<SUBMISSION>
<ACCESSION-NUMBER>0000898430-01-001302
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>1
<PERIOD>20010522
<FILING-DATE>20010409
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>KILROY REALTY CORP
<CIK>0001025996
<ASSIGNED-SIC>6798
<IRS-NUMBER>954598246
<STATE-OF-INCORPORATION>MD
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEF 14A
<ACT>34
<FILE-NUMBER>001-12675
<FILM-NUMBER>1598324
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2250 E IMPERIAL HWY
<STREET2>C/O KILROY INDUSTRIES
<CITY>EL SEGUNDO
<STATE>CA
<ZIP>90245
<PHONE>3105635500
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>C/O KILROY INDUSTRIES
<STREET2>2250 E IMPERIAL HIGHWAY #1200
<CITY>EL SEGUNDO
<STATE>CA
<ZIP>90245
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>DEFINITIVE PROXY STATEMENT
<TEXT>

<PAGE>

                           SCHEDULE 14A INFORMATION

  PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
                                     1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary proxy statement

                                           [_] Confidential, for use of the
[X] Definitive proxy statement                 commission only (as permitted
                                               by Rule 14a-6(e)(2))

[_] Definitive additional materials

[_] Soliciting Material Pursuant to Rule 14a-12


                           KILROY REALTY CORPORATION
               (Name of Registrant as Specified In Its Charter)

   (Name of Person(s) Filing Proxy Statement, if Other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]  No fee required.

[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

  (1) Title of each class of securities to which transaction applies:

  (2) Aggregate number of securities to which transaction applies:

  (3) Per unit price or other underlying value of transaction computed
      pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
      filing fee is calculated and state how it was determined):

  (4) Proposed maximum aggregate value of transaction:

  (5) Total fee paid:

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act
    Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
    paid previously. Identify the previous filing by registration statement
    number, or the Form or Schedule and the date of its filing.

  (1) Amount Previously Paid:

  (2) Form, Schedule or Registration Statement No.:

  (3) Filing Party:

  (4) Date Filed:
<PAGE>

                           KILROY REALTY CORPORATION

                    2250 EAST IMPERIAL HIGHWAY, SUITE 1200
                         EL SEGUNDO, CALIFORNIA 90245

April 6, 2001

Dear Stockholder:

  You are cordially invited to attend the 2001 annual meeting of stockholders
of KILROY REALTY CORPORATION to be held on May 22, 2001, at 10:00 a.m. at The
Beverly Hilton Hotel located at 9876 Wilshire Boulevard, Beverly Hills,
California 90210.

  Information about the meeting and the various matters on which the
stockholders will act is included in the Notice of Annual Meeting of
Stockholders and Proxy Statement that follow. Also included is a Proxy Card
and postage paid return envelope.

  It is important that your shares be represented at the meeting. Whether or
not you plan to attend, we hope that you will complete and return your Proxy
Card in the enclosed envelope as promptly as possible.

                                          Sincerely,

                                          Richard E. Moran Jr.
                                          Executive Vice President,
                                          Chief Financial Officer and
                                           Secretary
<PAGE>

                           KILROY REALTY CORPORATION
                    2250 EAST IMPERIAL HIGHWAY, SUITE 1200
                         EL SEGUNDO, CALIFORNIA 90245

                   NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                            TO BE HELD MAY 22, 2001

To the Stockholders of Kilroy Realty Corporation:

  NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the "Annual
Meeting") of Kilroy Realty Corporation, a Maryland corporation (the
"Company"), will be held at The Beverly Hilton Hotel located at 9876 Wilshire
Boulevard, Beverly Hills, California 90210 on May 22, 2001, at 10:00 a.m.,
local time, for the following purposes:

    1. To elect two directors to the Company's Board of Directors to serve
  until the annual meeting of stockholders in the year 2004 and until their
  successors are duly elected and qualify;

    2. To consider and act upon one stockholder proposal, if presented to the
  meeting; and

    3. To transact such other business as may properly come before the
  meeting or any adjournment(s) or postponement(s) thereof.

  The Board of Directors has fixed the close of business on March 20, 2001 as
the record date (the "Record Date") for determining the stockholders entitled
to receive notice of and to vote at the Annual Meeting or any adjournment or
postponement thereof.

  The enclosed proxy is solicited by the Board of Directors of the Company,
which recommends that stockholders vote FOR the election of the Board of
Director nominees named therein and recommends that the stockholders vote
AGAINST the proposed stockholder proposal contained therein. Please refer to
the attached Proxy Statement, which forms a part of this Notice and is
incorporated herein by reference, for further information with respect to the
business to be transacted at the Annual Meeting.

  STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE, SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.

                                          By Order of the Board of Directors,

                                          Richard E. Moran Jr.
                                          Executive Vice President,
                                          Chief Financial Officer and
                                           Secretary

April 6, 2001
El Segundo, California
<PAGE>

                           KILROY REALTY CORPORATION
                    2250 EAST IMPERIAL HIGHWAY, SUITE 1200
                         EL SEGUNDO, CALIFORNIA 90245

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

                        ANNUAL MEETING OF STOCKHOLDERS
                            TO BE HELD MAY 22, 2001

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

                                PROXY STATEMENT

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

                                 INTRODUCTION

General

  This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Kilroy Realty Corporation, a Maryland corporation (the
"Company"), of proxies from the holders of the Company's issued and
outstanding shares of common stock, par value $.01 per share (the "Common
Stock"), to be exercised at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on May 22, 2001 at The Beverly Hilton Hotel located at
9876 Wilshire Boulevard, Beverly Hills, California 90210 at 10:00 a.m. local
time, and at any adjournment(s) or postponement(s) thereof for the purposes
set forth in the accompanying Notice of Annual Meeting.

  At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the following proposals (the "Proposals"):

    1. The election of two directors to the Company's Board of Directors to
  serve until the annual meeting of stockholders to be held in the year 2004
  and until their successors are duly elected and qualify;

    2. One shareholder proposal, if presented to the meeting; and

    3. To transact such other business as may properly come before the Annual
  Meeting or any adjournment or postponement thereof.

  Only the holders of record of the shares of Common Stock at the close of
business on March 20, 2001 (the "Record Date") are entitled to notice of and
to vote at the Annual Meeting. Each share of Common Stock is entitled to one
vote on all matters. As of the Record Date, 26,964,526 shares of Common Stock
were outstanding. This Proxy Statement and enclosed form of proxy are first
being mailed to the stockholders of the Company on or about April 6, 2001.

  A majority of the shares of Common Stock outstanding must be represented at
the Annual Meeting in person or by proxy to constitute a quorum for the
transaction of business at the Annual Meeting. Shares represented by proxies
that reflect abstentions or "broker non-votes" will be counted as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum. In order to be elected as a director, a nominee must receive a
plurality of all the votes cast at the Annual Meeting at which a quorum is
present. For purposes of calculating votes cast in the election of the
directors, abstentions or broker non-votes will not be counted as votes cast
and will have no effect on the result of the vote on the Proposal regarding
the election of the director nominees. The stockholder proposal must be
approved by a plurality of the votes cast, assuming a quorum is present.
Abstentions and broker non-votes will not be counted as votes cast and will
have no effect on the result of of the vote the stockholder proposal.

  The shares of Common Stock represented by all properly executed proxies
returned to the Company will be voted at the Annual Meeting as indicated or,
if no instruction is given, FOR election of the two director nominees

                                       1
<PAGE>

named herein and AGAINST approval of the stockholder proposal. As to any other
business that may properly come before the Annual Meeting, all properly
executed proxies will be voted by the persons named therein in accordance with
their discretion. The Company does not presently know of any other business
that may come before the Annual Meeting. However, if any other matter properly
comes before the Annual Meeting, or any adjournment or postponement thereof,
which may properly be acted upon, unless otherwise indicated, the proxies
solicited hereby will be voted on such matter in accordance with the
discretion of the proxy holders named therein. Any person giving a proxy has
the right to revoke it at any time before it is exercised (i) by filing with
the Secretary of the Company a duly signed revocation or a proxy bearing a
later date or (ii) by electing to vote in person at the Annual Meeting. Mere
attendance at the Annual Meeting will not revoke a proxy.

  NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF
GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED AND THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

  The Company's executive offices are located at 2250 East Imperial Highway,
Suite 1200, El Segundo, California 90245, telephone (310) 563-5500. References
herein to the "Company" refer to Kilroy Realty Corporation and its
subsidiaries, unless the context otherwise requires.

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

              The date of this Proxy Statement is April 6, 2001.

                                       2
<PAGE>

                       PROPOSAL 1: ELECTION OF DIRECTORS

  Pursuant to the Company's articles of incorporation, as amended (the
"Charter"), the Company's bylaws, as amended (the "Bylaws"), and the
resolutions adopted by the Board of Directors (the "Board"), the Board
presently consists of seven directors, with one vacancy. The Board is divided
into three classes serving staggered three-year terms, consisting of two
members whose term will expire at the Annual Meeting, two members whose terms
will expire at the 2002 annual meeting of stockholders and two members whose
terms will expire at the 2003 annual meeting of stockholders.

  Pursuant to the Charter, at each annual meeting the successors to the class
of directors whose terms expire at such meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election. Accordingly, at the Annual
Meeting, the nominees for election will be elected to hold office for a term
of three years until the annual meeting of stockholders to be held in the year
2004, and until their successors are duly elected and qualify. Except where
otherwise instructed, proxies solicited by this Proxy Statement will be voted
for the election of each of the nominees to the Board listed below. Each such
nominee has consented to be named in this Proxy Statement and to serve as a
director if elected.

  The information below relating to the nominees for election as director and
to each of the other directors whose terms of office continue after the Annual
Meeting has been furnished to the Company by the respective individuals.

  The Board recommends a vote FOR the election of John R. D'Eathe and William
P. Dickey to serve until the annual meeting of stockholders to be held in the
year 2004 and until their respective successors are duly elected and qualify.

Nominees for Director

  The following table sets forth certain current information with respect to
the nominees for directors to the Board of the Company:

<TABLE>
<CAPTION>
                                                                        Position
                                                               Director With The
   Name                                                    Age  Since   Company
   ----                                                    --- -------- --------
   <S>                                                     <C> <C>      <C>
   John R. D'Eathe........................................  65   1997   Director
   William P. Dickey......................................  58   1997   Director
</TABLE>

  The following is a biographical summary of the experience of the nominees
for directors to the Board of the Company:

  John R. D'Eathe, has been a member of the Company's Board since October
1997. Mr. D'Eathe is a 30-year veteran of real estate development and
management in Canada, Europe and the United States. Since 1980, Mr. D'Eathe
has been serving as the President of Freehold Development Canada, which is
primarily focused on commercial and industrial development in western Canada.
From 1970 to 1979, Mr. D'Eathe was President and Chief Executive Officer of
Canadian Freehold Properties Ltd., a Canadian-based development company
involved in commercial projects in both Canada and the United States. From
1965 to 1969, he served as a director and senior vice president of Grosvenor
International, a private real estate group that owns and develops property
around the world. Since 1997, Mr. D'Eathe has been the Chairman and President
of Penreal Advisors Ltd., one of Canada's largest pension fund real estate
investment and advisory firms. In addition, he has been the Chairman of Spark
Music Inc., of Vancouver since 1992, and has been a director of John Hancock's
Maritime Life Assurance Company since 1995. Mr. D'Eathe holds an honors
Bachelor of Laws degree from London University, UK and is an associate member
of The Canadian Bar Association.

  William P. Dickey, has been a member of the Company's Board since its
inception as a public company in January 1997. Mr. Dickey has been the
President of The Dermot Company, Inc., a real estate investment and

                                       3
<PAGE>

management company since 1990. From 1986 to 1990, Mr. Dickey was a Managing
Director of Real Estate for Credit Suisse First Boston Corporation. Prior to
1986, Mr. Dickey was a partner at the New York law firm of Cravath, Swaine &
Moore, where he started as an associate beginning in 1974. Mr. Dickey is a
member of the board of directors of Prime Retail, Inc., a real estate
investment trust ("REIT") which invests primarily in factory outlet centers,
Burnham Pacific Properties, Inc., a REIT that is currently liquidating its
shopping center portfolio, and Mezzanine Capital Property Investors, Inc., a
REIT which invests primarily in East Coast office/mixed use space. Mr. Dickey
received his undergraduate degree from the United States Air Force Academy,
his Masters Degree from Georgetown University and his Juris Doctor Degree from
Columbia Law School.

Vote Required

  The election of each director requires the plurality of the votes cast by
the holders of the shares of Common Stock entitled to vote thereon present in
person or by proxy at the Annual Meeting. The Board recommends a vote "FOR"
the election of John R. D'Eathe and William P. Dickey to serve until the
annual meeting of stockholders to be held in the year 2004 and until their
respective successors are duly elected and qualify.

Directors Continuing in Office

  Information concerning the other directors of the Company whose terms do not
expire at the Annual Meeting is set forth below.

<TABLE>
<CAPTION>
   Name                     Age            Position With The Company            Term
   ----                     ---            -------------------------            ----
   <S>                      <C> <C>                                             <C>
   John B. Kilroy, Sr. ....  78 Chairman of the Board of Directors              2002
   John B. Kilroy, Jr. ....  52 President, Chief Executive Officer and Director 2003
   Matthew J. Hart.........  48 Director                                        2002
   Dale F. Kinsella........  52 Director                                        2003
</TABLE>

  John B. Kilroy, Sr., has served as the Company's Chairman of the Board since
its incorporation in September 1996, and served in the same capacity for
Kilroy Industries ("KI"), the predecessor to the Company, since 1954. In 1947,
Mr. Kilroy founded the businesses that were incorporated in 1952 as the entity
known as KI. Mr. Kilroy served as KI's President from 1952 until 1981, and as
its Chairman of its Board of Directors from 1954 to 1997. Mr. Kilroy is a
nationally recognized member of the real estate community, providing the
Company with strategic leadership and a broad based network of relationships.
Mr. Kilroy is a trustee of the Independent Colleges of Southern California,
serves on the board of directors of Pepperdine University, and is a past
trustee of Harvey Mudd College. Mr. Kilroy is the father of John B. Kilroy,
Jr., the Company's President and Chief Executive Officer.

  John B. Kilroy, Jr., has served as the Company's President, Chief Executive
Officer and Director since its incorporation in September 1996. Prior to
joining the Company, Mr. Kilroy served in the same capacity for KI and was
responsible for the overall management of all facets of KI and its various
affiliates since 1981. Mr. Kilroy has been involved in all aspects of
commercial and industrial real estate development, construction, acquisition,
sales, leasing, financing, and entitlement since 1967 and worked for KI for
over 30 years. Mr. Kilroy became President of KI in 1981 and was elected Chief
Executive Officer in 1991. Prior to that time, he held positions as Executive
Vice President and Vice President--Leasing & Marketing. He is a trustee of the
El Segundo Employers Association, and a past trustee of Viewpoint School, the
Jefferson Center For Character Education and the National Fitness Foundation.
Mr. Kilroy holds a Bachelor of Science degree in Economics from the University
of Southern California. Mr. Kilroy is the son of John B. Kilroy, Sr., the
Chairman of the Company's Board of Directors.

  Matthew J. Hart, has been a member of the Company's Board since its
inception as a public company in January 1997. Mr. Hart joined Hilton Hotels
Corporation in 1996 and presently serves as its Executive Vice President and
Chief Financial Officer. Mr. Hart is primarily responsible for Hilton's
corporate finance and development activities. Prior to joining Hilton, Mr.
Hart was Senior Vice President and Treasurer of The Walt

                                       4
<PAGE>

Disney Company from 1995 to 1996. From 1981 to 1995, Mr. Hart was employed by
Host Marriott Corporation (formerly known as Marriott Corporation), most
recently as its Executive Vice President and Chief Financial Officer. He was
responsible for the company's corporate and project financing activities, as
well as the corporate controller and corporate tax functions. Before joining
Marriott Corporation, Mr. Hart had been a lending officer with Bankers Trust
Company in New York. Mr. Hart is a member of the board of directors of First
Washington Realty Trust, Inc., a REIT that invests primarily in retail
properties, Heal the Bay and the Westside Breckers Soccer Club, both nonprofit
organizations. Mr. Hart received his undergraduate degree from Vanderbilt
University and a Masters of Business Administration from Columbia University.

  Dale F. Kinsella, has been a member of the Company's Board since its
inception as a public company in January 1997. Mr. Kinsella is currently a
partner with the law firm of Greensberg, Glusker, Fields, Claman, Machtinser &
Kinsella, LLP. Prior to that time, he had been a partner with the Los Angeles
law firm of Kinsella, Boesch, Fujikawa & Towle. Mr. Kinsella received his
undergraduate degree from the University of California at Santa Barbara and
his Juris Doctor degree from the University of California at Los Angeles.

Board of Directors Meetings and Attendance

  During the year ended December 31, 2000, the Board held four meetings and
conducted three meetings by unanimous written consent. All but one director
attended 75% or more of the aggregate of (i) the total number of meetings of
the Board while they were on the Board and (ii) the total number of meetings
of the committees of the Board on which such directors served. Mr. Kilroy, Sr.
attended 65% of the total meetings of the Board and the committees on which he
served.

Board Committees

  The Board of Directors of the Company has an Independent Committee, an
Executive Committee, an Executive Compensation Committee, and an Audit
Committee.

  Independent Committee. The Independent Committee consists of four
Independent Directors, Mr. Kinsella, who serves as its Chairman, and Messrs.
Dickey, Hart and D'Eathe. An "Independent Director" is a director who is not
an employee, officer or affiliate of the Company or a subsidiary or a division
thereof, or a relative of a principal executive officer, or who is not an
individual member of an organization acting as an advisor, consultant or legal
counsel, receiving compensation on a continuing basis from the Company in
addition to director's fees. The Independent Committee has the authority to
approve transactions between the Company and its affiliates, including,
without limitation, John B. Kilroy, Sr. or John B. Kilroy, Jr. and their
respective affiliates. The Independent Committee held one meeting during 2000.

  Executive Committee. The Executive Committee consists of Mr. Kilroy, Jr.,
who serves as its Chairman, and Messrs. Kilroy, Sr. and Kinsella. Subject to
the Company's conflict of interest policies, the Executive Committee has
authority to acquire and dispose of real property and the power to authorize,
on behalf of the full Board, the execution of certain contracts and
agreements, including those related to the borrowing of money by the Company
(and, consistent with the Agreement of Limited Partnership as amended from
time to time (the "Partnership Agreement") of Kilroy Realty, L.P. (the
"Operating Partnership"), to cause the Operating Partnership to take such
actions). The Executive Committee held no meetings during 2000.

  Executive Compensation Committee. The Executive Compensation Committee
consists of two Independent Directors, Mr. Dickey, who serves as its Chairman,
and Mr. Kinsella. The function of the Executive Compensation Committee is to
(i) establish, review, modify and adopt remuneration levels for executive
officers of the Company, and (ii) implement the Company's Stock Incentive Plan
and any other incentive programs. The Executive Compensation Committee held
three meetings during 2000.

  Audit Committee. The Audit Committee consists of three Directors, Mr. Hart,
who serves as its Chairman, and Messrs. D'Eathe and Dickey. All three members
of the Audit Committee are independent from the Company

                                       5
<PAGE>

in accordance with the New York Stock Exchange ("NYSE") listing standards, are
financially literate, and possess accounting and related financial management
expertise, as determined by the Company's Board of Directors. The Audit
Committee's purpose is to assist the Board of Directors in fulfilling its
oversight responsibilities regarding the Company's accounting and system of
internal controls, the quality and integrity of the Company's financial
reports and the independence and performance of the Company's independent
public accountants. The Audit Committee is governed by a written charter
approved by the Board, a copy of which is included as Appendix A to this Proxy
Statement. Information regarding the specific functions performed by the Audit
Committee and the number of meetings held during 2000 is set forth in the
following "Report of the Audit Committee."

Report of the Audit Committee

  The Audit Committee of the Company's Board of Directors is comprised of
Independent Directors, as required by the listing standards of the NYSE. The
Audit Committee operates pursuant to a written charter adopted by the Board of
Directors, a copy of which is attached to this Proxy Statement as Appendix A.

  The Audit Committee oversees the Company's financial reporting process on
behalf of the Board. Management has the primary responsibility for the
financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including the reasonableness of significant judgments, and the clarity of
disclosures in the financial statements.

  The independent auditors are responsible for performing an audit of the
Company's financial statements and expressing an opinion on the conformity of
those audited financial statements with generally accepted accounting
principles. The Committee reviewed and discussed the audited financial
statements of the Company as of and for the year ended December 31, 2000 with
the independent auditors. The Committee discussed with the independent
auditors their judgments as to the Company's accounting principles and such
other matters as are required to be discussed with the Committee under
generally accepted auditing standards Statement of Auditing Standard Number
61, "Communications with Audit Committees," as currently in effect. In
addition, the Committee received the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), as currently in effect,
and it discussed with the auditors their independence from the Company. The
Committee also considered the compatibility of the independent auditors'
provision of non-audit services with the auditors' independence.

  The Committee discussed with the Company's independent auditors the overall
scope of their respective audits. The Committee meets with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting. In the performance of
their oversight function, the members of the Audit Committee necessarily
relied upon the information, opinions, reports and statements presented to
them by management of the Company and by the independent auditors. The
Committee held four meetings during fiscal year 2000.

  In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Annual Report on Form 10-K for the
year ended December 31, 2000 for filing with the Securities and Exchange
Commission. The Committee and the Board have also approved the selection of
the Company's independent auditors.

Matthew J. Hart, Audit Committee Chair
John R. D'Eathe, Audit Committee Member
William P. Dickey, Audit Committee Member

March 20, 2001


                                       6
<PAGE>

Compensation of Directors

  During 2000, the Company paid its non-employee directors (including those
who are deemed "inside" directors) annual compensation of $20,000 for their
services. In addition, each non-employee director also received annual
compensation of $2,000 for their services as chairman of any committee of the
Board and $1,000 for each Board meeting attended by such director. Each non-
employee Director was also reimbursed for reasonable expenses incurred to
attend director and committee meetings. Officers of the Company who are
directors were not paid any directors fees.

  In addition, under the Company's 1997 Stock Option and Incentive Plan (the
"Stock Incentive Plan"), upon his initial election to the Board, each
Independent Director was automatically granted options to purchase
10,000 shares of Common Stock which vest pro rata in annual installments over
a three-year period, and on each anniversary of his election to the Board,
prior to February 1999, each Independent Director received an option to
purchase 1,000 shares of Common Stock which vest pro rata in annual
installments over a three-year period. In February 1999, the annual grant of
options to purchase shares to each non-employee director was increased from
options to purchase 1,000 shares, to options to purchase 5,000 shares based
upon Board approval of a recommendation by management to modify and increase
the Board's compensation structure to a level comparable to the Company's
peers. For administrative simplicity, the revised structure provides that all
future option grants to Board members will be made on a common annual date,
rather than the respective anniversary dates of each Board member's election
to the Board. All stock options were issued pursuant to the Stock Incentive
Plan at an exercise price equal to or greater than the fair market value of
the Common Stock at the date of grant.

  The following table presents stock options granted to the Company's
Independent Directors through December 31, 2000:

<TABLE>
<CAPTION>
                                 Total  Exercise  Exercisable at Unxercisable at
                        Grant   Options Price per  December 31,   December 31,
Name                     Date   Granted   Share        2000           2000
----                   -------- ------- --------- -------------- ---------------
<S>                    <C>      <C>     <C>       <C>            <C>
John R. D'Eathe......  10/17/97 10,000   $27.25       10,000            --
                       10/17/98  1,000    20.56          667            333
                        2/18/99  5,000    20.38        1,667          3,333
                        2/18/00  5,000    20.75          --           5,000

William P. Dickey....   1/31/97 10,000   $23.00       10,000            --
                         2/2/98  1,000    28.56          667            333
                        2/18/99  5,000    20.38        1,667          3,333
                        2/18/00  5,000    20.75          --           5,000

Matthew J. Hart......   1/31/97 10,000   $23.00       10,000             --
                         2/2/98  1,000    28.56          667            333
                        2/18/99  5,000    20.38        1,667          3,333
                        2/18/00  5,000    20.75          --           5,000

John B. Kilroy, Sr...   1/31/97 15,000   $23.00       15,000            --
                        2/18/99  5,000    20.38        1,667          3,333
                        2/18/00  5,000    20.75          --           5,000

Dale F. Kinsella.....   1/31/97 10,000   $23.00       10,000            --
                         2/2/98  1,000    28.56          667            333
                        2/18/99  5,000    20.38        1,667          3,333
                        2/18/00  5,000    20.75          --           5,000
</TABLE>

                                       7
<PAGE>

                       PROPOSAL 2: STOCKHOLDER PROPOSAL

  The Company was notified that Services Employees International Union
("SEIU"), 1313 L Street, NW, Washington D.C. 20005, beneficial owner of 132
shares of the Company's Common Stock, intends to present the following
proposal at our Annual Meeting on May 22, 2001.

Stockholder Proposal

  "Resolved: The shareholders of Kilroy Realty Corporation (the Company)
request the Board of Directors to redeem the shareholder rights issued in
October, 1998 unless such issuance is approved by the affirmative vote of the
outstanding shareholders, to be held as soon as is practicable."

Supporting Statement

  In October, 1998 the Board of Directors of Kilroy Realty Corporation issued,
without shareholder approval, certain shareholder rights pursuant to a
Shareholder Rights Plan. These rights are a type of anti-takeover device,
commonly referred to as a "poison pill," which injure shareholders by reducing
management accountability and adversely affecting shareholder value.

  While management and the Board of Directors should have the appropriate
tools to ensure that all shareholders benefit from any proposal to acquire the
Company, the future possibility of takeover does not justify the unilateral
imposition of a poison pill. As Nell Minow and Robert Monks note in their book
Power and Accountability, poison pills "amount to major de facto shifts of
voting rights away from shareholders to management, on matters pertaining to
the sale of the corporation. They give target boards of directors absolute
veto power over any proposed business combination, no matter how beneficial it
might be for the shareholders."

  Rights plans like ours have become increasingly unpopular in recent years.
Last year, a majority of shareholders at Quaker Oats, Anheuser-Busch, Baxter
International, Electronic Data Systems, Mattel and Southwest Airlines among
others, voted in favor of proposals asking management to redeem or repeal
poison pills. In addition, the Council of Institutional Investors--an
organization of large corporate and public pension plans--calls for
shareholder approval of all poison pills in its Shareholder Bill of Rights.

  To assure shareholders that management and Board of Directors respect the
right of shareholders to participate in the fundamental decision that affect
the Company's governance and performance, we urge the Company to redeem the
Shareholder Rights Plan or subject it to a vote as soon as may be practical.

Board Response to Stockholder Proposal

  THE BOARD RECOMMENDS THAT YOU VOTE "AGAINST" THIS PROPOSAL FOR THE FOLLOWING
REASONS:

  The Board believes that the stockholder proposal is not in the best interest
of the Company or you, the stockholders, and recommends that you vote against
it.

  The Board adopted the current Rights Agreement (the "Plan") to protect our
stockholders against abusive takeover tactics and to ensure that each
stockholder is treated fairly in any transaction involving an acquisition of
control of the Company. Before making its decision, the Board reviewed the
arguments for and against adopting such a plan and approved the Plan because
it believed that the Plan would enable it to better represent the interests of
its stockholders in the event of a hostile takeover bid.

  The Board's duty to the Company is to consider and evaluate any legitimate
acquisition proposal and to determine whether any offer would deliver full
value to Company. The Plan provides the means for the Board, as your elected
representatives, to fulfill this duty and to maximize the value for, and
protect the interest of all stockholders. The Plan is not intended to and does
not, prevent or inhibit a legitimate takeover offer but encourages a bidder to
negotiate with the Board. This strengthens your Board's bargaining position
with the bidder. Also, the Plan does not eliminate the obligation of the
directors to exercise their legal duties. Rather, the

                                       8
<PAGE>

Plan also gives the Board a greater period of time to evaluate an acquisition
offer and properly consider all relevant information outside of the typical
"crisis" environment that typically occurs when a potential acquiror makes a
hostile bid. Stockholders benefit from a more stable trading environment and
from the increased likelihood of receiving proper value and a higher premium
in the event of a change in control. Employees and customers benefit because
we will not face the myriad distractions caused by coercive, inadequate or
insufficiently funded offers. All of our constituents can be assured that any
change in control will be the result of careful consideration and not
decisions forced to be made in the heat of a crisis. The Plan allows the Board
to reject an offer that does not reflect the full value of the Company or that
is not fair to all stockholders, or to seek alternative proposals that would
better reflect the full value of the Company and treat all stockholders
fairly.

  There is substantial empirical evidence that a such rights plans may better
position a board of directors to achieve the best result for all stockholders
in the event there is a bid for the Company. In fact, two studies published in
1997 provide strong evidence that, in general, companies with rights plans
tend to receive higher takeover premiums than those without them. The study by
proxy solicitor Georgeson & Company, Inc. of 319 take-over transactions with a
deal size of over $250 million from 1992 to 1996 found that companies with
rights plans received on average 8 percentage points higher takeover premiums
than companies without such plans. In 1997, J.P. Morgan reviewed 300 of $500
million-plus majority-stake acquisitions from 1993 through June 1997 and found
that the median acquisition premium (the price paid over the stock price five
days before the offer) was 9.4% higher when a company had a rights plan in
place.

  Also, empirical evidence supports that the presence of a stockholder rights
plan does not increase the likelihood of the withdrawal of a friendly bid or
the defeat of a hostile bid nor does it reduce the likelihood of a company
becoming a takeover target. In fact, as displayed below, companies with
stockholder rights plans had a slightly higher takeover rate than companies
without plans). The following information is based upon a study conducted by
Jamill Aboumen and Christopher Hayden, and support the premise that companies
with stockholder rights plans have experienced higher takeover rates, and
lower takeover bid withdrawal and failure rates, than companies without
stockholders rights plans.

                         TAKEOVER BID WITHDRAWAL RATE

<TABLE>
     <S>                                                                   <C>
     Firms Without Pills.................................................. 11.2%
     Firms With Pills..................................................... 10.3%

                           HOSTILE BID FAILURE RATE

     Firms Without Pills.................................................. 66.7%
     Firms With Pills..................................................... 45.0%

                           TAKEOVER RATE S&P 500/400

     Firms Without Pills..................................................  5.6%
     Firms With Pills.....................................................  7.7%
</TABLE>

Source: Jamill Aboumen and Christopher Hayden, article entitled "Poison Pills,
Stockholder Value, and Voting on Recision Proposals" published in
Directorship, Inc. (1998)

  Your Board's commitment has always been, and will always be, to serve the
best interests of the Company. The Board, as your legal representatives, has
responsibilities and duties that require it to act in the best interests of
the Company in the event of a takeover bid of the Company. Redeeming the
rights would take from the Board an essential tool to protect stockholders. In
the interest of stockholders, the Board believes that any decision to redeem
the rights should be made in context of a specific acquisition offer.

  THE BOARD RECOMMENDS THAT YOU VOTE "AGAINST" THIS STOCKHOLDER PROPOSAL.

                                       9
<PAGE>

            CERTAIN INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS

  The following table sets forth certain current information with respect to
the executive officers of the Company:

<TABLE>
<CAPTION>
          Name           Age                            Position
          ----           ---                            --------
<S>                      <C> <C>
John B. Kilroy, Sr. ....  78 Chairman of the Board
John B. Kilroy, Jr. ....  52 President, Chief Executive Officer and Director
Jeffrey C. Hawken.......  42 Executive Vice President and Chief Operating Officer
Richard E. Moran Jr. ...  49 Executive Vice President, Chief Financial Officer and Secretary
Steven R. Scott.........  44 Senior Vice President, San Diego Development
Campbell Hugh Greenup...  47 Executive Vice President, Los Angeles Development
</TABLE>

  The following is a biographical summary of the experience of the executive
and senior officers of the Company:

  John B. Kilroy, Sr. has served as Chairman of the Board since its
incorporation in September 1996. Biographical information regarding Mr. Kilroy
is set forth under "Proposal 1: Election of Directors--Directors Continuing in
Office."

  John B. Kilroy, Jr. has served as the President and Chief Executive Officer
of the Company since its incorporation in September 1996. Biographical
information regarding Mr. Kilroy is set forth under "Proposal 1: Election of
Directors--Directors Continuing in Office."

  Jeffrey C. Hawken has served as Executive Vice President and Chief Operating
Officer of the Company since it commenced operations as a public company in
January 1997. Prior to that time, Mr. Hawken served in the same capacity for
KI and was responsible for the management and operations of KI's real estate
portfolio and served on KI's acquisitions and executive committees. Mr. Hawken
joined KI in 1980, as a Senior Financial Analyst, and has been involved in
property and asset management with the company since May 1983. Since that
time, he attained the designation of Real Property Administrator through the
Building Owner's and Manager's Association ("BOMA"). Mr. Hawken holds a
Bachelor of Science degree in Business Administration from the University of
Southern California.

  Richard E. Moran Jr. has served as the Company's Executive Vice President,
Chief Financial Officer and Secretary since December 1996. Prior to that time,
Mr. Moran was Executive Vice President, Chief Financial Officer and Secretary
of Irvine Apartment Communities, Inc. from 1993 to 1996. Prior to that, Mr.
Moran was Executive Vice President, Corporate Finance and Treasurer of The
Irvine Company, where he was employed from 1977 to 1993. Previously, he was a
certified public accountant with Coopers & Lybrand. He is a member of the
Urban Land Institute and serves on the Policy Advisory Board for the Center
for Real Estate and Urban Economics at the University of California at
Berkeley. Mr. Moran received a Master of Business Administration degree from
the Harvard University Graduate School of Business Administration and a
Bachelor of Science degree in Accounting from Boston College.

  Steven R. Scott is currently a Senior Vice President of the Company and has
served in that capacity since he joined the Company in January 1998. He has
more than 18 years of real estate experience, the last 15 of which have been
devoted to commercial real estate leasing and brokerage. From January 1996 to
December 1997, Mr. Scott was Senior Vice President with CB Richard Ellis in
San Diego, where he concentrated in corporate services, build- to-suits, and
brokerage in the mid-San Diego County markets of Sorrento Mesa, Torrey Pines,
University Towne Centre and the I-15 Corridor. Prior to CB Richard Ellis, he
was affiliated with the San Diego office of Grubb & Ellis Company for 13 years
most recently as Senior Marketing Consultant. Mr. Scott holds a Bachelor of
Science degree in Business Administration from San Diego State University.

                                      10
<PAGE>

  Campbell Hugh Greenup is currently an Executive Vice President of the
Company and has served in that capacity since it commenced operations as a
public company in January 1997. Mr. Greenup is responsible for the Company's
development activity in the Los Angeles area. Prior to that time, Mr. Greenup
was employed at KI as Assistant General Counsel and was also President of
Kilroy Technologies Company, LLC. Mr. Greenup is a member of the American Bar
Association, the Urban Land Institute, the National Association of Corporate
Real Estate Executives and the Los Angeles County Beach Advisory Commission.
Mr. Greenup holds a Juris Doctor from Hastings College of Law and a Bachelors
of Arts degree in History from the University of California, Los Angeles.

                                      11
<PAGE>

                            EXECUTIVE COMPENSATION

  The following table sets forth the salary rates and other compensation paid
for the fiscal years ended December 31, 2000, 1999 and 1998, to the Chief
Executive Officer and each of the Company's other executive officers (the
"Named Executive Officers"). The Company has entered into employment
agreements with each of its executive officers, except for Steven R. Scott, as
described below. See "--Employment Agreements."

<TABLE>
<CAPTION>
                                                                                Long-Term
                                            Annual Compensation               Compensation
                                      ----------------------------------- ---------------------
                                                                                     Securities
                                                                          Restricted Underlying
                                                             Other Annual   Stock      Options
  Name and Principal Position    Year  Salary       Bonus    Compensation  Award(1)  Granted(2)
  ---------------------------    ---- --------    ---------- ------------ ---------- ----------
<S>                              <C>  <C>         <C>        <C>          <C>        <C>
John B. Kilroy, Jr. ............ 2000 $650,000    $2,250,000      (4)       67,500
 Director, President and Chief   1999 $465,000    $1,029,500
 Executive Officer               1998 $350,000    $  510,000                          250,000

Jeffrey C. Hawken............... 2000 $350,000    $  825,000      (4)       40,500
 Executive Vice President and    1999 $275,000    $  611,700
 Chief Operating Officer         1998 $225,000    $  325,000                          150,000

Richard E. Moran Jr. ........... 2000 $350,000    $  659,000      (4)       27,000
 Executive Vice President, Chief 1999 $275,000    $  545,300
 Financial Officer and Secretary 1998 $225,000    $  325,000                          150,000

Steven R. Scott................. 2000 $225,000    $  275,000      (4)       10,000
 Senior Vice President,          1999 $182,400    $  225,000
 San Diego Development           1998 $167,750(3) $  116,000                           20,000

Campbell Hugh Greenup........... 2000 $225,000    $  225,000      (4)       10,000
 Executive Vice President,       1999 $207,000    $  225,000
 Los Angeles Development         1998 $200,000    $  200,000
</TABLE>
--------
(1) In June 2000, the Company's Compensation Committee granted restricted
    shares of the Company's Common Stock to the Named Executive Officers under
    the Company's 1997 Stock Option and Incentive Plan. All of the shares
    issued under this grant were granted at a value of $24.94 per share, the
    Company's closing per share price on the NYSE on the grant date, against
    the payment of the par value or $0.01 per share. The restricted shares
    granted contain cliff-vesting provision such that all of the shares vest
    on March 1, 2003. The Named Executive Officers are entitled to receive
    distributions in respect of such restricted shares.

(2) Options to purchase an aggregate of 1,951,132 shares of Common Stock and
    195,000 of restricted shares of Common Stock granted to directors,
    executive officers and other employees of the Company are currently
    outstanding. Such options vest pro rata in annual installments over a
    three-year period. An additional 674,332 shares of Common Stock are
    reserved for issuance under the Stock Option and Incentive Plan, as of the
    date of this Proxy Statement.

(3) The salary, which was paid to the Named Executive Officer during the
    fiscal year ended December 31, 1998, commenced on January 5, 1998.

(4) The aggregate amount of the perquisites and other personal benefits,
    securities or property for each Named Executive Officer is less than the
    lesser of $50,000 or 10% of the total of salary and bonus for such Named
    Executive Officer for each of the years presented.

                                      12
<PAGE>

Option Grants in Last Fiscal Year

  The Company did not grant options to purchase any shares of Common Stock to
the Named Executive Officers during 2000.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

  The following table sets forth certain information concerning options
exercised by Named Executive Officers during the year ended December 31, 2000,
and exercised and unexercised options held by the Named Executive Officers at
December 31, 2000.

<TABLE>
<CAPTION>
                                                        Number of Securities
                                                             Underlying           Value of Unexercised
                                                       Unexercised Options at    In-The-Money Options at
                                                          December 31, 2000       December 31, 2000(1)
                         Shares Acquired    Value     ------------------------- -------------------------
          Name             on Exercise   Realized ($) Exercisable Unexercisable Exercisable Unexercisable
          ----           --------------- ------------ ----------- ------------- ----------- -------------
<S>                      <C>             <C>          <C>         <C>           <C>         <C>
John B. Kilroy, Jr. ....        --           N/A        416,667      83,333     $2,255,210    $494,790
Jeffrey C. Hawken.......        --           N/A        250,000      50,000      1,353,125     296,875
Richard E. Moran Jr.....     52,535        $356,332     197,465      50,000      1,052,611     296,875
Campbell Hugh Greenup...        --           N/A        100,000         --         506,250         --
Steven R. Scott.........        --           N/A        13,334        6,666         65,003      32,497
</TABLE>
--------
(1) Based on the closing price of $28.0625 per share of Common Stock on
    December 31, 2000, as reported by the NYSE.

401(k) Plan

  The Company has a Section 401(k) Savings/Retirement Plan (the "401(k) Plan")
to cover eligible employees of the Company and any designated affiliate. The
401(k) Plan permits eligible employees of the Company to defer up to 20% of
their annual compensation, subject to certain limitations imposed by the
Internal Revenue Code (the "Code"). The employees' elective deferrals are
immediately vested and non-forfeitable upon contribution to the 401(k) Plan.
The Company currently makes matching contributions to the 401(k) Plan in an
amount equal to fifty-cents for each one dollar of participant contributions
up to a maximum of five percent of the participant's annual salary up to
certain limits. Participants vest immediately in the amounts contributed by
the Company. Employees of the Company are eligible to participate in the
401(k) Plan after one year of credited service with the Company. For the year
ended December 31, 2000, the Company's contribution to the 401(k) Plan was
$181,000. The 401(k) Plan qualifies under Section 401 of the Code so that
contributions by employees to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan.

Employment Agreements

  Each of John B. Kilroy, Jr., Jeffrey C. Hawken, Richard E. Moran Jr, and
Campbell Hugh Greenup have entered into an employment agreement with the
Company. Each of the employment agreements had an initial three-year term and
is subject to automatic one-year renewals. Each of the employment agreements
provides that the amount paid for annual base compensation and the amount of
any bonus is determined at the discretion of the Executive Compensation
Committee.

  The employment agreements entitle the executives to participate in the
Company's Stock Incentive Plan and to receive certain other insurance
benefits. The employment agreements also provide that in the event of death,
the executive's estate will receive monthly payments of the executive's annual
salary, plus one-twelfth of any bonus to be received, for a period equal to
the lesser of the term remaining under the employment agreement or one year.
In addition, in the event of a termination by the Company without "cause," a
termination of employment resulting from "disability," a termination by the
executive for "good reason," or, in the case of Mr. Kilroy and Mr. Moran, a
termination pursuant to a "change of control" of the Company (as such terms
are

                                      13
<PAGE>

defined in the respective employment agreements) the terminated executive will
be entitled to (i) severance (the "Severance Amount") and (ii) continued
receipt of certain benefits including medical insurance, life and disability
insurance and the receipt of other customary benefits established by the
Company for its executive employees for two years following the date of
termination (collectively, the "Severance Benefits"). The Severance Amount is
equal to the sum of two times the executive's average annual base compensation
and two times the highest annual bonus received during the preceding 36-month
period.

  Under the employment agreements, "Disability" means a physical or mental
disability or infirmity which, in the opinion of a physician selected by the
Board, renders the executive unable to perform his duties for six consecutive
months or for shorter periods aggregating 180 business days in any 12-month
period (but only to the extent that such definition does not violate the
Americans with Disabilities Act). "Cause," as defined under the terms of the
respective employment agreements, means (i) the executive's conviction for
commission of a felony or a crime involving moral turpitude, (ii) the
executive's willful commission of any act of theft, embezzlement or
misappropriation against the Company or (iii) the executive's willful and
continued failure to substantially perform the executive's duties (other than
such failure resulting from the executive's incapacity due to physical or
mental illness), which is not remedied within a reasonable time. "Good reason"
means (i) the Company's material breach of any of its obligations under the
employment agreement (subject to certain notice and cure provisions) or (ii)
any removal of the executive from one or more of the appointed offices or any
material alteration or diminution in the executive's authority, duties or
responsibilities, without "cause" and without the executive's prior written
consent. "Change of Control" means (i) the event by which the individuals
constituting the Board as of the date of the IPO cease for any reason to
constitute at least a majority of the Company's Board; provided, however, that
if the election, or nomination for election by the Company's stockholders of
any new director was approved by a vote of at least a majority of the members
of the original Board, such new director shall be considered a member of the
original Board; (ii) an acquisition of any voting securities of the Company by
any "person" (as the term "person" is used for purposes of Section 13(d) or
Section 14(d) of the Exchange Act, immediately after which such person has
"beneficial ownership" (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20%, or more of the combined voting power of the Company's
then outstanding voting securities unless such acquisition was approved by a
vote of at least one more than a majority of the original Board; or (iii)
approval by the stockholders of the Company of (a) a merger, consolidation,
share exchange or reorganization involving the Company, unless the
stockholders of the Company, immediately before such merger, consolidation,
share exchange or reorganization, own, directly or indirectly immediately
following such merger, consolidation, share exchange or reorganization, at
least 80% of the combined voting power of the outstanding voting securities of
the corporation that is the successor in such merger, consolidation, share
exchange or reorganization in substantially the same proportion as their
ownership of the voting securities immediately before such merger,
consolidation, share exchange or reorganization; (b) a complete liquidation or
dissolution of the Company; or (c) an agreement for the sale or other
disposition of all or substantially all of the assets of the Company.

Executive Compensation Interlocks and Insider Participation

  The Executive Compensation Committee is comprised of William P. Dickey and
Dale F. Kinsella. There are no Executive Compensation Committee interlocks and
no employees of the Company participate on the Executive Compensation
Committee.

                                      14
<PAGE>

Executive Compensation Committee Report on Executive Compensation

Role of the Executive Compensation Committee

  The Company's Executive Compensation Committee of the Board of Directors is
responsible for:

  .  Developing, administering, and monitoring the Company's executive
     compensation programs;

  .  Ensuring that the executive compensation programs are designed to be
     consistent with the Company's corporate strategies and business
     objectives;

  .  Reviewing and approving all compensation plans affecting the senior
     officers and management of the Company; and

  .  Determining the specific amounts of compensation for the Chief Executive
     Officer, the Chief Operating Officer and the Chief Financial Officer of
     the Company.

General Policies Regarding Compensation of Executive Officers

  In establishing compensation for executive officers, the Committee seeks to:

  .  Attract and retain individuals of superior ability and managerial
     talent;

  .  Ensure senior officer compensation is aligned with the Company's
     corporate strategies, business objectives as well as the long-term
     interests of the Company's stockholders;

  .  Increase the incentive to achieve key strategic and financial
     performance measures by linking annual incentive award opportunities to
     the achievement of specific performance goals in these areas; and

  .  Enhance the incentive to increase the Company's stock price and maximize
     stockholder value, as well as enhance the opportunities for retention of
     key people, through providing a portion of total compensation
     opportunities for senior officers in the form of restricted stock and
     stock options.

Determination of Compensation of Executive Officers for the Year 2000

  2000 compensation decisions were made with a view towards furthering the
foregoing compensation objectives and in light of the Company's 2000
performance. In determining the total amount of cash compensation paid to its
senior executive officers, the Committee evaluated the following in
determining the desired positioning of the Company relative to the market, as
well as the desired mix of base salary, annual incentives and long-term
compensation opportunities:

  .  Performance of the Company for 2000 as compared to other REITs, with an
     emphasis on office REITs;

  .  Performance of the Company for 2000 as compared to other real estate
     companies engaged in activities similar to those engaged in by the
     Company, with an emphasis on developers; and

  .  The current economic environment of the real estate industry in general.

  To these ends, the Company's executive compensation package consists of a
fixed base salary, variable annual cash incentive compensation (bonus) and
stock-based long-term incentive awards. Compensation for each executive
officer is weighted towards the variable components in order to ensure that
total compensation reflects the overall success or failure by the Company and
the executive officer to meet the appropriate performance measures.

  Base Salary. Salary levels of executive officers are established after a
review of REITs and other real estate companies deemed comparable to the
Company. The Committee generally compares the Company's performance with that
of other REITs and real estate companies engaged in activities similar to
those engaged in by the Company. Individual base salaries are reviewed at
least annually and salary increases are granted based on each executive's
performance and contribution to the overall success of the Company. Other
subjective features are considered such as the individual's experience and
performance.

                                      15
<PAGE>

  Annual Incentive Bonus. The Company's annual bonus plan promotes the
Company's pay for performance philosophy and is designed to motivate all
employees by linking bonus awards to the achievement of performance benchmark
goals in key strategic and financial performance measures. The Company
believes that linking short-term incentives to the Company's performance
provides executive officers with the appropriate incentive to achieve the
Company's annual business objectives. The amount of each executive officer's
annual bonus is based upon a combination of three performance factors,
recognizing that executive officers' have their annual incentives weighted
more heavily toward the achievement of overall corporate and team performance
rather than individual performance:

  .  ""Overall Corporate Performance" refers to the Company's performance
     measures including its financial and strategic measures;

  .  ""Team Performance" refers to key functional or departmental performance
     measures. This aspect of performance links individuals to the
     performance of their collective work group and is intended to foster
     cooperation within the Company; and

  .  ""Individual Achievements and Performance" refers to each individual's
     annual goals as established each year during the Company's formal
     performance review process. This aspect of performance motivates
     individuals to achieve a high level of individual success and personal
     contribution.

  For 2000, overall corporate goals were measured on the basis of achieving
targeted earnings, operations, development, disposition, financing, and
shareholder return objectives. These objectives included contributions to
Funds From Operations ("FFO") per share, as defined by the National
Association of Real Estate Investment Trusts ("NAREIT"), total returns from
and value created by targeted amounts of completed development, performance of
the existing property portfolio, completion of a targeted amount of
dispositions at targeted selling capitalization rates, execution of specific
financing strategies, and contributions to total shareholder return.
Department goals were measured on specific departmental strategic and
operational objectives. Individual performance measures are assessed in a
subjective manner based upon each individual's annual goals.

  Long-Term Incentive Compensation. The Compensation Committee recognized
that, while the bonus program provides awards for positive short-term and mid-
term performance, the interests of shareholders are best served by giving key
employees the opportunity to participate in the appreciation of the Company's
Common Stock through the granting of stock based incentives. The members of
the Committee believe that share performance, over the long-term, will reflect
executive performance and that such arrangements further reinforce management
goals and incentives to achieve shareholder objectives. To that end, the long-
term portion of the Company's executive compensation package is comprised of
stock based incentives that motivate executives to increase the Company's
stock price and, therefore, the return to the Company's stockholders.

  In granting stock-based awards, the Committee takes into account such
factors as it determines to be appropriate under the circumstances, including
an assessment of the senior officer's achieved performance goals and
objectives, the extent of an executive's equity ownership in the Company and
the amounts and value of long-term compensation and stock-based compensation
received by similarly situated executives at competitor firms. Stock options
are granted at 100% of the stock's fair market value on the grant date. Grants
of restricted shares of Common Stock are purchased by the executive officers
at par value. During 2000, 175,000 shares of restricted stock were granted to
the Company's executive officers. The Company did not grant options to
purchase shares of Common Stock to the Company's executive officers during
2000.

  Chief Executive Officer Compensation. The compensation of John B. Kilroy,
Jr. for the year ended December 31, 2000 was determined in accordance with the
criteria discussed above. In determining the total amount of cash compensation
paid to Mr. Kilroy, the Committee evaluated the following:

  .  Performance of the Company for 2000 as compared to other REITs, with an
     emphasis on office REITs;

  .  Performance of the Company for 2000 as compared to other real estate
     companies engaged in activities similar to those engaged in by the
     Company; and


                                      16
<PAGE>

  .  The current economic environment of the real estate industry in general.

  Specifically, the Committee gave substantial weight to the achievement of
the Company's goals for growth in FFO per share, total returns from and value
created by completed development, operating portfolio results, and the
specific contributions that the CEO personally made in strategically
positioning the Company to be a leader in its target markets. The Committee
took into consideration the continuing growth and success of the Company's
development business and how the Company has been well-positioned to take
advantage of growth opportunities by identifying key markets and projects
designed to appeal to growing companies in the expanding California economy.
The Committee also considered what was, in it's judgement, the particularly
successful completion in 2000, following multi-year development periods, of
nine new development projects representing a total investment of $203 million.
The Committee granted to Mr. Kilroy 67,500 shares of restricted stock, but did
not issue any options to purchase shares of Common Stock for the year ended
December 31, 2000.

  Limitation on Deductibility of Executive Compensation. Section 162(m) of the
Code limits the deductibility of compensation paid to certain executive
officers of the Company. To qualify for deductibility under Section 162(m),
compensation in excess of $1,000,000 per year paid to the Chief Executive
Officer and the four other most highly compensated executive officers at the
end of such fiscal year generally must be "performance-based" compensation as
determined under Section 162(m), which includes most stock option and other
incentive arrangements, the material terms of which have been approved by
shareholders. While the Committee's intention is to comply, to the greatest
extent reasonable, with the requirements under Section 162(m), the Committee
will balance the costs and burdens involved in such compliance against the
value to the Company and its stockholders of the tax benefits to be obtained
by the Company, and thereby may pay compensation that is not fully deductible
if in its determination such costs and burdens outweigh such benefits.

  Despite the fact that the Company's incentive bonuses are determined based
on the evaluation of the Company's performance and take into consideration
certain financial and strategic goals, the Committee does not apply these
factors on a strict formulaic basis. As a result, the Company's incentive
bonuses do not satisfy the requirements of Section 162(m). The Committee
believes that because the Company qualifies as a REIT under the Code and is
not subject to Federal income taxes, the payment of compensation that does not
satisfy the requirements of Section 162(m) does not have a material adverse
consequence to the Company, provided the Company continues to distribute 95%
of its taxable income.

April 6, 2001                             Executive Compensation Committee

                                          William P. Dickey
                                          Dale F. Kinsella


                                      17
<PAGE>

                               PERFORMANCE GRAPH

  As a part of the rules concerning executive compensation disclosure, the
Company is obligated to provide a chart comparing the yearly percentage change
in the cumulative total stockholder return on the Company's Common Stock over a
five-year period. However, since the Company's Common Stock has been publicly
traded only since January 28, 1997, such information is provided from that date
through December 31, 2000.

  The following line graph compares the change in the Company's cumulative
stockholder return on its shares of Common Stock to the cumulative total return
of the NAREIT Equity REIT Total Return Index ("NAREIT Equity Index") and the
Standard & Poor's 500 Stock Index ("S&P 500 Index") from January 31, 1997, the
closing date of the Company's initial public offering, to December 31, 2000.
The line graph starts at January 28, 1997, the date that the Company's shares
of Common Stock commenced trading on the NYSE; however, the beginning value of
each of the NAREIT Equity Index and the S&P 500 Index is as of January 31,
1997, as each index is calculated only on a monthly basis. The graph assumes
the investment of $100 in the Company and each of the indices on January 28,
1997 and as required by the Securities and Exchange Commission, the
reinvestment of all distributions. The return shown on the graph is not
necessarily indicative of future performance.

                        [PERFORMANCE GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
       Measurement Period
       (Fiscal Year Covered)   Kilroy Realty Corp. NAREIT Equity Index(1) S&P 500 Index(1)
       ---------------------   ------------------- ---------------------- ----------------
       <S>                     <C>                 <C>                    <C>
          1/28/97                      100                  100                 100
         12/31/97                      132                  120                 133
         12/31/98                      113                   99                 171
         12/31/99                      119                   94                 195
         12/31/00                      160                  118                 178
</TABLE>
--------
(1) Beginning value of each of the NAREIT Equity Index and the S&P 500 Index is
    as of January 31, 1997, as each index is calculated only on a monthly
    basis.

                                       18
<PAGE>

                            PRINCIPAL STOCKHOLDERS

  The following table sets forth certain information, as of December 31, 2000,
regarding the beneficial ownership of Common Stock (or Common Stock issuable
upon the redemption of common limited partnership interests (the "Units") in
the Operating Partnership) for (i) each person known by the Company to be the
beneficial owner of five percent or more of the Company's outstanding Common
Stock (or Common Stock issuable upon the redemption of Units), (ii) each
director and each Named Executive Officer and (iii) the directors and such
Named Executive Officers of the Company as a group. Except as indicated below,
all of such Common Stock is owned directly, and the indicated person has sole
voting and investment power with respect to all of the shares of Common Stock
beneficially owned by such person. The Company has relied upon information
supplied by its officers, directors and certain stockholders and upon
information contained in filings with the Securities and Exchange Commission.

<TABLE>
<CAPTION>
                                      Number of Shares of     Percentage of
                                          Common Stock      Outstanding Shares
     Name of Beneficial Owner(1)      Beneficially Owned(2) of Common Stock(2)
     ---------------------------      --------------------  ------------------
<S>                                   <C>                   <C>
LaSalle Investment Management,
 Inc. ...............................      2,914,662(3)             9.9%
European Investors Incorporated......      2,340,611(4)             8.0%
John B. Kilroy, Jr. .................      1,748,970(5)             6.0%
CRA Real Estate Securities, L.P. ....      1,618,429(6)             5.5%
Cohen & Steers Capital Management,
 Inc. ...............................      1,544,700(7)             5.3%
John B. Kilroy, Sr. .................      1,161,270(8)             4.0%
Richard E. Moran Jr. ................        313,635(9)             1.1%
Jeffrey C. Hawken....................        290,500(10)            1.0%
Campbell Hugh Greenup................        110,000(11)              *
Steven R. Scott......................         23,334(12)              *
Matthew J. Hart......................         21,001(13)              *
William P. Dickey....................         18,001(14)              *
Dale F. Kinsella.....................         16,001(15)              *
John R. D'Eathe......................         15,668(16)              *
All directors and executive officers
 as a group (10 persons).............      3,718,380               12.7%
</TABLE>
--------
  * Represents less than 1.0% of outstanding shares of Common Stock.

 (1) Unless otherwise indicated, the address for each of the persons listed is
     c/o Kilroy Realty Corporation, 2250 East Imperial Highway, Suite 1200, El
     Segundo, California 90245.

 (2) Assumes the exchange, at the Company's option, of Units held by such
     beneficial owner that are redeemable within 60 days of December 31, 2000
     into shares of Common Stock on a one-for-one basis and includes shares of
     Common Stock issuable upon the exercise of options held by such
     beneficial owner that are exercisable within 60 days of December 31,
     2000, the date as of which information in the table is presented.

 (3) Represents the number of shares of Common Stock beneficially owned as
     reported on Schedule 13G filed with the Securities and Exchange
     Commission on February 13, 2001 by LaSalle Investment Management, Inc.
     ("LaSalle") and LaSalle Investment Management (Securities), L.P.
     ("LaSalle Securities"), a wholly-owned subsidiary of LaSalle. The address
     for LaSalle is 200 East Randolph Drive, Chicago, Illinois 60601.

 (4) Represents the number of shares of Common Stock beneficially owned as
     reported on Schedule 13G filed with the Securities and Exchange
     Commission on January 9, 2001 by European Investors Incorporated ("EII")
     and EII Realty Securities Incorporated ("ERS"), a wholly-owned subsidiary
     of EII. The address for EII is 667 Madison Avenue, 16th Floor, New York,
     New York 10021-8041.

 (5) Includes (i) 416,667 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000, (ii) 1,012,402
     shares of Common Stock issuable, at the Company's option, upon the
     redemption of Units (including Units beneficially owned by KI, Kilroy
     Airport Imperial Co. ("KAICO") and Kilroy Technologies Company, LLC, a
     California limited liability company ("Kilroy

                                      19
<PAGE>

     Technologies") and allocated to Mr. Kilroy as one of its two shareholders),
     (iii) 252,401 shares of Common Stock beneficially owned by Mr. Kilroy and
     (iv) 67,500 restricted shares of Common Stock held directly.

 (6) Based on information provided in a questionnaire by Clarion CRA
     Securities. As of December 31, 2000 Clarion CRA Securities had sole
     voting power with respect to 1,618,429 shares of Common Stock. The
     address for Clarion CRA Securities is 259 N. Radnor-Chester Road, Suite
     205, Radnor, Pennsylvania 19087.

 (7) Represents the number of shares of Common Stock beneficially owned as
     reported on Schedule 13G filed with the Securities and Exchange
     Commission on February 14, 2001 by Cohen & Steers Capital Management,
     Inc. ("Cohen & Steers"). The address for Cohen & Steers is 757 Third
     Avenue, New York, New York, 10017

 (8) Includes (i) 20,001 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000, (ii) 783,170
     shares of Common Stock issuable upon the redemption of Units (including
     Units beneficially owned by KI, KAICO, and Kilroy Technologies, and
     allocated to Mr. Kilroy as one of its two shareholders) and (iii) 358,099
     shares of Common Stock beneficially owned by Mr. Kilroy.

 (9) Includes (i) 197,465 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000 (ii) 49,170
     shares of Common Stock held directly and (iii) 67,000 restricted shares
     of Common Stock held directly.

(10) Includes (i) 250,000 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000 and (ii) 40,500
     restricted shares of Common Stock held directly.

(11) Includes (i) 100,000 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000 and (ii) 10,000
     restricted shares of Common Stock held directly. Subsequent to December
     31, 2000, the Company issued 35,000 shares of Common Stock to Mr. Greenup
     upon his exercise of 35,000 options.

(12) Includes (i) 13,334 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000 and (ii) 10,000
     restricted shares of Common Stock held directly.

(13) Includes (i) 16,001 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000 and (ii) 5,000
     shares of common stock beneficially owned by Mr. Hart. Subsequent to
     December 31, 2000, the Company issued 5,000 shares of Common Stock to Mr.
     Hart upon his exercise of 5,000 options.


(14) Includes (i) 16,001 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000 and (ii) 2,000
     shares of common stock beneficially owned by Mr. Dickey.


(15) Includes 16,001 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000.

(16) Includes 15,668 shares of Common Stock issuable upon the exercise of
     options exercisable within 60 days of December 31, 2000.

Certain Relationships and Related Transactions

  Certain directors and executive officers of the Company, including John B.
Kilroy, Sr. and John B. Kilroy, Jr., the Chairman of the Board and the
President and Chief Executive Officer, respectively, (or members of their
immediate families) have direct or indirect interests in transactions and
potential transactions with the Company, the Operating Partnership or Kilroy
Services Inc. ("KSI") as described below.

Option Property

  In connection with the formation of the Company, the Operating Partnership
entered into an agreement with Kilroy Airport Imperial Co. ("KAICO"), a
partnership controlled by John B. Kilroy, Sr. and John B. Kilroy, Jr., the
Chairman of the Board, and President, Chief Executive Officer and Director,
respectively, granting to the Operating Partnership an option to acquire the
three-building office complex located on the corner of Sepulveda Boulevard and
Imperial Highway in El Segundo, California (the "Imperial and Sepulveda Office
Complex").

                                      20
<PAGE>

  Pursuant to the terms of the agreement, the Operating Partnership had the
option to purchase the Imperial and Sepulveda Office Complex on or before
January 31, 2004 for a purchase price equal to the sum of (i) the then
outstanding mortgage indebtedness secured by the respective properties, plus
(ii) $1, plus (iii) the aggregate amount of capital contributed by the
beneficial owners of the property, net of actual cash distributions
distributed in respect of such beneficial owners, during the period beginning
on January 31, 1997 and ending on the date of exercise of the option, plus
(iv) an annualized return of 8.0% on the amount in excess of $5.0 million, if
any, as determined pursuant to clause (iii) preceding.

  In May 2000, the Operating Partnership purchased the outstanding mortgage
indebtedness secured by the complex, which consisted of a non-recourse note
receivable with an outstanding principal balance of $60.8 million, accrued
interest of $10.2 million, bearing an annual interest rate of 9.63%, and
maturing February 1, 2005, from an institutional lender at a discount for
$45.3 million. At the time of the acquisition, KAICO was in payment default
under the terms of the note. In connection with the purchase of this note
receivable, KAICO and the Operating Partnership entered into agreements to
modify the terms of the option agreement such that, as amended, the Operating
Partnership had the option to purchase the Imperial and Sepulveda Office
Complex for a purchase price equal to the sum of (i) the then outstanding
mortgage indebtedness secured by the respective properties, plus (ii) $120,000
to be paid in either cash or common limited partnership units of the Operating
Partnership. The Operating Partnership also agreed to pay KAICO approximately
$3.3 million for the reimbursement of expenditures incurred by KAICO on the
complex since 1997 and for the modification of the existing option. As a
result of the acquisition of the note, the Company received approximately $2.7
million which was recorded as interest income during 2000.

  The Company subsequently exercised the amended option and acquired the
property. In October 2000, the Operating Partnership and KAICO agreed to
modify the terms of the note to write down the principal and accrued interest
to $45.3 million. In connection with the modification of the note, a wholly-
owned subsidiary of the Company acquired a 25% tenancy-in-common interest in
the complex from KAICO, subject to 25% or $11.3 million of the $45.3 million
note, in exchange for 1,133 common limited partnership units of the Operating
Partnership valued at approximately $30,000, based upon the average closing
share price of the Company's common stock as reported on the New York Stock
Exchange for the ten business days preceding the date of acquisition. During
the fourth quarter of 2000, the Company recorded approximately $0.2 million as
other income related to its equity in earnings from its 25% tenancy-in-common
interest. On January 9, 2001, the Operating Partnership acquired the remaining
75% tenancy-in-common interest in the complex from KAICO for a cash purchase
price equal to the outstanding indebtedness secured by the property plus
$90,000 in cash. KAICO concurrently used the proceeds to repay the outstanding
principal and accrued and unpaid interest on the note held by the Company.

Other Relationships and Transactions

  Prior to the acquisition of the Imperial and Sepulveda Complex, the
Operating Partnership provided management and leasing services pursuant to
management agreements executed in January 1997. During 2000, in connection
with the management and leasing services provided by the Operating Partnership
for the Option Property, Messrs. Kilroy, Sr. and Kilroy, Jr. paid to the
Operating Partnership fees in the aggregate amount of $120,000, which the
Company believes is to the fair market value for such services provided.

  As part of the Company's marketing strategy, in April 2000, KSI entered into
an agreement with TradeWind Navigation, Inc., a company owned solely by John
B. Kilroy, Sr., to charter a sailing vessel for 26 weeks during the year. The
Company uses the sailing vessel in its marketing efforts by sponsoring broker
and tenant events. During 2000, the Company paid TradeWind Navigation
approximately $0.2 million under this agreement.

                                      21
<PAGE>

                    COMPLIANCE WITH FEDERAL SECURITIES LAWS

  Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities (collectively, "Insiders"), to file with the
Commission initial reports of ownership and reports of changes in ownership of
the Company's Common Stock and other equity securities of the Company.
Insiders are required by regulation of the Commission to furnish the Company
with copies of all Section 16(a) forms they file.

  To the Company's knowledge, based solely on review of the copies of reports
furnished to the Company or written representations that no other reports were
required, during the year ended December 31, 2000, all Insiders complied with
all Section 16(a) filing requirements applicable to them, except that Steven
S. Scott was late with respect to the filing of a Statement of Changes in
Beneficial Ownership on Form 3 for the month of June 2000. The Form 3 for Mr.
Scott related to a single transaction and the initiation of his Section 16
reporting obligations.

                 STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING

  A stockholder desiring to have a proposal included in the Company's proxy
statement for the 2002 annual meeting of stockholders must comply with the
applicable rules and regulations of the Securities and Exchange Commission,
including that any such proposal must be received by the Company's Secretary
at the Company's principal executive offices by December 7, 2001.

  The Company's bylaws require a stockholder desiring to present a proposal
for a vote at the 2002 annual meeting of stockholders to notify the Company's
Secretary in writing. The notice generally must be delivered to or mailed and
received at the Company's principal executive offices (i) not less than 50
days nor more than 75 days prior to the 2002 annual meeting or (ii) if the
Company provides less than 65 days public notice of the date of its annual
meeting, then not later than the 15th day following the earlier of the day on
which public notice of the date for the 2002 annual meeting is published or
mailed. Other specifics regarding the notice procedures, including the
required content of the notice, can be found in the Company's bylaws, a copy
of which may be obtained without charge by request to the Company's Secretary
at the Company's executive offices.

  Stockholders who wish to have a proposal included in the Company's proxy
statement for the 2002 annual meeting or have a proposal properly brought
before the 2002 annual meeting for a vote must comply with the above
requirements, as applicable. Stockholders that comply with the rules and
regulations of the Securities and Exchange Commission to have a proposal
included in the Company's proxy statement for the 2002 annual meeting will be
deemed to have complied with the notice requirements contained in the
Company's bylaws. Stockholder proposals submitted to the Company's Secretary
that do not comply with these requirements may be excluded from the Company's
proxy statement and/or may not be brought before the 2002 annual meeting, as
applicable.

                             INDEPENDENT AUDITORS

  Subject to its discretion to appoint alternative auditors if it deems such
action appropriate, the Board has retained Deloitte & Touche LLP as the
Company's independent auditors for the current fiscal year. The Board has been
advised by Deloitte & Touche LLP that it is independent with regard to the
Company within the meaning of the Securities Act and the applicable published
rules and regulations thereunder. Representatives of Deloitte & Touche, LLP
are expected to be present at the Annual Meeting and will have the opportunity
to make statements if they desire and to respond to appropriate questions from
stockholders.

                                      22
<PAGE>

Fees Paid to Independent Auditor

  The fees paid to Deloitte & Touche, LLP, the Company's independent auditor,
during the 2000 fiscal year are as follows:

<TABLE>
<CAPTION>
     Fees Paid
     ---------
     <S>                                                                <C>
     Audit Fees(1)..................................................... $154,500
     All Other Fees(2),(3)............................................. $540,500
</TABLE>
--------
(1) Includes the aggregate fees billed for professional services rendered by
    Deloitte & Touche, LLP for the audit of the Company's annual financial
    statements for the 2000 fiscal year and the reviews of the financial
    statements included in the Company's Quarterly Reports on Form 10-Q for
    the 2000 fiscal year.

(2) Deloitte & Touche, LLP did not provide any information technology services
    of the type described in Rule 2-01(c)(4)(ii) of Regulation S-X during the
    2000 fiscal year.

(3) Includes the aggregate fees billed for all services rendered Deloitte &
    Touche, LLP, other than fees for the services which must be reported under
    Audit Fees or Financial Information Systems Design and Implementation
    Fees, during the 2000 fiscal year.

                          PROXY SOLICITATION EXPENSE

  The cost of soliciting proxies will be borne by the Company. These costs
will include reimbursements paid to brokerage firms and others for their
expenses incurred in forwarding solicitation material regarding the annual
meeting to beneficial owners of the Company's Common Stock. The Company will
use the services of Mellon Investor Services LLC, P.O. Box 3315, South
Hackensack, NJ, 07606, to assist with the mailing of proxies and expects to
pay a fee of approximately $2,000 for these services. Proxies may be solicited
by directors, officers, and employees of the Company in person or by mail,
telephone or facsimile transmission, but such persons will not be specifically
compensated therefore.

                             AVAILABLE INFORMATION

  The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission. Reports, proxy
statements and other information filed by the Company may be inspected without
charge and copies obtained upon payment of prescribed fees from the Public
Reference Section of the Securities and Exchange Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or at the
Securities and Exchange Commission's regional offices located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60621-2511, or by way of the
Securities and Exchange Commission's Internet address, http://www.sec.gov.

  The Company will provide without charge to each person to whom a copy of the
Proxy Statement is delivered, upon the written or oral request of any such
persons, additional copies of the Company's Form 10-K for the period ended
December 31, 2000. Requests for such copies should be addressed to: Kilroy
Realty Corporation, 2250 East Imperial Highway, Suite 1200, El Segundo,
California 90245, Attn: Secretary, telephone (310) 563-5500.

                                      23
<PAGE>

                                 OTHER MATTERS

  The Board of Directors does not know of any other matter that will be
brought before the Annual Meeting. However, if any other matter properly comes
before the Annual Meeting, or any adjournment or postponement thereof, which
may properly be acted upon, the proxies solicited hereby will be voted on such
matter in accordance with the discretion of the proxy holders named therein.

  You are urged to sign, date and return the enclosed proxy in the envelope
provided. No further postage is required if the envelope is mailed within the
United States. If you subsequently decide to attend the Annual Meeting and
wish to vote your shares, you may do so. Your cooperation in giving this
matter your prompt attention will be appreciated.

April 6, 2001

                                          By Order of the Board of Directors,

                                          Richard E. Moran Jr.
                                          Executive Vice President,
                                          Chief Financial Officer and
                                           Secretary

                                      24
<PAGE>

                                  APPENDIX A

                           KILROY REALTY CORPORATION
                            AUDIT COMMITTEE CHARTER

Overview

  Audit Committees are required for all New York Stock Exchange companies. The
Audit Committee (the "Committee") is constituted and established by the board
of directors of the Company (the "Board of Directors") pursuant to the bylaws
of the Company and reports to the Board of Directors. The Committee's
responsibilities and authorities are summarized in this Audit Committee
Charter, which is approved by the Board of Directors. The Committee shall
review this charter annually and recommend any proposed changes to the Board
of Directors for approval.

Responsibility of the Committee

  The Committee's purpose is to assist the Board of Directors in fulfilling
its oversight responsibilities regarding the Company's accounting and system
of internal controls, the quality and integrity of the Company's financial
reports and the independence and performance of the Company's independent
public accountants. The Committee is the Board of Directors' principal agent
in assuring the independence of the Company's independent public accountants,
although the opportunity for the independent public accountants to meet with
the entire Board of Directors' as needed is not to be restricted.

Responsibilities of Management and Independent Public Accountants

  Management of the Company has the responsibility for the Company's financial
statements as well as the Company's financial reporting process, principles
and internal controls. The independent public accountants are responsible for
performing an audit of the Company's annual financial statements, expressing
an opinion as to the conformity of such annual financial statements with
generally accepted accounting principles, reviewing the Company's quarterly
financial statements and other procedures. Each member of the Committee shall
be entitled to rely on (i) the integrity of those persons within the Company
and of the professionals and experts (such as the independent public
accountants) from which it receives information, (ii) the accuracy of the
financial and other information provided to the Committee by such persons,
professionals or experts absent actual knowledge to the contrary and (iii)
representations made by management or the independent public accountants as to
any non-audit services provided by the independent public accountants to the
Company.

Authority of the Committee

  Subject to the overriding responsibility and authority of the Board of
Directors, the Committee shall have nonexclusive authority to perform the
following functions:

  A. General

    1. The Committee shall inform the independent public accountants and
       management that the independent public accountants and the Committee
       may communicate with each other at any and all times and that the
       Committee Chairman may call a meeting whenever deemed necessary.

    2. Each of the Committee members shall have a general familiarity with
       the accounting and reporting principles included in the Company's
       financial statements and with other significant compliance
       requirements of the Company.

    3. The Committee shall review significant reports on the results of any
       regulatory or other audits and monitor management's corrective
       action, where applicable.

    4. The Committee shall provide the report for inclusion in the
       Company's Annual Proxy Statement required by Item 306 of Regulation
       S-K of the Securities and Exchange Commission.


                                      25
<PAGE>

    5. The Committee shall review and reassess the Committees charter at
       least annually and submit any recommended changes to the Board of
       Directors for its consideration.

    6. The Committee, through its Chair, shall report periodically, as
       deemed necessary or desirable by the Committee, but at least
       annually, to the full Board of Directors regarding the Committee's
       actions and recommendations, if any.

  B. Independent Public Accountants

    1. The Committee shall evaluate and recommend to the Board of Directors
       the selection of independent public accountants for the annual
       audit, giving full consideration to independence, effectiveness and
       cost. The Board of Directors, with the help of the Committee, has
       the ultimate authority and responsibility to select, evaluate and,
       where appropriate, replace the independent public accountants. Such
       independent public accountants are ultimately accountable to the
       Board of Directors and the Committee, as representatives of the
       shareholders.

    2. The Committee shall approve the fees to be paid to the independent
       public accountant and any other terms of the engagement of the
       independent public accountants.

    3. The Committee shall review(1) the scope and general extent of the
       independent public accountants' annual audit, including the
       independent public accountants' engagement letter. The Committee's
       review shall encompass an understanding of factors considered in
       determining the audit scope, including:

              .  Industry and business risk characteristics of the Company;
              .  External reporting requirements;
              .  Quality of internal accounting controls; and
              .  Requirements to maintain the Company's status as a REIT.

    4. The Committee shall obtain formal written affirmation of
       independence from the independent public accountants.

    5. The Committee shall obtain a formal written statement from the
       independent public accountants delineating all relationships between
       the independent public accountant and the Company consistent with
       Independence Standards Board Standard No. 1. The Committee is
       responsible for actively engaging in dialogue with the independent
       public accountants with respect to any disclosed relationships or
       services that may impact the objectivity and independence of the
       independent public accountants and for recommending that the Board
       of Directors take appropriate action if necessary.

    6. If applicable, the Committee shall consider whether the independent
       public accountant's provision of non-audit services to the Company
       is compatible with maintaining the independence of the outside
       auditor.

    7. The Committee shall discuss with management and the independent
       public accountants any limitations in scope or significant
       disagreements with management encountered during the course of the
       audit, and significant adjustments proposed by the independent
       public accountants.

--------
(1) Auditing literature, particularly, Statement of Accounting Standards No.
    71, defines the term "review" to include a particular set of required
    procedures to be undertaken by independent accountants. The members of the
    Committee are not independent accountants, and the term "review" as used
    in this Audit Committee charter is not intended to have this meaning.
    Consistent with footnote 47 of SEC Release No. 34-4226, any use in this
    Audit Committee Charter of the term "review" should not be interpreted to
    suggest that the Committee member can or should follow the procedures
    required of auditors performing reviews of interim financial statements.

                                      26
<PAGE>

    8. The Committee shall review the annual financial statements and
       discuss them with management and the independent public accountants.
       This discussion shall take into consideration the quality of the
       Company's accounting principles. It should include all matters
       required to be communicated by the independent public accountants
       under Statement of Auditing Standards No. 61 and any such items that
       the Committee or the independent public accountants deem
       appropriate. Based on such review, and discussions, the Committee
       shall recommend to the Board of Directors as to the inclusion of the
       Company's audited financial statements in the Company's Annual
       Report on Form 10-K.

    9. The independent public accountant is required to review the interim
       financial statements to be included in any Form 10-Q of the Company
       using professional standards and procedures for conducting such
       reviews, as established by generally accepted auditing standards as
       modified or supplemented by the Securities and Exchange Commission,
       prior to the filing of the Form 10-Q. The chairman of the Committee
       shall discuss with management and the independent public accountants
       the interim financial information contained in the Company's
       earnings announcement prior to its release. The independent public
       accountants will summarize the results of their review of the
       interim financial information as part of the discussion. In the
       event there are items that require further evaluation, the chairman
       will, at his discretion, discuss those items with the other members
       of the Committee.

    10. The Committee shall discuss with management and the independent
        public accountants the Company's compliance with the applicable
        regulatory provisions required to maintain the Company's status as
        a REIT.

    11. The Committee shall discuss with the Company's independent
        accountant the adequacy of the Company's internal controls.

  C. Other

    1. Perform such other functions as the committee lawfully assumes and
       which it believes in good faith are necessary, appropriate or
       desirable to help perform the above functions.

    2. Retain persons who have special competence as necessary to assist
       the committee in fulfilling its responsibilities.

Membership

  The Committee shall consist of three or more members of the Board of
Directors. The members shall be appointed by action of the Board and shall
serve at the discretion of the Board of Directors. Each Committee member shall
be "financially literate" as determined by the Board of Directors in its
business judgment and shall satisfy the "independence" requirements of the New
York Stock Exchange. At least one member of the Committee shall have
"accounting or related financial management expertise," as determined by the
Board of Directors in its business judgment.

Meetings

  The Committee shall meet at least annually to review the annual financial
statements and discuss them with management and the independent public
accountants. In addition, the chairman of the Committee shall discuss with
management and the independent public accountants the interim financial
information contained in the Company's earnings announcement prior to its
release. The Committee chairman may call a meeting whenever it is deemed
necessary. The Committee may establish a regular annual agenda and meeting
schedule. Meetings of the Committee will be held at the convenience of the
members.

                                      27
<PAGE>

Attendance

  A quorum shall be constituted by a majority of the Committee's members, or
all of the Committee's members if the Committee has less than three members.
The Chairman may additionally request that members of management,
representatives of the independent auditors, and other advisors and/or
employees be present at meetings.

Agenda and Minutes

  An agenda shall be prepared by the Corporate Secretary in consultation with
the Committee chairman. Minutes of each meeting are to be prepared by the
person acting as secretary of the meeting, approved by the Committee, and
subsequently distributed to the Board of Directors. The Secretary will retain
a copy in the Company's permanent files.

                                      28
<PAGE>

PROXY

                           KILROY REALTY CORPORATION
                        ANNUAL MEETING OF STOCKHOLDERS
                                 MAY 22, 2001

          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

 The undersigned stockholder of Kilroy Realty Corporation (the "Company")
acknowledges receipt of a copy of the Annual Report and the proxy statement
dated April 6, 2001 and, revoking any proxy heretofore given, hereby appoints
John B. Kilroy, Sr., John B. Kilroy, Jr., Richard E. Moran Jr. and each of
them, as proxies for the undersigned, and hereby authorizes each of them to
vote all the shares of Common Stock of the Company held of record by the
undersigned of March 20, 2001, at the Annual Meeting of Stockholders to be
held on May 22, 2001, or any adjournment or postponement thereof, and
otherwise to represent the undersigned at the meeting with all powers
possessed by the undersigned if personally present at the meeting.

 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
INDICATED, IT WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR LISTED IN THE PROXY
STATEMENT AND AGAINST THE STOCKHOLDER PROPOSAL REGARDING THE COMPANY'S RIGHTS
PLAN.

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                             FOLD AND DETACH HERE
<PAGE>

Please mark
your votes  [X]
like this


PROPOSAL 1: ELECTION OF DIRECTORS
Nominees: William P. Dickey
          John R. D'Eathe

  FOR (except as indicated to the contrary)  [_]

  WITHHOLD                                   [_]

INSTRUCTION: To withhold authority to vote for any nominee's name on the space
provided below:


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

PROPOSAL 2: STOCKHOLDER PROPOSAL RELATING TO THE COMPANY'S RIGHTS PLAN

  FOR          [_]

  AGAINST      [_]

  ABSTAIN      [_]

This proxy will be voted as directed or, if no contrary direction is indicated,
will be voted FOR approval of Proposal 1 and AGAINST Proposal 2.

[_] Please check if you have had a change of address and print your new
address and phone number below

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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.

Date: ________________________, 2001 ___________________________________________
                                     (Signature)

NOTE: Please sign exactly as shown at left. If stock is jointly held, each
owner should sign. Executors, administrators, trustees, guardians, attorneys
and corporate officers should indicate their fiduciary capacity or full title
when signing.

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                             FOLD AND DETACH HERE








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