference from Exhibit 4.2(a) of Amendment No. 1 to Form S-1, filed by
            CBRE Holding, Inc. on June 12, 2001, File No. 333-59440).
  
  2.3       Amendment, dated as of July 19, 2001, to the Amended and Restated
            Contribution and Voting Agreement, by and among CBRE Holding, Inc.,
            BLUM CB Corp., RCBA Strategic Partners, L.P., FS Equity Partners III,
            L.P., FS Equity Partners International, L.P., Raymond E. Wirta, W.
            Brett White,  Frederic V. Malek and The Koll Holding Company
            (incorporated by reference from Exhibit 23 of Amendment No. 9 to the
            Schedule 13D, filed by RCBA GP, L.L.C., RCBA Strategic Partners, L.P.,
            Richard C. Blum & Associates, Inc., BLUM Capital Partners, L.P.,
            Richard C. Blum and CBRE Holding, Inc. on July 25, 2001, File No. 005-
            46943).
  
  99.1      Securityholders' Agreement, dated as of July 20, 2001, by and among
            RCBA Strategic Partners, L.P., Blum Strategic Partners II, L.P., FS
            Equity Partners III, L.P., FS Equity Partners International, L.P., The
            Koll Holding Company, California Public Employees' Retirement System,
            Frederic V. Malek, DLJ Investment Funding, Inc., Credit Suisse Boston
            Corporation, Raymond E. Wirta, W. Brett White, CB Richard Ellis
            Services, Inc. and CBRE Holding, Inc. (incorporated by reference from
            Exhibit 25 of Amendment No. 9 to the Schedule 13D, filed by RCBA GP,
            L.L.C., RCBA Strategic Partners, L.P., Richard C. Blum & Associates,
            Inc., BLUM Capital Partners, L.P., Richard C. Blum and CBRE Holding,
            Inc. on July 25, 2001, File No. 005-46943).
  
  99.2      Press Release of CB Richard Ellis Services, Inc. (filed herewith).
  <PAGE>
  
                                     SIGNATURE
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, the
  registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
  Date:  August 3, 2001                     CBRE HOLDING, INC.
  
  
  
                                            By: /s/ Walter V. Stafford
                                                ----------------------
                                                    Walter V. Stafford
                                                    Secretary
  <PAGE>
  
                                 Index to Exhibits
  
  Exhibit No.              Title
  ----------               -----
  
  2.1            Amended and Restated Agreement and Plan of Merger dated as of May
                 31, 2001 by and among CB Richard Ellis Services, Inc., CBRE
                 Holding, Inc., and BLUM CB Corp. (incorporated by reference from
                 Exhibit 2.1 of Amendment No. 1 to the Registration Statement on
                 Form S-1, filed by CBRE Holding, Inc. on June 12, 2001, File No.
                 333-59440).
  
  2.2            Amended and Restated Contribution and Voting Agreement, dated as
                 of May 31, 2001, by and among CBRE Holding, Inc., BLUM CB Corp.,
                 RCBA Strategic Partners, L.P., FS Equity Partners III, L.P., FS
                 Equity Partners International, L.P., Raymond E. Wirta, W. Brett
                 White, Frederic V. Malek and The Koll Holding Company
                 (incorporated by reference from Exhibit 4.2(a) of Amendment No. 1
                 to Form S-1, filed by CBRE Holding, Inc. on June 12, 2001, File
                 No. 333-59440).
  
  2.3            Amendment, dated as of July 19, 2001, to the Amended and Restated
                 Contribution and Voting Agreement, by and among CBRE Holding,
                 Inc., BLUM CB Corp., RCBA Strategic Partners, L.P., FS Equity
                 Partners III, L.P., FS Equity Partners International, L.P.,
                 Raymond E. Wirta, W. Brett White, Frederic V. Malek and The Koll
                 Holding Company (incorporated by reference from Exhibit 23 of
                 Amendment No. 9 to the Schedule 13D, filed by RCBA GP, L.L.C.,
                 RCBA Strategic Partners, L.P., Richard C. Blum & Associates,
                 Inc., BLUM Capital Partners, L.P., Richard C. Blum and CBRE
                 Holding, Inc. on July 25, 2001, File No. 005-46943).
  
  99.1           Securityholders' Agreement, dated as of July 20, 2001, by and
                 among RCBA Strategic Partners, L.P., Blum Strategic Partners II,
                 L.P., FS Equity Partners III, L.P., FS Equity Partners
                 International, L.P., The Koll Holding Company, California Public
                 Employees' Retirement System, Frederic V. Malek, DLJ Investment
                 Funding, Inc., Credit Suisse Boston Corporation, Raymond E.
                 Wirta, W. Brett White, CB Richard Ellis Services, Inc. and CBRE
                 Holding, Inc. (incorporated by reference from Exhibit 25 of
                 Amendment No. 9 to the Schedule 13D, filed by RCBA GP, L.L.C.,
                 RCBA Strategic Partners, L.P., Richard C. Blum & Associates,
                 Inc., BLUM Capital Partners, L.P., Richard C. Blum and CBRE
                 Holding, Inc. on July 25, 2001, File No. 005-46943).
  
  99.2           Press Release of CB Richard Ellis Services, Inc. (filed
                 herewith).
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metadata_filer: {"company-data": {"conformed-name": "CBRE HOLDING INC", "cik": "0001138118", "assigned-sic": "6500", "irs-number": "943391143", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-32983", "film-number": "1697603"}, "business-address": {"street1": "3330 HILLVIEW AVE", "city": "PALO ALTO", "state": "CA", "zip": "94304", "phone": "6502515000"}, "mail-address": {"street1": "3330 HILLVIEW AVE", "city": "PALO ALTO", "state": "CA", "zip": "94304"}}
text: SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549
  
                                     FORM 8-K
  
                                  CURRENT REPORT
                      PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
  
          Date of Report (Date of earliest event reported):  July 20, 2001
  
                                 CBRE HOLDING, INC.
             --------------------------------------------------------
              (Exact Name of Registrant as Specified in its Charter)
  
    DELAWARE                      000-32983                      94-3391143
  ---------------           ------------------------         -------------------
  (State or Other           (Commission File Number)         (IRS Employer
  Jurisdiction of                                            Identification No.)
  Incorporation)
  
        200 North Sepulveda Boulevard, El Segundo, California        90245
        -----------------------------------------------------      ----------
            (Address of Principal Executive Offices)               (Zip Code)
  
                                  (310) 563-8600
                 --------------------------------------------------
                 Registrant's Telephone Number, Including Area Code
  
                                        NA
           -------------------------------------------------------------
           (Former Name or Former Address, if Changed Since Last Report)
  This Current Report on Form 8-K (this "Form 8-K") is filed by CBRE Holding,
  Inc. (the "Company"), a Delaware corporation, in connection with the matters
  described herein.
  
  Item 2.   Acquisition or Disposition of Assets.
  
            On July 20, 2001, pursuant to an Amended and Restated Agreement and
  Plan of Merger dated as of May 31, 2001 (the "Merger Agreement"), among CB
  Richard Ellis Services, Inc. (the "Services"), the Company and BLUM CB Corp., a
  Delaware corporation and a wholly-owned subsidiary of the Company
  ("Acquisition"), Acquisition was merged with and into Services (the "Merger").
  Services was the surviving corporation in the Merger and at the effective time
  of the Merger became a wholly-owned subsidiary of the Company.  Pursuant to the
  terms of the Merger Agreement, at the effective time of the Merger each issued
  and outstanding share of Common Stock, par value $.01 per share (the "Common
  Stock"), of Services was converted into the right to receive $16.00 in cash,
  other than (i) shares of Common Stock owned by the Company and Acquisition,
  which totaled 7,967,274 shares at such time, which were cancelled, (ii) treasury
  shares and shares of Common Stock owned by any of Services' subsidiaries, which
  were cancelled, and (iii) shares held by stockholders who perfect appraisal
  rights for such shares in accordance with Delaware law.  Following the Merger,
  the Common Stock was delisted from the New York Stock Exchange.
  
            Pursuant to an Amended and Restated Contribution and Voting Agreement,
  dated as of May 31, 2001 and as amended on July 19, 2001 (the "Contribution
  Agreement"), among (i) RCBA Strategic Partners, L.P., a Delaware limited
  partnership ("Strategic"), FS Equity Partners III, L.P., a Delaware limited
  partnership ("FSEP III"), FS Equity Partners International, L.P., a Delaware
  limited partnership ("FSEP International"), The Koll Holding Company, a
  California corporation ("Koll Holding"), Frederic V. Malek, a former director of
  Services ("Malek"), Raymond E. Wirta, the Chief Executive Officer and a director
  of Services ("Wirta"), and W. Brett White, the Chairman of the Americas and a
  director of Services ("White") (collectively, the "Continuing Stockholders");
  (ii) the Company; and (iii) Acquisition, among other things, immediately prior
  to the effective time of the Merger, the Continuing Stockholders and their
  affiliates contributed 7,967,274 shares of Common Stock to the Company (the
  "Share Contribution") in consideration for the issuance to them of an equal
  number of shares of Class B Common Stock, par value $.01 per share, of the
  Company (the "Class B Common Stock").  Such shares of Common Stock contributed
  to the Company were cancelled at the effective time of the Merger.  Also
  pursuant to the Contribution Agreement, Strategic contributed $25,522,992.00 to
  the Company and the Company issued 1,595,187 shares of Class B Common Stock to
  Strategic and Blum Strategic Partners II, L.P. ("Blum") contributed
  $45,439,472.00 to the Company and the Company issued 2,839,967 shares of Class B
  Common Stock to Blum (the foregoing, collectively, the "Cash Contribution," and
  together with the Share Contribution, the "Contributions").
  
            In connection with the completion of the Merger, a Securityholders'
  Agreement, dated as of July 20, 2001 (the "Securityholders' Agreement"), was
  entered into among Strategic, Blum, FSEP III, FSEP International, Koll Holding,
  California Public Employees' Retirement System ("CalPERS"), Malek, DLJ
  Investment Funding, Inc., Credit Suisse First Boston Corporation, Wirta, White,
  Services and the Company, which sets forth certain agreements among the parties
  thereto with respect to the Company's Class A Common Stock and Class B
  Common Stock. Immediately prior to the Merger and the related transactions, the
  Company was wholly-owned and controlled by Strategic. As a result of the
  provisions set forth in the Securityholders' Agreement, after the Merger, the
  Company remains controlled by Strategic and its affiliates, which have the right
  to designate a majority of the Company's directors.
  
            The funding to complete the Merger, as well as the refinancing of
  substantially all of the outstanding indebtedness of Services, was obtained
  through (i) the Contributions, (ii) the offering by the Company of shares of its
  Class A Common Stock, par value $.01 per share, of the Company (the "Class A
  Common Stock") to employees of Services, (iii) the sale of 625,000 shares of
  Class A Common Stock to CalPERS for $16.00 per share, (iv) the issuance and sale
  by the Company of units for $65 million, which units consist in the aggregate of
  $65 million aggregate principal amount of 16% Senior Notes due 2001 and 339,820
  shares of Class A Common Stock, (v) the issuance and sale by Acquisition of $229
  million aggregate principal amount of 11 1/4% Senior Subordinated Notes due 2011
  for $225.6 million (which Senior Subordinated Notes were assumed by Services in
  connection with the Merger) and (vi) borrowings by Services under a new credit
  agreement with Credit Suisse First Boston and other lenders of approximately
  $285 million.
  
            The Merger Agreement is hereby incorporated herein by reference to
  Exhibit 2.1, the Contribution Agreement, as amended, is hereby incorporated
  herein by reference to Exhibits 2.2 and 2.3, the Securityholders' Agreement is
  hereby incorporated herein by reference to Exhibit 99.1 and Services' press
  release announcing the effectiveness of the Merger is incorporated herein by
  reference to Exhibit 99.2.  The foregoing descriptions of such documents are
  qualified in their entirety by reference to such exhibits.
  
  Item 7.   Financial Statements, Pro Forma Financial Information and Exhibits.
  
        (a) Financial Statements of Business Acquired.
  
            Audited financial statements for Services as of December 31, 2000 and
  1999 and for the years ended December 31, 2000, 1999 and 1998 are set forth
  below.  Unaudited financial statements for Services as of March 31, 2001 and for
  the three months ended March 31, 2001 and 2000 are also set forth below.
  CB RICHARD ELLIS SERVICES, INC.
  
                            CONSOLIDATED BALANCE SHEETS
              (Dollars in thousands, except share and per share data)
  March 31,  December 31,
                                                             2001         2000
                                                          ----------- ------------
                                                          (Unaudited)
                          ASSETS
                          ------
  Current Assets:
   Cash and cash equivalents............................   $ 20,339     $ 20,854
   Receivables, less allowance for doubtful accounts of
    $11,959 and $12,631 at March 31, 2001 and
    December 31, 2000 ..................................    141,792      176,908
   Prepaid expenses.....................................      9,819        8,017
   Deferred taxes, net..................................     13,105       11,139
   Other current assets.................................      8,716        6,127
                                                           --------     --------
   Total current assets.................................    193,771      223,045
  Property and equipment, net...........................     75,048       75,992
  Goodwill, net of accumulated amortization of $59,738
   and $56,417 at March 31, 2001 and December 31, 2000..    415,299      423,975
  Other intangible assets, net of accumulated
   amortization of $290,679 and $289,038 at March 31,
   2001 and December 31, 2000...........................     44,169       46,432
  Cash surrender value of insurance policies, deferred
   compensation plan....................................     61,267       53,203
  Investment in and advances to unconsolidated
   subsidiaries.........................................     38,187       41,325
  Deferred taxes, net...................................     35,316       32,327
  Prepaid pension costs.................................     24,126       25,235
  Other assets..........................................     44,113       41,571
                                                           --------     --------
   Total assets.........................................   $931,296     $963,105
                                                           ========     ========
  LIABILITIES AND STOCKHOLDERS' EQUITY
           ------------------------------------
  Current Liabilities:
   Accounts payable and accrued expenses................   $ 77,803     $ 83,673
   Compensation and employee benefits payable...........     63,790       79,801
   Accrued bonus and profit sharing.....................     20,807      107,878
   Income taxes payable.................................     14,696       28,260
   Short-term borrowings................................      8,418        9,215
   Current maturities of long-term debt.................      1,161        1,378
                                                           --------     --------
   Total current liabilities............................    186,675      310,205
  Long-term debt:
   Senior subordinated notes, less unamortized discount
    of $1,604 and $1,664 at March 31, 2001 and December
    31, 2000............................................    173,396      173,336
   Revolving credit facility............................    218,000      110,000
   Other long-term debt.................................     18,257       20,235
                                                           --------     --------
   Total long-term debt.................................    409,653      303,571
  Deferred compensation liability.......................     79,980       80,503
  Other liabilities.....................................     27,729       29,739
                                                           --------     --------
   Total liabilities....................................    704,037      724,018
  Minority interest.....................................      2,967        3,748
  Commitments and contingencies
  Stockholders' Equity:
   Preferred stock, $0.01 par value; 8,000,000 shares
    authorized; no shares issued or outstanding.........        --           --
   Common stock, $0.01 par value; 100,000,000 shares
    authorized; 20,636,051 and 20,605,023 shares
    outstanding at March 31, 2001 and December 31,
    2000................................................        217          217
   Additional paid-in capital...........................    365,420      364,168
   Notes receivable from sale of stock..................    (11,661)     (11,847)
   Accumulated deficit..................................    (91,943)     (89,097)
   Accumulated other comprehensive loss.................    (21,897)     (12,258)
   Treasury stock at cost, 1,072,155 shares at March 31,
    2001 and December 31, 2000..........................    (15,844)     (15,844)
                                                           --------     --------
   Total stockholders' equity...........................    224,292      235,339
                                                           --------     --------
   Total liabilities and stockholders' equity...........   $931,296     $963,105
                                                           ========     ========
  The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         4
  CB RICHARD ELLIS SERVICES, INC.
  
                 CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
              (Dollars in thousands, except share and per share data)
  Three Months Ended
                                                                March 31,
                                                          ----------------------
                                                             2001        2000
                                                          ----------  ----------
  Revenue:
    Leases............................................... $  103,166  $   99,753
    Sales................................................     73,843      74,281
    Property and facilities management fees..............     27,872      25,285
    Consulting and referral fees.........................     16,367      16,314
    Appraisal fees.......................................     18,836      16,284
    Loan origination and servicing fees..................     14,812       9,263
    Investment management fees...........................      8,549       7,337
    Other................................................      9,053      12,402
                                                          ----------  ----------
      Total revenue......................................    272,498     260,919
  Costs and Expenses:
    Commissions, fees and other incentives...............    124,398     113,963
    Operating, administrative and other..................    134,079     127,148
    Depreciation and amortization........................     11,696      10,569
                                                          ----------  ----------
  Operating income.......................................      2,325       9,239
  Interest income........................................        800         489
  Interest expense.......................................      9,055       9,685
                                                          ----------  ----------
  (Loss) income before (benefit) provision for income
   tax...................................................     (5,930)         43
  (Benefit) provision for income tax.....................     (3,084)         23
                                                          ----------  ----------
  Net (loss) income...................................... $   (2,846) $       20
                                                          ==========  ==========
  Basic (loss) earnings per share........................ $    (0.13) $      --
                                                          ==========  ==========
  Weighted average shares outstanding for basic (loss)
   earnings per share.................................... 21,309,550  20,819,268
                                                          ==========  ==========
  Diluted (loss) earnings per share...................... $    (0.13) $      --
                                                          ==========  ==========
  Weighted average shares outstanding for diluted (loss)
   earnings per share.................................... 21,309,550  20,851,184
                                                          ==========  ==========
  The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         5
  CB RICHARD ELLIS SERVICES, INC.
  
                 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                               (Dollars in thousands)
  Three Months Ended
                                                                March 31,
                                                            -------------------
                                                              2001       2000
                                                            ---------  --------
  Cash flows from operating activities:
  Net (loss) income........................................ $  (2,846) $     20
  Adjustments to reconcile net (loss) income to net cash used in
   operating activities:
   Depreciation and amortization excluding deferred
    financing costs........................................    11,696    10,569
   Gain on sale of properties, businesses and servicing
    rights.................................................    (6,279)   (4,735)
   Deferred compensation deferrals.........................    11,113     8,513
   Equity interest in earnings of unconsolidated
    subsidiaries...........................................    (1,042)   (1,742)
   Provision for doubtful accounts.........................     1,173       987
  Decrease in receivables..................................    27,920    20,973
  Increase in cash surrender value of insurance policies,
   deferred compensation plan..............................    (8,064)  (10,751)
  Decrease in compensation and employee benefits payable
   and accrued bonus and profit sharing....................  (100,714)  (87,165)
  Decrease in accounts payable and accrued expenses........    (4,505)   (6,783)
  Decrease in income taxes payable.........................   (17,632)   (5,463)
  (Decrease) increase in other liabilities.................   (11,664)    1,777
  Other....................................................    (3,419)    6,278
                                                            ---------  --------
    Net cash used in operating activities..................  (104,263)  (67,522)
                                                            ---------  --------
  
  Cash flows from investing activities:
  Purchases of property and equipment......................    (6,639)   (4,538)
  Proceeds from sale of properties, businesses and
   servicing rights........................................     6,105    11,304
  Distributions from (contributions to) investments in and
   advances to unconsolidated subsidiaries, net............     3,276      (711)
  Other investing activities, net..........................    (3,278)      259
                                                            ---------  --------
    Net cash (used in) provided by investing activities....      (536)    6,314
                                                            ---------  --------
  
  Cash flows from financing activities:
  Proceeds from revolving credit facility..................   142,000    88,000
  Repayment of revolving credit facility...................   (34,000)  (27,000)
  Repayment of senior notes and other loans, net...........    (2,786)   (1,168)
  Other financing activities, net..........................      (274)   (1,038)
                                                            ---------  --------
    Net cash provided by financing activities..............   104,940    58,794
                                                            ---------  --------
  Net increase (decrease) in cash and cash equivalents.....       141    (2,414)
  Cash and cash equivalents, at beginning of period........    20,854    27,844
  Effect of exchange rate changes on cash..................      (656)     (639)
                                                            ---------  --------
  Cash and cash equivalents, at end of period.............. $  20,339  $ 24,791
                                                            =========  ========
  Supplemental data:
  Cash paid during the period for:
   Interest (none capitalized)............................. $   3,733  $  6,074
   Income taxes, net....................................... $  14,575  $  5,376
  The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         6
  CB RICHARD ELLIS SERVICES, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (Unaudited)
  
  1. Organization
  
     CB Richard Ellis Services, Inc. (the Company), was founded in 1906. It is a
  holding company that conducts its worldwide operations through approximately 75
  direct and indirect subsidiaries. Approximately 77% of the Company's revenues
  are from the United States and 23% from the rest of the world. On February 24,
  2001, the Company announced that it had entered into an Agreement and Plan of
  Merger with CBRE Holding, Inc. and Blum CB Corporation, which was amended and
  restated as of April 24, 2001, whereby members of senior management, Ray Wirta,
  CEO, and Brett White, Chairman, The Americas, together with director, Fred
  Malek and directors, Richard Blum, Bradford Freeman and Donald Koll and their
  respective affiliates will acquire all of the Company's outstanding shares
  which they do not own at a price of $16.00 per share. The acquisition, which is
  expected to close in July of 2001, remains subject to certain conditions,
  including, among others, the receipt of debt financing by CBRE Holding, Inc.
  and the Company, the approval of the merger by the holders of two-thirds of the
  outstanding shares of the Company not owned by the buying group, the expiration
  or termination of waiting periods under applicable antitrust laws and a
  successful tender offer for at least 51% of the Company's outstanding 8 7/8%
  Senior Subordinated Notes. The Company will pay a termination fee of $7.5
  million and reimburse up to $3.0 million of the buying group's expenses if it
  wishes to accept a superior acquisition proposal.
  
  2. Basis of Preparation
  
     The accompanying unaudited consolidated financial statements include all
  information and footnotes required for interim financial statement
  presentation. In the Company's opinion, all adjustments (consisting of normal
  recurring adjustments) considered necessary for a fair presentation have been
  included. The preparation of financial statements in conformity with accounting
  principles generally accepted in the United States requires management to make
  estimates and assumptions that affect reported amounts of assets and
  liabilities and disclosure of contingent assets and liabilities at the date of
  the financial statements and the reported amounts of revenue and expenses
  during the reporting periods. Actual results could differ materially from those
  estimates. All significant intercompany transactions and balances have been
  eliminated and certain reclassifications have been made to prior periods'
  consolidated financial statements to conform to current period presentation.
  The results of operations for the three months ended March 31, 2001 are not
  necessarily indicative of the results of operations to be expected for the year
  ending December 31, 2001.
  
  3. Investments in and Advances to Unconsolidated Subsidiaries
  
     Condensed Statement of Operations (unaudited) for the unconsolidated
  subsidiaries accounted for using the equity method is as follows (in
  thousands):
  Three Months
                                                                  Ended March 31,
                                                                  ---------------
                                                                   2001    2000
                                                                  ------- -------
  Revenues.................................................... $69,649 $48,496
     Income from operations......................................  12,689  13,219
     Net income..................................................   7,846   8,957
  4. Debt
  
     The Company has a revolving credit facility of $270.0 million, which is
  subject to a mandatory reduction of $70.0 million on December 31, 2001 and
  expires on May 20, 2003. The amount outstanding under this facility totaled
  $218.0 million at March 31, 2001. Interest rate alternatives include Bank of
  America's reference
  
                                         7
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                    (Unaudited)
  
  rate plus 1.00% and LIBOR plus 2.00%. The weighted average interest rate on
  amounts outstanding at March 31, 2001 and December 31, 2000 was 7.69% and
  8.79%, respectively.
  
     The revolving credit facility contains numerous restrictive covenants that,
  among other things, limit the Company's ability to incur or repay other
  indebtedness, make advances or loans to subsidiaries and other entities, make
  capital expenditures, incur liens, enter into mergers or effect other
  fundamental corporate transactions, sell its assets, or declare dividends. In
  addition, the Company is required to meet certain ratios relating to its
  adjusted net worth, level of indebtedness, fixed charges and interest coverage.
  
     The Company has outstanding 8 7/8% Senior Subordinated Notes due on June 1,
  2006. The 8 7/8% Senior Subordinated Notes are redeemable in whole or in part
  after June 1, 2002 at 104.438% of par on that date and at declining prices
  thereafter. On or before June 1, 2001, up to 35.0% of the issued amount may be
  redeemed at 108.875% of par plus accrued interest solely with the proceeds from
  an equity offering. The amount included in the accompanying Consolidated
  Balance Sheet less unamortized discount was $173.4 million at March 31, 2001.
  
     The Company has short-term borrowings of $8.4 million and $9.2 million with
  related weighted average interest rates of 7.0% and 7.3% as of March 31, 2001
  and December 31, 2000, respectively.
  
     The Company has a credit agreement with Residential Funding Corporation
  (RFC). The credit agreement provides for a revolving line of credit of up to
  $100.0 million, and bears interest at 1.00% per annum over LIBOR. The agreement
  expires on August 31, 2001. During the quarter, the Company had a maximum of
  $91.6 million revolving line of credit principal outstanding. At March 31,
  2001, the Company had $0.6 million revolving line of credit principal
  outstanding.
  
  5. Commitments and Contingencies
  
     Between November 12, and December 6, 2000, five putative class actions were
  filed in the Court of Chancery of the State of Delaware in and for New Castle
  County by various of the Company's stockholders against the Company, its
  directors and the group which has proposed to take the Company private. A
  similar action was also filed on November 17, 2000 in the Superior Court of the
  State of California in and for the County of Los Angeles. These actions all
  alleged that the offering price for the going private transaction was unfair
  and inadequate and sought injunctive relief or rescission of the merger
  transactions and, in the alternative, money damages.
  
     The five Delaware actions have been consolidated. As of February 23, 2001,
  the parties to the Delaware litigation entered into a memorandum of
  understanding in which they agreed in principle to a settlement. The memorandum
  provides, among other things:
  
    . that the defendants admit no liability or wrongdoing whatsoever;
  
    . that the members of the going private group acknowledge that the pendency
      and prosecution of the Delaware litigation were positive contributing
      factors to its decision to increase the merger consideration;
  
    . for the certification of a settlement class and the entry of a final
      judgment granting a full release of the defendants; and
  
    . for attorneys' fees in an amount not to exceed $380,000.
  
     There are numerous conditions to the settlement proposed by the memorandum
  including the closing of the merger.
  
                                         8
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                    (Unaudited)
  
     The parties may not be able to complete a mutually acceptable stipulation of
  settlement, and, if so, the litigation will continue. In addition, no
  agreements have been reached with respect to any settlement of the California
  action.
  
     In December 1996, GMH Associates, Inc. (GMH) filed a lawsuit against
  Prudential Realty Group (Prudential) and the Company in Superior Court of
  Pennsylvania, Franklin County, alleging various contractual and tort claims
  against Prudential, the seller of a large office complex, and the Company, its
  agent in the sale, contending that Prudential breached its agreement to sell
  the property to GMH, breached its duty to negotiate in good faith, conspired
  with the Company to conceal from GMH that Prudential was negotiating to sell
  the property to another purchaser and that Prudential and the Company
  misrepresented that there were no other negotiations for the sale of the
  property. Following a non-jury trial, the court rendered a decision in favor of
  GMH and against Prudential and the Company, awarding GMH $20.3 million in
  compensatory damages, against Prudential and the Company jointly and severally,
  and $10.0 million in punitive damages, allocating the punitive damage award
  $7.0 million as against Prudential and $3.0 million as against the Company.
  Following the denial of motions by Prudential and the Company for a new trial,
  a judgment was entered on December 3, 1998. Prudential and the Company filed an
  appeal of the judgment. On March 3, 2000, the appellate court in Pennsylvania
  reversed all of the trial courts' decisions finding that liability was not
  supported on any theory claimed by GMH and directed that a judgment be entered
  in favor of the defendants including the Company. The plaintiff filed an appeal
  with the Pennsylvania Supreme Court which was denied. The plaintiff has
  exhausted all appeal possibilities and judgment has been entered in favor of
  all defendants.
  
     In August 1993, a former commissioned sales person of the Company filed a
  lawsuit against the Company in the Superior Court of New Jersey, Bergen County,
  alleging gender discrimination and wrongful termination by the Company. On
  November 20, 1996, a jury returned a verdict against the Company, awarding $1.5
  million in general damages and $5.0 million in punitive damages to the
  plaintiff. Subsequently, the trial court awarded the plaintiff $0.6 million in
  attorneys' fees and costs. Following denial by the trial court of the Company's
  motions for a new trial, reversal of the verdict and reduction of damages, the
  Company filed an appeal of the verdict and requested a reduction of damages. On
  March 9, 1999 the appellate court ruled in the Company's favor, reversed the
  trial court's decision and ordered a new trial. On February 16, 2000, the
  Supreme Court of New Jersey reversed the decision of the appellate court,
  concluded that the general damage award in the trial court should be sustained
  and returned the case to the appellate court for a determination as to whether
  a new trial should be ordered on the issue of punitive damages. In April 2000,
  the Company settled the compensatory damages claim, including interest, and all
  claims to date with respect to attorneys fees by paying to the plaintiff the
  sum of $2.75 million leaving only the punitive damage claim for resolution. The
  plaintiff also agreed, with very limited exceptions, that no matter what the
  outcome of the punitive damage claim the Company would not be responsible for
  more than 50% of the plaintiff's future attorney fees. In February 2001, the
  Company settled all remaining claims for the sum of $2.0 million and received a
  comprehensive release.
  
     The Company is a party to a number of pending or threatened lawsuits arising
  out of, or incident to, its ordinary course of business. Based on available
  cash and anticipated cash flows, the Company believes that the ultimate outcome
  will not have an impact on the Company's ability to carry on its operations.
  Management believes that any liability that may result from disposition of
  these lawsuits will not have a material effect on the Company's consolidated
  financial position or results of operations.
  
     An important part of the strategy for the Company's investment management
  business involves investing its own capital in certain real estate investments
  with its clients. As of March 31, 2001, the Company had committed $40.6 million
  to fund future co-investments.
  
                                         9
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                    (Unaudited)
  
  6. Comprehensive Loss
  
     Comprehensive loss consists of net income (loss) and other comprehensive
  loss. Accumulated other comprehensive loss consists of foreign currency
  translation adjustments. For the three months ended March 31, 2001, total
  comprehensive loss was $12.5 million, which consists of foreign currency
  translation loss of $9.6 million. For the three months ended March 31, 2000,
  total comprehensive loss was $3.2 million, which consists of foreign currency
  translation loss.
  
  7. Per Share Information
  
     Basic (loss) earnings per share was computed by dividing net (loss) income
  by the weighted average number of common shares outstanding of 21,309,550 and
  20,819,268 for the three months ended March 31, 2001 and 2000, respectively. As
  a result of operating losses incurred for the three months ended March 31,
  2001, diluted weighted average shares outstanding do not give effect to common
  stock equivalents, as to do so would be anti-dilutive. At March 31, 2000, the
  computation of diluted earnings per share further assumes the dilutive effect
  of 31,916 common stock equivalents, which consisted principally of stock
  options.
  
  8. Industry Segments
  
     The Company reports its operations through three business segments:
  Transaction Management, Financial Services and Management Services. The Company
  has a number of lines of business which are aggregated, reported and managed
  through these three segments. The Transaction Management segment is the
  Company's largest generator of revenue and includes Brokerage Services,
  Corporate Services and Investment Property activities. Brokerage Services
  includes activities that provide sales, leasing and consulting services in
  connection with commercial real estate and is the Company's primary revenue
  source. Corporate Services focuses on building relationships with large
  corporate clients which generate recurring revenue. Investment Property
  activities provide brokerage services for commercial real property marketed for
  sale to institutional and private investors. The Financial Services segment
  provides commercial mortgage, valuation, investment management and consulting
  and research services. The current year results of Financial Services include a
  nonrecurring pre-tax gain of $5.6 million from the sale of mortgage fund
  management contracts. The Management Services segment provides facility
  management services to corporate real estate users and property management and
  related services to owners. Prior year quarter includes a $4.7 million
  nonrecurring pre-tax gain on the sale of certain non-strategic assets.
  
                                         10
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                                    (Unaudited)
  
     The following unaudited table summarizes the revenue, cost and expenses, and
  operating (loss) income by operating segment for the three months ended March
  31, 2001 and 2000:
  Three Months
                                                                Ended March 31
                                                               ------------------
                                                                 2001      2000
                                                               --------  --------
                                                                  (Dollars in
                                                                  thousands)
  Revenue
    Transaction Management.................................... $179,981  $178,459
    Financial Services........................................   55,919    41,397
    Management Services.......................................   36,598    41,063
                                                               --------  --------
                                                               $272,498  $260,919
                                                               ========  ========
  Operating (loss) income
    Transaction Management.................................... $ (4,130) $  4,631
    Financial Services........................................    6,849       805
    Management Services.......................................     (394)    3,803
                                                               --------  --------
                                                                  2,325     9,239
  Interest income.............................................      800       489
  Interest expense............................................    9,055     9,685
                                                               --------  --------
  (Loss) income before (benefit) provision for income tax..... $ (5,930) $     43
                                                               ========  ========
  Geographic Information
  
  Revenue
    Americas
      United States........................................... $211,009  $198,500
      Canada, South and Central America.......................   11,504     9,199
                                                               --------  --------
                                                                222,513   207,699
    Pacific...................................................    7,690     8,014
    Asia......................................................    9,015     9,733
    Europe, Middle East and Africa............................   33,280    35,473
                                                               --------  --------
                                                               $272,498  $260,919
                                                               ========  ========
  11
  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
  
  To the Stockholders and Board of Directors of CB Richard Ellis Services, Inc.:
  
     We have audited the accompanying consolidated balance sheets of CB Richard
  Ellis Services, Inc. (a Delaware corporation) as of December 31, 2000, and
  1999, and the related consolidated statements of operations, stockholders'
  equity, comprehensive income and cash flows for each of the three years in the
  period ended December 31, 2000. These financial statements and the schedule
  referred to below are the responsibility of the Company's management. Our
  responsibility is to express an opinion on these financial statements and
  schedule based on our audits.
  
     We conducted our audits in accordance with auditing standards generally
  accepted in the United States. Those standards require that we plan and perform
  the audits to obtain reasonable assurance about whether the financial
  statements are free of material misstatement. An audit includes examining, on a
  test basis, evidence supporting the amounts and disclosures in the financial
  statements. An audit also includes assessing the accounting principles used and
  significant estimates made by management, as well as evaluating the overall
  financial statement presentation. We believe that our audits provide a
  reasonable basis for our opinion.
  
     In our opinion, the financial statements referred to above present fairly,
  in all material respects, the financial position of CB Richard Ellis Services,
  Inc. as of December 31, 2000, and 1999, and the results of their operations and
  their cash flows for each of the three years in the period ended December 31,
  2000, in conformity with accounting principles generally accepted in the United
  States.
  
     Our audits were made for the purpose of forming an opinion on the basic
  financial statements taken as a whole. The schedule listed in the index to
  consolidated financial statements is presented for purposes of complying with
  the Securities and Exchange Commission's rules and is not a required part of
  the basic financial statements. This schedule has been subjected to the
  auditing procedures applied in our audits of the basic financial statements
  and, in our opinion, is fairly stated in all material respects in relation to
  the basic financial statements taken as a whole.
  
  Arthur Andersen LLP
  
  Los Angeles, California
  February 24, 2001
  
                                         12
  CB RICHARD ELLIS SERVICES, INC.
  
                            CONSOLIDATED BALANCE SHEETS
              (Dollars in thousands, except share and per share data)
  December 31
                                                             -------------------
                                                               2000      1999
                                                             --------  ---------
  ASSETS
                           ------
  Current Assets:
    Cash and cash equivalents..............................  $ 20,854  $  27,844
    Receivables, less allowance for doubtful accounts of
     $12,631 and $15,560 at December 31, 2000 and 1999.....   176,908    168,276
    Prepaid expenses.......................................     8,017      8,370
    Deferred taxes, net....................................    11,139     11,758
    Other current assets...................................     6,127     10,596
                                                             --------  ---------
     Total current assets..................................   223,045    226,844
  Property and equipment, net..............................    75,992     70,149
  Goodwill, net of accumulated amortization of $56,417 and
   $41,008 at December 31, 2000 and 1999...................   423,975    445,010
  Other intangible assets, net of accumulated amortization
   of $289,038 and $279,156 at December 31, 2000 and 1999..    46,432     57,524
  Cash surrender value of insurance policies, deferred
   compensation plan.......................................    53,203     20,442
  Investment in and advances to unconsolidated
   subsidiaries............................................    41,325     38,514
  Deferred taxes, net......................................    32,327     28,190
  Prepaid pension costs....................................    25,235     26,323
  Other assets.............................................    41,571     16,487
                                                             --------  ---------
     Total assets..........................................  $963,105  $ 929,483
                                                             ========  =========
            LIABILITIES AND STOCKHOLDERS' EQUITY
            ------------------------------------
  Current Liabilities:
    Accounts payable and accrued expenses..................  $ 83,673  $  81,068
    Compensation and employee benefits.....................    79,801     84,357
    Accrued bonus and profit sharing.......................   107,878     81,394
    Income taxes payable...................................    28,260     18,429
    Current maturities of long-term debt...................    10,593      6,765
                                                             --------  ---------
     Total current liabilities.............................   310,205    272,013
  Long-term debt:
    Senior subordinated notes, less unamortized discount of
     $1,664 and $1,892 at December 31, 2000 and 1999.......   173,336    173,108
    Revolving credit facility..............................   110,000    160,000
    Other long-term debt...................................    20,235     24,764
                                                             --------  ---------
     Total long-term debt..................................   303,571    357,872
  Deferred compensation liability..........................    80,503     47,202
  Other liabilities........................................    29,739     38,787
                                                             --------  ---------
     Total liabilities.....................................   724,018    715,874
  Minority interest........................................     3,748      3,872
  
  Commitments and contingencies
  
  Stockholders' Equity:
    Preferred stock, $0.01 par value; 8,000,000 shares
     authorized; no shares issued or outstanding...........       --         --
    Common stock, $0.01 par value; 100,000,000 shares
     authorized; 20,605,023 and 20,435,692 shares issued
     and outstanding at December 31, 2000 and 1999.........       217        213
    Additional paid-in capital.............................   364,168    355,893
    Notes receivable from sale of stock....................   (11,847)    (8,087)
    Accumulated deficit....................................   (89,097)  (122,485)
    Accumulated other comprehensive loss...................   (12,258)    (1,928)
    Treasury stock at cost, 1,072,155 and 885,100 shares at
     December 31, 2000 and 1999............................   (15,844)   (13,869)
                                                             --------  ---------
     Total stockholders' equity............................   235,339    209,737
                                                             --------  ---------
     Total liabilities and stockholders' equity............  $963,105  $ 929,483
                                                             ========  =========
  The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         13
  CB RICHARD ELLIS SERVICES, INC.
  
                       CONSOLIDATED STATEMENTS OF OPERATIONS
              (Dollars in thousands, except share and per share data)
  Year Ended December 31
                                               --------------------------------
                                                  2000       1999       1998
                                               ---------- ---------- ----------
  Revenue:
    Leases.................................... $  539,419 $  448,091 $  371,300
    Sales.....................................    389,745    394,718    357,718
    Property and facilities management fees...    110,654    110,111     86,379
    Consulting and referral fees..............     78,714     73,569     72,586
    Appraisal fees............................     75,055     71,050     48,082
    Loan origination and servicing fees.......     58,190     45,940     39,402
    Investment management fees................     42,475     28,929     33,145
    Other.....................................     29,352     40,631     25,891
                                               ---------- ---------- ----------
      Total revenue...........................  1,323,604  1,213,039  1,034,503
  Costs and Expenses:
    Commissions, fees and other incentives....    634,639    559,289    458,463
    Operating, administrative and other.......    538,481    536,381    448,794
    Merger-related and other nonrecurring
     charges..................................        --         --      16,585
    Depreciation and amortization.............     43,199     40,470     32,185
                                               ---------- ---------- ----------
  Operating income............................    107,285     76,899     78,476
  Interest income.............................      2,554      1,930      3,054
  Interest expense............................     41,700     39,368     31,047
                                               ---------- ---------- ----------
  Income before provision for income tax......     68,139     39,461     50,483
  Provision for income tax....................     34,751     16,179     25,926
                                               ---------- ---------- ----------
  Net income.................................. $   33,388 $   23,282 $   24,557
                                               ========== ========== ==========
  Deemed dividend on preferred stock.......... $      --  $      --  $   32,273
                                               ========== ========== ==========
  Net income (loss) applicable to common
   stockholders............................... $   33,388 $   23,282 $   (7,716)
                                               ========== ========== ==========
  Basic earnings (loss) per share............. $     1.60 $     1.11 $    (0.38)
                                               ========== ========== ==========
  Weighted average shares outstanding for
   basic earnings (loss) per share............ 20,931,111 20,998,097 20,136,117
                                               ========== ========== ==========
  Diluted earnings (loss) per share........... $     1.58 $     1.10 $    (0.38)
                                               ========== ========== ==========
  Weighted average shares outstanding for
   diluted earnings (loss) per share.......... 21,097,240 21,072,436 20,136,117
                                               ========== ========== ==========
  The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         14
  CB RICHARD ELLIS SERVICES, INC.
  
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
  Year Ended December 31
                                                  -------------------------------
                                                    2000       1999       1998
                                                  ---------  ---------  ---------
  Cash flows from operating activities:
  Net income....................................  $  33,388  $  23,282  $  24,557
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation and amortization excluding
     deferred financing costs...................     43,199     40,470     32,185
    Amortization of deferred financing costs....      2,069      1,696      1,184
    Deferred compensation deferrals.............     43,557     25,932     14,738
    (Gain) loss on sale of properties,
     businesses and servicing rights............    (10,184)    (9,865)     2,058
    Equity interest in earnings of
     unconsolidated subsidiaries................     (7,112)    (7,528)    (3,443)
    Minority interest...........................        607      2,016        730
    Provision for litigation, doubtful accounts
     and other..................................      5,125      4,724      5,185
    Deferred income tax (benefit) provision.....     (4,083)   (12,688)    14,394
  Increase in receivables.......................    (12,545)   (37,640)   (24,846)
  Increase in cash surrender value of insurance
   policies, deferred compensation plan.........    (32,761)   (20,442)       --
  Increase in compensation and employee benefits
   payable and accrued bonus and profit share...     24,418     37,339      7,782
  (Decrease) increase in accounts payable and
   accrued expenses.............................     (3,201)     1,346      2,615
  Increase in income taxes payable..............     11,074     16,696      8,913
  (Decrease) increase in other liabilities......     (9,553)     7,583     (9,536)
     Net change in other operating assets and
      liabilities...............................        114      1,090         98
                                                  ---------  ---------  ---------
     Net cash provided by operating activities..     84,112     74,011     76,614
                                                  ---------  ---------  ---------
  Cash flows from investing activities:
  Purchases of property and equipment...........    (26,921)   (35,130)   (29,715)
  Proceeds from sale of inventoried property....        --       7,355        --
  Proceeds from sale of properties, businesses
   and servicing rights.........................     17,495     12,072        --
  Purchase of investments.......................    (23,413)    (1,019)       --
  Increase in intangible assets and goodwill....     (3,119)    (5,331)   (14,595)
  Acquisition of businesses including net assets
   acquire intangibles and goodwill.............     (3,442)    (8,931)  (189,895)
  Other investing activities, net...............      3,678      4,217     10,685
                                                  ---------  ---------  ---------
     Net cash used in investing activities......    (35,722)   (26,767)  (223,520)
                                                  ---------  ---------  ---------
  Cash flows from financing activities:
  Proceeds from revolving credit facility.......    179,000    165,000    315,000
  Repayment of revolving credit facility........   (229,000)  (172,000)  (268,000)
  Proceeds from senior subordinated term loan...        --         --     172,788
  Repayment of inventoried property loan........        --      (7,093)      (377)
  Proceeds from (repayment of) senior notes and
   other loans, net.............................        588    (12,402)   (14,324)
  Payment of dividends payable..................        --         --      (5,000)
  Repurchase of preferred stock.................        --         --     (72,331)
  Repurchase of common stock....................     (2,018)    (4,986)    (8,883)
  Repayment of capital leases...................     (1,373)    (1,340)    (1,655)
  Minority interest payments....................     (2,180)    (3,801)    (2,902)
  Other financing activities, net...............      1,460     (1,099)     5,122
                                                  ---------  ---------  ---------
     Net cash (used in) provided by financing
      activities................................    (53,523)   (37,721)   119,438
                                                  ---------  ---------  ---------
  Net (decrease) increase in cash and cash
   equivalents..................................     (5,133)     9,523    (27,468)
  Cash and cash equivalents, at beginning of
   period.......................................     27,844     19,551     47,181
  Effect of exchange rate changes on cash.......     (1,857)    (1,230)      (162)
                                                  ---------  ---------  ---------
  Cash and cash equivalents, at end of period...  $  20,854  $  27,844  $  19,551
                                                  =========  =========  =========
  Supplemental data:
  Cash paid during the period for:
    Interest (none capitalized).................  $  38,352  $  36,997  $  27,528
    Income taxes, net...........................  $  27,607  $  12,689  $   3,395
  The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         15
  CB RICHARD ELLIS SERVICES, INC.
  
                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                               (Dollars in thousands)
  Notes                 Accumulated
                                            Additional receivable                 other
                           Preferred Common  Paid-in   from sale  Accumulated comprehensive Treasury
                             Stock   Stock   capital    of stock    deficit   income (loss)  stock     Total
                           --------- ------ ---------- ---------- ----------- ------------- --------  --------
  Balance, December 31,
   1997...................   $ 40     $188   $333,981   $ (5,956)  $(170,324)   $   (158)   $    --   $157,771
  Net income..............     --      --         --         --       24,557         --          --     24,557
  Common stock issued for
   incentive plans........     --        1        962       (962)        --          --          --          1
  Contributions, deferred
   compensation plan......     --      --       5,361        --          --          --          --      5,361
  Collection on, net of
   cancellation of notes
   receivable from
   employee stock
   incentive plan.........     --      --        (646)     1,264         --          --          --        618
  Common stock issued for
   REI and HP
   acquisitions...........     --       15     58,486        --          --          --          --     58,501
  Shares issued for
   Capital Accumulation
   Plan...................     --      --       2,889        --          --          --          --      2,889
  Common stock options
   exercised..............     --        7      8,835        --          --          --          --      8,842
  Amortization of cheap
   stock..................     --      --         312        --          --          --          --        312
  Tax deduction from
   issuance of stock......     --      --      11,907        --          --          --          --     11,907
  Foreign currency
   translation gain.......     --      --         --         --          --        1,297         --      1,297
  Purchase of preferred
   stock..................    (40)     --     (72,291)       --          --          --          --    (72,331)
  Purchase of common
   stock..................     --      --         --         --          --          --       (8,883)   (8,883)
                             ----     ----   --------   --------   ---------    --------    --------  --------
  Balance, December 31,
   1998...................     --      211    349,796     (5,654)   (145,767)      1,139      (8,883)  190,842
  Net income..............     --      --         --         --       23,282         --          --     23,282
  Common stock issued for
   incentive plans........     --        2      2,534     (2,534)        --          --          --          2
  Contributions, deferred
   compensation plan......     --      --       2,094        --          --          --          --      2,094
  Collection on, net of
   cancellation of notes
   receivable from
   employee stock
   incentive plan.........     --      --         --         101         --          --          --        101
  Common stock options
   exercised..............     --      --         449        --          --          --          --        449
  Amortization of cheap
   stock..................     --      --         312        --          --          --          --        312
  Tax deduction from
   issuance of stock......     --      --         708        --          --          --          --        708
  Foreign currency
   translation loss.......     --      --         --         --          --       (3,067)        --     (3,067)
  Purchase of common
   stock..................     --      --         --         --          --          --       (4,986)   (4,986)
                             ----     ----   --------   --------   ---------    --------    --------  --------
  Balance, December 31,
   1999...................     --      213    355,893     (8,087)   (122,485)     (1,928)    (13,869)  209,737
  Net income..............     --      --         --         --       33,388         --          --     33,388
  Common stock issued for
   incentive plans........     --        4      4,310     (4,310)        --          --          --          4
  Contributions, deferred
   compensation plan......     --      --       2,729        --          --          --          --      2,729
  Deferred compensation
   plan co-match..........     --      --         907        --          --          --          --        907
  Collection on, net of
   cancellation of notes
   receivable from
   employee stock
   incentive plan.........     --      --        (550)       550         --          --          --        --
  Amortization of cheap
   and restricted stock...     --      --         342        --          --          --          --        342
  Tax deduction from
   issuance of stock......     --      --         580        --          --          --          --        580
  Foreign currency
   translation loss.......     --      --         --         --          --      (10,330)        --    (10,330)
  Purchase of common
   stock..................     --      --         (43)       --          --          --       (1,975)   (2,018)
                             ----     ----   --------   --------   ---------    --------    --------  --------
  Balance, December 31,
   2000...................   $ --     $217   $364,168   $(11,847)  $ (89,097)   $(12,258)   $(15,844) $235,339
                             ====     ====   ========   ========   =========    ========    ========  ========
  The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         16
  CB RICHARD ELLIS SERVICES, INC.
  
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                               (Dollars in thousands)
  Year Ended December 31
                                                       --------------------------
                                                         2000     1999     1998
                                                       --------  -------  -------
  Net income.......................................... $ 33,388  $23,282  $24,557
  Other comprehensive (loss) income net of tax........  (10,330)  (3,067)   1,297
                                                       --------  -------  -------
  Comprehensive income................................ $ 23,058  $20,215  $25,854
                                                       ========  =======  =======
  The accompanying notes are an integral part of these consolidated financial
                                    statements.
  
                                         17
  CB RICHARD ELLIS SERVICES, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  1. Summary of Significant Accounting Policies
  
   Principles of Consolidation
  
     The accompanying consolidated financial statements include the accounts of
  CB Richard Ellis Services, Inc. (the Company) and majority owned and controlled
  subsidiaries. The equity attributable to minority shareholders' interests in
  subsidiaries is shown separately in the balance sheets. All significant
  intercompany accounts and transactions have been eliminated in consolidation.
  
     The Company's investments in unconsolidated subsidiaries in which it has the
  ability to exercise significant influence over operating and financial
  policies, but does not control, are accounted for by using the equity method.
  Accordingly, the Company's share of the earnings of these equity basis
  companies is included in consolidated net income. All other investments held on
  a long-term basis are valued at cost less any permanent impairment in value.
  
   Cash and Cash Equivalents
  
     Cash and cash equivalents consist of cash and highly liquid investments with
  an original maturity of less than three months. The Company controls certain
  cash and cash equivalents as agent for its investment and property management
  clients. These amounts are not included in the consolidated balance sheets.
  
   Goodwill and Other Intangible Assets
  
     Goodwill represents the excess of the purchase price of an acquisition over
  the Company's interest in the fair value of the net identifiable assets
  acquired. Goodwill is carried at cost less accumulated amortization and
  amortized on a straight-line basis. Net goodwill at December 31, 2000 consisted
  of $405.7 million related to the 1995 through 2000 acquisitions which is being
  amortized over an estimated useful life of 30 years and $18.3 million related
  to the Company's original acquisition in 1989 which is being amortized over an
  estimated useful life of 40 years.
  
     Net other intangible assets at December 31, 2000 included $6.0 million of
  deferred financing costs and $40.4 million of intangibles stemming from the
  1995 through 2000 acquisitions. These are amortized on a straight-line basis
  over the estimated useful lives of the assets up to 12 years.
  
     The Company periodically evaluates the recoverability of the carrying amount
  of goodwill and other intangible assets. In this assessment, the Company
  considers macro market conditions and trends in the Company's relative market
  position, its capital structure, lender relationships and the estimated
  undiscounted future cash flows associated with these assets. If any of the
  significant assumptions inherent in this assessment materially change due to
  market, economic and/or other factors, the recoverability is assessed based on
  the revised assumptions and resultant undiscounted cash flows. If the analysis
  indicates impairment, it would be recorded in the period the changes occur
  based on the fair value of the goodwill and other intangible assets.
  
   Property, Plant and Equipment
  
     The Company capitalizes expenditures that materially increase the life of
  the related assets and charges the cost of maintenance and repairs to expense.
  Upon sale or retirement, the capitalized costs and related accumulated
  depreciation or amortization are eliminated from the respective accounts, and
  the resulting gain or loss is included in operating income.
  
     Depreciation is computed primarily using the straight line method over
  estimated useful lives ranging from 3 to 10 years. Leasehold improvements are
  amortized over the term of the respective leases, excluding options
  
                                         18
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  to renew. Equipment under capital leases is depreciated over the related term
  of the leases. The Company periodically reviews property, plant and equipment
  for impairment whenever events or changes in circumstances indicate that the
  carrying amount of an asset may not be recoverable. If any of the significant
  assumptions inherent in this assesment materially change due to market,
  economics, and/or other factors, the recoverability is assessed based on the
  revised assumptions. If this analysis indicates that such assets are considered
  to be impaired, the impairment is recognized in the period the changes occur
  and is measured by the amount in which the carrying value exceeds the fair
  value of the asset.
  
   Income Recognition
  
     Real estate commissions on sales are recorded as income upon close of escrow
  or upon transfer of title. Real estate commissions on leases are generally
  recorded as income once the Company satisfies all obligations under the
  commission agreement, which generally occurs upon the earlier of the date of
  occupancy or cash receipt, if cash is received prior to occupancy. The
  existence of any significant future contingencies will result in the delay of
  recognition of income until such contingency is satisfied. If, for example, the
  tenant has a free rent period, lease revenue is not recorded until the first
  month's rent is paid. Investment management fees and management fees are
  recognized when earned under the provisions of the related agreements.
  Appraisal fees are recorded after services have been rendered. Loan origination
  fees are recognized at the time the loan closes and the Company has no
  significant remaining obligations for performance in connection with the loan
  transaction, while loan servicing fees are recorded as principal and interest
  payments are collected from mortgagors. Other commissions and fees are recorded
  as income at the time the related services have been performed unless
  significant future contingencies exist. The adoption of Staff Accounting
  Bulletin No. 101, "Revenue Recognition in Financial Statements," did not have a
  material effect on our operations or financial position.
  
   Foreign Currencies
  
     The financial statements of subsidiaries located outside the United States
  (US) are generally measured using the local currency as the functional
  currency. The assets and liabilities of these subsidiaries are translated at
  the rates of exchange at the balance sheet date and income and expenses are
  translated at the average monthly rate. The currency effects of translating the
  financial statements of these non-US operations of the Company are included in
  the "Accumulated other comprehensive income (loss)" component of stockholders'
  equity. Gains and losses resulting from foreign currency transactions are
  included in the results of operations. The aggregate transaction gains and
  losses included in the consolidated statements of operations are a $3.1 million
  loss, $1.1 million gain and $0.2 million loss for 2000, 1999 and 1998,
  respectively.
  
   Comprehensive Income
  
     Comprehensive income consists of net income and other comprehensive income
  (loss). Accumulated other comprehensive income (loss) consists of foreign
  currency translation adjustments.
  
   Accounting for Transfers and Servicing
  
     The Company follows Statement of Financial Accounting Standards (SFAS) No.
  125, Accounting for Transfers and Servicing of Financial Assets and
  Extinguishments in accounting for loan sales and acquisition of servicing
  rights. Under SFAS No. 125, the Company is required to recognize, at fair
  value, financial and servicing assets it has acquired control over and related
  liabilities it has incurred and amortize them over the period of estimated net
  servicing income or loss. Write-off of the asset is required when control is
  surrendered. The fair value of these servicing rights resulted in a gain, which
  is reflected in the Consolidated Statements of Operations, with a corresponding
  servicing asset of approximately $0.7 million and $0.8 million, at December 31,
  2000 and 1999, respectively, which is reflected in the Consolidated Balance
  Sheets.
  
                                         19
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
   Use of Estimates
  
     The preparation of financial statements in conformity with generally
  accepted accounting principles in the US requires management to make estimates
  and assumptions that affect the reported amounts of certain assets and
  liabilities and disclosure of contingent assets and liabilities at the date of
  the financial statements and the reported amounts of certain revenues and
  expenses during the reporting periods. Actual results could differ from those
  estimates. Management believes that these estimates provide a reasonable basis
  for the fair presentation of its financial condition and results of operations.
  
   Stock Based Compensation
  
     The Company has elected to apply the provisions of Accounting Principles
  Board (APB) Opinion No. 25 and provide the pro forma disclosure requirements of
  SFAS No. 123, Accounting for Stock Based Compensation in the footnotes to its
  consolidated financial statements. SFAS No. 123 requires pro forma disclosure
  of net income and, if presented, earnings per share, as if the fair-value based
  method of accounting defined in this statement had been applied. APB Opinion
  No. 25 and related interpretations require accounting for stock compensation
  awards based on their intrinsic value as of the grant date.
  
   Income Taxes
  
     Income taxes are accounted for under the asset and liability method in
  accordance with SFAS 109, Accounting for Income Taxes. Deferred tax assets and
  liabilities are determined based on temporary differences between financial
  reporting and tax basis of assets and liabilities and operating loss and tax
  credit carryforwards. Deferred tax assets and liabilities are measured by
  applying enacted tax rates and laws to taxable income in the years in which the
  temporary differences are expected to be recovered or settled. The effect on
  deferred tax assets and liabilities of a change in tax rates is recognized in
  income in the period that includes the enactment date.
  
   New Accounting Pronouncements
  
     In September 2000, the Financial Accounting Standards Board (FASB) issued
  Statement of Financial Accounting Standards (SFAS) 140, Accounting for
  Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
  SFAS 140 revises the standards for accounting for securitizations and other
  transfers of financial assets and collateral established by SFAS 125. In
  addition, this statement is effective for recognition and reclassification of
  collateral and for disclosures relating to securitization transactions and
  collateral for fiscal years ending after December 15, 2000. The Company does
  not perform these types of transactions. This statement is effective for all
  transfers and servicing of financial assets and extinguishments of liabilities
  occurring after March 31, 2001. The Company is evaluating the impact of SFAS
  140 on its results of operation and financial position for these types of
  transactions.
  
     In June 2000, the Financial Accounting Standards Board (FASB) issued
  Statement of Financial Accounting Standards (SFAS) No. 138, Accounting for
  Certain Derivative Instruments and Certain Hedging Activities--an Amendment of
  FASB Statement No. 133. SFAS No. 138 amends the accounting and reporting for
  certain derivative instruments and hedging activities and is effective for all
  fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 138 is
  not expected to have a material impact on earnings or other components of
  comprehensive income of the Company.
  
     In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative
  Instruments and Hedging Activities--Deferral of the Effective Date of FASB
  Statement No. 133, which deferred the effective date of SFAS No. 133 for one
  year. SFAS No. 137 is effective for all fiscal quarters of all fiscal years
  beginning after
  
                                         20
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  June 15, 2000. SFAS No. 137 is not anticipated to have a material impact on
  earnings or other components of comprehensive income as the Company had no
  derivatives outstanding at December 31, 2000.
  
     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
  Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
  reporting standards requiring that every derivative instrument (including
  certain derivative instruments embedded in other contracts) be recorded in the
  balance sheet as either an asset or liability measured at its fair value. SFAS
  No. 133 requires that changes in the derivative's fair value be recognized
  currently in earnings unless specific hedge accounting criteria are met.
  Special accounting for qualifying hedges allows a derivative's gains and losses
  to offset related results on the hedged item in the income statement, and
  requires that a company must formally document, designate, and assess the
  effectiveness of transactions that receive hedge accounting. SFAS No. 133 is
  not expected to have a material impact on earnings or other components of
  comprehensive income as the Company had no derivatives outstanding at December
  31, 2000.
  
   Reclassifications
  
     Some reclassifications, which do not have an effect on net income, have been
  made to the 1999 and 1998 financial statements to conform to the 2000
  presentation.
  
  2. Acquisitions and Dispositions
  
     During 2000, the Company acquired five companies with an aggregate purchase
  price of approximately $3.4 million in cash, $0.7 million in notes, plus
  additional payments over the next five years based on acquisition earnout
  agreements. These payments will supplement the purchase price and be recorded
  as additional goodwill. The most significant acquisition in 2000 was the
  purchase of Boston Mortgage Capital Corporation (Boston Mortgage), through L.J.
  Melody, for approximately $2.1 million, plus supplemental payments based on an
  acquisition earnout agreement. Boston Mortgage provides further mortgage
  banking penetration into the northeast. It services approximately $1.8 billion
  in loans covering roughly 175 commercial properties throughout New England, New
  York and New Jersey.
  
     In February 2000, the Company sold certain non-strategic assets for cash
  proceeds of $8.4 million, resulting in a pre-tax gain of $4.7 million.
  
     During 1999, the Company acquired four companies with an aggregate purchase
  price of approximately $13.8 million. The two significant acquisitions were
  Eberhardt Company which was acquired in September 1999 through L.J. Melody for
  approximately $7.0 million and Profi Nordic which was acquired in February 1999
  through CBRE Profi Acquisition Corp. (formerly Koll Tender III) for
  approximately $5.5 million.
  
     During 1999, the Company sold five of its smaller non-strategic offices
  (Bakersfield and Fresno, California; Albuquerque, New Mexico; Reno, Nevada; and
  Salt Lake City, Utah) for a total of approximately $7.0 million received in
  cash and notes. It also sold an insurance operation which was used to help
  property management and other clients with complex insurance problems for $3.0
  million in receivables. These sales resulted in a pre-tax gain of $8.7 million.
  
     On October 20, 1998 the Company, through L.J. Melody, purchased Carey,
  Brumbaugh, Starman, Phillips, and Associates, Inc., a regional mortgage banking
  firm for approximately $5.6 million in cash and approximately $2.4 million in
  notes bearing interest at 9.0% with three annual payments which began in
  October 1999. Approximately $0.2 million of the $2.4 million notes was
  accounted for as deferred cash compensation to select key executives. The
  acquisition was accounted for as a purchase. The purchase price has
  
                                         21
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  largely been allocated to intangibles and goodwill which are amortized on a
  straight line basis over their estimated useful lives of 7 and 30 years,
  respectively.
  
     On October 1, 1998 the Company purchased the remaining ownership interests
  that it did not already own in the Richard Ellis Australia and New Zealand
  businesses. The costs for the remaining interest was $20.0 million in cash.
  Virtually all of the revenue of these locations is derived from brokerage and
  appraisal services. The acquisition was accounted for as a purchase. The
  purchase price has largely been allocated to intangibles and goodwill which are
  amortized on a straight line basis over their estimated useful lives ranging up
  to 30 years.
  
     On September 22, 1998 the Company purchased the approximately 73.0% interest
  that it did not already own in CB Commercial Real Estate Group of Canada, Inc.
  The Company acquired the remaining interest for approximately $14.3 million in
  cash. The acquisition was accounted for as a purchase. The purchase price has
  been largely allocated to intangibles and goodwill which are amortized on a
  straight line basis over their estimated useful lives ranging up to 30 years.
  
     On July 7, 1998 the Company acquired the business of Hillier Parker May and
  Rowden, now known as CB Hillier Parker Limited (HP), a commercial property
  services partnership operating in the United Kingdom (UK). The acquisition was
  accounted for as a purchase. The purchase price for HP included approximately
  $63.6 million in cash and $7.1 million in shares of the Company's common stock.
  In addition, the Company assumed a contingent payout plan for key HP employees
  with a potential payout over three years of approximately $13.9 million and
  assumed various annuity obligations of approximately $15.0 million. The
  purchase price has largely been allocated to goodwill which is amortized on a
  straight line basis over its estimated useful life of 30 years.
  
     On July 1, 1998 the Company increased its ownership percentage in CB
  Commercial/Arnheim & Neely, an existing partnership formed in September 1996,
  which then combined with the Galbreath Company Mid-Atlantic to form CB Richard
  Ellis/Pittsburgh, LP. The total purchase price of the Company's 50% interest in
  the combined enterprise is $5.7 million.
  
     On May 31, 1998 the Company acquired Mathews Click and Associates, a
  property sales, leasing, and management firm, for approximately $10.0 million
  in cash and potential supplemental payments of $1.9 million which were
  contingent upon operating results, payable to the sellers over a period of two
  years. The acquisition was accounted for as a purchase. The total purchase
  price including potential supplemental payments was allocated to intangibles
  and goodwill which are amortized on a straight line basis over their estimated
  useful lives of 7 and 30 years, respectively.
  
     Effective May 1, 1998 the Company, through L.J. Melody, acquired Shoptaw-
  James, Inc. (Shoptaw-James), a regional mortgage banking firm, for
  approximately $6.3 million in cash and approximately $2.7 million in notes
  bearing interest at 9.0% with three annual payments which began in May 1999.
  The acquisition was accounted for as a purchase. Approximately $0.3 million of
  the $2.7 million notes are being accounted for as compensation over the term of
  the notes as the payment of these notes are contingent upon select key
  executives' and producers' continued employment with the Company. Approximately
  $2.4 million of the $2.7 million is being accounted for as supplemental
  payments to the sellers over a period of three years. The purchase price and
  supplemental payments have largely been allocated to intangibles and goodwill
  which are amortized on a straight line basis over their estimated useful lives
  of 7 and 30 years, respectively.
  
     On April 17, 1998 the Company purchased all of the outstanding shares of CB
  Commercial Limited, formerly known as REI Limited (REI), an international
  commercial real estate services firm operating under the name Richard Ellis in
  major commercial real estate markets worldwide (excluding the UK). The
  acquisition
  
                                         22
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  was accounted for as a purchase. The purchase price has largely been allocated
  to goodwill, which is amortized on a straight line basis over an estimated
  useful life of 30 years. The purchase price for REI was approximately $104.8
  million of which approximately $53.3 million was paid in cash and notes and
  approximately $51.5 million was paid in shares of the Company's common stock.
  In addition, the Company assumed approximately $14.4 million of long-term debt
  and minority interest. The Company incurred a one-time charge of $3.8 million
  associated with the integration of REI's operations and systems into the
  Company's.
  
     On February 1, 1998 the Company, through L.J. Melody, acquired all of the
  issued and outstanding stock of Cauble and Company of Carolina, a regional
  mortgage banking firm for approximately $2.2 million, including cash payments
  of approximately $1.8 million and a note payable of approximately $0.4 million
  bearing interest at 9.0% with principal payments starting in April 1998. The
  acquisition was accounted for as a purchase. The purchase price has been
  largely allocated to intangibles and goodwill, which are amortized on a
  straight line basis over their estimated useful lives of 7 and 30 years,
  respectively.
  
     On January 31, 1998 the Company, through L.J. Melody, acquired certain
  assets of North Coast Mortgage Company, a regional mortgage banking firm for
  cash payments of approximately $3.0 million and approximately $0.9 million in
  notes. Approximately $0.3 million of the $0.9 million notes have been accounted
  for as supplemental payments to the sellers and approximately $0.6 million as
  deferred compensation to certain key executives and producers payable in three
  annual installments which began in February 1999. The acquisition was accounted
  for as a purchase. The purchase price and supplemental payments have largely
  been allocated to intangibles and goodwill, which are amortized on a straight
  line basis over their estimated useful lives of 7 and 30 years, respectively.
  The $0.6 million of deferred cash compensation is being accounted for as
  compensation over the term of the agreements as the payment of the compensation
  is contingent upon select key executives' and producers' continued employment
  with the Company.
  
     The assets and liabilities of certain acquired companies, along with the
  related goodwill, intangibles and indebtedness, are reflected in the
  accompanying consolidated financial statements at December 31, 2000. The
  results of operations of the acquired companies are included in the
  consolidated results from the dates they were acquired. The unaudited pro forma
  results of operations of the Company for the year ended December 31, 1998,
  assuming the REI acquisition had occurred on January 1, 1998, would have been
  as follows (amounts in thousands, except per share data):
  Year Ended
                                                                      December 31,
                                                                          1998
                                                                      ------------
  Revenue.......................................................  $1,051,114
       Net income....................................................      15,586
       Net loss applicable to common stockholders....................     (16,687)
       Loss per share
         Basic.......................................................       (0.81)
         Diluted.....................................................       (0.81)
  For the year ended December 31, 1998, net loss applicable to common
  stockholders includes a deemed dividend of $32.3 million on the repurchase of
  the Company's preferred stock. The pro forma results do not necessarily
  represent results which would have occurred if the acquisitions had taken place
  on the date assumed above, nor are they indicative of the results of future
  combined operations. The amounts are based upon certain assumptions and
  estimates, and do not reflect any benefit from economies which might be
  achieved from combined operations. Further, REI historical results for the
  first three months of 1998 include certain nonrecurring adjustments.
  
                                         23
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  3. Property and Equipment
  
     Property and equipment is stated at cost and consists of the following (in
  thousands):
  December 31
                                                               ------------------
                                                                 2000      1999
                                                               --------  --------
  Buildings and improvements............................. $ 17,354  $ 19,273
       Furniture and equipment................................  128,678   111,840
       Equipment under capital leases.........................   28,765    29,800
                                                               --------  --------
                                                                174,797   160,913
       Accumulated depreciation and amortization..............  (98,805)  (90,764)
                                                               --------  --------
       Property and equipment, net............................ $ 75,992  $ 70,149
                                                               ========  ========
  The Company sold its headquarters building in downtown Los Angeles,
  California, in September 1999 and a small office building in Phoenix, Arizona
  in October 1999, both at a minimal loss. Depreciation expense was $19.2
  million, $17.1 million and $14.8 million during 2000, 1999 and 1998,
  respectively.
  
  4. Investments in and Advances to Unconsolidated Subsidiaries
  
     Investments in and advances to unconsolidated subsidiaries as of December
  31, 2000 and 1999 are as follows (in thousands):
  December 31
                                                                  ---------------
                                                         Interest  2000    1999
                                                         -------- ------- -------
  CB Commercial/Whittier Partners, LP..............   50.0%  $10,173 $ 9,646
       CBRE Pittsburgh..................................   50.0%    6,261   5,853
       Ikoma CB Richard Ellis K.K.......................   20.0%    3,695   2,523
       Strategic Partners (CBRE Investors)..............    3.4%    3,659     --
       Building Technology Engineers....................   49.9%    2,595     --
       CBRE Corp Partners, LLC..........................    9.1%    2,510   1,453
       Other............................................     *     12,432  19,039
                                                                  ------- -------
                                                                  $41,325 $38,514
                                                                  ======= =======
  --------
  * Various interests with varying ownership rates.
  
     Unaudited combined condensed financial information for the entities
  accounted for using the equity method is as follows (in thousands):
  
                  Consolidated Statement of Operations Information
  Year Ended December 31
                                                        -------------------------
                                                          2000     1999    1998
                                                        -------- -------- -------
                                                               (Unaudited)
  Net revenue..................................... $241,902 $172,365 $72,911
       Income from operations..........................   59,936   43,088  27,921
       Net income......................................   50,183   32,795  23,678
  24
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
     Condensed Balance Sheet Information:
  December 31
                                                                -----------------
                                                                  2000     1999
                                                                -------- --------
                                                                   (Unaudited)
  Current assets.......................................... $153,942 $ 62,579
       Noncurrent assets.......................................  777,718  689,286
       Current liabilities.....................................   94,507   34,076
       Noncurrent liabilities..................................  302,530  249,546
       Minority interest.......................................      519    1,115
  5. Employee Benefit Plans
  
     Option Plans. In conjunction with the North Coast Mortgage Company
  acquisition, options for 25,000 shares were granted with an exercise price
  representing the fair market value at date of grant of $32.50 per share. On
  December 15, 1998, the option holders elected to change the exercise price to
  $20.00 per share, which was above market value on the date of election, and
  simultaneously reduce the number of shares by 20%. The options vest over five
  years at a rate of 20% per year, expiring in February 2008. Options for
  20,000 shares under the North Coast Mortgage Company acquisition were
  outstanding at December 31, 2000.
  
     In conjunction with the Shoptaw-James acquisition, options for 25,000 shares
  were granted with an exercise price representing a fair market value of $37.32
  per share on the date of grant. On December 15, 1998 the option holders elected
  to change the exercise price to $20.00 per share, which was above market value
  on the date of election, and simultaneously reduce the number of shares by 20%.
  The options vest over five years at a rate of 20% per year, expiring in May
  2008. Options for 20,000 shares under the Shoptaw-James acquisition were
  outstanding at December 31, 2000.
  
     In October 1998, in conjunction with the Carey, Brumbaugh acquisition,
  options for 25,000 shares were granted with an exercise price representing a
  fair market of $19.44 per share on the grant date. The options vest over five
  years at a rate of 20% per year, expiring in September 2008. Options for 25,000
  shares under the Carey, Brumbaugh acquisition were outstanding at December 31,
  2000.
  
     In April 1998, in conjunction with the REI acquisition, the Company approved
  the assumption of the options outstanding under the REI Limited Stock Option
  Plan. These options for 46,115 shares of common stock were issued and exercised
  immediately at $14.95 per share in exchange for existing REI options. Also in
  conjunction with the REI acquisition, the Company granted options for 475,677
  shares at an exercise price equal to fair market value at date of grant of
  $33.76 per share. On December 15, 1998 select holders of stock options elected
  to change the exercise price of their options to $20.00 per share, which was
  above market value on the date of election, and simultaneously reduce the
  number of shares by 20%. During 2000, the Company granted options for 58,000
  shares of common stock at an exercise price of $12.88 per share. All options
  were granted at an exercise price equal to fair market value at date of grant.
  The vesting periods of these options range from three to five years and they
  expire at various dates through August 2010. Options for 492,984 shares were
  outstanding under the REI Limited Stock Option Plan at December 31, 2000.
  
     A total of 700,000 shares of common stock have been reserved for issuance
  under the Company's 1997 Employee Stock Option Plan. On December 15, 1998,
  select holders of stock options with an exercise price in excess of $20.00 per
  share elected to change the exercise price of their options to $20.00 per
  share, which was above market value on the date of election and simultaneously
  reduce the number of shares by 20%. During 2000, the Company granted options
  for 105,000 shares of common stock at exercise prices ranging from $10.38 to
  $12.85 per share. All options were granted at an exercise price equal to fair
  market value at date of grant.
  
                                         25
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  The vesting periods for these options range from approximately four to five
  years and they expire at various dates through August 2010. Options for 692,060
  shares were outstanding under the 1997 Employee Stock Option Plan at December
  31, 2000.
  
     In August 1997, in conjunction with the Koll acquisition, the Company
  approved the assumption of the options outstanding under the KMS Holding
  Company Amended 1994 Stock Option Plan (now known as the CBC Substitute Option
  Plan (CBCSP)) and the Koll Acquisition Stock Option Plan (KASOP). Under the
  CBCSP, 407,087 stock options were issued with exercise prices ranging from
  $12.89 to $18.04 per share in exchange for existing Koll options. These options
  were immediately exercisable and expire at various dates through April 2006.
  All options were granted at an exercise price equal to fair market value at
  date of grant. At December 31, 2000, 231,941 options were outstanding. Under
  the KASOP, options for 550,000 shares were approved for issuance to former
  senior executives of Koll who became employees or directors of the Company.
  These options have exercise prices ranging from $14.25 to $36.75 per share and
  vesting periods ranging from immediate to three years. During 2000, the Company
  granted options for 20,000 shares of common stock under the KASOP at an
  exercise price of $12.88 per share. These options expire at various dates
  through August 2010. Options for 550,000 shares were outstanding for the KASOP
  at December 31, 2000.
  
     In August 1997, in conjunction with the Koll acquisition, the Company
  approved the issuance of warrants to purchase 599,967 shares. Of the
  outstanding warrants, 42,646 are attached to common stock obtainable under the
  CBC Substitute Option Plan and 555,741 are attached to shares of outstanding
  common stock. Each warrant is exercisable into one share of common stock at an
  exercise price of $30.00 commencing in August 2000 and expiring in August 2004.
  At December 31, 2000, 598,387 warrants issued were outstanding.
  
     A total of 90,750 shares of common stock have been reserved for issuance
  under the L.J. Melody Acquisition Stock Option Plan, which was adopted by the
  Board of Directors in September 1996 as part of the July 1996 acquisition of
  L.J. Melody. Options for all these shares have been issued at an exercise price
  of $10.00 per share and vest over a period of five years at the rate of 5% per
  quarter and these options expire in June 2006. Options for 90,750 shares of
  common stock under the L.J. Melody Acquisition Stock Option Plan were
  outstanding at December 31, 2000.
  
     A total of 600,000 shares of common stock have been reserved for issuance
  under the Company's 1991 Service Providers Stock Option Plan. In various years,
  options were granted below market price to select directors as partial payment
  for director fees. On December 15, 1998 select holders of stock options with an
  exercise price in excess of $20.00 per share elected to change the exercise
  price of their options to $20.00 per share, which was above market value on the
  date of election and simultaneously reduce the number of shares by 20%. During
  2000, options for 39,000 shares were granted to select directors and executive
  officers at an exercise price equal to fair market value at date of grant
  ranging from $11.81 to $12.88 per share. These options vest from a zero to a
  five year period and expire at various dates through August 2010. Options for
  583,888 shares were outstanding under the 1991 Service Providers Stock Option
  Plan at December 31, 2000.
  
     A total of 1,000,000 shares of common stock have been reserved for issuance
  under the Company's 1990 Stock Option Plan. All options vest over a four year
  period, expiring at various dates through November 2006. Options for 35,000
  shares under the 1990 Stock Option Plan were outstanding at December 31, 2000.
  
     The Company completed the 1999 stock repurchase program on January 5, 2000.
  A total of 397,450 shares of common stock were purchased for a total of $5.0
  million. In 1998, a total of 488,900 shares of common stock were purchased for
  $8.8 million. The shares purchased in 1999 and 1998 will be used to minimize
  the dilution caused by the exercise of stock options and the grant of stock
  purchase rights.
  
                                         26
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
     A summary of the status of the Company's option plans at December 31, 2000,
  1999 and 1998 and changes during the years then ended is presented in the table
  and narrative below:
  2000                1999                1998
                            ------------------- ------------------- --------------------
                                       Weighted            Weighted             Weighted
                                       Average             Average              Average
  Stock Options and                    Exercise            Exercise             Exercise
  Warrants                   Shares     Price    Shares     Price     Shares     Price
  -----------------         ---------  -------- ---------  -------- ----------  --------
  Outstanding beginning of
   the year...............  3,075,356   $20.71  2,937,085   $23.18   3,284,381   $22.43
  Granted.................    487,710    24.81    628,611    15.17   1,885,944    25.94
  Exercised...............        --       --     (58,000)   10.00    (824,385)   10.73
  Forfeited/Expired.......   (223,056)   19.84   (432,340)   31.64  (1,408,855)   32.42
                            ---------   ------  ---------   ------  ----------   ------
  Outstanding end of
   year...................  3,340,010   $21.25  3,075,356    20.71   2,937,085   $23.18
                            ---------   ------  ---------   ------  ----------   ------
  Exercisable at end of
   year...................  1,824,665   $23.90    770,756   $21.86     830,289   $21.94
  Weighted average fair
   value of options
   granted during the
   year...................              $ 6.72              $ 8.84               $12.27
  Significant option and warrant groups outstanding at December 31, 2000 and
  related weighted average price and life information is presented below:
  Exercisable Options
                                  Outstanding Options and Warrants        and Warrants
                                ------------------------------------- --------------------
                                                             Weighted             Weighted
                                            Weighted Average Average              Average
                                  Number       Remaining     Exercise   Number    Exercise
     Range of Exercise Prices   Outstanding Contractual Life  Price   Exercisable  Price
     ------------------------   ----------- ---------------- -------- ----------- --------
  $00.38-$10.38..........      167,594     5.32 yrs.      $ 7.44     143,519   $ 6.97
      $11.81-$19.44..........      985,941     7.69 yrs.       14.48     327,141    14.48
      $20.00-$23.75..........    1,273,754     6.84 yrs.       20.52     488,218    20.79
      $30.00-$36.75..........      912,721     4.64 yrs.       32.11     865,787    32.02
                                 ---------                    ------   ---------   ------
                                 3,340,010                    $21.25   1,824,665   $23.90
                                 =========                    ======   =========   ======
  Deferred Compensation Plan (the DCP). In 1994, the Company implemented the
  DCP. Under the DCP, a select group of management and highly compensated
  employees can defer the payment of all or a portion of their compensation
  (including any bonus). The DCP permits participating employees to make an
  irrevocable election at the beginning of each year to receive amounts deferred
  at a future date either in cash, which is an unsecured long-term liability of
  the Company, or in shares of common stock of the Company which elections are
  recorded as additions to stockholders' equity. In May 2000, the Company began
  repurchasing stock from the open market in order to minimize the dilutive
  effect of issuing stock pursuant to the DCP. As of December 31, 2000, the
  Company has repurchased 185,800 shares of common stock for $2.0 million, which
  is reported as an increase in treasury stock. In 1999, the Company revised the
  DCP to add insurance products which function like mutual funds as an investment
  alternative and to fund the Company's obligation for deferrals invested in
  these insurance products. Prior to July 1, 2000, cash payments to purchase
  additional insurance products were made on the third business day of the month
  following the related DCP participant deferral. Currently, payments are made
  twice a month. For the year ended December 31, 2000, $43.6 million was deferred
  and mainly allocated to the other investment products. The accumulated non-
  stock liability at December 31, 2000 was $80.5 million and the assets (in the
  form of insurance proceeds) set aside to cover the liability was $53.2 million.
  The total liability of $92.0 million, including $11.5 million deferred in
  stock, was charged to expense in the period of deferral and classified as
  deferred compensation plan liability, except for
  
                                         27
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  stock which is included in stockholders' equity. On July 17, 2000, the Company
  announced a match of the stock portion of the DCP for the Plan Year 1999 in the
  amount of $4.5 million, equivalent to 437,880 shares of common stock at a
  market price of $10.38 per share. The vesting period is over five years with
  20% vesting each year at December 31, 2000 through 2004. The related
  compensation expense will be amortized over the vesting period. The Company
  charged to compensation expense a total of $0.9 million for the year ended
  December 31, 2000. The weighted average fair value of the shares granted during
  the year is $5.90. In October 2000, the Company added the "Retention Program"
  and the "Recruitment Program" to the DCP, with the awards being effective
  January 2001. Under the Retention Program, the 125 best sales professionals
  were credited with 5,700, 4,500 or 3,000 stock units under the DCP (each unit
  is the equivalent of one share of stock). The stock units do not vest for four
  years and in the case of those sales professionals who were credited with 5,700
  or 4,500 stock units, there was a requirement to execute a long-term covenant
  not to compete. Under the Recruitment Program, the Company credited either
  stock units or cash to experienced new hires for sales professional jobs. The
  share awards ranged from 750 to 4,500 and the cash awards ranged from
  $30 thousand to $100 thousand.
  
     As allowed under the provisions of SFAS No. 123, Accounting for Stock-Based
  Compensation, the Company has elected to follow Accounting Principles Board
  (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related
  interpretations in accounting for its employee stock based compensation plans.
  Under this method the Company does not recognize compensation expense for
  options that were granted at or above the market price of the underlying stock
  on the date of grant. Had compensation expense been determined consistent with
  SFAS No. 123, the Company's net income and per share information would have
  been reduced to the following pro forma amounts (in thousands except per share
  data):
  2000    1999    1998
                                                          ------- ------- -------
  Net Income:
       As Reported....................................... $33,388 $23,282 $24,557
       Pro Forma.........................................  30,393  19,039  20,396
     Basic EPS:
       As Reported.......................................    1.60    1.11   (0.38)
       Pro Forma.........................................    1.45    0.91   (0.59)
     Diluted EPS:
       As Reported.......................................    1.58    1.10   (0.38)
       Pro Forma.........................................    1.44    0.91   (0.59)
  Because the SFAS 123 method of accounting has not been applied to options
  granted prior to January 1, 1995, the resulting pro forma compensation cost may
  not be representative of that to be expected in future years.
  
     The fair value of each option grant and DCP company match is estimated on
  the date of grant using the Black-Scholes option pricing model with the
  following weighted average assumptions used for grants:
  2000       1999       1998
                                                  ---------- ---------- ----------
  Risk free interest rate.....................    6.52%      5.55%      4.95%
     Expected volatility.........................   58.06%     61.83%     48.16%
     Expected life............................... 5.00 years 5.00 years 5.00 years
  Dividend yield is excluded from the calculation since it is the present
  intention of the Company to retain all earnings.
  
     The Black-Scholes option valuation model was developed for use in estimating
  the fair value of traded options which have no vesting restrictions and are
  fully transferable. In addition, option valuation models
  
                                         28
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  require the input of highly subjective assumptions including the expected stock
  price volatility. Because the Company's employee stock options have
  characteristics significantly different from those of traded options, and
  because changes in the subjective input assumptions can materially affect the
  fair value estimate, the Company believes the Black-Scholes model does not
  necessarily provide a reliable single measure of the fair value of its employee
  stock options.
  
     Stock Purchase Plans. The Company has restricted stock purchase plans
  covering select key executives including senior management. A total of 500,000
  and 550,000 shares of common stock have been reserved for issuance under the
  Company's 1999 and 1996 Equity Incentive Plans, respectively. The shares may be
  issued to senior executives for a purchase price equal to the greater of $18.00
  and $10.00 per share or fair market value, respectively. Under the 1999 and
  1996 Equity Incentive Plans, the Company issued 285,000 and 50,000 shares in
  2000, and 415,833 and 441,937 shares were outstanding at December 31, 2000,
  respectively. The purchase price for these shares must be paid either in cash
  or by delivery of a full recourse promissory note. The related promissory notes
  are also included in the Consolidated Statements of Stockholders' Equity.
  
     In October 1998, the Company offered all employees under the 1990 Stock
  Option Plan who held options that expired in April 1999 a loan equal to 100% of
  the total exercise price plus 40% of the difference between the current market
  value of the shares and the exercise price. Loan proceeds were applied towards
  the total exercise price and payroll withholding taxes. The loans are evidenced
  by full recourse promissory notes having a maturity of five years at an
  interest rate of 6.0%. Interest is due annually, while the principal is due the
  earlier of five years or upon sale of the shares. The shares issued under this
  offering may not be sold until after 18 months from the date of issuance. A
  total of 415,000 shares were issued under this offering. The related promissory
  notes of $4.7 million and $4.9 million are included in other assets in the
  Consolidated Balance Sheets at December 31, 2000 and 1999, respectively.
  
     Bonuses. The Company has bonus programs covering select key employees,
  including senior management. Awards are based on the position and performance
  of the employee and the achievement of pre-established financial, operating and
  strategic objectives. The amounts charged to expense for bonuses were $49.8
  million, $44.3 million and $33.7 million for the years ended December 31, 2000,
  1999, and 1998, respectively.
  
     Capital Accumulation Plan (the Cap Plan). The Cap Plan is a defined
  contribution profit sharing plan under Section 401(k) of the Internal Revenue
  Code and is the Company's only such plan. Under the Cap Plan, each
  participating employee may elect to defer a portion of his or her earnings and
  the Company may make additional contributions from the Company's current or
  accumulated net profits to the Cap Plan in these amounts as determined by the
  Board of Directors. The Company expensed, in connection with the Cap Plan, $2.2
  million and $1.6 million for the years ended December 31, 2000 and 1999. No
  expense, in connection with the Cap Plan, was incurred for the year ended
  December 31, 1998.
  
     Employee Stock Purchase Plan. In May 2000, the Company amended and restated,
  effective July 1, 2000, its 1998 employee stock purchase plan designed
  exclusively for employees who earn less than $100,000 in total annual
  compensation. Under the plan, the eligible employees may purchase common stock
  by means of contributions to the Company at a price equal to 90% of the fair
  market value of the share on the last trading day of the purchase period. The
  plan provides for purchases by employees up to an aggregate of 150,000 shares
  each year for 2000, 2001 and 2002. This program was discontinued effective
  October 2000.
  
     Pension Plan. The Company, through the acquisition of Hillier Parker,
  maintains a contributory defined benefit pension plan to provide retirement
  benefits to existing and former Hillier Parker employees participating in the
  plan. It is the Company's policy to fund the minimum annual contributions
  required by applicable regulations. Pension expense totaled $0.9 million, $1.9
  million and $0.9 million in 2000, 1999 and 1998, respectively.
  
                                         29
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
     The following sets forth a reconciliation of benefit obligation, plan
  assets, plan's funded status and amounts recognized in the accompanying
  Consolidated Balance Sheets:
  Year Ended
                                                                 December 31
                                                              ------------------
                                                                2000      1999
                                                              --------  --------
                                                               (in thousands)
  Change in benefit obligation
     Benefit obligation at beginning of year................. $ 72,146  $ 73,190
     Service cost............................................    5,728     5,350
     Interest cost...........................................    4,026     4,175
     Plan participants' contributions........................      671       804
     Actuarial gain..........................................   (4,680)   (7,495)
     Benefits paid...........................................   (1,343)   (1,760)
     Currency gain...........................................   (5,472)   (2,118)
                                                              --------  --------
     Benefit obligation at end of year....................... $ 71,076  $ 72,146
                                                              ========  ========
  
     Change in plan assets
     Fair value of plan assets at beginning of year.......... $115,039  $ 95,731
     Actual return on plan assets............................   (3,340)   22,666
     Company contributions...................................    1,257       786
     Plan participants' contributions........................      671       419
     Benefits paid...........................................   (1,343)   (1,760)
     Currency loss...........................................   (8,596)   (2,803)
                                                              --------  --------
     Fair value of plan assets at end of year................ $103,688  $115,039
                                                              ========  ========
     Funded status........................................... $ 32,612  $ 42,893
     Unrecognized net actuarial gain.........................   (7,941)  (16,570)
     Company contributions in the post-measurement period....      564       --
                                                              --------  --------
     Prepaid benefit cost.................................... $ 25,235  $ 26,323
                                                              ========  ========
  Weighted-average assumptions used in developing the projected benefit
  obligation were as follows:
  December 31
                                                                 ----------------
                                                                  2000     1999
                                                                 -------  -------
  Discount rate..............................................  6.00%    5.75%
     Expected return on plan assets.............................  7.75%    7.75%
     Rate of compensation increase..............................  5.00%    5.00%
  
     Net periodic pension cost consisted of the following:
  Year Ended
                                                                   December 31
                                                                 ----------------
                                                                  2000     1999
                                                                 -------  -------
                                                                 (in thousands)
  Employer service cost...................................... $ 5,728  $ 5,350
     Interest cost on projected benefit obligation..............   4,026    4,175
     Expected return on plan assets.............................  (8,395)  (7,636)
     Unrecognized net gain......................................    (425)     --
                                                                 -------  -------
     Net periodic benefit cost.................................. $   934  $ 1,889
                                                                 =======  =======
  30
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  6. Long-term Debt
  
     Long-term debt consists of the following (in thousands):
  December 31
                                                                -----------------
                                                                  2000     1999
                                                                -------- --------
  Senior Subordinated Notes, less unamortized discount of
      $1.7 million and $1.9 million at December 31, 2000 and
      1999, respectively, with fixed interest at 8.9% due in
      2006....................................................  $173,336 $173,108
     Revolving Credit Facility, with interest ranging from
      8.5% to 9.0%, due in 2003...............................   110,000  160,000
     Westmark Senior Notes, with interest ranging from 9.0% to
      10.0% through December 31, 2004 and at variable rates
      depending on the Company's credit facility rate
      thereafter, due from 2001 through 2010..................    15,502   16,502
     Euro cash pool loan, with interest at 6.91% and no stated
      maturity date...........................................     6,946      --
     REI Senior Notes, with variable interest rates based on
      Sterling LIBOR minus 1.5%, due in 2002..................     2,742    2,965
     Shoptaw-James Senior Notes, with fixed interest at 9.0%,
      due in 2001.............................................       810    1,620
     Carey, Brumbaugh Senior Notes, with fixed interest at
      9.0%, due in 2001.......................................       720    1,440
     Eberhardt Acquisition Obligations, with fixed interest at
      8.0%, due from 2001 through 2002........................       600      900
     Capital lease obligations, mainly for autos and telephone
      equipment, with interest ranging from 6.8% to 8.9%, due
      through 2004............................................     2,302    3,554
     Other....................................................     1,206    4,548
                                                                -------- --------
     Total....................................................   314,164  364,637
     Less current maturities..................................    10,593    6,765
                                                                -------- --------
       Total long-term debt...................................  $303,571 $357,872
                                                                ======== ========
  Annual aggregate maturities of long-term debt at December 31, 2000 are as
  follows (in thousands): 2001--$10,593; 2002--$4,536; 2003--$110,512; 2004--
  $128; 2005--$20; and $188,375 thereafter.
  
     In October 1999, the Company executed an amendment to the revolving credit
  facility, eliminating the mandatory reduction on December 31, 1999, and
  revising some of the restrictive covenants. The new amendment is also subject
  to mandatory reductions of the facility by $80.0 million and $70.0 million on
  December 31, 2000 and 2001, respectively. This reduced the facility from $350.0
  million to $270.0 million at December 31, 2000. The amount outstanding under
  this facility was $110.0 million at December 31, 2000. Interest rate
  alternatives include Bank of America's reference rate plus 1.00% and LIBOR plus
  2.00%. The weighted average rate on amounts outstanding at December 31, 2000
  was 8.79%.
  
     The revolving credit facility contains numerous restrictive covenants that,
  among other things, limit the Company's ability to incur or repay other
  indebtedness, make advances or loans to subsidiaries and other entities, make
  capital expenditures, incur liens, enter into mergers or effect other
  fundamental corporate transactions, sell its assets, or declare dividends. In
  addition, the Company is required to meet certain ratios relating to its
  adjusted net worth, level of indebtedness, fixed charges and interest coverage.
  
     The Company has outstanding Senior Subordinated Notes (Subordinated Notes)
  due on June 1, 2006. The Subordinated Notes are redeemable in whole or in part
  after June 1, 2002 at 104.438% of par on that date and at declining prices
  thereafter. On or before June 1, 2001, up to 35.0% of the issued amount may be
  redeemed at 108.875% of par plus accrued interest solely with the proceeds from
  an equity offering.
  
                                         31
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
     The Company has a credit agreement with Residential Funding Corporation
  (RFC). The credit agreement provides for a revolving line of credit, which
  bears interest at 1.25% per annum over LIBOR. On July 19, 2000, the Company
  executed an amendment to the revolving line of credit, increasing the line of
  credit from $50.0 million to $100.0 million, decreasing the interest rate from
  1.25% to 1.00% per annum over LIBOR and extending the expiration date from
  August 31, 2000 to August 31, 2001. In addition, on November 8, 2000, the
  Company obtained a temporary line of credit increase of $52.0 million,
  resulting in a total line of credit equaling $152.0 million. This temporary
  line of credit increase expired on November 30, 2000. During the year, the
  Company had a maximum of $151.3 million revolving line of credit principal
  outstanding. At December 31, 2000, the Company had $0.4 million revolving line
  of credit principal outstanding.
  
  7. Commitments and Contingencies
  
     In December 1996, GMH Associates, Inc. (GMH) filed a lawsuit against
  Prudential Realty Group (Prudential) and the Company in the Superior Court of
  Pennsylvania, Franklin County, alleging various contractual and tort claims
  against Prudential, the seller of a large office complex, and the Company, its
  agent in the sale, contending that Prudential breached its agreement to sell
  the property to GMH, breached its duty to negotiate in good faith, conspired
  with the Company to conceal from GMH that Prudential was negotiating to sell
  the property to another purchaser and that Prudential and the Company
  misrepresented that there were no other negotiations for the sale of the
  property. Following a non-jury trial, the court rendered a decision in favor of
  GMH and against Prudential and the Company, awarding GMH $20.3 million in
  compensatory damages, against Prudential and the Company jointly and severally,
  and $10.0 million in punitive damages, allocating the punitive damage award
  $7.0 million as against Prudential and $3.0 million as against the Company.
  Following the denial of motions by Prudential and the Company for a new trial,
  a judgment was entered on December 3, 1998. Prudential and the Company filed an
  appeal of the judgment. On March 3, 2000, the appellate court in Pennsylvania
  reversed all of the trial courts' decisions finding that liability was not
  supported on any theory claimed by GMH and directed that a judgment be entered
  in favor of the defendants including the Company. The plaintiff filed an appeal
  with the Pennsylvania Supreme Court which was denied. The plaintiff has
  exhausted all appeal possibilities and judgment is expected to be entered
  shortly in favor of all defendants.
  
     In August 1993, a former commissioned sales person of the Company filed a
  lawsuit against the Company in the Superior Court of New Jersey, Bergen County,
  alleging gender discrimination and wrongful termination by the Company. On
  November 20, 1996, a jury returned a verdict against the Company, awarding $1.5
  million in general damages and $5.0 million in punitive damages to the
  plaintiff. Subsequently, the trial court awarded the plaintiff $0.6 million in
  attorneys' fees and costs. Following denial by the trial court of the Company's
  motions for new trial, reversal of the verdict and reduction of damages, the
  Company filed an appeal of the verdict and requested a reduction of damages. On
  March 9, 1999, the appellate court ruled in the Company's favor, reversed the
  trial court decision and ordered a new trial. On February 16, 2000, the Supreme
  Court of New Jersey reversed the decision of the appellate court, concluded
  that the general damage award in the trial court should be sustained and
  returned the case to the appellate court for a determination as to whether a
  new trial should be ordered on the issue of punitive damages. In April 2000,
  the Company settled the compensatory damages claim (including interest) and all
  claims to date with respect to attorneys fees by paying to the plaintiff the
  sum of $2.75 million leaving only the punitive damage claim for resolution (the
  plaintiff also agreed, with very limited exceptions, that no matter what the
  outcome of the punitive damage claim the Company would not be responsible for
  more than 50% of the plaintiff's future attorney fees). In February 2001, the
  Company settled all remaining claims for the sum of $2.0 million and received a
  comprehensive release.
  
     The Company is a party to a number of pending or threatened lawsuits arising
  out of, or incident to, its ordinary course of business. Based on available
  cash and anticipated cash flows, the Company believes that the ultimate outcome
  will not have an impact on the Company's ability to carry on its operations.
  Management
  
                                         32
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  believes that any liability to the Company that may result from disposition of
  these lawsuits will not have a material effect on the consolidated financial
  position or results of operations of the Company.
  
     The following is a schedule by years of future minimum lease payments for
  noncancelable leases as of December 31, 2000 (in thousands):
  Capital Operating
                                                                 Leases   Leases
                                                                 ------- ---------
  2001....................................................... $1,167  $ 48,299
     2002.......................................................    895    40,686
     2003.......................................................    518    33,316
     2004.......................................................     10    25,967
     2005.......................................................    --     22,195
     Thereafter.................................................    --     97,674
                                                                 ------  --------
       Total minimum payments required.......................... $2,590  $268,137
                                                                 ======  ========
  The interest portion of capital lease payments represents the amount
  necessary to reduce net minimum lease payments to present value calculated at
  the Company's incremental borrowing rate at the inception of the leases. This
  totaled $0.3 million at December 31, 2000, resulting in a present value of net
  minimum lease payments of $2.3 million. At December 31, 2000, $0.9 million and
  $1.4 million are included in the current portion of long-term debt and long-
  term debt, respectively. In addition, the total minimum payments for
  noncancelable operating leases have not been reduced by the minimum sublease
  rental income of $42.9 million due in the future under noncancelable subleases.
  
     Substantially all leases require the Company to pay maintenance costs,
  insurance and property taxes, and generally may be renewed for five year
  periods. The composition of total rental expense under noncancelable operating
  leases consisted of the following (in thousands):
  December 31,
                                                        -------------------------
                                                         2000     1999     1998
                                                        -------  -------  -------
  Minimum rentals................................... $56,243  $51,467  $33,126
     Less sublease rentals.............................  (1,387)    (928)    (706)
                                                        -------  -------  -------
                                                        $54,856  $50,539  $32,420
                                                        =======  =======  =======
  In 1999, the Company entered into an agreement with Fannie Mae in which the
  Company agreed to fund the purchase of a $103.6 million loan portfolio from
  proceeds from its RFC line of credit, which was temporarily increased to $140.0
  million in 2000. In December 2000, the Company entered into an agreement with
  Fannie Mae in which the Company agreed to fund the purchase of an additional
  $7.5 million loan from proceeds from its RFC line of credit. A 100%
  participation in both the original and additional loan portfolio was
  subsequently sold to Fannie Mae with the Company retaining the credit risk on
  the first 2% of loss incurred on the underlying commercial mortgage loans. The
  Company has collateralized a portion of its obligation to cover the first 2% of
  losses for both the $103.6 million loan portfolio and the additional
  $7.5 million loan portfolio by increasing a letter of credit in favor of Fannie
  Mae to total $1.1 million.
  
     The Company has a participation agreement with RFC whereby RFC agrees to
  purchase a 99% participation interest in any eligible multifamily mortgage
  loans owned by the Company and outstanding at quarter-end. This participation
  agreement, which originally expired on August 31, 2000, has been extended to
  August 31, 2001.
  
                                         33
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
     An important part of the strategy for the Company's investment management
  business involves investing the Company's own capital in certain real estate
  investments with its clients. As of December 31, 2000, the Company had
  committed an additional $37.7 million to fund future co-investments.
  
  8. Income Taxes
  
     The tax provision (benefit) for the years ended December 31, 2000, 1999 and
  1998 consisted of the following (in thousands):
  Year Ended December 31
                                                        -------------------------
                                                         2000     1999     1998
                                                        -------  -------  -------
  Federal:
       Current......................................... $24,924  $14,403  $ 4,265
       Deferred tax....................................     921   (1,417)  14,469
       Reduction of valuation allowances...............  (3,000)  (6,347)     --
                                                        -------  -------  -------
                                                         22,845    6,639   18,734
     State:
       Current.........................................   6,895    5,627    3,470
       Deferred tax....................................  (1,243)  (1,411)     (75)
                                                        -------  -------  -------
                                                          5,652    4,216    3,395
     Foreign:
       Current.........................................   7,015    8,837    3,797
       Deferred tax....................................    (761)  (3,513)     --
                                                        -------  -------  -------
                                                          6,254    5,324    3,797
                                                        -------  -------  -------
                                                        $34,751  $16,179  $25,926
                                                        =======  =======  =======
  The following is a reconciliation, stated as a percentage of pre-tax income,
  of the US statutory federal income tax rate to the Company's effective tax rate
  on income from operations:
  Year Ended December 31
                                                  ---------------------------
                                                   2000      1999      1998
                                                  -------   -------   -------
  Federal statutory tax rate..................      35%       35%       35%
     Permanent differences, including goodwill,
      meals, entertainment and other.............      11        15         8
     State taxes, net of federal benefit.........       6         9         4
     Foreign income taxes........................       4         4         4
     Reduction of valuation allowances...........      (5)      (22)       --
                                                  -------   -------   -------
     Effective tax rate..........................      51%       41%       51%
                                                  =======   =======   =======
  The domestic component of income before provision for income tax included in
  the consolidated statement of operations was $63.2 million, $32.0 million and
  $45.6 million, for 2000, 1999 and 1998, respectively. The international
  component of income before provision for income tax was $4.9 million, $7.4
  million and $4.9 million, for 2000, 1999 and 1998, respectively.
  
                                         34
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
     Cumulative tax effects of temporary differences are shown below at December
  31, 2000 and 1999 (in thousands):
  December 31
                                                             ------------------
                                                               2000      1999
                                                             --------  --------
  Asset (Liability)
     Property and equipment................................. $ 11,910  $  5,820
     Bad debts and other reserves...........................   12,832    15,940
     Intangible amortization................................  (15,736)  (16,533)
     Bonus, unexercised restricted stock, deferred
      compensation..........................................   35,343    23,990
     Partnership income.....................................    6,950     7,092
     Net operating loss (NOL) and alternative minimum tax
      credit carryforwards..................................    6,134    23,086
     Unconsolidated affiliates..............................    1,010    (1,167)
     All other, net.........................................    1,853     2,040
                                                             --------  --------
     Net deferred tax asset before valuation allowances.....   60,296    60,268
     Valuation allowances...................................  (16,830)  (20,320)
                                                             --------  --------
       Net deferred tax asset............................... $ 43,466  $ 39,948
                                                             ========  ========
  The Company had federal income tax NOLs of approximately $16.3 million at
  December 31, 2000, corresponding to $5.7 million of the Company's $60.3 million
  in net deferred tax assets before valuation allowances.
  
     The ability of the Company to utilize NOLs was limited in 1998 and will be
  in subsequent years as a result of the Company's 1996 public offering, the 1997
  Koll acquisition and the 1998 repurchase of preferred stock which cumulatively
  caused a more than 50.0% change of ownership within a three year period. As a
  result of the limitation, the Company's ability to utilize its existing NOLs is
  limited to $26.0 million on an annual basis. It is anticipated that the Company
  will utilize the remaining NOLs in 2001.
  
     A deferred US tax liability has not been provided on the unremitted earnings
  of foreign subsidiaries because it is the intent of the Company to permanently
  reinvest these earnings. Undistributed earnings of foreign subsidiaries, which
  have been or are intended to be permanently invested in accordance with APB
  No. 23, Accounting for Income Taxes--Special Areas, aggregated $27.7 million at
  December 31, 2000.
  
  9. Earnings Per Share Information
  
     Basic earnings (loss) per share was computed by dividing net income (loss),
  less preferred dividend requirements as applicable, by the weighted average
  number of common shares outstanding during each period. The computation of
  diluted earnings (loss) per share further assumes the dilutive effect of stock
  options, stock warrants and other stock-based compensation programs, as well as
  the conversion of the preferred stock during periods when preferred stock was
  outstanding and was dilutive.
  
     In January 1998, the Company repurchased all 4.0 million shares of its
  outstanding convertible preferred stock. The portion of the purchase price in
  excess of the carrying value represents the deemed dividend charge to net
  income applicable to common shareholders when computing basic and diluted
  earnings (loss) per share for the year ended December 31, 1998.
  
                                         35
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
     The following is a calculation of earnings (loss) per share for the years
  ended December 31 (in thousands, except share and per share data):
  2000                      1999                       1998
                           ------------------------- ------------------------- ---------------------------
                                               Per-                      Per-                        Per-
                                              Share                     Share                       Share
                           Income    Shares   Amount Income    Shares   Amount  Income     Shares   Amount
                           ------- ---------- ------ ------- ---------- ------ --------  ---------- ------
  Basic earnings (loss)
   per share:
   Net income............. $33,388                   $23,282                   $ 24,557
   Deemed dividend on
    preferred stock
    repurchase............     --                        --                     (32,273)
                           ------- ---------- -----  ------- ---------- -----  --------  ---------- ------
   Net income (loss)
    applicable to common
    stockholders.......... $33,388 20,931,111 $1.60  $23,282 20,998,097 $1.11  $ (7,716) 20,136,117 $(0.38)
                           ======= ========== =====  ======= ========== =====  ========  ========== ======
  Diluted earnings (loss)
   per share:
   Net income (loss)
    applicable to common
    stockholders.......... $33,388 20,931,111        $23,282 20,998,097        $ (7,716) 20,136,117
   Diluted effect of
    exercise of options
    outstanding...........             35,594                    74,339                         --
   Diluted effect of
    stock-based
    compensation
    programs..............            130,535                       --                          --
                           ------- ----------        ------- ----------        --------  ----------
   Net income (loss)
    applicable to common
    stockholders.......... $33,388 21,097,240 $1.58  $23,282 21,072,436 $1.10  $ (7,716) 20,136,117 $(0.38)
                           ======= ========== =====  ======= ========== =====  ========  ========== ======
  The following items were not included in the computation of diluted earnings
  per share because their effect in the aggregate was anti-dilutive for the years
  ended December 31,
  2000           1999           1998
                                     -------------- -------------- ---------------
  Stock options
       Outstanding..................   2,574,029      2,008,659       2,337,118
       Price ranges................. $11.81-$36.75  $16.38-$36.75   $0.30-$37.31
       Expiration ranges............ 6/8/04-8/31/10 6/8/04-5/31/09 4/18/99-7/22/08
     Stock warrants
       Outstanding..................    598,387        599,967         599,967
       Price........................     $30.00         $30.00         $30.00
       Expiration date..............    8/28/04        8/28/04         8/28/04
  10. Disclosures About Fair Value of Financial Instruments
  
     Long-term Debt. Based on dealer's quote, the estimated fair value of the
  Company's $173.3 million Senior Subordinated Note, discussed in Note 6, is
  $155.8 million.
  
     Estimated fair values for the Revolving Credit Facilities and the remaining
  long-term debts are not presented because the Company believes that it is not
  materially different from book value, primarily because the majority of the
  Company's debt is based on variable rates.
  
                                         36
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  11. Industry Segments
  
     In July 1999, the Company undertook a reorganization to streamline its US
  operations which resulted in a change in its segment reporting from four to
  three segments. The Company has a number of lines of business which are
  aggregated, reported and managed through these three segments: Transaction
  Management, Financial Services and Management Services. The Transaction
  Management segment is our largest generator of revenue and operating income and
  includes Brokerage Services, Corporate Services and Investment Property
  activities. Brokerage Services includes activities that provide sales, leasing
  and consulting services in connection with commercial real estate and is the
  Company's primary revenue source. Corporate Services focuses on building
  relationships with large corporate clients which generate recurring revenue.
  Investment Property activities provide brokerage services for commercial real
  property marketed for sale to institutional and private investors. The
  Financial Services segment provides commercial mortgage, valuation, investment
  management and consulting and research services. The Management Services
  segment provides facility management services to corporate real estate users
  and property management and related services to owners. The following table
  summarizes the revenue, cost and expenses, and operating income (loss) by
  operating segment for the year ended December 31, 2000, 1999 and 1998 (in
  thousands):
  Year Ended December 31
                                               --------------------------------
                                                  2000       1999       1998
                                               ---------- ---------- ----------
  Revenue:
  Transaction Management
    Leases.................................... $  510,287 $  426,108 $  352,811
    Sales.....................................    378,486    383,726    330,206
    Other consulting and referral fees(1).....     61,479     71,095     79,934
                                               ---------- ---------- ----------
      Total revenue...........................    950,252    880,929    762,951
  Financial Services
    Appraisal fees............................     72,861     69,007     48,090
    Loan origination and servicing fees.......     58,188     45,938     39,402
    Investment management fees................     40,433     27,323     32,591
    Other(1)..................................     42,622     35,059     25,167
                                               ---------- ---------- ----------
      Total revenue...........................    214,104    177,327    145,250
  Management Services
    Property management fees..................     83,251     79,994     67,300
    Facilities management fees................     23,069     25,597     17,219
    Other(1)..................................     52,928     49,192     41,783
                                               ---------- ---------- ----------
      Total revenue...........................    159,248    154,783    126,302
                                               ---------- ---------- ----------
  Consolidated revenues....................... $1,323,604 $1,213,039 $1,034,503
                                               ========== ========== ==========
  Operating income (loss)
  Transaction Management...................... $   83,305 $   68,382 $   81,232
  Financial Services..........................     17,712      7,113      6,849
  Management Services.........................      6,268      1,404      6,980
  Merger-related and other nonrecurring
   charges....................................        --         --     (16,585)
                                               ---------- ---------- ----------
                                                  107,285     76,899     78,476
  Interest income.............................      2,554      1,930      3,054
  Interest expense............................     41,700     39,368     31,047
                                               ---------- ---------- ----------
  Income before provision for income taxes.... $   68,139 $   39,461 $   50,483
                                               ========== ========== ==========
  37
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  Year Ended December 31
                                                          -----------------------
                                                           2000    1999    1998
                                                          ------- ------- -------
  Depreciation and amortization
  Transaction Management................................. $21,342 $20,676 $13,722
  Financial Services.....................................  12,001  10,719  11,025
  Management Services....................................   9,856   9,075   7,438
                                                          ------- ------- -------
                                                          $43,199 $40,470 $32,185
                                                          ======= ======= =======
  Year Ended December 31
                                                          -----------------------
                                                           2000    1999    1998
                                                          ------- ------- -------
  Capital expenditures
  Transaction Management................................  $15,435 $15,830 $12,669
  Financial Services....................................    6,674  11,030  10,179
  Management Services...................................    4,812   8,270   6,867
                                                          ------- ------- -------
                                                          $26,921 $35,130 $29,715
                                                          ======= ======= =======
  Equity interest in earnings of unconsolidated subsidi-
   aries
  Transaction Management................................  $ 3,930 $ 2,542 $   315
  Financial Services....................................    1,162   4,030     706
  Management Services...................................    2,020     956   2,422
                                                          ------- ------- -------
                                                          $ 7,112 $ 7,528 $ 3,443
                                                          ======= ======= =======
  --------
  (1) Revenue is allocated by material line of business specific to each segment.
      "Other" includes types of revenue that have not been broken out separately
      due to their immaterial balances and/or nonrecurring nature within each
      segment. Certain revenue types disclosed on the consolidated statements of
      operations may not be derived directly from amounts shown in this table.
  December 31
                                                                -----------------
                                                                  2000     1999
                                                                -------- --------
  Identifiable assets
       Transaction Management.................................. $477,268 $444,422
       Financial Services......................................  261,682  246,151
       Management Services.....................................  159,835  171,118
       Corporate...............................................   64,320   67,792
                                                                -------- --------
                                                                $963,105 $929,483
                                                                ======== ========
  
     Identifiable assets by industry segment are those assets used in the Company
  operations in each segment. Corporate identified assets are principally made up
  of cash and cash equivalents and deferred taxes.
  December 31
                                                                -----------------
                                                                  2000     1999
                                                                -------- --------
  Investment in and advances to unconsolidated subsidiaries
       Transaction Management.................................. $ 14,208 $ 11,352
       Financial Services......................................   15,199   18,587
       Management Services.....................................   11,918    8,575
                                                                -------- --------
                                                                 $41,325 $ 38,514
                                                                ======== ========
  38
  CB RICHARD ELLIS SERVICES, INC.
  
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
  
  Geographic Information:
  Year Ended December 31
                                                 --------------------------------
                                                    2000       1999       1998
                                                 ---------- ---------- ----------
  Revenue
       Americas
         United States.......................... $1,027,359 $  940,341 $  884,304
         Canada, South and Central America......     46,721     42,112     16,473
                                                 ---------- ---------- ----------
                                                  1,074,080    982,453    900,777
       Asia Pacific.............................     84,985     79,420     46,528
       Europe, Middle East and Africa...........    164,539    151,166     87,198
                                                 ---------- ---------- ----------
                                                 $1,323,604 $1,213,039 $1,034,503
                                                 ========== ========== ==========
  December 31
                                                                   ---------------
                                                                    2000    1999
                                                                   ------- -------
  Long-Lived assets
       United States.............................................. $55,100 $51,064
       All other countries........................................  20,892  19,085
                                                                   ------- -------
                                                                   $75,992 $70,149
                                                                   ======= =======
  Long lived assets include property, plant and equipment.
  
  12. Subsequent Event
  
     On February 24, 2001, the Company announced that it had entered into a
  merger agreement providing for the acquisition of the Company by Blum CB
  Corporation (Blum CB) for $16.00 per share in cash. Blum CB is an affiliate of
  Blum Capital Partners, Freeman Spogli & Co. and certain directors and executive
  officers of the Company.
  
     The agreement provides that the Company employees will have the option to
  roll over their existing shares in the Company's deferred compensation plan and
  a portion of the Company shares held in their 401(k) accounts. Employees will
  also be provided the opportunity to make a direct equity investment in the
  surviving company.
  
     The acquisition, which is expected to close early in the third quarter,
  remains subject to certain conditions, including the receipt of Blum CB's debt
  financing, the approval of the merger by the holders of two-thirds of the
  outstanding shares of the Company not owned by the buying group, the expiration
  or termination of waiting periods under applicable antitrust laws and a
  successful tender offer for at least 51% of the Company's outstanding 8 7/8%
  Senior Subordinated Notes. The Company will pay a termination fee of
  $7.5 million and reimburse up to $3.0 million of the buying group's expenses if
  the Company wishes to accept a superior acquisition proposal.
  
                                         39
  CB RICHARD ELLIS SERVICES, INC.
  
              QUARTERLY RESULTS OF OPERATIONS AND OTHER FINANCIAL DATA
                                    (Unaudited)
  
     The following table sets forth the Company's unaudited quarterly results of
  operations. The unaudited quarterly information should be read in conjunction
  with the audited consolidated financial statements of the Company and the notes
  thereto. The operating results for any quarter are not necessarily indicative
  of the results for any future period.
  2000                                            1999
                            ----------------------------------------------  ----------------------------------------------
                             Dec. 31     Sept. 30    June 30     March 31    Dec. 31     Sept. 30    June 30     March 31
                            ----------  ----------  ----------  ----------  ----------  ----------  ----------  ----------
                                                            (Dollars in thousands)
  Results of Operation:
  
  Revenue.................  $  418,280  $  326,521  $  317,884  $  260,919  $  395,653  $  307,018  $  277,167  $  233,201
  
  Operating income........  $   50,617  $   24,884  $   22,545  $    9,239  $   35,197  $   20,046  $   16,580  $    5,076
  
  Interest expense, net...  $    9,018  $   10,039  $   10,893  $    9,196  $    9,629  $    9,503  $    9,667  $    8,639
  
  Net income (loss).......  $   20,914  $    6,977  $    5,477  $       20  $   17,031  $    4,648  $    3,356  $   (1,753)
  
  Basic EPS(1)............  $     0.99  $     0.34  $     0.26  $      --   $     0.81  $     0.22  $     0.16  $    (0.08)
  
  Weighted average shares
   outstanding for basic
   EPS(1).................  21,217,685  20,086,651  20,879,218  20,819,268  20,928,615  21,098,757  21,032,324  20,640,438
  
  Diluted EPS(1)..........  $     0.97  $     0.33  $     0.26  $      --   $     0.81  $     0.22  $     0.16  $    (0.08)
  
  Weighted average shares
   outstanding for diluted
   EPS(1).................  21,554,942  20,881,092  20,906,117  20,851,184  20,964,066  21,162,334  21,125,074  20,640,438
  
  Other Financial Data:
  
  EBITDA, excluding
   merger-related and
   other nonrecurring
   charges................  $   61,682  $   35,718  $   33,276  $   19,808  $   45,704  $   30,047  $   26,548  $   15,070
  
  Net cash provided by
   (used in) operating
   activities.............  $   86,601  $   48,528  $   16,505  $  (67,522) $   71,174  $   47,062  $   10,122  $  (54,347)
  
  Net cash (used in)
   provided by investing
   activities.............  $   (7,350) $  (16,255) $  (18,431) $    6,314  $   (5,417) $   (6,863) $  (16,327) $    1,840
  
  Net cash (used in)
   provided by financing
   activities.............  $  (80,037) $  (28,824) $   (3,456) $   58,794  $  (62,330) $  (27,820) $    2,389  $   50,040
  
  Balance Sheet Data:
  
  Cash and cash
   equivalents............  $   20,854  $   20,724  $   19,195  $   24,791  $   27,844  $   25,122  $   12,553  $   17,425
  
  Total assets............  $  963,105  $  930,029  $  904,925  $  897,756  $  929,483  $  871,159  $  841,311  $  824,757
  
  Total long-term debt....  $  303,571  $  390,624  $  418,231  $  416,531  $  357,872  $  413,227  $  435,419  $  431,135
  
  Total liabilities.......  $  724,018  $  717,618  $  693,416  $  687,765  $  715,874  $  670,685  $  648,801  $  634,707
  
  Total stockholders
   equity.................  $  235,339  $  209,569  $  208,276  $  206,711  $  209,737  $  196,324  $  187,819  $  185,259
  
  Number of shares
   outstanding............  20,605,023  20,246,122  20,270,560  20,408,692  20,435,692  20,686,995  20,794,165  20,640,865
  
  Ratios:
  
  Debt/equity.............        1.33        1.88        2.03        2.04        1.74        2.13        2.35        2.37
  
  EBITDA, excluding
   merger-related and
   other nonrecurring
   charges net interest
   expense................        6.84        3.56        3.05        2.15        4.75        3.16        2.75        1.74
  
  EBITDA, excluding
   merger-related and
   other nonrecurring
   charges as a percentage
   of revenue.............        14.7%       10.9%       10.5%        7.6%       11.6%        9.8%        9.6%        6.5 %
  
  Net income as a
   percentage of revenue..         5.0%        2.1%        1.7%        --          4.3%        1.5%        1.2%       (0.8)%
  
  International revenue as
   a percentage of
   consolidated revenue...        21.6%       21.8%       22.7%       23.9%       22.5%       22.5%       22.3%       22.6 %
  --------
  (1) EPS is defined as earnings (loss) per share
  
                                         40
  (b)  Pro Forma Financial Information.
  
            The pro forma financial information required by Item 7(b) is not
  included in this filing.  The Company intends to file such information as an
  amendment to this Form 8-K not later than October 2, 2001.
  
       (c)  Exhibits.
  
  2.1       Amended and Restated Agreement and Plan of Merger dated as of May 31,
            2001 by and among CB Richard Ellis Services, Inc., CBRE Holding, Inc.,
            and BLUM CB Corp. (incorporated by reference from Exhibit 2.1 of
            Amendment No. 1 to the Registration Statement on Form S-1, filed by
            CBRE Holding, Inc. on June 12, 2001, File No. 333-59440).
  
  2.2       Amended and Restated Contribution and Voting Agreement, dated as of
            May 31, 2001, by and among CBRE Holding, Inc., BLUM CB Corp., RCBA
            Strategic Partners, L.P., FS Equity Partners III, L.P., FS Equity
            Partners International, L.P., Raymond E. Wirta, W. Brett White,
            Frederic V. Malek and The Koll Holding Company (incorporated by
            reference from Exhibit 4.2(a) of Amendment No. 1 to Form S-1, filed by
            CBRE Holding, Inc. on June 12, 2001, File No. 333-59440).
  
  2.3       Amendment, dated as of July 19, 2001, to the Amended and Restated
            Contribution and Voting Agreement, by and among CBRE Holding, Inc.,
            BLUM CB Corp., RCBA Strategic Partners, L.P., FS Equity Partners III,
            L.P., FS Equity Partners International, L.P., Raymond E. Wirta, W.
            Brett White,  Frederic V. Malek and The Koll Holding Company
            (incorporated by reference from Exhibit 23 of Amendment No. 9 to the
            Schedule 13D, filed by RCBA GP, L.L.C., RCBA Strategic Partners, L.P.,
            Richard C. Blum & Associates, Inc., BLUM Capital Partners, L.P.,
            Richard C. Blum and CBRE Holding, Inc. on July 25, 2001, File No. 005-
            46943).
  
  99.1      Securityholders' Agreement, dated as of July 20, 2001, by and among
            RCBA Strategic Partners, L.P., Blum Strategic Partners II, L.P., FS
            Equity Partners III, L.P., FS Equity Partners International, L.P., The
            Koll Holding Company, California Public Employees' Retirement System,
            Frederic V. Malek, DLJ Investment Funding, Inc., Credit Suisse Boston
            Corporation, Raymond E. Wirta, W. Brett White, CB Richard Ellis
            Services, Inc. and CBRE Holding, Inc. (incorporated by reference from
            Exhibit 25 of Amendment No. 9 to the Schedule 13D, filed by RCBA GP,
            L.L.C., RCBA Strategic Partners, L.P., Richard C. Blum & Associates,
            Inc., BLUM Capital Partners, L.P., Richard C. Blum and CBRE Holding,
            Inc. on July 25, 2001, File No. 005-46943).
  
  99.2      Press Release of CB Richard Ellis Services, Inc. (filed herewith).
  SIGNATURE
  
       Pursuant to the requirements of the Securities Exchange Act of 1934, the
  registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
  Date:  August 3, 2001                     CBRE HOLDING, INC.
  
                                            By: /s/ Walter V. Stafford
                                                ----------------------
                                                    Walter V. Stafford
                                                    Secretary
  Index to Exhibits
  
  Exhibit No.              Title
  ----------               -----
  
  2.1            Amended and Restated Agreement and Plan of Merger dated as of May
                 31, 2001 by and among CB Richard Ellis Services, Inc., CBRE
                 Holding, Inc., and BLUM CB Corp. (incorporated by reference from
                 Exhibit 2.1 of Amendment No. 1 to the Registration Statement on
                 Form S-1, filed by CBRE Holding, Inc. on June 12, 2001, File No.
                 333-59440).
  
  2.2            Amended and Restated Contribution and Voting Agreement, dated as
                 of May 31, 2001, by and among CBRE Holding, Inc., BLUM CB Corp.,
                 RCBA Strategic Partners, L.P., FS Equity Partners III, L.P., FS
                 Equity Partners International, L.P., Raymond E. Wirta, W. Brett
                 White, Frederic V. Malek and The Koll Holding Company
                 (incorporated by reference from Exhibit 4.2(a) of Amendment No. 1
                 to Form S-1, filed by CBRE Holding, Inc. on June 12, 2001, File
                 No. 333-59440).
  
  2.3            Amendment, dated as of July 19, 2001, to the Amended and Restated
                 Contribution and Voting Agreement, by and among CBRE Holding,
                 Inc., BLUM CB Corp., RCBA Strategic Partners, L.P., FS Equity
                 Partners III, L.P., FS Equity Partners International, L.P.,
                 Raymond E. Wirta, W. Brett White, Frederic V. Malek and The Koll
                 Holding Company (incorporated by reference from Exhibit 23 of
                 Amendment No. 9 to the Schedule 13D, filed by RCBA GP, L.L.C.,
                 RCBA Strategic Partners, L.P., Richard C. Blum & Associates,
                 Inc., BLUM Capital Partners, L.P., Richard C. Blum and CBRE
                 Holding, Inc. on July 25, 2001, File No. 005-46943).
  
  99.1           Securityholders' Agreement, dated as of July 20, 2001, by and
                 among RCBA Strategic Partners, L.P., Blum Strategic Partners II,
                 L.P., FS Equity Partners III, L.P., FS Equity Partners
                 International, L.P., The Koll Holding Company, California Public
                 Employees' Retirement System, Frederic V. Malek, DLJ Investment
                 Funding, Inc., Credit Suisse Boston Corporation, Raymond E.
                 Wirta, W. Brett White, CB Richard Ellis Services, Inc. and CBRE
                 Holding, Inc. (incorporated by reference from Exhibit 25 of
                 Amendment No. 9 to the Schedule 13D, filed by RCBA GP, L.L.C.,
                 RCBA Strategic Partners, L.P., Richard C. Blum & Associates,
                 Inc., BLUM Capital Partners, L.P., Richard C. Blum and CBRE
                 Holding, Inc. on July 25, 2001, File No. 005-46943).
  
  99.2           Press Release of CB Richard Ellis Services, Inc. (filed
                 herewith).