<PAGE>
LaSalle
Investment Management
SEMI-ANNUAL REPORT
June 30, 2000
LaSalle
U.S. Real Estate Fund
LaSalle
Master Trust
LASALLE INVESTMENT MANAGEMENT FUNDS
Global Leadership in the New World of Real Estate/SM/
<PAGE>
LaSalle Master Trust
LaSalle U.S. Real Estate Fund
Semi-Annual Report - June 30, 2000
(Unaudited)
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report Highlights.................................... 1
Letter To Shareholders............................... 2
LaSalle Master Trust -- U.S. Real Estate Portfolio
Statement of Net Assets......................... 8
Statement of Operations......................... 10
Statement of Changes in Net Assets.............. 11
Financial Highlights............................ 12
Notes to Financial Statements................... 13
LaSalle Investment Management Funds Inc. --
LaSalle U.S. Real Estate Fund
Statement of Assets and Liabilities............. 15
Statement of Operations......................... 16
Statement of Changes in Net Assets.............. 17
Financial Highlights............................ 18
Notes to Financial Statements................... 19
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
LASALLE U.S. REAL ESTATE FUND
SEMI-ANNUAL REPORT
JUNE 30, 2000
Report Highlights
. In the first half of 2000, REIT price earnings ratios made some progress in
returning to their traditional relationship with the broad market. The
combination of current yields and anticipated earnings growth is expected to
produce mid-teens total returns for real estate stocks over the next twelve
months, absent further earnings multiple changes.
. The economy continues to support a robust, healthy real estate market. This
environment should be fertile for the best run, most financially secure
companies. We are increasingly vigilant in anticipating supply imbalances in
sectors and regions.
. Managements' ingenuity and abilities are replacing raw capital as the driver
of growth and returns. Most companies are developing business plans that are
self-financing. Since managements now own a significant share of their
companies' stock, increased value-per-share is becoming a more important
corporate goal.
. Companies that can selectively embrace and use relevant new technologies in
their core businesses should achieve faster growth rates and more solid
commands of their investment and geographic niches.
. REIT market valuations continue to be low compared with the broad market. As
of the end of June 2000, REIT stocks in the Fund's portfolio were trading at
a discount of 5% to 15% to our current NAV estimates. The overall REIT
industry is currently trading at a Funds From Operations (FFO) multiple of
less than nine times 2000 estimates versus a historical average multiple of
over twelve times.
. We believe these factors make this an excellent time to allocate investment
assets to the public real estate sector.
--------------------------------------------------------------------------------
1
<PAGE>
--------------------------------------------------------------------------------
LaSalle U.S. Real Estate Fund
Semi-Annual Report
June 30, 2000
Dear Shareholder:
The LaSalle U.S. Real Estate Fund seeks total return, with a significant income
component, by investing in a diversified portfolio of REITs and real-estate
operating companies.
The Fund's investment manager, LaSalle Investment Management (Securities) L.P.,
has more than a dozen professionals dedicated solely to investing in public real
estate securities. The management team brings direct operating experience in
property development, management, investment and finance, as well as more than a
decade of successful real estate portfolio management experience to its efforts
on behalf of your Fund.
The following graph represents the total return based on $10,000 investment made
in the LaSalle U.S. Real Estate Fund at the trading commencement date of March
30, 1998 and held through June 30, 2000 as well as the performance of the
Wilshire Real Estate Securities and NAREIT Indices over the same period. Past
performance is not predictive of future performance.
-----------------------------------------------------
LaSalle U.S. Real Estate Fund - Institutional Class
LaSalle U.S. Real Estate Fund - Retail Class
LaSalle U.S. Real Estate Fund - Retail Class
adjusted for maximum 5.0% sales charge
Wilshire Real Estate Securities Index
NAREIT Index
-----------------------------------------------------
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
LaSalle U.S. Real Estate
Fund - Retail Class
LaSalle U.S. Real Estate LaSalle U.S. Real Estate adjusted for maximum Wilshire Real Estate
Fund - Institutional Class Fund - Retail Class 5.0% sales charge Securities Index NAREIT Index
<S> <C> <C> <C> <C> <C>
3/30/98 10,000 10,000 9,500 10,000 10,000
6/30/98 9,563 9,537 9,056 9,540 9,540
12/31/98 8,008 7,978 7,576 8,320 8,290
6/30/99 8,408 8,322 7,903 8,880 8,680
12/31/99 7,620 7,543 7,163 8,060 7,910
6/30/2000 8,755 8,643 8,208 9,240 8,812
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Since Commencement
of Operations
Total Return 6/30/00 1 Year March 30, 1998
------------ ------- ------ --------------
<S> <C> <C> <C>
LaSalle U.S. Real Estate Fund - Institutional Class 14.6% 4.14% (5.72%)
LaSalle U.S. Real Estate Fund - Retail Class 14.3% 3.86% (6.6%)
LaSalle U.S. Real Estate Fund - Retail Class
adjusted for maximum 5.0% sales charge 8.51% (1.3%) (8.38%)
-----------------------------------------------------------------------------------------------
</TABLE>
The performance data quoted represents past performance. The investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
On June 30, 2000 the Net Asset Value (NAV) of the Fund was $7.90 per
Institutional share and $7.90 per Retail share. In addition, dividends were paid
in the first six months totaling $.30 per Institutional share and $.28 per
Retail share.
2
<PAGE>
The first half of 2000 has been a good one for the economy, for real estate and
for real estate stocks. The real estate industry's solid operating performance
and asset values have finally begun to be reflected in the companies' stock
prices, and the sector's first-half performance was one of the best in the
financial market.
This relative performance has been the result of the interaction of a variety of
factors. Chief among them, in our view, is the concern of some investors over
the high valuation accorded technology and very large capitalization companies.
Inflation concerns may have also had a role, as well as the relatively small
supply of REIT shares for sale due to company buybacks, lack of new equity
issues and the completion of selling programs by maturing unit investment
trusts.
The results of the Fund's portfolio were better than the REIT market as a whole
in the first half of 2000, with contributions from our concentration in
apartment, office and industrial companies coupled with superior performance by
our upscale and luxury hotel holdings. The portfolio is largely made up of high
quality, higher growth companies, which we believe will increase their dominance
of their markets and sectors in the years to come.
Market Comment
Even with this strong performance, the sector today has a valuation that is very
low compared with broad market measures. The National Association of Real Estate
Investment Trust (NAREIT) Equity Index is at 1993 levels, notwithstanding the
fact that Funds From Operations (FFO - the measure of REIT earnings) are up 70%
over the period.
REIT Equity Index
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Jan-92 196.23
Jan-93 211.88
Jan-94 231.33
Jan-95 211.37
Jan-96 235.52
Jan-97 292.94
Jan-98 326.7
Jan-99 255
Jan-00 228
Jun-00 248
</TABLE>
Source: NAREIT
REIT Earnings Ratios versus S&P 500
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P 500 Price/4 Quarters
Forward PFO Multiple
<S> <C> <C>
92
93 17.9 15.3
94 15.2 12.3
95 14.5 10.9
96 15.4 11.3
97 16.2 12.6
98 24.1 12.2
99 25.2 8.6
00 26.8 8.2
</TABLE>
Source: NAREIT & Bloomberg
3
<PAGE>
Companies' share prices are also attractive relative to the values of their
underlying assets. Discounts average nearly 10%, with discounts of 5% or more
even in many of the best companies. Price discounts to the real estate
companies' Intrinsic Values (their values as going businesses) are even higher,
ranging from 15% to 25% today.
REIT Price versus Net Asset Value
[GRAPH APPEARS HERE]
Jun-94 5.30%
Dec-94 4.50%
Jun-95 0.10%
Dec-95 8.20%
Jun-96 11.10%
Dec-96 28.20%
Jun-97 25.50%
Dec-97 24.00%
Jun-98 8.10%
Dec-98 -2.20%
Jun-99 -1.50%
Dec-99 -16.50%
Jun-00 -9.10%
Source: NAREIT
The economy continues to perform well with limited inflation, although gasoline
prices are of concern this summer, and there are both skilled and unskilled
labor shortages building up in many high-tech centers. Retail sales continue to
be strong, and office vacancies are approaching historically low levels in some
markets. Apartment occupancies are stable to rising, with rent increases
outstripping inflation. Interest rates are increasing somewhat, which should
curtail new commercial building and possibly slow new home sales. Fewer new
buildings should be a mild positive for the investment real estate sectors
affected.
As a result, solid increases in the earnings of real estate owners and
developers continue. Although second quarter results have been reported for only
a few companies thus far, earnings growth rates are expected to exceed 10% in
many cases compared with second quarter 1999. For the full year, we expect
industry earnings growth in FFO per share in the 8% to 9% range, and expect
2001's average growth will exceed 8% as well. Companies in our portfolios are
growing faster than the average, with earnings growth of 11% to 12% expected in
2000, and more than 10% in 2001. Performance of the fund will differ from the
projected earning.
Technology continues to be a matter of interest in the real estate business,
with many of the public companies participating in several of the consortia that
have been developed in the past few months to take advantage of the buying power
of large landlords, or act as incubators for a variety of technological
innovations with applicability to real estate. We do not expect this to make a
dramatic difference in companies' earnings over the intermediate term, and think
the best real estate companies will generally also be the ones that are the most
tech-savvy.
4
<PAGE>
LaSalle Company Universe: Earnings and Dividends
<TABLE>
<CAPTION>
-----------------------------------------------------------
Current FFO/Share Growth
Div. Yield '99 vs. '98
<S> <C> <C>
Apartments 6.7% 10.9%
Diversified 5.7% 13.3%
Factory Outlets 14.4% 12.3%
Health Care 13.6% 2.5%
Lodging 5.4% 6.1%
Manufactured Homes 7.0% 9.5%
Net Lease 9.0% 6.3%
Office/Industrial 6.4% 12.0%
Regional Malls 8.6% 10.9%
Self Storage 7.1% 11.0%
Shopping Centers 8.8% 12.0%
Weighted Average 7.1% 10.8%
-----------------------------------------------------------
</TABLE>
Source: LaSalle Investment Management (Securities) L.P.
Real estate sector performance was solid with most regions and sectors posting
double-digit total returns so far this year. The Hospitality sector has done
particularly well, led by high-quality upscale and luxury hotel owners and
operators. Office/industrial and apartments sectors were also good performers,
reflecting their strong underlying performance and prospects.
More than half of the growth in the United States economy has been in less than
two dozen "technology nodes" and strong central business districts. Strong
demand, usually combined with supply and planning constraints, are resulting in
above-average growth and expected stability. The bulk of the investments in the
Fund are located in these regions.
Regional Allocation
Northeast............ 21%
Mideast.............. 10%
Southeast............ 14%
Southwest............ 11%
East North Central... 12%
West North Central... 3%
Pacific.............. 22%
Mountain............. 6%
Other................ .4%
Source: LaSalle Investment Management (Securities) L.P.
5
<PAGE>
Public Market Trends
From time to time we find it useful to look at the longer-term trends that will
affect the real estate business and the investors and operators who participate
in it.
. Capital constraints and higher real estate prices are reducing asset growth
among the public real estate companies. The bulk of earnings growth over the
next two years will come from development, existing asset repositioning and
taxable subsidiary investments. The REIT Modernization Act (RMA) will offer
opportunities for more aggressive companies to differentiate themselves and
increase their profitability.
. Capital structures are expected to continue to evolve, with more joint
ventures, asset sales, stock buybacks and partial or complete corporate
liquidations. Mergers and acquisitions should continue, with most profits
being made by the sellers.
. Technology is becoming more important to the real estate industry. Technology
rich regions of the country will have higher growth, coupled with more
volatility and inflation. This is an investment positive, but requires
continuous monitoring.
. Basic technologies, such as wiring and web-site support, are becoming
commodities. Although they offer only moderate potential increases in
profits, companies that do not provide them will be at a significant
operating and marketing disadvantage.
. Major technology initiatives by real estate companies can lead to increased
growth and competitive strength, with the caveat that technology, like any
development initiative, dampens short term results and increases risk and
potential volatility.
. Moderate rates of inflation and higher interest rates should favor those
companies with appropriate leverage and financing in place. It is now more
important to monitor and evaluate companies' capital structures.
. Individual company selection continues to be the primary investment
criterion, but market and valuation imbalances among sectors and regions may
build up over time.
Capital Markets
The past six months have been the quietest period for public REIT capital since
prior to 1993. There were no public equity offerings and just over $3 billion of
debt was issued, in contrast to total capital of more than $14 billion raised in
the peak second quarter of 1998.
Capital Raising Activities
<TABLE>
<CAPTION>
----------------------------------------------------
($ millions) 2nd Qtr 1st Qtr YTD
<S> <C> <C> <C>
Initial Public Offering 0 0 0
Other Common Equity 15 298 313
-----------------------
TOTAL EQUITY 15 298 313
Public Debt, Preferred 1,135 2,286 3,421
-----------------------
TOTAL PUBLIC CAPITAL 1,150 2,584 3,734
----------------------------------------------------
</TABLE>
Source: NAREIT
There has been considerably more capital provided during this period by the
private sector from asset sales and institutional joint ventures. Merger
activity has picked up as well. While conventional wisdom says that profits
6
<PAGE>
in mergers belong to the sellers, the typical deal today is priced at close to
the selling company's current price; no deals have been priced at a premium to
net asset value.
While debt-to-market capital ratios have recently eased to some extent as stock
prices have recovered, leverage ratios in the sector have increased somewhat
over the past two years. Most of the increase has had its impetus in the
evolving nature of public real estate companies' portfolios, which now consist
of more stabilized or repositioned property and less work-in-process.
Financial coverage remains strong. Most REITs have significantly reduced their
dividend payout ratios. Concern is often voiced that a disproportionate amount
of equity will be raised if prices recover, but most companies are not counting
on additional public capital, focusing instead on selling or joint venturing
assets to raise capital that is then put to a variety of uses.
Investment Strategy
The Fund's portfolio continues to focus on high quality, market dominant
companies, with appropriate concern for valuation. We believe these firms have
the ability to command their region or sector, and that their financial
flexibility and excellent managements will enable them to compete effectively in
the changing real estate end economic environment.
These investments are supplemented with holdings in selected companies that have
the potential to become market dominant in the future or where we expect that an
event or other change in a company's condition or environment will produce
attractive returns over the intermediate return. We believe this continues to be
an excellent time to initiate or increase positions in real estate equities.
Very truly yours,
/s/ William K. Morrill, Jr. /s/ Keith R. Pauley /s/ James A. Ulmer
William K. Morrill, Jr. Keith R. Pauley James A. Ulmer III
President Executive Vice President Vice President
July 30, 2000
7
<PAGE>
<TABLE>
<CAPTION>
LaSalle Master Trust - U.S. Real Estate Portfolio
----------------------------------------------------------------------------------------------
Statement of Net Assets
June 30, 2000 (Unaudited)
Shares Value
----------------------------------------------------------------------------------------------
<S> <C> <C>
REAL ESTATE SECURITIES -- 97.4%
Apartments -- 22.6%
Apartment Investment & Management Co..................... 13,900 $ 601,175
Avalon Bay Communities, Inc.............................. 14,888 621,574
Camden Property Trust.................................... 7,000 205,625
Equity Residential Properties Trust...................... 9,100 418,600
Essex Property Trust, Inc................................ 3,400 142,800
Post Properties, Inc..................................... 8,086 355,784
----------
2,345,558
----------
Diversified/Other -- 14.5%
Beacon Capital Partners, Inc. (a) (b).................... 14,250 165,648
Catellus Development Corp.*.............................. 14,700 220,500
Forest City Enterprises, Inc............................. 3,200 106,800
Franchise Finance Corp. of America....................... 9,000 207,000
IStar Financial, Inc..................................... 13,000 272,187
Vornado Realty Trust..................................... 15,500 538,625
----------
1,510,760
----------
Factory Outlets -- 2.7%
Chelsea GCA Realty, Inc.................................. 8,100 279,956
----------
Hotels -- 5.9%
Meristar Hospitality Corp................................ 7,127 149,667
Meristar Hotels & Resorts, Inc.*......................... 8,200 23,575
Starwood Hotels & Resorts................................ 13,500 436,219
----------
609,461
----------
Office/Industrial -- 33.9%
Boston Properties, Inc................................... 11,300 436,462
Duke-Weeks Realty Corp................................... 21,252 475,513
Equity Office Properties Trust........................... 22,288 614,313
Kilroy Realty Corp....................................... 13,000 337,188
Mack-Cali Realty Corp.................................... 13,300 341,644
Mission West Properties, Inc............................. 2,000 21,000
ProLogis Trust........................................... 17,200 366,575
PS Business Parks, Inc................................... 7,550 181,200
Reckson Associates Realty Corp........................... 13,500 320,625
SL Green Realty Corp..................................... 1,900 50,825
Spieker Properties, Inc.................................. 8,000 378,000
----------
3,523,345
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
LaSalle Master Trust - U.S. Real Estate Portfolio
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Net Assets -- Concluded
June 30, 2000 (Unaudited)
Shares Value
----------------------------------------------------------------------------------------------
<S> <C> <C>
Regional Malls -- 7.8%
General Growth Properties, Inc.......................... 8,400 $ 266,700
Rouse Co................................................ 11,300 279,675
Simon Property Group, Inc............................... 12,100 268,469
-----------
814,844
-----------
Retail -- 3.8%
Developers Diversified Realty Corp...................... 11,600 173,275
Kimco Realty Corp....................................... 3,300 135,300
Pan Pacific Retail Properties, Inc...................... 4,500 90,563
-----------
399,138
-----------
Self Storage -- 6.2%
Public Storage, Inc..................................... 19,900 466,406
Storage USA, Inc........................................ 6,000 177,000
-----------
643,406
-----------
Total Real Estate Securities (Cost $9,629,740).......... 10,126,468
-----------
SHORT TERM INVESTMENTS -- 1.6%
Temporary Investment Fund, Inc.--TempCash Portfolio..... 80,546 80,546
Temporary Investment Fund, Inc.--TempFund Portfolio..... 80,545 80,545
-----------
Total Short Term Investments (Cost $161,091)............ 161,091
-----------
TOTAL INVESTMENTS (Cost -- $9,790,831)+ -- 99.0%....................... 10,287,559
Other Assets in Excess of Liabilities -- 1.0%.......................... 103,875
-----------
NET ASSETS -- 100.0%................................................... $10,391,434
===========
</TABLE>
+ Cost for Federal income tax purposes is $9,730,885.
* Non-income producing security.
(a) Security valued at fair value as determined in good faith under procedures
established and monitored by the Board of Trustees. Beacon Capital
Partners, Inc. incorporates the voting trust rights to Cypress
Communications, Inc. At June 30, 2000, this security represented 1.6% of
net assets.
(b) Security exempt from registration under Rule 144A of Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
LaSalle Master Trust -- U.S. Real Estate Portfolio
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Operations
For the six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<S> <C>
Investment Income:
Dividend income................................................ $ 613,726
Interest income................................................ 24,814
----------
Total Investment Income................................... 638,540
----------
Expenses:
Advisory fees.................................................. 76,660
Administration and accounting fees............................. 45,765
Legal fees..................................................... 12,465
Audit fees..................................................... 11,588
Printing expense............................................... 10,130
Amortization of deferred organizational costs.................. 9,185
Directors fees................................................. 8,477
Custodian fees................................................. 5,485
Transfer agent fees............................................ 2,244
Other expenses................................................. 2,027
----------
Total Expenses............................................ 184,026
----------
Less: Fee waivers.............................................. (16,126)
----------
Net Expenses.............................................. 167,900
----------
Net Investment Income............................................... 470,640
----------
Net realized (loss) and unrealized gain on investments:
Net realized (loss) on investments............................. (3,905,406)
Net change in unrealized appreciation on investments........... 6,055,982
----------
Net realized and unrealized gain/(loss) on investment transactions.. 2,150,576
----------
Net increase in net assets resulting from operations................ $2,621,216
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
LaSalle Master Trust -- U.S. Real Estate Portfolio
----------------------------------------------------------------------------------------------
Statement of Changes in Net Assets For the six
months ended For the
June 30, 2000 year ended
(Unaudited) December 31, 1999
----------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income.................................. $ 470,640 $ 1,467,368
Net realized (loss) on investments..................... (3,905,406) (3,622,763)
Net change in unrealized appreciation (depreciation)
on investments......................................... 6,055,982 1,322,748
------------ ------------
Net increase (decrease) in net assets resulting
from operations........................................ 2,621,216 (832,647)
------------ ------------
Capital Share Transactions:
Contributions.......................................... 3,119,312 4,033,038
Withdrawals............................................ (16,411,105) (12,053,595)
------------ ------------
Net (decrease) increase in net assets resulting from
operations............................................. (13,291,793) (8,020,557)
------------ ------------
Net (decrease) in net assets................................ (10,670,577) (8,853,204)
Net assets at beginning of period........................... 21,062,011 29,915,215
------------ ------------
Net assets at end of period................................. $ 10,391,434 $ 21,062,011
============ ============
</TABLE>
---------------------------
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
LaSalle Master Trust -- U.S. Real Estate Portfolio
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six months For the period from
ended June 30, 2000 For the year ended March 30, 1998* through
(unaudited) December 31, 1999 December 31, 1998
------------------- ------------------ -----------------------
<S> <C> <C> <C>
Net assets, end of period (000's).......... $10,391 $21,062 $29,915
Ratio of net expenses to average
net assets (1) (2).................... 1.64% 1.39% 1.27%
Ratio of net investment income to average
net assets (1) (3).................... 4.59% 5.47% 5.10%
Portfolio turnover rate.................... 24% 23% 31%
</TABLE>
-------------------------------
* Commencement of operations
(1) Annualized for periods less than 1 year.
(2) The expense ratio without waivers and reimbursements for the six months
ended June 30, 2000, the year ended December 31, 1999, and the period ended
December 31, 1998 would have been 1.75%, 1.60%, and 1.55%, respectively.
(3) The net investment income ratio without waivers and reimbursements for the
six months ended June 30, 2000, the year ended December 31, 1999 and the
period ended December 31, 1998 would have been 4.49%, 5.25% and 4.82%,
respectively.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
LaSalle Master Trust -- U.S. Real Estate Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
Note 1 -- Organization
LaSalle Master Trust (the "Trust"), formerly known as LaSalle Partners Master
Trust, a Delaware business trust, is registered under the Investment Company Act
of 1940, as amended (the "Investment Company Act"), 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. On that date, the LaSalle U.S. Public
Real Estate Securities Fund, L.P. and the LaSalle Partners U.S. Real Estate Fund
contributed assets with a value of $38,411,064 and $100,000, respectively, in
exchange for beneficial interest in the Portfolio. 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. These services
calculate 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. Proceeds resulting from the sale of these securities
may differ significantly from the fair value assigned by the Board of Trustees.
Debt obligations with maturities of 60 days or less are valued at amortized
cost.
b) Federal Income Taxes:
The Trust is 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. Expenses solely attributable to the Trust are charged directly to the
Trust, while common expenses attributable to both the Trust and a feeder fund
are allocated among both.
13
<PAGE>
LaSalle Master Trust -- U.S. Real Estate Portfolio
--------------------------------------------------------------------------------
Notes to Financial Statements -- (Unaudited) Concluded
--------------------------------------------------------------------------------
d) Deferred Organization Costs:
The Trust has capitalized certain costs in connection with its organization. All
such costs are being 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
Investment Management (Securities) L.P. (the "Manager"). Under this agreement,
the Portfolio pays the Manager an investment management fee, which is accrued
daily and payable monthly, at an annual rate of 0.75% of the Portfolio's average
daily net assets. For the six months ended June 30, 2000, the Manager
voluntarily waived fees totalling $10,221. Certain officers and trustees of the
Trust are also affiliates 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 six months ended June 30, 2000, the Administrator voluntarily waived
fees totalling $5,905. In accordance with the agreement, the Administrator
discontinued its waiver on April 1, 2000.
Note 4 -- Securities Transactions
For the six months ended June 30, 2000, purchases of portfolio securities (other
than short-term securities) totalled $4,245,136. Sales of portfolio securities
totalled $16,168,371.
Note 5 -- Investment Transactions:
At June 30, 2000, gross unrealized appreciation and depreciation for federal
income tax purposes of investment securities for the Portfolio was as follows:
<TABLE>
<S> <C>
Gross Unrealized Appreciation.................. $ 857,658
Gross Unrealized Depreciation.................. (300,984)
----------
Net Unrealized Appreciation.................... $ 556,674
==========
</TABLE>
14
<PAGE>
LaSalle Investment Management Funds, Inc. -- LaSalle U.S. Real Estate Fund
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment in LaSalle Master Trust -- U.S. Real Estate Portfolio........ $4,727,081
Deferred organization costs............................................. 61,812
Receivable from Investment Manager...................................... 48,789
Prepaid expenses........................................................ 40,221
----------
Total Assets....................................................... 4,877,903
----------
LIABILITIES:
Distribution payable to shareholders.................................... 69,408
Accrued expenses and other liabilities.................................. 38,592
----------
Total Liabilities.................................................. 108,000
----------
NET ASSETS................................................................... $4,769,903
==========
COMPOSITION OF NET ASSETS:
Capital Stock, par value $.01 per share, 100,000,000 shares authorized.. $ 6,038
Additional paid-in capital.............................................. 4,710,757
Undistributed net investment income..................................... 4,123
Accumulated net realized (loss) on investments.......................... (196,634)
Net unrealized appreciation on investments.............................. 245,618
----------
$4,769,902
==========
NET ASSET VALUE PER SHARE:
Institutional Class: Net Assets......................................... $4,413,076
Shares outstanding...................................................... 558,638
----------
Net Asset Value, Offering and Redemption Price per Share................ $ 7.90
==========
Retail Class: Net Assets................................................ $ 356,827
Shares outstanding...................................................... 45,184
----------
Net Asset Value and Redemption Price per Share.......................... $ 7.90
==========
Maximum Offering Price Per Share ($7.90/0.95)........................... $ 8.32
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
LaSalle Investment Management Funds, Inc. -- LaSalle U.S. Real Estate Fund
--------------------------------------------------------------------------------
Statement of Operations
For the six months ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income:
Investment Income allocated from LaSalle Master Trust --
U.S. Real Estate Portfolio.................................. $120,814
Expenses allocated from LaSalle Master Trust --
U.S. Real Estate Portfolio.................................. (27,289)
--------
Net Investment Income allocated from LaSalle Master Trust --
U.S. Real Estate Portfolio.................................. 93,525
--------
Expenses:
Transfer agent fees........................................... 25,103
Administration and accounting fees............................ 15,702
Legal fees.................................................... 12,465
Shareholders' reports......................................... 11,016
State registration fees....................................... 10,465
Amortization of organizational costs.......................... 9,480
Directors fees................................................ 8,951
Audit fees.................................................... 1,187
Distribution fees -- Retail Class............................. 386
Shareholders' services........................................ 232
Other expenses................................................ 2,492
--------
Total Expenses........................................... 97,479
--------
Less: Fee waivers............................................. (2,238)
Less: Expense reimbursements.................................. (106,299)
--------
Net Investment Income.............................................. 104,583
--------
Net realized and unrealized (loss) on investments from LaSalle
Master Trust -- U.S. Real Estate Portfolio:
Net realized (loss) on investments............................ (110,685)
Net change in unrealized appreciation on investments.......... 503,011
--------
Net realized (loss) and unrealized gain on investments............. 392,326
--------
Net increase in net assets resulting from operations............... $496,909
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
LaSalle Investment Management Funds, Inc. -- LaSalle U.S. Real Estate Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Statement of Changes in Net Assets For the For the
six months ended year ended
June 30, 2000 December 31, 1999
(Unaudited)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income........................................................ $ 104,583 $ 83,022
Net realized (loss) on investments from
LaSalle Master Trust -- U.S Real Estate Portfolio.......................... (110,685) (82,421)
Change in unrealized appreciation/(depreciation)
of investments from LaSalle Master Trust --
U.S. Real Estate Portfolio................................................. 503,011 (215,537)
---------- ----------
Net increase (decrease) in net assets resulting
from operations............................................................ 496,909 (214,936)
---------- ----------
Distributions to Shareholders:
From net investment income:
Institutional Class.......................................................... (116,760) (46,734)
Retail Class................................................................. (11,752) (8,235)
---------- ----------
Total from net investment income............................................. (128,512) (54,969)
From capital:
Institutional Class.......................................................... -- --
Retail Class................................................................. -- --
---------- ----------
Total from capital........................................................... -- --
---------- ----------
Total Distributions.......................................................... (128,512) (54,969)
---------- ----------
Capital Share Transactions:
Net increase in net assets resulting from
capital share transactions................................................. 2,639,600 1,833,177
---------- ----------
Total increase in net assets................................................. 3,007,997 1,563,272
---------- ----------
Net assets at beginning of period............................................ 1,761,906 198,634
---------- ----------
Net assets at end of period.................................................. $4,769,903 $1,761,906
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
LaSalle Investment Management Funds, Inc. -- LaSalle U.S. Real Estate Fund
--------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout the period
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the six months For the year For the period from
ended June 30, 2000 ended March 30, 1998* through
(Unaudited) December 31, 1999 December 31, 1998
---------------------- ---------------------- ------------------------
Institutional Retail Institutional Retail Institutional Retail
Class Class Class Class Class Class
------------- ------ ------------- ------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period....................... $ 7.17 $ 7.17 $ 7.76 $ 7.77 $ 10.00 $ 10.00
------ ------ ------- ------- -------- --------
Increase/(Decrease) from operations:
Net investment income
from operations........................... 0.15 0.10 0.35 0.31 0.26 0.22
Net realized and unrealized gain
(loss) on investments..................... 0.88 0.91 (0.70) (0.71) (2.24) (2.23)
------ ------ ------- ------- -------- --------
Total from investment
operations................................ 1.03 1.01 (0.35) (0.40) (1.98) (2.01)
------ ------ ------- ------- -------- --------
Less Distributions:
Distributions from net
investment income......................... (0.30) (0.28) (0.24) (0.20) (0.24) (0.20)
Distributions from return
of capital................................ -- -- -- -- (0.02) (0.02)
------ ------ ------- ------- -------- --------
Total Distributions......................... (0.30) (0.28) (0.24) (0.20) (0.26) (0.22)
------ ------ ------- ------- -------- --------
Net asset value,
end of period............................. $ 7.90 $ 7.90 $ 7.17 $ 7.17 $ 7.76 $ 7.77
====== ====== ======= ======= ======== ========
Total Return (1)............................ 14.59% 14.26% (4.58)% (5.19)% (19.92)% (20.22)%
Ratios/Supplementary Data:
Net assets,
end of period (000)....................... $4,413 $ 357 $ 1,470 $ 292 $ 154 $ 45
Ratio of net expenses to average
net assets (2)(3)(5)...................... 1.05% 1.45% 1.05% 1.45% 1.05% 1.45%
Ratio of net investment income to
average net assets (2)(4)(5).............. 7.18% 5.61% 6.15% 5.11% 4.28% 3.93%
Portfolio turnover rate on LaSalle Master
Trust -- U.S. Real Estate Portfolio...... 4% 4% 23% 23% 31% 31%
</TABLE>
-----------------------------------
* Commencement of operations.
(1) Not annualized.
(2) Annualized for periods less than 1 year.
(3) The expense ratio without waivers and reimbursements for the six months
ended June 30, 2000, the year ended December 31, 1999, and the period ended
December 31, 1998, for the Institutional Class would have been 7.23%,
16.82%, and 113.17%, respectively. For the same periods, the Retail Class
ratios would have been 16.73%, 28.39%, and 143.31%, respectively.
(4) The net investment income ratios without waivers and reimbursements for the
six months ended June 30, 2000, the year ended December 31, 1999, and the
period ended December 31, 1998 for the Institutional Class would have been
0.99%, (9.63)%, and (106.79)%, respectively. For the same periods, the
Retail Class ratios would have been (9.68)%, (21.80)%, and (136.93)%,
respectively.
(5) Expense and net investment income ratios represent the combined ratios for
LaSalle U.S. Real Estate Fund and its pro rata share of the LaSalle Master
Trust -- U.S. Real Estate Portfolio's expenses and income.
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
LaSalle Investment Management Funds, Inc. -- LaSalle U.S. Real Estate Fund
--------------------------------------------------------------------------------
Notes to Financial Statements -- (Unaudited)
--------------------------------------------------------------------------------
Note 1 -- Organization
LaSalle Investment Management Funds, Inc. (the "Company"), formerly known as
LaSalle Partners Funds, Inc., a Maryland corporation, is registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), as a
diversified open-end management investment company currently offering one
series: LaSalle 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 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, 2000, the
Fund held a 45.5% 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 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.
19
<PAGE>
LaSalle Investment Management Funds, Inc. -- LaSalle U.S. Real Estate Fund
--------------------------------------------------------------------------------
Notes to Financial Statements -- (Unaudited) Continued
--------------------------------------------------------------------------------
The amount of dividends from net investment income and distributions from net
realized gains are determined in accordance with federal income tax regulations,
which may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the composition of net assets based on their federal tax-basis treatment;
temporary differences do not require reclassification. Distributions that exceed
net investment income and net realized capital gains for financial reporting
purposes but not for tax purposes are reported as distributions in excess of net
investment income or net realized gains. To the extent they exceed net
investment income and net realized capital gains for tax purposes, they are
reported as distributions of capital.
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 and 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
LaSalle Investment Management (Securities) L.P. (the "Manager") has
contractually agreed to reimburse the operating expenses in excess of 1.45% and
1.05% for the Retail and Institutional Classes, respectively. For the six months
ended June 30, 2000, the Manager reimbursed the Fund $106,299 in expenses/fees
due/accured. Certain officers and directors of the Company are also officers,
directors, and shareholders of the Manager. No officer or director of the
Company who is an officer, director or shareholder of the Manager receives any
compensation from the Fund.
The Company 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 six months ended June 30, 2000, the
Administrator voluntarily waived fees totalling $2,238. In accordance with the
agreement, the Administrator discontinued its waiver on April 1, 2000.
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. 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 daily 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 six months ended June 30, 2000, there was $386 accrued in
distribution fees.
Under a shareholder services 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
20
<PAGE>
LaSalle Investment Management Funds, Inc. -- LaSalle U.S. Real Estate Fund
--------------------------------------------------------------------------------
Notes to Financial Statements -- (Unaudited) Concluded
--------------------------------------------------------------------------------
of 0.15% of average daily net assets. For the six months ended June 30, 2000,
there was $232 accrued in shareholder services fees.
Note 4 - Share Capital:
The Fund is authorized to issue up to 50 million Retail Class shares and 50
million Institutional Class shares, each with a par value of $.01 per share.
Transactions in shares of capital stock, for the six months ended June 30, 2000,
were as follows:
<TABLE>
<CAPTION>
Institutional Class
--------------------------------------------
Six months ended Year ended
June 30, 2000 December 31, 1999
-------------------- ---------------------
Shares Amount Shares Amount
------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Shares issued................ 397,623 $2,926,548 294,434 $2,307,986
Shares reinvested............ 7,225 52,152 6,384 46,679
Shares redeemed.............. (51,087) (373,522) (115,757) (824,614)
------- ---------- -------- ----------
Net increase................. 353,761 $2,605,178 185,061 $1,530,051
======= ========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Retail Class
--------------------------------------------
Six months ended Year ended
June 30, 2000 December 31, 1999
-------------------- ---------------------
Shares Amount Shares Amount
------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Shares issued................ 11,625 $ 85,990 153,051 $1,200,009
Shares reinvested............ 954 6,884 1,056 7,966
Shares redeemed.............. (8,180) (58,452) (119,091) (904,849)
------- ---------- -------- ----------
Net increase................. 4,399 $ 34,422 35,016 $ 303,126
======= ========== ======== ==========
</TABLE>
Note 5 - Capital Loss Carryover:
The Fund had the following capital loss carryforwards as of December 31, 1999:
<TABLE>
<CAPTION>
Capital Loss
Carryforward Expiration Date
------------ ---------------
<S> <C>
$ 3,529 2006
78,892 2007
</TABLE>
These carryforwards may be applied against any realized net taxable capital gain
in subsequent years until fully utilized or until the expiration date, whichever
occurs first.
21
<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.
The Fund's shares are not deposits or obligations of, or guaranteed or endorsed
by, any bank. The shares are not federally insured by the FDIC, Federal Reserve
Board or any other governmental agency, and are subject to investment risks,
including possible loss of principal amount invested.
Distributor: Funds Distributor, Inc.
