UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21210
ALPINE INCOME TRUST
(Exact name of registrant as specified in charter)
2500 WESTCHESTER AVENUE, SUITE 215
PURCHASE, NY 10577
(Address of principal executive offices) (Zip code)
SAMUEL A. LIEBER
ALPINE MANAGEMENT & RESEARCH, LLC
2500 WESTCHESTER AVENUE, SUITE 215
PURCHASE, NY 10577
(Name and address of agent for service)
1-888-785-5578
Registrant's telephone number, including area code
Date of fiscal year end: OCTOBER 31, 2003
Date of reporting period: OCTOBER 31, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
- ------------------------------
(ALPINE LOGO)
EQUITY AND INCOME FUNDS
DYNAMIC BALANCE FUND
DYNAMIC DIVIDEND FUND
MUNICIPAL MONEY MARKET FUND
TAX OPTIMIZED INCOME FUND
ANNUAL REPORT
October 31, 2003
This material must be preceded or accompanied by a current prospectus.
TABLE OF CONTENTS
-----------------
PORTFOLIO MANAGER'S REPORT TO SHAREHOLDERS
PAGE 1
SCHEDULES OF PORTFOLIO INVESTMENTS
PAGE 13
STATEMENTS OF ASSETS AND LIABILITIES
PAGE 21
STATEMENTS OF OPERATIONS
PAGE 23
STATEMENTS OF CHANGES IN NET ASSETS
PAGE 25
NOTES TO FINANCIAL STATEMENTS
PAGE 29
FINANCIAL HIGHLIGHTS
PAGE 35
REPORT OF INDEPENDENT AUDITORS
PAGE 39
INFORMATION ABOUT TRUSTEES AND OFFICERS
PAGE 40
CHANGES IN INDEPENDENT ACCOUNTANTS
PAGE 42
PORTFOLIO MANAGER'S REPORT TO SHAREHOLDERS ALPINE MUTUAL FUNDS
Dear Shareholder:
We are pleased to provide you with this annual report of the Alpine 'Dynamic'
Estate Mutual Funds and Income Funds for the fiscal year ended October 31st,
2003. With these Funds, Alpine is building upon the performance record of our
Real Estate Funds dating back to 1989. Although the Funds discussed here are
comparatively unseasoned, they are already meeting our expectations. The Alpine
Dynamic Balance Fund is now 28 months old and the Alpine Dynamic Dividend Fund
was just launched this September. These Funds are using both time tested
strategies and recently evolved approaches to providing income and growth from
both equities and fixed income securities. The Alpine Municipal Money Market
Fund and Alpine Tax Optimized Income Fund use methods which the manager has
honed over sixteen years. Standardized performance data and historical
comparisons where appropriate, with specific indexes are detailed in the later
sections pertaining to each fund. We believe that these Funds can produce a
track record of performance that fits our established Fund's motto of
"Experience - Performance - Leadership".
Every one of the Alpine Funds has an expected pattern of returns and
potential volatility related to their distinctive investment focus. We design
our Fund's investment objectives and strategies to build upon the opportunities
afforded by the investment focus as opposed to a pre-existing model or index.
Thus, you will never see an Alpine 'mid-cap value' fund or 'core growth' fund
which invests only within a limited universe of stocks. We believe investment
objectives should not be defined by how comparable a fund is with a category or
a group of funds. Principally, investors should be focused on performance with
distinctive strategies which can be balanced with other investments to provide
individually appropriate risk-adjusted returns in a tax sensitive manner over an
extended period of time. This is what we do for ourselves, as well as for
investors who partner with us as shareholders in the Alpine Mutual Funds.
ALPINE'S VIEW OF RECENT MUTUAL FUND SCANDALS
Unfortunately, recent scandals in the mutual fund world highlight a lack of
responsibility towards and respect for investors as partners by many mutual
funds. So far, this appears to be more prevalent in large mutual fund complexes
where the emphasis is less on co-investment to profit from the performance of
the funds and more on profiteering, not just from fees but by selectively
permitting timing and trading opportunities which disadvantage the typical fund
holder. Perhaps these problems stem from the corporate cultures at many of
these large fund complexes, which create fashionable products that are often
managed by faceless teams of mercenary managers who may come and go. In
contrast at Alpine, we welcome you to join our families in investing in these
Funds where you will always know the portfolio manager's name and have access to
what we have to say.
As we monitor the flows in and out of our Funds, we hope that investors who
join us will stay the course. However, this past summer, we were surprised by a
sharp rise in relatively short-term trading by certain groups of investors using
the Alpine International Real Estate Fund. In response to such trading which
was becoming disruptive in both scale and frequency, management recommended to
the Fund's Board of Directors that a redemption fee be instituted to dissuade
such activity. As managers, volatility of fund flows was a nuisance; however,
as investors, we realized that such trading could impact our performance. While
we do not wish to penalize or otherwise restrict the flexibility of investors in
an uncertain world, we felt that a two-month holding period before a 1% penalty
would be lifted was not a hardship. Any redemption fees collected are paid to
the Fund itself for shareholder benefit. We are pleased to say that subsequent
to the imposition of the redemption fee, fund flows have resumed a more stable
pace.
2003: FISCAL YEAR-END REVIEW
In last year's 2002 report to shareholders, we stated that despite
uncertainty regarding the political and economic prospects, "...the underlying
issue is whether consumer spending can continue at current levels until
corporate capital expenditures pick up." We concluded with cautious optimism
that "... a low growth low inflation world economy will supercede this
period..." Broadly speaking, our assessment was pretty much on target, and
remains so today.
This past fiscal year began with a challenged investment environment. We had
just passed the market lows of October 10th, 2002, which was the culmination of
a virtual rejection of common stocks by many investors who had endured the
challenges of the Enron and Tyco scandals, capping 30 months of equity index
declines. However, as the U.S. Army's successful invasion of Iraq unfolded in
March, a powerful stock market rally emerged. This 'relief rally' was
reinforced by the Federal Reserve's commitment to minimal interest rates as the
most important factor in sustaining both domestic consumption and the revival of
investor interest in common stocks. More than merely lowering rates, the
Federal Reserve made clear that its cautious view of the economy would require
historically low interest rates for a "considerable period" of time. Thus,
after the nadir of pessimism in 2002 when investor fixation on the deflation of
the tech stock bubble combined with an uncertain economic environment and
divisive political climate, the focus of Federal Reserve policy was to encourage
a return to optimism. The Fed's intervention combined with tax legislation
favorable to equity dividends helped to restore investor confidence. In the
third quarter ended September 30th, inventory restocking, military spending and
continued strong domestic consumption produced GDP growth of 8.2%. Record new
home sales, strong orders for durable goods, rising consumer confidence and even
modest improvement in jobless data indicate that a new economic cycle is
beginning. However, uncertainty over the pace and sustainability of this
cyclical up-turn remain a concern.
The equity markets have climbed a proverbial "wall of worry" this year. Even
though this is not quite a 'normal' cyclical recovery, risk premiums or the
excess returns typically required for many asset classes have fallen to low
levels, as anticipation of an extended up-cycle in economic activity would lead
to greater corporate earnings growth, new jobs and broad expansion of the
economy. We believe the stock market is generally true to trend if not always
exact in discounting future business potential.
THE ECONOMY TODAY
With the Federal Funds rate at 1% helping to propel the economy to 8.2% GDP
growth in the third quarter and projections of sustainable growth of 4 - 4.5%
over the near term, the prospect for equity market returns still look positive.
Strong reports on new orders from the Chicago purchasing managers and expanding
durable goods orders are supported by rising consumer confidence figures which
reflect gradual improvement in personal income data and modest improvement in
jobless claims. These positive economic data are leading to rising mid-teen
percent corporate earnings estimates and to growing provisional capital
expenditures budgets. Since much of what we consume is produced in Asia, it is
worth noting that industrial production is soaring in the region and GDP growth
is strong. Even Japan appears to be in recovery after a decade of decline.
Nonetheless, much of this activity is dependent upon the U.S. as an engine of
growth for the global economy, along with secondary support from an internally
focused Chinese expansion and modernization.
OUTLOOK FOR 2004
As we enter 2004, uncertainty over progress in Iraq and the probability of a
close and rancorous election will not be positive for the stock market. From
both an economic and corporate earnings perspective, the most important issue
next year will be the level of domestic consumption combined with the
prospective acceleration of corporate capital expenditures. Holiday sales will
be fundamental in establishing a trend line of activity. Many industry experts
are projecting Christmas sales to rise by 4% this year. This compares with 2.1%
last year and would be a return to historically normal levels.
The most important long-term issue for the economy is the level of the U.S.
dollar. After a decline of 17.06% versus the Euro and 11.41% versus the Yen
during the course of the year ended in October, the month of November has seen
further weakness, and some observers are calling for an additional 20% decline
through the next year. Alpine believes that a shift of this magnitude is partly
a reaction to the overvaluation of the dollar during the past decade. It is
also in response to concerns regarding our nation's current account deficit,
which is running approximately 5% of GDP. This makes America more dependent
upon the rest of the world for capital than at any time in the past 50 years.
The weaker our currency gets the less competitive foreign imports are, which
should bode well for the corporate profits of domestic companies. However, too
weak a dollar could put pressure on the Treasury and the Federal Reserve either
to raise interest rates or otherwise tinker with the yield curve. Since this is
an election year, the stimulative benefit of a weak dollar will likely be
favored, instead of minimizing the long-term cost to our economy.
Having raised a cautionary flag, we wish to remind investors that the Federal
Reserve has been highly accommodative in promoting growth and while they no
longer talk cautiously of deflation, they still see disinflationary tendencies.
Perhaps the continuation of recent positive economic data could become trends
which may persuade the Federal Reserve that interest rates will have to be
raised sometime during the second calendar quarter of 2004. Prices from the Fed
Funds futures market show some investors believe that the Fed Funds rate will
rise from 1% to 2.25% by the end of next year. If that is the case, we expect
the ten-year treasury bond to rise from its recent trading range between 4% to
4.5% towards 5.5%. This in turn suggests moderate growth and a relatively
benign interest rate environment may carry well into 2004, barring a dramatic
slide in the dollar.
In summary, our portfolio strategy should remain consistent with our pattern
over the past year. While we are increasingly positive over the prospects for
recovery, the risks to such a scenario which we outlined above will be carefully
monitored. We will be looking for signs of durability and any emerging trends
regarding business spending and consumer demand in the economy. Following the
strong performance of equities in 2003, and historically modest yield of fixed
income securities, we believe that investors will increase their focus on equity
yielding investments in 2004. We believe both the equity and income portfolios
of Alpine are well positioned for next year.
As always we appreciate your interest and support. We look forward to
reporting on our progress in our next report to shareholders. Thank you.
Sincerely,
/s/ Samuel A. Lieber
Samuel A. Lieber
President, Alpine Mutual Funds
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Mutual fund investing
involves risk. Principal loss is possible.
This letter and those that follow represent the opinions of Alpine Funds
management and are subject to change, are not guaranteed and should not be
considered recommendations to buy or sell any security.
Please refer to the following letters/report for more information regarding
holdings and index descriptions. Fund holdings and sector weightings are
subject to change and should not be considered a recommendation to buy or sell
any security.
Must be preceded or accompanied by a prospectus. Please read it carefully
before you invest or send money.
Quasar Distributors, LLC, Distributor, 12/03
ALPINE DYNAMIC BALANCE FUND
Value of a $10,000 Investment
Alpine Dynamic Moody's Equity Mutual
Date Balance Fund Fund Balanced Index S&P 500 Index
---- ------------ ------------------- -------------
6/7/2001 $10,000 $10,000 $10,000
6/30/2001 $9,960 $9,726 $9,593
7/31/2001 $10,100 $9,703 $9,499
8/31/2001 $10,180 $9,398 $8,904
9/30/2001 $9,993 $8,916 $8,185
10/31/2001 $10,164 $9,090 $8,341
11/30/2001 $10,325 $9,406 $8,981
12/31/2001 $10,481 $9,439 $9,060
1/31/2002 $10,461 $9,360 $8,928
2/28/2002 $10,613 $9,277 $8,755
3/31/2002 $10,738 $9,438 $9,085
4/30/2002 $10,707 $9,252 $8,534
5/31/2002 $10,615 $9,242 $8,471
6/30/2002 $10,309 $8,902 $7,868
7/31/2002 $9,991 $8,537 $7,254
8/31/2002 $10,145 $8,620 $7,302
9/30/2002 $9,378 $8,162 $6,508
10/31/2002 $9,471 $8,465 $7,081
11/30/2002 $9,822 $8,724 $7,497
12/31/2002 $9,614 $8,509 $7,057
1/31/2003 $9,468 $8,393 $6,872
2/28/2003 $9,353 $8,364 $6,769
3/31/2003 $9,434 $8,388 $6,835
4/30/2003 $10,228 $8,778 $7,397
5/31/2003 $10,939 $9,127 $7,787
6/30/2003 $10,892 $9,182 $7,886
7/31/2003 $10,797 $9,168 $8,025
8/31/2003 $10,923 $9,304 $8,181
9/30/2003 $11,179 $9,350 $8,095
10/31/2003 $11,696 $9,613 $8,552
This chart represents a comparison of a hypothetical $10,000 investment in the
Fund versus a similar investment in the Fund's benchmark. PAST PERFORMANCE IS
NOT PREDICTIVE OF FUTURE RESULTS. 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. Investment return and principal value of the Dynamic
Balance Fund will fluctuate, so that the shares, when redeemed, may be worth
more or less than their original cost. Investment performance reflects voluntary
fee waivers in effect. Without the waiver of fees, total return would have been
lower.
The Moody's Equity Mutual Fund Balanced Index tracks a group of similar funds
that typically correspond to standard classifications based on investment
objectives and fundamental policies. The index includes balanced funds, asset
allocation funds, and to a lesser extent, multiasset global funds. 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 Moody's Equity Mutual Fund Balanced Index and S&P 500 Index are
unmanaged and do not reflect the deduction of fees associated with a mutual
fund, such as investment adviser fees. The performance for the Dynamic Balance
Fund reflects the deduction of fees for these value-added services. Investors
cannot directly invest in an index.
COMPARATIVE TOTAL RETURNS AS OF 10/31/03
SINCE INCEPTION
1 YEAR (6/7/01)
------ ---------------
Alpine Dynamic Balance Fund 23.50% 6.75%
Moody's Equity Mutual Fund Balanced Index 13.57% -1.63%
S&P 500 Index 20.80% -6.31%
PORTFOLIO DISTRIBUTION*<F1>
US Treasury Obligation 14%
Government Agency Bonds 4%
Cash\Cash Equivalents 3%
Financial-Banks 16%
Real Estate 14%
Financial Services 12%
Construction-Residential 10%
Pharmaceutical 6%
Utilities 6%
Consumer Products & Services 5%
Energy 4%
Information Technology 2%
Publishing 2%
Conglomerate 1%
Retail 1%
TOP 10 HOLDINGS*<F1>
1. U.S. Treasury Bond, 6.000%, 2/15/2026 10.22%
2. Federal National Mortgage Association,
6.250%, 5/15/2029 4.00%
3. Chelsea Property Group, Inc. 3.48%
4. FleetBoston Financial Corporation 3.01%
5. Fannie Mae 2.93%
6. Pulte Homes, Inc. 2.41%
7. U.S. Treasury Bond, 7.250%, 5/15/2016 2.31%
8. Standard Pacific Corp. 2.23%
9. ChevronTexaco Corporation 2.07%
10. Johnson & Johnson 2.06%
*<F1> Portfolio holdings, geographical distributions and/or sector
distributions are as of 10/31/03 and are subject to change. Portfolio
holdings are not recommendations to buy or sell any securities. Top 10
Holdings does not include short-term investments.
ALPINE DYNAMIC BALANCE FUND
We are pleased to report that the investment performance of the Alpine
Dynamic Balance Fund for its fiscal year ended October 31, 2003 provided a total
return of 23.50%. The Fund's return compared favorably with a 13.57% increase
in the Moody's Balanced Fund Index and a 20.80% return for the Standard & Poor's
500 Index in the period. This continues the Fund's trend of outperformance
since inception on June 7th, 2001 with an annualized total return of 6.75%
(16.96% cumulative) compared with a price decline of -1.63% (-3.84% cumulative)
for the Moody's Balanced Fund Index and loss of -6.31% (-14.42% cumulative) for
the Standard & Poor's 500 Index.
The Federal Reserve's commitment to minimal interest rates is the most
important factor in the 2003 revival of investor interest in common stocks.
More than merely lowering rates, the Federal Reserve made clear that its
cautious view of the economy would sustain historically low interest rates for a
considerable period of time. Thus, after the nadir of pessimism in 2002 when
investor's fixation on the deflation of the tech stock bubble combined with an
uncertain economic environment and divisive political climate, the focus of
Federal Reserve policy was to encourage a return to optimism.
The Fed's policy stance, combined with tax legislation favorable to equity
dividends, supported renewal of investor confidence. Illustrating the change,
on June 17 the number of stocks reaching 52 week highs in the stock market rose
to 710, versus 9 new lows. In contrast, at the market bottom on October 10,
2002, the number of new highs was 29 as compared with 923 new lows. All this
happened before the economy showed strong signs of a general upturn. It was
only in the third quarter, ended September 30, that the GDP growth rate jumped
to an 8.2% record, as new home sales, strong orders for durable goods, rising
consumer confidence and even modest improvement in jobless data indicate that a
new economic cycle is beginning. However, uncertainty over its pace and
sustainability remain.
In this evolving environment, we chose to continue to hold a larger
concentration in equities than in bonds for the Alpine Dynamic Balance Fund
portfolio. While we held our allocation in longer-term bonds steady, since we
did not see prospects of near term interest rate increases, we did make some
adjustments; such as selling some long-term Treasuries at what we thought were
near peak prices and then buying them back after modest declines.
With the view that low interest rates were still the driving force in the
economy, our asset allocation for the Fund has remained highly interest
sensitive. The top groups were; Banks and Thrifts (15.9%), Real Estate
Investment Trusts (13.6%), Financial Institutions (12.4%), Homebuilders (9.7%).
At the start of the fiscal year, we viewed a number of the Fund's holdings in
these areas as dramatically undervalued, given the depths of the then prevailing
pessimism. There had been widespread liquidation of stocks of leading banks,
utilities and energy companies, particularly as a result of the California
energy crisis, and then, the Enron crisis. Many had concluded that such
institutions were financially insecure and fundamentally threatened. But,
investors began to look beyond short term challenges, confidence was soon
rebuilt and portfolio gains ensued. The Fund then enjoyed outstanding gains
during the fiscal year, including; 85.61% for Allegheny Energy Inc., 73.01% for
JPMorgan Chase, 72.68% for FleetBoston Corp., 59.02% for TXU and 55.99% for
Merrill Lynch.
These were dramatic turnarounds, yet not the top performers in the
portfolio. This position was held by the homebuilding companies where the big
increases included 114.38% for Centex Corp., 97.08% for Standard Pacific Corp.
and 88.39% for Pulte Corp. The role of homebuilding in sustaining and even
reaccelerating the economy was dramatic. Yet, investors had been pricing this
industry, on a price earnings ratio basis, at multiples 60%-70% below those of
the market as a whole. While the lowest interest rates in 40 years added to
demand for homes, that incremental demand was in addition to both unmet
demographic needs for new housing and the investment benefits of homeownership.
The prime support for the economy from low interest rates was not housing
demand, but from unrealized appreciation in housing, as an unprecedented level
of refinancing at lower interest costs generated new equity and/or lower monthly
costs. This was unquestionably a major economic stimulus, enhancing both
homeowner's disposable cash and purchasing power.
Real estate investment trusts were also beneficiaries of the lowered interest
rates, achieving a consequent upward revaluation. Portfolio gains included
51.15% in Chelsea Property Group, 39.78% in Prime Group Realty Trust, 37.55% in
Vornado Realty Trust, and 35.05% Developers Diversified Realty Trust.
These benefits of lowered rates and a reviving economy for financial
institutions were apparent at many levels. Most dramatic was the October, 2003,
announcement by Bank of America of its proposed acquisition of FleetBoston
Corp., providing the aforementioned 72.68% gain for the Fund's portfolio.
Smaller, lesser known banks also provided sizeable returns, such as the Bancorp
of Rhode Island with a 44.02% gain and Synovus Financial with a 34.70% gain.
Sizeable profits were taken in other financial institutions, including Golden
West, a major thrift and Student Loan Corp.
THE OUTLOOK AND POSITIONING FOR 2004
Investment strategies are impacted by the much changed environment over the
last twelve months. The stability of the bond market is challenged by fears
that economic growth rates may accelerate to the point which reignites fears of
inflation and, therefore, pushes interest rates up. However, members of the
Federal Reserve board have recently made great effort to point out that these
are not their expectations. They continue to see this as a non-inflationary
environment. The other major fear about bond market values is that the nation's
continuing slide into ever larger balance of payments deficits will lead foreign
creditor nations to demand higher returns on the United States Government
obligations which are their primary investment in the U.S. currency. While this
apprehension may be premature, trends of liquidations of U.S. holdings by
foreigners will need careful scrutiny in the months ahead. For the present, we
are holding to a 25% allocation in fixed income, the low end of our range, with
an emphasis on both very short and longer-term bonds.
The stock market is no longer undervalued, on an historical basis. For many
stock issues, companies large and small, justification for present pricing will
only be found through continued overall economic acceleration. For the next
year or two, further growth is likely, largely because of the sizeable stimulus
to the economy from government spending. The better trend of employment and the
evidence of a beginning revival of capital spending growth, reflect the enormous
impact of the military machine and the U.S. commitments in Iraq and other
countries. The huge imbalance in both current account and fiscal deficit is a
matter of concern, though their impact on weakening the dollar should also be an
export stimulant this year. If left unaddressed, however, this could hurt the
economy.
Finally, we would again note the potential impact of the lowered income tax
rate on dividends. In the first few months of the new rates, they have already
begun to reverse the long-term trend toward reduced corporate dividend payouts;
25% of the equities of this Fund have had dividend increases since the new law
was enacted in May.
This Fund's holding of equity investments and our choice of new ones will
continue to center upon undervalued potential growth. Our research will seek
such opportunities whether they be the massive misapprehensions of the risk in
the low price-earnings ratios of homebuilders at the beginning of the year, or
of unforeseen capability to execute corporate turnarounds such as by JPMorgan
Chase, and fearful undervaluation of business trends among strong growth
companies.
We believe this strategy, together with a dynamic fixed income allocation,
provides the potential to sustain the Fund's record of outperformance.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. The principal value and
investment return of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their cost. Investment
performance reflects voluntary fee waivers in effect. In the absence of such
waivers, total return would be reduced.
INVESTING IN THIS FUND INVOLVES SPECIAL RISKS, INCLUDING BUT NOT LIMITED TO,
OPTIONS AND FUTURES TRANSACTIONS. PLEASE REFER TO THE PROSPECTUS FOR FURTHER
DETAILS.
The Moody's Equity Mutual Fund Balanced Index tracks a group of similar funds
that typically correspond to standard classifications based on investment
objectives and fundamental policies. The index includes balanced funds, asset
allocation funds, and to a lesser extent, multiasset global funds. 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. These indices are unmanaged and do not reflect the deduction of
fees associated with a mutual fund. Investors cannot directly invest in an
index.
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.
ALPINE DYNAMIC DIVIDEND FUND
COMPARATIVE TOTAL RETURNS AS OF 10/31/03
SINCE INCEPTION
(9/22/03)
---------------
Alpine Dynamic Dividend Fund 6.90%
Moody's Equity Mutual Fund Growth Income Index 2.58%
S&P 500 Index 2.92%
The Moody's Equity Mutual Fund Growth Income Index tracks a group of similar
funds that typically correspond to standard classifications based on investment
objectives and fundamental policies. 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 Moody's Equity
Mutual Fund Growth Income Index and S&P 500 Index are unmanaged and do not
reflect the deduction of fees associated with a mutual fund, such as investment
adviser fees. The performance for the Dynamic Dividend Fund reflects the
deduction of fees for these value-added services. Investors cannot directly
invest in an index.
PORTFOLIO DISTRIBUTION*<F2>
Utilities 20%
Financial-Banks 14%
Food 10%
Financial Services 7%
Energy 6%
Manufacturing 6%
Transportation 6%
Cash\Cash Equivalents 5%
Chemicals 5%
Telecommunications 5%
Retail 3%
Software 3%
Automobiles 2%
Construction-Materials 2%
Consumer Products & Services 2%
Printing 2%
Real Estate 2%
TOP 10 HOLDINGS*<F2>
1. Lance, Inc. 3.90%
2. American Software, Inc. - Class A 3.29%
3. Unitrin, Inc. 3.28%
4. Bassett Furniture Industries, Incorporated 3.14%
5. Sanderson Farms, Inc. 3.12%
6. Hawaiian Electric Industries, Inc. 2.91%
7. Lyondell Chemical Company 2.85%
8. PNC Financial Services Group 2.81%
9. ChevronTexaco Corporation 2.80%
10. SBC Communications Inc. 2.66%
*<F2> Portfolio holdings, geographical distributions and/or sector
distributions are as of 10/31/03 and are subject to change. Portfolio
holdings are not recommendations to buy or sell any securities. Top 10
Holdings does not include short-term investments.
ALPINE DYNAMIC DIVIDEND FUND
We are pleased to report that the Alpine Dynamic Dividend Fund is off to a
strong start since its inception on September 22, 2003. Although NASD rules do
not permit us to discuss our overall fund results in detail until the portfolio
has at least three months of performance, we can say that we very pleased to
date. The Fund ended the period with total net assets of $13.5 million, an
increase of 26% since inception, with the average portfolio holdings' dividend
yield of approximately 4.9% on an annualized basis at current prices and
indicated rates.
Since this is the first reporting period, we wanted to take this opportunity
to reaffirm our investment goals. We have designed the Alpine Dynamic Dividend
Fund specifically to try to maximize the amount of equity income that is
qualified for the new 15% tax rate, while also employing a research driven
approach to identifying companies with the potential for dividend increases and
capital appreciation. While our focus is on total return, we believe we can
provide our investors with an attractive proportion of tax advantaged dividend
income, significantly above the level of typical equity income funds.
This introduction to our evolving portfolio highlights our selective and
dynamic approach to maximizing both income and capital appreciation potential.
Within our portfolio, we are actually running three different investment
strategies with a multi-cap focus that allows the most opportunities for our
shareholders.
First, we have invested part of the portfolio in consistent, high yielding
stocks that may have less growth potential but are returning cash to
shareholders in the form of large dividend payout ratios. We intend to enhance
this return through effective portfolio reinvestment aimed at selectively taking
advantage of the 61-day holding period now required to obtain the 15% dividend
tax rate. Next, we have identified core growth and income stocks that have
attractive current dividend yields plus a catalyst for potential capital
appreciation and dividend increases. Lastly, we look for mis-valued or
turnaround situations where there may be high current dividend yields due to
depressed earnings that we believe are poised to recover, or where we see a
potential for a special dividend payment in a depressed stock that is
attractively valued.
With these strategies, some of our principal holdings are not the traditional
higher yield, large capitalization segments of the dividend-paying universe.
Instead, we have identified specialized businesses where each has an important
catalyst that we believe will produce attractive earnings growth and higher
dividends. These include some of our top 10 holdings that are small cap stocks
(less than $3 billion) and have posted attractive appreciation since our Fund's
inception, such as American Software (up 28.37%), Lance Foods (up 26.34%),
Bassett Furniture (up 11.74%), Lyondell Chemical (up 10.68%), and Hawaiian
Electric (up 3.44%).
Our value orientation also led to the purchase of Fleet Boston Bancorp, which
provided a 33% increase in value following Bank of America's bid to acquire the
company and triggered price advances for a number of our regional bank holdings,
including Key Corp., PNC Bank Corp, and National City Corp. The selection of
these and other stocks in the portfolio are based on our independent appraisal
of each company's potential for profits, dividend growth and market revaluation
across a broad spectrum of stock market capitalizations. Further, capturing
dividend increases is an important component of our research strategy. In the
short time from our inception through October 31st, five stocks in our portfolio
either increased their dividend rate (by an average of 38%) or provided a
special dividend payment.
As we look out to 2004, we believe that our portfolio of dividend paying
stocks with strong earnings potential and cash flow generation will continue to
garner more attention from the investing community, as valuations on many of the
lesser quality companies that have had strong runs in 2003 now look stretched.
In addition, we believe a large portion of dividend paying stocks will be poised
to benefit from the weaker dollar, continuing improvements in global economic
demand, improved balance sheets and operational leverage following years of
restructuring, and management incentive to use excess cash to reward
shareholders with improved dividend payouts under the new 15% dividend tax rate.
Thank you for your participation in what we believe is an excellent start for
this exciting new investment vehicle and we look forward to reporting on our
progress in 2004.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
Mutual fund investing involves risk. Principal loss is possible. Neither the
Fund nor any of its representatives may give tax advice. Investors should
consult their tax advisor for information concerning their particular situation.
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.
ALPINE MUNICIPAL MONEY MARKET FUND
EQUIVALENT TAXABLE YIELDS
AS OF 10/31/03
YOUR TAX-EXEMPT
EFFECTIVE YIELD OF
MARGINAL 1.09% IS EQUIVALENT
JOINT RETURN SINGLE RETURN TAX RATE TO A TAXABLE YIELD OF:
------------ ------------- -------- ----------------------
$56,801-114,650 $28,401-68,800 25.0% 1.45%
$114,651-174,700 $68,801-143,500 28.0% 1.51%
$174,701-311,950 $143,501-311,950 33.0% 1.63%
Over $311,950 Over $311,950 35.0% 1.68%
The chart reflects 2003 marginal federal tax rates before limitations and
phaseouts. Individuals with adjusted gross income in excess of $139,500 should
consult a tax professional to determine their actual 2003 marginal tax rate.
ALPINE TAX OPTIMIZED INCOME FUND
Value of a $10,000 Investment
Alpine Tax Optimized Lipper Short Municipal
Date Income Fund Debt Funds Index
---- ----------- ----------------
12/6/2002 $10,000 $10,000
12/31/2002 $10,061 $10,057
1/31/2003 $10,091 $10,079
2/28/2003 $10,176 $10,130
3/31/2003 $10,168 $10,124
4/30/2003 $10,252 $10,146
5/31/2003 $10,357 $10,204
6/30/2003 $10,398 $10,213
7/31/2003 $10,317 $10,171
8/31/2003 $10,328 $10,195
9/30/2003 $10,441 $10,261
10/31/2003 $10,412 $10,256
This chart represents a comparison of a hypothetical $10,000 investment in the
indicated share class versus a similar investment in the Fund's benchmark. PAST
PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. 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. Investment return and principal
value of the Tax Optimized Income Fund will fluctuate, so that the shares, when
redeemed, may be worth more or less than their original cost. The returns set
forth reflect the waiver of certain fees. Without the waiver of fees, total
return would have been lower.
Lipper Short Municipal Debt Funds Index is an unmanaged index that tracks funds
that invest in municipal debt issues with dollar-weighted average maturities of
less than three years and does not reflect the deduction of fees associated with
a mutual fund, such as investment adviser fees.. The performance for the Tax
Optimized Income Fund reflects the deduction of fees for these value-added
services. Investors cannot directly invest in an index.
COMPARATIVE TOTAL RETURNS AS OF 10/31/03
SINCE INCEPTION
(12/6/02)
---------------
Alpine Tax Optimized Income Fund 4.12%
Lipper Short Municipal Debt Funds Index 2.56%
ALPINE MUNICIPAL MONEY MARKET FUND / ALPINE TAX OPTIMIZED INCOME FUND
We are pleased to provide you with the inaugural Alpine Income Trust annual
report for the period ending October 31, 2003. The Income Trust includes both
the Alpine Tax Optimized Income Fund and the Alpine Municipal Money Market Fund.
The total return since inception on 12/06/02 for the Alpine Tax Optimized
Income Fund was 4.12%. For the Alpine Municipal Money Market Fund, the total
return since inception on 12/05/02 was 1.00%. The Lipper Analytical Service's
peer average since each fund's inception date was 2.38% and .42% for the Short
Municipal Debt and Tax Exempt Money Market peer groups.
The market was weak at the beginning of our reporting period as uncertainty
regarding the impending conflict with Iraq weighed on business and consumer
confidence. Businesses were reluctant to invest in capital and labor and sought
to keep a tight rein on inventories. Concern over subpar economic growth and
prospects of further deflation prompted the Federal Reserve to cut the federal
funds rate 25 basis points from 1.25% to 1.00%. This was the thirteenth rate
cut since January 2001 and drove already low interest rates to 45-year lows by
mid-June.
In the second half of our reporting period, rates rebounded sharply as easy
financial conditions began to help the economy. Business caution slowly gave
way to greater confidence and renewed spending. With the help of new tax cuts,
consumer spending improved as well, most notably in the housing sector.
Likewise, improving profits and a steadily advancing stock market underpinned
business confidence and the outlook for investment. By the end of our reporting
period, with interest rates at or near 12-month highs, investors were wrestling
with the possibility that the three-year bull market in bonds was over.
Fueled by the lowest interest rates since the 1950s and budget pressures in
many states, municipal issuance remained heavy in the last six months, which
kept tax-free bonds attractive relative to taxable alternatives. Most states,
which are constitutionally required to balance their budgets, have managed to
address their shortfalls and should benefit from the recent economic recovery.
The main exception is California, whose bonds have been hampered by the state's
$38 billion budget deficit and credit downgrades.
One notable trend in the municipal market is that many local governments,
whose obligations are predominantly supported by property taxes, have been
upgraded by the major rating agencies as strong growth in residential values
increased tax bases. Another is that lower-quality municipal bonds decisively
outperformed their higher-quality counterparts in the last six months, as yield-
hungry investors embraced riskier assets amid signs of stronger economic growth.
ALPINE MUNICIPAL MONEY MARKET FUND
Taxable money market rates bottomed in June as market sentiment, increasingly
dominated by deflation concerns, pushed interest rates to all-time lows. When
the Fed cut its overnight interest rate by only 25 basis points instead of 50
basis points, the deflation bubble began to lose air. Interest rates began to
rise, returning to levels they were in March.
Municipal money market rates moved in similar fashion, sliding progressively
lower in June and July and then retracing their path from August on. Overnight
and seven-day securities were very volatile with yields averaging between 0.80%
and 1.20%. Rates in the six-to-twelve month area of the curve moved in a
similar range, reaching a low of 0.80% in June before returning to 1.25 by the
end of October.
At the same time, the supply of newly issued municipal money market
securities rose sharply as the weak economy took its toll on tax revenues.
Since tax receipts fell short of many state's budgeted projections, they issued
more short-term securities to finance their operating budget deficits. During
the reporting period, tax-exempt money market instruments provided between 85%
and 100% of the yield of comparable U.S. Treasury bills, resulting in very
attractive after-tax returns compared to historical norms for many investors.
In managing the Fund, we employ two primary strategies. First, we attempt to
add value by constructing a diverse portfolio of high quality, federally tax-
exempt money market securities. Second, we actively manage the Fund's maturity
in anticipation of what we believe are interest rate trends, supply and demand
changes in the short-term municipal marketplace and anticipated liquidity needs.
During the past six months, we continued to maintain a large amount of the
Fund's assets in variable rate demand notes. Our aggressive efforts in this
area resulted in the Fund holding upwards of 80% in this type of security.
During most of the past year, even with yields falling, fixed-rate municipal
notes did not appear attractive relative to variable rate securities. Among the
reasons for this situation was the large demand among money market funds looking
to reinvest proceeds from maturing notes from the previous year and the fact
that their yields were at historical lows.
Amid more convincing signs of an economic recovery, the yield differences
between very short-term money market instruments and one-year notes should
widen. We will continue to scour the market for the best relative value
available and shift into and out of different categories of securities as
opportunities arise.
ALPINE TAX OPTIMIZED INCOME FUND
The Alpine Tax Optimized Income Fund, which seeks to provide high after-tax
current income consistent with principal preservation, returned 4.12% from the
period of inception (12/6/02) on through October 31, 2003. At the close of this
period, the Fund had 66% of its holdings in municipal securities and 34% of its
holdings in taxable securities.
The environment for short to intermediate fixed income securities was fairly
volatile through much of the past six months. As a result, we continued to
maintain our focus on the two areas of the fixed income market that we felt
offered the best value for after-tax returns.
The first area was the municipal bond market, as this sector continued to
trade at very high ratios relative to most taxable securities and therefore
presented us with many buying opportunities. We had positioned this sector with
an overweighting in variable rate demand notes and one year bonds to maintain a
slightly shorter duration then our peer group in anticipation of a rising
interest rate environment.
In the taxable sector, we concentrated mainly on corporate bonds. This area
continues to provide the Fund with attractive after-tax yield not available in
other sectors of the fixed income market. Our initial reasoning for focusing on
the area of the market was that corporate bond spreads had widened to levels
that made them significant cheaper to other securities. As the economy started
to show signs of improvement, these spreads decreased, thus increasing the value
of our holdings. This was especially true in the automotive sector of which we
maintain holdings of the three major companies. Another opportunity that we
were able to capitalize on was the new issue market. As interest rates moved
significantly lower in late June and July, we rode the wave by buying and then
selling several new offerings that came to market.
The best of corporate fundamentals are on the horizon, but the best of the
credit market performance is in the past. Therefore, we do not anticipate
increasing our holdings in these securities in the near future.
Thank you for your confidence and support as we finish our first fiscal year
of operation. We look forward to continuing to meet your expanding investment
needs in years to come.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. The principal value and
investment return of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their cost. Investment
performance reflects voluntary fee waivers in effect. In the absence of such
waivers, total return would be reduced.
Short term performance, in particular, is not a good indication of a fund's
future performance, and an investment should not be made based solely on
returns.
AN INVESTMENT IN THESE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THE ALPINE
MUNICIPAL MONEY MARKET FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE. IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.
INVESTING IN THESE FUNDS INVOLVES SPECIAL RISKS, INCLUDING BUT NOT LIMITED TO,
INVESTING IN MUNICIPAL OBLIGATIONS AND DERIVATIVE SECURITIES, MORTGAGE-RELATED
AND ASSET-BACKED INVESTMENTS. PLEASE REFER TO THE PROSPECTUS FOR FURTHER
DETAILS.
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.
Lipper Analytical Services, Inc. is an independent mutual fund research and
rating service. Each Lipper average represents a universe of Funds with similar
invest objectives.
Any tax or legal information provided is merely a summary of our understanding
and interpretation of some of the current income tax regulations and is not
exhaustive. Investors must consult their tax advisor or legal counsel for advice
and information concerning their particular situation. Neither the Fund nor any
of its representatives may give legal or tax advice.
The federal government guarantees interest payments from government securities,
such as U.S. Treasury bills, while dividend payments carry no such guarantee.
Government securities, if held to maturity, guarantee the timely payment of
principal and interest.
ALPINE MUTUAL FUNDS
DYNAMIC BALANCE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
OCTOBER 31, 2003
SHARES/ SECURITY
PAR VALUE DESCRIPTION VALUE
--------- ----------- -----
COMMON STOCKS -- 78.3%
Conglomerate -- 1.1%
20,000 General Electric Company $ 580,200
-----------
Construction -- Homebuilder -- 9.7%
1,000 Cavco Industries, Inc (a)<F3> 24,150
10,000 Centex Corporation 975,000
10,000 D.R. Horton, Inc. 398,000
5,000 M.D.C. Holdings, Inc. 336,600
15,000 Pulte Homes, Inc. 1,297,650
10,000 The Ryland Group, Inc. 889,000
3,000 Skyline Corporation 103,350
25,000 Standard Pacific Corp. 1,196,250
-----------
5,220,000
-----------
Consumer Products & Services -- 4.7%
10,000 Avery Dennison Corporation 525,800
15,000 Colgate-Palmolive Company 797,850
15,000 Kimberly-Clark Corporation 792,150
28,000 RPM International, Inc. 404,600
-----------
2,520,400
-----------
Energy -- 3.4%
15,000 ChevronTexaco Corporation 1,114,500
7,000 CONSOL Energy Inc. 151,900
13,000 Penn Virginia Corporation 589,550
-----------
1,855,950
-----------
Financial -- Banks -- 16.0%
13,000 Bancorp Rhode Island, Inc. 414,700
15,000 Banknorth Group, Inc. 469,800
3,000 Bank of America Corporation 227,190
25,000 The Bank of New York
Company, Inc. 779,750
8,579 BSB Bancorp, Inc. 265,005
11,000 Comerica Incorporated 566,280
12,000 Doral Financial Corp. (b)<F4> 606,000
40,000 FleetBoston Financial Corporation 1,615,600
26,000 J.P. Morgan Chase & Co. 933,400
17,000 North Fork Bancorporation, Inc. 662,660
11,000 PNC Financial Services Group 589,270
2,608 Rurban Financial Corp. (a)<F3> 38,077
19,000 State Street Corporation 994,840
10,000 Synovus Financial Corp. 276,000
4,000 Taylor Capital Group, Inc. 101,680
-----------
8,540,252
-----------
Financial Services -- 12.4%
14,000 Ambac Financial Group, Inc. 990,360
13,000 American International Group, Inc. 790,790
9,500 The Chubb Corporation 634,695
22,000 Fannie Mae 1,577,180
40,000 GATX Corporation 899,600
14,000 Marsh & McLennan
Companies, Inc. 598,500
36,000 MBNA Corporation 891,000
7,500 Municipal Mortgage & Equity, L.L.C. 178,200
3,000 Unitrin, Inc. 111,000
-----------
6,671,325
-----------
Information Technology -- 2.0%
12,000 International Business
Machines Corporation 1,073,760
-----------
Pharmaceutical -- 5.7%
20,000 Bristol-Myers Squibb Company 507,400
4,000 Eli Lilly and Company 266,480
22,000 Johnson & Johnson 1,107,260
1,809 Medco Health Solutions, Inc. (a)<F3> 60,059
15,000 Merck & Co. Inc. 663,750
15,000 Pfizer Inc. 474,000
-----------
3,078,949
-----------
Printing -- 1.0%
20,000 R.R. Donnelley & Sons Company 520,000
-----------
Publishing -- 1.3%
11,000 The McGraw-Hill Companies, Inc. 736,450
-----------
Real Estate Investment Trusts -- 13.6%
10,000 Boston Properties, Inc. 442,500
38,000 Chelsea Property Group, Inc. 1,869,600
10,000 Developers Diversified
Realty Corporation 289,000
35,000 Impac Mortgage Holdings, Inc. 526,750
10,000 Mack-Cali Realty Corporation 376,900
15,000 Maguire Properties, Inc. 327,000
70,000 MeriStar Hospitality
Corporation (a)<F3> 478,100
18,000 Post Properties, Inc. 475,200
56,500 Prime Group Realty Trust (a)<F3> 351,430
10,000 Simon Property Group, Inc. 450,800
26,000 Taubman Centers, Inc. 524,160
8,000 Town & Country Trust 185,840
20,000 Vornado Realty Trust 1,011,000
-----------
7,308,280
-----------
Retail -- 1.2%
18,000 Ethan Allen Interiors Inc. 662,400
-----------
Utilities -- 6.2%
27,000 Allegheny Energy, Inc. (a)<F3> 285,660
35,000 Aquila, Inc. (a)<F3> 138,250
5,000 FPL Group, Inc. 318,700
10,000 Hawaiian Electric Industries, Inc. 457,700
10,000 KeySpan Corporation 349,700
12,000 NUI Corporation 204,840
5,200 SJW Corp. 460,200
23,800 TECO Energy, Inc. 312,494
15,000 TXU Corp. 342,300
30,550 Xcel Energy, Inc. 501,020
-----------
3,370,864
-----------
Total Common Stocks
(Cost $37,280,977) 42,138,830
-----------
PREFERRED STOCKS -- 0.2%
4,600 Southside Cap Trust II,
8.750%, 12/31/2030 92,460
-----------
Total Preferred Stocks
(Cost $70,910) 92,460
-----------
BONDS AND NOTES -- 18.4%
U.S. Government Agencies -- 4.0%
$2,000,000 Federal National
Mortgage Association
6.250%, 5/15/2029 2,151,646
-----------
U.S. Government Obligations -- 14.4%
1,000,000 U.S. Treasury Bond,
7.250%, 5/15/2016 1,239,571
5,000,000 U.S. Treasury Bond,
6.000%, 2/15/2026 5,494,145
1,000,000 U.S. Treasury Bond,
5.250%, 11/15/2028 998,360
-----------
7,732,076
-----------
Total Bonds and Notes
(Cost $9,473,351) 9,883,722
-----------
SHORT-TERM INVESTMENTS -- 3.9%
U.S. Government Agencies -- 3.9%
2,087,000 Federal Home Loan Bank Discount
Note, 0.800%, 11/03/2003 2,086,907
-----------
Total Short-Term Investments
(Cost $2,086,907) 2,086,907
-----------
Total Investments
(Cost $48,912,145) 100.8% 54,201,919
Liabilities in excess
of other assets (0.8)% (445,585)
-----------
Total Net Assets 100.0% $53,756,334
-----------
-----------
(a)<F3> Non-income producing securities.
(b)<F4> Foreign security.
See notes to financial statements.
ALPINE MUTUAL FUNDS
DYNAMIC DIVIDEND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
OCTOBER 31, 2003
SHARES/ SECURITY
PAR VALUE DESCRIPTION VALUE
--------- ----------- -----
COMMON STOCKS -- 97.2%
Automobiles -- 2.5%
8,000 General Motors Corporation $ 341,360
-----------
Chemicals -- 5.3%
10,000 Eastman Chemical Company 324,600
27,000 Lyondell Chemical Company 386,100
-----------
710,700
-----------
Construction -- Materials -- 2.3%
12,100 International Aluminum
Corporation 306,130
-----------
Consumer Products & Services -- 2.5%
10,000 Newell Rubbermaid Inc. 228,000
3,000 Russ Berrie and Company, Inc. 107,550
-----------
335,550
-----------
Energy -- 6.0%
7,800 BP p.l.c. -- ADR 330,564
5,100 ChevronTexaco Corporation 378,930
2,000 Kinder Morgan, Inc. 107,100
-----------
816,594
-----------
Financial -- Banks -- 14.8%
1,000 Bank of America Corporation 75,730
6,800 Citigroup Inc. 322,320
5,000 FleetBoston Financial Corporation 201,950
9,000 J.P. Morgan Chase & Co. 323,100
11,000 KeyCorp 310,750
882 NASB Financial Inc. 34,795
10,800 National City Corporation 352,728
7,100 PNC Financial Services Group 380,347
-----------
2,001,720
-----------
Financial Services -- 5.0%
10,000 Municipal Mortgage
& Equity, L.L.C. 237,600
12,000 Unitrin, Inc. 444,000
-----------
681,600
-----------
Food -- 10.5%
15,000 ConAgra Foods, Inc. 357,600
10,502 Ingles Markets, Incorporated --
Class A 106,595
40,600 Lance, Inc. 528,206
12,000 Sanderson Farms, Inc. 421,680
-----------
1,414,081
-----------
Manufacturing -- 6.2%
5,500 Bandag, Incorporated -- Class A 177,650
18,300 Twin Disc, Incorporated 346,785
21,000 Worthington Industries, Inc. 306,180
-----------
830,615
-----------
Printing -- 2.4%
12,500 R. R. Donnelley & Sons Company 325,000
-----------
Real Estate Investment Trusts -- 2.1%
18,800 Impac Mortgage Holdings, Inc. 282,940
-----------
Retail -- 3.1%
27,000 Bassett Furniture
Industries, Incorporated 424,170
-----------
Software -- 3.3%
69,800 American Software, Inc. -- Class A 445,324
-----------
Telecommunications -- 5.1%
13,200 Atlantic Tele-Network, Inc. 332,508
15,000 SBC Communications Inc. 359,700
-----------
692,208
-----------
Transportation -- 5.6%
11,000 Alexander & Baldwin, Inc. 342,760
10,000 Frontline Limited (b)<F6> 193,400
15,000 Tsakos Energy Navigation Ltd. (b)<F6> 225,000
-----------
761,160
-----------
Utilities -- 20.5%
8,500 Cinergy Corp. 308,635
15,000 Cleco Corporation 251,250
8,000 Consolidated Edison, Inc. 323,760
8,000 DTE Energy Company 295,040
8,600 Hawaiian Electric Industries, Inc. 393,622
9,200 KeySpan Corporation 321,724
8,600 National Fuel Gas Company 192,210
4,300 Progress Energy, Inc. 185,330
3,500 SJW Corp. 309,750
6,600 The Southern Company 196,680
-----------
2,778,001
-----------
Total Common Stocks
(Cost $12,373,800) 13,147,153
-----------
PREFERRED STOCKS -- 2.4%
5,000 The Bear Stearns Companies Inc.,
Series G, 5.490% 249,500
3,000 Lehman Brothers Holdings Inc.,
Series F, 6.500% 79,605
-----------
Total Preferred Stocks
(Cost $322,070) 329,105
-----------
SHORT-TERM INVESTMENTS -- 5.3%
U.S. Government Agencies -- 5.3%
$713,000 Federal Home Loan Bank Discount
Note, 0.800%, 11/03/2003 712,968
-----------
Total Short-Term Investments
(Cost $712,968) 712,968
-----------
Total Investments
(Cost $13,408,838) 104.9% 14,189,226
Liabilities in excess
of other assets (4.9%) (661,866)
-----------
Total Net Assets 100.0% $13,527,360
-----------
-----------
(a)<F5> Non-income producing securities.
(b)<F6> Foreign security.
ADR - American Depository Receipt
See notes to financial statements.
ALPINE MUTUAL FUNDS
MUNICIPAL MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
OCTOBER 31, 2003
SHARES/ SECURITY
PAR VALUE DESCRIPTION VALUE
--------- ----------- -----
MUNICIPAL BONDS -- 99.6%
Alabama -- 2.9%
Dothan Houston County Alabama
Airport Authority Airport Revenue,
Pemco Aviation Group Project
(LOC: Southtrust Bank N.A.)
$1,250,000 1.300%, 11/07/2003 (a)<F7> (b)<F8> $ 1,250,000
University of Alabama University
Revenue, Huntsville General Fees --
Series A (CS: FSA)
455,000 1.450%, 11/07/2003 (b)<F8> 454,962
-----------
1,704,962
-----------
Arkansas -- 2.4%
Clark County Solid Waste Disposal
Revenue, Alcoa Inc. Project
1,000,000 1.550%, 11/07/2003 (a)<F7> (b)<F8> 1,000,000
Texarkana Arkansas Industrial
Development Revenue,
Precision Roll Grinders Inc.
Project (CS: Arkansas Department
of Economic Development)
425,000 1.950%, 11/07/2003 (b)<F8> 425,000
-----------
1,425,000
-----------
California -- 7.8%
California Statewide Communities
Development Authority Multifamily
Housing Revenue, Main Plaza
Apartments Project (GIC:
Transamerica Life Insurance)
1,600,000 1.600%, 12/01/2003 1,600,000
State of California RAWS -- Series B
3,000,000 2.000%, 6/16/2004 3,010,023
-----------
4,610,023
-----------
Colorado -- 8.5%
Cherry Creek Colorado South
Metropolitan District 1 --
Series B (LOC: Compass Bank)
2,000,000 1.400%, 11/07/2003 (a)<F7> (b)<F8> 2,000,000
Vail Colorado Multifamily Housing
Revenue, Middle Creek Village
Apartments Project (LOC:
California Bank & Trust)
3,000,000 1.350%, 11/07/2003 (a)<F7> (b)<F8> 3,000,000
-----------
5,000,000
-----------
Florida -- 1.8%
Hillsborough County Florida
Industrial Development Authority
Industrial Development Revenue,
Ringhaver Equipment Co. Project
(LOC: Suntrust Bank)
500,000 1.350%, 11/07/2003 (a)<F7> (b)<F8> 500,000
Northern Palm Beach County
Improvement District Florida,
Water Control & Improvement
(CS: Radian)
565,000 1.500%, 11/01/2004 565,000
-----------
1,065,000
-----------
Georgia -- 9.4%
De Kalb County Development
Authority, Noland Company Project
(LOC: Wachovia Bank N.A.)
1,500,000 1.300%, 11/07/2003 (a)<F7> (b)<F8> 1,500,000
Rockdale County Georgia
Development Authority Revenue,
Great Southern Wood Project
1,755,000 1.220%, 11/07/2003 (a)<F7> (b)<F8> 1,755,000
Walton County Georgia Industrial
Building Authority Industrial
Development Revenue, Leggett &
Platt Inc. Project
2,300,000 1.300%, 11/07/2003 (a)<F7> (b)<F8> 2,300,000
-----------
5,555,000
-----------
Hawaii -- 0.7%
Hawaii State Housing Finance &
Development Corp., Hawaii Rental
Housing Systems -- Series B
(LOC: Industrial Bank of Japan)
400,000 3.760%, 11/07/2003 (a)<F7> (b)<F8> 400,000
-----------
Illinois -- 7.7%
Harvard Illinois Healthcare Facility
Revenue, Harvard Memorial
Hospital Inc. Project
(LOC: M&I Bank)
1,430,000 1.350%, 11/07/2003 (a)<F7> (b)<F8> 1,430,000
Illinois Development Finance
Authority Industrial Development
Revenue, Forty Foot High Realty LLC
(LOC: Charter One Bank)
3,100,000 1.390%, 11/07/2003 (a)<F7> (b)<F8> 3,100,000
-----------
4,530,000
-----------
Indiana -- 0.3%
Indianapolis Indiana Industrial
Development Revenue, Hoosier
Gasket Corp. Project (LOC: Bank
One Indianapolis)
195,000 1.950%, 11/07/2003 (a)<F7> (b)<F8> 195,000
-----------
Kentucky -- 1.3%
Erlanger Kentucky Industrial
Development Revenue, Stronghold
Kentucky Enterprises
(LOC: PNC Bank)
750,000 2.300%, 11/01/2003 (a)<F7> (b)<F8> 750,000
-----------
Louisiana -- 10.0%
Ascension Parish Solid Waste
Disposal, Allied Signal Inc. Project
2,000,000 1.400%, 11/07/2003 (a)<F7> (b)<F8> 2,000,000
Louisiana Tobacco Settlement
Financing Corp. Rev. PA-1079
(SPA: Merrill Lynch Capital Services)
3,690,000 1.310%, 11/07/2003 (a)<F7> (b)<F8> 3,690,000
Monroe Louisiana Sales Tax
Increment Revenue, Garrett
Road Development Area Project
(CS: Radian)
250,000 2.140%, 3/01/2004 250,483
-----------
5,940,483
-----------
Michigan -- 1.0%
Michigan State Job Development
Authority Revenue, Fisher Big
Wheel Inc. Project
600,000 1.650%, 11/07/2003 (a)<F7> (b)<F8> 600,000
-----------
Minnesota -- 0.3%
Elk River Minnesota Multifamily
Housing Revenue, Elk River Estates
Project (LOC: Associated Bank)
200,000 1.400%, 11/07/2003 (a)<F7> (b)<F8> 200,000
-----------
New Mexico -- 5.5%
Albuquerque New Mexico Revenue,
Charter Hospital of Albuquerque
Inc. Project
3,100,000 1.750%, 11/07/2003 (a)<F7> (b)<F8> 3,100,000
Sandoval County New Mexico
Gross Receipts Tax Revenue
130,000 1.500%, 11/07/2003 129,965
-----------
3,229,965
-----------
Ohio -- 3.4%
Lorain County Ohio Hospital
Revenue, Catholic Healthcare
Authority Project
1,000,000 5.000%, 10/01/2004 1,033,969
Ohio State Water Development
Authority Pollution Control
Revenue, PPG Industries Project
1,000,000 1.540%, 11/07/2003 (a)<F7> (b)<F8> 1,000,000
-----------
2,033,969
-----------
Oklahoma -- 5.2%
Grand River Dam Authority
Oklahoma Revenue
3,000,000 4.000%, 6/01/2004 3,043,261
-----------
South Carolina -- 0.9%
South Carolina Jobs-Economic
Development Authority, Trimite
Powders Inc. Project
(LOC: Wachovia Bank)
530,000 2.000%, 9/01/2004 (a)<F7> (b)<F8> 530,000
-----------
Tennessee -- 0.6%
Jackson Tennessee Health Educational
& Housing Facility Board Multifamily
Revenue, Creekside Apartments
Project (LOC: First Tennessee Bank)
345,000 2.000%, 11/07/2003 (a)<F7> (b)<F8> 345,000
-----------
Texas -- 7.4%
Bell County Texas Health Facility
Development Corp. Revenue,
Southern Healthcare Systems Project
2,900,000 1.300%, 11/07/2003 (a)<F7> (b)<F8> 2,900,000
Port Corpus Christi Authority Texas
Nueces County Solid Waste
Disposal, Flint Hills Project
1,500,000 1.400%, 11/07/2003 (a)<F7> (b)<F8> 1,500,000
-----------
4,400,000
-----------
Virginia -- 3.4%
Orange County Virginia Industrial
Development Authority Revenue,
Zamma Corp. Project (LOC:
Southtrust Bank N.A.)
2,000,000 1.250%, 11/07/2003 (a)<F7> (b)<F8> 2,000,000
-----------
Washington -- 8.8%
Washington State Economic
Development Finance Authority
Economic Development Revenue,
B&H Dental Laboratory Project
(LOC: Washington Mutual Bank)
2,225,000 1.550%, 11/07/2003 (a)<F7> (b)<F8> 2,225,000
Washington State Economic
Development Finance Authority
Economic Development Revenue,
Belina Interiors Inc. -- Series F
(LOC: Keybank N.A.)
1,110,000 1.300%, 11/07/2003 (a)<F7> (b)<F8> 1,110,000
Washington State Economic
Development Finance Authority
Economic Development Revenue,
Hillstrom Ventures LLC Project
(LOC: Washington Mutual Bank)
1,875,000 1.550%, 11/07/2003 (a)<F7> (b)<F8> 1,875,000
-----------
5,210,000
-----------
Wisconsin -- 4.2%
Marshfield Wisconsin Industrial
Development Revenue, Beatrice
Cheese Project (LOC: Wachovia
Bank & Trust)
2,500,000 1.400%, 11/07/2003 (a)<F7> (b)<F8> 2,500,000
-----------
Multistate -- 6.1%
Clipper Tax Exempt Trust
2,005,000 1.250%, 11/07/2003 (a)<F7> (b)<F8> 2,005,000
Pooled Multi-Family
Puttable Floating Option
Tax-Exempt Receipts
1,600,000 1.300%, 11/07/2003 (a)<F7> (b)<F8> 1,600,000
-----------
3,605,000
-----------
Total Municipal Bonds
(Cost $58,872,663) 58,872,663
-----------
MONEY MARKET FUNDS -- 0.3%
171,819 Federated Government Obligations
Fund (Cost $171,819) 171,819
-----------
Total Investments
(Cost $59,044,482) 99.9% 59,044,482
Other Assets
less Liabilities 0.1% 81,897
-----------
Total Net Assets 100.0% $59,126,379
-----------
-----------
(a)<F7> Variable Rate Security - The rate reported is the rate in effect as of
October 31, 2003. The date shown is the next reset date.
(b)<F8> Maturity date represents first available put date.
CS - Credit Support
GIC - Guaranty Insurance Company
LOC - Letter of Credit
SPA - Standby Purchase Agreement
See notes to financial statements.
ALPINE MUTUAL FUNDS
TAX OPTIMIZED INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
OCTOBER 31, 2003
SHARES/ SECURITY
PAR VALUE DESCRIPTION VALUE
--------- ----------- -----
BONDS -- 98.4%
CORPORATE BONDS -- 33.8%
Bank of America Corporation
$1,000,000 3.250%, 8/15/2008 $ 980,513
Boeing Capital Corporation
1,800,000 5.750%, 2/15/2007 1,928,569
CIT Group Inc.
1,150,000 5.910%, 11/23/2005 1,222,121
500,000 4.000%, 5/08/2008 503,981
Daimler-Chrysler NA Holding Co.
2,000,000 4.750%, 1/15/2008 1,998,362
Ford Motor Credit Company
500,000 5.750%, 2/23/2004 506,021
2,400,000 6.875%, 2/01/2006 2,511,823
General Motors
Acceptance Corporation
1,200,000 6.125%, 8/28/2007 1,264,134
The Goldman Sachs Group, Inc.
1,575,000 4.125%, 1/15/2008 1,608,014
Household Finance Corporation
2,000,000 4.625%, 1/15/2008 2,072,714
International Lease
Finance Corporation
3,000,000 4.750%, 2/15/2008 3,103,623
Time Warner Inc.
1,000,000 6.150%, 5/01/2007 1,087,108
-----------
Total Corporate Bonds
(Cost $18,207,729) 18,786,983
-----------
MUNICIPAL BONDS -- 64.6%
Alabama -- 0.9%
University of Alabama University
Revenue, Huntsville General
Fees -- Series A
460,000 2.050%, 12/01/2004 464,545
-----------
Alaska -- 2.6%
Alaska Industrial Development &
Export Authority, Revolving
Fund -- Series A
1,400,000 4.500%, 4/01/2005 1,446,270
-----------
Arkansas -- 6.2%
Saline County Arkansas Pollution
Control Improvement Revenue,
Alcoa Inc. Project
1,350,000 1.460%, 11/07/2003 (a)<F9> (b)<F10> 1,350,000
Searcy Arkansas Industrial
Development Revenue,
Yarnell Ice Cream Co. Project
2,100,000 2.120%, 1/01/2010 (a)<F9> 2,100,000
-----------
3,450,000
-----------
California -- 4.3%
California Statewide Communities
Development Authority Multifamily
Housing Revenue, Main Plaza
Apartments Project
400,000 1.600%, 12/01/2003 400,036
State of California RAWS -- Series B
2,000,000 2.000%, 6/16/2004 2,006,720
-----------
2,406,756
-----------
Illinois -- 5.4%
Illinois Development Finance
Authority Industrial Development
Revenue, Forty Foot High Realty LLC
500,000 1.390%, 11/07/2003 (a)<F9> (b)<F10> 500,000
Illinois Development Finance
Authority Pollution Control
Revenue, Illinois Power Company --
Series B Project
2,500,000 1.530%, 11/07/2003 (a)<F9> (b)<F10> 2,500,000
-----------
3,000,000
-----------
Indiana -- 5.4%
Indiana State Development Finance
Authority Solid Waste Disposal
Revenue, Waste Management
Inc. Project
1,000,000 2.700%, 10/01/2004 (b)<F10> 1,000,000
Vigo County Indiana Industrial
Development Revenue, Republic
Services Inc. Project
2,000,000 1.800%, 11/07/2003 (a)<F9> (b)<F10> 2,000,000
-----------
3,000,000
-----------
Kentucky -- 1.8%
Boyd County Kentucky Sewage &
Solid Waste Revenue, Air Products
& Chemicals Inc. Project
1,000,000 1.170%, 11/07/2003 (a)<F9> (b)<F10> 1,000,000
-----------
Massachusetts -- 2.7%
Massachusetts State Development
Finance Agency Environmental
Improvement Revenue, Mead Corp.
Project -- Series A
1,500,000 2.250%, 11/07/2003 (a)<F9> (b)<F10> 1,500,000
-----------
Michigan -- 3.7%
Michigan State Strategic Fund,
Dow Chemical Project
1,000,000 3.100%, 12/01/2004 (a)<F9> (b)<F10> 1,014,480
1,000,000 3.800%, 6/01/2006 (a)<F9> (b)<F10> 1,030,160
-----------
2,044,640
-----------
Mississippi -- 0.5%
Mississippi Hospital Equipment &
Facilities Authority Revenue,
Southwest Mississippi Regional
Medical Center Project
250,000 2.300%, 11/07/2003 (b)<F10> 250,238
-----------
Missouri -- 7.9%
Missouri State Environmental
Improvement & Energy
Resources Authority, Amerenue --
Series B Project
1,700,000 1.450%, 11/07/2003 (a)<F9> (b)<F10> 1,700,000
Missouri State Environmental
Improvement & Energy
Resources Authority, Union
Electric Company Project
2,000,000 1.700%, 11/30/2003 (a)<F9> (b)<F10> 2,000,000
St. Louis Missouri Airport Revenue
Project, Series C
680,000 3.000%, 7/01/2004 688,364
-----------
4,388,364
-----------
New Mexico -- 2.7%
Farmington New Mexico Pollution
Control Revenue, Public Service --
San Juan Project
1,500,000 2.750%, 4/01/2004 (b)<F10> 1,504,560
-----------
New York -- 3.6%
St. Catherine Siena Medical Center /
NY Taxable Revenue Bonds
2,000,000 6.750%, 11/30/2003 (a)<F9> (b)<F10> 2,000,000
-----------
Ohio -- 5.9%
Ohio State Air Quality Development
Authority Revenue, Cincinnati Gas
& Electric Co. -- Series B
1,300,000 1.400%, 11/07/2003 (a)<F9> (b)<F10> 1,300,000
Ohio State Water Development
Authority Pollution Control
Facilities Revenue, Ohio Edison
Co. Project
2,000,000 4.400%, 12/01/2003 (a)<F9> (b)<F10> 2,003,300
-----------
3,303,300
-----------
Texas -- 10.8%
Brazos River Texas Harbor Naval
District Brazoria County Revenue
1,700,000 1.250%, 11/07/2003 (a)<F9> (b)<F10> 1,700,000
Cypress-Fairbanks Texas
Independent School District,
Schoolhouse -- Series B
1,200,000 5.000%, 8/15/2007 (b)<F10> 1,319,748
Matagorda County Texas Navigation
District No. 1 Pollution Control
Revenue, Central Power & Light
2,000,000 4.000%, 11/01/2003 (a)<F9> (b)<F10> 2,000,000
1,000,000 2.350%, 11/01/2004 (a)<F9> (b)<F10> 999,800
-----------
6,019,548
-----------
Washington -- 0.2%
Washington State Economic
Development Finance Authority,
Hillstrom Ventures LLC
125,000 1.550%, 11/07/2003 (a)<F9> (b)<F10> 125,000
-----------
Total Municipal Bonds
(Cost $35,814,892) 35,903,221
-----------
Total Bonds
(Cost $54,022,621) 54,690,204
-----------
MONEY MARKET FUNDS -- 2.7%
88,216 Federated Government Obligations
Fund -- Institutional Shares 88,216
1,400,000 Janus Tax Exempt Money Market
Fund -- Institutional Shares 1,400,000
-----------
Total Money Market Funds
(Cost $1,488,216) 1,488,216
-----------
Total Investments
(Cost $55,510,837) 101.1% 56,178,420
Liabilities in excess
of other assets (1.1)% (587,797)
-----------
Total Net Assets 100.0% $55,590,623
-----------
-----------
(a)<F9> Variable Rate Security -- The rate reported is the rate in effect as
of October 31, 2003. The date shown is the next reset date.
(b)<F10> Maturity date represents first available put date.
See notes to financial statements.
ALPINE MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2003
DYNAMIC DYNAMIC
BALANCE DIVIDEND
FUND FUND
------- --------
ASSETS:
Investments, at value(1)<F11> $54,201,919 $14,189,226
Cash 265 655
Dividends receivable 44,185 36,870
Interest receivable 179,076 --
Receivable for capital shares issued -- 14,539
Receivable for investment securities sold 28,316 65,757
Receivable from Adviser -- 7,062
Prepaid expenses and other assets 16,646 225
----------- -----------
Total assets 54,470,407 14,314,334
----------- -----------
LIABILITIES:
Payable for investment securities purchased 596,989 750,235
Payable for capital shares redeemed -- 10,259
Accrued expenses and other liabilities:
Investment advisory fees 53,583 --
Other 63,501 26,480
----------- -----------
Total liabilities 714,073 786,974
----------- -----------
NET ASSETS $53,756,334 $13,527,360
----------- -----------
----------- -----------
NET ASSETS REPRESENTED BY
Capital stock $48,528,459 $12,706,045
Accumulated undistributed net investment income 106,697 72,343
Accumulated net realized losses
from investments sold (168,596) (31,416)
Net unrealized appreciation on investments 5,289,774 780,388
----------- -----------
TOTAL NET ASSETS $53,756,334 $13,527,360
----------- -----------
----------- -----------
NET ASSET VALUE
Net assets $53,756,334 $13,527,360
Shares of beneficial interest
issued and outstanding 4,853,734 1,265,653
Net asset value, offering price
and redemption price per share $11.08 $10.69
(1)<F11> Cost of Investments $48,912,145 $13,408,838
See notes to financial statements.
ALPINE MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2003
MUNICIPAL TAX OPTIMIZED
MONEY MARKET INCOME
FUND FUND
------------ -------------
ASSETS:
Investments, at value(1)<F12> $59,044,482 $56,178,420
Cash 538 --
Interest receivable 213,831 462,595
Receivable for capital shares issued 168,076 --
Prepaid expenses and other assets 5,622 9,457
----------- -----------
Total assets 59,432,549 56,650,472
----------- -----------
LIABILITIES:
Payable for investment securities purchased 250,483 1,000,131
Payable for capital shares redeemed 10,090 --
Dividends payable to shareholders 2,367 555
Accrued expenses and other liabilities:
Investment advisory fees 4,534 15,745
Other 38,696 43,418
----------- -----------
Total liabilities 306,170 1,059,849
----------- -----------
NET ASSETS $59,126,379 $55,590,623
----------- -----------
----------- -----------
NET ASSETS REPRESENTED BY
Capital stock $59,126,379 $54,891,596
Accumulated undistributed net investment income -- --
Accumulated net realized gains
from investments sold -- 31,444
Net unrealized appreciation on investments -- 667,583
----------- -----------
TOTAL NET ASSETS $59,126,379 $55,590,623
----------- -----------
----------- -----------
NET ASSET VALUE
Net assets $59,126,379 $55,590,623
Shares of beneficial interest
issued and outstanding 59,126,379 5,460,543
Net asset value, offering price
and redemption price per share $1.00 $10.18
(1)<F12> Cost of Investments $59,044,482 $55,510,837
See notes to financial statements.
ALPINE MUTUAL FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 2003
DYNAMIC DYNAMIC
BALANCE DIVIDEND
FUND FUND(1)<F13>
------- ------------
INVESTMENT INCOME:
Interest income $ 517,688 $ 2,905
Dividend income 1,172,386 85,669
----------- --------
Total investment income 1,690,074 88,574
----------- --------
EXPENSES:
Investment advisory fees 468,404 12,576
Administration fees 31,283 3,120
Fund accounting fees 33,969 4,320
Audit fees 26,302 6,500
Custodian fees 13,303 920
Interest expense 71 --
Legal fees 76,714 4,640
Registration and filing fees 19,448 3,480
Printing fees 4,334 480
Transfer agent fees 21,753 2,520
Trustee fees 5,159 600
Insurance expense 5,054 --
----------- --------
Total expenses before expense
reimbursement by Adviser 705,794 39,156
Less: Reimbursement by Adviser (73,377) (22,179)
----------- --------
Net expenses 632,417 16,977
----------- --------
Net investment income 1,057,657 71,597
----------- --------
REALIZED/UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (30,104) (31,416)
Change in unrealized
appreciation/depreciation on investments 9,058,775 780,388
----------- --------
Net realized/unrealized gains on investments 9,028,671 748,972
----------- --------
Change in net assets resulting from operations $10,086,328 $820,569
----------- --------
----------- --------
(1)<F13> For the period September 22, 2003 (commencement of operations) through
October 31, 2003.
See notes to financial statements.
ALPINE MUTUAL FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 2003
MUNICIPAL TAX OPTIMIZED
MONEY MARKET INCOME
FUND(1)<F14> FUND(2)<F15>
------------ ------------
INVESTMENT INCOME:
Interest income $605,793 $1,317,552
-------- ----------
Total investment income 605,793 1,317,552
-------- ----------
EXPENSES:
Investment advisory fees 192,815 320,884
Administration fees 57,977 60,464
Audit fees 15,166 17,196
Other fees 47,114 39,635
-------- ----------
Total expenses before expense
reimbursement by Adviser 313,072 438,179
Less: Reimbursement by Adviser (175,958) (181,472)
-------- ----------
Net expenses 137,114 256,707
-------- ----------
Net investment income 468,679 1,060,845
-------- ----------
REALIZED/UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (36) 54,913
Change in unrealized
appreciation/depreciation on investments -- 667,583
-------- ----------
Net realized/unrealized
gains (losses) on investments (36) 722,496
-------- ----------
Change in net assets resulting from operations $468,643 $1,783,341
-------- ----------
-------- ----------
(1)<F14> For the period December 5, 2002 (commencement of operations) through
October 31, 2003.
(2)<F15> For the period December 6, 2002 (commencement of operations) through
October 31, 2003.
See notes to financial statements.
ALPINE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
DYNAMIC BALANCE FUND
------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
---------------- ----------------
OPERATIONS:
Net investment income $ 1,057,657 $ 1,038,718
Net realized loss on investments (30,104) (173,726)
Change in unrealized appreciation/depreciation on investments 9,058,775 (3,970,490)
----------- -----------
Change in net assets resulting from operations 10,086,328 (3,105,498)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,020,091) (1,039,037)
From net realized gains on investments -- (51,211)
----------- -----------
Change in net assets resulting from distributions to shareholders (1,020,091) (1,090,248)
----------- -----------
SHARES OF BENEFICIAL INTEREST TRANSACTIONS:
Proceeds from shares sold 1,436,616 8,042,889
Dividends reinvested 896,893 1,009,991
Cost of shares redeemed (670,726) (33,178)
----------- -----------
Change in net assets from shares of beneficial interest transactions 1,662,783 9,019,702
----------- -----------
Total change in net assets 10,729,020 4,823,956
----------- -----------
NET ASSETS:
Beginning of period 43,027,314 38,203,358
----------- -----------
End of period*<F16> $53,756,334 $43,027,314
----------- -----------
----------- -----------
*<F16> Including undistributed net investment income of $ 106,697 $ 103,773
----------- -----------
----------- -----------
See notes to financial statements.
ALPINE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
DYNAMIC DIVIDEND FUND
---------------------
FOR THE PERIOD
SEPTEMBER 22, 2003 (1)<F18>
THROUGH
OCTOBER 31, 2003
---------------------------
OPERATIONS:
Net investment income $ 71,597
Net realized loss on investments (31,416)
Change in unrealized
appreciation/depreciation on investments 780,388
-----------
Change in net assets resulting from operations 820,569
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income --
From net realized gains on investments --
-----------
Change in net assets resulting
from distributions to shareholders --
-----------
SHARES OF BENEFICIAL INTEREST TRANSACTIONS:
Proceeds from shares sold 12,717,086
Dividends reinvested --
Cost of shares redeemed (10,295)
-----------
Change in net assets from shares
of beneficial interest transactions 12,706,791
-----------
Total change in net assets 13,527,360
-----------
NET ASSETS:
Beginning of period --
-----------
End of period*<F17> $13,527,360
-----------
-----------
*<F17> Including undistributed net investment income of $ 72,343
-----------
-----------
(1)<F18> Commencement of Operations
See notes to financial statements.
ALPINE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
MUNICIPAL MONEY MARKET FUND
---------------------------
FOR THE PERIOD
DECEMBER 5, 2002(1)<F19>
THROUGH
OCTOBER 31, 2003
------------------------
OPERATIONS:
Net investment income $ 468,679
Net realized loss on investments (36)
Change in unrealized
appreciation/depreciation on investments --
------------
Change in net assets resulting from operations 468,643
------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (468,643)
------------
SHARES OF BENEFICIAL INTEREST TRANSACTIONS:
Proceeds from shares sold 102,670,596
Dividends reinvested 466,068
Cost of shares redeemed (44,010,285)
------------
Change in net assets from shares
of beneficial interest transactions 59,126,379
------------
Total change in net assets 59,126,379
------------
NET ASSETS:
Beginning of period --
------------
End of period $ 59,126,379
------------
------------
(1)<F19> Commencement of operations
See notes to financial statements.
ALPINE MUTUAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
TAX OPTIMIZED INCOME FUND
-------------------------
FOR THE PERIOD
DECEMBER 6, 2002(1)<F20>
THROUGH
OCTOBER 31, 2003
------------------------
OPERATIONS:
Net investment income $ 1,060,845
Net realized gain on investments 54,913
Change in unrealized
appreciation/depreciation on investments 667,583
-----------
Change in net assets resulting from operations 1,783,341
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,060,845)
From net realized gains on investments (23,469)
-----------
Change in net assets resulting
from distributions to shareholders (1,084,314)
-----------
SHARES OF BENEFICIAL INTEREST TRANSACTIONS:
Proceeds from shares sold 57,078,436
Dividends reinvested 1,083,329
Cost of shares redeemed (3,270,169)
-----------
Change in net assets from shares
of beneficial interest transactions 54,891,596
-----------
Total change in net assets 55,590,623
-----------
NET ASSETS:
Beginning of period --
-----------
End of period $55,590,623
-----------
-----------
(1)<F20> Commencement of Operations
See notes to financial statements.
ALPINE MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2003
1. ORGANIZATION:
Alpine Series Trust (the "Series Trust") was organized in 2001 as a
Delaware Business Trust, and is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company. Alpine Income Trust (the "Income Trust") was organized in 2002 as
a Delaware Business Trust, and is registered under the 1940 Act, as an
open-end management investment company. Alpine Dynamic Balance Fund and
Alpine Dynamic Dividend Fund are two separate funds of the Series Trust and
Alpine Municipal Money Market Fund and Alpine Tax Optimized Income Fund are
two separate funds of the Income Trust. Alpine Dynamic Balance Fund,
Alpine Dynamic Dividend Fund, Alpine Municipal Money Market Fund and Alpine
Tax Optimized Income Fund (individually referred to as a "Fund" and
collectively, "the Funds") are diversified funds. 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 Dynamic Balance, Dynamic Dividend and Tax Optimized Income Funds value
securities for which the primary market is on a domestic or foreign
exchange and over-the-counter securities admitted to trading on the
National Association of Securities Dealers Automated Quotation National
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 closing bid and
asked price. 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 accurate
quotations are not available or market quotations are not readily
available, are valued at fair value as determined in good faith according
to procedures approved by the Board of Trustees. The valuation of certain
debt securities for which market quotations are not readily available may
be based upon current market prices of securities, which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors.
The Municipal Money Market Fund values its investments at amortized cost,
which approximates market value. Pursuant to Rule 2a-7 of the Investment
Company Act of 1940, amortized cost, as defined, is a method of valuing
securities at acquisition cost, adjusted for amortization of premium or
accretion of discount rather than at their value based on current market
factors.
B. REPURCHASE AGREEMENTS:
The Funds may invest in repurchase agreements. A custodian holds securities
pledged as collateral for repurchase agreements on the Funds' behalf. The
Funds monitor the adequacy of the collateral daily and will require the
seller to provide additional collateral in the event the market value of
the securities pledged falls below the carrying value of the repurchase
agreement, including accrued interest. The Funds will only enter into
repurchase agreements with banks and other financial institutions which are
deemed by the investment advisor to be creditworthy pursuant to guidelines
established by the Board of Trustees.
C. 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.
D. SHORT SALE TRANSACTIONS:
The Dynamic Balance Fund and the Dynamic Dividend Fund are authorized to
engage in short selling. Short sales are transactions in which a Fund sells
a security it does not own in anticipation of a decline in the market value
of that security. To complete such a transaction, a fund must borrow the
security to deliver to the buyer when effecting a short sale. The fund is
then 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. A fund 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 fund
replaces the borrowed security. A fund will realize a gain if the security
declines in value between those dates. A fund is also at risk of incurring
dividend expense if the issuer of the security that has been sold short
declares a dividend. A fund must pay the dividend to the lender of the
security.
All short sales must be fully collateralized. Accordingly, a fund maintains
collateral in a segregated account with their custodian, consisting of cash
and/or liquid securities sufficient to collateralize their obligations on
short positions.
E. INTEREST EXPENSE:
The Funds are charged by U.S. Bank, N.A. for all cash overdrafts at the
bank's prime lending rate. The Dynamic Balance Fund incurred interest
expense totaling $71 for the year ended October 31, 2003.
F. FEDERAL TAXES:
It is each Fund's policy to comply with the requirements 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.
G. DIVIDENDS AND DISTRIBUTIONS:
The Dynamic Balance Fund and the Dynamic Dividend Fund 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. The Municipal Money Market Fund and the Tax Optimized Income
Fund declare and accrue dividends daily on each business day based upon
each respective Fund's net income, and pay dividends monthly. Distributions
to shareholders are recorded at the close of business on the ex-dividend
date. All dividends are automatically reinvested in full and fractional
shares of a Fund at net asset value per share, unless otherwise requested.
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 a return of
capital.
H. FOREIGN EXCHANGE TRANSACTIONS:
The Dynamic Balance and Dynamic Dividend Funds may invest up to 15% of the
value of their 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 exchange gains
and losses recorded in the Statement 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.
I. RISK ASSOCIATED WITH FOREIGN SECURITIES AND CURRENCIES:
Investments in securities of foreign issuers carry certain risks not
ordinarily associated with investments in securities of domestic issuers.
Such risks include future political and economic developments and the
possible imposition of exchange controls or other foreign governmental laws
and restrictions. In addition, with respect to certain countries, there is
a possibility of expropriation of assets, confiscatory taxation, political
or social instability or diplomatic developments, which could adversely
affect investments in those countries.
Certain countries may also impose substantial restrictions on investments
in their capital markets by foreign entities, including restrictions on
investments in issuers or industries deemed sensitive to relevant national
interests. These factors may limit the investment opportunities available
to the Fund or result in a lack of liquidity and high price volatility with
respect to securities of issuers from developing countries.
3. CAPITAL SHARE TRANSACTIONS:
The Funds have an unlimited number of shares of beneficial interest, with
$0.001 par value, authorized. Transactions in shares and dollars of the
Funds were as follows:
DYNAMIC BALANCE FUND
YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold 138,742 $1,436,616 810,279 $8,042,889
Shares issued in reinvestment of dividends 91,251 896,893 101,490 1,009,991
Shares redeemed (68,511) (670,726) (3,491) (33,178)
------- ---------- ------- ----------
Total net change 161,482 $1,662,783 908,278 $9,019,702
------- ---------- ------- ----------
------- ---------- ------- ----------
DYNAMIC DIVIDEND FUND
FOR THE PERIOD
SEPTEMBER 22, 2003(1)<F21>
THROUGH
OCTOBER 31, 2003
--------------------------
SHARES AMOUNT
------ ------
Shares sold 1,266,615 $12,717,086
Shares issued in reinvestment of dividends -- --
Shares redeemed (962) (10,295)
---------- -----------
Total net change 1,265,653 $12,706,791
---------- -----------
---------- -----------
(1)<F21> Commencement of operations.
MUNICIPAL MONEY MARKET FUND
FOR THE PERIOD
DECEMBER 5, 2002(1)<F22>
THROUGH
OCTOBER 31, 2003
--------------------------
SHARES AMOUNT
------ ------
Shares sold 102,670,596 $102,670,596
Shares issued in reinvestment of dividends 466,068 466,068
Shares redeemed (44,010,285) (44,010,285)
----------- ------------
Total net change 59,126,379 $ 59,126,379
----------- ------------
----------- ------------
(1)<F22> Commencement of operations.
TAX OPTIMIZED INCOME FUND
FOR THE PERIOD
DECEMBER 6, 2002(1)<F23>
THROUGH
OCTOBER 31, 2003
--------------------------
SHARES AMOUNT
------ ------
Shares sold 5,668,318 $57,078,436
Shares issued in reinvestment of dividends 115,511 1,083,329
Shares redeemed (323,286) (3,270,169)
--------- -----------
Total net change 5,460,543 $54,891,596
--------- -----------
--------- -----------
(1)<F23> Commencement of operations.
4. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
periods ended October 31, 2003 are as follows:
NON-U.S. GOVERNMENT U.S. GOVERNMENT
-------------------------- --------------------------
PURCHASES SALES PURCHASES SALES
--------- --------- --------- ---------
Dynamic Balance Fund $16,636,144 $15,184,194 $3,244,447 $2,330,625
Dynamic Dividend Fund 13,586,028 858,742 -- --
Tax Optimized Income Fund 44,660,260 11,005,324 -- --
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 Funds, Alpine is entitled to an annual fee based on 1.00% of each
Fund's average daily net assets for the Dynamic Balance Fund and the
Dynamic Dividend Fund. Alpine is entitled to an annual fee based on 0.45%
of the Municipal Money Market Fund's average daily net assets and an annual
fee based on 0.75% of the Tax Optimized Income Fund's average daily net
assets.
The Adviser agreed to reimburse the Dynamic Balance Fund, the Dynamic
Dividend Fund, the Municipal Money Market Fund and the Tax Optimized Income
Fund to the extent necessary to ensure that the Funds' total operating
expenses (excluding interest, brokerage commissions and extraordinary
expenses) did not exceed 1.35%, 1.35%, 0.32% and 0.60% of the Funds'
average daily net assets, respectively. The Adviser may recover from each
Fund the 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. For the period ended October 31, 2003, the Adviser
waived investment advisory fees totaling $73,377, $22,179, $175,958 and
$181,472 for the Dynamic Balance Fund, the Dynamic Dividend Fund, the
Municipal Money Market Fund and the Tax Optimized Income Fund,
respectively.
Reimbursed/absorbed expenses subject to potential recovery by year of
expiration are as follows:
Year of Expiration Dynamic Balance Fund Dynamic Dividend Fund
------------------ -------------------- ---------------------
10/31/04 $ 6,253 $ --
10/31/05 $63,753 $ --
10/31/06 $73,377 $22,179
Year of Expiration Municipal Money Market Fund Tax Optimized Income Fund
------------------ --------------------------- -------------------------
10/31/06 $175,958 $181,472
6. FEDERAL INCOME TAX INFORMATION:
At October 31, 2003, the components of accumulated earnings (losses) on a
tax basis were as follows:
DYNAMIC DYNAMIC MUNICIPAL TAX
BALANCE DIVIDEND MONEY OPTIMIZED
FUND FUND MARKET FUND INCOME FUND
------- -------- ----------- -----------
Cost of investments $48,896,691 $13,409,021 $59,044,482 $55,510,837
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Gross unrealized appreciation $ 7,963,556 $ 856,845 $ -- $ 688,754
Gross unrealized depreciation (2,658,328) (76,640) -- (21,171)
----------- ----------- ----------- -----------
Net unrealized appreciation $ 5,305,228 $ 780,205 $ -- $ 667,583
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Undistributed ordinary income $ 84,368 $ 72,343 $ -- $ 31,444
Undistributed long-term capital gain -- -- -- --
----------- ----------- ----------- -----------
Total distributable earnings $ 84,368 $ 72,343 $ -- $ 31,444
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Other accumulated losses
and temporary differences $ (161,721) $ (31,233) $ -- $ --
----------- ----------- ----------- -----------
Total accumulated earnings $ 5,227,875 $ 821,315 $ -- $ 699,027
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
The tax basis of investments for tax and financial reporting purposes
differs principally due to the deferral of losses on wash sales and REIT
tax adjustments.
The tax character of distributions paid during the periods ended October
31, 2003 and 2002 were as follows:
DYNAMIC BALANCE FUND 2003 2002
---- ----
Ordinary income $1,020,091 $1,090,248
Long-term capital gain -- --
---------- ----------
$1,020,091 $1,090,248
---------- ----------
---------- ----------
DYNAMIC DIVIDEND FUND 2003
----
Ordinary income --
Long-term capital gain --
----------
--
----------
----------
MUNICIPAL MONEY MARKET FUND 2003
----
Exempt interest dividends $ 468,643
Long-term capital gain --
----------
$ 468,643
----------
----------
TAX OPTIMIZED INCOME FUND 2003
----
Ordinary income $ 574,675
Exempt interest dividends 509,639
Long-term capital gain --
----------
$1,084,314
----------
----------
Capital loss carryovers as of October 31, 2003 are as follows:
Net Capital Loss Carryover*<F24> Capital Loss Carryover Expiration
-------------------------------- ---------------------------------
Dynamic Balance Fund $140,968 10/31/10
20,753 10/31/11
Dynamic Dividend Fund 31,233 10/31/11
*<F24> Capital gain distributions will resume in the future to the extent
gains are realized in excess of the available carryovers.
7. ADDITIONAL TAX INFORMATION (UNAUDITED)
The Dynamic Balance Fund designates 57.34% of dividends declared after
December 31, 2002 from net investment income as qualified dividend income
under the Jobs & Growth Tax Relief Reconciliation Act of 2003.
The Municipal Money Market Fund designated 100% of its dividends as exempt
interest dividends. The Tax Optimized Income Fund designated 47% of its
dividends as exempt interest dividends.
ALPINE MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
DYNAMIC BALANCE FUND
-----------------------------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2001 (A)<F25>
---------------- ---------------- -------------------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.17 $10.10 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.22 0.24 0.09
Net realized/unrealized gains (losses) on investments 1.91 (0.91) 0.07
------ ------ ------
Total from investment operations 2.13 (0.67) 0.16
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.22) (0.25) (0.06)
Net realized gains on investments -- (0.01) --
------ ------ ------
Total distributions (0.22) (0.26) (0.06)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.08 $ 9.17 $10.10
------ ------ ------
------ ------ ------
TOTAL RETURN 23.50% (6.82)% 1.64%(b)<F26>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $53,756 $43,027 $38,203
Ratio of expenses to average net assets:
Before waivers and reimbursements 1.51% 1.50% 1.40%(c)<F27>
After waivers and reimbursements 1.35% 1.35% 1.35%(c)<F27>
Ratio of net investment income to average net assets 2.26% 2.45% 2.55%(c)<F27>
Portfolio turnover 39% 42% 9%
(a)<F25> For the period from June 7, 2001 (commencement of operations) to
October 31, 2001.
(b)<F26> Not Annualized
(c)<F27> Annualized
See notes to financial statements.
ALPINE MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
DYNAMIC DIVIDEND FUND
---------------------
PERIOD ENDED
OCTOBER 31, 2003(A)<F28>
------------------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.06
Net realized/unrealized gains on investments 0.63
------
Total from investment operations 0.69
------
LESS DISTRIBUTIONS:
Dividends from net investment income --
Net realized gains on investments --
------
Total distributions --
------
NET ASSET VALUE, END OF PERIOD $10.69
------
------
TOTAL RETURN 6.90%(b)<F29>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $13,527
Ratio of expenses to average net assets:
Before waivers and reimbursements 3.11%(c)<F30>
After waivers and reimbursements 1.35%(c)<F30>
Ratio of net investment income to average net assets 5.69%(c)<F30>
Portfolio turnover 9%
(a)<F28> For the period from September 22, 2003 (commencement of operations)
to October 31, 2003.
(b)<F29> Not Annualized
(c)<F30> Annualized
See notes to financial statements.
ALPINE MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
MUNICIPAL MONEY
MARKET FUND
---------------
PERIOD ENDED
OCTOBER 31, 2003(A)<F31>
------------------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
-----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.01
Net realized/unrealized gains on investments --
-----
Total from investment operations 0.01
-----
LESS DISTRIBUTIONS:
Dividends from net investment income (0.01)
Net realized gains on investments --
-----
Total distributions (0.01)
-----
NET ASSET VALUE, END OF PERIOD $1.00
-----
-----
TOTAL RETURN 1.00%(b)<F32>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $59,126
Ratio of expenses to average net assets:
Before waivers and reimbursements 0.73%(c)<F33>
After waivers and reimbursements 0.32%(c)<F33>
Ratio of net investment income to average net assets 1.09%(c)<F33>
(a)<F31> For the period from December 5, 2002 (commencement of operations) to
October 31, 2003.
(b)<F32> Not Annualized
(c)<F33> Annualized
See notes to financial statements.
ALPINE MUTUAL FUNDS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
TAX OPTIMIZED
INCOME FUND
-------------
PERIOD ENDED
OCTOBER 31, 2003(A)<F34>
------------------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.23
Net realized/unrealized gain on investments 0.18
------
Total from investment operations 0.41
------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.23)
Net realized gains on investments --(d)<F37>
------
Total distributions (0.23)
------
NET ASSET VALUE, END OF PERIOD $10.18
------
------
TOTAL RETURN 4.12%(b)<F35>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $55,591
Ratio of expenses to average net assets:
Before waivers and reimbursements 1.02%(c)<F36>
After waivers and reimbursements 0.60%(c)<F36>
Ratio of net investment income to average net assets 2.48%(c)<F36>
Portfolio turnover 46%
(a)<F34> For the period from December 6, 2002 (commencement of operations) to
October 31, 2003.
(b)<F35> Not Annualized
(c)<F36> Annualized
(d)<F37> Amount is less than $0.005.
See notes to financial statements.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Trustees of
Alpine Series Trust and Alpine Income Trust
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alpine Dynamic Balanced Fund and
Alpine Dynamic Dividend Fund (two series constituting Alpine Series Trust) and
Alpine Municipal Money Market Fund and Alpine Tax Optimized Income Fund (two
series constituting Alpine Income Trust) (hereafter collectively referred to as
the "Funds") at October 31, 2003, and the results of each of their operations,
the changes in each of their net assets and their financial highlights for each
of the periods indicated, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 2003 by correspondence with the custodian and brokers, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 19, 2003
ADDITIONAL INFORMATION
INFORMATION ABOUT TRUSTEES AND OFFICERS
- ---------------------------------------
The business and affairs of the Funds are managed under the direction of the
Funds' Board of Trustees. Information pertaining to the Trustees and Officers of
the Funds as of December 16, 2003 is set forth below. The SAI includes
additional information about the Funds' Trustees and Officers and is available,
without charge, upon request by calling 1-888-785-5578.
INDEPENDENT TRUSTEES
TERM OF # OF PORTFOLIOS
POSITION(S) OFFICE AND IN FUND COMPLEX OTHER
NAME, ADDRESS HELD WITH LENGTH OF PRINCIPAL OCCUPATION OVERSEEN BY DIRECTORSHIPS
AND AGE THE TRUST TIME SERVED DURING PAST FIVE YEARS TRUSTEE OR OFFICER HELD BY TRUSTEE
- ------------- --------- ----------- ---------------------- ------------------ ---------------
Laurence B. Independent Indefinite, Real estate developer and construction 4 Trustee of Alpine
Ashkin (75), Trustee since consultant since 1980; Founder and Equity Trust
180 East inception President of Centrum Equities since (formerly Evergreen
Pearson Street, 1987 and Centrum Properties, Inc. Global Equity
Chicago, IL since 1980. Trust); Trustee
60611 Emeritus of
Evergreen Fund
complex
H. Guy Independent Indefinite, President, Skidmore, Owings & Merrill 4 Director and
Leibler (49), Trustee since LLP, (2001-2003), Chairman and Chairman, White
25 Cowdray inception President of Pailatus, a news media Plains Hospital
Park Drive company (1997-1999); Director of Center; Founding
Greenwich, CT Brand Space Inc., a brand marketing/ Director, Stellaris
06831 advertising company (1997-1999). Health Network;
Trustee of Alpine
Equity Trust
Donald Stone (79) Independent Indefinite, Retired, Former advisor to chairman of 4 Vice Chairman,
49 Red Oak Lane Trustee since 2002 Merrill Lynch. (1996 to 1999). White Plains
White Plains, NY Hospital Board;
10604 Board Member,
White Plains
Hospital Special
Surgery Board;
Board Member,
Save the Children;
Trustee of Alpine
Equity Trust
INTERESTED TRUSTEES & OFFICERS
Samuel A. Interested Indefinite, CEO of Alpine Management & Research, 4 Trustee of Alpine
Lieber*<F38> (47) Trustee, since LLC since November 1997. Equity Trust
2500 Westchester Portfolio inception
Ave. Manager, and
Purchase, NY President
10577
Stephen A. Vice Indefinite, Chairman and Senior Portfolio Manager, 4 None
Lieber (78) President since Saxon Woods Advisors, LLC (October
2500 Westchester inception 1999 - Present). Formerly, Chairman and
Ave. Co-Chief Executive Officer, Lieber &
Purchase, NY Company (February 1969 - July 1999).
10577
Steven C. Vice Indefinite, Managing Director of Alpine 2 None
Shachat (42) President since 2002 Management and Research, LLC since
2500 Westchester September 2002. A senior portfolio
Ave. manager with Evergreen Investment
Purchase, NY Management Company LLC
10577 (1989 - 2001).
Oliver Sun (39) Secretary Indefinite, Controller of Alpine Management and 4 None
2500 Westchester since 2002 Research, LLC, 1998 to Present.
Ave.
Purchase, NY
10577
Sheldon R. Treasurer Indefinite, Chief Financial Officer, Saxon Woods 4 None
Flamm (55) since 2002 Advisors, LLC, 1999 to Present, Chief
2500 Westchester Financial Officer, Lieber & Co. (a
Ave. wholly-owned subsidiary of First Union
Purchase, NY National Bank), 1997 to 1999, Chief
10577 Financial Officer of Evergreen Asset
Management Corp., March 1987 to
September 1999.
*<F38> Denotes Trustee who is an "interested person" of the Trust or Fund by
virtue of his relationship with the Adviser.
CHANGES IN INDEPENDENT ACCOUNTANTS
Effective December 15, 2003, the Board of Trustees selected the accounting firm
of Deloitte & Touche LLP to serve as the Funds' independent certified public
accountants for the fiscal year ending October 31, 2004 to fill a vacancy in
such position in accordance with Section 32(a)(2) of the 1940 Act resulting from
PricewaterhouseCoopers LLP's resignation. PricewaterhouseCoopers LLP's reports
on the financial statements of the Funds for the fiscal years ended October 31,
2003 and 2002 did not contain an adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principles. There were no disagreements with PricewaterhouseCoopers LLP on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure during the fiscal years ended October 31, 2003 and
2002 or through the date of their resignation.
The Funds represent that they had not consulted with Deloitte & Touche LLP any
time prior to their engagement with respect to the application of accounting
principles to a specified transaction, either completed or proposed; or the type
of audit opinion that might be rendered on the Funds' financial statements.
TRUSTEES
Samuel A. Lieber
Laurence B. Ashkin
H. Guy Leibler
Donald Stone
INVESTMENT ADVISER
Alpine Management and Research, LLC
2500 Westchester Avenue, Suite 215
Purchase, NY 10577
www.alpinefunds.com
CUSTODIAN
U.S. Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT & ADMINISTRATOR
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee,Wisconsin 53202
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue
Milwaukee, WI 53202
LEGAL COUNSEL
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
DISTRIBUTOR
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee,Wisconsin 53202
SHAREHOLDER/INVESTOR INFORMATION
(888) 785-5578
ALPINE FUNDS
2500 Westchester Avenue, Suite 215
Purchase, NY 10577
(914) 251-0880
(12/03)
ITEM 2. CODE OF ETHICS.
- -----------------------
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer and principal financial officer. The registrant has
not made any amendments to its code of ethics during the covered period. The
registrant has not granted any waivers from any provisions of the code of ethics
during the covered period. The registrant undertakes to provide to any person
without charge, upon request, a copy of its code of ethics by mail when they
call the registrant at 1-888-785-5578.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ----------------------------------------
The registrant's board of trustees has determined that it does not have an audit
committee financial expert serving on its audit committee. At this time, the
registrant believes that the experience provided by each member of the audit
committee together offers the registrant adequate oversight for the registrant's
level of financial complexity.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- -----------------------------------------------
Not required for annual reports filed for periods ending before December 15,
2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Not applicable to open-end investment companies.
ITEM 6. [RESERVED]
- ------------------
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
- -------------------------------------------------------------------------
MANAGEMENT INVESTMENT COMPANIES.
- --------------------------------
Not applicable to open-end investment companies.
ITEM 8. [RESERVED]
- ------------------
ITEM 9. CONTROLS AND PROCEDURES.
- --------------------------------
(a) The Registrant's President/Chief Executive Officer and Treasurer/Chief
Financial Officer have concluded that the Registrant's disclosure controls
and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940 (the "Act")) are effective as of a date within 90 days of the
filing date of the report that includes the disclosure required by this
paragraph, based on the evaluation of these controls and procedures
required by Rule 30a-3(b) under the Act.
(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 Registrant's last fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 10. EXHIBITS.
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(a) Any code of ethics or amendment thereto. Filed herewith.
(b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
(c) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
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 Income Trust
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By (Signature and Title) /s/ Samuel A. Lieber
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Samuel A. Lieber, President
Date 1-6-04
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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
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Samuel A. Lieber, President
Date 1-6-04
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By (Signature and Title) /s/ Sheldon Flamm
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Sheldon Flamm, Treasurer
Date 1-6-04
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