Form N-CSR ALPINE EQUITY TRUST

Certified annual shareholder report of registered management investment companies

What is Form N-CSR?
  • Accession No.: 0000950137-06-000226 Act: 40 File No.: 811-05684 Film No.: 06520118
  • CIK: 0000842436
  • Submitted: 2006-01-09
  • Period of Report: 2005-10-31

CERTIFIED SHAREHOLDER REPORT HTML

c01264nvcsr.htm

 

As filed with the Securities and Exchange Commission on 01/09/06
 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05684
Alpine Equity Trust
(Exact name of registrant as specified in charter)
615 East Michigan Street
3rd Floor
Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)
Samuel A. Lieber
Alpine Management & Research, LLC
2500 Westchester Avenue, Suite 215

Purchase, NY 10577
(Name and address of agent for service)
1-888-785-5578
Registrant’s telephone number, including area code
Date of fiscal year end: October 31, 2005
Date of reporting period: October 31, 2005
 
 

 


 

Item 1. Report to Stockholders.
(ALPINE PICTURE)

 


 

Table of Contents
         
Alpine’s Investment Outlook
    1  
 
       
Fund Manager Reports
       
 
       
Alpine U.S. Real Estate Equity Fund
    4  
 
       
Alpine Realty Income & Growth Fund
    8  
 
       
Alpine International Real Estate Equity Fund
    12  
 
       
Schedules of Portfolio Investments
    15  
 
       
Statements of Assets and Liabilities
    21  
 
       
Statements of Operations
    22  
 
       
Statements of Changes in Net Assets
    23  
 
       
Financial Highlights
    26  
 
       
Notes to Financial Statements
    29  
 
       
Report of Independent Registered Public Accounting Firm
    35  
 
       
Additional Information
    36  

 


 

Alpine’s Investment Outlook
(PHOTO OF SAMUEL A. LIEBER)
Dear Investor,
We are pleased to report that for the fiscal year ended October 31, 2005, the Alpine Funds have continued to deliver outstanding performance compared to either the relevant broad equity and debt markets, or applicable benchmark indices, as detailed in the individual reports of each fund. Alpine’s investment returns are a product of a continuous process of evaluation and selection even though investors focus on standardized periods as of a point in time. Over time, distinct events, such as this year’s “Gulf Hurricane Season’’, which transfixed our country, can focus our attention on simmering problems in a manner which may at first be painful, but could prove beneficial over time. We believe that this pattern may well depict a transition of investor sentiment during the 4th quarter of 2005 into the 2nd quarter next year.
Hurricanes Katrina and Rita inflicted horrendous suffering on hundreds of thousands of people, but they significantly damaged our nation’s confidence as well as our infrastructure. The credibility of certain institutions and individuals was questioned, the resiliency of our economy became a concern, and the capacity to improve future protection from catastrophe came into doubt. As a result, equity market indices sagged, hitting a nadir in late October, before they began to rally in anticipation of next year. Indeed, consumer confidence is now recovering, October’s new home sales hit a record level, employment remains strong, and the dollar has surged towards recent highs. Of greatest importance to the capital markets, energy prices have retraced some of their meteoric rise, while the Federal Reserve’s round of recurring interest rate increases appear to be in the home stretch (perhaps to 4.5%).
The major influences upon business economics during the past year were dominated by the gradual increase of short-term interest rates set by the Federal Reserve and the dramatic increases in oil and gas prices. Given the restraining influences on both business and consumer activity of each of these trends, it is impressive that share prices have remained within a narrow range of average price fluctuation throughout the year. Corporate earnings results suggested that most industries and businesses adjusted well to these diverse pressures. Profitability and corporate cash flow were well maintained with few exceptions. Most impressively, the combination of stability in the economy and higher interest rates supported a recovery of the dollar up 5.9% and 9.3%, respectively versus the Euro and the Yen during Alpine Fund’s fiscal year. Most significantly, consumer purchasing was sustained in the face of not only higher short-term interest rates and large increases in fuel costs, but also the shock and disruption of the hurricanes. Government mishandling of both Iraq and the Katrina response severely hurt consumer confidence, but as we suspected, its market impact was short-lived. Anxieties over the military burden and its consequences in the Iraq war have become prominent issues for the Administration and Congress in recent months, suggesting that pressures to reduce both American economic and military exposure in Iraq will grow in advance of next year’s mid-term elections.
The capital markets and economy appear to be finishing a period of transition between the 2003/2004 recovery and an extended mid-cycle expansion. Rising interest rates, commodity capacity constraints and rising productivity all reflect transitional adjustments. Needless to say, transitions create uncertainty, which had restrained market pricing, although sentiment is now benefiting from improved clarity as to America’s ongoing exposure in Iraq and the approaching end to Fed tightening. Thus, Alpine is increasingly optimistic that companies can achieve projected low-teens percentage earnings growth which would be rewarded by higher market price to earnings (P/E) multiples. Even stronger outperformance will accrue to those companies which can generate strong, sustained growth based upon unique assets or products and better execution of their business plans.
Looking forward to 2006, we see positive factors which suggest an outlook of improving confidence on behalf of consumers, businesses and investors. This should be reflected in higher corporate dividend payouts, larger corporate capital expenditures and

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expanded corporate share buy-backs, plus accelerating activity in merger and acquisitions. This should all help to sustain profits growth. We assume that the majority of interest rate increases by the Federal Reserve have already been made, that the peak of the energy panic is past and will not be exacerbated, and that Congressional and Administration economic and tax policies will be limited to moderate change rather than radical shifts. With ample liquidity in both domestic and international capital markets, we believe opportunities for significant corporate profits growth will reward appropriate individual stock selection by concentrating on the outstanding business performances in the economy.
Momentum investors may focus on big cap stocks, but we do not expect a “nifty fifty’’ emphasis on large companies, so Alpine’s multi-cap value oriented approach should do well. Opportunity and private equity funds have amassed huge cash commitments, which leads us to expect a high level of mergers and acquisitions (M&A) next year. At this stage of the business cycle, few companies trade well below break up value, so buy-out firms will be drawn to companies with either dynamic growth Potential supported by unique business franchises or companies with stable cash earners.
Financial services is one segment of the stock market where we expect to see attractive investment opportunities. Alpine has been fortunate that our bank analyst, Peter Kovalski, has been managing a private investment partnership for us with excellent results. Given the confluence of Peter’s performance and our perception of the potential for these stocks, we recently launched the Alpine Dynamic Financial Services Fund. During his fifteen years of experience as a bank analyst, over 100 of his selections of banks and thrifts have been acquired by other institutions. Please visit our website or contact our call center for a prospectus and other information. Read it carefully before investing.
Having projected an optimistic tone for the equity markets next year, we should note that our underlying caution of the past few years has not dissipated. Rather, we believe the business cycle is strong enough to sustain our somewhat stretched economy, despite its reduced capacity to rebound from systemic or cyclical shocks. Alpine is projecting a gradual moderation in both home price appreciation and sales volume, as well as, moderate income growth. After a few years, affordability levels would likely normalize. This may lead to slower per capita consumer spending, but business capital expenditures should sustain employment growth. The net effect might be a stable business environment producing 3% GDP growth. If this leads observers to proclaim, “Goldilocks economy!’’—part 2, then we will all be thankful next December. We look forward to reporting on our progress in Alpine’s next report.
Sincerely,
(-s- Samuel A. Lieber)
Samuel A. Lieber
President, Alpine Mutual Funds
 
This letter and those that follow represent the opinions of Alpine Funds management and are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security.
 
The Alpine Dynamic Financial Services Fund investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company, and it may be obtained by calling 888-785-5578, or visiting www.alpinefunds.com. Read it carefully before investing.
 
Price to earnings ratio is a common tool for comparing the prices of different common stocks and is calculated by dividing the current market price of a stock by the earnings per share.

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(EQUITY MANAGER REPORTS)


 

(LINE GRAPH)
This chart represents a comparison of a hypothetical $10,000 investment in the indicated share class versus similar investments in the Fund’s benchmark’s. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Fund’s return reflects the waiver of certain fees. Without the waiver of fees, the Fund’s total returns would have been lower.
Performance data quoted represents past performance and is not predictive of future results. Investment return and principal value of the Fund fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance current to the most recent month end may be lower or higher than the performance quoted and may be obtained by calling 888-785-5578.
The Wilshire Real Estate Securities Index is a market capitalization weighted performance index of listed property and real estate securities. The Lipper Real Estate Funds Average is an average of funds that invest at least 80% of their portfolio in equity securities of domestic and foreign companies engaged in real estate industry. Lipper Rankings for the periods shown are based on Fund total returns with dividends and distributions reinvested and do not reflect sales charges. The S&P 500 Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Wilshire Real Estate Securities Index, the Lipper Real Estate Funds Average and the S&P 500 Index are unmanaged and do not reflect fees associated with a mutual fund, such as investment adviser fees. The performance for the U.S. Real Estate Equity Fund reflects the deduction of fees for these value-added services. Investors cannot directly invest in an index.
Comparative Annualized Total Returns as of 10/31/05
                                         
                                    Since Inception
    1 Year   3 Year   5 Year   10 Year   (9/1/93)
 
Alpine U.S. Real Estate Equity Fund
    22.18 %     35.89 %     28.02 %     18.81 %     16.60 %
 
Wilshire Real Estate Securities Index
    20.09 %     28.84 %     20.02 %     15.35 %     12.78 %
 
S&P 500 Index
    8.72 %     12.85 %     –1.74 %     9.34 %     10.17 %
 
Lipper Real Estate Funds Average
    17.29 %     26.82 %     19.09 %     15.09 %     12.37 %
 
Lipper Real Estate Fund Rank
    12/216       2/154       2/119       2/30       1/7  

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(ALPINE U.S. REAL ESTATE EQUITY FUND LOGO)
(PIE CHART)
Commentary
The Alpine U.S. Real Estate Equity Fund ended the fiscal year on October 31, 2005 with a closing NAV per share of $39.45. This resulted in a total return of 22.18% for the prior 12 months which builds on the Fund’s strong three, five and ten year performance records and rankings as detailed on the facing page. Our view remains positive on some of the more cyclical sectors of the property industry. This is strongly supported by both historical trends and current data. The Fund’s investment thesis is underpinned by the following key trends:
    Expanded Real Estate Allocations Lead to Mergers and Acquisitions
 
    Lodging Demand Runs Ahead of Supply
 
    Homebuilders Benefit from Market Share Gains
Buying on Dips
The two year long trend of rising energy prices and modestly higher interest rates impacted the Alpine U.S. Real Estate Equity fund in its 4th fiscal quarter. Post Katrina, the equity markets initially took a cautious perspective on 2006 economic prospects which created significant downward volatility in many share prices of cyclical companies. We believe this created a very attractive entry point for additional purchases of such shares as pessimism peaked during late October. While short-term volatility in the Fund’s NAV has not been uncommon over the 12 years since inception, we believe our selective approach to opportunistic purchases of out of favor companies has contributed to the long-term strength of this fund’s investment performance. The portfolio continues to emphasize undervalued growth, unique assets and dominant niche businesses in its investment profile.
In prior shareholder reports, we have written extensively on the continuing trend of expanded institutional investment allocations to real estate. This rise in demand coincided with low interest rates which together have elevated prices. Higher prices have induced owners to sell, but the level of demand still exceeds attractive opportunities. At today’s prices, commercial acquisitions are marginally accretive and are dependent on significant rental growth to achieve desired profitability. One product of this dearth of direct real estate investments has been an increase in mergers and acquisitions (M&A) activity of public real estate companies. The Fund enjoyed several acquisitions last year and this year, most notably the November 9th purchase announcement of hotelier La Quinta Corp., by buy-out firm Blackstone Group, L.P. for $11.25 per share. This was a long-term holding of the Fund, with initial investment at $2.05 per share during April 2000. The Fund’s return on average purchase price of $7.71 was 45.91%. The Fund also benefited from the acquisition of Chicago office

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(ALPINE U.S. REAL ESTATE EQUITY FUND LOGO)
company, Prime Group by Lightstone Group, L.P. The increasing aggressiveness created by the weight of investment capital may pressure the directors of many companies to examine their growth prospects in light of value enhancing alternatives. Alternative methods of surfacing value for shareholders includes share repurchase programs, which many homebuilders have recently expanded, growing dividends or self liquidations which Wellsford Real Properties is undertaking.
Portfolio Changes
The Fund’s manager believes that the shares of homebuilding and lodging companies offer the greatest value as well as superior growth potential among domestic real estate equities. They could provide the strongest returns among publicly traded real estate stocks over the next two years. Accordingly, when share prices in these property subsectors sold-off in October, the Fund was able to increase its exposure to both. Homebuilders now constitute 55.3% of the portfolio versus 53.1% last year. Lodging stocks currently constitute 31.9% of the portfolio versus 28.7% at this time last year. Over the past year, the portfolio’s exposure to mortgage REITs and finance companies has declined from 7.9% to 4.1% of the portfolio. Specifically, we eliminated exposure to the subprime segment of the marketplace primarily due to an evolving cyclical compression of yields and profitability for the sector. Our retail exposure was also reduced from 4.6% down to 2.6% as were office and industrial investments from 3.8% to 1.5%. Even though their fundamentals are improving, these stocks appear historically expensive. Notably, the Fund’s apartment exposure was increased through a focused investment on the segment’s premier assisted living company, Sunrise Assisted Living, which bridges the gap between apartments and nursing homes by designing its properties for upscale tenants. This fast growing company dominates the demographically compelling high-end niche, suggesting continued expansion potential.
No Room at the Hotel
Alpine has focused much of its investment effort on identifying the best opportunities in the lodging sector. Historically, following years when the supply of new hotel rooms falls significantly below 100,000 additional rooms per year, this contraction created conditions that permit an extended period of room rate revenue growth which enhanced profitability for hotels. This pattern was created between 1974 and 1976, when room production fell from 150,000 to 40,000 rooms, leading to five consecutive years of strong growth in revenue per available room (REVPAR). Similarly, between 1990 and 1992, production which had already fallen over the prior few years from 148,000 to 100,000 then slipped to roughly 30,000 rooms per year. This led to nine straight years of solid REVPAR performance. The current opportunity began in 2002 when room production fell from 140,000 newly constructed units to just about 40,000 additional rooms in 2004. Over the past two years, we have seen very strong REVPAR growth and we believe this could last for another 3-5 years. Alpine believes that this potential period of extended growth is only partially reflected in today’s hotel share prices. Hotel prices have appreciated over the past few years, but not as much as other commercial property types. Thus, lodging provides the potential for the most accretive acquisitions, which supports ongoing investment activity.
Public Homebuilders Grow Market Share Through Dips
In prior reports to shareholders, as well as on our website, Alpine has provided investors with extensive analysis underpinning our positive stance on the publicly traded homebuilding stocks. We believe such companies will prosper even after the nation as a whole passes a probable, near-term peak in both prices and volumes for home sales during 2005. Barring a recession, we do not expect a significant decline in either activity or prices in 2006, with volumes nationwide probably declining between 3-7% next year and prices running flat to up 3%. But even with such a slowdown in demand, we are confident that publicly traded homebuilders could continue to grow their revenues and earnings at a double digit pace.
Consolidation has transformed the homebuilding market over the past decade as the ten largest builders have grown national market share from 8% in 1994 to 25% this year. This has enabled the ten largest public builders to grow revenues even during the three most recent declines in new home sales nationwide. Specifically, during 1994, 1997 and 1999, the number of new home sales nationwide declined by an average of more than 10.5%, while the revenues of the ten largest home builders grew by

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(ALPINE U.S. REAL ESTATE EQUITY FUND)
25%. Only during the severe real estate recession (RTC, S&Ls) of 1990, when new home sales fell 26%, did builder’s revenues fall, in this case, by 5%. In fact, that was the only calendar year when median prices for new homes declined, losing –1%. Combining this historic perspective with recent third quarter data for the ten largest builders, who on average saw new orders grow by 30%, and enjoyed backlogs running 39% above last year’s pace, we have a strong conviction that even in the face of a 5-7% decline in nationwide home sales, the large publicly traded builders will likely be able to further expand their market share and could generate 15% annual revenue growth over the next two years. This could sustain a long-term trend of double digit earnings growth, albeit not at the 35% annual pace of the past five years.
With prospective price earnings (P/E) ratios of 6.2 times earnings, we believe home building stocks may be the cheapest sector of the entire stock market. Indeed, all five homebuilders in the S&P 500 are amongst the seven cheapest among 500 stocks when measured by P/E ratio. This suggests that homebuilders’ low price earnings multiple, which currently stands at 40% of the P/E ratio for the S&P 500, is too low by historic standards. Over the past 25 years, this relative P/E multiple has averaged 55%. Between 1980 and 1995, the relative multiple was even higher, averaging 65% when interest rates were substantially above current levels. This historically low relative rating does not reflect the current stature of the nation’s dominant public builders. Thus, in addition to prospective earnings growth, we anticipate P/E multiple expansion to 60% or greater of the S&P 500 will follow if these companies demonstrate growth through a slower phase of the housing cycle.
Barring a significant recession, leading to broad job losses, we believe there is minimum downside to both lodging and homebuilding groups and a compelling long-term growth and revaluation story. For this report, we have emphasized the uniquely concentrated focus of this portfolio, which reflects these compelling value-to-growth relationships. Over time, we would expect compelling value to growth relationships to emerge in other stocks and sectors, however, current share prices for many property stocks already reflect near term prospects. In general, we expect real estate fundamentals to improve as the property cycle evolves over the next few years. Thus, we remain positive on domestic property share performance for the foreseeable future.
Samuel A. Lieber
Portfolio Manager
 
Funds that concentrate their investments in a specific sector, such as real estate, tend to experience more volatility and be exposed to greater risk than more diversified mutual funds. Alpine advocates the use of sector funds as part of an integrated investment strategy.
 
Please refer to the schedule of portfolio investments for fund holding information. Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.
 
Price to earnings ratio (PE) is a common tool for comparing the prices of different common stocks and is calculated by dividing the current market price of a stock by the earnings per share.

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(LINE GRAPH)
This chart represents a comparison of a hypothetical $10,000 investment in the indicated share class versus similar investments in the Fund’s benchmark’s. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Fund’s return reflects the waiver of certain fees. Without the waiver of fees, the Fund’s total returns would have been lower.
Performance data quoted represents past performance and is not predictive of future results. Investment return and principal value of the Fund fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance current to the most recent month end may be lower or higher than the performance quoted and may be obtained by calling 888-785-5578.
The Morgan Stanley REIT (“RMS’’) is a total return index comprising of the most actively traded real estate investment trusts and designed to be a measure of real estate equity performance. The Lipper Real Estate Funds Average is an average of funds that invest at least 80% of their portfolio in equity securities of domestic and foreign companies engaged in the real estate industry. Lipper Rankings for the periods shown are based on Fund total returns with dividends and distributions reinvested and do not reflect sales charges. The S&P 500 Index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The Morgan Stanley REIT Index, the Lipper Real Estate Funds Average and the S&P 500 Index are unmanaged and do not reflect fees associated with a mutual fund, such as investment advisor fees. The performance for the Realty Income & Growth Fund reflects the deduction of fees for these value-added services. Investors cannot directly invest in an index.
Comparative Annualized Total Returns as of 10/31/05
                                 
                            Since Inception
    1 Year   3 Year   5 Year   (12/29/98)
 
Alpine Realty Income & Growth Fund
    15.92 %     23.81 %     20.72 %     19.20 %
 
Morgan Stanley REIT Index
    17.64 %     26.84 %     19.78 %     16.14 %
 
S&P 500 Index
    8.72 %     12.85 %     -1.74 %     1.10 %
 
Lipper Real Estate Funds Average
    17.29 %     26.82 %     19.09 %     16.13 %
 
Lipper Real Estate Fund Rank
    153/216       131/154       14/119       5/97  

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(PIE CHART)
Commentary
The Alpine Realty Income & Growth Fund produced a total return of 15.92% during the fiscal year that ended on October 31, 2005. Net asset value per share increased 9.76% from $19.97 to $21.92. Additionally, the Fund made four quarterly income distributions aggregating $.84 as well as short term and long term gain distributions of $.0394 and $.303, respectively, during the period. Since its inception on December 29, 1998 through October 31, 2005, the Fund produced a cumulative total return to shareholders of 232.4%, which equates to a 19.20% annualized return. The table on the left presents the Fund’s returns for the latest one-year, three-year, five-year, and since inception periods relative to the Morgan Stanley REIT Index (“the RMS Index’’) and the S&P 500 Index (“the S&P’’).
As shown in the adjacent table, real estate securities maintained their status as a top returning asset class during the latest fiscal year, outperforming the S&P for a sixth consecutive twelve month period and adding to their cumulative outperformance over the last six years. Indeed, since October 31, 1999, the RMS Index returned 191.4% (19.49% annualized) compared to the - 2.81% ( -.47% annualized) return of the S&P. During this same timeframe, the Fund returned 220.58% (21.41% annualized).
Real Estate Markets Driven by Capital Flows
In our opinion, returns in the public and private real estate markets have been and continue to be driven by significant capital flows. Low expectations for potential returns in the broader equity and fixed income arenas have moved investors to place increasing emphasis on alternative asset classes such as real estate. In turn, the elevated demand for real estate’s relatively high current income and prospects for cyclical growth has led to historically high prices and low unleveraged prospective returns in the private property markets as well as historically high earnings multiples and low dividend yields for public REIT securities. In fact, in a December 9, 2005 report, Citigroup’s research team noted that property acquisition cap rates (i.e. first year income returns) have dropped from roughly 9% on average during the first quarter of 2002 to the low 6% range, thereby generating significant appreciation for real estate assets.
The abundance of both equity and debt capital has led a powerful seller’s market and transactional activity has accelerated. Public companies have increased their disposition activity, exemplified by the sale of approximately $2.6 billion of assets so far in 2005 by Equity Office, one of the largest office REITs, and by the sales of a significant number of apartment projects to condominium converters and leveraged buyers by multi-family REITs. Merger and acquisition activity has also been brisk. Nearly $28 billion of public company mergers or privatizations were closed during the latest fiscal period and an additional $14 billion of announced transactions are pending. Interestingly, nine of the latest ten takeovers have been privatizations, typically led by investment advisory firms putting sizable backlogs of institutional capital to work.

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(ALPINE REALTY INCOME & GROWTH FUND LOGO)
Debate persists whether the “repricing’’ of real estate assets represents a new paradigm or is due primarily to today’s globally low interest rates and moderate return prospects for traditional asset classes. In our opinion, some of the lowering of risk premiums for real estate is appropriate given the securitization of real estate debt and equity markets and the increased transparency in the sector that have occurred over the past decade. However, we believe more important factors in the current environment are lowered equity yield expectations and availability of low cost financing. Investors essentially are acting rationally given such specific market conditions. With most real estate purchased on a significantly financed basis, investors’ leveraged cash returns today may not be that much lower than in previous periods. Rising interest rates though would necessarily force such leveraged buyers to be less aggressive in their bids and likely impact pricing across the real estate spectrum.
Interest Rate Sensitivity of REITs Defining Feature in 2005
Movements in interest rates and the resultant sensitivity of REIT security pricing were in fact defining characteristics of the latest fiscal period, suggesting that the equity markets believe current risk premiums will not tighten further. Stock price volatility increased measurably with the RMS Index experiencing three periods of significant declines: - 9.01% (12/30/04 - 1/27/05), - 9.02% (8/02/05 - 8/08/05), and - 8.07% (10/03/05 — 10/13/05). Two of the large decreases in the REIT market were, we believe, primarily attributable to market concerns regarding rising rates. On August 2nd, the RMS Index rose to an all-time high. Concurrently, the average REIT dividend yield declined to an historic low of approximately 4.35%. However, stronger than anticipated economic reports fueled concerns of inflationary pressures, already heightened by rising oil prices, and accelerated a rise in long term interest rates, causing the 10-Year Treasury yield and the average REIT dividend yield to be nearly at parity. The increasing relative appeal of fixed income alternatives coupled with investor concern of rising rates on property valuations sparked a sell-off in REIT shares. REITs sold off dramatically over four trading days between August 2nd and August 8th dropping 9.02%. Over the next approximate two month period, REITs rallied back 5.79% but on October 4th, a Federal Reserve President stated that inflation was at the upper end of the Fed’s target range increasing expectations that the Fed would continue raising the short end of the curve. REITs suffered a decline of 8.07% over the next eight trading days before again rallying back 5.77% by the end of the fiscal year. Also contributing to volatility in the markets during the year were two major hurricanes, Katrina and Rita, which impacted both investor and consumer psychology.
While the Fund was not immune to the heightened volatility in REIT securities during the fiscal period, its value held up better during the three above noted decreases in the RMS Index, declining less than the index during the falls in January, August, and October by 331 basis points, 218 basis points, and 31 basis points, respectively. This is consistent with the Fund’s historic pattern of diminished downside volatility and its comparatively low standard deviation of return (12.4% on a trailing three year basis as of September 30, 2005).
Portfolio Review
The lodging sector of the portfolio, accounting for approximately 26% of investment at the end of the fiscal year, did, however, feel the impact of hurricane, energy, and economic concerns on its component share prices, particularly during the last three months of the period, despite the hotel industry exhibiting and forecasting very strong operating fundamentals. With current forecasts for new hotel supply additions to be well contained nationally (approximately 1% in 2005, 1.5% in 2006) and certain urban markets actually experiencing decreases in inventory given condominium conversion activity, the major hotel operators are confident about 2006 and beyond. Pricing power remains strong, boosted by transient business traveler demand and group and contract bookings for 2006. Starwood Hotels & Resorts, the Fund’s largest holding, projects 8-10% improvement in hotel revenue per available room (“REVPAR’’) and another 200 basis points of margin improvement over 2005 results. Marriott forecasts 7-9% REVPAR gains aided by the 10+% increases being achieved for 2006 advance group bookings.
Though market sentiment about the economy and consumer discretionary expenditures impacted lodging stocks disproportionately relative to other real estate operating businesses at the end of the fiscal period, many of the Fund’s lodging investments still produced strong overall gains over the twelve month period. Sunstone Hotel Investors led the group with a +39.9% increase and Felcor Lodging Trust and Starwood Hotels contributed strong returns at +28.4% and +24.2%, respectively. La Quinta Corporation, one of the Fund’s largest holdings, appreciated only +3.73%, negatively impacting the Fund’s yearly results. However, on November 9th the company announced that it had agreed to be acquired by an affiliate of The Blackstone Group for $11.25 per share, a 34.7% premium over its stock price at the end of the fiscal period.

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(ALPINE REALTY INCOME & GROWTH FUND LOGO)
Retail property investments, which at 23.2% of Fund assets represent its second largest sub-sector concentration, produced strong overall returns. Although high short term interest rates, gasoline prices, and prospective winter heating fuel expenditures impact consumer confidence and investor expectations for future retail sales, shopping mall landlords continue to report very healthy leasing demand from their retailer tenant base. The Fund increased its investment in regional mall owning companies during the fiscal period and benefited particularly from its investments in General Growth Properties (+33.95%) and Simon Property Group (+27.1%), two top ten holdings, as well as Taubman Centers (+19.3%) and CBL & Associates (+18.8%). Other results were mixed with Kite Realty Group, Kimco Realty, and Developers Diversified, owners/developers of community and power centers, registering returns of +17.8%, +13.3% and +9.5%, respectively, and The Mills Corp. increasing only +.77%.
Office and industrial companies, representing 22.3% of the Fund, benefited from a continuing trend of slow but steady improvement in operating fundamentals. Office markets experienced a sixth straight quarter of positive space absorption with vacancy rates declining to 14.4% nationally as of September 30th according to CB Richard Ellis. Mid-town Manhattan, Washington, D.C., and San Diego and Orange Counties continue to represent some of the healthiest markets with vacancy rates below 10%. Our coastal focus produced above average results with Arden Realty (+40.0%), Alexandria Real Estate (+26.96%), Vornado Realty Trust (+25.5%), Boston Properties (+25.0%), Reckson Associates (+21.8%), and Maguire Properties (+21.7%) leading the way.
Apartment market conditions also continued to strengthen throughout the year, particularly in locations with high housing costs and low amounts of new multi-family construction. Owners of apartments in markets including southern California, the Washington, D.C. and New York metropolitan areas, and southeast Florida experienced higher year-over-year occupancies and rental increases resulting in the best net operating income growth in three years. Meanwhile, the purchase and sale market remained extremely strong with condominium converters willing to pay significantly higher premiums than income buyers for apartment projects. While companies with national portfolios had varied results, Equity Residential (+23.5%) and United Dominion Realty (+10.7%), the Fund’s two holdings with concentrated west coast portfolios, Essex Property Trust and BRE Properties, delivered exceptional results (33.1% and 27.2%) since our initial investment in these entities in March and April, respectively. Meanwhile, Archstone-Smith, with assets concentrated on both coasts, returned a strong +30.1%.
Mortgage finance companies were the Fund’s weakest performers during the period. Investor apprehension about rising short term rates, a flattening yield curve, and decreased residential activity weighed on the share prices of companies in this subsector, especially those involved in the residential mortgage markets. iStar Financial, which does not participate in the residential mortgage business, nevertheless experienced a - 4.5% return despite match funding its commercial real estate activities to insure that rising interest rates and changes in the shape of the yield curve have a minimal impact on earnings. iStar’s underperformance had the largest single negative impact on Fund results during the year.
2006 Outlook
Overall our outlook for real estate market conditions remains positive. Underlying operating fundamentals for real estate companies continue to strengthen. Conditions have been bolstered by improved corporate profitability and balance sheets which should ultimately lead to increased spending and reasonable job creation. While we suspect that some further increases in interest rates may slow capital inflows into the REIT securities market and dampen the rate of appreciation in the near term, operating cash flow improvements will in time make pricing levels more appropriate as long as rates don’t rise significantly. Rapid or greater than anticipated interest rates increases are likely to have a negative impact on both public REIT securities as well as the prices paid in the private real estate investment market by leveraged buyers. We anticipate decreasing the Fund’s weightings in select healthcare and net lease REITs which potentially face disproportionate risk in a rising rate environment and increasing our investment in office owning companies that should benefit from improved corporate spending in 2006. We look forward to updating you on the Fund in our next report.
Robert W. Gadsden
Portfolio Manager
 
Funds that concentrate their investments in a specific sector, such as real estate, tend to experience more volatility and be exposed to greater risk than more diversified mutual funds.
 
Please refer to the schedule of portfolio investments for fund holding information. Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.

11


 

(LINE GRAPH)
This chart represents a comparison of a hypothetical $10,000 investment in the indicated share class versus similar investments in the Fund’s benchmark’s. The graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Fund’s return reflects the waiver of certain fees. Without the waiver of fees, the Fund’s total returns would have been lower.
Performance data quoted represents past performance and is not predictive of future results. Investment return and principal value of the Fund fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Performance current to the most recent month end may be lower or higher than the performance quoted and may be obtained by calling 888-785-5578. The Fund charges a redemption fee equal to 1.00% of the net amount of your redemption if you redeem your shares less than 60 days “after purchase.’’
The GPR General Property Securities Global Index is a market weighted total return performance index, available on a monthly basis. The purpose of this index is to cover a broad range of property investment companies with a market capitalization of more than 50 million U.S. dollars. It is constructed on a total return basis with immediate reinvestment of all dividends. The S&P/Citigroup World (ex. U.S.) Property Index is a market weighted total performance index, available on a monthly basis. The index consists of companies from developed markets that have float larger than 100 million U.S. dollars and derive more than half of its revenue from property-related activities. The MSCI EAFE Index is a capitalization weighted index that monitors the performance of stocks from Europe, Asia, and the Far East. This is one of the most widely used measures of international stock performance. The Lipper Real Estate Funds Average is an average of funds that invest at least 80% of their portfolio in equity securities of domestic and foreign companies engaged in the real estate industry. Lipper Rankings for the periods shown are based on Fund total returns with dividends and distributions reinvested and do not reflect sales charges. The S&P/Citigroup World (ex. U.S.) Property Index, the GPR General Property Securities Global Index, the MSCI EAFE Index and the Lipper Real Estate Funds Average, are unmanaged and do not reflect fees associated with a mutual fund, such as investment advisor fees. The performance for the International Real Estate Equity Fund reflects the deduction of fees for these value-added services. Investors cannot directly invest in an index.
Comparative Annualized Total Returns as of 10/31/05
                                         
                                    Since Inception
    1 Year   3 Year   5 Year   10 Year   (2/1/89)
 
Alpine International Real Estate Equity Fund
    27.29 %     32.68 %     20.89 %     11.06 %     8.06 %
 
S&P/Citigroup World (ex U.S.) Property Index
    18.46 %     25.54 %     12.65 %     4.72 %     N/A  
 
GPR General Property Securities Global Index
    16.52 %     25.88 %     17.60 %     8.43 %     6.37 %
 
MSCI EAFE Index
    18.59 %     21.74 %     3.42 %     6.15 %     4.98 %
 
Lipper Real Estate Funds Average
    17.29 %     26.82 %     19.08 %     15.09 %     10.72 %
 
Lipper Real Estate Fund Rank
    2/216       8/154       12/119       30/30       3/3  
 

12


 

(PIE CHART)
Commentary
The Alpine International Real Estate Equity Fund produced a 27.29% total return for the fiscal year ended October 31, 2005, with a closing NAV of $28.89. The Fund’s performance continued to build on the strong pattern of performance of recent years, as illustrated by the standardized performance data on the opposite page.
The Global Property Securities Market is Growing Rapidly
The global property securities market over the past year has begun to grow in size and importance. The creation of REIT legislation in a number of different countries has led to the listing of new real estate companies and a broadening of the investor base for real estate securities. Activity in 2005 is concluding with a flurry of IPOs investing in diverse markets such as Hong Kong, Hungary, Malaysia and Turkey as well as Germany and Japan. It is quite possible that the next two to three years will see a dramatic expansion of global market capitalization for real estate securities on a scale similar to what we enjoyed in the U.S. between 1992 and 1995. During that period, the number of companies doubled and the merchant capitalization rose by a factor of 4.5 times. Even now, the world’s largest public real estate company is no longer in a major developed nation. Emaar Properties in Dubai experienced explosive petro-dollar fueled growth to achieve a market capitalization of $43.5 billion!
Much of the growth in property securities markets has been brought about not only through increased demand for real estate investments, but also by significantly higher prices for properties and property companies around the world. Recent acquisitions of individual “trophy’’ properties by private investors have taken place at initial yields (cap rates) ranging from 6 1/2% in Budapest, 4 1/2% in Paris, 4% in London to 3% in Tokyo. In all of these cases, investors have made bets on a premier property’s ability to generate rental growth over the duration of the property cycle. We agree that in many cases rental growth should accelerate over the next two to three years, however, the pace and strength of rent and value growth could vary dramatically across global markets. It should be noted that this “cap rate’’ compression or “yield shift’’, is a truly global phenomenon and is not limited to premier properties. Note that CALPERS, the largest state pension fund, just bought Center Point Properties, a Chicago industrial property REIT at an imputed property yield of roughly 4.25%!
M&A is a Growing Trend in Property Securities as well as in the Stock Market as a Whole.
The Fund benefited from eight distinct transactions during or immediately following the end of the fiscal year. Gecina SA, a French REIT received a takeover proposal in March from Metrovacesa of Spain which predicated the acquirer to keep 30% of the company in public hands to facilitate continued REIT status. Prime Realty Group also received a takeover bid in the Spring which was consummated on July 1st. Raffles Holdings of Singapore was also partially

13


 

(ALPINE INTERNATIONAL REAL ESTATE EQUITY FUND LOGO)
liquidated, as they sold the Raffles Hotel chain to L.A. based Colony Capital in July. Also in July, long-term holding, Societe de Louvre agreed to be acquired by Starwood Capital. Then in August, the major shareholder of Choice Hotels in Norway began a privatization of shares that concluded in October. On November 3rd, Oslo Areal saw its brief public existence cut short of six months, as a local insurance company took the shares private at a 26% gain from the IPO. Then on November 9th, LaQuinta Corp. announced it would be acquired by Blackstone Group, to be followed the next day when Dutch retail and residential developer, AM, announced its acquisition by a venture between Morgan Stanley Real Estate Funds and BAM Groep of the Netherlands.
IPOs Expected to Surge
On one hand the high level of M&A activity signifies the strong level of investor demand for property, while the expansion of the Initial Public Offerings (IPO) for publicly traded real estate companies demonstrates the amount of capital available for attractive investment opportunities. During the fiscal year, the Alpine International Real Estate Equity Fund participated in eight IPOs which continued the trend started in June, 2004, with three other initial public offerings. Subsequent to fiscal year-end 2005, the Fund has participated in several of the dozen IPOs on offer. In our opinion, this is a potential tip of the iceberg, if private property companies around the world seek greater participation in an expansion of property investment, dominated by the capital markets.
Examples within the portfolio of this emerging trend are some of the Fund’s top performers over the past 12 to 18 months. In April, 2004, Fadesa, the largest homebuilder in Spain, came public at a share price of 12.4 Euros. By October 31st, 2005, the shares were trading at 28.05 Euros. In a highly fragmented housing market, Fadesa saw an opportunity to increase its sub 2% market share by acquiring large tracts of farmland prior to rezoning into residential subdivisions. Access to the capital markets has helped fuel this expansion. In October 2004, Nexity in France came public for similar reasons. As one of France’s largest residential and commercial developers, Nexity required additional capital to fuel its growth plans as the French economy began a revival. Nexity came public at 17.9 Euros per share and ended October with a share price of 38.09 Euros. In August of this year, Dawnay Day Carpathian came public as a new entity designed to invest in retail properties throughout Eastern Europe. The initial portfolio is primarily focused on Hungary and the Czech Republic. Its IPO share price was 100 pence and it closed the Fund’s fiscal year in October at 112 pence. In September, the Brazilian residential developer, Cyrela Brazilian Realty S.A., came public with plans to expand its land bank of condo projects in Rio de Janeiro and Sao Paulo. After an IPO price of 16 Reais, the share price ended the month of October at 18.9.
The aforementioned examples illustrate companies which have come public primarily to raise capital for significant expansion opportunities. Some other IPO’s provide an efficient cash-out to their sponsor and will typically offer an attractive yield or a modest valuation discount to investors. Many, but not all, of the new international REITs are being created according to legislation, which promotes passive investment models. However, we expect there will be a fairly rapid legal evolution to a more flexible structure, similar to what has occurred in both the U.S. and Australia. Thus, over time, there may be less polarization between income or growth potential if self-managed, vertically integrated operating businesses are permitted for REITs.
Throughout the sixteen years that we have managed this Fund, there has never been so much interest or activity in and among international property stocks. REITs are part of the story, as is the global yield shift. Perhaps the most important elements are the perceptions that foreign real estate markets may offer greater potential upsides than our own and that real estate is well positioned for solid performance in this business cycle. That is our view, as well.
Samuel A. Lieber
Portfolio Manager
 
Funds that concentrate their investments in a specific sector, such as real estate, tend to experience more volatility and be exposed to greater risk than more diversified mutual funds. Alpine advocates the use of sector funds as part of an integrated investment strategy.
 
Please refer to the schedule of portfolio investments for fund holding information. Fund holdings and sector allocations are subject to change and should not be considered a recommendation to buy or sell any security.

14


 

Alpine Mutual Funds – U.S. Real Estate Equity Fund
Schedule of Portfolio Investments
October 31, 2005
                     
Shares/     Security      
Par Value     Description   Value  
Real Estate Investment Trusts — 17.0%        
Lodging — 10.0%        
 
    1,289,500     DiamondRock Hospitality Company
(Cost $13,147,180, Acquired — Various Dates) (c)
  $ 14,377,925  
 
    825,000     DiamondRock Hospitality Company     9,198,750  
 
    1,065,000     Highland Hospitality Corporation     11,193,150  
 
    777,900     MeriStar Hospitality Corporation (a)     6,744,393  
 
    612,000     Sunstone Hotel Investors, Inc.     13,708,800  
 
                 
 
                55,223,018  
 
                 
Mortgage & Finance — 4.3%        
 
    798,200     Deerfield Triarc Capital Corp.     10,352,654  
 
    652,700     Impac Mortgage Holdings, Inc.     6,553,108  
 
    568,000     MortgageIT Holdings Inc.     7,202,240  
 
                 
 
                24,108,002  
 
                 
Retail — 2.7%        
 
    63,000     Alexander’s, Inc. (a)     15,120,000  
 
                 
 
          Total Real Estate Investment Trusts     94,451,020  
 
                 
Common Stocks — 90.6%        
Homebuilders — 59.5%        
 
    70,000     Beazer Homes USA, Inc. (a)     4,056,500  
 
    356,600     Brookfield Homes Corporation     17,862,094  
 
    274,200     Champion Enterprises, Inc. (a)     3,805,896  
 
    398,828     Comstock Homebuilding Companies, Inc. (a)     6,620,545  
 
    452,666     D.R. Horton, Inc.     13,892,320  
 
    670,100     Hovnanian Enterprises, Inc. — Class A (a)     30,147,799  
 
    440,000     KB HOME     28,754,000  
 
    600,800     Lennar Corporation — Class A     33,392,464  
 
    114,800     Levitt Corporation     2,255,820  
 
    406,333     M.D.C. Holdings, Inc.     27,874,444  
 
    226,000     Meritage Homes Corporation (a)     14,073,020  
 
    245,200     Orleans Homebuilders, Inc.     4,884,384  
 
    64,000     Palm Harbor Homes, Inc. (a)     1,179,520  
 
    800,000     Pulte Homes, Inc.     30,232,000  
 
    200,000     The Ryland Group, Inc.     13,460,000  
 
    900,000     Standard-Pacific Corp.     34,722,000  
 
    1,326,075     Technical Olympic USA, Inc.     28,033,225  
 
    799,600     Toll Brothers, Inc. (a)     29,513,236  
 
    270,700     WCI Communities, Inc. (a)     6,772,914  
 
                 
 
                331,532,181  
 
                 
Lodging — 24.4%        
 
    248,362     Gaylord Entertainment Company (a)     9,805,332  
 
    303,975     Great Wolf Resorts, Inc. (a)     2,674,980  
 
    1,504,200     Hilton Hotels Corporation     29,256,690  
 
    1,366,360     Interstate Hotels & Resorts, Inc. (a)     6,093,965  
 
    4,120,025     La Quinta Corporation (a)     34,402,209  
 
    649,300     Orient-Express Hotels Ltd. — Class A (b)     18,310,260  
 
    607,400     Starwood Hotels & Resorts Worldwide, Inc.     35,490,382  
 
                 
 
                136,033,818  
 
                 
Mortgage & Finance — 0.1%        
 
    53,600     Delta Financial Corporation     405,216  
 
                 
Racetracks — 0.8%        
 
    134,868     Churchill Downs, Incorporated     4,330,611  
 
                 
Real Estate Operating Companies — 0.8%        
 
    218,100     Thomas Properties Group, Inc.     2,621,562  
 
    108,100     Wellsford Real Properties, Inc. (a)     2,056,062  
 
                 
 
                4,677,624  
 
                 
Retirement Community — 2.9%        
 
    490,000     Sunrise Senior Living, Inc. (a)     15,846,600  
 
                 
Transportation & Real Estate — 2.1%        
 
    267,500     Florida East Coast Industries, Inc.     11,660,325  
 
                 
 
          Total Common Stocks     504,486,375  
 
                 
Short Term Investments — 0.0%        
 
    3     Milestone Funds Treasury Obligations Portfolio   $ 3  
 
                 
 
          Total Short-Term Investments     3  
 
                 
 
          Total Investments (Cost $562,141,554) — 107.6%     598,937,398  
 
          Liabilities, less Other Assets — (7.6)%     (42,289,117 )
 
                 
 
          TOTAL NET ASSETS — 100.0%   $ 556,648,281  
 
                 
 
(a)   Non-income producing securities
 
(b)   Foreign security which trades on U.S. exchange
 
(c)   Restricted under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions from registration, normally to qualified institutional buyers. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
See notes to financial statements.

15


 

Alpine Mutual Funds – Realty Income & Growth Fund
Schedule of Portfolio Investments
October 31, 2005
                     
Shares/     Security      
Par Value     Description   Value  
Real Estate Investment Trusts — 81.7%        
Apartments — 9.5%        
 
    136,900     Apartment Investment & Management Company — Class A   $ 5,256,960  
 
    227,500     Archstone-Smith Trust     9,229,675  
 
    218,000     BRE Properties, Inc.     9,615,980  
 
    253,700     Equity Residential     9,957,725  
 
    69,000     Essex Property Trust, Inc.     6,201,720  
 
    106,900     Home Properties, Inc.     4,153,065  
 
    85,500     Town & Country Trust     2,530,800  
 
    631,000     United Dominion Realty Trust, Inc.     13,964,030  
 
                 
 
                60,909,955  
 
                 
Diversified — 3.6%        
 
    280,900     Vornado Realty Trust     22,752,900  
 
                 
Health Care — 5.2%        
 
    153,300     Health Care REIT, Inc.     5,402,292  
 
    511,000     Omega Healthcare Investors, Inc.     6,280,190  
 
    245,200     Senior Housing Properties Trust     4,342,492  
 
    717,200     Sunrise Senior Living Real Estate Investment Trust     7,863,636  
 
    80,700     Universal Health Realty Income Trust     2,626,785  
 
    215,500     Ventas, Inc.     6,600,765  
 
                 
 
                33,116,160  
 
                 
Lodging — 12.0%        
 
    1,435,900     DiamondRock Hospitality Company     16,010,285  
 
    1,352,800     FelCor Lodging Trust, Inc.     20,183,776  
 
    283,400     Highland Hospitality Corporation     2,978,534  
 
    96,350     Hospitality Properties Trust     3,825,095  
 
    865,500     Host Marriott Corporation     14,531,745  
 
    182,000     Innkeepers USA Trust     2,839,200  
 
    606,600     Sunstone Hotel Investors, Inc.     13,587,840  
 
    177,300     Strategic Hotel Capital, Inc.     3,012,327  
 
                 
 
                76,968,802  
 
                 
Mortgage & Finance — 4.3%        
 
    627,600     iStar Financial Inc.     23,139,612  
 
    102,100     KKR Financial Corp.     2,278,872  
 
    93,700     Newcastle Investment Corporation     2,463,373  
 
                 
 
                27,881,857  
 
                 
Net Lease — 2.6%        
 
    421,000     Entertainment Properties Trust     16,882,100  
 
                 
Office — Industrial Buildings — 21.3%        
 
    255,800     Alexandria Real Estate Equities, Inc.     20,681,430  
 
    255,000     AMB Property Corporation     11,265,900  
 
    207,500     Arden Realty, Inc.     9,366,550  
 
    341,500     Boston Properties, Inc.     23,638,630  
 
    316,600     Brandywine Realty Trust     8,674,840  
 
    475,883     Equity Office Properties Trust     14,657,196  
 
    46,600     Mack-Cali Realty Corporation     1,987,490  
 
    303,200     Maguire Properties, Inc.     9,096,000  
 
    56,400     Prentiss Properties Trust     2,225,544  
Office — Industrial Buildings — continued        
 
    364,800     ProLogis     15,686,400  
 
    554,500     Reckson Associates Realty Corporation     19,462,950  
 
                 
 
                136,742,930  
 
                 
Retail Centers — 23.2%        
 
    415,900     CBL & Associates Properties, Inc.     15,533,865  
 
    476,726     Developers Diversified Realty Corporation     20,823,392  
 
    526,700     General Growth Properties, Inc.     22,374,216  
 
    57,700     Glimcher Realty Trust     1,325,369  
 
    414,000     Kimco Realty Corporation     12,262,680  
 
    277,300     Kite Realty Group Trust     4,098,494  
 
    269,800     The Macerich Company     17,340,046  
 
    394,800     The Mills Corp.     21,121,800  
 
    398,200     Simon Property Group, Inc.     28,519,084  
 
    164,500     Taubman Centers, Inc.     5,423,565  
 
                 
 
                148,822,511  
 
                 
 
          Total Real Estate Investment Trusts     524,077,215  
 
                 
Common Stocks — 15.6%        
Homebuilders — 3.7%        
 
    86,500     Hovnanian Enterprises, Inc. — Class A (a)     3,891,635  
 
    4,600     NVR, Inc. (a)     3,153,300  
 
    20,000     The Ryland Group, Inc.     1,346,000  
 
    165,400     Standard-Pacific Corp.     6,381,132  
 
    124,700     Technical Olympic USA, Inc.     2,636,158  
 
    178,940     Toll Brothers, Inc. (a)     6,604,675  
 
                 
 
                24,012,900  
 
                 
Lodging — 11.9%        
 
    441,300     Hilton Hotels Corporation     8,583,285  
 
    3,188,300     La Quinta Corporation (a)     26,622,305  
 
    145,900     Marriott International, Inc. — Class A     8,698,558  
 
    552,100     Starwood Hotels & Resorts Worldwide, Inc.     32,259,203  
 
                 
 
                76,163,351  
 
                 
 
          Total Common Stocks     100,176,251  
 
                 
Preferred Stocks — 3.7%        
Apartments — 0.1%        
 
    37,700     Apartment Investment & Management Co. Series T, 8.000%     949,286  
 
                 
Health Care — 0.2%        
 
    38,400     Omega Healthcare Investors, Inc. Series D, 8.375%     967,680  
 
                 
Lodging — 2.1%        
 
    273,100     FelCor Lodging Trust, Inc. Series A, 7.800%     6,518,897  
 
    169,400     FelCor Lodging Trust, Inc. Series C, 8.000%     4,082,540  
 
    81,600     La Quinta Corp. Series A, 9.000%     2,079,984  
See notes to financial statements.

16


 

Alpine Mutual Funds – Realty Income & Growth Fund
Schedule of Portfolio Investments—Continued
October 31, 2005
                     
Shares/     Security      
Par Value     Description   Value  
Preferred Stocks — continued        
Lodging — continued        
 
    27,300     Winston Hotels, Inc. Series B, 8.000%   $ 682,909  
 
                 
 
                13,364,330  
 
                 
Mortgage & Finance — 0.3%        
 
    29,700     Anthracite Capital, Inc. Series C, 9.375%     765,666  
 
    61,500     Novastar Financial, Inc. Series C, 8.900%     1,466,775  
 
                 
 
                2,232,441  
 
                 
Office — Industrial Buildings — 1.0%        
 
    36,700     Digital Realty Trust, Inc. Series A, 8.500%     937,685  
 
    235,100     Prime Group Realty Trust Series B, 9.000%     5,153,392  
 
                 
 
                6,091,077  
 
                 
 
          Total Preferred Stocks     23,604,814  
 
                 
Convertible Bonds — 0.1%        
 
    500,000     MeriStar Hospitality Corporation 9.500%, 04/01/2010   $ 634,375  
 
                 
 
          Total Convertible Bonds     634,375  
 
                 
Short-Term Investments — 0.0%        
 
    0     Alpine Municipal Money Market Fund     0  
 
    102     Milestone Funds Treasury Obligations Portfolio     102  
 
                 
 
          Total Short-Term Investments     102  
 
                 
 
          Total Investments (Cost $551,410,329) — 101.1%     648,492,757  
 
          Liabilities, less Other Assets — (1.1)%     (7,268,974 )
 
                 
 
          TOTAL NET ASSETS — 100.0%   $ 641,223,783  
 
                 
 
(a)  Non-income producing securities
See notes to financial statements.

17


 

Alpine Mutual Funds – International Real Estate Equity Fund
Schedule of Portfolio Investments
October 31, 2005
                     
Shares/     Security      
Par Value     Description   Value  
Common Stocks — 98.9%        
Asia — 29.8%        
Australia — 0.5%        
 
    250,000     Mirvac Group   $ 714,098  
 
    70,000     Westfield Group (a)     869,406  
 
                 
 
                1,583,504  
 
                 
Hong Kong — 13.3%        
 
    18,000,000     Far East Consortium International Limited     5,456,586  
 
    4,800,000     The Hongkong & Shanghai Hotels, Limited     4,798,700  
 
    1,675,000     Hysan Development Company Limited     3,629,984  
 
    400,000     Kowloon Development Company Limited     420,531  
 
    16,006,000     Midland Realty (Holdings) Limited     7,742,741  
 
    8,201,600     New World China Land Limited     2,644,961  
 
    7,000,000     Pacific Century Premium Developments Limited (a)     1,873,686  
 
    1,822,000     Shangri-La Asia Limited     2,550,109  
 
    3,000,000     Silver Grant International     766,244  
 
    8,000,000     Sino Land Company Limited     8,875,014  
 
                 
 
                38,758,556  
 
                 
Japan — 4.2%        
 
    166,700     Diamond City Co., Ltd     6,744,756  
 
    475     Japan Retail Fund Investment Corporation     3,435,702  
 
    200     NTT Urban Development Corporation (a)     1,164,848  
 
    80,000     The Sankei Building Co., Ltd     562,151  
 
    23,692     Sekisui House, Ltd     294,089  
 
                 
 
                12,201,546  
 
                 
Malaysia — 1.0%        
 
    1,000,000     Eastern & Oriental Berhad     255,629  
 
    3,203,800     Landmarks Berhad     874,149  
 
    200,000     Resorts World Berhad     556,291  
 
    1,000,000     SP Setia Berhad     974,835  
 
    500,000     Sunway City Berhad     185,431  
 
                 
 
                2,846,335  
 
                 
New Zealand — 0.1%        
 
    393,215     Kiwi Income Property Trust     321,928  
 
                 
Philippines — 0.1%        
 
    13,625,000     SM Development Corporation     332,438  
 
                 
Singapore — 4.3%        
 
    1,195,425     Ascendas Real Estate Investment Trust     1,418,630  
 
    5,000,000     Capitacommercial Trust (a)     4,664,207  
 
    695,000     City Developments Limited     3,610,922  
 
    2,695,000     Fortune Real Estate Investment Trust     1,946,827  
 
    1,197,000     Raffles Holdings Limited     749,119  
 
                 
 
                12,389,705  
 
                 
Asia — continued        
Thailand — 6.3%        
 
    7,000,000     Amata Corporation Public Company Limited     2,197,156  
 
    3,000,000     Asian Property Development Public Company Limited     248,651  
 
    9,342,300     Central Pattana Public Company Limited (a)     2,749,083  
 
    3,000,000     Ch. Karnchang Public Company Limited     897,499  
 
    10,000,000     CPN Retail Growth Property Fund (a)     2,672,879  
 
    178,600     Dusit Thani Public Company Limited     182,848  
 
    16,307,700     The Erawan Group Public Company Limited (a)     735,806  
 
    2,200,000     Golden Land Property Development Public Company Limited (a)     399,215  
 
    3,930,000     Lalin Property Public Company Limited     530,039  
 
    5,000,000     Land and Houses Public Company Limited     974,743  
 
    5,000,000     M.K. Real Estate Development Public Company Limited     269,740  
 
    2,500,000     Major Cineplex Group Public Company Limited     796,959  
 
    13,750,000     Minor International Public Company Limited (a)     1,888,181  
 
    2,338,700     Noble Development Public Company Limited     186,958  
 
    9,000,000     Power Line Engineering Public Company Limited     1,555,910  
 
    15,979,100     Quality House Public Company Limited (a)     450,612  
 
    4,040,000     Saha Pathana Inter-Holding Public Company Limited     1,540,510  
 
                 
 
                18,276,789  
 
                 
 
          Total Common Stocks — Asia     86,710,801  
 
                 
Europe — 45.1%        
Finland — 3.5%        
 
    2,261,000     Citycon Oyj     8,671,037  
 
    166,400     Sponda Oyj     1,605,350  
 
                 
 
                10,276,387  
 
                 
France — 9.6%        
 
    16,678     Affine     1,821,886  
 
    66,000     Club Mediterranee SA (a)     2,883,115  
 
    19,750,000     Euro Disney S.C.A. (a)     2,603,636  
 
    30,000     Gecina     3,314,917  
 
    12,489     Kaufman & Broad S.A. (a)     927,983  
 
    126,636     Nexity (a)     5,780,810  
 
    16,446     Pierre & Vacances     1,261,423  
 
    17,272     Société du Louvre (a)     3,044,091  
 
    42,350     Société Immobilière de Location pour l’Industrie et le Commerce     3,923,317  
 
    18,426     Unibail     2,433,510  
 
                 
 
                27,994,688  
 
                 
See notes to financial statements.

18


 

Alpine Mutual Funds — International Real Estate Equity Fund
Schedule of Portfolio Investments—Continued
October 31, 2005
                 
Shares/     Security      
Par Value     Description   Value  
Common Stocks — continued        
Europe — continued        
France — continued        
Germany — 0.4%        
  64,400    
IVG Immobilien AG
  $ 1,238,744  
       
 
     
Greece — 1.2%        
  40,500    
Lamda Development S.A. (a)
    253,365  
  551,380    
Techniki Olympiaki S.A
    3,132,202  
       
 
     
       
 
    3,385,567  
       
 
     
Italy — 1.5%        
  199,414    
Aedes S.p.A. Ligure Lombarda per Imprese e Costruzioni
    1,321,604  
  675,790    
Risanamento S.p.A
    3,126,220  
       
 
     
       
 
    4,447,824  
       
 
     
Netherlands — 0.5%        
  117,417    
AM N.V
    1,379,042  
       
 
     
Norway — 3.5%        
  72,281    
Home Invest ASA (a)
    0  
  840,000    
NorGani Hotels ASA (a)
    7,745,088  
  246,800    
Oslo Areal ASA (a)
    2,294,544  
       
 
     
       
 
    10,039,632  
       
 
     
Spain — 5.5%        
  296,000    
Fadesa Inmobiliaria SA (a)
    9,950,504  
  328,892    
Inmobiliaria Urbis SA
    6,133,147  
       
 
     
       
 
    16,083,651  
       
 
     
Sweden — 6.8%        
  396,473    
JM AB
    16,480,706  
  241,200    
Skanska AB
    3,377,430  
       
 
     
       
 
    19,858,136  
       
 
     
United Kingdom — 12.6%        
  100,000    
Barratt Developments plc
    1,339,009  
  50,000    
Bellway p.l.c
    769,510  
  614,000    
Brixton plc
    4,075,438  
  1,800,000    
Dawnay Day Carpathian PLC (a)
    3,536,471  
  110,000    
Derwent Valley Holdings plc
    2,548,631  
  45,000    
Eurocastle Investment Limited (a)
    972,903  
  250,000    
Hammerson plc
    3,947,112  
  220,000    
Land Securities Group plc
    5,408,783  
  325,500    
Millennium & Copthorne Hotels plc (a)
    2,114,422  
  60,000    
Persimmon plc (a)
    915,447  
  200,000    
Redrow plc
    1,508,045  
  660,000    
Shaftesbury plc
    4,114,997  
  195,000    
Slough Estates plc
    1,749,916  
  125,000    
St. Modwen Properties plc
    927,040  
  250,000    
Unite Group plc
    1,432,598  
  50,000    
Westbury plc
    385,861  
  40,000    
Wilson Bowden plc
    795,794  
       
 
     
       
 
    36,541,977  
       
 
     
       
Total Common Stocks — Europe
    131,245,648  
       
 
     
North & South America — 24.0%        
Argentina — 1.1%        
  8    
IRSA Inversiones y Representaciones S.A. (a)
    9  
Argentina — continued        
  262,121    
IRSA Inversiones y Representaciones S.A. — ADR (a)
    3,032,740  
       
 
     
       
 
    3,032,749  
       
 
     
Bermuda — 0.4%        
  42,900    
Orient-Express Hotels Ltd. — Class A
    1,209,780  
       
 
     
Brazil — 0.8%        
  30,000    
Cyrela Brazil Realty S.A. — GDR (Acquired 09/21/2005, Cost $1,961,100) (b)
    2,357,643  
       
 
     
Canada — 3.0%        
  150,100    
ClubLink Corporation
    1,195,869  
  842,000    
Killam Properties (a)
    1,782,237  
  300,000    
Parkbridge Lifestyles Communities, Inc. (a)
    1,244,603  
  400,000    
Sunrise Senior Living Real Estate Investment Trust
    4,385,742  
       
 
     
       
 
    8,608,451  
       
 
     
Mexico — 3.5%        
  199,900    
Desarrolladora Homex S.A. de C.V. — ADR (a)
    5,975,011  
  6,597,500    
Empresas ICA S.A. de CV (a)
    2,563,027  
  2,346,000    
Impulosra Del Desarrollo Economico de America Latina (a)
    1,759,690  
       
 
     
       
 
    10,297,728  
       
 
     
United States — 15.2%        
  12,000    
Alexander’s, Inc. (a)
    2,880,000  
  131,666    
D.R. Horton, Inc.
    4,040,829  
  20,000    
Gaylord Entertainment Company (a)
    789,600  
  60,000    
Hilton Hotels Corporation
    1,167,000  
  90,000    
Hovnanian Enterprises, Inc. — Class A (a)
    4,049,100  
  100,000    
Impac Mortgage Holdings, Inc.
    1,004,000  
  50,000    
KB HOME
    3,267,500  
  65,000    
La Quinta Corporation (a)
    542,750  
  80,000    
Lennar Corporation — Class A
    4,446,400  
  26,000    
M.D.C. Holdings, Inc.
    1,783,600  
  90,900    
MeriStar Hospitality Corporation (a)
    788,103  
  100,600    
Pulte Homes, Inc.
    3,801,674  
  15,000    
The Ryland Group, Inc.
    1,009,500  
  93,200    
Standard-Pacific Corp
    3,595,656  
  119,900    
Starwood Hotels & Resorts Worldwide, Inc.
    7,005,757  
  110,000    
Toll Brothers, Inc. (a)
    4,060,100  
       
 
     
       
 
    44,231,569  
       
 
     
       
Total Common Stocks — North and South America
    69,737,920  
       
 
     
       
Total Common Stocks
    287,694,369  
       
 
     
See notes to financial statements.

19


 

Alpine Mutual Funds — International Real Estate Equity Fund
Schedule of Portfolio Investments—Continued
October 31, 2005
                 
Shares/     Security      
Par Value     Description   Value  
Warrants — 0.4%        
  300,000    
City Developments Limited Expiration May 2006 Exercise Price 2.50 SPD (Acquired 6/2001 — 5/2001, Cost $287,435)
  $ 1,115,867  
  375,000    
Major Cineplex Group Public Company Limited (a) Expiration February 2007 Exercise Price 13.00 TB (Acquired 4/2003 — 5/2003, Cost $0)
    23,173  
       
 
     
       
Total Warrants
    1,139,040  
       
 
     
Short-Term Investments — 0.0%        
  299    
Milestone Funds Treasury Obligations Portfolio
    299  
       
 
     
       
Total Short-Term Investments
    299  
       
 
     
       
Total Investments (Cost $233,016,324) — 99.3%
    288,833,708  
       
Other Assets, less Liabilities — 0.7%
    1,913,679  
       
 
     
       
TOTAL NET ASSETS — 100.0%
  $ 290,747,387  
       
 
     
 
(a)   Non-income producing securities
 
(b)   Restricted under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions from registration, normally to qualified institutional buyers. These securities have been determined to be liquid under guidelines established by the Board of Trustees.
 
    ADR—American Depository
 
    GDR—Global Depository Receipt
 
    SPD—Singapore Dollars Receipt
 
    TB—Thai Baht
See notes to financial statements.

20


 

Alpine Mutual Funds
Statements of Assets and Liabilities
October 31, 2005
                         
            Realty     International  
    U.S. Real Estate     Income & Growth     Real Estate  
    Equity Fund     Fund     Equity Fund  
ASSETS:
                       
Investments, at value (1)
  $ 598,937,398     $ 648,492,757     $ 288,833,708  
Dividends receivable
    16,010       729,433       301,268  
Interest receivable
          11,243       80,450  
Receivable for capital shares issued
    1,660,394       2,305,967       1,658,366  
Receivable for investment securities sold
    20,157,794       7,361,635       5,923,849  
Prepaid expenses and other assets
    59,247       27,223       16,088  
 
                 
Total assets
    620,830,843       658,928,258       296,813,729  
 
                 
LIABILITIES:
                       
Payable for investment securities purchased
    4,631,517       555,836       544,317  
Payable for capital shares redeemed
    1,786,434       848,557       328,628  
Accrued expenses and other liabilities:
                       
Investment advisory fees
    516,345       548,525       276,953  
Distribution fees
    14,945              
Payable to custodian
    56,867,329       15,361,306       4,745,634  
Other
    365,992       390,251       170,810  
 
                 
Total liabilities
    64,182,562       17,704,475       6,066,342  
 
                 
Net Assets
  $ 556,648,281     $ 641,223,783     $ 290,747,387  
 
                 
Net assets represented by
                       
Capital Stock
  $ 500,714,510     $ 526,272,474     $ 231,406,657  
Accumulated undistributed net investment income
    653,709       9,415,324       24,417  
Accumulated net realized gains from investments, short sales and foreign currencies
    18,484,218       8,453,887       3,531,971  
Net unrealized appreciation (depreciation) on:
                       
Investments
    36,795,844       97,082,428       55,817,384  
Foreign currency translation
          (330 )     (33,042 )
 
                 
Total Net Assets
  $ 556,648,281     $ 641,223,783     $ 290,747,387  
 
                 
Net asset value
                       
Class Y Shares
                       
Net assets
  $ 556,648,281     $ 641,223,783     $ 290,747,387  
Shares of beneficial interest issued and outstanding
    14,109,188       29,248,230       10,065,301  
Net asset value, offering price and redemption price per share
  $ 39.45     $ 21.92     $ 28.89  
 
                 
 
 
                         
(1) Cost of Investments
  $ 562,141,554     $ 551,410,329     $ 233,016,324  
See notes to financial statements.

21


 

Alpine Mutual Funds
Statements of Operations
Year Ended October 31, 2005
                         
            Realty     International  
    U.S. Real Estate     Income & Growth     Real Estate  
    Equity Fund     Fund     Equity Fund  
INVESTMENT INCOME:
                       
Interest income
  $ 687,317     $ 1,341,714     $ 1,080,709  
Dividend income*
    6,767,465       25,796,732       5,102,293  
 
                 
Total investment income
    7,454,782       27,138,446       6,183,002  
 
                 
EXPENSES:
                       
Investment advisory fees
    5,508,651       5,835,930       2,574,085  
Administration fees
    236,440       257,063       110,981  
Distribution fees—Class B
    7,633              
Shareholder service fees—Class B
    2,544              
Fund accounting fees
    137,405       149,367       64,398  
Audit and tax fees
    23,615       23,590       25,433  
Custodian fees
    54,347       57,622       25,113  
Interest expense
    77,218       621       10,606  
Legal fees
    11,445       12,495       5,372  
Registration and filing fees
    126,301       89,787       66,402  
Printing fees
    127,056       137,874       31,768  
Transfer agent fees
    240,525       260,802       111,513  
Trustee fees
    7,613       7,838       7,471  
Other fees
    18,230       23,416       11,585  
Dividends on short positions
          19,400        
 
                 
Net expenses
    6,579,023       6,875,805       3,044,727  
 
                 
Net investment income
    875,759       20,262,641       3,138,275  
 
                 
REALIZED/UNREALIZED GAIN (LOSS) ON INVESTMENTS:
                       
Net realized gain (loss) on:
                       
Long transactions
    20,145,675       18,575,432       4,368,772  
Short transactions
          (32,315 )     (83,656 )
Option contracts expired or closed
                241,371  
Foreign currency translation
                (258,415 )
Forward currency exchange contracts
                  (253,493 )
 
                 
Net realized gain
    20,145,675       18,543,117       4,014,579  
 
                 
Change in unrealized appreciation/depreciation on:
                       
Investments
    2,763,436       33,966,993       30,721,028  
Foreign currency translation
                (36,124 )
 
                 
Net change in unrealized appreciation (depreciation)
    2,763,436       33,966,993       30,684,904  
 
                 
Net realized/unrealized gain on investments
    22,909,111       52,510,110       34,699,483  
 
                 
Change in net assets resulting from operations
  $ 23,784,870     $ 72,772,751     $ 37,837,758  
 
                 
 
                         
* Net of foreign taxes withheld
  $ 270     $ 107,567     $ 513,552  
 
                 
See notes to financial statements.

22


 

Alpine Mutual Funds
Statements of Changes in Net Assets
                 
    U.S. Real Estate Equity Fund  
    Year Ended     Year Ended  
    October 31, 2005     October 31, 2004  
OPERATIONS:
               
Net investment income (loss)
  $ 875,759     $ (335,865 )
Net realized gain (loss) on:
               
Long transactions
    20,145,675       17,820,057  
Short transactions
          (131,624 )
Change in unrealized appreciation (depreciation) on:
               
Investments
    2,763,436       13,785,989  
Short positions
          (8,930 )
 
           
Change in net assets resulting from operations
    23,784,870       31,129,627  
 
           
 
               
DISTRIBUTIONS TO SHAREHOLDERS:
               
Distributions to Class B Shareholders:
               
From net investment income
    (2,468 )     (141,744 )
From net realized gains on investments
    (178,870 )      
Distributions to Class Y Shareholders:
               
From net investment income
    (622,756 )     (13,181 )
From net realized gains on investments
    (18,224,728 )     (6,199,330 )
 
           
Change in net assets resulting from distributions to shareholders
    (19,028,822 )     (6,354,255 )
 
           
 
               
CAPITAL SHARE TRANSACTIONS:
               
Proceeds from shares sold
    778,174,270       218,039,206  
Dividends reinvested
    17,393,229       5,883,810  
Redemption Fees
    852        
Cost of shares redeemed
    (462,995,950 )     (140,298,603 )
 
           
Change in net assets from capital share transactions
    332,572,401       83,624,413  
 
           
Total change in net assets
    337,328,449       108,399,785  
 
           
 
               
NET ASSETS:
               
Beginning of period
    219,319,832       110,920,047  
 
           
End of period*
  $ 556,648,281     $ 219,319,832  
 
           
 
                 
* Including accumulated undistributed net investment income of:
  $ 653,709     $ 91,108  
 
           
See notes to financial statements.

23


 

Alpine Mutual Funds
Statements of Changes in Net Assets
                 
    Realty Income & Growth Fund  
    Year Ended     Year Ended  
    October 31, 2005     October 31, 2004  
OPERATIONS:
               
Net investment income
  $ 20,262,641     $ 10,554,528  
Net realized gain (loss) on:
               
Long transactions
    18,575,432       10,642,138  
Short transactions
    (32,315 )     357,965  
Change in unrealized appreciation (depreciation) on investments
    33,966,993       38,603,810  
 
           
Change in net assets resulting from operations
    72,772,751       60,158,441  
 
           
 
               
DISTRIBUTIONS TO SHAREHOLDERS:
               
Distributions to Class Y Shareholders:
               
From net investment income
    (22,632,068 )     (7,906,453 )
From net realized gains on investments
    (7,702,088 )     (4,996,867 )
 
           
Change in net assets resulting from distributions to shareholders
    (30,334,156 )     (12,903,320 )
 
           
 
               
CAPITAL TRANSACTIONS:
               
Proceeds from shares sold
    457,228,812       311,585,922  
Dividends reinvested
    27,699,449       11,195,810  
Cost of shares redeemed
    (280,321,048 )     (159,269,240 )
 
           
Change in net assets from capital transactions
    204,607,213       163,512,492  
 
           
Total change in net assets
    247,045,808       210,767,613  
 
           
 
               
NET ASSETS:
               
Beginning of period
    394,177,975       183,410,362  
 
           
End of period*
  $ 641,223,783     $ 394,177,975  
 
           
 
                 
* Including accumulated undistributed net investment income of:
  $ 9,415,324     $ 1,914,448  
 
           
See notes to financial statements.

24


 

Alpine Mutual Funds
Statements of Changes in Net Assets
                 
    International  
    Real Estate Equity Fund  
    Year Ended     Year Ended  
    October 31, 2005     October 31, 2004  
OPERATIONS:
               
Net investment income
  $ 3,138,275     $ 1,261,653  
Net realized gain (loss) on:
               
Long transactions
    4,368,772       6,081,898  
Short transactions
    (83,656 )     827  
Options contracts expired or closed
    241,371       1,508  
Foreign currency translation
    (258,415 )     (7,576 )
Forward currency exchange contracts
    (253,493 )     (8,103 )
Change in unrealized appreciation (depreciation) on:
               
Investments
    30,721,028       10,020,498  
Foreign currency translation
    (36,124 )     (6,358 )
Foreign currencies
          165  
Forward currency exchange contracts
          (28,447 )
 
           
Change in net assets resulting from operations
    37,837,758       17,316,065  
 
           
DISTRIBUTIONS TO SHAREHOLDERS:
               
Distributions to Class Y Shareholders:
               
From net investment income
    (3,542,113 )     (1,848,790 )
From net realized gain on investments
    (5,398,131 )     (441,396 )
 
           
Change in net assets resulting from distributions to shareholders
    (8,940,244 )     (2,290,186 )
 
           
CAPITAL SHARE TRANSACTIONS:
               
Proceeds from shares sold
    330,885,764       50,237,782  
Dividends reinvested
    8,436,642       2,152,111  
Redemption fees
    164,178       59,916  
Cost of shares redeemed
    (172,724,083 )     (58,816,665 )
 
           
Change in net assets from capital share transactions
    166,762,501       (6,366,856 )
 
           
Total change in net assets
    195,660,015       8,659,023  
 
           
NET ASSETS:
               
Beginning of period
    95,087,372       86,428,349  
 
           
End of period*
    290,747,387       95,087,372  
 
           
 
                 
* Including accumulated undistributed (overdistributed) net investment income of:
  $ 24,417     $ (53,403 )
 
           
See notes to financial statements.

25


 

Alpine Mutual Funds – U.S. Real Estate Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
                                                 
    Year Ended     Period Ended     Year Ended  
    October 31,     October 31,     September 30,  
    2005     2004     2003     2002     2001 (a)     2001  
Net asset value per share, beginning of period
  $ 34.51     $ 29.21     $ 17.53     $ 13.54     $ 13.57     $ 13.54  
 
                                   
Income from investment operations:
                                               
Net investment income
    0.12       (0.05 )(b)     0.07 (c)     0.03             (0.04 )
Net realized gains (losses) and change in unrealized appreciation or depreciation on investments
    7.47       6.61       11.63       3.96       (0.03 )     0.07  
 
                                   
Total from investment operations
    7.59       6.56       11.70       3.99       (0.03 )     0.03  
 
                                   
Less Distributions:
                                               
Net investment income
    (0.09 )           (0.02 )                  
Net realized gains on investments
    (2.56 )     (1.26 )                        
 
                                   
Total distributions
    (2.65 )     (1.26 )     (0.02 )                  
 
                                   
Net asset value per share, end of period
  $ 39.45     $ 34.51     $ 29.21     $ 17.53     $ 13.54     $ 13.57  
 
                                   
Total return
    22.18 %     23.12 %     66.81 %     29.47 %     –0.22 %(d)     0.22 %
Ratios/Supplemental Data:
                                               
Net Assets at end of period (000)
  $ 556,648     $ 216,773     $ 107,753     $ 36,083     $ 19,314     $ 19,643  
Ratio of expenses to average net assets:
                                               
Before waivers and reimbursements
    1.19 %     1.31 %     1.67 %     1.72 %     2.46 %(e)     2.16 %
After waivers and reimbursements
    1.19 %     1.31 %     1.67 %     1.72 %     2.23 %(e)     1.98 %
Ratio of net investment income (loss) to average net assets
    0.16 %     (0.17 )%     0.32 %     0.16 %     (0.33) %(e)     (0.25 )%
Ratio of interest expense to average net assets
    0.01 %     0.03 %     0.05 %     0.00 %     0.03 %(e)     0.00 %
Portfolio turnover (f)
    34 %     73 %     86 %     115 %     10 %     151 %
 
(a)   For the period from October 1, 2001 to October 31, 2001.
 
(b)   Net Investment income per share is calculated using undistributed net investment income per share at the beginning and end of the period prior to consideration of adjustments for permanent book and tax differences.
 
(c)   Net investment income is calculated using average shares outstanding during the period.
 
(d)   Not annualized.
 
(e)   Annualized.
 
(f)   Portfolio turnover is calculated on the basis of the Fund, as a whole, without distinguishing between the classes of shares issued.
See notes to financial statements.

26


 

Alpine Mutual Funds – Realty Income & Growth Fund
Financial Highlights
(For a share outstanding throughout each period)
                                         
    Year Ended October 31,  
    2005     2004     2003     2002     2001  
Net asset value per share, beginning of period
  $ 19.97     $ 16.67     $ 13.55     $ 11.92     $ 11.43  
 
                             
 
                                       
Income from investment operations:
                                       
Net investment income
    1.06       0.71 (a)     0.77 (a)     0.76 (a)     0.59  
Net realized/unrealized gains on investments
    2.07       3.45       3.21       1.74       0.71  
 
                             
Total from investment operations
    3.13       4.16       3.98       2.50       1.30  
 
                             
 
                                       
Less Distributions:
                                       
Net investment income
    (0.84 )     (0.82 )     (0.81 )     (0.81 )     (0.81 )
Net realized gains on investments
    (0.34 )     (0.04 )     (0.05 )     (0.06 )      
 
                             
Total distributions
    (1.18 )     (0.86 )     (0.86 )     (0.87 )     (0.81 )
 
                             
Net asset value per share, end of period
  $ 21.92     $ 19.97     $ 16.67     $ 13.55     $ 11.92  
 
                             
 
                                       
Total return
    15.92 %     25.51 %     30.45 %     21.21 %     11.44 %
Ratios/Supplemental Data:
                                       
Net Assets at end of period (000)
  $ 641,224     $ 394,153     $ 183,410     $ 49,650     $ 8,051  
Ratio of expenses to average net assets:
                                       
Before waivers and reimbursements
    1.18 %     1.25 %     1.38 %     1.57 %     2.59 %
After waivers and reimbursements
    1.18 %     1.25 %     1.40 %     1.46 %     1.41 %
Ratio of net investment income to average net assets
    3.47 %     3.85 %     4.98 %     5.62 %     4.68 %
Ratio of interest expense to average net assets
    0.00 %     0.01 %     0.00 %     0.00 %     0.11 %
Portfolio turnover
    34 %     65 %     45 %     86 %     149 %
 
(a)   Net investment income per share is calculated using undistributed net investment income per share at the beginning and end of the period prior to consideration of adjustments for permanent book and tax differences.
See notes to financial statements.

27


 

Alpine Mutual Funds – International Real Estate Equity Fund
Financial Highlights
(For a share outstanding throughout each period)
                                         
    Year Ended October 31,  
    2005     2004     2003     2002     2001  
Net asset value per share, beginning of period
  $ 24.28     $ 20.23     $ 13.81     $ 12.34     $ 12.73  
 
                             
 
                                       
Income from investment operations:
                                       
Net investment income
    0.74       0.29 (a)     0.22 (a)     0.12 (a)      
Net realized/unrealized gains on investments
    5.71       4.30       6.42       1.60       (0.39 )
 
                             
Total from investment operations
    6.45       4.59       6.64       1.72       (0.39 )
 
                             
 
                                       
Less Distributions:
                                       
Net investment income
    (0.73 )     (0.44 )     (0.22 )     (0.25 )      
Net realized gains on investments
    (1.11 )     (0.10 )                  
 
                             
Total distributions
    (1.84 )     (0.54 )     (0.22 )     (0.25 )      
 
                             
Net asset value per share, end of period
  $ 28.89     $ 24.28     $ 20.23     $ 13.81     $ 12.34  
 
                             
 
                                       
Total return
    27.29 %     23.25 %     48.87 %     14.03 %     –(3.06 )%
Ratios/Supplemental Data:
                                       
Net Assets at end of period (000)
  $ 290,747     $ 87,621     $ 86,428     $ 31,457     $ 25,344  
Ratio of expenses to average net assets:
                                       
Before waivers and reimbursements
    1.18 %     1.35 %     1.52 %     1.81 %     2.14 %
After waivers and reimbursements
    1.18 %     1.35 %     1.52 %     1.81 %     1.96 %
Ratio of net investment income to average net assets
    1.22 %     1.40 %     1.36 %     0.82 %     0.00 %
Ratio of interest expense to average net assets
    0.00 %     0.00 %     0.02 %     0.00 %     0.11 %
Portfolio turnover
    10 %     38 %     51 %     48 %     49 %
 
(a)   Net investment income per share is calculated using undistributed net investment income per share at the beginning and end of the period prior to consideration of adjustments for permanent book and tax differences.
See notes to financial statements.

28


 

Alpine Mutual Funds
Notes to Financial Statements
October 31, 2005
1.   Organization:
 
    Alpine Equity Trust (the “Equity Trust’’) was organized in 1988 as a Massachusetts Business Trust, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act’’), as an open-ended management investment company. The Alpine U.S. Real Estate Equity Fund, the Alpine Realty Income & Growth Fund and the Alpine International Real Estate Equity Fund are three separate funds of the Equity Trust (individually referred to as a “Fund’’ and collectively, “the Funds’’). The Alpine U.S. Real Estate Equity Fund and the Alpine International Real Estate Equity Fund are diversified funds. The Alpine Realty Income & Growth Fund is a non-diversified fund. Alpine Management & Research, LLC (the “Adviser’’) is a Delaware Corporation and serves as the investment manager to the Funds. The Funds currently offer Class Y shares for sale to investors. The Equity Trust Board of Trustees voted to merge the U.S. Real Estate Equity Fund Class B shares into the U.S. Real Estate Equity Fund Class Y shares effective May 1, 2005.
 
2.   Significant Accounting Policies:
 
    The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP’’), which require management to make estimates and assumptions that affect amounts reported herein. Actual results could differ from those estimates.
 
    A. Valuation of Securities:
 
    The Funds value securities for which the primary market is on a domestic or foreign exchange and over-the-counter admitted to trading on the National Association of Securities Dealers Automated Quotation Market System (“NASDAQ’’) National List at the last quoted sale price at the end of each business day or, if no sale, at the mean of the closing bid and asked prices. Over-the-counter securities not included in the NASDAQ National List for which market quotations are readily available are valued at a price quoted by one or more brokers. Securities for which market quotations are not readily available or whose values have been materially affected by events occurring before the close of U.S. markets but after the close of the securities’ primary markets, are valued at fair value as determined in good faith according to procedures approved by the Board of Trustees.
 
    B. Security Transactions and Investment Income:
 
    Securities transactions are recorded on the date a security is purchased or sold (i.e. on the trade date). Realized gains and losses are computed on the identified cost basis. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums, where applicable. Dividend income is recorded on the ex-dividend date or in the case of some foreign securities, on the date thereafter when the Funds are made aware of the dividend. Foreign income may be subject to foreign withholding taxes, which are accrued as applicable. Capital gains realized on some foreign securities are subject to foreign taxes, which are accrued as applicable.
 
    C. Short Sale Transactions:
 
    The Funds are authorized to engage in short selling. Short sales are transactions in which the Funds sell a security it does not own in anticipation of a decline in the market value of that security. To complete such a transaction, the Funds must borrow the security to deliver to the buyer when effecting a short sale. The Funds then are obligated to replace the security borrowed by purchasing it in the open market at some later date. When a fund sells a security short, an amount equal to the sales proceeds is included in the Statements of Assets and Liabilities as an asset and an equal amount as a liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the short position. The Funds will incur a loss, which could be substantial and potentially unlimited, if the market price of the security increases between the date of the short sale and the date on which the Funds replace the borrowed security. The Funds will realize a gain if the security declines in value between those dates. The Funds are also at risk of incurring dividend expense if the issuer of the security that has been sold short declares a dividend. The Funds must pay the dividend to the lender of the security. Dividends on short-positions are recorded as an expense on the ex-dividend date.

29


 

Alpine Mutual Funds
Notes to Financial Statements—Continued
October 31, 2005
All short sales must be fully collateralized. Accordingly, the Funds maintain collateral in a segregated account with their custodian, consisting of cash and/or liquid securities sufficient to collateralize their obligations on short positions.
D. Interest Expense:
The U.S. Real Estate Equity Fund, the Realty Income & Growth Fund and the International Real Estate Equity Fund are charged by U.S. Bank, N.A. for all cash overdrafts at the bank’s prime lending rate. The average prime lending rate was 5.92% for the year ended October 31, 2005. The U.S. Real Estate Equity Fund, the Realty Income & Growth Fund and the International Real Estate Equity Fund incurred interest expense totaling $77,218, $621, and $10,606, respectively for the year ended October 31, 2005. Cash overdrafts at the balance sheet date are reported as payable to custodian.
E. Income Taxes:
It is each Fund’s policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute timely, all of its investment company taxable income and net realized capital gains to shareholders. Therefore, no federal income tax provision is recorded.
Under applicable foreign tax laws, a withholding tax may be imposed on interest, dividends, and capital gains earned on foreign investments. Where available, the Funds will file for claims on foreign taxes withheld.
F. Dividends and Distributions:
The Funds intend to distribute substantially all of their net investment income and net realized capital gains, if any, throughout the year to their shareholders in the form of dividends. Distributions to shareholders are recorded at the close of business on the ex-dividend date.
The amounts of dividends from net investment income and of distributions from net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. In the event dividends and distributions to shareholders exceed net investment income and net realized gains for tax purposes, they are reported as returns of capital.
G. Class Allocations:
Income, expenses (other than class specific expenses) and realized and unrealized gains and losses of the U.S. Real Estate Equity Fund are allocated among the classes of each respective Fund based on the relative net assets of each class. Class specific expenses are allocated to the class to which they relate. Class specific expenses are limited to those incurred under the Distribution Plan for Class B shares that existed through May 1, 2005.
H. Foreign Translation Transactions:
The U.S. Real Estate Equity Fund and the Realty Income & Growth Fund may invest up to 15% and 35%, respectively of the value of their total assets in foreign securities. The International Real Estate Equity Fund will, under normal market conditions, invest no less than 80% of its total assets in foreign securities. The books and records of the Funds are maintained in U.S. dollars. Non-U.S. denominated amounts are translated into U.S. dollars as follows, with the resultant translation gains and losses recorded in the Statements of Operations:
  i)   market value of investment securities and other assets and liabilities at the exchange rate on the valuation date,
 
  ii)   purchases and sales of investment securities, income and expenses at the exchange rate prevailing on the respective date of such transactions.
Dividends and interest from non-U.S. sources received by the Funds are generally subject to non-U.S. withholding taxes at rates ranging up to 30%. Such withholding taxes may be reduced or eliminated under

30


 

Alpine Mutual Funds
Notes to Financial Statements—Continued
October 31, 2005
    the terms of applicable U.S. income tax treaties, and the Funds intend to undertake any procedural steps required to claim the benefits of such treaties.
 
    I. Risk Associated With Foreign Securities and Currencies:
 
    Investments in securities of foreign issuers carry certain risks not ordinarily associated with investments in securities of domestic issuers. Such risks include future political and economic developments and the possible imposition of exchange controls or other foreign governmental laws and restrictions. In addition, with respect to certain countries, there is a possibility of expropriation of assets, confiscatory taxation, political or social instability or diplomatic developments, which could adversely affect investments in those countries.
 
    Certain countries may also impose substantial restrictions on investments in their capital markets by foreign entities, including restrictions on investments in issuers or industries deemed sensitive to relevant national interests. These factors may limit the investment opportunities available to the Funds or result in a lack of liquidity and high price volatility with respect to securities of issuers from developing countries.
 
    J. Forward Currency Contracts:
 
    A forward currency contract (“forward’’) is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of the forward contract fluctuates with changes in forward currency exchange rates. The forward contract is marked-to-market daily and the change in market value is recorded by the Funds as unrealized appreciation or depreciation. When the forward contract is closed, the Funds record a realized gain or loss equal to the fluctuation in value during the period the forward contract was open. The Funds could be exposed to risk if a counterparty is unable to meet the terms of a forward or if the value of the currency changes unfavorably.
 
3.   Capital Share Transactions:
 
    The Funds have an unlimited number of shares of beneficial interest, with $0.0001 par value, authorized. Transactions in shares and dollars of the Funds were as follows:
 
    U.S. Real Estate Equity Fund
                                 
    Year Ended     Year Ended  
    October 31, 2005     October 31, 2004  
    Shares     Amount     Shares     Amount  
Class B
                               
Shares sold
    294     $ 10,275           $  
Shares issued in reinvestment of dividends
    3,751       131,074       4,097       113,971  
Redemption Fees
          852              
Shares redeemed
    (53,648 )     (1,949,082 )     (40,355 )     (1,173,001 )
Shares merged into Class Y
    (30,989 )     (1,108,527 )            
 
                       
Net change
    (80,592 )   $ (2,915,408 )     (36,258 )   $ (1,059,030 )
 
                       
Class Y
                               
Shares sold
    18,301,032     $ 778,163,995       6,915,988     $ 218,039,206  
Shares merged from Class B
    28,092       1,108,527              
Shares issued in reinvestment of dividends
    449,652       17,262,155       191,498       5,769,839  
Shares redeemed
    (10,950,183 )     (461,046,868 )     (4,516,295 )     (139,125,602 )
 
                       
Net change
    7,828,593       335,487,809       2,591,191       84,683,443  
 
                       
Total net change
    7,748,001     $ 332,572,401       2,554,933     $ 83,624,413  
 
                       

31


 

Alpine Mutual Funds
Notes to Financial Statements—Continued
October 31,2005
Realty Income & Growth Fund
                                 
    Year Ended     Year Ended  
    October 31, 2005     October 31, 2004  
    Shares     Amount     Shares     Amount  
Class Y
                               
Shares sold
    21,136,828     $ 457,228,812       16,982,173     $ 311,585,922  
Shares issued in reinvestment of dividends
    1,284,550       27,699,449       610,952       11,195,810  
Shares redeemed
    (12,909,966 )     (280,321,048 )     (8,860,181 )     (159,269,240 )
 
                       
Total net change
    9,511,412     $ 204,607,213       8,732,944     $ 163,512,492  
 
                       
International Real Estate Equity Fund
                                 
    Year Ended     Year Ended  
    October 31, 2005     October 31, 2004  
    Shares     Amount     Shares     Amount  
Class Y
                               
Shares sold
    11,927,740     $ 330,885,764       2,326,485     $ 50,237,782  
Shares issued in reinvestment of dividends
    322,625       8,436,642       105,032       2,152,111  
Redemption Fees
          164,178             59,916  
Shares redeemed
    (6,100,900 )     (172,724,083 )     (2,788,734 )     (58,816,665 )
 
                       
Total net change
    6,149,465     $ 166,762,501       (357,217 )   $ (6,366,856 )
 
                       
4.   Purchases and Sales of Securities:
 
    Purchases and sales of securities (excluding short-term securities) for the year ended October 31, 2005 are as follows:
                                 
    Non-U.S. Government   U.S. Government
    Purchases   Sales   Purchases   Sales
U.S. Real Estate Equity Fund
  $ 533,548,152     $ 185,773,007              
Realty Income & Growth Fund
    439,439,913       180,678,719              
International Real Estate Equity Fund
    187,081,853       16,773,015              
5.   Distribution Plans:
 
    Quasar Distributors, LLC (“Quasar’’) serves as the Funds’ distributor. The U.S. Real Estate Equity Fund has adopted a distribution and servicing plan (the “Plan’’) for its Class B shares as allowed by Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Fund in connection with the distribution and servicing of its shares at an annual rate, as determined from time to time by the Board of Trustees, of up to 0.25% of the Fund’s average daily net assets for distribution fees and up to 0.75% of the Fund’s average daily net assets for shareholder servicing fees. Amounts paid under the Plan by the Fund may be spent by the Fund on any activities or expenses primarily intended to result in the sale of shares of the Fund, including but not limited to, advertising, compensation for sales and marketing activities of financial institutions and others such as dealers and distributors, shareholder account servicing, the printing and mailing of prospectuses to other than current shareholders and the printing and mailing of sales literature. The Fund incurred $10,177 pursuant to the Plan for the year ended October 31, 2005.
 
    The Plan for the U.S. Real Estate Equity Fund was terminated upon the conversion of Class B shares into Class Y shares.

32


 

Alpine Mutual Funds
Notes to Financial Statements—Continued
October 31, 2005
6.   Investment Advisory Agreement and Other Affiliated Transactions:
 
    Alpine Management & Research, LLC (“Alpine’’) provides investment advisory services to the Funds. Pursuant to the investment adviser’s agreement with the U.S. Real Estate Equity Fund and Realty Income & Growth Fund, Alpine is entitled to an annual fee based on the Funds’ average daily net assets, in accordance with the following schedule:
         
First $750 million
    1.00 %
Next $250 million
    0.90 %
Over $1 billion
    0.80 %
    Alpine is entitled to an annual fee based on 1.00% of the Fund’s average daily net assets for the International Real Estate Equity Fund.
 
    The Adviser agreed to reimburse the Realty Income & Growth Fund to the extent necessary to ensure that the Fund’s total operating expenses (excluding interest, brokerage commissions and extraordinary expenses) did not exceed 1.50% of the Fund’s average daily net assets. The Adviser may recover expenses paid in excess of the cap on expenses for the three previous years, as long as the recovery does not cause the Fund to exceed such cap on expenses. No reimbursements or recoupments were made in 2005, 2004, or 2003. Therefore, at October 31, 2005 there are no recoverable expenses eligible for recoupments. The expense limitation will remain in effect unless and until the Board of Trustees of the Equity Trust approve its modification or termination.
 
7.   Concentration of Credit Risk:
 
    The Funds invest a substantial amount of their assets in the equity securities of issuers engaged in the real estate industry, including real estate investment trusts (REITs). As a result, the Funds may be more affected by economic developments in the real estate industry than would a general equity fund.
 
8.   Federal Income Tax Information:
 
    At October 31, 2005, the components of accumulated earnings/(losses) on a tax basis were as follows:
                         
            Realty     International  
    U.S. Real Estate     Income &     Real Estate  
    Equity Fund     Growth Fund     Equity Fund  
Cost of Investments
  $ 562,980,877     $ 542,222,172     $ 236,509,507  
 
                 
Gross unrealized appreciation
  $ 82,674,362     $ 120,522,792     $ 65,832,646  
Gross unrealized depreciation
    (46,717,841 )     (14,252,207 )     (13,508,445 )
 
                 
Net unrealized appreciation/(depreciation)
  $ 35,956,521     $ 106,270,585     $ 52,324,201  
 
                 
Undistributed ordinary income
  $     $     $ 3,517,600  
Undistributed long-term capital gain
    19,977,250       8,681,054       3,531,971  
 
                 
Total distributable earnings
  $ 19,977,250     $ 8,681,054     $ 7,049,571  
 
                 
Other accumulated gains/(losses)
  $     $ (330 )   $ (33,042 )
 
                 
Total accumulated earnings/(losses)
  $ 55,933,771     $ 114,951,309     $ 59,340,730  
 
                 
    The tax basis of investments for tax and financial reporting purposes differs principally due to the deferral of losses on wash sales, REIT tax adjustments, and mark-to-market cost basis adjustments for investments in foreign passive investment companies (PFICs) for tax purposes.

33


 

Alpine Mutual Funds
Notes to Financial Statements—Continued
October 31, 2005
The tax character of distributions paid during the years ended October 31, 2004 and 2005 were as follows:
                 
    2005     2004  
U.S. Real Estate Equity Fund
               
Ordinary Income
  $ 9,312,372     $ 2,969,130  
Long-term capital gain
    9,716,450       3,385,125  
 
           
 
  $ 19,028,822     $ 6,354,255  
 
           
 
               
Realty Income & Growth Fund
               
Ordinary Income
  $ 23,517,517     $ 12,435,846  
Long-term capital gain
    6,816,639       467,474  
 
           
 
  $ 30,334,156     $ 12,903,320  
 
           
 
               
International Real Estate Fund
               
Ordinary Income
  $ 5,949,219     $ 1,848,790  
Long-term capital gain
    2,991,025       441,396  
 
           
 
  $ 8,940,244     $ 2,290,186  
 
           

34


 

Alpine Mutual Funds
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Boards of Trustees of
Alpine Equity Trust:
We have audited the accompanying statements of assets and liabilities, including the schedules of portfolio investments of Alpine Equity Trust, comprising the Alpine Realty Income & Growth Fund, Alpine U.S. Real Estate Equity Fund, and Alpine International Real Estate Equity Fund (collectively, the “Funds’’), as of October 31, 2005 and the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the two years then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The Funds’ financial highlights for the periods ended prior to October 31, 2004 were audited by other auditors whose report, dated December 19, 2003, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds as of October 31, 2005, the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for the two years then ended, in conformity with accounting principles generally accepted in the United States of America.
Milwaukee, WI
December 28, 2005

35


 

Alpine Mutual Funds
Additional Information (Unaudited)
Expense Examples
October 31, 2005
As a shareholder of the U.S. Real Estate Equity Fund or the Realty Income & Growth Fund, you will incur ongoing costs, including management fees; distribution and/or service fees; and other Fund expenses. As a shareholder of International Real Estate Equity Fund, you will incur two types of costs: (1) redemption fees and (2) ongoing costs. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 for the period 5/1/05—10/31/05.
Actual Expenses
The first line of the tables below provides information about actual account values and actual expenses. The Funds charge no sales load or transaction fees, but do assess shareholders for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent. If you request a redemption by wire transfer, currently a $15.00 fee is charged by the Funds’ transfer agent. Shareholders in the International Real Estate Equity Fund will be charged a redemption fee equal to 1.00% of the net amount of the redemption if they redeem their shares less than 60 calendar days after purchase. IRA accounts will be charged a $15.00 annual maintenance fee. To the extent the Funds invest in shares of other investment companies as a part of their investment strategies, you will indirectly bear your proportionate share of any fees and expenses charged by the underlying funds in which the Funds invest in addition to the expenses of the Fund. These expenses are not included in the example below. The example below includes, but is not limited to, management fees, shareholder servicing fees, fund accounting, custody and transfer agent fees. However, the example below does not include portfolio trading commissions, related expenses and other extraordinary expenses as determined under GAAP. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under heading entitled “Expenses Paid During Period’’ to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which does not represent the Funds’ actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Alpine U.S. Real Estate Equity Fund
Class Y Shares
                         
    Beginning   Ending   Expenses Paid
    Account Value   Account Value   During Period
    5/01/2005   10/31/2005   5/1/05–10/31/05
Actual
  $ 1,000.00     $ 999.70     $ 6.00  
Hypothetical
  $ 1,000.00     $ 1,019.00     $ 6.06  
 
(1)   Ending account values and expenses paid during period based on a –.03% return. The return is considered after expenses are deducted from the fund.
 
(2)   Ending account values and expenses paid during period based on a 5.00% annual return. The return is considered before expenses are deducted from the fund.

36


 

Alpine Mutual Funds
Additional Information (Unaudited)—Continued
Expense Examples
October 31, 2005
Alpine Realty Income & Growth Fund
                         
    Beginning   Ending   Expenses Paid
    Account Value   Account Value   During Period
    5/01/2005   10/31/2005   5/1/05–10/31/05
Actual
  $ 1,000.00     $ 1,058.00     $ 6.07  
Hypothetical
  $ 1,000.00     $ 1,019.05     $ 6.01  
 
(1)   Ending account values and expenses paid during period based on a 5.80% return. The return is considered after expenses are deducted from the fund.
 
(2)   Ending account values and expenses paid during period based on a 5.00% annual return. The return is considered before expenses are deducted from the fund.
Alpine International Real Estate Equity Fund
                         
    Beginning   Ending   Expenses Paid
    Account Value   Account Value   During Period
    5/01/2005   10/31/2005   5/1/05–10/31/05
Actual
  $ 1,000.00     $ 1,072.40     $ 6.16  
Hypothetical
  $ 1,000.00     $ 1,019.26     $ 6.01  
 
(1)   Ending account values and expenses paid during period based on a 7.24% return. The return is considered after expenses are deducted from the fund.
 
(2)   Ending account values and expenses paid during period based on a 5.00% annual return. The return is considered before expenses are deducted from the fund.

37


 

Alpine Mutual Funds
Additional Information (Unaudited)—Continued
Investment Adviser and Advisory Contracts
On December 20, 2004, at a meeting called for the purpose of voting on such approval, the Boards of Trustees, including all of the Trustees who are not parties to the Advisory Contracts or interested persons of any such party (the non-interested Trustees), approved the continuance of the Advisory Contracts for the Funds. In so doing, the Board Members studied materials specifically relating to the Advisory Contracts provided by the Adviser, the Funds’ counsel and the Funds’ administrator. The Board Members considered a variety of factors, including the following:
The Board Members considered the expected nature, quality and scope of the management and investment advisory services and personnel provided each Fund by the Adviser; the rate of investment advisory fees payable to the Adviser and a comparison of the fees paid by comparable funds; the compensation (in addition to the investment advisory fees) and other benefits received by the Adviser and its respective affiliates; the Adviser’s costs in providing services; the economies of scale realized by the Adviser; the annual operating expenses of each Fund; and the policies and practices of the Adviser with respect to portfolio transactions for each Fund.
The Board Members also evaluated the investment performance of the Funds relative to their respective benchmark indices over the last year, three years, five years, ten years and since inception (as applicable).
The Board Members also reviewed Lipper analytical data relating to average expenses and advisory fees for comparable funds. Based on the information provided, the Board Members determined that each Fund’s fee structure is competitive with funds having similar investment goals and strategies.
The Board Members considered the Funds’ total expense ratios and contractual investment advisory fees compared to their respective industry average by quartile, within the appropriate Lipper benchmark category and Lipper category range. The Board Members also considered the amount and nature of fees paid by shareholders. The Board Members considered the fact that the Adviser has contractually agreed to waive a portion of its fees for the Dynamic Balance Fund, the Dynamic Dividend Fund, the Municipal Money Market Fund and the Tax Optimized Income Fund for a period of one year, to be reviewed again at the next Advisory Contract renewal. It was noted that each Fund’s management fee and expense ratio are within the average range compared to its peer funds.
The Board Members considered the extent to which economies of scale would be realized with respect to operational costs as the Funds grow in their number of shareholders and assets under management, the existence of breakpoints previously established by the Adviser, and whether fee levels to be charged by the Adviser reflect these economies of scale for the benefit of Fund investors and are fair under the circumstances, which the Board Members, including all of the non-interested Trustees, believed to be the case.
Based on the Board Members’ review and consultation with the Funds’ independent counsel, of the material aspects of the Advisory Contracts, including the foregoing factors and such other information believed to be reasonably necessary to evaluate the terms of the Advisory Contracts, the Board Members, including all of the non-interested Trustees voting separately, concluded that the continuation of the Advisory Contracts would be in the best interest of the Funds’ shareholders, and determined that the compensation to the Adviser provided for in the Advisory Contracts is fair and equitable.

38


 

Alpine Mutual Funds
Additional Information (Unaudited)—Continued
October 31, 2005
Information about Trustees and Officers
     The business and affairs of the Funds are managed under the direction of Funds’ Board of Trustees. Information pertaining to the Trustees and Officers of the Funds is set forth below. The SAI includes additional information about the Funds’ Trustees and Officers and is available, without charge, upon request by calling 1-888-785-5578.
Independent Trustees
                         
                # of    
    Position(s)   Term of Office       Portfolios in    
    Held with   and Length of   Principal Occupation During   Fund   Other Directorships
Name, Address and Age   the Trust   Time Served   Past Five Years   Complex*   Held by Trustee
Laurence B. Ashkin (76),
2500 Westchester Ave.
Purchase, NY 10577
  Independent
Trustee
  Indefinite,
Since the
Trust’s
inception
  Real estate developer and construction consultant since 1980; Founder and President of Centrum Properties, Inc. since 1980.     7     Trustee of Alpine Equity and Alpine Series Trusts (formerly Evergreen Global Equity trust
  Trust).
H. Guy Leibler (50),
2500 Westchester Ave.
Purchase, NY 10577
  Independent
Trustee
  Indefinite, since the Trust’s inceptions.   Chief Operating Officer L&L Acquisitions, LLC since 2004; President, Skidmore, Owings & Merrill LLP, 2001–2003, Director of Brand Space Inc., a brand marketing/advertising company (1997–1999).     7     Director, White Plains Hospital Center; Founding Director, Stellaris Health Network, Trustee of Alpine Equity and Alpine Series Trusts
 
Jeffrey E. Wacksman (44),
2500 Westchester Ave.
Purchase, NY 10577
  Independent
Trustee
  Indefinite,
since 2004
  Partner, Loeb, Block & Partners LLP, since 1994.     7     Director, Adair International Limited; Director, Cable Beach Properties, Inc.; Director, Bondi Icebergs Inc.; Trustee, Larchmont Manor Park Society; Trustee of Alpine Equity and Alpine Series Trusts
 
 
*   The term “Fund Complex’’ refers to the Funds in the Alpine Equity Trust, Alpine Series Trust and Alpine Income Trust.

39


 

Alpine Mutual Funds
Additional Information (Unaudited)—Continued
October 31, 2005
Interested Trustees & Officers
                         
                # of    
    Position(s)   Term of Office       Portfolios in    
    Held with   and Length of   Principal Occupation During   Fund   Other Directorships
Name, Address and Age   the Trust   Time Served   Past Five Years   Complex**   Held by Trustee
Samuel A. Lieber* (48),
2500 Westchester Ave.
Purchase, NY 10577
  Interested Trustee, Portfolio Manager, and President   Indefinite, since inceptions.   CEO of Alpine Management & Research, LLC since November 1997. Formerly Senior Portfolio Manager with Evergreen Asset Management Corp. (1985–1997)     7     Trustee of Alpine Equity and Alpine Series Trusts
 
Stephen A. Lieber (79),
2500 Westchester Ave.
Purchase, NY 10577
  Vice President   Indefinite,
since
inception
  Chairman and Senior Portfolio Manager, Saxon Woods Advisors, LLC Since 1999. Formerly President, Evergreen Asset Management Corp. (1971–1999). Formerly, Chairman and Chief Executive Officer, Lieber & Company (1969–1999)     7     None
 
Robert W. Gadsden (48),
2500 Westchester Ave.
Purchase, NY 10577
  Vice President and Portfolio Manager   Indefinite,
since 1999
  Portfolio Manager and Senior Real Estate Analyst of Alpine Management & Research, LLC since 1999. Formerly Vice President, Prudential Realty Group (1990–1999).     7     None
 
Sheldon R. Flamm (57),
2500 Westchester Ave.
Purchase, NY 10577
  Treasurer and Chief Compliance Officer   Indefinite,
since 2002
  Chief Financial Officer, Saxon Woods Advisors, LLC, 1999– Present; Chief Financial Officer, Lieber & Co. a wholly-owned subsidiary of First Union National Bank), 1997–1999, Chief Financial Officer of Evergreen Asset Management Corp. March 1987 to September 1999.     7     None
 
Oliver Sun (40),
2500 Westchester Ave.
Purchase, NY 10577
  Secretary   Indefinite,
since 2002
  Controller of Alpine Management & Research, LLC, 1998 to present.     7     None
 
 
*   Denotes Trustees who is an “interested persons’’ of the Trust or Fund under the 1940 Act.
 
**   The term “Fund Complex’’ refers to the Funds in the Alpine Equity Trust, Alpine Series Trust, and Alpine Income Trust.
Tax Information
The Funds designated the following percentages of dividends declared from net investment income for the fiscal year ended October 31, 2005 as qualified dividend income under the Jobs & Growth Tax Relief Reconciliation Act of 2003.
         
U.S. Real Estate Equity Fund
    9.02 %
Realty Income & Growth Fund
    9.70 %
International Real Estate Equity Fund
    35.98 %
The Funds designated the following percentages of dividends declared during the fiscal year ended October 31, 2005 as dividends qualifying for the dividends received deduction available to corporate shareholders.
         
U.S. Real Estate Equity Fund
    7.30 %
Realty Income & Growth Fund
    5.40 %
International Real Estate Equity Fund
    0.80 %

40


 

Alpine Mutual Funds
Additional Information (Unaudited)—Continued
October 31, 2005
For the year ended October 31, 2005, the International Real Estate Equity Fund earned foreign source income and paid foreign taxes, which they intend to pass through to their shareholders pursuant to Section 853 of the Internal Revenue Code as follows:
                 
    Foreign Source    
    Income    
    Earned   Foreign Taxes Paid
    (per share)   (per share)
Canada
    0.0253       0.0038  
Finland
    0.0351       0.0053  
France
    0.0952       0.0142  
Germany
    0.0028       0.0004  
Greece
    0.0026       0.0000  
Hong Kong
    0.1017       0.0000  
Italy
    0.0061       0.0017  
Japan
    0.0149       0.0010  
Netherlands
    0.0179       0.0020  
New Zealand
    0.0021       0.0003  
Norway
    0.0070       0.0011  
Philippines
    0.0020       0.0005  
Spain
    0.0209       0.0031  
Sweden
    0.0474       0.0071  
Thailand
    0.0447       0.0046  
Availability of Proxy Voting Information
Information regarding how the Fund votes proxies relating to portfolio securities is available without charge upon request by calling toll-free at 1-888-785-5578 and on the SEC’s website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the period ending June 30, 2005 is available on the SEC’s website at www.sec.gov or by calling the toll-free number listed above.
Availability of Quarterly Portfolio Schedule
Beginning with the Fund’s fiscal quarter ended July 31, 2004, the Funds filed their complete schedules of portfolio holdings on Form N-Q with the SEC. Going forward, the Funds will file Form N-Q for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

41


 

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(ALPINE SHAREHOLDER/INVESTOR INFORMATION PICTURE)

 


 

Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
A copy of the registrant’s Code of Ethics is filed herewith.
Item 3. Audit Committee Financial Expert.
The registrant’s board of trustees has determined that there is at least one audit committee financial expert serving on its audit committee. Laurence Ashkin is the “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refer to performing an audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. “Other services” provided by the principal accountant were not applicable. The following table details the aggregate fees billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
                 
    FYE 10/31/2005   FYE 10/31/2004
 
Audit Fees
  $ 59,150     $ 51,750  
Audit-Related Fees
    0       0  
Tax Fees
  $ 9,850     $ 8,250  
All Other Fees
    0       0  
 
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant. All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.

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Item 5. Audit Committee of Listed Registrants.
Not applicable to open-end investment companies.
Item 6. Schedule of Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchases.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11. Controls and Procedures.
(a)   The Registrant’s President and Treasurer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) are effective as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 15d-15(b) under the Securities Exchange Act of 1934, as amended.
(b)   There were no significant changes in the Registrant’s internal controls over financial reporting that occurred during the Registrant’s last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)   (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith.
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(b)   Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
                     
    (Registrant)   Alpine Equity Trust    
                 
 
                   
    By (Signature and Title)   /s/ Samuel A. Lieber    
 
                   
 
                    Samuel A. Lieber, President    
 
                   
 
  Date       01/09/06        
             
     Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
                     
    By (Signature and Title)*   /s/ Samuel A. Lieber    
 
                   
 
                    Samuel A. Lieber, President    
 
                   
 
  Date       01/09/06        
             
 
                   
    By (Signature and Title)*   /s/ Sheldon Flamm    
 
                   
 
                    Sheldon Flamm, Treasurer    
 
                   
 
  Date       01/09/06        
             
 
* Print the name and title of each signing officer under his or her signature.

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