<PAGE>
Prospectus
Begins on page 1
LaSalle U.S. Real Estate Fund
Retail Class Shares
Institutional Class Shares
April 30, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or
disapproved these securities or passed upon the adequacy of this prospectus,
and any
representation to the contrary is a criminal offense
Global Leadership in the New World of Real Estate
<PAGE>
Strength in Real Estate Management
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Focus
LaSalle Investment Management focuses exclusively on real estate investment
management and historically has managed portfolios for large institutional
clients. Now through the LaSalle U.S. Real Estate Fund, the firm seeks to offer
smaller institutions and high-net worth investors the best long-term total
return opportunities--capital appreciation and current income--from high-
quality REITs.
Experience
At LaSalle, managing REIT securities is a long-term specialty, not a short-term
fad. For 15 years LaSalle has provided institutional investors with expertise
in the management of REIT portfolios. During this time, LaSalle's managers have
weathered various real estate market cycles, gaining unparalleled industry
knowledge and insight.
Philosophy
At LaSalle Investment Management, we believe that real estate is, first and
foremost, an asset class, not a market sector. Real estate investments may be
an important component of an asset allocation strategy, complementing an
investor's traditional equity, fixed-income and cash holdings.
Consistency
This conviction underscores the importance of style consistency. In an
effective asset allocation strategy, there is no room for style drift among
individual mutual funds. The LaSalle U.S. Real Estate Fund maintains its long-
term style focus on the real estate market, regardless of short-term market
cycles and trends. This dedication to style helps keep your asset allocation
strategies intact.
Research
At the heart of our investment management process is a rigorous research effort
focused on top-down and bottom-up analysis. Driving the top-down effort is the
firm's proprietary Market Tracking System, a forecasting tool developed by our
research department. The system:
. Predicts market conditions and rental-rate growth in the U.S. office and
industrial markets.
. Combines information on current market conditions with forecast supply and
demand over the next three years to predict rental-rate changes by market.
Armed with this important market data, our researchers then conduct in-depth
sector and company analysis. It is through this intensive bottom-up research
that our analysts select specific real estate securities that meet our
standards for quality, yield, appreciation potential and risk management.
Jones Lang Lasalle--The Premier Force in Real Estate
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When you invest in the LaSalle U.S. Real Estate Fund, you have the world's
leading real estate services and investment management firm, operating across
more than 100 key markets on five continents, on your side. Jones Lang LaSalle
provides comprehensive integrated expertise, including property and cooperate
facility management, transaction services and investment management core
services on a local, regional and global level to owners, occupiers and
investors. Jones Lang LaSalle offers clients exposure to worldwide real estate
investments opportunities, innovative products and an unmatched level of
experience and expertise.
LaSalle Investment Management is the world's second largest and most diverse
real estate investment management firm, with $21.5 billion of assets under
management. Jones Lang LaSalle also is the industry leader in property and
cooperate facility management service, with a portfolio of approximately 700
million square feet under management worldwide.
Not part of the prospectus. Data presented is the most recent available as of
print date.
<PAGE>
Table of Contents
An Overview of the Fund........................................................2
Fees and Expenses..............................................................3
The Fund's Goals and Strategies................................................4
Principal Risks................................................................5
Performance of LaSalle Investment
Management (Securities) L.P....................................................7
Purchasing Shares..............................................................8
Redeeming Shares..............................................................12
Distributions and Taxes.......................................................13
Management of the Fund........................................................14
Financial Highlights..........................................................16
Additional Fund Information...................................................17
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 Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other government
agency. Investing in the Fund involves risk, and you could lose money.
Objective: LaSalle U.S. Real Estate Fund (the "Fund") seeks total return
primarily through investments in U.S. real estate securities. The Fund operates
under a "master/feeder" structure, whereby it invests all of its assets in the
U.S. Real Estate Portfolio of LaSalle Master Trust (the "Trust"). The Trust is
a separate mutual fund with an investment objective identical to the Fund. The
Fund is a separate series of LaSalle Investment Management Funds, Inc. (the
"Company"), an open-end diversified investment management company.
Share Classes: The Fund offers Retail Class shares and Institutional Class
shares.
Manager: LaSalle Investment Management (Securities) L.P. (the "Manager"), a
registered investment adviser and a subsidiary of Jones Lang LaSalle
Incorporated, manages the Fund and the Trust's assets.
Distributor: Funds Distributor, Inc. (the "Distributor") serves as principal
underwriter and distributor of the Fund's shares.
Administrator/Transfer Agent: PFPC Inc. serves as the Fund's administrator and
as transfer agent and dividend disbursing agent for the Fund's shares.
1
<PAGE>
LaSalle Investment An Overview of the Funds
Management Funds
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An Overview of the Fund
Principal Investment Strategy
The Fund and the Trust seek to provide current income and capital appreciation
by investing in the equity securities of real estate investment trusts (REITs)
and other publicly-traded real estate industry operating companies. The Fund
seeks to achieve its investment strategy by investing all of its investable
assets in the Trust which has an identical investment objective. Under normal
conditions, at least 85% of the Trust's total assets will be invested in REITs
and other publicly-traded real estate industry companies. The Trust's
investments normally will be allocated among a number of companies representing
diverse investment policies and real property holdings Certain securities will
be selected for high current return, while others will be chosen for long-term
capital appreciation potential.
Principal Risks
An investment in the Fund involves risks, and you could lose money.
The Fund is subject to market risk, which is the possibility that stock prices
overall will decline over short or even extended periods. If there is a decline
in the stock market in general, the Fund's share price may decline.
The Fund is subject to risks similar to those associated with owning real
estate directly. These risks include declines in the value of real estate and
increased costs associated with operating real estate. The Fund also is subject
to various risks related to investing in REITs. These risks include changes in
the value of and income from the underlying properties and credit and interest
rate risk. Credit risk, which principally affects mortgage REITs, is the
possibility that an issuer will default on a security by failing to pay
interest or principal when due. Interest rate risk is the possibility that
interest rates applicable to the Trust's investments in fixed-rate obligations
could change. The Fund also may invest in illiquid securities, each of which
has additional risks.
For more information on the risks of investing in the Fund, see the Principal
Risks section.
Average Annual Total Return
The table shows average total returns of the Fund's Retail Class and
Institutional Class shares, compared to the Wilshire Real Estate Securities
Index, a market capitalization weighted index of publicly traded real estate
securities.
This information gives some indication of the risks of an investment in the
Fund by comparing the Fund's performance with a broad measure of market
performance.
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<TABLE>
<CAPTION>
Calendar period Retail Class* Institutional Class Wilshire Real Estate Securities Index
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<S> <C> <C> <C>
1 Year -5.2% -4.6% -3.2%
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Life of
the
Fund/1/ -14.7% -14.2% -11.4%
- -------------------------------------------------------------------------------------------
</TABLE>
*The Retail Class shares are sold subject to a sales charge, which currently is
waived for certain investors (see Purchasing Shares--Retail Class Shares). The
effect of the sales charges is not reflected in the total returns shown above;
if these amounts were reflected, total returns would be less than those shown
above.
The performance of Retail and Institutional Shares will differ due to
differences in expenses. This bar chart shows changes in the performance of the
Portfolio's Institutional Shares for 1 year and for the life of the Fund/1/.
<TABLE>
------------------------------------
<S> <C> <C>
Best Quarter 7.21% 6/30/99
------------------------------------
Worst Quarter -15.04% 9/30/98
------------------------------------
</TABLE>
/1/The Retail Class and Institutional Class of the Fund each commenced
operations on March 30, 1998.
2
<PAGE>
LaSalle Investment Fees and Expenses
Management Funds
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Explanation of Fees
Management fee: The fee the Trust pays to the Manager for managing the Trust's
assets.
12b-1 fee: A fee the Fund pays for sales compensation to financial services
firms for marketing and distributing the Fund's shares.
Shareholder services fee: A fee the Fund pays for sales compensation to
financial services firms for shareholder account service and maintenance.
Other expenses: These include fees for items related to transfer agency,
custody and other expenses.
Fees and Expenses
The following tables summarize the fees and expenses related to investing in
the Fund.
Shareholder fees (fees paid directly from your investment)
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<TABLE>
<CAPTION>
Retail Class Institutional Class
<S> <C> <C>
Maximum sales charge imposed on purchases (as
a percentage of offering price) 5%* None
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Sales charge on reinvested dividends None None
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Redemption fee None None
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</TABLE>
*The sales charge currently is being waived for certain investors (see
Purchasing Shares--Retail Class Shares).
Annual fund operating expenses as % of average net assets/1/
(expenses that are deducted from Fund assets)
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<TABLE>
<CAPTION>
Retail Class Institutional Class
<S> <C> <C>
Management fee/2/ 0.75% 0.75%
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Distribution (12b-1) fee 0.25% None
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Shareholder services fee 0.15% None
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Other expenses/3/ 27.24% 16.07%
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Total Fund operating expenses/3/ 28.39% 16.82%
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Waivers/Reimbursements/2/ 26.94% 15.77%
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Net expenses after waivers/reimbursements 1.45% 1.05%
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</TABLE>
/1/The information in the table reflects the aggregate fees and expenses of the
Fund and the Trust. Expenses for the Fund include 12b-1, shareholder services
and administration fees; expenses for the Trust include management fees and
other expenses.
/2/The Manager has contractually agreed to waive a portion of its management
fee and reimburse the Fund to limit total operating expenses until April 30,
2001.
/3/Expenses shown in the fee table are estimated based on expenses incurred in
the last fiscal year. Actual expenses may be higher or lower.
Example
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This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
This example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year, payment of
the 5% sales charge on Retail Class shares and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
----------------------------------------
<TABLE>
<CAPTION>
Retail Class Institutional Class
<S> <C> <C>
One year $ 640 $ 107
----------------------------------------------
Three years $ 936 $ 334
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Five years $1,253 $ 579
----------------------------------------------
Ten years $2,148 $1,283
----------------------------------------------
</TABLE>
3
<PAGE>
LaSalle Investment The Fund's Goals and Strategies
Management Funds
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A Note About the Fund's Objective
The investment objective is not a fundamental policy, meaning that it may be
changed upon notice to, but without the approval of, the Fund's shareholders or
the Trust's investors. There can be no assurance that the Fund or the Trust
will achieve the investment objective.
Real Estate Investment Trusts
REITs pool investors' funds primarily in income-producing real estate or real
estate-related loans or interests. A REIT is not taxed on income distributed to
its shareholders if it complies with specific regulatory requirements and
distributes to its shareholders at least 95% of its taxable income for each
taxable year.
Generally, REITs are classified as:
. Equity REITs, which invest their assets directly in real property and derive
their income primarily from rents;
. Mortgage REITs, which invest in real estate mortgages and derive their income
primarily from interest payments; and
. Hybrid REITs, which combine the characteristics of Equity and Mortgage REITs.
The Manager expects to invest primarily in REITs.
Investment Objective
The Fund's investment objective is total return through investments primarily
in U.S. real estate securities. The Fund seeks to achieve its objective by
investing all of its investable assets in the Trust, a separate mutual fund
with an investment objective identical to the Fund and managed by the Manager.
Principal Investment Strategies
The Trust seeks to provide investors with current income from dividends and
distributions. It also seeks to provide capital appreciation from the selection
of securities that the Manager believes are undervalued, meaning that the
securities may achieve price gains if their true value is realized in the
marketplace.
Under normal conditions, at least 85% of the Trust's total assets will be
invested in the equity securities of real estate investment trusts (REITs) and
other publicly-traded real estate industry operating companies. These real
estate industry operating companies must derive at least half of their revenues
or net profits from the ownership, development, construction, financing,
management or sale of commercial, industrial or residential real estate.
The Trust's investments normally will be allocated among a number of companies
representing diverse investment policies and real property holdings. For
example, certain securities may be selected for high current return, while
others may be chosen for long-term capital appreciation potential. In selecting
these securities, the Manager may use intensive analysis that covers economic,
industry and market-cycle trends and individual company research.
The Trust may invest up to 15% of its total assets in illiquid securities and
up to 10% of its total assets in foreign securities.
The Manager typically invests a portion of the Trust's assets in money market
securities, primarily to provide liquidity for payment of expenses and proceeds
of redemptions.
4
<PAGE>
LaSalle Investment Principal Risks
Management Funds
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Principal Risks
As with all investments, an investment in the Fund could cause you to lose
money. The specific risks associated with investing in the Fund are described
below.
General Risks of Real Estate Securities
Because the Fund concentrates its investments in the real estate industry, the
Fund will be subject to risks similar to those associated with the direct
ownership of real estate, including:
. Declines in the value of real estate
. Risks related to general and local economic conditions
. Dependency on management skill
. Heavy cash flow dependency
. Possible lack of availability of mortgage funds
. Overbuilding
. Extended vacancies of properties
. Increased competition
. Increases in property taxes and operating expenses
. Changes in zoning laws
. Losses due to costs resulting from the clean-up of environmental problems
. Liability to third parties for damages resulting from environmental problems
. Casualty or condemnation losses
. Limitations on rents
. Changes in neighborhood values and the appeal of properties to tenants
. Changes in interest rates
REIT Risks
Investors also will be subject to certain risks associated with REITs. For
example, Equity REITs may be affected by changes in the value of the underlying
properties owned by the REITs, while Mortgage REITs may be affected by the
quality of any credit extended. Credit risk is the possibility that an issuer
will default on a security by failing to pay interest or principal when due. If
this happens, the Fund could lose money. Equity and Mortgage REITs depend on
management skills and generally may not be diversified. These REITs also are
dependent on the income generated by the underlying properties to meet
operating expenses, and they are subject to borrower default and to self-
liquidation. In addition, Equity and Mortgage REITs possibly could fail to
qualify for tax-free pass-through of income or to maintain their exemptions
from registration under the Investment Company Act of 1940.
The above factors also may adversely affect a borrower's or a lessee's ability
to meet its obligations to the REIT. In the event of a default by a borrower or
lessee, the REIT may experience delays in enforcing its rights as a mortgagee
or lessor and may incur substantial costs associated with protecting its
investments.
REITs, particularly Mortgage REITs, are subject to interest rate risk. When
interest rates decline, the value of a REIT's investment in fixed-rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed-rate obligations can be expected to
decline. In contrast, as interest rates on adjustable-rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans gradually will
align themselves to reflect changes in market interest rates. This causes the
value of these investments to fluctuate less dramatically in response to
interest rate fluctuations than investments in fixed-rate obligations.
5
<PAGE>
LaSalle Investment Principal Risks, continued
Management Funds
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Master/Feeder Fund Structure
The Fund is a separate series of the Company, governed by its board of
directors. The board of directors of the Company believes that the
master/feeder fund structure offers opportunities for substantial growth in the
assets of the Trust, which may enable the Fund to realize economies of scale
that could reduce the Fund's operating expenses.
In addition to selling its shares to the Fund, the Trust may sell shares to
other mutual funds or institutional investors. These investors will invest in
the Trust under the same terms and conditions and will pay a proportionate
share of the Trust's expenses. However, due to variations in distribution
arrangements and operating expenses, the other funds investing in the Trust may
sell their shares at a different price than the Fund. So, the Trust's various
investors may earn different returns.
The Fund's investment in the Trust may be adversely affected by the actions of
other funds investing in the Trust. For example, if a large fund withdraws from
the Trust, the remaining funds may experience higher pro rata operating
expenses, which can lower returns. (Of course, this possibility also exists for
traditionally structured funds that have large institutional investors.)
Additionally, the Trust may become less diverse, resulting in increased risk.
Also, funds with a greater pro rata ownership in the Trust could have effective
voting control of the Trust's operations.
The Fund may withdraw its investment from the Trust at any time, as long as the
Company's board of directors determines that the withdrawal is in the best
interest of Fund shareholders. Upon any such withdrawal, the board of directors
would consider what action might be taken, including retaining the investment
manager to manage the Fund's assets directly or investing all the Fund's assets
in another pooled investment entity having the same investment objective as the
Fund.
Distributions in Kind
Certain changes in the Trust's investment objective, policies or restrictions
may require the Fund to withdraw its interest in the Trust. Such withdrawal
could result in a distribution "in kind" of portfolio securities, rather than
cash, from the Trust. If this happens, the Fund, may incur brokerage, tax and
other charges associated with converting its securities to cash. In addition, a
distribution in kind may result in a less diversified portfolio or adversely
affect the Fund's liquidity.
Illiquid Securities
According to the Trust's guidelines for investing in illiquid securities, the
Trust may purchase Rule 144A securities, which are restricted securities that
have not been registered under the Securities Act of 1933. Nevertheless,
certain qualified institutional investors may trade these securities. The
presence or absence of a secondary market in these securities may affect their
value.
General Risks of Investing in Stocks
The Fund is subject to market risk, which is the possibility that stock prices
overall will decline over short or even extended periods. Stock markets tend to
move in cycles, with periods of rising stock prices and periods of rising stock
prices. The Trust's portfolio will reflect changes in prices of individual
portfolio stocks or general changes in stock valuations. As a result, the
Fund's share price may decline and you could lose money.
6
<PAGE>
LaSalle Investment Performance of LaSalle
Management Funds Investment Management
- --------------------------------------------------------------------------------
The chart below shows the historical performance of all accounts and funds of
the Manager having the same investment objective, policies and strategy as the
Fund and the Trust. The data, calculated on an average annual total return
basis, is provided to illustrate the Manager's past performance in managing
accounts in accordance with the same strategy, research and analytical models
used for the Trust. This information does not represent the performance of the
Fund and the Trust. You should not consider this performance data as an
indication of future performance of the Fund or the Trust. The Fund's
performance for the period March 30, 1998 (commencement of operations) through
December 31, 1999, is contained in the Fund's 1999 Annual Report.
<TABLE>
<CAPTION>
Years Ended December 31,
- -----------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LaSalle Investment
Management Weighted Rate
of Return/1/ (1.5%) (19.1%) 21.2% 37.8% 15.8% 6.0% 17.5% 16.7% 35.0% (18.7%)
- -----------------------------------------------------------------------------------------------------------
Wilshire Real Estate
Securities Index/2/ (3.2%) (17.1%) 19.0% 36.9% 13.7% 1.6% 15.2% 7.4% 20.0% (33.5%)
- -----------------------------------------------------------------------------------------------------------
Assets end of period
($ millions) 2,808.0 3,177.4 3,134.2 2,250.3 1,346.4 629.4 291.5 144.4 127.8 84.5
- -----------------------------------------------------------------------------------------------------------
Number of portfolios 39 44 37 32 27 18 14 16 12 10
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</TABLE>
/1/The composite performance data shown above for the LaSalle Securities Asset
Weighted Rate of Return (the "LaSalle Securities Composite") was developed from
the aggregate performance of all accounts managed with sole discretionary
investment authority by the Manager on a basis substantially the same as the
Trust. The composite performance data is provided net of investment management
fees, and custodial fees and custodial expenses have not been deducted. The
investment management fees deducted generally are substantially lower than the
fees and expenses paid by the Fund and the Trust and their returns would have
been lower if the accounts included had been subject to the fees and expenses
incurred by the Fund and the Trust. In addition, if the accounts were regulated
investment companies under the federal securities and tax laws, the composite
return might have been adversely affected by the diversification requirements,
tax restrictions and investment limitations to which the Fund and the Trust are
subject. The net investment performance represents total return, assuming
reinvestment of all dividends and proceeds from capital transactions.
The composite performance data has been calculated in accordance with
Performance Presentation Standards established by the Association for
Investment Management and Research ("AIMR"), but have not been verified by an
entity independent of the Manager. These standards differ from the SEC's method
of performance calculation.
/2/The Wilshire Real Estate Securities Index is an unmanaged index of REITs and
real estate operating companies and is widely recognized as an indicator of the
performance of the real estate securities market.
7
<PAGE>
LaSalle Investment Purchasing Shares
Management Funds
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Purchasing Shares
The Fund offers two classes of shares of the Fund:
. Retail Class, with a minimum initial investment of $10,000.
. Institutional Class, with a minimum initial investment of $250,000.
Other than the minimum investment requirements, the primary difference between
the two classes is that the Retail Class is sold with a sales charge that
currently is waived for certain investors (see Retail Class Shares on following
page) and is subject to distribution and shareholder services fees, while the
Institutional Class is not. Because each class is subject to different
expenses, they likely will have different share prices.
Determination of Share Price
The Fund's net asset value (NAV) is determined each business day (any day the
NYSE is open for trading) as of the close of regular trading on the New York
Stock Exchange (NYSE), which currently is 4 p.m., Eastern time. Shares will not
be priced on days on which the NYSE is closed for trading.
NAV Calculation
The NAV of a share class is calculated by valuing its proportion of the Fund's
assets (the value of its investment in the Trust and other assets), deducting
all liabilities attributable to that class, and dividing the result by the
number of shares outstanding for that particular class. For this purpose, the
Trust's portfolio securities are valued primarily on the basis of market
quotations or, if market values are not available, at fair value determined by
the Trust.
Purchase Price
Investors purchase shares at the NAV next determined after the transfer agent
receives the purchase order. Purchase orders that are received by the transfer
agent prior to the close of regular trading on the NYSE on any business day are
priced at the NAV determined that day. Purchase orders received after the close
of trading on a business day are priced as of the time the next NAV is
calculated. (If you place a purchase order through your investment
representative, it is that representative's responsibility to forward the order
to the transfer agent in a timely manner.)
8
<PAGE>
LaSalle Investment Purchasing Shares, continued
Management Funds
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Distribution Plan
The Fund's distribution plan provides for the payment of a distribution fee
(12b-1 fee) from the assets of the Retail Class. This fee supports activities
designed to increase sales of the Retail Class, including advertising, the
creation of sales literature and compensation to dealers. The board of
directors has authorized an annual distribution fee of 0.25%, and the annual
fee may not exceed 0.75% of the average daily net assets of the Retail Class.
Because this fee is paid out of the assets of the Retail Class, over time this
fee will increase the cost of your investment and may cost you more than paying
other types of sales charges.
Shareholder Services Plan
This plan allows the Fund to pay 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. The board of directors has authorized an annual shareholder services
fee of 0.15%, and the annual fee may not exceed 0.25% of the average daily net
assets of the applicable shareholder accounts. Because this fee is paid out of
the assets of the Retail Class, over time this fee will increase the cost of
your investment.
Sales Compensation
Whenever you invest in Retail Class shares, your financial services firm
receives compensation. These firms typically pass along a portion of this
compensation to your financial representative. Compensation payments originate
from sales charges paid by investors and from 12b-1 fees paid out of the assets
of the Fund's Retail Class.
Financial services firms selling large amounts of Fund shares may receive extra
compensation. This compensation, which the Manager, pays out of its own
resources, may include asset retention fees as well as reimbursement for
marketing expenses.
Retail Class Shares
Purchasing Retail Class shares
Investors may purchase Retail Class shares:
. Through any securities dealer or financial services firm that has a sales
agreement with the Distributor. The Fund accepts telephone orders for shares
from certain securities dealers and other financial services firms. It is the
responsibility of these firms to forward purchase orders and payments for
shares promptly. Financial services firms may charge the investor a
transaction fee or other fees for their services. These fees are not charged
if the shares are purchased directly through the Fund's transfer agent.
. Directly through the Fund's transfer agent (PFPC Inc., P.O. Box 8976,
Wilmington, DE 19899-8976).
Making Additional Investments
Shareholders may purchase additional shares for an existing account by mailing
a check payable to "LaSalle Investment Management Funds, Inc.--LaSalle U.S.
Real Estate Fund" to the following address:
LaSalle Investment Management Funds, Inc.
c/o PFPC Inc.
P.O. Box 8976
Wilmington, DE 19899-8976
Shareholders may not purchase shares with a check issued by a third party and
endorsed over to the Fund.
Shareholders also may purchase shares for an existing account via a wire
transfer. Wire funds to:
PNC Bank, N.A.
Philadelphia, Pennsylvania
ABA #0310-0005-3
Credit DDA #8511088160
For credit to: LaSalle Investment Management Funds, Inc.--LaSalle U.S. Real
Estate Fund
Account No.:
Account Name:
9
<PAGE>
LaSalle Investment Purchasing Shares, continued
Management Funds
- --------------------------------------------------------------------------------
Sales Charge
The Fund's Retail Class shares are offered and sold at NAV plus a sales charge
that varies according to the size of your purchase. The Fund receives the NAV
and the sales charge is then allocated between your investment dealer and the
Distributor as shown in the following table. However, the Distributor, at its
discretion, may allocate the entire sales charge to your investment dealer.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sales charge as a Sales charge as a Dealers' re-allowance
% of net asset % of the offering as a % of offering
Amount of transaction value per share price per share price per share
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.26% 5.00% 4.25%
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$50,000 but less than
$100,000 4.71% 4.50% 3.75%
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$100,000 but less than
$250,000 3.63% 3.50% 2.85%
- -----------------------------------------------------------------------------------
$250,000 but less than
$500,000 2.56% 2.50% 2.10%
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$500,000 but less than
$1 million 2.04% 2.00% 1.60%
- -----------------------------------------------------------------------------------
$1 million or more See below See below See below
- -----------------------------------------------------------------------------------
</TABLE>
Purchases of $1 Million or More
No initial sales charge applies to purchases of Retail Class shares of $1
million or more. However, a contingent deferred sales charge (CDSC) of 1% is
imposed if you redeem these shares within one year of purchase. A dealer
concession of up to 1% may be paid on these investments.
The CDSC is based on the lesser of the original purchase cost or the current
NAV of the shares being redeemed, and it is not charged on shares you acquired
by reinvesting dividends. To keep your CDSC as low as possible, each time you
place a request to redeem shares, we first redeem any shares in your account
that are not subject to the CDSC. The Distributor receives the entire amount of
any CDSC you pay.
Reducing Your Sales Charge
There are three ways you may be able to combine your purchases and reduce your
sales charge:
. Accumulation privilege lets you add the value of any Fund shares you already
own to the amount of your next Retail Class investment for purposes of
calculating the sales charge.
. Group investment program lets a group purchase Retail Class shares at a
reduced sales charge. A qualified group is treated as a single purchaser
under this privilege. Each investor has an individual account, but the
group's investments are lumped together for sales charge purposes, making the
investors potentially eligible for reduced sales charges. There is no charge
to participate, no obligation to invest (although initial investments must
total at least $10,000) and individual investors may close their accounts at
any time.
. Letter of intention lets you purchase Retail Class shares over a 13-month
period and receive the same sales charge as if all shares had been purchased
at once.
To take advantage of any of these programs, complete the appropriate section of
your account application. For more information, see the Statement of Additional
Information or contact your investment dealer or the Fund.
10
<PAGE>
LaSalle Investment Purchasing Shares, continued
Management Funds
- --------------------------------------------------------------------------------
Reinstatement Privilege
When you redeem Retail Class shares, you may reinvest some or all of the
proceeds within 120 days without a sales charge, as long as you notify the Fund
in writing before you reinvest. If you paid a CDSC when you redeemed your
shares, you will be credited with that amount. All accounts involved must have
the same registration.
Waivers for Certain Investors
The Fund may sell Retail Class shares at NAV without a sales charge to various
individuals and institutions, including:
. Registered representatives and other employees (and their families) of
broker-dealers having sales agreements with the Distributor;
. Employees (and their families) of financial institutions having sales
agreements with the Distributor (or otherwise having an arrangement with a
broker-dealer or financial institution with respect to sales of Fund shares);
. ""Wrap accounts" for the benefit of clients of broker-dealers, financial
institutions or financial planners adhering to certain standards established
by the Distributor;
. Financial representatives using Fund shares in fee-based investment products
under a signed agreement with the Distributor or the Manager; and
. Individuals transferring assets from an employee benefit plan.
Institutional Class Shares
Institutional Class shares currently are available only to certain qualified
purchasers, including financial institutions; pension, profit-sharing and
employee benefit plans and trusts; insurance companies; investment companies;
and investment advisers and broker-dealers acting for their own accounts or for
the accounts of such institutional investors.
Employee Purchase Program
Current and former directors and officers of LaSalle Investment Management
(Securities), Inc.; current and retired officers, directors and employees of
Jones Lang LaSalle Incorporated and its direct and indirect subsidiaries; and
their spouses and minor children also may purchase Institutional Class shares
by opening an employee investment account directly with the Company. The
account requires an initial investment of $1,000 or more. Call 1-800-LaSalle
for an account application.
Retirement Plans
Fund investors can establish an account under one of several tax-sheltered
plans, including Individual Retirement Accounts (IRAs). For more information on
IRAs and other retirement plans, along with their benefits, provisions and
fees, contact your investment professional.
11
<PAGE>
LaSalle Investment Redeeming Shares
Management Funds
- --------------------------------------------------------------------------------
Redeeming Shares
Shareholders may redeem all or part of their investment on any business day
(any day the NYSE is open for trading) by transmitting a redemption order
either through their dealer (who may charge a fee for the service) or directly
to the Fund's transfer agent.
Your shares will be sold at the NAV next determined after the Fund receives
your redemption order in proper form. Under normal conditions, redemption
proceeds are made by check and are mailed within seven days. However, if the
board of directors of the Fund determines that it would be in the best interest
of the remaining shareholders to pay the redemption proceeds in whole or in
part by a distribution in kind of portfolio securities in lieu of cash, the
Fund may make such distribution in kind in compliance with applicable SEC
rules. If shares are redeemed in kind, the redeeming shareholder may incur
brokerage costs in later converting the assets to cash. In no event will a
redeeming shareholder of the Fund receive a security issued by the Trust.
By Mail
Shareholders may redeem Fund shares via written requests delivered to the
Fund's transfer agent. To redeem by mail, you must send a letter containing
written instructions specifying:
1. The account number
2. The number of shares or dollar amount to be redeemed
All account owners must sign the letter in the exact names in which the account
is registered. (Additional documentation may be required for redemptions by
corporations, partnerships, trusts or fiduciaries.)
Send the letter to the Fund at the following address: LaSalle Investment
Management Funds, Inc., c/o PFPC Inc., P.O. Box 8976, Wilmington, DE 19899-
8976.
By Telephone
Shareholders who authorize telephone transactions on their account application
may redeem up to $25,000 by calling the Fund's transfer agent toll free at 1-
800-LaSalle. A check for the redeemed shares will be mailed to the account
address of record.
Neither the Fund nor its transfer agent will be responsible for any loss,
liability, cost or expense for acting upon telephone instructions that it
believes to be genuine. The Fund and transfer agent will employ reasonable
procedures to confirm that the telephone instructions are genuine.
Other Redemption Information
. Selling recently purchased shares: Redemption proceeds for shares recently
purchased by check will be mailed after the check for the purchase has
cleared.
. Dividends and redemptions: Dividends payable up to the redemption date will
be paid on the next dividend payment date. If a shareholder redeems all
shares in an account, the Fund will remit a check to the shareholder.
. Low balances: Upon 60 days' notice, the Fund may redeem the shares in any
account that falls below the minimum required balance, unless the decline in
account value is due solely to a decline in the Fund's NAV.
Signature Guarantee
To protect against fraud, you must include a signature guarantee along with
your redemption request if:
. The redemption is for more than $25,000;
. You request redemption proceeds to be sent to a name or address that differs
from your account registration; or
. You request a transfer of registration.
You may obtain a signature guarantee from most banks, trust companies,
brokerage firms, clearing agencies or savings associations that are
participants in a medallion program recognized by the securities transfer
association. Signature guarantees that are not a part of these programs will
not be accepted.
12
<PAGE>
LaSalle Investment Distributions and Taxes
Management Funds
- --------------------------------------------------------------------------------
Distributions and Taxes
Dividends and Distributions
. Shareholders will receive quarterly distributions of investment company
taxable income, which consists of all taxable income, other than capital
gains, reduced by deductible expenses of the Fund.
. The Company expects that a portion of the Fund's dividends will be considered
return of capital, which is not subject to current taxation.
. Net capital gains, if any, will be distributed at least annually.
Dividend Reinvestment
All dividends and any capital gain distributions will be reinvested in
additional Fund shares of the same class, unless a shareholder has requested to
receive dividend payments by check. Shareholders may cancel automatic dividend
reinvestment by notifying the Fund's transfer agent either directly or through
their broker-dealer at least five days before the next dividend or distribution
payment date.
Fund's Tax Status
The Fund and the Trust are treated as separate entities for federal tax
purposes.
The Fund intends to qualify for the special tax treatment afforded regulated
investment companies under the Internal Revenue Code, so that it will be
relieved of federal income tax on investment company taxable income and net
capital gains distributed to shareholders. In addition, the Fund expects to
make sufficient distributions prior to the end of each calendar year to avoid
liability for federal excise tax.
As a partnership under the Code, the Trust does not pay federal income or
excise taxes.
Taxes and Distributions
As with any investment, there are tax implications associated with investing in
the Fund. The following is a summary of some of the important tax issues
generally affecting the Fund's shareholders. Consult your tax advisor regarding
issues specific to your own tax situation.
. Dividends from the Fund's investment company taxable income are taxable to
shareholders as ordinary income, whether received as cash or additional Fund
shares. The Fund intends to make such distributions and expects that, as a
result of its investment strategy, these distributions will consist primarily
of either ordinary income or capital gains.
. Capital gain distributions are taxable to shareholders as long-term capital
gains, regardless of how long the shares are held or whether the
distributions are taken in cash or additional Fund shares.
. Shareholders may realize capital gains or losses on the sale of Fund shares.
. The Fund expects only a portion of its dividends paid to qualify for the
dividends-received deduction available to corporate shareholders.
. The Fund provides shareholders with annual information regarding the federal
income tax status of its dividends and distributions.
13
<PAGE>
LaSalle Investment Management of the Funds
Management Funds
- --------------------------------------------------------------------------------
Management of the Fund
Board of Directors
The business and affairs of the Fund are managed under the supervision of the
board of directors of the Company, while the business and affairs of the Trust
are managed under the supervision of its board of trustees.
The Company's board of directors approves all significant agreements between
the Company and those furnishing services to the Fund, including the agreements
with the Fund's investment manager, distributor, administrator, transfer agent
and custodian.
A majority of the Company's directors are not affiliated with either the
manager or the distributor of the Fund. The same individuals serve as members
of the board of directors of the Fund and the board of trustees of the Trust.
Investment Manager
LaSalle Investment Management (Securities) L.P. (the "Manager"), a registered
investment adviser with principal offices at 100 East Pratt St., Baltimore,
Maryland, 21202, serves as the investment manager of the Fund, pursuant to an
agreement with the Company. Under the agreement, the Manager is responsible for
monitoring the Fund's operations and the services provided to the Fund by
others. The Manager currently receives no fee for providing these services.
However, in the event that the Manager becomes responsible for managing the
Fund's portfolio directly, it would be entitled to receive an investment
management fee of 0.75% of average net assets.
The Fund seeks to achieve its investment objective by investing all of its
assets in the Trust. The Manager also serves as the Trust's investment manager.
In that capacity, the Manager is responsible for managing the Trust's portfolio
in accordance with its investment objective, policies and restrictions, making
investment decisions, placing purchase and sale orders for securities, and
employing portfolio managers and securities analysts who provide research
services to the Trust. The investment management fee under the agreement with
the Trust is 0.75% of average net assets, a portion of which is being waived by
the investment manager.
The Trust may, from time to time, consistent with its investment policies and
applicable law, invest in securities of companies with which Jones Lang LaSalle
Incorporated has a business relationship. The Manager will not consider any
such relationship in making decisions regarding the securities to be purchased
or sold for the Trust.
The Manager is one of several entities through which Jones Lang LaSalle
Incorporated and its affiliates conduct real estate investment advisory and
related businesses. Jones Lang LaSalle Incorporated is a leading full-service
real estate firm that provides management services, corporate and financial
services, and investment management services to corporations and other real
estate owners, users and investors worldwide.
Together with its affiliates, the Manager had $2.8 billion in real estate
securities under management as of December 31, 1999. The Manager, together with
its predecessors, has provided real estate investment advice to pension funds
and other institutional investors since 1985. The Manager's investment team has
more than 15 years of experience managing accounts similar to the Trust and is
supported by Jones Lang LaSalle Incorporated's extensive research and property
management organization that consists of more than 6,400 employees in offices
throughout the world. The Manager uses the same research, analytical models and
professional staff in managing the Trust's assets and its other accounts.
14
<PAGE>
LaSalle Investment Management of the Funds, continued
Management Funds
- --------------------------------------------------------------------------------
Portfolio Managers
William K. Morrill Jr., Keith R. Pauley and James A. Ulmer III share the
primary responsibility of managing the Trust's Assets.
William K. Morrill Jr., a Managing Director, has more than 16 years of real
estate securities investment experience and has been a portfolio manager with
the Manager and its predecessors since 1985. Mr. Pauley, a Managing Director,
has more than 15 years of real estate securities investment experience and has
been a portfolio manager with the Manager and its predecessors since 1986. Mr.
Ulmer, a Principal, has more than 14 years of real estate securities investment
experience and joined the Manager in 1997 as a securities analyst and portfolio
manager. Prior to 1997, Mr. Ulmer was a principal at AIRES Real Estate
Services, providing security analysis and portfolio strategy for institutional
investors in real estate securities.
Additional Fund Information
Description of Shares
The board of directors of the Company is authorized to establish "series" of
shares of capital stock and separate classes of shares of each series.
Different classes of the Company's shares of any series may be offered to
certain investors. All classes of a particular series share a common investment
objective and portfolio of investments. However, the net asset values per share
of the classes will differ to the extent there are different fees and expenses
applicable to the classes.
The shares offered by this Prospectus have been designated Retail Class and
Institutional Class shares of the LaSalle U.S. Real Estate Fund series. The
board of directors may add additional series or share classes in the future.
Shareholder Meetings
Whenever the Company is requested to vote on matters pertaining to the Trust,
the Company will hold a meeting of Fund shareholders and will cast all of its
votes in the same proportion as the votes of its shareholders.
The Company does not expect to hold annual meetings. However, Fund shareholders
have the right, under certain circumstances, to request a meeting for the
purpose of considering the removal of a director. If a proper request is made,
the Company will assist with the shareholder communications in connection with
the meeting.
Investor Inquiries
For additional information about the Fund or to obtain a copy of this
prospectus, call toll free at 1-800-557-5753. Investors who have questions
about the Fund may contact their broker-dealer or the Company toll free at 1-
800-LaSalle, extension 55.
15
<PAGE>
LaSalle Investment Financial Highlights
Management Funds
- --------------------------------------------------------------------------------
Financial Highlights
The following financial highlights are intended to help you understand the
Fund's financial performance since its inception. Certain information reflects
financial results for a single share of the Fund. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP
whose report along with the Fund's audited financial statements, is included in
the Annual Report for the Fund and the Trust which is available upon request.
LaSalle Investment Management Funds, Inc.--LaSalle U.S. Real Estate Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period from
March 30, 1998*
For the Year ended through
December 31, 1999 December 31, 1998
- -------------------------------------------------------------------------------
Institutional Retail Institutional Retail
Class Class Class Class
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 7.76 $ 7.77 $ 10.00 $ 10.00
- -------------------------------------------------------------------------------
Increase/(Decrease) from
operations:
Net investment income 0.35 0.31 0.26 0.22
Net realized and unrealized
(loss) on investments (0.70) (0.71) (2.24) (2.23)
Total from investment operations (0.35) (0.40) (1.98) (2.01)
- -------------------------------------------------------------------------------
Less distributions:
Distributions from net investment
income (0.24) (0.20) (0.24) (0.20)
Distributions from return of
capital -- -- (0.02 (0.02)
Total distributions (0.24) (0.20) (0.26) (0.22)
Net asset value, end of period $ 7.17 $ 7.17 $ 7.76 $ 7.77
Total Return/1/ (4.58%) (5.19%) (19.92%) (20.22%)
- -------------------------------------------------------------------------------
Ratios/Supplementary data:
Net assets, end of period (000) $1,470 $ 292 $ 154 $ 45
Ratio of net expenses to average
net assets/2/,/3/,/5/ 1.05% 1.45% 1.05% 1.45%
Ratio of net investment income to
average net assets/2/,/4/,/5/ 6.15% 5.11% 4.28% 3.93%
Portfolio turnover rate on
LaSalle Master Trust--U.S. Real
Estate Portfolio 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 period ended
December 31, 1999 and the period ended December 31, 1998 for the Institutional
Class would have been 16.82% and 113.17%, respectively. For the same periods,
the Retail class ratios would have been 28.39% and 143.31%, respectively.
/4/The net investment income ratio without waivers and reimbursements for the
period ended December 31, 1999, and the period ended December 31, 1998 for the
Institutional Class would have been (9.63%) and (106.79%), respectively. For
the same periods, the Retail class ratios would have been (21.80%) and
(136.93%), respectively.
Expense and net investment income ratios represent the combined ratios for the
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.
16
<PAGE>
Additional Fund Information
- --------------------------------------------------------------------------------
Obtaining additional information
The Company makes available free of charge the following information about
the Fund:
Annual/Semiannual Reports
These reports highlight performance of the Fund and the Trust and feature
discussions on investment strategy, portfolio holdings and market
conditions and influences.
Statement of Additional Information (SAI)
The SAI contains more details about the Fund and its policies, and is
incorporated by reference into (legally considered part of) this
prospectus. A current SAI is on file with the SEC.
You may obtain the SAI, annual reports, semiannual reports and other
information about the Fund via:
Phone: Call toll free, 1-800-557-5753.
Mail: Write to the Fund at: LaSalle Investment Management Funds, Inc., 60
State Street, Suite 1300,
Boston, MA 02109.
The SEC: These documents can be reviewed and copied at the Commission's
Public Reference Room in Washington, D.C. Information on the operation of
the Public Reference Room may be obtained by calling
the Commission at 1-202-942-8090. You also may obtain these documents via
the SEC's web site http://www.sec.gov or by sending your request and a
duplicating fee to the Commission's Public Reference Section, Washington,
D.C. 20549-0102 or by electronic request at the following E-mail address:
[email protected]. The Fund's Investment Company Act file number is
811-08373.
17
<PAGE>
LaSalle U.S. Real Estate Fund:
The Potential of REITs, the Benefits of a Mutual Fund
- --------------------------------------------------------------------------------
As the market for REITs has become more complex and sophisticated, many
investors have discovered the advantages of the LaSalle U.S. Real Estate Fund.
The Fund, which invests in a portfolio of U.S. real estate securities, most of
which are REIT equity securities, lets you take advantage of LaSalle Investment
Management's 16 years of investment experience and industry focus while
investing for attractive long-term total return.
Expertise: The Fund's manager, LaSalle Investment Management, focuses
exclusively on real estate. The Fund gives institutional managers and high-net
worth individuals access to the same real estate investment management
expertise that large institutions have enjoyed since 1985.
Insight: The Fund's managers have unparalleled access to property information
and market trends through LaSalle Investment Management's affiliation with
Jones Lang LaSalle.
Return Potential: The Fund offers attractive long-term return potential by
pursuing growth from capital appreciation and income from dividend
distributions.
Risk Management: By investing in real estate securities from different regions
and sectors, the Fund offers broad diversification within the real estate
market, which may help lower risk.
Liquidity: Investors have quick access to their funds at the current net asset
value.
For more information, please call your
Financial advisor or LaSalle Investment Management Funds at
1-800-557-5753
This information is not authorized for distribution to prospective investors
unless preceded or accompanied by a Fund prospectus containing complete
information about the Fund, including expenses. Please read the prospectus
carefully before you invest or send money.
Investment return and principal value of shares will fluctuate so that, when
redeemed, an investor's shares may be worth more or less than the original
amount invested.
Not part of the prospectus. Data presented the most recent available as of
print date.
Distributor: Funds Distributor, Inc.
<PAGE>
LaSalle U.S. Real Estate Fund
LaSalle Investment Management Funds, Inc.
STATEMENT OF ADDITIONAL INFORMATION
April 30, 2000
This Statement of Additional Information is not a prospectus but provides
additional information that should be read in conjunction with the Prospectus
for the LaSalle U.S. Real Estate Fund (the "Fund") dated April 30, 2000
including any supplements thereto. The Fund's Annual Report (including financial
statements for the fiscal year ended December 31, 1999) are incorporated herein
by reference. To obtain additional copies of the Prospectus, this Statement of
Additional Information or the Annual Report, please call 1-800-LaSalle.
Table of Contents
-----------------
Page
----
General Information B-2
Investment Policies and Practices B-3
Investment Restrictions B-7
Portfolio Transactions and Brokerage B-8
Valuation of Portfolio Securities B-10
Purchase of Shares B-10
Redemption of Shares B-12
Taxation B-13
Management B-16
Investment Manager B-19
Administrator B-20
Custodian B-21
Transfer Agent B-21
Distribution Arrangements B-21
Performance Information B-24
Description of Capital Stock B-25
Independent Accountants B-26
Legal Counsel B-26
Financial Statements B-26
<PAGE>
GENERAL INFORMATION
LaSalle U.S. Real Estate Fund (the "Fund") is a series of LaSalle Investment
Management Funds, Inc. (the "Company"), an open-end diversified management
investment company. The Company currently offers two classes of shares of the
Fund: Retail Class shares and Institutional Class shares.
The Company was incorporated under the laws of the State of Maryland on
September 19, 1997. The Company filed a registration statement with the SEC
registering as an open-end diversified management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and registering an
indefinite number of Retail Class and Institutional Class shares of the Fund
under the Securities Act of 1933, as amended (the "1933 Act"). The Fund
commenced operations on March 30, 1998. Effective December 10, 1999, the
Company, in connection with the merger of LaSalle Partners Incorporated and
Jones Lang Wootton, changed its name from LaSalle Partners Funds, Inc. to
LaSalle Investment Management Funds, Inc.
As described in the Prospectus, the Fund seeks to achieve its investment
objective by investing all of its investable assets in a series of an open-end
management investment company having the same investment objective as the Fund.
The investment company is the U.S. Real Estate Portfolio of LaSalle Master
Trust, a Delaware business trust (the "Trust"), for which LaSalle Investment
Management (Securities) L.P. (the "Manager") serves as investment manager. Since
the investment characteristics of the Fund will correspond directly to those of
the Trust, the Prospectus and this Statement of Additional Information include a
discussion of the various investments of and techniques employed by the Trust.
Under the rules and regulations of the Securities and Exchange Commission (the
"SEC"), all mutual funds are required to furnish prospective investors with
certain information regarding the activities of the fund being considered for
investment. Important information concerning the Fund and the Company is
included in the Prospectus which may be obtained without charge from the
Company's distributor or securities dealers and other financial institutions
that have a sales agreement with the Company's distributor. Some of the
information required to be in this Statement of Additional Information is also
included in the Prospectus. To avoid unnecessary repetition, references are made
to related sections of the Prospectus.
B - 2
<PAGE>
INVESTMENT POLICIES AND PRACTICES
The Fund's investment objective is total return primarily through investments in
U.S. real estate securities. As described in the Prospectus, the Fund will
attempt to achieve its objective by investing all of its investable assets in
the Trust. The Trust invests its assets primarily in equity securities of real
estate investment trusts ("REITs") and other real estate industry companies that
are publicly traded in the United States securities markets. Equity securities
of real estate industry companies in which the Trust invests consist of common
stock, shares of beneficial interest of REITs and securities with
characteristics of common stock, such as preferred stock and debt securities
convertible into common stock. The Trust does not have a policy requiring a
minimum rating for investment in debt securities. The Trust does not expect to
invest in debt securities during the current fiscal year. There can be no
assurance that either the Fund or the Trust will achieve its investment
objective. The following information supplements, and should be read in
conjunction with, the discussion in the Prospectus of the investment objective
and policies of the Fund and the Trust.
REAL ESTATE INVESTMENT TRUSTS
Real estate investment trusts ("REITs") pool investors' funds for investment
primarily in income-producing commercial real estate or real estate related
loans. A REIT is not taxed on income distributed to shareholders if it complies
with several requirements relating to its organization, ownership, assets and
income, and a requirement that it distribute to its shareholders at least 95% of
its taxable income (other than net capital gains) for each taxable year.
REITs can generally be classified as follows:
- Equity REITs, which invest the majority of their assets directly
in real property and derive their income primarily from rents.
Equity REITs can also realize capital gains by selling properties
that have appreciated in value.
- Mortgage REITs, which invest the majority of their assets in real
estate mortgages and derive their income primarily from interest
payments.
- Hybrid REITs, which combine the characteristics of both Equity
REITs and Mortgage REITs.
REITs are like closed-end investment companies in that they are essentially
holding companies that rely on professional managers to supervise their
investments.
ILLIQUID AND RESTRICTED SECURITIES
As discussed in the Prospectus, the Trust may invest up to 15% of the value of
its net assets, measured at the time of investment, in illiquid securities. Both
restricted securities (other than
B - 3
<PAGE>
Rule 144A securities that are deemed to be liquid as discussed below), which may
not be resold to the public without registration under the 1933 Act, and
securities that, due to their market or the nature of the security, have no
readily available market for their disposition are considered to be not readily
marketable or "illiquid". Limitations on resale and marketability may have the
effect of preventing the Trust from disposing of a security at the time desired
or at a reasonable price. In addition, in order to resell a restricted security,
the Trust might have to bear the expense and incur the delays associated with
registration. In purchasing illiquid securities, the Trust does not intend to
engage in underwriting activities, except to the extent the Trust may be deemed
to be a statutory underwriter under the 1933 Act in purchasing or selling such
securities. Illiquid securities will be purchased for investment purposes only
and not for the purpose of exercising control or management of other companies.
In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act. Institutional investors
generally will not seek to sell these instruments to the general public, but
instead will often depend on an efficient institutional market in which such
unregistered securities can readily be resold or on an issuer's ability to honor
a demand for repayment. Therefore, the fact that there are contractual or legal
restrictions on resale to the general public or certain institutions is not
dispositive of the liquidity of these investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. The Trust may invest in Rule 144A securities which, as
disclosed in the Prospectus, are restricted securities which may or may not be
readily marketable. Rule 144A securities are readily marketable if institutional
markets for the securities develop pursuant to Rule 144A and provide both
readily ascertainable values for the securities and the ability to liquidate the
securities when liquidation is deemed necessary or advisable. However, an
insufficient number of qualified institutional buyers interested in purchasing a
Rule 144A security held by the Fund could affect adversely the marketability of
the security. In such an instance, the Trust might be unable to dispose of the
security promptly or at a reasonable price.
Securities eligible for resale pursuant to Rule 144A will not be subject to the
Trust's limitations on investing in securities that are not readily marketable,
provided that the Manager determines that a liquid market exists for such
securities under guidelines adopted and monitored by the Trust's Board of
Trustees. In making this determination, the Manager will consider the following
factors, among others: (1) the unregistered nature of a Rule 144A security; (2)
the frequency of trades and quotes for the security; (3) the number of dealers
willing to purchase or sell the security and the number of additional potential
purchasers; (4) dealer undertakings to make a market in the security; and (5)
the nature of the security and the nature of market place trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of transfers).
B - 4
<PAGE>
MONEY MARKET INSTRUMENTS
From time to time the Trust may purchase high quality, short-term debt
securities, commonly known as money market instruments. These securities include
U.S. Government securities, obligations of U.S. commercial banks and commercial
paper.
U.S. Government securities include direct obligations of the U.S. Government,
which consist of bills, notes and bonds issued by the U.S. Treasury, and
obligations issued by agencies of the U.S. Government which, while not direct
obligations of the U.S. Government, are either backed by the full faith and
credit of the United States or are guaranteed by the U.S. Treasury or supported
by the issuing agency's right to borrow from the U.S. Treasury.
The obligations of U.S. commercial banks include certificates of deposit and
bankers' acceptances. Certificates of deposit are negotiable interest-bearing
instruments with a specific maturity. Certificates of deposit are issued by
banks in exchange for the deposit of funds and normally can be traded in the
secondary market prior to maturity. Bankers' acceptances typically arise from
short-term credit arrangements designed to enable businesses to obtain funds to
finance commercial transactions. Generally, an acceptance is a time draft drawn
on a bank by an exporter or importer to obtain a stated amount of funds to pay
for specific merchandise. The draft is then "accepted" by a bank that, in
effect, unconditionally guarantees to pay the face value of the instrument on
its maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.
Money market instruments are subject to risks including market risks and credit
risks.
Prices of fixed income securities respond to market changes in interest rates
for similar securities. Generally, when interest rates rise, prices of fixed
income securities fall.
Certain risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Trust
will lose money. Services such as Standard & Poor's and Moody's Investors
Service assign credit ratings to many fixed income securities. Securities
receive ratings based on the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Trust must rely entirely upon the investment manager's credit assessment. Fixed
income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is perceived
to have an increased credit risk. An increase in the spread will cause the price
of the security to decline.
Commercial paper consists of short-term (usually from one to 270 days) unsecured
promissory notes issued by corporations to finance their current operations. A
variable amount master demand note (which is a type of commercial paper)
represents a direct borrowing arrangement
B - 5
<PAGE>
involving periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to which
the lender may determine to invest in varying amounts.
REPURCHASE AGREEMENTS
The Trust may enter into repurchase agreements with financial institutions, such
as banks and broker-dealers, deemed by the Manager to be creditworthy under
criteria established by the Board of Trustees. A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Trust) acquires
ownership of a debt security and the seller agrees to repurchase the obligation
at a future time and set price, usually not more than seven days from the date
of purchase, thereby determining the yield during the purchaser's holding
period. The value of underlying securities will be at least equal at all times
to the total amount of the repurchase obligation, including the interest factor.
The Trust makes payment for such securities only upon physical delivery or
evidence of book-entry transfer to the account of its custodian bank or its
agent. The underlying securities, which in the case of the Trust must be issued
by the U.S. Treasury, may have maturity dates exceeding one year. The Trust does
not bear the risk of a decline in value of the underlying securities unless the
seller defaults under its repurchase obligation. In the event of a bankruptcy or
other default of a seller of a repurchase agreement, the Trust could experience
both delays in liquidating the underlying securities and loss including (a)
possible decline in the value of the underlying security while the Trust seeks
to enforce its rights thereto, (b) possible subnormal levels of income and lack
of access to income during this period and (c) expenses of enforcing its
rights.
B - 6
<PAGE>
INVESTMENT RESTRICTIONS
The Fund's and the Trust's investment programs are subject to a number of
restrictions that reflect self-imposed standards as well as regulatory
limitations. The investment restrictions recited below are in addition to those
described in the Prospectus. No investment restriction of the Fund prevents the
Fund from investing all of its investable assets in an open-end investment
company with substantially the same investment objective.
Investment restrictions which are designated as matters of fundamental policy
may only be changed with the approval of a "majority of the outstanding voting
securities" of the Fund or the Trust, as the case may be. Under the 1940 Act,
the vote of a majority of the outstanding voting securities of a company means
the vote, at an annual or a special meeting of the security holders of the
company duly called, (i) of 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the outstanding voting securities of
such company are present or represented by proxy; or (ii) of more than 50% of
the outstanding voting securities of such company, whichever is the less.
The Fund and the Trust may not as a matter of fundamental policy:
(1) Issue senior securities, except as permitted under the 1940 Act.
(2) Effect short sales of securities or sell any security which it does not
own unless by virtue of its ownership of other securities it has, at the
time of sale, a right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities sold and,
provided that if such right is conditional, the sale is made upon the same
conditions; or purchase securities on margin (but the Fund/Trust may obtain
such short-term credits as may be necessary for the clearance of
transactions).
(3) Borrow money, except that the Fund/Trust may borrow money for temporary
or emergency purposes in an amount not exceeding 33 1/3% of the value of
its total assets (including the amount borrowed) less liabilities (other
than borrowings).
(4) Act as an underwriter of securities within the meaning of the U.S.
federal securities laws, except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired
within the limitation on purchases of illiquid securities.
(5) Purchase or sell real estate, provided that the Fund/Trust may invest
in securities of companies in the real estate industry and may purchase
securities secured or otherwise supported by interests in real estate.
(6) Purchase or sell commodities or commodities contracts, provided that
the Fund/Trust may invest in financial futures and options on such futures.
B - 7
<PAGE>
(7) Make loans, except that the Fund/Trust may lend portfolio securities in
accordance with its investment policies and may enter into, purchase or
invest in repurchase agreements, debt instruments or other securities,
whether or not the purchase is made upon the original issuance of the
securities.
The Trust will invest more than 25% of its total assets in securities
issued by companies in the real estate industry. Except as noted in the
previous sentence, it is a fundamental policy of the Fund and the Trust not
to concentrate its investments in securities of companies in any particular
industry. Following the current opinion of the staff of the SEC,
investments are concentrated in a particular industry if such investments
(but not investments in U.S. Government securities) aggregate more than 25%
of the Fund's/Trust's total assets.
The Trust does not intend to invest in or to enter into financial futures
contracts or purchase options on such futures or to lend portfolio
securities during the current fiscal year.
The following investment restrictions are not fundamental policies and may be
changed by the Fund's Board of Directors or by the Trust's Board of Trustees
without shareholder approval. The Fund and the Trust will not as a matter of
operating policy:
(1) Borrow money, except that the Fund/Trust may borrow money for temporary
or emergency purposes in an amount not exceeding 10% of the value of its
total assets at the time of such borrowing, provided that, while borrowings
by the Fund/Trust equaling 5% or more of its total assets are outstanding,
the Fund/Trust will not purchase securities for investment.
(2) Invest in shares of any other investment company registered under the
1940 Act, except as permitted by federal law.
(3) Invest for the purpose of exercising control or management.
(4) Invest more than 10% of its total assets in foreign securities.
(5) Invest more than 20% of its total assets in any one issuer.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Manager is responsible for decisions to buy and sell securities for the
Trust, for the selection of brokers and dealers to execute securities
transactions and for negotiation of commission rates. Purchases and sales of
securities on a securities exchange will be effected through broker-dealers
which charge a commission for their services. The Manager may direct purchase
and sale orders to any registered broker-dealer. In the over-the-counter market,
transactions are effected on a "net" basis with dealers acting as principal for
their own accounts without charging a stated commission, although the price of
the security usually includes a profit to the dealer based on the spread between
the bid and asked price for the security. The prices of securities purchased
from
B - 8
<PAGE>
underwriters include a commission or concession paid by the issuer to the
underwriter. On occasion, certain money market instruments may be purchased
directly from an issuer without payment of a commission or concession.
The Manager's primary consideration in effecting securities transactions is to
obtain the most favorable execution of orders on an overall basis. As described
below, the Manager may, in its discretion, effect agency transactions with
broker-dealers that furnish statistical, research or other information or
services that are deemed by the Manager to be beneficial to the Trust's
investment program. Certain research services furnished by broker-dealers may be
useful to the Manager with clients other than the Trust. Similarly, any research
services received by the Manager through placement of portfolio transactions of
other clients may be of value to the Manager in fulfilling its obligations to
the Trust. No specific value can be determined for research and statistical
services furnished without cost to the Manager by a broker-dealer. The Manager
is of the opinion that because the material must be analyzed and reviewed by its
staff, its receipt does not tend to reduce expenses, but may be beneficial in
supplementing the Manager's research and analysis. Therefore, it may tend to
benefit the Trust by improving the Manager's investment advice.
The Manager's policy is to pay a broker-dealer commissions for particular
transactions that are higher than might be charged if a different broker-dealer
had been chosen when, in the Manager's opinion, this policy furthers the overall
objective of obtaining the most favorable execution. The Manager is also
authorized to pay broker-dealers higher commissions on brokerage transactions
for the Trust in order to secure research and investment services described
above.
The Manager manages other investment accounts. It is possible that, at times,
identical securities will be acceptable for the Trust and one or more of such
other accounts; however, the position of each account in the securities of the
same issuer may vary and the length of time that each account may choose to hold
its investment in such securities may likewise vary. The timing and amount of
purchase by each account will also be determined by its cash position. If the
purchase or sale of securities consistent with the investment policies of the
Trust or one or more of these accounts is considered at or about the same time,
transactions in such securities will be allocated among the accounts in a manner
deemed equitable by the Manager.
The allocation of orders among broker-dealers and the commission rates paid by
the Trust will be reviewed periodically by the Board of Trustees. The foregoing
policy under which the Trust may pay higher commissions to certain broker-
dealers in the case of agency transactions does not apply to transactions
effected on a principal basis.
For the fiscal year ended December 31, 1998, the Trust paid brokerage
commissions of $37,641. For the fiscal year ended December 31, 1998, the Trust
paid no brokerage commissions to affiliated brokers.
For the fiscal year ended December 31, 1999, the Trust paid brokerage
commissions of $46,320. For the fiscal year ended December 31, 1999, the Trust
paid no brokerage commissions to affiliated brokers.
B - 9
<PAGE>
The Company and the Trust are required to identify any securities of its
"regular brokers or dealers" (as such term is defined in the 1940 Act) which
each of them has acquired during its most recent fiscal year. As of December 31,
1998, neither the Fund nor the Trust held securities of its "regular brokers or
dealers". As of December 31, 1999, neither the Fund nor the Trust held
securities of its "regular brokers or dealers".
VALUATION OF PORTFOLIO SECURITIES
The Fund's net asset value per share is determined daily as of the close of
regular trading on the New York Stock Exchange (the "NYSE"), which is normally
4:00 p.m. (Eastern time), each day on which the NYSE is open for business (a
"business day"). The NYSE is open for business on all weekdays except for the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Portfolio securities traded on a national exchange on the valuation date are
valued at the last quoted sale 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
prices. Securities or other assets for which market quotations are not readily
available are valued at their fair value as 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. The net asset values of the Retail Class shares
and Institutional Class shares will differ to the extent different fees and
expenses are applicable to each class.
PURCHASE OF SHARES
Retail Class shares of the Fund are offered and sold at a public offering price
equal to their net asset value plus a sales charge that varies depending on the
size of your purchase. The sales charges applicable to purchases of Retail Class
shares are described in the Prospectus. Investors may reduce or eliminate the
sales charge under one or more of the privileges and programs described below.
ACCUMULATION PRIVILEGE
A purchaser of Retail Class shares may qualify for a quantity discount by
combining a current purchase with certain other shares of any class of the Fund
already owned. The applicable sales charge is based on the total of: (i) the
investor's current purchase; and (ii) the maximum public offering price (at the
close of business on the previous day) of all shares held by the investor in the
Fund. To obtain the accumulation privilege on a purchase through an investment
dealer, when each purchase is made the investor or dealer must provide the
Fund's Administrator with sufficient information to verify that the purchase
qualifies for the privilege. The shareholder must furnish this information to
the Fund's transfer agent when making direct cash investments.
B - 10
<PAGE>
LETTER OF INTENTION
A Letter of Intention allows an investor to receive a reduced sales charge on
purchases of Retail Class shares purchased during a 13-month period as if the
total amount invested had been invested in a single lump sum. A non-binding
Letter of Intention must be filed with the Fund's Administrator within 90 days
of the start of your purchases. The initial investment must be at least 5% of
the total amount to be invested. Out of the initial investment, 5% of the dollar
amount specified in the Letter of Intention will be registered in the investor's
name and held in escrow. The investor will earn income dividends and capital
gain distributions on the escrowed shares. Neither income dividends nor capital
gain distributions reinvested in additional shares will apply toward completion
of the Letter of Intention. When the full amount indicated has been purchased,
the escrow will be released. Investors are not obligated to complete the Letter
of Intention and, in such case, sufficient escrowed shares will be redeemed to
pay any applicable sales charge.
GROUP INVESTMENT PROGRAM
Members of qualified groups may purchase Retail Class shares of the Fund at a
reduced sales charge. To receive the Retail Class group rate, group members must
purchase shares through a single investment dealer designated by the group.
Purchases of shares are made at the public offering price based on the net asset
value next determined after payment for the shares is received. The minimum
investment requirements described in the Prospectus apply to purchases by any
group member. Only shares purchased under the Retail Class group discount are
included in calculating the purchased amount for the purposes of these
requirements. Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or association, or other
organized groups of persons (the members of which may include other qualified
groups) provided that: (i) the group has at least 25 members of which at least
10 members participate in the initial purchase; (ii) the group has been in
existence for at least six months; (iii) the group has some purpose in addition
to purchasing investment company shares at a reduced sales charge; (iv) the
group's sole organizational nexus or connection is not that the members are
credit card holders of a company, policyholders of an insurance company,
customers of a bank or broker-dealer, clients of an investment adviser or
security holders of a company; (v) the group agrees to provide its designated
investment dealer access to the group's membership by means of written
communication or direct presentation to the membership at a meeting not less
frequently than on an annual basis; (vi) the group or its investment dealer will
provide annual certification in form satisfactory to the Distributor that the
group then has at least 25 members and that at least 10 members participated in
group purchases during the immediately preceding 12 calendar months; and (vii)
the group or its investment dealer will provide periodic certification in form
satisfactory to the Distributor as to the eligibility of the purchasing members
of the group. Members of a qualified group include: (i) any group that meets the
requirements stated above and is a constituent member of a qualified group; (ii)
any individual purchasing for his or her own account who is carried on the
records of the group or on the records of any constituent member of the group as
being a good standing employee, partner, member or person of like status of the
group or constituent member; or (iii) any fiduciary purchasing shares for the
account of a member of a qualified group or a member's beneficiary. For example,
a qualified
B - 11
<PAGE>
group could consist of a trade association which would have as its members
individuals, sole proprietors, partnerships and corporations. The members of the
group would then consist of the individuals, the sole proprietors and their
employees, the members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of employee benefit
trusts acquiring Retail Class shares for the benefit of any of the foregoing.
Interested groups should contact their investment dealer or the Fund. The Fund
reserves the right to revise the terms of or to suspend or discontinue group
sales at any time.
WAIVER OF THE SALES CHARGE
Certain investors who are eligible to purchase Retail Class shares without a
sales charge are listed in the Prospectus. In addition, the Fund may sell Retail
Class shares at net asset value without an initial sales charge or a CDSC in
connection with the acquisition by the Fund of assets of an investment company
or personal holding company.
REDEMPTION OF SHARES
The Company may suspend the right of redemption or postpone the date of payment
during any period when (a) trading on the NYSE is restricted by applicable rules
and regulations of the SEC; (b) the NYSE is closed for other than customary
weekend and holiday closings; (c) the SEC has by order permitted such
suspension; or (d) an emergency exists as determined by the SEC so that
valuation of the net assets of the Fund is not reasonably practicable.
Under normal circumstances, the Company will redeem shares by check as described
in the Prospectus. However, if the Board of Directors determines that it would
be in the best interests of the remaining shareholders to make payment of the
redemption price in whole or in part by a distribution in kind of portfolio
securities in lieu of cash, in conformity with applicable rules of the SEC, the
Company will make such distributions in kind. If shares are redeemed in kind,
the redeeming shareholder will incur brokerage costs in later converting the
assets into cash. The method of valuing portfolio securities is described under
"Valuation of Portfolio Securities" and such valuation will be made as of the
same time the redemption price is determined. The Company and the Trust have
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the
Company and the Trust are each obligated to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the Fund/Trust during any
90-day period for any one shareholder.
The Trust has agreed to make a redemption in kind to the Fund whenever the
Company wishes to make redemption in kind and therefore shareholders of the Fund
that receive redemptions in kind will receive portfolio securities of the Trust,
and in no case will a redeeming shareholder of the Fund receive a security
issued by the Trust.
The Board of Directors of the Company may cause the redemption of a Retail Class
share account with a balance of less than $10,000, or an Institutional Class
share account with a balance of less than $250,000, provided (1) the value of
the account has been reduced for reasons other than market action below the
minimum initial investment in such shares at the time the account was
established, (2) the account has remained below the minimum level for six
months,
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<PAGE>
and (3) 60 days' prior written notice of the proposed redemption has been sent
to the shareholder. Shares will be redeemed at the net asset value on the date
fixed for redemption by the Board of Directors. Prompt payment will be made by
mail to the last known address of the shareholder.
TAXATION
The following is only a summary of certain additional federal income tax
considerations generally affecting the Fund and its shareholders. No attempt is
made to present a detailed explanation of the federal, state or local tax
treatment of the Fund or its shareholders, and the discussion here and in the
Fund's Prospectus is not intended as a substitute for careful tax planning.
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
The Fund expects to qualify as a regulated investment company ("RIC") under
Subchapter M of the Code. In order to qualify as a RIC for any taxable year, the
Fund must derive at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans and gains from the sale or
other disposition of stock, securities or foreign currencies and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income Requirement"). In addition, at the close
of each quarter of the Fund's taxable year, (1) at least 50% of the value of its
assets must consist of cash and cash items, U.S. Government securities,
securities of other RICs, and securities of other issuers (as to which the Fund
has not invested more than 5% of the value of its total assets in securities of
such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and (2) no more than 25% of the
value of its total assets may be invested in the securities of any one issuer
(other than U.S. Government securities and securities of other RICs), or in two
or more issuers that the Fund controls and that are engaged in the same or
similar trades or businesses or related trades or businesses (the "Asset
Diversification Test"). Generally, the Fund will not lose its status as a RIC if
it fails to meet the Asset Diversification Test solely as a result of a
fluctuation in value of portfolio assets not attributable to a purchase.
Under Subchapter M of the Code, the Fund is not subject to federal income tax on
the portion of its taxable net investment income and net capital gains that it
distributes to shareholders, provided generally that it distributes at least 90%
of its investment company taxable income (net investment income and the excess
of net short-term capital gains over net long- term capital loss) for the year
(the "Distribution Requirement") and complies with the Income Requirement, the
Diversification Test and certain other requirements of the Code. The
Distribution Requirement for any year may be waived if a RIC establishes to the
satisfaction of the Internal Revenue Service that it is unable to satisfy the
Distribution Requirement by reason of distributions previously made for the
purpose of avoiding liability for federal excise tax (discussed below).
B - 13
<PAGE>
If for any taxable year the Fund does not qualify as a RIC, all of its taxable
income will be subject to tax at regular corporate rates without any deduction
for distributions to shareholders, and such distributions generally will be
taxable as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. However, in the case of corporate
shareholders, such distributions generally would be eligible for the 70%
dividends received deduction for "qualifying dividends".
The Code imposes a nondeductible 4% excise tax on RICs that do not distribute in
each calendar year an amount equal to 98% of their ordinary income for the
calendar year plus 98% of their capital gains net income for the one-year period
ending on October 31 of such calendar year. The balance of such income must be
distributed during the next calendar year. For the foregoing purposes, a RIC
will include in the amount distributed any amount taxed to the RIC as investment
company taxable income or capital gains for any taxable year ending in such
calendar year. The Fund intends to make sufficient distributions of its ordinary
income and capital gains net income prior to the end of each calendar year to
avoid liability for excise tax. However, the Fund may in certain circumstances
be required to liquidate portfolio investments in order to make sufficient
distributions to avoid excise tax liability.
The Fund will invest all of its investable assets in the Trust. As a
partnership, the Trust will not be subject to federal income or excise taxes
under the Code. Instead, the Fund and other investors in the Trust must take
into account, in computing their federal tax liability, their proportionate
share of the Trust's income, gain, losses, deductions, credits and tax
preference items, without regard to whether they have received any cash
distributions from the Trust. In addition, the Fund will be deemed to own a
proportionate share of the Trust's assets and income for the purpose of
determining whether the Fund qualifies as a regulated investment company.
Accordingly, the Trust intends to conduct its operations so that the Fund will
be able to satisfy applicable tax requirements.
If the Trust acquires stock in certain non-U.S. corporations ("passive foreign
investment companies" or "PFICs") that receive at least 75% of their annual
gross income from passive sources (such as interest, dividends, rents, royalties
or capital gains) or at least 50% of whose average assets produce or are held
for the production of such passive income, the Fund indirectly through its
interest in the Trust could be subject to federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if the Fund distributes its share
of the PFIC income as a taxable dividend to its shareholders. A certain election
(treating the PFIC as a "qualified electing fund") filed with the Fund's federal
income tax return may, if available, ameliorate these adverse tax consequences,
but any such election would require the Fund to recognize ordinary taxable
income and net capital gain of the PFIC without the corresponding receipt of
cash which may need to be distributed by the Fund to satisfy the Distribution
Requirement.
Pursuant to proposed regulations, open-end regulated investment companies such
as the Fund would be entitled to avoid the tax consequences described in the
preceding paragraph by electing to mark-to-market their stock in certain PFICs.
Marking to market in this context means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
PFIC's stock over the owner's adjusted basis in that stock (including mark-to-
B - 14
<PAGE>
market gains of a prior year for which an election was in effect). Making the
election could result in the recognition of gain without the corresponding
receipt of cash which may need to be distributed by the Company to satisfy the
Distribution Requirement.
Distributions received by the Fund from the Trust generally will not result in
the Fund recognizing any gain or loss for federal income tax purposes, except
that (i) gain will be recognized to the extent that any cash distributed exceeds
the Fund's basis in its interest in the Trust prior to the distribution; (ii)
income or gain may be realized if the Trust holds unrealized receivables or
substantially appreciated inventory items (collectively, "tainted assets")
immediately before the distribution and (a) the distribution includes tainted
assets and reduces the Fund's interest in non-tainted assets of the Trust or (b)
the distribution includes non-tainted assets and reduces the Fund's interest in
tainted assets of the Trust; and (iii) loss may be recognized if the
distribution is made in liquidation of the Fund's entire interest in the Trust
and consists solely of cash and/or tainted assets. The Fund's basis in its
interest in the Trust generally will equal the amount of cash and the basis of
any property which the Fund invests in the Trust, increased by the Fund's share
of income from the Trust, and decreased by the amount of any cash distributions
and the basis of any property distributed from the Trust.
Distributions of capital gain (i.e., the excess, if any, of the net gains
realized by the Fund or the Trust on dispositions of capital assets held for
more than 1 year over the net losses, if any, realized by the Fund or the Trust
on dispositions of capital assets held for 1 year or less), if any, are taxable
to shareholders as net capital gains regardless of how long the shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction. The net capital gain of a noncorporate
taxpayer is generally subject to tax at a maximum rate of 20%; a corporation is
taxed on net capital gain at the same rates that apply to ordinary income.
Additionally, the maximum capital gain rate for assets that are held more than
five years and that are acquired after December 31, 2000 is 18%. Distributions
of earnings and profits of the Fund other than distributions of net long-term
capital gains are taxable to shareholders as ordinary income.
If capital gain distributions have been made with respect to shares of the Fund
that are sold at a loss after being held for six months or less, then the loss
is treated as a long-term capital loss to the extent of the capital gain
distributions. Any gain or loss recognized on a sale or redemption of shares of
the Fund by a shareholder who is not a dealer in securities generally will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise generally will be treated as a short-term
capital gain or loss.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions payable to any shareholder who (i) has provided
the Fund either an incorrect tax identification number or no number at all, (ii)
is subject to backup withholding by the Internal Revenue Service for failure to
properly report payments of interest or dividends, or (iii) has failed to
certify to the Fund that such shareholder is not subject to backup withholding.
Rules of state and local taxation of dividend and capital gains distributions
from RICs often differ from the rules for federal income taxation described
above. Shareholders are urged to
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<PAGE>
consult their tax advisors as to the consequences of these and other state and
local tax rules affecting an investment in the Fund and also as to the
application of the rules set forth above to a shareholder's particular
circumstances.
MANAGEMENT
DIRECTORS AND OFFICERS OF THE FUND
The Board of Directors of the Company is responsible for managing the business
affairs and for exercising all the Fund's powers except those reserved for
shareholders. The Board of Directors consists of seven directors. The directors
and officers of the Fund, their ages and their principal occupations during the
last five years are set forth below. Each director who is an "interested person"
of the Company (as defined in the 1940 Act) is indicated by an asterisk (*).
<TABLE>
<CAPTION>
Position(s) Held Principal Occupations(s)
Name and Address Age With Registrant During the Past Five Years
- ----------------------- --------- -------------------------------- ------------------------------------------
<S> <C> <C> <C>
Bruce D. Alexander 56 Director Vice President, Yale University (since
282 Prospect Street May 1998); Adjunct Professor, Yale
New Haven, CT 06511 University School of Management; Senior
Vice President and Director of New
Business, The Rouse Company
Lawrence S. Bacow 48 Director Chancellor, Massachusetts Institute of
75 Summit Technology (since August 1998); Professor,
Newton, MA 02458 Massachusetts Institute of Technology
Richard A. Dobbins 55 Director President, Historical Data
520 Washington Street Systems, Inc.
Duxbury, MA 02331
Lynn C. Thurber* 53 Director Chief Executive Officer, LaSalle
200 East Randolph Drive Investment Management; Director and
Chicago, IL 60601 Chairman of LaSalle Investment Management
(Securities), L.P., the adviser to the Fund;
Co-President, LaSalle Investment
Management, Inc.; Managing Director and Co-
President, LaSalle Advisors Limited
Partnership
William K. Morrill, Jr.* 63 Director; President Managing Director, LaSalle Investment
100 East Pratt Street Management (Securities) L.P.
Baltimore, MD 21202
Keith R. Pauley* 38 Director; Executive Managing Director/Portfolio Manager, LaSalle
100 East Pratt Street Vice President Investment Management (Securities) L.P.
Baltimore, MD 21202
Stephen A. Smith 42 Senior Vice President Managing Director and Director of
200 East Randolph Drive Secretary Global Client Services, LaSalle Investment
Chicago, IL 60601 Management, Inc.
James A. Ulmer, III 60 Vice President Senior Vice President, LaSalle Investment
100 East Pratt Street Management (Securities) L.P.;
Baltimore, MD 21202 Principal, AIRES Real Estate Services
Denise M. Ruth Organt 29 Assistant Secretary Vice President, LaSalle Investment
100 East Pratt Street Management (Securities) L.P.
Baltimore, MD 21202
Brian Hake 40 Treasurer Senior Vice President/Treasurer
200 East Randolph Drive Jones Lang LaSalle Incorporated; Assistant
Chicago, IL 60601 Vice President/Treasurer, First Merchants
Acceptance
</TABLE>
B - 16
<PAGE>
The Company's Articles of Incorporation require the Company to indemnify its
directors and officers to the full extent permitted by Maryland law. Nothing in
the charter or bylaws of the Company protects any director or officer against
any liability to the Company or its shareholders to which he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
The officers and directors of the Company who are "interested persons" of the
Company within the meaning of the 1940 Act do not receive compensation directly
from the Company for serving in the capacities described above. However, those
officers and directors who are affiliated with the Manager may receive
remuneration indirectly from the Company for services provided in their
respective capacities with the Manager. Each of the non-interested directors is
expected to receive for his service on the Board of Directors an annual fee,
plus reimbursement for out-of-pocket expenses incurred in connection with
attendance at board meetings. The following table sets forth the information
concerning the compensation anticipated to be paid by the Company to directors
in the current fiscal year. Neither the Company nor any investment company in
the Fund Complex offers any pension or retirement benefits to its directors or
trustees.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation from the
Name of Director From the Fund (1) Fund and Fund Complex (1)(2)
- ----------------------- ---------------------- ----------------------------
<S> <C> <C>
Bruce D. Alexander $6,000 $12,000
Lawrence S. Bacow $6,000 $12,000
Richard A. Dobbins $6,000 $12,000
William K. Morrill, Jr. -- --
Keith R. Pauley -- --
Lynn C. Thurber -- --
</TABLE>
(1) The amounts indicated are estimates of the compensation expected to be paid
to directors of the Company during the Company's current fiscal year ending
December 31, 2000.
(2) As of the date hereof, the "Fund Complex" consisted of the Company and the
Trust.
As of the date of this Statement of Additional Information, the officers,
directors and trustees of the Company and the Trust, as a group, owned of record
and beneficially less than 1% of the outstanding shares of the Fund.
TRUSTEES AND OFFICERS OF THE TRUST
The Board of Trustees of the Trust consists of seven trustees. The trustees and
officers of the Trust, their ages and their principal occupations during the
last five years are set forth below. Each trustee who is an "interested person"
of the Trust (as defined in the 1940 Act) is indicated by an asterisk (*).
<TABLE>
<CAPTION>
Position(s) Held Principal Occupations(s)
Name and Address Age With Registrant During the Past Five Years
- ---------------------- --------- --------------------- -------------------------------------------
<S> <C> <C> <C>
Bruce D. Alexander 56 Trustee Vice President, Yale University (since May
</TABLE>
B - 17
<PAGE>
<TABLE>
<CAPTION>
Positions(s) Held Principal Occupations(s)
Name and Address Age With Registrant During the Past Five Years
- ---------------------- --------- --------------------- -----------------------------------------
<S> <C> <C> <C>
282 Prospect Street 1998); Adjunct Professor, Yale University
New Haven, CT 06511 School of Management; Senior Vice President and
Director of New Business, The Rouse Company
Lawrence S. Bacow 48 Trustee Chancellor, Massachusetts Institute of
75 Summit Technology (since August 1998); Professor,
Newton, MA 02458 Massachusetts Institute of Technology
Richard A. Dobbins 55 Trustee President, Historical Data
520 Washington Street Systems, Inc.
Duxbury, MA 02331
Lynn C. Thurber* 53 Trustee Chief Executive Officer, LaSalle Investment
200 East Randolph Drive Management; Director and Chairman of LaSalle
Chicago, IL 60601 Investment Management (Securities), Inc., the
general partner of LaSalle Investment Management
(Securities), L.P., the adviser to the Trust; Co-
President, LaSalle Investment Management, Inc.,
Managing Director and Co-President, LaSalle
Advisors Limited Partnership
William K. Morrill, Jr.* 63 Trustee; President Managing Director, LaSalle Investment
100 East Pratt Street Management (Securities) L.P.
Baltimore, MD 21202
Keith R. Pauley* 38 Trustee; Executive Managing Director/Portfolio Manager, LaSalle
100 East Pratt Street Vice President Investment Management (Securities) L.P.
Baltimore, MD 21202
Stephen A. Smith 42 Senior Vice President Managing Director and Director of
200 East Randolph Drive Secretary Global Client Services, LaSalle Investment
Chicago, IL 60601 Management, Inc.
James A. Ulmer, III 60 Vice President Senior Vice President, LaSalle Investment
100 East Pratt Street Management (Securities) L.P.;
Baltimore, MD 21202 Principal, AIRES Real Estate Services
Denise M. Ruth Organt 29 Assistant Secretary Vice President, LaSalle Investment
100 East Pratt Street Management (Securities) L.P.
Baltimore, MD 21202
Brian Hake 40 Treasurer Senior Vice President/Treasurer
200 East Randolph Drive Jones Lang LaSalle Incorporated; Assistant
Chicago, IL 60601 Vice President/Treasurer, First Merchants
Acceptance
</TABLE>
CODE OF ETHICS
The Board of Directors of the Company and the Board of Trustees of the Trust
have adopted a Code of Ethics pursuant to Rule 17j-1 under the 1940 Act. The
Code of Ethics applies to the personal investing activities of all
directors/trustees and officers of the Company and the Trust, as well as to
designated officers, directors and employees of the Manager and the Distributor.
As described below, the Code of Ethics imposes significant restrictions on the
Manager's investment personnel, including the portfolio managers and employees
who execute or help execute a portfolio manager's decisions or who obtain
contemporaneous information regarding the purchase or sale of a security by the
Trust.
The Code of Ethics requires that covered employees of the Manager and all
Company directors and Trust trustees who are "interested persons", preclear
personal securities investments (with certain exceptions, such as non-volitional
purchases, purchases that are part of an automatic dividend reinvestment plan or
purchases of securities that are not eligible for purchase by the Trust). The
preclearance requirement and associated procedures are designed to identify any
substantive prohibition or limitation applicable to the proposed investment. The
substantive
B - 18
<PAGE>
restrictions applicable to investment personnel include a ban on acquiring any
securities in an initial public offering, a prohibition from profiting on short-
term trading in securities and special preclearance of the acquisition of
securities in private placements. Furthermore, the Code of Ethics provides for
trading "blackout periods" that prohibit trading by investment personnel and
certain other employees within periods of trading by the Trust in the same
security. Officers, directors and employees of the Manager and the Distributor
may comply with codes instituted by those entities so long as they contain
similar requirements and restrictions.
INVESTMENT MANAGER
The Board of Directors of the Company has approved a Management Agreement
between the Fund and the Manager. Under the agreement, the Manager monitors the
operations of the Fund. The Manager receives no fee for providing these
monitoring services. In the event the Company's Board of Directors determines
that it is in the best interests of the Fund's shareholders to withdraw its
investment in the Trust, the Manager would become responsible for directly
managing the assets of the Fund. In such event, the Manager would be entitled to
receive an investment management fee, accrued daily and paid monthly, at the
annual rate of 0.75% of the Fund's average daily net assets.
The Management Agreement will remain in effect for two years from the date of
its initial execution and from year to year thereafter, so long as such
continuance is specifically approved at least annually by the Board of Directors
of the Company or by vote of a majority of the outstanding voting securities of
the Fund (as defined in the 1940 Act) and by the vote of a majority of the
directors who are not parties to the agreement or "interested persons" of any
such party (as defined in the 1940 Act), cast in person at a meeting called for
the purpose of voting on such approval. The Management Agreement may be
terminated by either the Company or the Manager on 60 days' written notice. It
will terminate automatically in the event of its assignment (as defined by the
1940 Act).
The Manager serves as the Trust's investment manager pursuant to an Investment
Management Agreement with the Trust. Under the agreement, the Manager manages
the Trust's investments subject to the supervision and direction of the Board of
Trustees of the Trust. The Manager is responsible for providing a continuous
investment program for the Trust, including the provision of investment research
and management with respect to all securities and investments and cash
equivalents purchased, sold or held in the Trust and the selection of brokers-
dealers through which securities transactions for the Trust will be executed. In
carrying out its responsibilities, the Manager is required to act in conformance
with the Trust's Agreement and Declaration of Trust, the 1940 Act and the
Investment Advisers Act of 1940, as amended.
The Manager bears all expenses in connection with the performance of services
under its agreements with the Company and the Trust. Each of the Company and the
Trust bear certain other expenses incurred in its operation, including: (i) the
charges and expenses of any registrar, share transfer or dividend disbursing
agent, custodian or depository appointed for the safekeeping of the Trust's
cash, portfolio securities and other property; (ii) the charges and expenses of
auditors; (iii) brokerage commissions for transactions in the portfolio
securities of the Trust; (iv) all taxes, including issuance and transfer taxes,
and fees payable by the
B - 19
<PAGE>
Company/Trust to federal, state or other governmental agencies; (v) the cost of
share certificates representing shares of the Company/Trust, (vi) fees involved
in registering and maintaining registrations of the Company/Trust and of the
Fund's shares with the SEC and various states and other jurisdictions; (vii) all
expenses of shareholders' and directors'/trustees' meetings and of preparing,
printing and mailing proxy statements, semi-annual and annual reports, and other
communications (including prospectuses) to existing shareholders; (viii)
compensation and travel expenses of directors/trustees who are not "interested
persons" within the meaning of the 1940 Act; (ix) the expense of furnishing or
causing to be furnished to each shareholder a statement of account, including
the expense of mailing; (x) charges and expenses of legal counsel in connection
with matters relating to the Company/Trust; (xi) membership or association dues
for the Investment Company Institute or similar organizations; (xii) interest
payable on Company/Trust borrowings; and (xiii) postage.
For the fiscal year ended December 31, 1998, the investment management fee
payable to the Manager was $166,972 of which $22,263 was waived. For the fiscal
year ended December 31, 1999, the investment management fee payable to the
Manager was $201,354 of which $26,847 was waived.
ADMINISTRATOR
PFPC Inc. (the "Administrator"), 103 Bellevue Parkway, Wilmington, DE 19809, a
Delaware corporation which is an indirect wholly-owned subsidiary of PNC
Financial Corp., serves as the administrator for both the Fund and the Trust.
Pursuant to Administration Agreements between the Administrator and the Company
and the Trust, respectively, the Administrator has agreed to provide certain
fund accounting and administrative services to the Fund and the Trust, including
among other services, accounting relating to the Fund and the Trust and the
investment transactions of the foregoing; computing daily net asset values;
monitoring the investments and income of the Fund and the Trust for compliance
with applicable tax laws; preparing for execution and filing federal and state
tax returns, and semi-annual and annual shareholder reports; preparing monthly
financial statements including a schedule of investments; assisting in the
preparation of registration statements and other filings related to the
registration of shares; coordinating contractual relationships and
communications between the Manager and the Fund's and the Trust's custodian;
preparing and maintaining the Fund's and the Trust's books of account, records
of securities transactions, and all other books and records in accordance with
applicable laws, rules and regulations (including, but not limited to, those
records required to be kept pursuant to the 1940 Act); and performing such other
duties related to the administration of the Fund and the Trust as may be agreed
upon in writing by the parties to the respective agreements.
Compensation for the services and facilities provided by the Administration
Agreements includes payment of the Administrator's out-of-pocket expenses. The
Administrator's reimbursable out-of-pocket expenses include, but are not limited
to, postage and mailing, telephone, telex, Federal Express, independent pricing
service charges and record retention/storage. The Administration Agreements will
continue in effect until terminated by either party on 60 days' prior written
notice to the other party.
B - 20
<PAGE>
For the fiscal year ended December 31, 1998, the administration fee payable to
the Administrator with respect to the Trust and the Fund was $72,098 (of which
$36,049 was waived) and $27,322 (of which $13,662 was waived), respectively. For
the fiscal year ended December 31, 1999, the administration fee payable to the
Administrator with respect to the Trust and the Fund was $95,002 (of which
$29,607 was waived) and $57,444 (of which $32,661 was waived), respectively.
CUSTODIAN
PFPC Trust Company, 400 Bellevue Parkway, Wilmington, DE 19809, serves as
custodian of the Fund's and the Trust's assets consisting of cash and
securities.
TRANSFER AGENT
PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809, serves as transfer agent
and dividend paying agent of the Fund's shares.
DISTRIBUTION ARRANGEMENTS
DISTRIBUTOR
Funds Distributor, Inc. (the "Distributor"), located at 60 State Street, Suite
1300, Boston, MA 02109, serves as the principal underwriter and distributor for
the Fund's shares pursuant to a Distribution Agreement with the Company. The
Distribution Agreement was initially approved by the Board of Directors of the
Company. The Distributor is a registered broker-dealer and a member of the
National Association of Securities Dealers, Inc.
The Distributor is an indirect wholly-owned subsidiary of Boston Institutional
Group, Inc., a holding company all of whose outstanding shares are owned by key
employees.
The Distributor offers shares of the Fund continuously and has agreed to use its
best efforts to solicit purchase orders for shares. Retail Class shares are sold
by securities dealers and other financial services firms which have executed
sales agreements with the Distributor. The Distributor is not obligated to sell
any specific amount of shares of the Fund. The Distributor bears all expenses of
providing services pursuant to the Distribution Agreement. The Fund bears the
expenses of registering its shares with the SEC and with applicable state
regulatory authorities.
The Distribution Agreement will remain in effect for two years from the date of
its initial execution and from year to year thereafter, so long as such
continuance is specifically approved at least annually by the Board of Directors
of the Company or by vote of a majority of the outstanding voting securities of
the Fund (as defined in the 1940 Act), and by the vote of a majority of the
directors who are not parties to the agreement or "interested persons" of any
such party (as defined in the 1940 Act), cast in person at a meeting called for
the purpose of voting on such approval. The Distribution Agreement may be
terminated by either the Company or the
B - 21
<PAGE>
Distributor on 60 days' written notice. It will terminate automatically in the
event of its assignment (as defined by the 1940 Act).
The Company and the Distributor reserve the right to reject any purchase order
and to suspend the offering of shares of the Fund. The Company reserves the
right to vary the initial investment minimums and to impose minimums for
additional investments in any of the classes of the Fund's shares at any time.
In addition, the Company may waive the minimum investment requirements for any
investor. The factors to be considered in the waiver or variation of such
minimum investments include, but are not limited to, the relationship of the
investor to the Company, the amount of the proposed investment, and the type of
investor.
DISTRIBUTION PLAN
The Company has adopted a Distribution Plan for the Retail Class of the Fund
(the "Plan") pursuant to Rule 12b-1 under the 1940 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,
including advertising, compensation to dealers and the preparation of sales
literature. Distribution fees paid under the Plan may not exceed 0.75% annually
of the average daily net assets of the Retail Class, or such lesser amount as
may be specified by the Company's Board of Directors. The Board of Directors has
authorized payment of an annual distribution fee of 0.25% to the Distributor and
participating dealers who assist in the distribution of Retail Class shares. The
Distributor may use the fees paid under the Plan and its other resources to pay
expenses associated with activities primarily intended to result in the sale of
Retail Class shares. Under the terms of the Plan, the Board of Directors of the
Company receives a quarterly written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made.
The Plan has been approved by the Board of Directors, including the majority of
the directors who are not "interested persons" of the Company (as defined in the
1940 Act) and who do not have any direct or indirect financial interest in the
operation of the Plan. In approving the Plan, the directors identified and
considered a number of potential benefits which the Plan may provide and
determined that there is a reasonable likelihood that the Plan will benefit the
Retail Class and its shareholders.
The Plan is a compensation plan because the Distributor is paid a fixed fee and
is given discretion concerning what expenses are payable under the Plan. The
Distributor may spend more for marketing and distribution than it receives in
fees from the Retail Class. However, to the extent fees received exceed
expenses, including indirect expenses such as overhead, the Distributor could be
said to have received a profit. For example, if the Distributor pays $1 for
distribution related expenses and receives $2 under the Plan, the $1 difference
could be said to be a profit for the Distributor. If after payments by the
Distributor for marketing and distribution there are any remaining fees which
have been paid under the Plan, they may be used as the Distributor may elect.
Since the amounts payable under the Plan may be commingled with the
Distributor's general funds, including the revenues it receives in the conduct
of its business, it is possible that certain of the Distributor's overhead
expenses will be paid out of distribution fees
B - 22
<PAGE>
and that these expenses may include the costs of leases, depreciation,
communications, salaries, training and supplies.
The Plan will remain in effect from year to year only so long as such
continuance is specifically approved at least annually by a vote of the Board of
Directors of the Company, and of the directors who are not "interested persons"
of the Company (as defined in the 1940 Act) and have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan, cast in person at a meeting called for the purpose of voting on the
Plan or such agreements. The Plan may be terminated at any time by vote of a
majority of the directors who are not "interested persons" of the Company (as
defined in the 1940 Act) and have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to the Plan, or by vote
of a majority of the outstanding voting securities of the Fund.
For the fiscal year ended December 31, 1999, the Retail Class of the Fund
accrued distribution fees of $746. No amount of the fee was paid.
As of the date of this Statement of Additional Information, all distribution
fees received by the Distributor under the Plan are paid to qualified securities
brokers or financial institutions or other investment professionals in respect
of their share accounts.
SHAREHOLDER SERVICES PLAN
The Company has adopted a Shareholder Services Plan for the Retail Class of the
Fund to compensate qualified recipients for individual shareholder services and
account maintenance. These functions include, but are not limited to, answering
shareholder questions and handling correspondence, assisting customers, and
account record keeping and maintenance. For these services, the Fund may pay a
qualified recipient a shareholder services fee at an annual rate not exceeding
0.25% of average daily net assets of the Retail Class attributable to its
shareholder accounts, or such lesser amount as may be specified by the Company's
Board of Directors. The Board of Directors has authorized payment of an annual
shareholder services fee of 0.15%.
For the fiscal year ended December 31, 1998, the Retail Class of the Fund
accrued shareholder servicing fees of $47. No amount of the fee was paid. For
the fiscal year ended December 31, 1999, the Retail Class of the Fund accrued
shareholder servicing fees of $447. No amount of the fee was paid.
PERFORMANCE INFORMATION
The Fund may compare its performance to other funds or to relevant indices, such
as the Wilshire Real Estate Index, the NAREIT Composite Index, the NAREIT Equity
Index, the S&P 500, the Russell 2000, the S&P Utilities Index and the Lehman
Brothers Fixed Income Index.
For purposes of quoting and comparing the performance of the Fund to that of
other open-end diversified management investment companies and to stock or other
relevant indices or averages in advertisements or in certain reports to
shareholders, performance will generally be stated both
B - 23
<PAGE>
in terms of total return and in terms of yield. However, the Fund may also from
time to time state its performance solely in terms of total return.
TOTAL RETURN CALCULATIONS
Under the formula for calculating total return, the time periods used in
advertising will be based on rolling calendar quarters, updated to the last day
of the most recent quarter prior to submission of the advertising for
publication, and will cover one-, five-, and ten-year periods or a shorter
period dating from the effectiveness of the Company's registration statement (or
the later commencement of operations of the Fund or class). In calculating the
ending redeemable value for a class of the Fund's shares, all dividends and
distributions by the Fund are assumed to have been reinvested at net asset value
as described in the Prospectus on the reinvestment dates during the period. The
calculation uses the average annual compounded rate of return over the period
that would equate an assumed initial payment of $1,000 to the ending redeemable
value. Any sales loads that might in the future be made applicable at the time
to investments or reinvestments would be included as would any recurring account
charges that might be imposed by the Fund.
The Company may also from time to time include in such advertising total return
figures that are not calculated according to the formulate set forth above to
compare more accurately the Fund's performance with other measures of investment
return. For example, in comparing the Fund's total return with data published by
Lipper Analytical Services, Inc., CDA/Weisenberger or Morningstar Inc., the Fund
calculates its aggregate and average annual total return for the specified
periods of time by assuming the investment of $10,000 in shares and assuming the
reinvestment of each dividend or other distribution at net asset value on the
reinvestment date.
Alternative total return information will be given no greater prominence in such
advertising than the information prescribed under SEC rules, and all
advertisements containing performance data will include a legend disclosing that
such performance data represent past performance and that 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.
The cumulative total returns for the period ended December 31, 1998 (since
inception) for the Retail Class and the Institutional Class of the Fund were
(20.22)% and (19.92)%, respectively. The cumulative total returns for the period
ended December 31, 1999 (since inception) for the Retail Class and the
Institutional Class of the Fund were (24.36)% and (23.59)%, respectively.
YIELD CALCULATIONS
Yields used in advertising are computed by dividing the interest income for a
given 30-day or one-month period, net of the Portfolio's expenses, by the
average number of shares entitled to receive dividends during the period,
dividing this figure by the Portfolio's NAV at the end of the period and
annualizing the result (assuming compounding of income) in order to arrive at an
annual percentage rate. Income is calculated for purposes of the yield
quotations in accordance
B - 24
<PAGE>
with standardized methods applicable to all stock and bond funds. In general,
interest income is reduced with respect to bonds trading at a premium over their
par value by subtracting a portion of the premium from income on a daily basis,
and is increased with respect to bonds trading at a discount by adding a portion
of the discount to daily income. Capital gains and losses generally are excluded
from the calculation.
Income calculated for the purposes of determining yield differs from income as
determined for other accounting purposes. Because of the different accounting
methods used, and because of the compounding of income assumed in yield
calculations, the Fund's yield may not equal its distribution rate, the income
paid to your account, or income reported in the Fund's financial statements.
For the thirty-day period ended December 31, 1998, the yields for the Retail
Class and Institutional Class shares of the Fund were 1.80% and 2.19%,
respectively. For the thirty-day period ended December 31, 1999, the yields for
the Retail Class and Institutional Class shares of the Fund were 4.66% and
5.07%, respectively.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 50 million Retail Class shares and 50 million
Institutional Class shares of its LaSalle Partners U.S. Real Estate Fund series
of Common Stock, par value $.01 per share. The Board of Directors may increase
or decrease the number of authorized shares without shareholder approval.
The Company's Articles of Incorporation provide for the establishment of
separate series and separate classes of shares by the Board of Directors at any
time. The Board has designated a single series of shares, the LaSalle Partners
U.S. Real Estate, having two classes of shares: Retail Class shares and
Institutional Class shares. In the event additional series are established, each
series would be managed separately and shareholders of each series would have an
undivided interest in the net assets of that series. For tax purposes, the
series will be treated as separate entities. Generally, each class of shares
issued by a particular series will be identical to every other class and
expenses of the series (other than any applicable distribution or shareholder
services fees) would be prorated between all classes of a series based upon the
relative net assets of that class.
All shares of the Fund, regardless of class, have equal rights with respect to
voting, except that the holders of a particular class of shares are not entitled
to vote on any matter which does not affect any interest of that class. All
classes of Fund shares vote together as a single class, except as otherwise
required by applicable law. Shareholders of the Fund do not have cumulative
voting rights, and therefore the holders of more than 50% of the outstanding
shares voting together for election of directors may elect all the members of
the Board of Directors of the Company. In such event, the remaining holders
cannot elect any members of the Board of Directors.
There are no preemptive, conversion or exchange rights applicable to any shares
of the Fund. The outstanding shares are fully paid and non-assessable. In the
event of liquidation of the Fund or
B - 25
<PAGE>
dissolution of the Company, each share is entitled to its portion of the Fund's
assets (or the assets allocated to a separate series of shares if there is more
than one series) after all debts and expenses have been paid.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 2400 Eleven Penn Center, Philadelphia, PA 19103,
serves as independent accountants for the Company and the Trust.
LEGAL COUNSEL
Piper Marbury Rudnick & Wolfe LLP serves as legal counsel to the Company and the
Trust.
FINANCIAL STATEMENTS
Audited financial statements for the Fund and the Trust as of and for the period
ended December 31, 1999, together with the notes thereto and the reports of
PricewaterhouseCoopers LLP, are incorporated herein by reference to the Annual
Report of the Fund and the Trust.
B - 26
