Form N-CSRS ALPINE EQUITY TRUST

Certified semi-annual shareholder report of registered management investment companies

What is Form N-CSRS?
  • Accession No.: 0000950137-06-007684 Act: 40 File No.: 811-05684 Film No.: 06953647
  • CIK: 0000842436
  • Submitted: 2006-07-10
  • Period of Report: 2006-04-30

SEMI-ANNUAL CERTIFIED SHAREHOLDER REPORT HTML

c06607nvcsrs.htm

 

As filed with the Securities and Exchange Commission on 7/10/06
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
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
3
rd Floor
Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)
Samuel A. Lieber
Alpine Woods Capital Investors, 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: 10/31/2006
Date of reporting period: 4/30/2006

 


 

Item 1. Report to Stockholders.
(ALPINE LOGO)
Real Estate Funds

(ALPINE COVER PAGE)
           
 
        Alpine U.S. Real Estate Equity Fund
 
         
 
        Alpine Realty Income & Growth Fund
 
         
 
        Alpine International Real Estate
Equity Fund
This material must be preceded or accompanied by a current prospectus.

 


 

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
    14  
 
       
Schedules of Portfolio Investments
    17  
 
       
Statements of Assets and Liabilities
    23  
 
       
Statements of Operations
    24  
 
       
Statements of Changes in Net Assets
    25  
 
       
Financial Highlights
    28  
 
       
Notes to Financial Statements
    31  
 
       
Additional Information
    36  

 


 

(PHOTO OF SAMUEL A. LIEBER)
Dear Investor,

We are pleased to present the Alpine Mutual Funds Semi-Annual Report for the period ending April 30, 2006. We typically write these reports a month after the ending period. This year, it has given us a broad perspective on the significant global market sell-off which began on May 10th when newly elected Federal Reserve Chairman Bernanke chose to reemphasize his inflation-fighting commitment. This was followed later in the month by the expected Federal Reserve interest rate increase and then a globally coordinated 25 basis point increase by the European Central Bank, as well as South Korea and India. Other countries have also followed this lead. In turn, equity markets tumbled dramatically as risk premiums were considered too low if the central banks were to continue a coordinated pattern of rising interest rates, which might lead to an economic slow down and hence, reduced corporate profitability.
The equity markets were probably too buoyant in their rapid rise earlier this year and perhaps overly pessimistic in the recent contraction, as is often the case. Our view is that the capital markets are in the midst of a mid-cycle correction, similar to those experienced in 2004 and early 2005. This often occurs after the central banks have succeeded in elevating economic activity following a recession. They provide significant financial liquidity at low cost, and then gradually withdraw that liquidity in order to find a balance between growth and inflation. We judge that the Federal Reserve is nearing the end of this second phase in the mid-cycle correction, and that over the next year we will see the Federal Reserve again adjust rates when it reevaluates the long-term trajectory of the economy. We believe that the Federal Reserve will conclude its extended cycle of interest rate increases this summer, and may likely find it necessary to reverse course and reduce rates for 2007.
The recent equity market sell-off has been the market’s correction when global liquidity for equities become constrained. This reflects the short-term influences of a transient shift in investor sentiment less than the fundamental prospects for either the economy and the equity markets over the next few
years. Currently, the equity markets are obsessed by Federal Reserve activity, although one or two more increases on top of 17 prior moves strike us as marginal adjustments rather than significant directional trends. However, the market is rightly concerned about the strength of consumer spending in light of declining consumer confidence expectations for the future and the progressive impact of rising interest rates on looming mortgage resets over the next 24 months. Any uncertainty is compounded by historically low confidence ratings for our government’s leadership or capacity to enact meaningful change. Obviously, this has been significantly eroded by both the war in Iraq and the post-Katrina rebuilding debacle.
Even though business hiring has been solid, corporate capital spending plans remain below expectations. From a global perspective, significant concerns include increased tendencies of Latin American governments to nationalize internationally controlled businesses, simmering wars and conflicts in Africa and Asia, ongoing stalemates between North Korea and Iran and their neighbors, as well as festering instability between Israel and its Palestinian neighbors. The threat of terrorism still looms in the background. On the positive side of the ledger, global growth should be supported by a number of developments. There is still the promise of increased long-term stability and growth in Latin America, and the gradual revival of both domestic demand and investment in exporting industries in Japan. Prospects are good for modestly improving business conditions in Europe, and the great potential of the world’s emerging juggernauts of China and India. Overall, the promise of continued economic growth throughout the world should translate into corporate earnings growth, both at home and abroad.
While this economic cycle shares many similarities in its broad outline with the prior one, a number of important factors may differentiate its shape and duration. During the period following the 1995 rate rise, corporate spending significantly increased through the year 2000 as significant capital


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expenditures on new technologies and the capacity to produce them was buoyed by the venture capital phenomenon of the late 90’s. In 2006, business capital expenditures have grown by low to mid teen percentages, but not nearly as dynamic as many expected. Businesses are still more inclined to maximize efficiency and profitability of existing operations than to invest in expanding their business model. As a result, most business balance sheets are flush with cash, bank borrowing tends to be less significant than in prior cycles and rising interest rates are having less impact on business decision making. It should be noted that globalization is also an important factor, particularly in terms of the relative cost restraints on production. This, too, influences business managers’ investment decisions.
Our overall assessment of the economy’s prospects and of the equity markets potential will in part be determined by whether we do see stable interest rates with perhaps a bit of a yield curve incorporated and modest growth in corporate cash flows and earnings. We suspect that the S&P 500 valuations are broadly fair at current levels, however, it is uneven and the market has, as always, underpriced certain business potential and paid too much for other companies’ growth potential.
With the economy in transition, it is fruitful to assess changes which may lie ahead. As we look out over the next few years, Alpine believes that the dollar could weaken, partly in response to the high current account deficits. High corporate cash flow should be reduced by rising dividend yields, continued capital expenditure and merger and acquisition (M&A) activity. Second quarter earnings projections are for about 121/2% growth in comparison to the 14% growth rate enjoyed by the S&P 500 in the first
quarter. We believe that 2007 will feature corporate earnings growth rates reduced from current levels. Market valuation is already factoring this in and could react positively if renewed growth into 2006 is perceived. We believe that the Federal Reserve is fully aware of the potential impact that rolling mortgage payment resets will have in 2007 when hybrid and adjustable rate mortgages come up for adjustment to current interest rate levels. The resulting “sticker shock’’ could be significant for many households and might lead to both a reduction in net household income as well as a decline in domestic consumption. We believe the Federal Reserve is currently moving interest rates above the so called “neutral level’’ in order to, if needed, slow the economy down quickly enough so that they can actually reduce interest rates modestly as the economy enters the peak of this mortgage reset period in mid 2007. Even though the equity markets will no doubt be cautious as to the ultimate strength of the economy in 2007, lower interest rates would be a positive factor for the markets which could perform reasonably well over the next 18 to 24 months.
We look forward to reviewing our assumptions with you in our next letter to shareholders as we evaluate conditions at that time as well as investment prospects for the near future.
Thank you for your interest and support.
Sincerely,
-s- Samuel A. Lieber
Samuel A. Lieber
President, Alpine Mutual Funds


 
The information provided herein represents the opinion of Samuel A. Lieber and is not intended to be a forecast of future events, a guarantee of future results, nor investment advice.
A basis point is a value equaling one one-hundredth of a percent (1/100 of 1%).
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. You cannot invest directly in an index.
Cash flow measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income.
Quasar Distributors, LLC, Distributor (06/06)

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Equity Manager Reports
(ALPINE LOGO)
           
 
        Alpine U.S. Real Estate Equity Fund
 
         
 
        Alpine Realty Income & Growth Fund
 
         
 
        Alpine International Real Estate
Equity Fund

 


 

(ALPINE LOGO)
(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 Returns as of 4/30/06 (Unaudited)
                                                 
                                            Since Inception
    6 Months(1)   1 Year   3 Year   5 Year   10 Year   (9/1/1993)
 
Alpine U.S. Real Estate Equity Fund
    8.56 %     8.53 %     34.42 %     25.40 %     18.41 %     16.65 %
 
Wilshire Real Estate Securities Index
    16.60 %     29.13 %     30.55 %     21.25 %     15.82 %     13.73 %
 
S &P 500 Index
    9.64 %     15.42 %     14.68 %     2.70 %     8.94 %     10.56 %
 
Lipper Real Estate Funds Average
    16.20 %     26.70 %     28.49 %     20.66 %     15.64 %     13.16 %
 
Lipper Real Estate Fund Rank
    N/A (1)     239/243       9/165       5/28       2/35       1/7  
 
 
(1)   Not annualized. The NASD does not recognize rankings for less than one year.

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Alpine U.S. Real Estate Equity Fund
  (ALPINE LOGO)
 
(PIE CHART)
Commentary
 

For the six-month period ended April 30, 2006, The Alpine U.S. Real Estate Equity Fund produced a total return of 8.56%. This lagged the S&P 500 Index total return of 9.64%, and the benchmark Wilshire Real Estate Securities Index return of 16.60%. Relevant points of comparison for this period are the Morgan Stanley REIT Index (15.56%), the S&P Supercomposite Hotel Index (13.18%) and the S&P Supercomposite Homebuilder Index (–4.77%). Even though the Fund’s strong long-term performance record for three, five or ten years since its inception as documented on the opposite page has included other periods of underperformance, they have always proved to be transitory. We believe a similar scenario may play out over the next few quarters for this Fund. We believe the portfolio is not only cheap in terms of price in relation to book value, cash flow, or normalized future earnings, but also with regard to medium-term growth prospects.
The five largest holdings illustrate where we see growth and value opportunity:
(1) Orient-Express Hotels has assembled a portfolio which includes world-class luxury boutique hotels which appeal to high-end worldwide tourist demand. From hillsides overlooking Florence, the Amalfi Coast, Capetown, Santa Barbara and Machu Pichu; the city centers of Madrid, St. Petersburg, Rio de Janeiro and
Charleston; and seasides of St. Martin, the Maya Riviera, Madeira and Venice; this portfolio achieves top room rates in its hotels. Seventy percent of the revenue comes from abroad.
(2) Hilton Hotels is now generating 30% of its revenue from abroad, and this should grow over the next five years. Iconic properties such as the Waldorf Astoria in New York and the Hilton Hawaiian Village in Honolulu should continue as the focal point of major brands expansion, ranging from Hampton Inn to a new luxury Waldorf brand, including Scondid and Conrad chains abroad. Major U.S. hotel companies are emphasizing their evolution to an asset-light, management fee driven, high return-on-equity business model which will become increasingly global.
(3) Technical Olympic USA is homebuilder which has significantly expanded its focus on Florida to become one of that state’s biggest builders. However, over the near term most of its revenue will come from other states, with the expected potential for 70% from Florida in future years.
(4) Toll Brothers has established itself as one of the nation’s best known high-end production homebuilders. With an average sales price of roughly $700,000 vs. $220,000-$300,000 for most builders, Toll is a dominant brand with considerable franchise value, as well as a large low-cost land bank.


5


 

     
Alpine U.S. Real Estate Equity Fund
  (ALPINE LOGO)
 

(5) Lennar Corp. is one of the country’s largest homebuilders. More important has been its emphasis on buying large, irreplaceable, land holdings near major cities which are complex and expensive to prepare for development. In addition to its land development profits, Lennar is able to assure its supply of lots for homes near Los Angeles (Newhall Ranch), San Francisco (Treasure Island), and New York City (Rosedale portfolio along the Hudson River). It too has an undervalued land bank.
Commercial property values
Commercial property has benefited significantly from the boom in residential real estate. Residential land values have often surpassed the land value for office buildings and shopping centers. In certain circumstances, property originally intended to be developed for commercial use has been set aside or developed as either residential apartments or condominiums, absorbing potential commercial development sites and, thus, reducing the future pipeline. In turn, this has given buyers greater confidence in their rent projections due to rising replacement costs, which helps to justify current record high prices and low yields. Apartment rents have achieved the fastest trajectory, although the rate of growth in net operating income will probably peak and slow after this year. With regard to publicly traded share prices, the pricing of many apartment REITs more than reflects potential growth over the near term.
Office property rents rise
Office properties should enjoy rising rental rates in many cities over the next three to five years. For investors with a three to five year time horizon, office property REITs have good dividend growth potential, yet most office REITs are fairly valued. Hotel stocks, however, offer considerable value in our estimation with regard to not only their fundamental supply and demand level (which should remain favorable for at least two or three more years), but also the relative pricing which appears to be some 20% cheaper than other property types. In part, this reflects historic revenue volatility but we believe that such volatility should be a moot issue for at least the next four or five years. At the end of the fiscal semi-annual period, the portfolio was weighted 37% in hotels and this was subsequently increased during the month of
May. We remain optimistic about the prospects for the sector.
Homebuilder stocks
Homebuilder stocks accounted for 55% of the portfolio on April 28, and were reduced significantly beginning in early May. From March 2000 through July 2005, the S&P Supercomposite Homebuilder Index gained 853%. Recently, in less than 10 months, the sector fell 27.1% through the end of April. Subsequent to the fiscal period, the Index fell further, as demand sharply deteriorated to 2003 levels even though the economy is still running at a relatively solid pace. It is too early to tell if this is anomalous or a new trend. If we are correct that the industry is in the process of stabilizing at trough earnings levels, which equate to 2004’s then record performance, this could produce a base for future growth, stimulating significant upward multiple revaluation with significant capital appreciation potential for the portfolio’s homebuilders shares. We trace the bulk of the Fund’s recent underperformance to last September and October. We elected to hold the generally long-term positions in the homebuilding group. Our view was that with valuations of price earnings multiples of one-third to one-half of the general market, these industry leaders would prove profitable long-term investments because of favorable demographics and consumer earning power.
Consumer confidence after Katrina
The short-term decline in consumer confidence following the Katrina debacle, had a greater impact on the housing market than we at first perceived. A 26% decline in S&P Supercomposite Homebuilding Index from its peak levels in last July through its low point in late October was the initial blow. The Index of builders shares then rallied into January in response to companies’ strong year-end backlogs combined with relatively strong mortgage application data. However, the Supercomposite Index quickly fell from January highs back to the October levels as the seasonal spring selling season did not register improvements in year-end buying patterns. Subsequent to the end of the fiscal period under review here, the sector took another fall during the distress in the equity markets after the new Federal Reserve Chairman Bernanke signaled a hawkish tone on inflation. The weakness in builders also reflects a


6


 

     
Alpine U.S. Real Estate Equity Fund
  (ALPINE LOGO)
 

significant decline in traffic patterns registered in May, with a steep fall in consumer expectations data, as measured by the University of Michigan Consumer Attitudes survey. Although not as bleak as the post-Katrina months, the survey levels are lower than the months surrounding the March, 2003 invasion of Iraq. We had been expecting the weaker demand as adjustment of homebuyer expectations from paying the offered price or higher to revert towards a normal bid offer spread of about 5%–10%. However, during the month of May general economic uncertainty pushed many potential buyers to the sidelines. This meant that some move-up buyers could not sell their old home to buy another, so sales slowed and inventories sat on the market longer, inflating perceived supply overhang. So far, this is a normal cooling cycle, but the precipitous fall in May bears watching.
Balance sheet strengths
In our discussions with many of the builders, it is clear that there are effectively two camps in terms of response to the recent decline in activity. Those builders with strong balance sheets and confidence in their land positions and their competitive product are generally holding the line on pricing. Builders with more extended balance sheets, higher totals of completed homes with no buyers (so called spec inventory) have felt compelled to reduce prices or offer upgraded features and finishes in order to move their product. Most of the public builders, however, have balance sheet strength to weather an extended period of slow sales and have focused on aligning
their land inventories and community opening schedules with the current sales pace trends.
Our view is that the housing market will stabilize either in the early Fall or by the first quarter of next year, in response to both a combination of the Federal Reserve’s culmination of interest rate increases and better clarity on home price trends. We do not expect nationwide prices to drop after forced sellers, such as speculative investors, are cleared from the market place. This summer may represent an optimum time to be a home buyer in soft markets. Indeed, if we are correct that home prices do stabilize at or near current levels over the next few months, then we would expect to see significant multiple expansion and thus price appreciation of the homebuilding stocks as the market will be investing with an eye toward revenue and earning growth over the following few years. The only caveat to our forecast would be the unlikely event of a recession in the next 12 months.
To summarize, we believe the portfolio offers significant value and dramatic upside potential. The portfolio is built for economic growth and is positioned to benefit from a more “neutral’’ Federal Reserve policy. Fears of inflation appear overblown, as are concerns of a severe slowdown. We very much appreciate your support through this volatile period.
Sincerely,
Samuel A. Lieber
Portfolio Manager


 
Past performance is no guarantee of future results.    
 
Because the Fund concentrates its investments in the real estate industry, the portfolio may experience more volatility and be exposed to greater risk than the portfolios of many other 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.    
 
The MS Reit Index is a capitalization-weighted benchmark index of the most actively traded real estate investment trusts (REITs), designed to measure real estate equity performance. Standard and Poor’s Supercomposite Hotels Index is a market capitalization-weighted performance index of listed lodging and cruise line companies. Standard and Poor’s Supercomposite Homebuilding Index is a market capitalization weighted performance index of publicly traded homebuilding companies. One cannot invest directly in an index.    
 
Cash flow measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income. Book value is the net asset value of a company, calculated by subtracting total liabilities from total assets. Return on Equity is a measure of a corporation’s profitability.    

7


 

(ALPINE LOGO)
(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 Returns as of 4/30/06 (Unaudited)
                                         
                                    Since Inception
    6 Months(1)   1 Year   3 Year   5 Year   (12/29/1998)
 
Alpine Realty Income & Growth Fund
    15.68 %     22.39 %     26.27 %     21.68 %     20.16 %
 
Morgan Stanley REIT Index
    15.56 %     26.77 %     28.50 %     20.75 %     17.26 %
 
S&P500 Index
    9.64 %     15.42 %     14.68 %     2.70 %     2.30 %
 
Lipper Real Estate Funds Average
    16.20 %     26.70 %     28.49 %     20.66 %     17.41 %
 
Lipper Real Estate Fund Rank
    N/A (1)     191/243       127/165       37/128       5/92  
 
 
(1)   Not annualized. The NASD does not recognize rankings for less than one year.

8


 

     
Alpine Realty Income & Growth Fund
  (ALPINE LOGO)
 
(PIE CHART)
Commentary
 

The Alpine Realty Income & Growth Fund produced a total return of 15.68% during the six-month period that ended April 30, 2006. Net asset value per share increased to $24.58 from $21.11. The Fund made a quarterly income distribution of $.225 and a long term gain distributions of $.3001 on December 22, 2005 and another $.21 income distribution on March 27, 2006. The Fund’s performance compares to the 15.56% return of the Morgan Stanley REIT Index (“RMS Index’’) and the 9.64% return of the S&P 500 Index (“S&P’’). Since its inception on December 29, 1998 through April 30, 2005, the Fund has produced a cumulative total return to shareholders of 284.53%, which equates to a 20.39% 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 RMS Index and the S&P.
The returns delivered by REIT securities during the semi-annual period represent a continuance of the strong performance for the group since early 2000. In our view, the latest period of returns were driven by improving property level fundamentals, continued large capital flows into the real estate asset class, and some liquidity fueled speculative influences, all of which drove valuation measures through historic record levels. It is the improving property fundamentals which we will discuss first in this report.
Strength in economy drives improvements in real estate fundamentals
In particular, strength in the U.S. economy, reflected in both employment gains and increased corporate spending, continued to drive improvements in the commercial real estate markets during the period. Though GDP growth dipped to a 1.7% rate in the fourth quarter of 2005, the economy rebounded and demonstrated above trend expansion during the first three months of 2006 (+4.8%). Companies added nearly 600,000 jobs during the first quarter and continued to increase their utilization of office property and warehouse/distribution facilities. During the same time, the consumer remained resilient. Despite elevated energy costs and diminished refinancing opportunities, consumer spending stayed at levels higher than most pundits anticipated and consumer confidence, as measured by the Conference Board, trended steadily higher reaching 109.6 in April 2006, its highest level since May 2002. While we anticipate that the past months’ higher interest rates, energy costs, and international tensions will ultimately impact confidence and spending, consumer behavior has to date kept retailers healthy and retail property owners prosperous. Meanwhile, apartment landlords have benefited from improved demand for their rentals, driven by relatively high levels of employment and decreasing home affordability. Finally, with land costs elevated by residential demand, material costs increased by surging commodity costs, and labor

9


 

Alpine Realty Income & Growth Fund
  (ALPINE LOGO)
 

availability pressured, new supply growth for most property types remains constrained and significantly below average levels. As a result, the commercial real estate recovery that began on the east and west coasts is now evident in many markets across the country and is occurring in virtually every property type.
Office market occupancies continued their improvement with national vacancy rates declining for the eighth straight quarter to approximately 13.6% as of March 31, 2006, down from 13.9% at the end of 2005 and 16.0% at the end of 2004 according to CB Richard Ellis. Landlords, particularly in the strongest markets of southern California, metropolitan Washington, D.C., and New York City where overall vacancy rates are below 10% (and significantly lower for Class A space), have regained pricing power and are reducing concessions and increasing asking rents. After years of experiencing declines in revenues when each successive lease that was written during earlier boom years was renewed or released at lower rents, the inflection point for landlords achieving prospective cash flow growth is finally at hand in numerous markets. Though many regions continue to face challenging conditions and several office REITs still have embedded rent rolldowns in their portfolios, improving fundamentals helped office-owning REIT entities to produce above average relative returns during the semi-annual period. The Fund’s holdings in Boston Properties (+29.59%) and Vornado Realty Trust (+21.45%) achieved the strongest results, followed by Reckson Associates (+18.41%) and Maguire Properties (+15.93%), all benefiting from their east and west coast concentrations and Boston Properties benefiting from inclusion in the S&P on the last day of March.
Industrial real estate is also benefiting from increased tenant demand. Though particular strength is occurring in regions tied to global trade, including submarkets in Los Angeles and New Jersey, national vacancy rates reflect tightening market conditions with rates having decreased from 10.7% as of March 31, 2005 to 9.9% as of the end of the first quarter of 2006 according to CB Richard Ellis. Corporations are interested in improving their supply chain management and this continues to provide new investment and/or fee opportunities for companies able to deliver new facilities both in the U.S. and internationally for their customers. The Fund’s two industrial REIT holdings, ProLogis and AMB Property, are gaining a significant source of earnings growth from developing modern distribution facilities in Europe, Mexico, and Asia where development margins tend to be wider than in the U.S. Using local development partners, these companies are building
new warehouses, contributing such facilities into funds in which they maintain a minority interest, and then deriving asset management and other additional fee income. In the latest period, ProLogis and AMB produced total returns of 18.71% and 15.19%, respectively.
Operating fundamentals for retail properties remained solid during the latest period, though stock performances of retail landlords were mixed. Despite positive low double-digit percentage releasing spreads, historically low tenant bankruptcies, and healthy demand from new retailing concepts, regional mall owning companies’ returns, on average, lagged broader REIT indices during the period, outperforming through the end of 2005 but then not keeping pace with overall REIT averages as well as their shopping center brethren through the end of the period. While the Fund’s two largest shopping center owning company investments, Developers Diversified and Kimco Realty, delivered very strong results of 24.52% and 27.69%, respectively, the returns of the Fund’s significant regional mall focused holdings, Simon Property Group (+16.49%), General Growth Properties (+12.43%), The Macerich Company (+16.24%), CBL Associates (+9.67%), and The Mills Corp. (-38.87%) on average held back overall Fund results. Mills accounted for the largest singular negative impact on overall performance during the period. Market uncertainty regarding Mills’ control of its complicated financial structure and ambitious development pipeline pushed Mill’s stock valuation significantly below what we believe is the inherent value of its real estate.
Lodging fundamentals remained robust during the period as the recovery that was led two years ago by leisure demand is now being propelled by the individual business traveler and group segments. Revenue per available room (“REVPAR’’), after gaining over 10% in the 4th quarter of 2005, continued at a 9.7% pace in the first quarter of 2006 and, with occupancies in general having already recovered, most of the REVPAR improvement is coming from achieving higher rates. As a result, hotel companies are gaining strong operating margin growth and thereby profitability, as reflected by Starwood Hotels’ 300 basis points and Marriott’s 230 basis points of year-over-year operating margin improvement for their respective North American hotel portfolios in the first quarter of 2006. With limited new competitive supply additions on the horizon, hotel companies remain bullish about business prospects for 2006 and into 2007. During the period, exceptional returns were delivered by the Fund’s lodging REIT holdings. Felcor Lodging Trust, buoyed by continued strength in


10


 

Alpine Realty Income & Growth Fund
  (ALPINE LOGO)
 

markets benefiting from hurricane displaced business such as Houston, returned 47.58% while DiamondRock Hospitality, Sunstone Hotel Investors, and Host Hotels & Resorts (formerly Host Marriott) returned 32.07%, 31.1%, and 26.82%, respectively. Also providing positive results were the Fund’s larger non-REIT lodging investments including Starwood (+23.95%), Hilton Hotels (+38.99%), and Marriott (+22.94).
The apartment sector had perhaps the strongest acceleration in operating fundamentals of all the property types. While the California, Washington, D.C., New York, and southern Florida markets have been strong for some time, numerous other markets across the nation have rebounded as nationwide employment picks up, allowing landlords to increase occupancies, reduce concessions, and obtain higher rents. United Dominion Realty, an owner of a national portfolio of properties, reported positive net operating income growth in the first quarter of 2006 in 25 of 32 markets in which it operates and 6.6% growth overall. During the semi-annual period, United Dominion returned 25.77% while other owners of national portfolios, Equity Residential and Apartment Investment & Management, returned 16.71% and 20.04%, respectively. Apartment company investments with more geographically focused portfolios also had strong quarters with BRE Properties (+24.67%), Archstone-Smith Trust (+22.91%), Essex Properties (+23.39%), and Home Properties (+32.51%) all delivering exceptional returns.
Merger & privatization activity remains robust
While improving fundamentals in the apartment and other property sectors played a very significant role in driving REIT returns, investor speculation regarding takeover and privatization activity also clearly contributed, in our view, to many stock valuations reaching record levels. As we wrote about in our October 31, 2005 report, the abundance of both debt and equity capital has led to a very active market for public real estate company mergers and privatizations. During 2005, ten separate transactions aggregating over $31 billion in total value were announced, with eight of the ten transactions being privatizations, typically at minimum mid-teens premiums to pre-announcement trading prices, and five of those occurring within a relatively condensed 60 day period at the end of the year. As a result, rumor and speculation regarding the next potential candidates gained momentum at the end of 2005 and carried into 2006. Such speculative buying only increased as one of the late 2005 transactions, the privatization of an apartment REIT, Town & Country Trust, led by
Onex Real Estate and a Morgan Stanley fund, became subject to a bidding war. That price competition ended two months later in February 2006 after the initial takeout price was pushed up by an additional 18.6%. Five more transactions (four going-private, one public to public company merger) aggregating an additional $20.9 billion were announced from January 30, 2006 through March 21, 2006. Thus, the real estate securities market, already responding to a positive fundamental improvement story, had a continual supply of new fuel to keep the return fire burning bright! Stocks benefited from takeover proceeds being recycled back into other real estate companies as well as new capital chasing the momentum and takeover activity in the group. Meanwhile, the Fund benefited from the privatizations of its holdings in Arden Realty, La Quinta Corp., and Town & Country Trust and the public company purchase of Prentiss Properties.
The active merger and acquisition market in real estate stocks is noteworthy on several levels. First, it speaks towards managements’ belief that the premium prices that private capital is willing to pay are significantly in excess of what that companies might be able to achieve and sustain in the public market in the foreseeable future. Indeed, common elements of several of the target REITs were below average earnings growth rates and low probabilities of raising or even covering their dividend distributions with operating cash flow in the near term. We also believe managements inevitable saw, in some instances, opportunities to (i) be free from Sarbanes-Oxley restrictions, (ii) have higher incentive compensation structures than the public markets might allow, and (iii) avoid the intense quarterly results spotlight of the public market. Meanwhile, private capital saw opportunities to buy a collection of assets, harvest some value immediately, be patient with other assets, and focus on maximizing total returns without regard to pleasing the Street with regard to quarterly earnings targets.
The privatization activity also speaks to the capital advantage which private funds have had and continue to have relative to public REITs and the potential impact this phenomenon might have on the size of the public REIT market. In the 1990s, companies operating in the public markets had a significantly lower cost of capital than their more liquidity constrained private market constituents. As a result, public companies used that advantage to be active acquirers of assets from the private market and many companies entered the public market through IPOs. In contrast, today private entities not only have huge stockpiles of institutional equity, looking to add real


11


 

Alpine Realty Income & Growth Fund
  (ALPINE LOGO)
 

estate to their portfolios for yield and diversification benefits, but also have the ability to use significantly higher levels of debt than the public markets afford REIT entities. With debt capital priced at historically low levels, private entities clearly are experiencing cost of capital advantages. As a result, these entities have been willing to pay premium prices for individual properties as well as collections of assets, including entire public companies. Numerous public REITs, priced out of the acquisition markets and thereby unable to grow earnings through asset base expansion, have sold individual assets or decided to exit the public market entirely.
Private market transactions impacting public real estate pricing
Meanwhile, such private market valuations have provided the catalysts as well as the support for current public real estate pricing. Although private pricing is itself occurring at historically low expected initial returns/yields, public market investors have taken comfort in the notion that the private bid for assets and/or companies provides at worst a floor for premium pricing in the public markets and at best a higher bid. Ignoring the private market bid and the huge wave of private capital to be placed in the asset class, public REIT pricing is extended versus all traditional measures—comparisons to fixed income alternatives, comparisons to equity alternatives, and comparisons to historic REIT metrics. In a report dated April 28, 2006, Merrill Lynch noted that REIT dividend yields compared to (i) the 10 year Treasury rate, (ii) the U.S. Corporate BBB bond yield, (iii) the S&P 500 dividend yield, and (iv) the S&P utility dividend yield, all reflected near record low comparisons over the past 12+ years. Relative to equities, Merrill noted that REIT Adjusted Funds From Operations (“AFFO’’) multiples were also close to a record month end high and an all-time premium to S&P earnings multiples.
Historic Comparisons—December 1993 to April 2006
                 
    Average   April 30, 2006
Avg. REIT AFFO Multiple
    12.46 x     21.9 x
 
               
Avg, REIT AFFO Multiple vs. S&P 500 Multiple
    .73 x     1.47 x
 
               
Avg. REIT Dividend
    6.55 %     4.19 %
 
               
Avg. REIT Dividend vs. 10 Yr. Treasury
  +111 bps   –90 bps
 
               
Avg. REIT Dividend vs. US Corp. BBB Yield
  –75 bps   –232 bps
 
               
Avg. REIT Dividend vs. S&P 500 Dvd. Yield
  474 bps   234 bps
Source: Merrill Lynch
Since its peak on March 17, 2006 through the end of the semi-annual period on April 30th, the RMS Index has retreated –5.35%. Nevertheless, the group continues to trade at lofty levels. Indeed, it remains uncertain whether pricing and return requirements in the private market will adjust to an elevated yield curve that raises both financing rates and alternative yield options. A significant amount of capital continues to try to enter the real estate asset class and advisory firms have not been in the habit of returning capital after it has been raised. Additionally, operating fundamentals continue to improve at the best pace in five to six years and commodity price increases push building replacement costs higher. Yet we believe that public market participants have become somewhat complacent about the inevitability of the private market bid. With Corporate BBB-rated long term obligations yielding nearly 6%, some private market participants may reanalyze their interest, particularly in the lowest yielding property types such as apartments which have traded as low as a 4-4.50% first year return, thereby requiring 8% compounded annual growth for over five years to reach today’s less risky BBB yield.


12


 

Alpine Realty Income & Growth Fund
  (ALPINE LOGO)
 

Given current strong operating fundamentals but lofty pricing, we will continue to construct the Fund portfolio with a mix of income and growth opportunities. It continues to be our belief that rising rates will put a cap on any significant further appreciation, particularly for those sectors trading at the lowest capitalization rates as well as those entities without prospects for healthy dividend growth. As stated in earlier reports, we believe lodging and select office companies should continue to benefit from positive supply/demand imbalances and maintain less negative correlation with any rise in interest rates in
the short term. Additionally, we will continue to monitor the impact on the consumer from rising oil prices, interest rates, and international tensions. We look forward to reporting to you after the end of the fiscal year.
Sincerely,
Robert W. Gadsden
Portfolio Manager


 
Because the Fund concentrates its investments in the real estate industry, the portfolio will experience more volatility and be exposed to greater risk than the portfolios of many other mutual funds.
 
Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities.
 
Please refer to the schedule of portfolio investments for fund holding information. Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security.
 
Cash flow measures the cash generating capability of a company by adding non-cash charges (e.g. depreciation) and interest expense to pretax income.
 
A basis point is a value equaling one one-hundredth of a percent (1/100 of 1%).
 
Securities rated “BBB’’ by S&P rating agency represent obligations which are subject to moderate credit risks.

13


 

(ALPINE LOGO)
(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 Returns as of 4/30/06 (Unaudited)
 
                                                 
                                            Since Inception
    6 Months(1)   1 Year   3 Year   5 Year   10 Year   (2/1/1989)
 
Alpine International Real Estate Equity Fund
    26.60 %     35.76 %     39.66 %     25.02 %     12.30 %     9.30 %
 
S&P/Citigroup World (ex U.S.) Property Index
    26.51 %     36.99 %     40.88 %     21.70 %     9.10 %     7.31 %
 
GPR General Property Securities Global Index
    20.74 %     28.09 %     31.03 %     20.23 %     9.26 %     7.07 %
 
MSCI EAFE Index
    21.60 %     30.58 %     26.21 %     6.88 %     4.79 %     4.43 %
 
Lipper Real Estate Funds Average
    16.20 %     26.70 %     28.49 %     20.66 %     11.43 %     11.43 %
 
Lipper Real Estate Fund Rank
    N/A (1)     6/243     4/165     7/128     34/35       3/3
 
 
(1)   Not annualized. The NASD does not recognize rankings for less than one year.

14


 

Alpine International Real Estate Equity Fund
  (ALPINE LOGO)
 
(PIE CHART)
Commentary
 

Trend of outperformance
We are pleased to report that for the six months ended April 30, 2006, the Alpine International Real Estate Equity Fund produced a total return of 26.60%, exceeding both the S&P Citigroup World ex U.S. Property Index and the GPR General Property Securities Global Index. We should point out that this performance continues the five-year trend of outperformance versus the Lipper Fund Average, which has been most prominent during the past three years as international stock markets in general have outperformed the domestic equity market. Subsequent to the end of the semi-annual period, global equity markets saw significant reversals during the month of May through early June, enabling the Fund to do a little “bottom fishing’’. Even though many of the Fund’s holdings saw depreciation of value during this period, it was in fact emerging markets equities, among which we have relatively limited exposure, that suffered the greatest losses. Many stocks which we believed were expensive six to twelve months ago, became even more so as momentum oriented international and emerging market funds bid their share prices higher. Now, many of these stocks have pulled back by 30% to 50% providing attractive entry points for investors more closely attuned to underlying real estate values.
A commonality among this Fund’s holdings is Alpine’s equal emphasis on small and mid-size companies along with larger ones. At this stage of the business/real estate cycle, we are focused on both undervalued stocks and companies with strong growth prospects.
This emphasis is evident in our five largest holdings as follows:
(1) JM is the leading builder of high-end condominiums in Stockholm, and active throughout Sweden as well as other Scandinavian markets. The company’s combination of financial discipline and risk management has enhanced their ability to grow market share. JM shares remain one of the cheapest builders in Europe.
(2) Orient-Express Hotels is a leading luxury boutique hotel chain. See its description among the top holdings of the Alpine U.S. Real Estate Equity Fund.
(3) Far East Consortium is a developer/operator of hotels in Hong Kong, of residential communities in Shanghai, as well as hotels and service apartments on the Cotai Strip in Macaw. The company is also developing the Las Vegas Sands’ convention center and retail mall in Cotai.
(4) Sino Land is a major residential developer in Hong Kong. Sino has also retained a major retail/office/hotel complex along the Kowloon waterfront which might one day form the core of a REIT.
(5) Citycon is the dominant Finnish shopping center owner in the process of expanding throughout the Baltic region. If and when REITs are adopted by Finland, Citycon will be ready.
Property type distribution was consistent with recent trends in the portfolio. Residential property continues to be the key area of our focus. However, exposure to this segment declined from 44% to 41% as continued cyclical outperformance of other property types is less likely over the next few years. Lodging

15


 

Alpine International Real Estate Equity Fund
  (ALPINE LOGO)
 

stocks on the other hand were expanded from roughly 16% to about 19% of the portfolio. In both cases, we expect this trend to continue to evolve. Retail holdings of 18% and office exposure of 12% were stable, but we expect them to shift over time.
Geographic diversification
There were few dramatic changes in the portfolio overall, although the Asian portion of the portfolio declined to 26.7% (down roughly 3%), primarily reflecting a 3.7% reduction in exposure to Hong Kong which in itself was still relatively heavily weighted at 9.6%. Europe was reduced from 45.1% to 38.3% of the portfolio, with notable reductions in Sweden (-3%) and France (-1.8%). The United Kingdom continued to be a large portion of the portfolio at 14.7% in comparison with 12.6% last October. The Fund’s North and South American exposure increased from 24% to over 28%, reflecting notably the Fund’s adding 2.4% to its weighting in Bermuda-based Orient Express Hotels, an American listed global portfolio of boutique luxury hotels, which generate 70% of its revenues from abroad. Over one-third of the U.S. weighting of 15.5% represents large global hotel companies, such as Hilton, Marriott and Starwood, which we believe are going to significantly increase their international exposure over the next two to three years. It is worth noting that the Fund’s cash position grew from approximately 1% last October to over 7% as of April, which reflected our caution with regard to market valuations. Subsequent to the quarter, we took advantage of falling share prices and put a significant amount of the cash position to work.
The calendar year-to-date has seen significant increase in the number of initial offerings of real estate companies in both Europe and Asia. This includes REITs, real estate operating companies, real estate management companies and real estate developers. We expect that many of these companies will fully justify their valuations and provide meaningful growth opportunities. However, there are a number of companies which we suspect will not meet investor expectations. Caveat Emptor is key to assessing the business plan, assets and capacities of such companies.
A review of the performance of different country’s real estate markets and real estate securities sectors over the past six months, reveals that the greatest strength was in markets where growth could be perceived as sustainable over the next few years. Indonesia was particularly strong, up over 45% during this period. We have returned into that market with small initial investments for the first time in almost a decade. The sector was depressed for nearly eight years, showing an initial stock recovery in 2004 but little fundamental improvement until the past year. Shanghai was up over 42% in part reflecting the perceived dynamic growth potential of China. However, we should caution that the Price to Earnings multiples for many China based property developers expanded from a range of 5 to 8 times to roughly 12 to 20 times, which may be excessive. Germany and Japan also performed well, rising over 36% and greater 34%, respectively. In both cases, these countries have experienced 10 year plus periods of languid growth and thus the market seems to be betting that a broad-based global economic recovery will lift these countries economies and thus their depressed real estate markets to higher levels over the next three to five years. Rounding out the top five, the U.K. property sector surged over 31% in anticipation of the creation of REIT statutes which will be adopted at the beginning of 2007.
Economic growth
The recent pullback in the market hit some of these countries harder than others. However, it is central to focus on the underlying theme of economic growth as a broad driver of real estate rents and values. We believe this trend plus the addition of REITs as another avenue for investors to participate in real estate capital markets and for companies to tap real estate investment demand should continue to drive the performance of real estate stocks abroad for a considerable period of time to come.
Amid this period of continual evolution of the international public real estate securities markets, we look forward to providing an updated overview in our annual report.
Sincerely,
Samuel A. Lieber
Portfolio Manager


 
The Fund invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. Because the Fund concentrates its investments in the real estate industry, the portfolio may experience more volatility and be exposed to greater risk than the portfolios of many other 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. The Price to Earnings (P/E) Ratio reflects the multiple of earnings at which a stock sells, and is calculated by dividing current price of the stock by the company’s trailing 12 months’ earnings per share.

16


 

Alpine Mutual Funds — U.S. Real Estate Equity Fund
 
Schedule of Portfolio Investments
April 30, 2006 (Unaudited)

                 
Shares/     Security      
Par Value     Description   Value  
Real Estate Investment Trusts—21.7%        
Lodging—13.8%        
  1,289,500    
DiamondRock Hospitality Company (Cost $13,147,180, Acquired— Various Dates) (c)
  $ 18,452,745  
  750,000    
DiamondRock Hospitality Company
    10,732,500  
  983,000    
Highland Hospitality Corporation
    12,680,700  
  550,000    
Sunstone Hotel Investors, Inc.
    15,807,000  
       
 
     
       
 
    57,672,945  
       
 
     
Mortgage & Finance—2.9%        
  325,600    
Deerfield Triarc Capital Corp.
    4,343,504  
  146,800    
Impac Mortgage Holdings, Inc.
    1,394,600  
  568,000    
MortgageIT Holdings Inc.
    6,520,640  
       
 
     
       
 
    12,258,744  
       
 
     
Retail—5.0%        
  63,000    
Alexander’ s, Inc. (a)
    17,592,750  
  103,700    
TheMills Corp.
    3,309,067  
       
 
     
       
 
    20,901,817  
       
 
     
       
Total Real Estate Investment Trusts
    90,833,506  
       
 
     
Common Stocks—88.8%        
Diversified—3.9%        
  926,000    
Cendant Corporation
    16,140,180  
       
 
     
Homebuilders—55.1%        
  228,966    
Brookfield Homes Corporation
    10,669,816  
  291,628    
Comstock Homebuilding Companies, Inc. Class A (a)
    2,717,973  
  207,666    
D.R. Horton, Inc.
    6,234,133  
  859,000    
Fleetwood Enterprises, Inc. (a)
    8,074,600  
  500,100    
Hovnanian Enterprises, Inc.— Class A (a)
    19,888,977  
  350,000    
KB HOME
    21,549,500  
  450,800    
Lennar Corporation—Class A
    24,762,444  
  341,333    
M.D.C.Holdings, Inc.
    19,722,221  
                 
Shares/     Security      
Par Value     Description   Value  
Common Stocks—continued        
  300,200    
Meritage Homes Corporation (a)
  $ 19,687,116  
  245,200    
Orleans Homebuilders, Inc.
    5,080,544  
  570,000    
Pulte Homes, Inc.
    21,289,500  
  690,000    
Standard Pacific Corp.
    21,879,900  
  1,219,175    
Technical Olympic USA, Inc.
    25,602,675  
  739,600    
Toll Brothers, Inc. (a)
    23,778,140  
       
 
     
       
 
    230,937,539  
       
 
     
Lodging—21.9%        
  525,675    
Great Wolf Resorts, Inc. (a)
    5,756,141  
  956,200    
Hilton Hotels Corporation
    25,760,028  
  1,516,360    
Interstate Hotels & Resorts, Inc. (a)
    8,567,434  
  725,300    
Orient-Express Hotels Ltd.—
       
       
   Class A (b)
    29,737,300  
  380,200    
Starwood Hotels & Resorts
       
       
   Worldwide, Inc.
    21,815,876  
       
 
     
       
 
    91,636,779  
       
 
     
Retirement Community—4.3%        
  490,000    
Sunrise Senior Living, Inc.(a)
    18,228,000  
       
 
     
Transportation—3.6%        
  267,500    
Florida East Coast Industries, Inc.
    14,953,250  
       
 
     
       
Total Common Stocks
  $ 371,895,748  
       
 
     
Short-Term Investments—0.0%        
  150    
Fidelity Institutional Government Portfolio
    150  
       
 
     
       
Total Short-Term Investments
    150  
       
 
     
       
Total Investments (Cost $426,595,044)—110.5%
    462,729,404  
       
Liabilities, less Other Assets— (10.5)%
    (43,847,425 )
       
 
     
       
TOTAL NET ASSETS—100.0%
  $ 418,881,979  
       
 
     


 
(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.

17


 

Alpine Mutual Funds — Realty Income & Growth Fund
 
Schedule of Portfolio Investments
April 30, 2006 (Unaudited)

                 
Shares/     Security      
Par Value     Description   Value  
Real Estate Investment Trusts—82.3%        
Apartments—11.8%        
  136,900    
Apartment Investment & Management Company— Class A
  $ 6,118,061  
  227,500    
Archstone Smith Trust
    11,120,200  
  218,000    
BRE Properties, Inc.
    11,745,840  
  431,700    
Equity Residential
    19,370,379  
  69,000    
Essex Property Trust, Inc.
    7,527,900  
  106,900    
Home Properties, Inc.
    5,347,138  
  94,300    
Mid-America Apartment Communities, Inc.
    4,997,900  
  116,700    
Post Properties, Inc.
    5,098,623  
  631,000    
United Dominion Realty Trust, Inc.
    17,156,890  
       
 
     
       
 
    88,482,931  
       
 
     
Diversified—5.0%        
  752,400    
Crombie Real Estate Investment Trust (b)
    7,368,883  
  315,900    
Vornado Realty Trust
    30,212,676  
       
 
     
       
 
    37,581,559  
       
 
     
Health Care—4.3%        
  148,700    
Health Care REIT, Inc.
    5,174,760  
  511,000    
Omega Healthcare Investors, Inc.
    6,535,690  
  219,300    
Senior Housing Properties Trust
    3,765,381  
  586,300    
Sunrise Senior Living Real Estate Investment Trust (b)
    6,423,840  
  80,700    
Universal Health Realty Income Trust
    2,595,312  
  235,600    
Ventas, Inc.
    7,697,052  
       
 
     
       
 
    32,192,035  
       
 
     
Lodging—13.1%        
  1,494,600    
DiamondRock Hospitality Company
    21,387,726  
  677,000    
FelCor Lodging Trust,Inc.
    14,657,050  
  96,350    
Hospitality PropertiesTrust
    4,152,685  
  1,224,738    
Host Hotels & Resorts Inc.
    25,743,993  
  501,700    
Innkeepers USA Trust
    8,037,234  
  292,100    
Strategic Hotels & Resorts, Inc.
    6,624,828  
  611,200    
Sunstone Hotel Investors, Inc.
    17,565,888  
       
 
     
       
 
    98,169,404  
       
 
     
Mortgage & Finance—3.9%        
  627,600    
iStar Financial Inc.
    24,011,976  
  246,300    
Newcastle Investment Corporation
    5,519,583  
       
 
     
       
 
    29,531,559  
       
 
     
Net Lease—2.8%        
  522,200    
Entertainment Properties Trust
    21,342,314  
       
 
     
Office—Industrial Buildings—19.2%        
  263,300    
Alexandria Real Estate Equities, Inc.
    23,854,980  
  273,900    
AMB Property Corporation
    13,692,261  
  326,600    
Boston Properties, Inc.
    28,828,982  
  316,916    
Brandywine Realty Trust
    8,971,892  
                 
Shares/     Security      
Par Value     Description   Value  
Real Estate Investment Trusts—continued        
Office—Industrial Buildings—continued        
  475,883    
Equity Office PropertiesTrust
  $ 15,371,021  
  46,600    
Mack-Cali Realty Corporation
    2,107,252  
  303,200    
Maguire Properties, Inc.
    10,296,672  
  364,800    
ProLogis
    18,320,256  
  554,500    
Reckson Associates Realty Corporation
    22,557,060  
       
 
     
       
 
    144,000,376  
       
 
     
Retail Centers—22.2%        
  415,900    
CBL & Associates Properties, Inc.
    16,631,841  
  476,726    
Developers Diversified Realty Corporation
    25,361,823  
  555,200    
General Growth Properties,Inc.
    26,066,640  
  414,000    
Kimco Realty Corporation
    15,371,820  
  305,500    
The Macerich Company
    22,368,710  
  600,080    
The Mills Corp.
    19,148,553  
  85,200    
Ramco-Gershenson Properties Trust
    2,302,956  
  398,200    
Simon Property Group, Inc.
    32,604,616  
  164,500    
Taubman Centers, Inc.
    6,767,530  
       
 
     
       
 
    166,624,489  
       
 
     
       
Total Real Estate Investment Trusts
    617,924,667  
       
 
     
Common Stocks—9.2%        
Homebuilders—1.1%        
  86,500    
Hovnanian Enterprises, Inc.— Class A (a)
    3,440,105  
  165,400    
Standard Pacific Corp.
    5,244,834  
       
 
     
       
 
    8,684,939  
       
 
     
Lodging—8.1%        
  46,500    
Four Seasons Hotels, Inc.
    2,511,930  
  441,300    
Hilton Hotels Corporation
    11,888,622  
  170,400    
Marriott International, Inc.— Class A
    12,451,128  
  586,800    
Starwood Hotels & Resorts Worldwide, Inc.
    33,670,584  
       
 
     
       
 
    60,522,264  
       
 
     
       
Total Common Stocks
    69,207,203  
       
 
     
Preferred Stocks—2.1%        
Apartments—0.1%        
  37,700    
Apartment Investment & Management Co., Series T, 8.000%
    948,532  
       
 
     
Health Care—0.1%        
  38,400    
Omega Healthcare Investors, Inc., Series D, 8.375%
    986,880  
       
 
     
Lodging—0.7%        
  171,400    
FelCor Lodging Trust, Inc. Series C, 8.000%
    4,202,728  
  26,400    
Winston Hotels, Inc., Series B, 8.000%
    652,080  
       
 
     
       
 
    4,854,808  
       
 
     


See notes to financial statements.

18


 

Alpine Mutual Funds — Realty Income & Growth Fund
 
Schedule of Portfolio Investments—Continued
April 30, 2006 (Unaudited)

                 
Shares/     Security      
Par Value     Description   Value  
Preferred Stocks—continued        
Mortgage & Finance—0.3%        
  29,700    
Anthracite Capital, Inc., Series C, 9.375%
  $ 758,835  
  57,100    
Novastar Financial, Inc. Series C, 8.900%
    1,376,110  
       
 
     
       
 
    2,134,945  
       
 
     
Office—Industrial Buildings—0.9%        
  36,700    
Digital Realty Trust, Inc. Series A, 8.500%
    928,143  
  278,000    
Prime Group Realty Trust, Series B, 9.000%
    5,504,400  
       
 
     
       
 
    6,432,543  
       
 
     
       
Total Preferred Stocks
    15,357,708  
       
 
     
                 
Shares/     Security      
Par Value     Description   Value  
Short-Term Investments—6.5%        
  26,798,000    
Alpine Municipal Money Market
  $ 26,798,000  
  21,862,261    
Fidelity Institutional Government Portfolio
    21,862,261  
  461,676    
Federated Government Obligations Fund
    461,676  
       
 
     
       
Total Short Term Investments
    49,121,937  
       
 
     
       
Total Investments (Cost $590,722,540)—100.1%
    751,611,515  
       
Liabilities, less Other Assets— (0.1)%
    (630,902 )
       
 
     
       
TOTAL NET ASSETS—100.0%
  $ 750,980,613  
       
 
     


 
(a)   Non-income producing securities
 
(b)   Foreign security
See notes to financial statements.

19


 

Alpine Mutual Funds – International Real Estate Equity Fund
 
Schedule of Portfolio Investments
April 30, 2006 (Unaudited)

                 
Shares/     Security      
Par Value     Description   Value  
Common Stocks—93.2%        
Asia—26.7%        
Australia—0.3%        
  250,000    
Mirvac Group
  $ 803,437  
  70,000    
Westfield Group
    900,381  
       
 
     
       
 
    1,703,818  
       
 
     
       
 
       
Hong Kong— 9.6%        
  30,000,000    
Far East Consortium International Limited
    13,349,155  
  4,800,000    
The Hongkong & Shanghai
    5,571,821  
  1,675,000    
Hysan Development Company Limited
    4,817,626  
  400,000    
Kowloon Development Company Limited
    701,637  
  17,756,000    
Midland Holdings Limited
    10,305,547  
  8,201,600    
New World China Land Limited
    3,940,381  
  7,000,000    
Pacific Century Premium Developments Limited
    2,211,961  
  1,822,000    
Shangri-La Asia Limited
    3,231,205  
  10,000,000    
Silver Grant International Industries Ltd.
    3,159,945  
  8,000,000    
Sino Land Company Limited
    13,310,461  
       
 
     
       
 
    60,599,739  
       
 
     
       
 
       
Indonesia—0.1%        
  650,000    
PT Jakarta International Hotels & Development Tbk (a)
    50,313  
  15,000,000    
PT Kawasan Industri Jababeka Tbk
    264,656  
  4,125,000    
PT Summarecon Agung Tbk
    586,938  
       
 
     
       
 
    901,907  
       
 
     
       
 
       
Japan—5.6%        
  200,000    
Daiwa House Industry Co., Ltd.
    3,409,300  
  166,700    
Diamond City Co., Ltd.
    7,920,318  
  100,000    
GOLDCREST Co., Ltd.
    4,970,799  
  1,200,000    
HASEKO Corporation (a)
    4,552,760  
  296    
Japan Retail Fund Investment Corporation
    2,453,994  
  435    
K.K. DaVinci Advisors (a)
    485,180  
  390    
Kenedix Realty Investment Corporation
    2,096,166  
  200,000    
Mitsui Fudosan Co., Ltd.
    4,478,988  
  80,000    
The Sankei Building Co., Ltd.
    675,186  
  23,692    
Sekisui House, Ltd.
    366,829  
  68,600    
Tachihi Enterprise Co., Ltd.
    3,488,289  
       
 
     
       
 
    34,897,809  
       
 
     
       
 
       
Malaysia—0.7%        
  1,000,000    
Eastern & Oriental Berhad
    339,310  
  1,150,700    
KLCC Property Holdings Berhad
    666,613  
  3,203,800    
Landmarks Berhad
    981,026  
  2,000,000    
SP Setia Berhad
    2,063,448  
  500,000    
Sunway City Berhad
    235,862  
       
 
     
       
 
    4,286,259  
       
 
     
       
 
       
Philippines—0.1%        
  13,625,000    
SM Development Corporation
    436,842  
       
 
     
                 
Shares/     Security      
Par Value     Description   Value  
Common Stocks—continued        
Asia—continued        
Singapore—5.7%        
  4,795,425    
Ascendas Real Estate Investment Trust
  $ 6,916,041  
  8,235,000    
Capitacommercial Trust
    9,480,486  
  695,000    
City Developments Limited
    4,440,192  
  2,695,000    
Fortune Real Estate Investment Trust
    2,207,221  
  14,816,600    
Macquarie MEAG Prime REIT
    9,137,950  
  1,197,000    
Raffles Holdings Limited
    526,229  
  3,575,000    
Suntec Real Estate Investment Trust
    2,894,554  
       
 
     
       
 
    35,602,673  
       
 
     
Thailand—4.6%        
  7,035,000    
Amata Corporation Public Company Limited
    4,011,431  
  1,965,000    
Amata Corporation Public Company Limited
    1,120,464  
  3,000,000    
Asian Property Development Public Company Limited
    319,744  
  9,342,300    
Central Pattana Public Company Limited
    4,928,791  
  10,000,000    
CPN Retail Growth Property Fund (a)
    2,877,698  
  178,600    
Dusit Thani Public Company Limited
    214,149  
  16,307,700    
The Erawan Group Public Company Limited
    2,042,264  
  3,930,000    
Lalin Property Public Company Limited
    586,411  
  3,176,000    
Land and Houses Public Company Limited
    715,087  
  2,000,000    
Land and Houses Public Company Limited
    450,306  
  11,760,000    
Land and Houses Public Company Limited
    2,647,802  
  5,000,000    
M.K. Real Estate Development Public Company Limited
    362,377  
  2,500,000    
Major Cineplex Group Public Company Limited
    1,165,734  
  13,666,666    
Minor International Public Company Limited
    4,224,176  
  3,797,400    
Power Line Engineering Public Company Limited
    839,819  
  20,179,100    
Quality House Public Company Limited
    655,969  
  4,040,000    
Saha Pathana Inter-Holding Public Company Limited
    1,883,826  
       
 
     
       
 
    29,046,048  
       
 
     
       
Total Asia
    167,475,095  
       
 
     
       
 
       
Europe—38.3%        
Finland—2.8%        
  2,713,200    
Citycon Oyj
    12,699,299  
  469,000    
Sponda Oyj
    5,029,395  
       
 
     
       
 
    17,728,694  
       
 
     


See notes to financial statements.

20


 

Alpine Mutual Funds – International Real Estate Equity Fund
 
Schedule of Portfolio Investments—Continued
April 30, 2006 (Unaudited)

                 
Shares/     Security      
Par Value     Description   Value  
Common Stocks—continued        
Europe—continued        
France—7.8%        
  98,000    
Accor SA
  $ 6,168,273  
  17,345    
Affine
    2,354,581  
  165,000    
Club Méditerranée SA (a)
    9,794,169  
  9,750,000    
Euro Disney S.C.A. (a)
    1,107,060  
  81,270    
Kaufman & Broad S.A. (a)
    4,818,947  
  126,636    
Nexity
    8,850,972  
  55,919    
Pierre & Vacances
    5,375,741  
  64,350    
Société Immobiliére de Location pour l’Industrie et le Commerce
    7,420,254  
  18,426    
Unibail
    3,210,323  
       
 
     
       
 
    49,100,320  
       
 
     
       
 
       
Greece—1.0%        
  75,000    
Eurobank Properties Real Estate Investment Company (a)
    1,542,314  
  761,380    
Technical Olympic S.A.
    4,725,966  
       
 
     
       
 
    6,268,280  
       
 
     
       
 
       
Guernsey—0.9%        
  141,000    
Eurocastle Investment Limited (a)
    5,407,751  
       
 
     
       
 
       
Italy—0.8%        
  675,790    
Risanamento S.p.A.
    4,876,765  
       
 
     
       
 
       
Netherlands— 0.3%        
  775,000    
Engel East Europe N.V.
    2,225,874  
       
 
     
       
 
       
Norway—2.4%        
  1,090,263    
Block Watne Gruppen ASA (a)
    6,490,082  
  72,281    
Home Invest ASA (a)
    0  
  840,000    
NorGani Hotels ASA (a)
    8,447,414  
       
 
     
       
 
    14,937,496  
       
 
     
       
 
       
Spain—3.9%        
  296,000    
Fadesa Inmobiliaria SA
    10,926,726  
  328,892    
Inmobiliaria Urbis SA
    7,987,448  
  300,000    
NH Hoteles, S.A.
    5,408,509  
       
 
     
       
 
    24,322,683  
       
 
     
       
 
       
Sweden—3.7%        
  296,273    
JM AB
    19,042,699  
  241,200    
Skanska AB—Class B
    4,178,908  
       
 
     
       
 
    23,221,607  
       
 
     
United Kingdom—14.7%        
  100,000    
Barratt Developments plc
    1,808,965  
  100,000    
Bellway p.l.c.
    2,188,264  
  674,000    
Brixton plc
    5,985,594  
  1,845,000    
Dawnay Day Carpathian PLC (a)
    3,583,145  
  8,250,000    
Dawnay, Day Treveria PLC (a)
    12,125,618  
  110,000    
Derwent Valley Holdings plc
    3,161,311  
  142,791    
Grainger Trust plc
    1,393,070  
  250,000    
Hammerson plc
    5,306,539  
  317,500    
Helical Bar plc
    2,200,117  
  220,000    
Land Securities Group plc
    7,437,908  
  520,500    
Millennium & Copthorne Hotels plc
    4,057,656  
                 
Shares/     Security      
Par Value     Description   Value  
Common Stocks—continued        
Europe—continued        
United Kingdom—continued        
  1,400,000    
The Ottoman Fund Limited (a)
  $ 2,974,215  
  120,000    
Persimmon plc
    2,866,625  
  200,000    
Redrow plc
    1,938,437  
  5,049,227    
Regus Group Plc (a)
    10,703,757  
  660,000    
Shaftesbury plc
    6,354,718  
  295,000    
Slough Estates plc
    3,292,243  
  125,000    
St. Modwen Properties Plc
    1,112,367  
  5,700,000    
Trinity Capital Plc (a)
    10,602,137  
  170,059    
Unite Group plc
    1,252,851  
  60,000    
Wilson Bowden plc
    1,714,505  
       
 
     
       
 
    92,060,042  
       
 
     
       
Total Europe
    240,149,512  
       
 
     
       
 
       
North & South America—28.2%        
Argentina—0.9%        
  8    
IRSA Inversiones y Representaciones S.A. (a)
    10  
  437,121    
IRSA Inversiones y Representaciones S.A.— GDR (a)
    5,818,081  
       
 
     
       
 
    5,818,091  
       
 
     
       
 
       
Bermuda—2.8%        
  423,400    
Orient-Express Hotels Ltd.— Class A
    17,359,400  
       
 
     
       
 
       
Brazil—1.3%        
  747,400    
Company SA (a)
    5,880,358  
  15,000    
Cyrela Brazil Realty S.A.—GDR (Acquired 09/21/2005, Cost $980,550) (b)
    2,546,324  
       
 
     
       
 
    8,426,682  
       
 
     
       
 
       
Canada—2.8%        
  150,100    
ClubLink Corporation
    1,343,858  
  390,000    
Crombie Real Estate Investment Trust
    3,819,597  
  1,053,900    
Killam Properties (a)
    2,733,608  
  237,700    
Mainstreet Equity Corp. (a)
    1,620,030  
  300,000    
Mainstreet Equity Corp. (a)
    2,044,631  
  300,000    
Parkbridge Lifestyles Communities, Inc. (a)
    1,495,908  
  250,000    
Sunrise Senior Living Real Estate Investment Trust
    2,739,144  
  150,000    
Sunrise Senior Living Real Estate Investment Trust
    1,643,486  
       
 
     
       
 
    17,440,262  
       
 
     
       
 
       
Mexico—4.9%        
  2,611,300    
Corporacion GEO, S.A. de C.V. (a)
    9,789,278  
  199,900    
Desarrolladora Homex S.A. de C.V.—ADR (a)
    7,660,168  
  1,399,583    
Empresas ICA S.A. de C.V. (a)
    4,360,300  
  8,900,600    
Impulosra del Desarrollo Empleo en America Latina, S.A. de C.V. (a)
    8,749,811  
       
 
     
       
 
    30,559,557  
       
 
     


See notes to financial statements.

21


 

Alpine Mutual Funds – International Real Estate Equity Fund
 
Schedule of Portfolio Investments—Continued
April 30, 2006 (Unaudited)

                 
Shares/     Security      
Par Value     Description   Value  
Common Stocks—continued        
North & South America—continued        
United States—15.5%        
  12,000    
Alexander’s, Inc. (a)
  $ 3,351,000  
  131,666    
D.R. Horton, Inc.
    3,952,613  
  400,000    
Hilton Hotels Corporation
    10,776,000  
  122,378    
Host Hotels & Resorts Inc.
    2,572,386  
  215,000    
Hovnanian Enterprises, Inc.— Class A (a)
    8,550,550  
  120,000    
KB HOME
    7,388,400  
  170,000    
Lennar Corporation—Class A
    9,338,100  
  76,000    
M.D.C. Holdings, Inc.
    4,391,280  
  98,400    
Marriott International, Inc.— Class A
    7,190,088  
  205,700    
The Mills Corp.
    6,563,887  
  240,600    
Pulte Homes, Inc.
    8,986,410  
  263,200    
Standard Pacific Corp.
    8,346,072  
  219,900    
Starwood Hotels & Resorts Worldwide, Inc.
    12,617,862  
  110,000    
Toll Brothers, Inc. (a)
    3,536,500  
       
 
     
       
 
    97,561,148  
       
 
     
       
Total North & South America
    177,165,140  
       
 
     
       
Total Common Stocks
    584,789,747  
       
 
     
       
 
       
Rights—0.2%        
  296,273    
JM AB
    1,019,904  
       
 
     
       
Total Rights
    1,019,904  
       
 
     
                 
Shares/     Security      
Par Value     Description   Value  
Warrants—0.2%        
  300,000    
City Developments Limited (a)
Expiration May 2006
Exercise Price 2.50 SPD
(Acquired 6/2001—5/2001, Cost $287,435)
  $ 1,413,751  
  375,000    
Major Cineplex Group Public
   Company Limited (a)
Expiration February 2007
Exercise Price 13.00 TB
(Acquired 4/2003—5/2003, Cost $0)
    43,965  
       
 
     
       
Total Warrants
    1,457,716  
       
 
     
       
 
       
Short-Term Investments—11.4%        
  41,780,000    
Alpine Municipal Money Market
    41,780,000  
  16,921,440    
Fidelity Institutional Government Portfolio
    16,921,440  
  13,100,524    
Federated Government Obligations Fund
    13,100,524  
       
 
     
       
Total Short-Term Investments
    71,801,964  
       
 
     
       
Total Investments (Cost $525,746,616)—105.0%
    659,069,331  
       
Liabilities, less Other Assets— (5.0)%
    (31,539,482 )
       
 
     
       
TOTAL NET ASSETS—100.0%
  $ 627,529,849  
       
 
     


 
(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 Receipt
GDR—Global Depository Receipt
SPD—Singapore Dollars
TB—Tahi Baht
See notes to financial statements.

22


 

Alpine Mutual Funds
 
Statements of Assets and Liabilities
April 30, 2006
(Unaudited)
                         
            Realty     International  
    U.S. Real Estate     Income & Growth     Real Estate  
    Equity Fund     Fund     Equity Fund  
ASSETS:
                       
Investments, at value (1)
  $ 462,729,404     $ 751,611,515     $ 659,069,331  
Cash
                 
Dividends receivable
    94,361       1,099,900       1,350,099  
Interest receivable
    272       187,286       197,983  
Receivable for capital shares issued
    572,014       1,956,175       4,018,097  
Receivable for investment securities sold
    27,033,742       656,799       3,919,424  
Prepaid expenses and other assets
    34,647       7,418,643       41,573  
 
                 
Total assets
    490,464,440       762,930,318       668,596,507  
 
                 
 
                       
LIABILITIES:
                       
Payable for investment securities purchased
          10,285,638       40,161,713  
Payable for capital shares redeemed
    1,471,622       703,238       216,409  
Accrued expenses and other liabilities:
                       
Investment advisory fees
    360,845       615,216       485,874  
Loans
    68,549,000              
Other
    1,200,994       345,613       202,662  
 
                 
Total liabilities
    71,582,461       11,949,705       41,066,658  
 
                 
Net Assets
  $ 418,881,979     $ 750,980,613     $ 627,529,849  
 
                 
 
                       
Net assets represented by
                       
Capital Stock
  $ 337,243,327     $ 558,416,117     $ 485,820,451  
Accumulated undistributed net investment income (loss)
    (166,278 )     7,883,768       (2,054,786 )
Accumulated net realized gains from investments, short sales and foreign currencies
    45,670,570       23,789,334       10,647,530  
Net unrealized appreciation on:
                       
Investments
    36,134,360       160,888,975       133,322,715  
Foreign currency translation
          2,419       (206,061 )
 
                 
Total Net Assets
  $ 418,881,979     $ 750,980,613     $ 627,529,849  
 
                 
 
                       
Net asset value
                       
Class Y Shares
                       
Net assets
  $ 418,881,979     $ 750,980,613     $ 627,529,849  
Shares of beneficial interest issued and outstanding
    10,157,034       30,548,655       17,578,346  
Net asset value, offering price and redemption price per share
  $ 41.24     $ 24.58     $ 35.70  
 
                 
(1) Cost of Investments
  $ 426,595,044     $ 590,722,540     $ 525,746,616  
See notes to financial statements.

23


 

Alpine Mutual Funds
 
Statements of Operations
Six Months Ended April 30, 2006
(Unaudited)
                         
            Realty     International  
    U.S. Real Estate     Income & Growth     Real Estate  
    Equity Fund     Fund     Equity Fund  
INVESTMENT INCOME:
                       
Interest income
  $ 985     $ 734,804     $ 761,446  
Dividend income*
    4,503,102       14,852,827       3,796,740  
 
                 
Total investment income
    4,504,087       15,587,631       4,558,186  
 
                 
EXPENSES:
                       
Investment advisory fees
    2,520,110       3,502,804       2,016,421  
Administration fees
    105,944       141,834       91,790  
Fund accounting fees
    60,383       81,191       52,444  
Audit fees
    10,815       11,290       12,379  
Custodian fees
    25,101       32,013       21,414  
Interest expense
    2,046,125       127,183       78,024  
Legal fees
    7,372       9,354       4,270  
Registration and filing fees
    35,412       26,742       30,280  
Printing fees
    70,670       72,073       21,880  
Transfer agent fees
    105,190       142,129       92,667  
Trustee fees
    3,336       3,486       3,570  
Other fees
    10,127       11,972       8,026  
Dividends on short positions
          52,991        
 
                 
Net expenses
    5,000,585       4,215,062       2,433,165  
 
                 
Net investment income
    (496,498 )     11,372,569       2,125,021  
 
                 
REALIZED/UNREALIZED GAIN (LOSS) ON INVESTMENTS:
                       
Net realized gain (loss) on:
                       
Long transactions
    47,515,444       24,434,758       11,051,739  
Short transactions
          (425,639 )      
Foreign currencies
                (694,105 )
 
                 
Net realized gain
    47,515,444       24,009,119       10,357,634  
 
                 
Change in unrealized appreciation/depreciation on:
                       
Investments
    (661,484 )     63,806,547       77,505,331  
Foreign currency translation
          2,749       (173,019 )
 
                 
Net change in unrealized appreciation/depreciation
    (661,484 )     63,809,296       77,332,312  
 
                 
Net realized/unrealized gain on investments
    46,853,960       87,818,415       87,689,946  
 
                 
Change in net assets resulting from operations
  $ 46,357,462     $ 99,190,984     $ 89,814,967  
 
                 
* Net of foreign taxes withheld
  $     $ 46,071     $ 315,646  
 
                 
See notes to financial statements.

24


 

Alpine Mutual Funds
 
Statements of Changes in Net Assets
                 
    U.S. Real Estate Equity Fund  
    Six Months Ended     Year Ended  
    April 30, 2006     October 31, 2005  
    (Unaudited)          
OPERATIONS:
               
Net investment income (loss)
  $ (496,498 )   $ 875,759  
Net realized gain (loss) on long transactions
    47,515,444       20,145,675  
Change in unrealized appreciation/depreciation on investments
    (661,484 )     2,763,436  
 
           
Change in net assets resulting from operations
    46,357,462       23,784,870  
 
           
DISTRIBUTIONS TO SHAREHOLDERS:
               
Distributions to Class B Shareholders
               
From net investment income
          (2,468 )
From net realized gains on investments
          (178,870 )
Distributions to Class Y Shareholders:
               
From net investment income
    (323,489 )     (622,756 )
From net realized gains on investments
    (20,329,092 )     (18,224,728 )
 
           
Change in net assets resulting from distributions to shareholders
    (20,652,581 )     (19,028,822 )
 
           
CAPITAL SHARE TRANSACTIONS:
               
Proceeds from shares sold
    81,650,392       778,174,270  
Dividends reinvested
    19,264,323       17,393,229  
Redemption Fees
    1,626       852  
Cost of shares redeemed
    (264,387,524 )     (462,995,950 )
 
           
Change in net assets from capital share transactions
    (163,471,183 )     332,572,401  
 
           
Total change in net assets
    (137,766,302 )     337,328,449  
 
           
NET ASSETS:
               
Beginning of period
    556,648,281       219,319,832  
 
           
End of period*
  $ 418,881,979     $ 556,648,281  
 
           
* Including accumulated undistributed (overdistributed) net investment income of:
  $ (166,278 )   $ 653,709  
 
           
See notes to financial statements.

25


 

Alpine Mutual Funds
 
Statements of Changes in Net Assets
                 
    Realty Income & Growth Fund  
    Six Months Ended     Year Ended  
    April 30, 2006     October 31, 2005  
    (Unaudited)          
OPERATIONS:
               
Net investment income
  $ 11,372,569     $ 20,262,641  
Net realized gain (loss) on:
               
Long transactions
    24,434,758       18,575,432  
Short transactions
    (425,639 )     (32,315 )
Change in unrealized appreciation/depreciation on investments
    63,809,296       33,966,993  
 
           
Change in net assets resulting from operations
    99,190,984       72,772,751  
 
           
DISTRIBUTIONS TO SHAREHOLDERS:
               
From net investment income
    (12,896,535 )     (22,632,068 )
From net realized gains on investments
    (8,681,262 )     (7,702,088 )
 
           
Change in net assets resulting from distributions to shareholders
    (21,577,797 )     (30,334,156 )
 
           
CAPITAL SHARE TRANSACTIONS:
               
Proceeds from shares sold
    143,875,220       457,228,812  
Dividends reinvested
    19,972,658       27,699,449  
Redemption Fees
    3,225        
Cost of shares redeemed
    (131,707,460 )     (280,321,048 )
 
           
Change in net assets from capital share transactions
    32,143,643       204,607,213  
 
           
Total change in net assets
    109,756,830       247,045,808  
 
           
NET ASSETS:
               
Beginning of period
    641,223,783       394,177,975  
 
           
End of period*
  $ 750,980,613     $ 641,223,783  
 
           
* Including accumulated undistributed net investment income of:
  $ 7,883,768     $ 9,415,324  
 
           
See notes to financial statements.

26


 

Alpine Mutual Funds
 
Statements of Changes in Net Assets
                 
    International  
    Real Estate Equity Fund  
    Six Months Ended     Year Ended  
    April 30, 2006     October 31, 2005  
    (Unaudited)          
OPERATIONS:
               
Net investment income
  $ 2,125,021     $ 3,138,275  
Net realized gain (loss) on:
               
Long transactions
    11,051,739       4,368,772  
Short transactions
          (83,656 )
Options contracts expired or closed
          241,371  
Foreign currencies
    (694,105 )     (258,415 )
Forward currency exchange contracts
          (253,493 )
Change in unrealized appreciation/depreciation on:
               
Investments
    77,505,331       30,721,028  
Foreign currency translation
    (173,019 )     (36,124 )
 
           
Change in net assets resulting from operations
    89,814,967       37,837,758  
 
           
DISTRIBUTIONS TO SHAREHOLDERS:
               
From net investment income
    (3,914,233 )     (3,542,113 )
From net realized gain on investments
    (3,532,066 )     (5,398,131 )
 
           
Change in net assets resulting from distributions to shareholders
    (7,446,299 )     (8,940,244 )
 
           
CAPITAL SHARE TRANSACTIONS:
               
Proceeds from shares sold
    298,417,685       330,885,764  
Dividends reinvested
    6,748,378       8,436,642  
Redemption fees
    37,587       164,178  
Cost of shares redeemed
    (50,789,856 )     (172,724,083 )
 
           
Change in net assets from capital share transactions
    254,413,794       166,762,501  
 
           
Total change in net assets
    336,782,462       195,660,015  
 
           
NET ASSETS:
               
Beginning of period
    290,747,387       95,087,372  
 
           
End of period*
    627,529,849       290,747,387  
 
           
* Including accumulated undistributed (overdistributed) net investment income of:
  $ (2,054,786 )   $ 24,417  
 
           
See notes to financial statements.

27


 

Alpine Mutual Funds — U.S. Real Estate Equity Fund
 
Financial Highlights
(For a share outstanding throughout each period)
                                                         
    Six Months                    
    Ended     Year Ended     Period Ended     Year Ended  
    April 30,     October 31,     October 31,     September 30,  
    2006     2005     2004     2003     2002     2001 (a)     2001  
    (Unaudited)                                                  
Net asset value per share, beginning of period
  $ 39.45     $ 34.51     $ 29.21     $ 17.53     $ 13.54     $ 13.57     $ 13.54  
 
                                         
Income from investment operations:
                                                       
Net investment income
    (0.04 )     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
    3.43       7.47       6.61       11.63       3.96       (0.03 )     0.07  
 
                                         
Total from investment operations
    3.39       7.59       6.56       11.70       3.99       (0.03 )     0.03  
 
                                         
 
                                                       
Less Distributions:
                                                       
Net investment income
    (0.03 )     (0.09 )           (0.02 )                  
Net realized gains on investments
    (1.57 )     (2.56 )     (1.26 )                        
 
                                         
Total distributions
    (1.60 )     (2.65 )     (1.26 )     (0.02 )                  
 
                                         
Net asset value per share, end of period
  $ 41.24     $ 39.45     $ 34.51     $ 29.21     $ 17.53     $ 13.54     $ 13.57  
 
                                         
Total return
    8.56 %(d)     22.18 %     23.12 %     66.81 %     29.47 %     –0.22 %(d)     0.22 %
Ratios/Supplemental Data:
                                                       
Net Assets at end of period (000)
  $ 418,882     $ 556,648     $ 216,773     $ 107,753     $ 36,083     $ 19,314     $ 19,643  
Ratio of expenses to average net assets:
                                                       
Before waivers and reimbursements
    1.98 %(e)     1.19 %     1.31 %     1.67 %     1.72 %     2.46 %(e)     2.16 %
After waivers and reimbursements
    1.98 %(e)     1.19 %     1.31 %     1.67 %     1.72 %     2.23 %(e)     1.98 %
Ratio of net investment income (loss) to average net assets
    (0.20 )%(e)     0.16 %     (0.17 )%     0.32 %     0.16 %     (0.33 )%(e)     (0.25 )%
Ratio of interest expense to average net assets
    0.81 %     0.01 %     0.03 %     0.05 %     0.00 %     0.03 %(e)     0.00 %
Portfolio turnover
    21 %     34 %(f)     73 %(f)     86 %(f)     115 %(f)     10 %(f)     151 %(f)
 
(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. Class B shares were terminated on April 30, 2005.
See notes to financial statements.

28


 

Alpine Mutual Funds – Realty Income & Growth Fund
 
Financial Highlights
(For a share outstanding throughout each period)
                                                 
    Six Months        
    Ended        
    April 30,     Year Ended October 31,  
    2006     2005     2004     2003     2002     2001  
    (Unaudited)                                          
Net asset value per share, beginning of period
  $ 21.92     $ 19.97     $ 16.67     $ 13.55     $ 11.92     $ 11.43  
 
                                   
Income from investment operations:
                                               
Net investment income
    0.37       1.06       0.71 (a)     0.77 (a)     0.76 (a)     0.59  
Net realized/unrealized gains on investments
    3.03       2.07       3.45       3.21       1.74       0.71  
 
                                   
Total from investment operations
    3.40       3.13       4.16       3.98       2.50       1.30  
 
                                   
Less Distributions:
                                               
Net investment income
    (0.44 )     (0.84 )     (0.82 )     (0.81 )     (0.81 )     (0.81 )
Net realized gains on investments
    (0.30 )     (0.34 )     (0.04 )     (0.05 )     (0.06 )      
 
                                   
Total distributions
    (0.74 )     (1.18 )     (0.86 )     (0.86 )     (0.87 )     (0.81 )
 
                                   
Net asset value per share, end of period
  $ 24.58     $ 21.92     $ 19.97     $ 16.67     $ 13.55     $ 11.92  
 
                                   
Total return
    15.68 %(b)     15.92 %     25.51 %     30.45 %     21.21 %     11.44 %
Ratios/Supplemental Data:
                                               
Net Assets at end of period (000)
  $ 750,981     $ 641,224     $ 394,153     $ 183,410     $ 49,650     $ 8,051  
Ratio of expenses to average net assets:
                                               
Before waivers and reimbursements
    1.20 %(c)     1.18 %     1.25 %     1.38 %     1.57 %     2.59 %
After waivers and reimbursements
    1.20 %(c)     1.18 %     1.25 %     1.40 %     1.46 %     1.41 %
Ratio of net investment income to average net assets
    3.25 %(c)     3.47 %     3.85 %     4.98 %     5.62 %     4.68 %
Ratio of interest expense to average net assets
    0.04 %     0.00 %     0.01 %     0.00 %     0.00 %     0.11 %
Portfolio turnover
    14 %     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.
 
(b)   Not annualized
 
(c)   Annualized
See notes to financial statements.

29


 

Alpine Mutual Funds – International Real Estate Equity Fund
 
Financial Highlights
(For a share outstanding throughout each period)
                                                 
    Six Months        
    Ended        
    April 30,     Year Ended October 31,  
    2006     2005     2004     2003     2002     2001  
    (Unaudited)                                          
Net asset value per share, beginning of period
  $ 28.89     $ 24.28     $ 20.23     $ 13.81     $ 12.34     $ 12.73  
 
                                   
 
                                               
Income from investment operations:
                                               
Net investment income
    0.19       0.74       0.29 (a)     0.22 (a)     0.12 (a)      
Net realized/unrealized gains on investments
    7.36       5.71       4.30       6.42       1.60       (0.39 )
 
                                   
Total from investment operations
    7.55       6.45       4.59       6.64       1.72       (0.39 )
 
                                   
 
                                               
Less Distributions:
                                               
Net investment income
    (0.39 )     (0.73 )     (0.44 )     (0.22 )     (0.25 )      
Net realized gains on investments
    (0.35 )     (1.11 )     (0.10 )                  
 
                                   
Total distributions
    (0.74 )     (1.84 )     (0.54 )     (0.22 )     (0.25 )      
 
                                   
Net asset value per share, end of period
  $ 35.70     $ 28.89     $ 24.28     $ 20.23     $ 13.81     $ 12.34  
 
                                   
Total return
    26.60 %(b)     27.29 %     23.25 %     48.87 %     14.03 %     –3.06 %
Ratios/Supplemental Data:
                                               
Net Assets at end of period (000)
  $ 627,530     $ 290,747     $ 87,621     $ 86,428     $ 31,457     $ 25,344  
Ratio of expenses to average net assets:
                                               
Before waivers and reimbursements
    1.21 %(c)     1.18 %     1.35 %     1.52 %     1.81 %     2.14 %
After waivers and reimbursements
    1.21 %(c)     1.18 %     1.35 %     1.52 %     1.81 %     1.96 %
Ratio of net investment income to average net assets
    0.72 %(c)     1.22 %     1.40 %     1.36 %     0.82 %     0.00 %
Ratio of interest expense to average net assets
    0.04 %(c)     0.00 %     0.00 %     0.02 %     0.00 %     0.11 %
Portfolio turnover
    11 %     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.
 
(b)   Not annualized
 
(c)   Annualized
See notes to financial statements.

30


 

Alpine Mutual Funds
 
Notes to Financial Statements
April 30, 2006 (Unaudited)
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.
 
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.

31


 

Alpine Mutual Funds
 
Notes to Financial Statements—Continued
April 30, 2006 (Unaudited)
    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. Line of Credit:
 
    Each Fund has a line of credit with Custodial Trust Company (“CTC’’). Loans in the aggregate, whether to cover overdrafts or for investment purposes, may not exceed the maximum amount that is permitted under the Investment Company Act of 1940, as amended. Interest expense incurred in connection with such loans during the six months ended April 30, 2006 was $2,046,125, $127,183, and $78,024 for the U.S. Real Estate Equity Fund, Realty Income & Growth, and International Real Estate Equity Fund, respectively. The average interest rate paid on outstanding borrowings was 5.57% for the six months ended April 30, 2006.
 
    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. 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 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.
 
    H. 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

32


 

Alpine Mutual Funds
 
Notes to Financial Statements—Continued
April 30, 2006 (Unaudited)
    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.
 
    I. 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
                                 
    Six Months Ended     Year Ended  
    April 30, 2006     October 31, 2005  
    Shares     Amount     Shares     Amount  
Shares sold
    1,984,826     $ 81,650,392       18,301,032     $ 778,163,995  
Shares merged from Class B
                28,092       1,108,527  
Shares issued in reinvestment of dividends
    463,307       19,264,323       449,652       17,262,155  
Redemption fees
          1,626              
Shares redeemed
    (6,400,287 )     (264,387,524 )     (10,950,183 )     (461,046,868 )
 
                       
Total net change
    (3,952,154 )   $ (163,471,183 )     7,828,593     $ 335,487,809  
 
                       
    Realty Income & Growth Fund
                                 
    Six Months Ended     Year Ended  
    April 30, 2006     October 31, 2005  
    Shares     Amount     Shares     Amount  
Shares sold
    6,043,230     $ 143,875,220       21,136,828     $ 457,228,812  
Shares issued in reinvestment of dividends
    853,627       19,972,658       1,284,550       27,699,449  
Redemption fees
          3,225              
Shares redeemed
    (5,596,432 )     (131,707,460 )     (12,909,966 )     (280,321,048 )
 
                       
Total net change
    1,300,425     $ 32,143,643       9,511,412     $ 204,607,213  
 
                       

33


 

Alpine Mutual Funds
 
Notes to Financial Statements—Continued
April 30, 2006 (Unaudited)
International Real Estate Equity Fund
                                 
    Six Months Ended     Year Ended  
    April 30, 2006     October 31, 2005  
    Shares     Amount     Shares     Amount  
Shares sold
    8,922,498     $ 298,417,685       11,927,740     $ 330,885,764  
Shares issued in reinvestment of dividends
    224,198       6,748,378       322,625       8,436,642  
Redemption fees
          37,587             164,178  
Shares redeemed
    (1,633,651 )     (50,789,856 )     (6,100,900 )     (172,724,083 )
 
                       
Total net change
    7,513,045     $ 254,413,794       6,149,465     $ 166,762,501  
 
                       
4.   Purchases and Sales of Securities:
 
    Purchases and sales of securities (excluding short-term securities) for six months ended April 30, 2006 are as follows:
                                 
    Non-U.S. Government   U.S. Government
    Purchases   Sales   Purchases   Sales
U.S. Real Estate Equity Fund
  $ 64,414,706     $ 245,762,107              
Realty Income & Growth Fund
    91,207,751       124,462,566              
International Real Estate Equity Fund
    253,214,852       43,237,415              
5.   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 the six months ended April 30, 2006, 2005, 2004, or 2003. Therefore, at April 30, 2006 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. At April 30, 2006, the Realty Income & Growth Fund and International Real Estate Equity Fund had $26,738,000 and $41,780,000, respectively, invested in the Alpine Municipal Money Market Fund.
 
6.   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.

34


 

Alpine Mutual Funds
 
Notes to Financial Statements—Continued
April 30, 2006 (Unaudited)
7.   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.
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  
 
           

35


 

Alpine Mutual Funds
 
Additional Information (Unaudited)
Expense Examples
April 30, 2006
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 11/1/05–4/30/06.
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
                         
    Beginning   Ending   Expenses Paid
    Account Value   Account Value   During Period
    11/1/05   4/30/06   11/1/05–4/30/06*
Actual(1)
  $ 1.000.00     $ 1,085.60     $ 10.24  
Hypothetical(2)
  $ 1,000.00     $ 1,014.98     $ 9.89  
 
(1)   Ending account values and expenses paid during period based on a 8.56% 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.
 
*   Expenses are equal to Fund’s annualized expense ratio of 1.98%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

36


 

Alpine Mutual Funds
 
Additional Information (Unaudited)—Continued
Expense Examples
April 30, 2006
Alpine Realty Income & Growth Fund
                         
    Beginning   Ending   Expenses Paid
    Account Value   Account Value   During Period
    11/1/05   4/30/06   11/1/05–4/30/06*
Actual(1)
  $ 1,000.00     $ 1,156.80     $ 6.42  
Hypothetical(2)
  $ 1,000.00     $ 1,018.84     $ 6.01  
 
(1)   Ending account values and expenses paid during period based on a 15.68% 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.
 
*   Expenses are equal to Fund’s annualized expense ratio of 1.20%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Alpine International Real Estate Equity Fund
                         
    Beginning   Ending   Expenses Paid
    Account Value   Account Value   During Period
    11/1/05   4/30/06   11/1/05–4/30/06*
Actual(1)
  $ 1,000.00     $ 1,266.00     $ 6.80  
Hypothetical(2)
  $ 1,000.00     $ 1,018.79     $ 6.06  
 
(1)   Ending account values and expenses paid during period based on a 26.60% 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.
 
*   Expenses are equal to Fund’s annualized expense ratio of 1.21%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

37


 

Alpine Mutual Funds
 
Additional Information (Unaudited)—Continued
Investment Adviser and Advisory Contracts
On December 13, 2005, 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 U.S. Real Estate Equity Fund, the Realty Income & Growth Fund, and the International Real Estate Equity 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
April 30, 2006
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 %

39


 

Alpine Mutual Funds
 
Additional Information (Unaudited)—Continued
April 30, 2006
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
    00028       0.0004  
Greece
    0.0026       0.0000  
Hong Kong
    01017       00000  
Italy
    0.0061       0.0017  
Japan
    0.0149       0.0010  
Netherlands
    00179       00020  
New Zealand
    00021       00003  
Norway
    0.0070       0.0011  
Philippines
    00020       00005  
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.

40


 

     (ALPINE LOGO)

Trustees
 
Sub-Custodian
 
Fund Counsel
         
         
         
Samuel A. Lieber   The Bank of New York   Blank Rome LLP
Laurence B. Ashkin   One Wall Street   The Chrysler Building
H. Guy Leibler   New York, NY 10286   405 Lexington Avenue
Jeffrey E. Wacksman       New York, NY 10174
         
   
Independent Registered
   
Custodian
 
Public Accounting Firm
 
Distributor
         
         
         
U.S. Bank, N.A.   Deloitte & Touche LLP   Quasar Distributors, LLC
1555 N. Rivercenter Drive   555 East Wells Street   615 East Michigan Street
Milwaukee, WI 53212   Milwaukee, WI 53202   Milwaukee, WI 53202
     
Investment Adviser
 
Transfer Agent & Administrator
     
     
     
Alpine Woods Capital Investors, LLC   U.S. Bancorp Fund Services, LLC
2500 Westchester Ave., Suite 215   615 East Michigan Street
Purchase, NY 10577   Milwaukee, WI 53202
             
 
 
 
     
 
           
 
   
Shareholder /Investor
     
 
   
Information
     
 
   
 
     
 
    (888) 785-5578      
 
           
 
       
w w w . a l p i n e f u n d s . c o m


 

Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
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 Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors/trustees.

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Item 11. Controls and Procedures.
(a)   The Registrant’s President and Treasurer have reviewed the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.
(b)   There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report 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. Not Applicable
 
    (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
 
    (3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
 
(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   06/30/2006    
 
     
 
   
     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   06/30/2006    
 
     
 
   
             
     By (Signature and Title)*   /s/ Sheldon Flamm
 
     Sheldon Flamm, Treasurer
   
             
     Date   06/30/2006
 
   
 
*   Print the name and title of each signing officer under his or her signature.

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