<PAGE>
LA SALLE PARTNERS U.S. REAL ESTATE FUND
- --------------------------------------------------------------------------------
SEMI - ANNUAL REPORT
-----------------------------------
JUNE 30, 1998
TO OUR SHAREHOLDERS:
We are pleased to welcome you as shareholders of the LaSalle Partners U.S.
Real Estate Fund and to provide you with our semi-annual report for the first
half of 1998. The Fund commenced operations on March 30, 1998 with an NAV of
$10 per share. As of June 30, 1998, the NAV was $9.48 per Institutional Class
share and $9.46 per Retail Class share.
The Fund is designed to take advantage of the many opportunities present in
today's real estate market. The Fund's investment objective is total return
primarily through investments in U.S. real estate securities. The Fund seeks to
achieve its objective by investing all of its investible assets in the U.S. Real
Estate Portfolio of LaSalle Partners Master Trust, which is a separate mutual
fund with an identical investment objective managed by LaSalle Partners Real
Estate Securities. As a part of a diversified investment portfolio, your Fund
should produce an attractive risk-adjusted return, and provide a certain amount
of stability in a choppy market.
The Fund's investment manager LaSalle Partners Real Estate Securities --
has nearly a dozen professionals dedicated solely to investing in public real
estate securities. Its management team brings direct operating experience in
property development, management, investment, and finance as well as more than a
decade of successful REIT portfolio management experience to its efforts on
behalf of your Fund.
MARKET COMMENTARY REIT STOCKS TRAILED THE BROAD MARKET IN THE PAST SIX MONTHS
- -----------------------------------------------------------------------------
The first half of 1998 was perhaps the most frustrating time for
institutional investors and REIT managements since the renaissance of the
industry began in the early 1990s. Despite real estate industry performance and
an economy that many observers call the best in a decade, the public companies
in the real estate industry traded down in absolute terms, and underperformed
the broad market, particularly the largest companies represented in the S&P 500.
There has been no lack of analysis of the reasons for this performance
differential. We believe it is largely a matter of momentum investors chasing
the climax of a record-setting bull market, considerable concern over
legislation affecting a few REITS (largely unfounded, in our view), and some
perfectly legitimate concerns over whether the rapidly falling capitalization
rates that increase the value of properties already in REIT portfolios also hurt
the potential for continued attractive spread investing or increase the
potential for new construction.
BUT THE BUSINESS FUNDAMENTALS AND RELATIVE VALUES OF REAL ESTATE STOCKS HAVE
- ----------------------------------------------------------------------------
NEVER BEEN BETTER!
- -------------------
FFO multiples are at their lowest level since 1990; the REIT FFO / S&P
price/earnings margin has never been wider. New construction is at modest
levels in most sectors and regions, and there is no glut on the horizon. Solid
rental rate rises are being achieved and are expected to continue for several
years.
<PAGE>
LA SALLE PARTNERS U.S. REAL ESTATE FUND
As the first quarter's earnings results show, the companies' operations are
strong and getting stronger. Most analysts underestimated per share gains early
in the year. We continue to project that our portfolio companies will produce
1998 per share growth averaging nearly 20%, and 1999's growth should be well
into the teens, both well above our long-term growth rates of 6% to 8% for
quality property companies. These operating gains are close to twice those
projected for the broad market.
PORTFOLIO DISTRIBUTION AT JUNE 30, 1998
[PIE CHART APPEARS HERE]
The principal sector overweighting is in full-service hotels. The Fund has
major holdings in two paired-share REITS whose price has been impacted by
pending legislation. We believe this legislation will have only moderate impact
on these companies' future operations, that they will continue to be among the
fastest growing and best run companies in the real estate business, and that the
stocks are oversold and will provide significant above average performance in
the next several quarters.
The Fund is moderately overweighted in office and industrial, and at a
market weighting in apartments. Retail is significantly underweighted, and we
are making selective additional investments in those companies we think will
benefit most from an improving retail environment.
In the first half we added several investments of note, including NorthStar
Capital Investment Corp., an opportunity fund providing entity-level equity
capital to a variety of fast-growing pre-IPO real estate companies, and Sunterra
Resorts, the largest developer and operator of time share resorts worldwide.
These new holdings offer the Fund additional exposure to companies we think can
become the leaders of tomorrow, and to emerging areas of real estate activity.
INDUSTRY TRENDS: 1999 AND BEYOND
- --------------------------------
We find it useful to look periodically at the longer-term trends that will
affect the real estate business and the investors and operators who participate
in it. Our current perspective follows:
. OPERATING PERFORMANCE IN 1997 AND 1998 IS AT HISTORICALLY HIGH LEVELS
for most real estate companies and sectors, particularly hotels and
office/industrial. Earnings growth is nearly twice that of the broad
market. This differential should moderate somewhat in 1999-2000, but
real estate companies should still provide ATTRACTIVE EARNINGS GROWTH
FOR THE NEXT SEVERAL YEARS.
<PAGE>
LA SALLE PARTNERS U.S. REAL ESTATE FUND
. HOTELS AND OFFICE/INDUSTRIAL companies should continue to produce STRONG
EARNINGS RESULTS, with moderating growth trends. APARTMENTS are in
EQUILIBRIUM and should produce TREND-LINE GROWTH. HEALTH CARE and other
NET LEASE companies will provide additional insulation and RELATIVELY
HIGH YIELD in an unsettled environment.
. RETAIL BUSINESSES ARE IN A DIFFICULT FUNDAMENTAL ENVIRONMENT, with
supply still continuing in excess of demand, BUT WITH AN IMPROVING
TREND. DOMINANT MALLS, insulated GROCERY-ANCHORED STRIP CENTERS, and
companies skilled in REPOSITIONING PROPERTIES should be ABLE TO DO WELL
in this environment, and the anticipation of better times is likely to
show up in stock prices before showing up in operating results.
. As CAPITALIZATION RATES FALL, properties already owned become more
valuable, causing companies' NET ASSET VALUES TO RISE. PROPERTY
ACQUISITION will continue to become LESS PROFITABLE, with eroding
spreads. Competition with private debt and equity providers, especially
pension funds, will intensify. Companies without development capacity
may become more passive.
. DEVELOPMENT ACTIVITY WILL CONTINUE TO INCREASE, with stabilized returns
on new development well above yields on acquisitions. This could retard
short-term earnings growth for some companies. Companies with expertise
in REHAB AND REPOSITIONING SHOULD PROSPER.
. CONSOLIDATION WILL CONTINUE, but combinations between equals will
produce limited stock market profits in the short term. Shareholders
will do better selling to a stronger, more profitable company. Smaller
companies not open to this possibility will be left behind.
. The timing and magnitude of renewed INFLATION REMAIN AN OPEN QUESTION.
Moderate rates of inflation and higher interest rates will favor those
companies with appropriate leverage and financing in place. Real estate
does best in times of moderate, but visible inflation.
. COST OF CAPITAL WILL BECOME MORE CRITICAL as margins thin. Industry
LEVERAGE WILL INCREASE, and per share growth is likely to accelerate as
debt expands. Beyond the point of appropriate leverage, however,
declining earnings quality will hurt stock prices.
. Almost all REGIONS ARE HEALTHY today; longer term, above average
economic growth rates should make California, Texas, and Florida
especially attractive. Parts of California and Florida are insulated
from rapid increases in supply. Many URBAN CENTERS should be attractive
long term including New York City, San Francisco and Boston; also
Chicago, Los Angeles, Miami, and Washington DC.
. FEE BUSINESSES and joint-venture, GENERAL PARTNER or CO-INVESTMENT
POSITIONS will be used to leverage Return On Equity and increase access
to deal flow.
. COMPANY SELECTION will increasingly replace sector and geography as the
key factor in producing superior investment returns. MANAGEMENT AND
CAPITAL SKILLS will come to the fore. DIVERSIFIED COMPANIES with
ENTREPRENEURIAL MANAGEMENT may be well received.
<PAGE>
LA SALLE PARTNERS U.S. REAL ESTATE FUND
CONCLUSION
- ----------
While the first half of 1998 has been a sober time, we are convinced that
the fundamentals of the public real estate business are intact, and that these
fundamentals will translate into positive absolute returns, and excellent
relative returns, especially if there is weakness in the broad market. In
summary:
. Industry fundamentals are excellent, with strong demand and only
moderate new supply.
. Earnings growth is strong in absolute terms, and particularly compared
to the broad market.
. Securitization of institutionally held real estate is still in the very
early stage.
. Valuations are compelling. Price earnings ratios are historically low,
dividends are increasing, and payouts are conservative.
We thank you for your participation in the Fund, and look forward to
reporting to you on the Fund's progress in the months and years ahead.
/s/ William K. Morrill, Jr. /s/ Keith R. Pauley, CFA
William K. Morrill, Jr. Keith R. Pauley, CFA
President Executive Vice President
/s/ James A. Ulmer III
James A. Ulmer III
Vice President
<PAGE>
LASALLE PARTNERS MASTER TRUST
LASALLE PARTNERS U.S. REAL ESTATE FUND
UNAUDITED FINANCIAL STATEMENTS JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
LaSalle Partners Master Trust - U.S. Real Estate Portfolio
Schedule of Investments............................................ 1-2
Statement of Assets and Liabilities................................ 3
Statement of Operations............................................ 4
Statement of Changes in Net Assets................................. 5
Supplementary Data................................................. 6
Notes to Financial Statements...................................... 7-8
LaSalle Partners U.S. Real Estate Fund
Statement of Assets and Liabilities................................ 9
Statement of Operations............................................ 10
Statement of Changes in Net Assets................................. 11
Financial Highlights............................................... 12
Notes to Financial Statements...................................... 13-15
</TABLE>
<PAGE>
LASALLE PARTNERS MASTER TRUST - U.S. REAL ESTATE PORTFOLIO
================================================================================
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
COMMON STOCKS -- 99.8%
APARTMENTS -- 16.6%
Apartment Investment & Management Co. ................ 20,500 $ 809,750
Avalon Bay Communities, Inc. ......................... 41,288 1,568,944
Camden Property Trust................................. 21,500 639,625
Equity Residential Properties Trust................... 17,800 844,388
Irvine Apartment Communities, Inc. ................... 10,000 289,375
Post Properties, Inc. ................................ 20,786 800,261
------------
4,952,343
------------
DIVERSIFIED / OTHER -- 13.8%
Capital Trust......................................... 11,600 111,650
Catellus Development Corp. ........................... 38,600 682,738
Commercial Net Lease Realty, Inc. .................... 20,500 331,844
Forest City Enterprises, Inc. ........................ 2,600 153,888
Northstar Capital Investment Corp. ................... 75,000 1,500,000
Vornado Realty Trust.................................. 33,700 1,337,469
------------
4,117,589
------------
FACTORY OUTLETS -- 2.7%
Chelsea GCA Realty, Inc. ............................. 20,000 800,000
------------
HOTELS -- 22.4%
American General Hospitality Corp. ................... 9,000 191,250
Capstar Hotel Co. .................................... 11,800 330,400
Host Marriott Corp. .................................. 62,900 1,120,406
Patriot American Hospitality, Inc. ................... 73,899 1,768,957
Sunterra Resorts Inc. ................................ 70,000 1,155,000
Starwood Hotels & Resorts............................. 43,400 2,096,763
------------
6,662,776
------------
MOBILE HOMES -- 2.0%
Sun Communities, Inc.................................. 17,800 589,625
------------
OFFICE / INDUSTRIAL -- 34.4%
Beacon Capital Partners, Inc.......................... 37,500 750,000
Boston Properties, Inc................................ 24,800 855,600
Brandywine Realty Trust............................... 14,600 326,675
Crescent Real Estate.................................. 17,900 601,888
Duke Reality Investment, Inc.......................... 51,100 1,210,431
Equity Office Properties Trust........................ 53,788 1,526,235
First Industrial Realty Trust, Inc.................... 16,600 528,088
Great Lakes REIT, Inc................................. 2,800 48,825
Mack-Cali Realty Corp................................. 28,600 983,121
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
LaSalle Partners Master Trust - U.S. Real Estate Portfolio
================================================================================
SCHEDULE OF INVESTMENTS (UNAUDITED) - CONTINUED
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
<S> <C> <C>
OFFICE / INDUSTRIAL -- 34.4% - CONTINUED
PS Business Parks, Inc................................ 6,200 $ 145,700
Reckson Associates Realty Corp........................ 30,400 718,200
Reckson Services Industries, Inc...................... 14,592 48,336
S1 Green Realty Corp.................................. 4,000 90,000
Spieker Properties, Inc............................... 41,900 1,623,625
Weeks Corp............................................ 23,900 755,838
------------
10,212,562
------------
REGIONAL MALLS -- 1.5%
Simon DeBartolo Group, Inc............................ 13,880 451,100
------------
RETAIL -- 2.0%
Developers Diversified Realty Corp.................... 15,300 599,569
------------
SELF STORAGE -- 4.4%
Public Storage, Inc................................... 27,200 761,600
Storage USA, Inc...................................... 16,000 560,000
------------
1,321,600
------------
TOTAL COMMON STOCKS (COST $31,275,187)................ 29,707,164
------------
SHORT TERM INVESTMENTS -- 0.2%
Temporary Investment Fund, Inc.- TempFund Portfolio... 36,333 36,333
Temporary Investment Fund, Inc.- TempFund Portfolio... 36,332 36,332
------------
TOTAL SHORT TERM INVESTMENTS (Cost $72,665)........... 72,665
------------
TOTAL INVESTMENTS (COST $31,347,852)+ -- 100% $ 29,779,829
============
</TABLE>
- --------------------
+ Cost for Federal income tax purposes
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
LASALLE PARTNERS MASTER TRUST - U.S. REAL ESTATE PORTFOLIO
================================================================================
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (Cost $31,347,852)........................ $ 29,779,829
Dividends and interest receivable.............................. 170,338
Due from brokers on unsettled trades........................... 52,730
Deferred organization costs.................................... 76,742
Prepaid expenses............................................... 5,650
------------
Total Assets.......................................... 30,085,289
------------
LIABILITIES:
Accrued management fees........................................ 15,600
Accrued expenses and other liabilities......................... 35,312
Organization costs payable to the Manager...................... 80,863
Other expenses payable to the Manager.......................... 5,650
------------
Total Liabilities..................................... 137,425
------------
NET ASSETS.......................................................... $ 29,947,864
============
</TABLE>
The acompanying notes are an integral part of the financial statements.
3
<PAGE>
LASALLE PARTNERS MASTER TRUST - U.S. REAL ESTATE PORTFOLIO
================================================================================
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD ENDED JUNE 30, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income............................................. $ 396,533
Interest income............................................. 2,109
-----------
Total Investment Income............................ 398,642
-----------
EXPENSES:
Advisory fees............................................... 63,426
Accounting & transfer agent fees............................ 25,734
Audit fees.................................................. 9,110
Legal fees.................................................. 7,592
Trustees fees............................................... 6,833
Amortization of deferred organizational costs............... 4,121
Insurance expense........................................... 1,904
Custodian fees.............................................. 1,529
Other expenses.............................................. 5,720
-----------
Total Expenses..................................... 125,969
-----------
Less: Fee waivers........................................... (21,324)
-----------
Net Expenses....................................... 104,645
-----------
NET INVESTMENT INCOME............................................ 293,997
-----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments.......................... (269,724)
Net change in unrealized (depreciation) on investments...... (1,568,023)
-----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENT TRANSACTIONS.... (1,837,747)
-----------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........... $(1,543,750)
===========
</TABLE>
- --------------------
*Commencement of operations was March 30, 1998.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
LaSalle Partners Master Trust - U.S. Real Estate Portfolio
================================================================================
Statement of Changes in Net Assets (Unaudited)
For the period ending June 30, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
OPERATIONS:
Net investment income...................................... $ 293,997
Net realized (loss) on investments......................... (269,724)
Net change in unrealized (depreciation) on investments..... (1,568,023)
------------
Net (decrease) in net assets resulting from operations..... (1,543,750)
------------
CAPITAL SHARE TRANSACTIONS:
Contributions.............................................. 38,515,064
Withdrawals................................................ (7,123,450)
------------
Net increase in net assets resulting from capital share
transactions............................................ 31,391,614
------------
Net increase in net assets...................................... 29,847,864
NET ASSETS AT BEGINNING OF PERIOD............................... 100,000
------------
NET ASSETS AT END OF PERIOD..................................... $ 29,947,864
============
</TABLE>
- --------------------
*Commencement of operations was March 30, 1998.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
LASALLE PARTNERS MASTER TRUST - U.S. REAL ESTATE PORTFOLIO
================================================================================
SUPPLEMENTARY DATA (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period from
March 30, 1998* through June 30, 1998
-------------------------------------
<S> <C>
Net assets, end of period (000's)............................ $29,948
Ratio of net expenses to average net assets (1) (2)......... 1.25%
Ratio of net investment income to average net assets (1)(3).. 3.52%
Portfolio turnover rate...................................... 6%
</TABLE>
- -----------------------
* Commencement of operations
(1) Annualized.
(2) The annualized expense ratio without waivers and reimbursements for the
period ended June 30, 1998 would have been 1.53%
(3) The annualized net investment income ratio without waivers and
reimbursements for the period ended June 30, 1998 would have been 3.25%
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
LASALLE PARTNERS MASTER TRUST
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
LaSalle Partners Master Trust (the "Trust"), a Delaware business trust, is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company currently offering one
portfolio: U.S. Real Estate Portfolio (the "Portfolio"). The Trust was
organized on December 29, 1997 and commenced operations on March 30, 1998. The
Trust operates under a "master/feeder" structure where the feeder funds invest
substantially all of their investable assets in the Trust.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Trust in conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Trust in the
preparation of its financial statements. The preparation of financial statements
in accordance with generally accepted accounting principles may require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
A) SECURITY VALUATION:
Portfolio securities traded on a national exchange on the valuation date are
valued at the last quoted sales price. Exchange traded securities for which
there have been no reported sales on the valuation date and securities traded
primarily in the over-the-counter market are valued at the last quoted bid
price. Securities or other assets for which market quotations are not readily
available are valued at their fair value determined in good faith under
procedures established and monitored by the Trust's Board of Trustees. These
procedures may include the use of an independent pricing service which
calculates prices based upon yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to value from dealers; and
general market conditions. Debt obligations with maturities of 60 days or less
are valued at amortized cost.
B)FEDERAL INCOME TAXES:
The Trust will be classified as a partnership for federal income tax purposes.
Any interest, dividends and gains or losses of the Trust will be deemed to have
been "passed through" to the feeder funds. It is intended that the Portfolio
will be managed in such a way that an investor will be able to satisfy the
requirements of the Internal Revenue Code applicable to regulated investment
companies.
C) INVESTMENT INCOME AND SECURITY TRANSACTIONS:
Security transactions are accounted for on the date the securities are purchased
or sold. Costs used in determining realized gains and losses on the sale of
investment securities are those specific to securities sold. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on an accrual
basis. Discount and premium on securities purchased are amoritized over the
lives of the respective securities. Expenses directly attributable to the Trust
are directly charged. Common expenses attributable to both the Trust and a
feeder fund are allocated among both.
- --------------------------------------------------------------------------------
7
<PAGE>
LASALLE PARTNERS MASTER TRUST
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
D) DEFERRED ORGANIZATION COSTS:
The Trust bears all costs in connection with its organization. All such costs
are amortized on a straight-line basis over a five-year period beginning on the
date of the commencement of operations.
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an Investment Management Agreement with LaSalle
Partners Real Estate Securities (the "Manager"). The Manager is entitled to a
fee from the Trust, which is accrued daily and payable monthly, at an annual
rate of 0.75% of the Trust's average net assets. For the period ended June 30,
1998, the Manager voluntarily waived fees totalling $8,457. Certain officers
and trustees of the Trust are also officers, directors and shareholders of the
Manager. No officer or trustee of the Trust who is an officer, director, or
shareholder of the Manager receives any compensation from the Trust.
The Trust has entered into an Administration and Accounting Services Agreement
with PFPC Inc. (the "Administrator"), under which the administrator provides
administration and accounting services to the Trust pursuant to the Agreement.
For the period ended June 30, 1998, PFPC Inc. voluntarily waived fees totalling
$12,867.
NOTE 4 - SECURITIES TRANSACTIONS
For the period ended June 30, 1998, purchases of portfolio securities (other
than short-term securities) were $2,079,933. Sales of portfolio securities were
$9,409,003.
NOTE 5 - INVESTMENT TRANSACTIONS
At June 30, 1998, gross unrealized appreciation and depreciation for federal
income tax purposes of investment securities for the Trust was as follows:
Gross Unrealized Appreciation $ 163,159
Gross Unrealized Depreciation (1,731,182)
-----------
$(1,568,023)
-----------
- --------------------------------------------------------------------------------
8
<PAGE>
LASALLE PARTNERS U.S. REAL ESTATE FUND
================================================================================
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investment in LaSalle Partners Master Trust - U.S. Real Estate Portfolio......... $190,450
Deferred organization costs...................................................... 90,219
Prepaid expenses................................................................. 40,555
--------
Total Assets............................................................ 321,224
--------
LIABILITIES:
Distribution payable to shareholders............................................. 1,668
Accrued expenses and other liabilities........................................... 44,036
Expenses payable to the Manager.................................................. 81,219
--------
Total Liabilities....................................................... 126,923
--------
NET ASSETS............................................................................ $194,301
========
COMPOSITION OF NET ASSETS:
Capital Stock, par value $.01 per share, 100,000,000 shares authorized........... $ 205
Additional paid - in capital..................................................... 203,795
Accumulated net investment loss.................................................. (28)
Net realized loss on investments................................................. (1,152)
Net unrealized depreciation on investments....................................... (8,519)
--------
$194,301
========
NET ASSET VALUE PER SHARE:
Institutional Class : Net Assets................................................. $140,242
--------
Shares outstanding............................................................... 14,800
--------
Net Asset Value, Offering and Redemption Price per Share......................... $ 9.48
========
Retail Class : Net Assets........................................................ $ 54,059
--------
Shares outstanding............................................................... 5,712
--------
Net Asset Value, Offering and Redemption Price per Share......................... $ 9.46
========
</TABLE>
The acompanying notes are an integral part of the financial statements.
9
<PAGE>
LASALLE PARTNERS U.S. REAL ESTATE FUND
================================================================================
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD ENDING JUNE 30, 1998*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Investment Income from LaSalle Partners Master Trust - U.S. Real Estate Portfolio....... $ 2,139
Expenses from LaSalle Partners Master Trust - U.S. Real Estate Portfolio................ (550)
----------
Net Investment Income from LaSalle Partners
Master Trust - U.S Real Estate Portfolio...................................... 1,589
----------
EXPENSES:
Legal fees.............................................................................. 15,184
Accounting & transfer agent fees........................................................ 15,290
State registration fees................................................................. 8,025
Insurance fees.......................................................................... 7,615
Shareholders' reports................................................................... 7,592
Directors fees.......................................................................... 6,833
Amortization of organizational costs.................................................... 4,844
Audit fees.............................................................................. 1,708
Distribution fees....................................................................... 20
Other expenses.......................................................................... 3,834
----------
Total Expenses................................................................. 70,945
----------
Less : Fee waivers and expense reimbursements........................................... (70,996)
----------
NET INVESTMENT INCOME........................................................................ 1,640
----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS FROM LASALLE PARTNERS MASTER TRUST
U.S. REAL ESTATE PORTFOLIO:
Net realized (loss) on investments...................................................... (1,152)
Net change in unrealized (depreciation) of investments.................................. (8,519)
----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............................................ (9,671)
----------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERAT........................................... $ (8,031)
==========
</TABLE>
- --------------
* Commencement of operations was March 30, 1998
The acompanying notes are an integral part of the financial statements.
10
<PAGE>
LASALLE PARTNERS U.S. REAL ESTATE FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE PERIOD ENDING JUNE 30, 1998*
<TABLE>
<CAPTION>
<S> <C>
OPERATIONS:
Net investment income............................................... $ 1,640
Net realized (loss) on investments from LaSalle Partners Master
U.S. Real Estate Portfolio.................................. (1,152)
Change in unrealized (depreciation) of investments from LaSalle
U.S. Real Estate Portfolio.................................. (8,519)
-----------
Net decrease in net assets resulting from operations................ (8,031)
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Institutional Class................................................. (1,212)
Retail Class........................................................ (456)
-----------
Total Distributions................................................. (1,668)
-----------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets resulting from capital share.............
transactions........................................................ 104,000
-----------
Total increase in net assets........................................ 94,301
Net assets at beginning of period................................... 100,000
-----------
Net assets at end of period......................................... $ 194,301
===========
</TABLE>
* Commencement of operations was March 30, 1998
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
LASALLE PARTNERS U.S. REAL ESTATE FUND
================================================================================
FINANCIAL HIGHLIGHTS (UNAUDITED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period from
March 30, 1998* through June 30, 1998
-------------------------------------
INSTITUTIONAL RETAIL
CLASS CLASS
------------- ------------
<S> <C> <C>
Net asset value, beginning of period......................... $ 10.00 $ 10.00
INCREASE (DECREASE) FROM OPERATIONS:
Net investment income from operations........................ 0.08 0.08
Net realized and unrealized (loss) on investments............ (0.52) (0.54)
------------- ------------
Total from investment operations............................. (0.44) (0.46)
LESS DISTRIBUTION:
Distributions from net investment income..................... (0.08) (0.08)
Net asset value, end of period .............................. $ 9.48 $ 9.46
SUPPLEMENTARY DATA:
Net assets, end of period (000).............................. $ 140 $ 54
Ratio of net expenses to average net assets (1)(4)........... 1.05 % 1.45 %
Ratio of net investment income to average net assets(1)(4)... 3.76 % 3.82 %
Total Return (2)............................................. (4.40) % (4.60) %
</TABLE>
- ----------------
* Commencement of operations
(1) Annualized.
(2) Not annualized
(3) The annualized net investment income ratio without waivers and
reimbursements for the period ended June 30, 1998 would have been (144.31)%
and (184.44)% for the Institutional and Retail Classes, respectively.
(4) The annualized expense ratio without waivers and reimbursements for the
period ended June 30, 1998 would have been 149.12% and 189.71% for the
Institutional and Retail Classes, respectively.
The acompanying notes are an integral part of the financial statements.
12
<PAGE>
LASALLE PARTNERS MASTER TRUST
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION
LaSalle Partners Funds, Inc. (the "Company"), a Maryland corporation, is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end management investment company currently offering one
series: LaSalle Partners U.S. Real Estate Fund (the "Fund"). The Company was
organized on December 29, 1997 and commenced operations on March 30, 1998. The
Fund invests solely in the U.S. Real Estate Portfolio of the LaSalle Partners
Master Trust (the "Portfolio"). The value of the Fund's investment in the
Portfolio, included in the accompanying Statement of Assets and Liabilities,
reflects the Fund's beneficial interest in the net assets of the Portfolio. At
June 30, 1998, the Fund held a 0.7% interest in the Portfolio. The financial
statements of the Portfolio are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies are consistently followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with generally accepted accounting principles
may require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A) SECURITY VALUATIONS:
The value of the Fund's beneficial interest in the Portfolio is determined by
multiplying the net assets of the Portfolio by the Fund's proportionate share of
the Portfolio. Valuation of securities held by the Portfolio is discussed in
Note 2(a) of the financial statements of LaSalle Partners Master Trust.
B) FEDERAL INCOME TAXES:
It is the Fund's intention to qualify as a regulated investment company under
the Internal Revenue Code and distribute all of its taxable income, including
any net realized gains to shareholders. Accordingly, no provision for federal
taxes is required in the financial statements.
C) INVESTMENT INCOME AND SECURITY TRANSACTIONS:
The Fund records its proportionate share of the Portfolio's net investment
income, realized and unrealized gains and losses. The Fund receives daily
allocations of investment operations from the Portfolio based on its beneficial
interest in the Portfolio.
D) DEFERRED ORGANIZATION EXPENSES:
The Fund bears all costs in connection with its organization. All such costs
are amortized on a straight-line basis over a five-year period beginning on the
date of the commencement of operations.
E) DISTRIBUTIONS TO SHAREHOLDERS:
Dividends, if any, from net investment income are declared and paid quarterly.
Net realized gains from investment transactions, if any, are distributed at
least annually. Distributions to shareholders are recorded on the ex-dividend
date.
- --------------------------------------------------------------------------------
13
<PAGE>
LASALLE PARTNERS MASTER TRUST
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
F) MULTIPLE CLASSES OF SHARES:
The Fund is divided into Institutional and Retail Class shares. The Retail Class
of shares is separately charged its distribution and shareholder services fees.
Income, expenses that are not specific to a particular class, and realized and
unrealized gains and losses are allocated to each class based on the daily value
of the shares of each class in relation to the total value of the Fund.
Dividends are declared separately for each class and the per-share amounts
reflect differences in class-specific expenses.
NOTE 3 - AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES
The Investment Manager has voluntarily agreed to reimburse operating expenses in
excess of 1.45% and 1.05% for the Retail and Institutional Classes,
respectively. All amounts paid or payable to the Fund by the Investment
Manager, under the agreement, are reflected in the Statement of Operations. For
the period ended June 30, 1998, the Investment Manager reimbursed the Fund
$63,351. Certain officers and directors of the Fund are also officers,
directors, and shareholders of the Manager. No officer or director of the Fund
who is an officer, director or shareholder of the Manager receives any
compensation from the Fund.
The Fund has entered into an Administration Agreement with PFPC Inc. (the
"Administrator"), whereby the Administrator provides certain fund accounting and
administrative services to the Fund. For the period ended June 30, 1998, the
administrator voluntarily waived $7,645.
Funds Distributor, Inc. (the "Distributor") serves as the principal underwriter
and distributor of the Fund. The Company has adopted a distribution plan for the
Retail Class of the Fund pursuant to Rule 12b-1 under the Investment Company Act
of 1940. The plan provides for the payment of a distribution fee from the assets
of the Retail Class for activities primarily intended to result in the sale of
Retail Class shares. Distribution fees paid under the plan may not exceed 0.75%
annually of the average net assets of the Retail Class. The Board of Directors
of the Company has authorized payment of an annual distribution fee of 0.25%.
For the period ended June 30, 1998, there were no payments made under the
distribution plan.
Under a shareholder service plan adopted for the Retail Class, the Fund may pay
shareholder services fees to financial services firms and others who have
entered into shareholder services agreements with the Company. These fees are
paid for services provided to Retail Class shareholders, including shareholder
assistance and communications, and maintenance of shareholder accounts.
Shareholder services fees paid under the plan may not exceed 0.25% annually of
the average net assets of the Retail Class attributable to applicable
shareholder accounts. The Board of Directors of the Company has authorized
payment of an annual shareholder services fee of 0.15% of average net assets.
For the period ended June 30, 1998, there were no payments made under the
shareholder services plan.
- --------------------------------------------------------------------------------
<PAGE>
LASALLE PARTNERS MASTER TRUST
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
NOTE 4 - SHARE CAPITAL
Transactions in shares of capital stock, for the period ended June 30, 1998,
were as follows:
<TABLE>
<CAPTION>
Institutional Class Retail Class
------------------- -------------------
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
At beginning of period 9,900 $ 99,000 100 $ 1,000
Shares sold 4,900 49,000 5,612 55,000
-------- -------- -------- --------
At end of period 14,800 $148,000 5,712 $ 56,000
-------- -------- -------- --------
</TABLE>
The Fund is authorized to issue up to 50 million Retail Class shares and 50
million Institutional Class shares with a par value of $.01 per share.
- --------------------------------------------------------------------------------
<PAGE>
This report and the financial statements contained herein are submitted for
the general information of the shareholders of the Fund. This report is
not authorized for distribution to prospective investors in the Fund unless
preceded or accompanied by a Fund prospectus containing more information
about the Fund, including expenses. Please read the prospectus carefully
before you invest or send your money.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
