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
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ALPINE INCOME TRUST
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(Exact name of registrant as specified in charter)
615 EAST MICHIGAN STREET
3RD FLOOR
MILWAUKEE, WI 53202
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(Address of principal executive offices) (Zip code)
SAMUEL A. LIEBER
ALPINE MANAGEMENT & RESEARCH, LLC
2500 WESTCHESTER AVENUE, SUITE 215
PURCHASE, NY 10577
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(Name and address of agent for service)
1-888-785-5578
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Registrant's telephone number, including area code
Date of fiscal year end: OCTOBER 31, 2004
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Date of reporting period: OCTOBER 31, 2004
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ITEM 1. REPORT TO STOCKHOLDERS.
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(ALPINE LOGO)
EQUITY & INCOME FUNDS
ALPINE DYNAMIC BALANCE FUND
ALPINE DYNAMIC DIVIDEND FUND
ALPINE MUNICIPAL MONEY MARKET FUND
ALPINE TAX OPTIMIZED INCOME FUND
Annual Report
October 31, 2004
This material must be preceded or accompanied by a current prospectus.
REPORT TO SHAREHOLDERS
ALPINE'S INVESTMENT OUTLOOK
PAGE 1
FUND MANAGER REPORTS
ALPINE DYNAMIC BALANCE FUND
PAGE 4
ALPINE DYNAMIC DIVIDEND FUND
PAGE 8
ALPINE MUNICIPAL MONEY MARKET FUND/ALPINE TAX OPTIMIZED INCOME FUND
PAGE 11
SCHEDULES OF PORTFOLIO INVESTMENTS
PAGE 16
STATEMENTS OF ASSETS AND LIABILITIES
PAGE 26
STATEMENTS OF OPERATIONS
PAGE 28
STATEMENTS OF CHANGES IN NET ASSETS
PAGE 30
FINANCIAL HIGHLIGHTS
PAGE 34
NOTES TO FINANCIAL STATEMENTS
PAGE 40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PAGE 47
ADDITIONAL INFORMATION
PAGE 48
ALPINE'S INVESTMENT OUTLOOK
Dear Investor:
We are pleased to provide you with this annual report of both the Alpine
Dynamic Balance and Dynamic Dividend Funds, and the Alpine Income Mutual Funds
for the fiscal year ended October 31st, 2004. Alpine has continued to build on
the strong positive performance of the prior five years for all three of our
real estate funds, three years for the Dynamic Balance Fund and 2003 results for
the Dynamic Dividend and Income Funds. As most existing shareholders know, real
estate and income oriented mutual funds have been a particularly strong area and
we are pleased to report that Alpine's Funds have been meeting or exceeding our
performance goals. Comparative standardized period performance data is detailed
in the specific fund sections of this report. In addition to specific reviews
of the year by our portfolio managers, we also wish to present Alpine's view of
the economic and investment environment which helps shape the Funds' portfolios.
THE ECONOMY: A CYCLICAL SWEET SPOT, SOURED BY EXCESSES AND TEMPERED BY CAUTION.
The Presidential elections and current concerns over weakness in the U.S.
dollar have highlighted their relationship to our government's deficit spending
program. This a classic example of Keynsian "guns and butter" fiscal stimulus
which has relied upon the current account deficit has helped to finance these
policies. As long as our payments for imports are recycled back into U.S.
Treasury bonds and notes, current fiscal policies can continue. The economy's
recovery from the 2001 recession was initially fueled by very low interest rates
designed to stimulate the housing sector as both a driver of economic activity
as well as a mechanism to create wealth through home price appreciation that
would offset the negative wealth effect of the collapsing stock market bubble.
An ancillary impact was the massive liquification of household balance sheets
through mortgage refinancing. Not only did this permit homeowners to capture
the accreted value in their homes, but it also stimulated the consolidation of
other consumer debt at lower interest costs which boosted disposable income for
additional consumption. As a result, some homeowners expanded their capacity to
consume through lower debt costs, while others used cash-out financing to fuel
expenditures, often (45%) on home improvement. Over the past year concerns of a
possible housing bubble have evolved out of legitimate concerns over stretched
household balance sheets. Alpine's estimation is that such fears exaggerate the
risk, although any severe disruptions in the job market or financial markets
could pressure the mortgage markets, and thus consumer demand.
In examining the rate of change in consumer spending versus change in
household income, it is particularly worrisome that we have seen income growing
faster than consumption in only three of the past ten quarters. This appears to
be an acceleration of a 22 year trend which began when interest rates started
falling in the aftermath of the 1981 recession. However, the October savings
rate calculated by the Commerce Department at 0.2% of disposable income leaves
very little room to adapt to potential changes in the economic environment
without an impact on either consumption or household debt. This has already
been a factor in the softer sales trends this Fall at Wal-Mart. The typical
household spent 75% of their take home pay on payments for housing, cars,
education, childcare, health insurance and taxes. Thus, the prospects for
continued strong consumption patterns in light of already stretched balance
sheets suggests that household income growth will require more than one-off tax-
cuts. Without a tighter job market or an inflating economy, retailers should
become increasingly cautious about sales growth in the near future.
Such caution is already apparent in corporate balance sheets. Corporate cash
holdings amounted to $1.3 trillion in the middle of 2004. At a time when
treasurers can only achieve nominal returns on short-term investments one would
expect much of this capital would go into corporate capital expenditures
(capex). Indeed, the historical pattern has been for corporate capex to exceed
operating cash flow, which necessitated periodic trips to the capital markets
for either debt or equity financing. However, today we see constrained spending
on new plant and equipment, as existing capacity utilization rates remain
historically low and prospective growth in consumption remains uncertain.
Inevitably, the key variable here is the expectation of future growth. One
signal of such expectations amongst our corporations leaders was revealed in
October when the business council released their survey of GDP growth estimates
for 2005 at only 2.0%, which was far more pessimistic than most economists who
estimate in excess of 3.0% growth. Perhaps this is why corporate cash levels
have grown by 20% since the end of 2002. This is another reason why we have
seen an increased number of companies increasing their regular dividends and
even paying special dividends to shareholders if not buying back their stock.
It is both ironic and unfortunate that companies have been hoarding cash, since
rising consumption is in part held back by sluggish household income growth due
to historically slow recoveries in corporate hiring at this stage of the cycle,
Alpine believes that a well conceived, payroll focused, temporary tax stimulus
plan might be beneficial if job creation does not improve. Given our
government's fiscal and current account deficits, this could prove tough to put
in place.
While corporations have taken a more conservative approach to their balance
sheet and operational needs, many household balance sheets appear to be maxed
out and the government has unfortunately limited its capacity to stimulate
fiscal policies much further before alarming financial markets. Seeing this,
the Federal Reserve is clearly trying to regain a neutral level on its Fed Funds
rate so it might regain some stimulative capacity if it needs to lower interest
rates again. Unfortunately, the lack of financial flexibility amongst our
households, the government and the Federal Reserve has been exacerbated by the
significant current account deficit with which we fund much of our consumption
and government spending as capital is borrowed from our largest trading
partners. Historically, current account deficits above levels exceeding 4-5% of
GDP has caused problems for less significant nations. Although it is unclear
what level might prove problematic for the U.S., it appears that the Dollar is
weakening in response to both foreign investors' concerns over these expanding
deficits and leverage, as well as Administration efforts to increase the cost of
imports, vis-a-vis domestic goods and services. A cheaper Dollar also serves to
lower the value of our debt to some of our foreign creditors. This could be a
quite risky for it might induce some of our foreign creditors to lower their
exposure to our Dollar and hence drive the currency even lower. The ultimate
risk here is that the U.S. would be forced to raise interest rates at a time
when the economy is not robust and this could potentially stagnate the economy
and potentially create a recessionary environment. Even though Alpine does not
believe this is an inevitable scenario, we do think our economic condition
leaves the U.S. increasingly vulnerable to unforeseen or cascading events which
could have a deleterious impact on our economy.
The rest of the world will probably evolve in different ways over the next
year or two. China and India will continue to see relatively rapid growth, as
will much of Southeast Asia which is increasingly supplying the needs of these
countries. It appears that Japan has seen an end of deflation, however, we are
not sure whether domestic demand will in fact accelerate at an important level
which might create sustained economic growth for Japan. Europe continues to
grow slowly, as transfer payments from the West to new EU member countries will
lead to both selective growth opportunities as well as displacement. Canada
will most likely follow the cycle set by the U.S. For Latin America, continued
recent economic and political stability in its major countries will likely
sustain growing trade and direct investment from both Asia and Europe, which
should have a long-term stimulative impact. Unfortunately, Africa continues to
be the saddest and most desperate region offering fewer investment
opportunities.
Even though regional economies still ebb and flow with internal dynamics, the
pull of globalization continues to link us all. This is especially so for
equity investors who can now participate in favored sectors and regions around
the world. Capital will continue to seek out enduring trends, stable situations
and undervalued opportunities. So too will Alpine.
EQUITY MARKET PROSPECTS
Given Alpine's sobering economic perspective, it follows that we might be
cautious in our outlook for equity markets. For the broad market, this is so,
however, we suspect there will be opportunities for superior investment returns
available to those of us who are diligent, nimble and perhaps fortunate to
accurately assess the continuation of a market in an extended cyclical and
perhaps structural transition. After the rebound in 2003 from depressed
valuations, 2004 saw alternating periods of rising or falling economic
expectations which in turn shifted sector favoritism and valuations. We think
this will recur in 2005, although we believe that the economy will slow over the
course of the year. Cheap capital, strong share prices and moderate growth
prospects should favor merger and acquisition activity, niche business
strategies, strong growth situations, and companies which can offer solid
dividend growth potential. Even though aggregate market valuations seem a bit
high for the pace of prospective growth, the probability of continued low
interest rates will provide few attractive investment options outside of equity
markets. While this may stabilize the broad market (excepting unforeseen
events), individual stocks or specific sectors which disappoint investors could
be especially vulnerable to severe correction. Selectively, this may create
attractive buying opportunities.
Alpine will continue to balance investments offering visibility with
opportunities, near term value timing situations with long term appreciation and
current yield versus future risk. We believe our multi-cap focus on
transitional values, out-of-favor growth, mispriced opportunities and dividends
which grow will enable Alpine to build on our proven history of performance.
All of us at Alpine wish to express our appreciation to Donald Stone, who
retired from the Fund's Board of Trustees. Don brought an uncommon wisdom and a
deep understanding of the financial markets to our meetings. He also
demonstrated both a passion for the investment business and compassion for
investors. While Don's wit and counsel will be missed by us, he stepped down to
focus on his oversight activities on behalf of members of the New York Stock
Exchange.
We welcome as trustee Jeffrey Wachsman, Esq. His expertise in the legal
affairs of international investors, as well as domestic real estate and private
investment portfolios will provide further resources to the Funds. With common
sense and uncommon integrity, Jeff has already assisted the Board and served
shareholders.
As significant investors in all of our Funds, Alpine's managers appreciate
both your support and interest in our investment endeavor. We look forward to
updating investors either in our next shareholder report, or through our
redesigned website (coming in late January) at www.alpinefunds.com.
Sincerely,
/s/Samuel A. Lieber
Samuel A. Lieber
President, Alpine Mutual Funds
This letter and those that follow represent the opinions of Alpine Funds
management and are subject to change, are not guaranteed and should not be
considered recommendations to buy or sell any security.
Must be preceded or accompanied by a prospectus. Please read it carefully
before you invest or send money. Mutual fund investing involves risk. Principal
loss is possible.
Quasar Distributors, LLC, Distributor. 12/04
ALPINE DYNAMIC BALANCE FUND
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
10/31/2001 $10,164 $9,090 $8,341
4/30/2002 $10,707 $9,252 $8,534
10/31/2002 $9,471 $8,465 $7,081
4/30/2003 $10,228 $8,778 $7,397
10/31/2003 $11,696 $9,613 $8,552
4/30/2004 $12,363 $10,019 $9,089
10/31/2004 $13,356 $10,319 $9,357
This chart represents a comparison of a hypothetical $10,000 investment in the
Fund versus a similar investment in the Fund's benchmark. 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 performance reflects
voluntary fee waivers in effect. Without the waiver of fees, total return would
have been lower.
Performance data quoted represents past performance and is not predictive of
future results. Investment return and principal value of the Fund fluctuate, so
that the shares, when redeemed, may be worth more or less than their original
cost. Performance current to the most recent month end may be lower or higher
than the performance quoted and may be obtained by calling 888-785-5578.
The 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 10/31/04
SINCE INCEPTION
1 YEAR 3 YEARS (6/7/01)
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Alpine Dynamic Balance Fund 14.19% 9.53% 8.88%
Moody's Equity Mutual Fund Balanced Index 7.35% 4.32% 0.93%
S&P 500 Index 9.42% 3.92% -1.77%
PORTFOLIO DISTRIBUTION*<F1>
Cash/Cash Equivalents 4.8%
U.S. Gov't Agency Obligations 3.2%
U.S. Gov't Obligations 18.3%
Automotive Equipment 1.2%
Commercial Products & Services 4.7%
Construction-Homebuilder 7.3%
Consumer Products & Service 5.3%
Energy 2.7%
Financial - Banks 14.9%
Financial Services 8.4%
Medical Instruments 2.0%
Pharmaceuticals 4.8%
Printing 1.0%
Real Estate Investment Trusts 10.8%
Retail 1.6%
Software 1.6%
Transportation 0.9%
Transportation Services 2.6%
Utilities 3.9%
TOP 10 HOLDINGS*<F1>
1. U.S. Treasury Bond, 6.000%, 2/15/2026 8.16%
2. U.S. Treasury Note, 5.000%, 2/15/2011 4.58%
3. Federal National Mortgage Association,
6.250%, 5/15/2029 3.22%
4. FedEx Corp. 2.58%
5. J.P. Morgan Chase & Co 2.18%
6. Fannie Mae 2.18%
7. Comerica Incorporated 2.17%
8. Standard Pacific Corp. 2.04%
9. Pulte Homes, Inc. 1.94%
10. Vornado Realty Trust 1.90%
*<F1> Portfolio holdings, geographical distributions and/or sector
distributions are as of 10/31/04 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.
We are pleased to report that the Alpine Dynamic Balance Fund completed its
third full fiscal year on October 29, 2004 with a gain of +14.19%. This total
return compares with 7.35% for the Moody's Balanced Equity Fund Index in the
same 12-month period and 9.41% for the Standard & Poor's 500 Stock Index. From
the inception of the fund on June 10, 2001, the Fund has provided a total return
of 33.55%, equal to an annualized rate of 8.88%. This compares with -0.03% for
the Moody's Balanced Equity Fund Index in the same period and 0.07% for the S&P
500 Index. These performances have earned the Fund a ranking of 5th among the
Lipper Analytical balanced mutual fund category, in the top one percent out of
552 Funds for the 12 months to October 29. It was in the top two percent for the
three-year period, ranking #8 among 450 funds (based on fund total returns).
The Fund received a 5-Star Overall Morningstar RatingTM among 755 Large Value
funds (derived from a weighted average of the performance figures associated
with its three-year Morningstar RatingTM metrics).
The Fund continued to follow the basic investment strategies initiated at its
inception in 2001. They have been rewarding. This fiscal year also saw a
significant new dynamic in our strategy focus - the dividend tax reduction
opportunity. With most dividends now taxed at a 15% level on the Federal basis,
and with a comparatively short holding period required for that tax rate to be
effective, we aimed to adjust the Fund's strategy to benefit from these new
opportunities. We also recognized that corporate policies will be increasingly
focused toward higher dividend payout after years of comparatively low dividend
payments. The Fund has already benefited. Through the fiscal year, 70 of our
holdings have increased their dividends, including those held at the end of the
period and those held for part of the period. This reflected our major effort
at research on selection of investments for portfolio dividend enhancement. It
is now a key focus for the Dynamic Balance Fund, as it is the central focus of
the Dynamic Dividend Fund. In addition to increased dividend payouts on a
regular basis, the Fund has also participated in a number of special dividends.
The most widely publicized of them was the $32 billion payout by Microsoft Corp.
While this was an exceptional example in size, it does typify the possibilities
in companies which have accumulated large cash positions and do not see the need
to fully utilize them for continuing capital investment. Looking ahead, we
expect a repeat of this pattern among many companies in many industries.
The dividend story complements our overall strategy of being sensitive to
unique opportunities in potential undervaluation. In the portfolio's record of
the 2004 fiscal year, we see many examples of gains in undervalued
opportunities. In energy, we chose to focus on coal. Among financial
institutions, our focus was potential merger and acquisition candidates. In
real estate, we emphasized uniquely positioned builders of growth values, and in
utilities on undervalued turnaround opportunities. The portfolio is being
managed with a search for growth values, whether it be purchasing Doral
Financial Corp. because of the quite unique mortgage financing opportunities in
the growth of Puerto Rico or Ryland Group because of the steady and increasing
demand for its home construction, or Vornado Realty Trust because of its unique
development and cash allocation potentials, or Union Pacific because of the
turnaround prospect of its understaffed operations.
The overall investment strategy of the Fund is to dynamically balance
investment commitments between the highest grade fixed income obligations and
undervalued, high quality common stocks. The latest year brought both
opportunities and challenges in both of these categories. The bond market was
quite volatile, with a sharp decline in yields and consequent price rises
through May, a jump in yields with price declines through August and then a
recovery, again, into October. Our basic strategy was driven by the expectation
that yields would not rise sharply in an economy of projected moderating growth.
While we retained the Fund's positions in long-term U.S. Treasuries and
Agencies, as we saw the market peaking in the spring we reduced selected
positions and then re-established them when prices fell. Toward the end of the
fiscal year, we added short-term to intermediate-term Treasury obligations.
The fixed income investment remained just above 25% of the portfolio,
including cash equivalents. We did not see the fiscal year as a period when
greater returns would be obtained in bonds than in selected stocks, so
maintained the bulk of the monies in equity positions.
As suggested by the portfolio's Treasury Bond positions, we did not share
widespread apprehensions about sizeable increases in interest rates in a rapidly
strengthening economy. Instead, we thought that a restrained pattern of rising
rates could generate opportunities in interest sensitive businesses capable of
improving returns. The 15% bank position provides a selection of such
opportunities. The largest holdings, JPMorgan Chase Co. and Comerica Inc. are
both viewed as beneficiaries of an improving industrial economy, with better
loan demand and improving credit standards. The next two largest holdings,
Doral Financial Corp. and Golden West Financial Corp. are seen as extremely
effective operators in the mortgage sector, the one predominantly in Puerto Rico
and the other in California. The largest number of holdings are smaller banks,
each of which is regarded as a potential special situation, either as an
acquirer or an acquiree. The major acquisition development in this group during
the year was the purchase of Fleet Boston Financial Corp. by Bank of America,
resulting in a 41.81% gain from cost in this issue, the largest financial
holding in the Fund portfolio. Among smaller holdings, BSB Bank Corp. was
acquired with a 64.54% gain from cost, and SouthTrust Corp. was sold with a
24.18% gain after the proposal of its acquisition by Wachovia Corp. In addition
to the above, BankNorth has recently agreed to a purchase of 51% its equity by
Toronto Dominion Bank.
While the great transition in banking through mergers and acquisitions has
been ongoing for over 20 years, the dynamics of consolidation appear to us to
still be vigorous due to technological advances and more intensive merchandising
efforts throughout the industry.
In financial services, our focus is on the special situation opportunities.
The largest holding is MBNA Corp., where we anticipate further opportunities for
consolidation and innovation in the credit card industry. At the very end of
our fiscal year, Marsh McLennan was added to the holdings after the shares lost
40% of their value upon the New York Attorney General's disclosure of
inappropriate practices within its industry. Our assumption is that the shares
had fallen below residual values.
The real estate investment trust holdings, 10.8% of the portfolio, provided
the outstanding realized gain in the portfolio's performance this year upon the
sale of Chelsea Property Group with a 171.29% price gain from cost. Chelsea,
the leading developer and operator of specialized shopping centers for
discounters of prominent brands, was acquired by the Simon Property Group. The
remaining largest holdings in this sector are Vornado Realty Trust and Simon
Property Group, itself. Vornado, which has provided a 65.7% appreciation since
purchase, has now entered another phase of potentially significant aggressive
growth with its acquisition of a key interest in Sears. Simon with a 51.7%
appreciation since purchase is at the threshold of significant new opportunities
through Chelsea, particularly with the latter's position in Japan.
The residential construction group has provided major appreciation in leading
holdings; 77.1% in Pulte Corp., 80.4% in Ryland Group, 65.3% in MDC Holdings,
since their purchase. We continue to believe it represents an area of
undervalued growth opportunity. These leading residential construction
companies typify an undervaluation of current earnings relative to the market
because of widespread investor expectation that the businesses will prove highly
cyclical. The widespread view is that very low interest rates have led to
exaggerated demand for residential ownership and thus, residential construction.
But, we do not expect a dangerous rise in interest rates in the present
environment to upset consumer financing for homes. We do expect that there will
be continued growth among the major efficient builders through increasing market
share and industry consolidation. Thus, with this group selling about one-third
to one-half of the overall equity market multiple, we have retained and in some
cases, increased holdings.
The pharmaceutical industry has been a very difficult segment of the stock
market in this recent environment of political and technological uncertainty.
The Fund's largest holding in the group, Johnson & Johnson, has withstood the
adversities of this period with its share price increasing 13% since the
beginning of the fiscal year and is 23.9% above cost. On the other hand, Merck
& Company has been the most disappointing, notably in the last days of the
Fund's fiscal year after the company announced the withdrawal of its product,
Vioxx, from the market. In this subsequent environment of apprehension over the
pharmaceutical industry, we added new holdings in Wyeth, Inc. to the portfolio.
It has already been impacted by a major product disappointment some years ago
and is in the process of an impressive recovery with products gaining new
consumer traction.
The majority of other holdings in commercial products and services and
consumer products and services are companies where we see a strong basic
position in markets with sustained and growing demand and reasonable valuation.
The longest held among these positions and the smallest company is RPM Inc. with
an 81% price appreciation since acquisition. The largest holding in the group
is Kimberly Clark Corp., where we expect a continuing rationalization of
production and operations. Accordingly, it will shortly spin off its Neenah
Paper Company subsidiary.
We begin the new fiscal year with an effort to evaluate the impact of the
changing political scene upon the investment structure and opportunities for
this Fund. While it is too early to project definitive changes in national
policies, there are many generally observable expectations. Significantly, the
tax structure, which has favored dividends and capital gains, will at least
continue as favorable. Any effort toward debt reduction is indicated to come
from cuts in programs and special tax benefits. Such changes are fraught with
political difficulties and unlikely to be evident over the near term.
Sustained, and even growing, defense spending appears likely as the
Administration regards its re-election as evidence of broad public support for
its policies in Iraq and in the build up of military systems. Policies in
restraint of imports and for increase of exports do not appear to be on the
agenda, thus suggesting continued pressure on the dollar versus other
currencies. Domestic policy initiatives initially seemed confined to an effort
to further lower taxes and transfer social security payments to the private
sector. Such steps are likely to result in insecurity and volatility for the
financial markets. Overall, we do not anticipate any near term shifting of
trends, but rather a gradual effort to legislate new directions.
Our selection of investments in the period ahead will focus most intensely on
the choice of common stocks of companies with potentially favorable
transformations. We will look, as we long have, for merger and acquisition
opportunities, for companies with good expectations of emerging from temporary
difficulties into renewed strength, and for companies which are undervalued
because of temporary adverse industry or company specific developments. Our
fixed income commitment will vary in size and maturity in accordance with our
evaluation of risk and reward potential in the highest grade bond market.
We look forward to continuing the Fund's record of outperformance, having
strengthened our organization through new staffing with highly experienced,
proven investment personnel. We thank our shareholders for their continuing
support.
Stephen A. Lieber
Samuel A. Lieber
Lorraine Klepacki
Co-Portfolio Managers
Please refer to the schedule of portfolio investments for fund holdings
information. Fund holdings and sector allocations are subject to change and
should not be considered a recommendation to buy or sell any security.
INVESTING IN THIS FUND INVOLVES SPECIAL RISKS, INCLUDING BUT NOT LIMITED TO,
OPTIONS AND FUTURES TRANSACTIONS. PLEASE REFER TO THE PROSPECTUS FOR FURTHER
DETAILS. INVESTMENTS IN DEBT SECURITIES TYPICALLY DECREASE IN VALUE WHEN
INTEREST RATES RISE. THIS RISK IS USUALLY GREATER FOR LONGER-TERM DEBT
SECURITIES.
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. Rankings for the periods shown include dividends and
distributions reinvested and do not reflect sales charges.
(c) 2004 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed;
and (3) is not warranted to be accurate, complete or timely. Neither Morningstar
nor its content providers are responsible for any damages or losses arising from
any use of this information. Past performance is no guarantee of future results.
For each fund with at least a three-year history, Morningstar calculates a
Morningstar RatingTM (based on a Morningstar Risk-Adjusted Return measure that
accounts for variation in a fund's monthly performance, including the effects of
sales charges, loads, and redemption fees), placing more emphasis on downward
variations and rewarding consistent performance. The top 10% of funds in each
broad asset class receive 5 stars, the next 22.5% receive 4 stars, the next 35%
receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1
star. (Each share class is counted as a fraction of one fund within this scale
and rated separately, which may cause slight variations in the distribution
percentages.) The Alpine Dynamic Balance Fund was rated against the following
numbers of U.S.-domiciled Large Value funds over the following time periods:755
funds in the last three years. With respect to these Large Value funds, the
Alpine Dynamic Balance Fund received a Morningstar RatingTM of 5 stars for the
three-year period.
ALPINE DYNAMIC DIVIDEND FUND
Alpine Dynamic Moody's Equity Mutual
Date Dividend Fund Fund Growth Income Index S&P 500 Index
---- -------------- ------------------------ -------------
9/22/2003 $10,000 $10,000 $10,000
10/31/2003 $10,690 $10,293 $10,257
11/30/2003 $10,940 $10,383 $10,349
12/31/2003 $11,673 $10,928 $10,804
1/31/2004 $12,219 $11,128 $10,973
2/29/2004 $12,644 $11,283 $11,110
3/31/2004 $12,567 $11,113 $10,960
4/30/2004 $12,339 $10,938 $10,761
5/31/2004 $12,631 $11,088 $10,892
6/30/2004 $13,060 $11,304 $11,085
7/31/2004 $12,744 $10,929 $10,656
8/31/2004 $12,638 $10,975 $10,657
9/30/2004 $13,193 $11,093 $10,791
10/31/2004 $13,355 $11,263 $10,931
This chart represents a comparison of a hypothetical $10,000 investment in the
Fund versus a similar investment in the Fund's benchmark. 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 performance reflects
voluntary fee waivers in effect. Without the waiver of fees, total return would
have been lower.
Performance data quoted represents past performance and is not predictive of
future results. Investment return and principal value of the Fund fluctuate, so
that the shares, when redeemed, may be worth more or less than their original
cost. Performance current to the most recent month end may be lower or higher
than the performance quoted and may be obtained by calling 888-785-5578. The
Fund charges a redemption fee equal to 1.00% of the net amount of the redemption
if you redeem your shares less than 60 days after you purchase them.
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.
COMPARATIVE TOTAL RETURNS AS OF 10/31/04
SINCE INCEPTION
1 YEAR (9/22/03)
------ ---------------
Alpine Dynamic Dividend Fund 24.90% 29.85%
Moody's Equity Mutual Fund Growth Income Index 6.57% 8.36%
S&P 500 Index 9.42% 10.00%
PORTFOLIO DISTRIBUTION*<F2>
Aerospace 3.0%
Apparel 1.2%
Building - Maintenance & Service 1.5%
Cash/Cash Equivalents 9.5%
Chemicals 3.7%
Computers 0.4%
Commercial Products & Services 3.4%
Conglomerate 1.5%
Construction - Homebuilder 0.3%
Construction - Services 1.6%
Consumer Products & Services 4.1%
Energy 6.0%
Entertainment 3.5%
Financial - Banks 9.4%
Financial Services 0.4%
Food & Beverages 7.7%
Lodging 0.8%
Lottery Services 0.8%
Manufacturing - Diversified 5.6%
Medical Supplies 3.4%
Pharmaceuticals 4.5%
Restaurants 1.4%
Retail 5.2%
Software 2.7%
Telecommunications 3.7%
Transportation 8.0%
Utilities 6.7%
TOP 10 HOLDINGS*<F2>
1. Tsakos Energy Navigation Ltd. 2.71%
2. Microsoft Corporation 2.70%
3. Abbott Laboratories 2.06%
4. Citigroup Inc. 2.02%
5. Frontline Limited 2.01%
6. Lincoln Electric Holdings, Inc. 1.96%
7. The Dow Chemical Company 1.96%
8. Lockheed Martin Corporation 1.92%
9. Bassett Furniture Industries, Incorporated 1.91%
10. Regal Entertainment Group - Class A 1.91%
*<F2> Portfolio holdings, geographical distributions and/or sector
distributions are as of 10/31/04 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.
We are pleased to report that the Alpine Dynamic Dividend Fund generated
strong results in its first full year of operation, outperforming both the broad
market and its equity income peers while also distributing an attractive
dividend yield. For the fiscal year ended October 31, 2004, the Fund provided a
total return of 24.90%, with 15.42% in capital appreciation and 9.48% in
dividend payments. This compares favorably with a 9.42% total return for the S&P
500 Stock Index and a 6.57% total return for the Moody's Equity Growth Income
Index for the same time period. Since inception on September 22, 2003, the
Alpine Dynamic Dividend Fund has produced a total return of 33.52%, with 23.40%
in capital appreciation and 10.12% in dividend payments, versus a return of
12.62% for the S&P 500 and a 9.31% return for the Moody's Equity Growth and
Income fund.
The Alpine Dynamic Dividend Fund ended the fiscal year with total net assets
of $43.53 million, an increase of 222% over the past 12 months. In addition, the
fund was ranked #1 out of 224 funds in the equity income category for the year
ended October 31st, 2004 (based on fund total returns), according to Lipper.
The Alpine Dynamic Dividend Fund was designed specifically to maximize the
amount of distributed dividend 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. We believe
we have taken a unique and dynamic approach to maximizing both income and
capital appreciation by combining three different investment strategies with a
multi-cap focus. These strategies are reflected in both our top 10 holdings as
well as our best performing stocks in fiscal 2004.
First, we run a portion of our portfolio with a dividend capture strategy,
where we invest in consistent, high yielding stocks or in special situations
where large cash balances are being returned to shareholders in the form of one-
time special dividends. These actions reflect strong corporate balance sheets as
well as management incentive to distribute excess cash in the form of dividends
due to the new lower tax rates. We enhance the return of this portfolio by
electively rotating a portion of our high yielding holdings after the 61-day
ownership period required to obtain the 15% dividend tax rate. Three of our
current top 10 holdings announced attractive special dividends in addition to
their current quarterly payouts in the past 12 months, including Frontline
($9.30 in special dividends), Regal Entertainment ($5 special), and Microsoft
($3 special).
Second, we have identified core growth and income stocks that may have
slightly lower but still attractive current dividend yields and predictable
earnings streams plus a catalyst for capital appreciation and potential dividend
increases. In our top 10 holdings, we would categorize Abbott Laboratories,
Citigroup, and Lockheed Martin in this group. We believe each of these companies
has solid near term earnings growth prospects and each raised their annual
dividends in the past year by an average of 11%.
Our third strategy is what we call "value with a catalyst", where we look for
under-valued or turnaround situations where there may exist high current
dividend yields due to depressed earnings that we believe are poised to recover.
We would categorize four of our current top 10 holdings, Tsakos Energy
Navigation, Lincoln Electric, Dow Chemical, and Bassett Furniture in this group,
where we believe there is a strong fundamental rebound in earnings and cash flow
over the next several years as well as attractive valuations. These four
holdings are forecasted to have earnings growth on average of 62% in 2004 and
31% in 2005 and are currently yielding 3.1%.
Capturing dividend increases is an important component of our research and
investment strategy. Since inception on September 22, 2003, 63% of the stocks
that we have owned in our portfolio have reported dividend increases averaging
41% or announced special dividends ranging from 10 cents to $17.50 per share.
The Fund has captured a total of 40 special dividend payouts since inception.
Although several of our top 10 holdings are from the traditional higher
yield, large capitalization segments of the dividend-paying universe, we believe
a major factor of our outperformance has been Alpine's multi-cap approach. All
of our top 10 performers in the 12-month period ended October 31, 2004 were
small or mid-cap stocks. Market capitalizations range from a low of $63 million
at Rocky Mountain Chocolate Factory (88.3% return in fiscal 2004) to a high of
$7.0 billion at Lyondell Chemical (37.8% return). This is consistent with our
strategy of researching and identifying specialized businesses where each has an
important catalyst that we believe will produce attractive earnings and cash
flow growth and higher dividends.
Notably, among our best performers in fiscal 2004 were commodity and material
stocks, which benefited from a rebound in global industrial demand. Four of our
top gainers, Frontline (309.7% return), Tsakos Energy Navigation (187.1%
return), Teekay Shipping (49.8% return) and Ship Finance International (41.4%
return) engage in the business of transporting oil. The other commodity standout
beside Lyondell Chemical was Eastman Chemicals with a 46.4% return. Rounding out
our top 10 performers were International Aluminum (68.6% return), a manufacturer
of building products like doors, windows, and storefronts for residential and
commercial construction; Sanderson Farms (42.3% return), a poultry producer
benefiting from the increased demand for chicken associated with low-carb diets;
and Bassett Furniture (44.25% return), which is benefiting from increased demand
for residential furniture and its restructured direct sales model.
We want to note that the last day of trading for our fiscal year was October
29, 2004, just a few days prior to the U.S presidential election. Given the
uncertainty regarding the political outcome of the election and potential
security issues, we made the decision to hold a large amount of cash (9.5%) on
our balance sheet. In addition, we structured the portfolio to be highly
diversified, with no individual sector representing more than 10% of assets, and
we reduced some of our higher beta names. Following the elimination of the
election uncertainty, we have since become fully invested.
As we look into 2005, we are optimistic about the outlook for the stocks in
our portfolio. We see several factors that point to investors wanting more
dividend yield and companies being more likely to increase their dividend
payouts. Based on our assumption of slower, single-digit earnings growth for the
S&P 500 in 2005, we believe investors will continue to demand higher dividend
yields as part of their total return expectations, particularly with the lower
15% tax rate. The current yield on the S&P 500 is 1.9%, but historically the
dividend component of total return was much higher. According to Standard and
Poor's, the average annual total return on stocks since 1926 has been about 7%,
with dividends accounting for 4% of that total. Therefore, we believe investors
will look to put more money in attractive dividend yielders to enhance returns.
In addition, we believe the fundamentals at many traditional dividend-
yielding companies like industrials, materials, consumer staples, and utilities,
look positive in 2005 and will attract more investors. A large portion of
dividend paying stocks will be poised to benefit from the weaker dollar,
continued penetration of global markets, improved balance sheets and operational
leverage following years of restructuring. Therefore, the earnings and cash flow
growth outlook for many of the companies in our portfolio remains strong and
above the average expectation for the broader market.
Lastly, companies are sitting on record levels of cash on their balance
sheets as they end 2004 and many forecast continued strong cash free cash flow
in 2005. With U.S. and global capacity utilization still well below historical
peaks, we expect only targeted capital spending increases in 2005. We believe
some capital will be spent on pent up demand for mergers and acquisitions as
companies look to supplement slowing organic growth. However, we still expect a
substantial amount of cash will likely be returned to shareholders in 2005
either in the form of share repurchases our increased dividend payouts.
Alpine is particularly focused on companies with high levels of inside
ownership as we believe the 15% tax rate provides additional incentive for
special dividends, as was the case for Microsoft in 2004. According to Standard
& Poor's, companies in the S&P 500 index currently pass on 34% of their earnings
in the form of dividends versus an average payout of 54% historically. Given
the large cash positions, solid earnings potential, low payout ratios and lack
of other uses of cash, we continue to believe that companies may increase their
dividends in 2005.
These positive fundamentals will be balanced with the risks of rising
interest rates, potentially slower global growth and continued geopolitical
uncertainties. Our approach is to remain broadly diversified within the
dividend-paying universe while actively looking for undervalued opportunities to
provide outperformance on the upside. The selection of stocks in our portfolio
is 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, industries, and international borders. We believe we will
continue to be able to distribute attractive dividend payouts to our
shareholders by capitalizing on our research driven approach to identifying
attractive situations as well as through our active management of the portfolio.
Thank you for your participation and we look forward to a prosperous year in
2005.
Jill K. Evans
Portfolio Manager
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.
INVESTING IN SMALL AND MID CAP STOCKS INVOLVES ADDITIONAL RISKS SUCH AS LIMITED
LIQUIDITY AND GREATER VOLATILITY AS COMPARED TO LARGE CAP STOCKS.
Neither the Fund nor any of its representatives may give tax advice. Investors
should consult their tax advisor for information concerning their particular
situation.
ALPINE MUNICIPAL MONEY MARKET FUND
EQUIVALENT TAXABLE YIELDS
AS OF 10/31/04
YOUR TAX-EXEMPT
EFFECTIVE YIELD OF
MARGINAL 1.63% IS EQUIVALENT
JOINT RETURN SINGLE RETURN TAX RATE TO A TAXABLE YIELD OF:
------------ ------------- -------- ----------------------
$58,101-117,250 $29,051-70,350 25.0% 2.17%
$117,251-178,650 $70,351-146,750 28.0% 2.26%
$178,651-319,100 $146,751-319,100 33.0% 2.43%
Over $319,100 Over $319,100 35.0% 2.51%
The chart reflects 2004 marginal federal tax rates before limitations and
phaseouts. Individuals with adjusted gross income in excess of $142,700 should
consult a tax professional to determine their actual 2004 marginal tax rate.
PORTFOLIO DISTRIBUTION*<F3>
Cash/Cash Equivalents 0.0%
General Market Notes 16.5%
Put Bonds 8.1%
Variable Rate Demand Notes 75.4%
TOP 10 HOLDINGS*<F3>
1. California Pollution Ctrl Fin Auth Rev,
1.775%, 11/05/2004 4.66%
2. Sergeant Bluff Iowa Ind Development
Rev, 1.915%, 11/05/2004 4.61%
3. Cleveland Ohio Apartment Sys Rev,
1.765%, 11/05/2004 4.15%
4. Haverstraw Stony Point New York
School Dist, 2.000%, 1/21/2005 3.15%
5. Michigan Strategic Fund Ltd Obl Rev,
2.005%, 11/05/2004 3.07%
6. Class B Rev Bond Cert Series Tr 2004-1,
2.104%, 11/05/2004 2.87%
7. Fort McDowell Arizona Yavapai Nation
Rev, 1.945%, 11/05/2004 2.69%
8. Roaring Fork Muni Prod LLC 2002-9
Cert Cl A, 2.054%, 11/05/2004 2.50%
9. Tippecanoe Cnty Indiana Ind Econ
Dev Rev, 1.915%, 11/05/2004 2.46%
10. Denver Colo City & Cnty Airport Rev
Series A, 0.00%, 11/15/2004 2.40%
*<F3>Portfolio holdings, geographical distributions and/or sector distributions
are as of 10/31/04 and are subject to change. Portfolio holdings are not
recommendations to buy or sell any securities.
ALPINE TAX OPTIMIZED INCOME FUND
Alpine Tax Optimized Lehman 1 Year
Date Income Fund Municipal Bond Index
---- -------------------- --------------------
12/6/2002 $10,000 $10,000
4/30/2003 $10,252 $10,107
10/31/2003 $10,412 $10,198
4/30/2004 $10,525 $10,254
10/31/2004 $10,664 $10,325
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. The
graph and the table do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares. The returns
set forth reflect the waiver of certain fees. Without the waiver of fees, total
return would have been lower.
Performance data quoted represents past performance and is not predictive of
future results. Investment return and principal value of the Fund fluctuate, so
that the shares, when redeemed, may be worth more or less than their original
cost. Performance current to the most recent month end may be lower or higher
than the performance quoted and may be obtained by calling 888-785-5578. The
Fund charges a redemption fee equal to 0.25% of the net amount of the redemption
if you redeem your shares less than 30 calendar days after you purchase them.
The Lehman Brothers Municipal 1 Year Bond Index is the 1-year (1-2) component of
the Municipal Bond Index. The Lehman Brothers Municipal bond Index is a rules-
based, market-value-weighted index engineered for the long-term, tax-exempt bond
market. 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. The Lehman Brothers Municipal 1 Year Bond
Index and the Lipper Short Municipal Debt Funds Average are unmanaged and do 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 10/31/04
1 YEAR SINCE INCEPTION(1)<F4>
------ ----------------------
Alpine Tax Optimized Income
Fund - Investor Class 2.42% 3.44%
Alpine Tax Optimized Income
Fund - Adviser Class N/A 0.55%
Lehman Brothers Municipal 1 Year Bond Index 1.25% 1.72%
Lipper Short Municipal Debt Funds Average 1.27% 1.93%
Lipper Short Municipal Debt
Fund Rank - Investor Class 3/53 2/49
(1)<F4> Adviser Class shares commenced on March 30, 2004 and Investor Class
shares commenced on December 6, 2002. Returns for indexes are since
December 6, 2002.
The performance table and graph do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares.
PORTFOLIO DISTRIBUTION*<F5>
Cash/Cash Equivalents 4.9%
Corporate Bonds 35.8%
General Market Notes 16.1%
Put Bonds 27.3%
Variable Rate Demand Notes 15.9%
TOP 10 HOLDINGS*<F5>
1. Essex County New Jersey Util Auth
Water Rev, 2.375%, 11/23/2004 8.96%
2. International Lease Finance Corporation.,
4.750%, 2/15/2008 6.05%
3. Marsh & McLennan Companies, Inc.
5.375%, 03/15/2007 4.98%
4. Ford Motor Credit Company,
6.875%, 2/01/2006 4.86%
5. Mecklenberg County North Carolina
Ind Rev, 2.750%, 11/05/2004 4.85%
6. GMAC Commercial Holding Trust,
3.010%, 10/30/2004 4.85%
7. Household Finance Corporation,
4.625%, 1/15/2008 4.04%
8. Daimler-Chrysler NA Holding Co.,
4.750%, 1/15/2008 4.02%
9. Searcy Arkansas Industrial Dev Rev,
2.842%, 1/01/2010 3.90%
10. Vigo County Indiana Industrial
Dev Rev, 1.805%, 11/05/2004 3.90%
*<F5> Portfolio holdings, geographical distributions and/or sector
distributions are as of 10/31/04 and are subject to change. Portfolio
holdings are not recommendations to buy or sell any securities.
ALPINE MUNICIPAL MONEY MARKET FUND /
ALPINE TAX OPTIMIZED INCOME FUND
We are pleased to provide you with the annual report for the Alpine Income
Trust for the period ending October 31, 2004. The Income Trust includes both
the Alpine Tax Optimized Income Fund and the Alpine Municipal Money Market Fund.
For the one-year period, each Fund produced relative performance leadership
when compared against its counterparts in their respected categories. Based on
fund total returns, the Alpine Municipal Money Market Fund was ranked number one
out of 135 Tax Exempt Money Market funds according to Lipper Analytical. It had
a total return for the period of 1.09%. Lipper ranked the Alpine Tax Optimized
Income Fund number three out of 53 funds in the Short Municipal Debt category
and had a total return for the period of 2.42%. The Lipper Analytical peer
average for the period was 1.27% and .48% for the Short Municipal Debt and Tax
Exempt Money Market Fund peer groups, respectively.
As we approached the second half of the year, the market's focus turned from
the reduction of the federal funds rate to its lowest level in more than 40
years, to the employment situation and the direction of interest rates. At the
start of the second quarter, the Fed was signaling its concern over a possible
resurgence in inflation and hinted that it wasn't comfortable maintaining the
fed funds rate at 1% indefinitely. With the May and initial June jobs reports
strong, the Fed stated that it would begin to raise interest rates in the near
future. On June 30, the central bank authorized the first of four quarter-point
rate increases, lifting the federal funds rate from a 46-year low of 1.00% to
2.00% as of this writing.
In early summer, growth began to slow from its sharp recovery phase as the
economy downshifted to a more sustainable pace of expansion. Fears of renewed
economic weakness, driven primarily by higher oil prices and the threat of
terrorism, prompted yields to decline from levels reached in the spring. Fed
officials have recently asserted, however, that the weakness should prove to be
short-lived, leaving the economy "poised to resume a stronger pace of expansion
going forward."
Yields generally increased over the past six months, but the paths were not
uniform. Even though rates were higher across the yield curve, long-term rates
rose less than short-term rates, leading to a flatter yield curve.
Interestingly, long-term maturities outperformed shorter maturities- the
opposite of what one may have expected in a rising interest rate environment.
Short rates responded more sharply to the Fed's rate hikes, and the low yields
in that area of the curve were not high enough to overcome principal erosion.
The improving economy has reduced the need for municipal issuers to borrow.
Projected full-year issuance is expected to exceed $300 billion, though it
should be well below last year's record $383 billion. Demand for municipal
securities has moderated, as investors are hesitant to purchase securities with
low absolute yields, given wide expectations of rising interest rates.
One positive factor for the municipal market is a general improvement in
state finances. Although revenues are still below pre-recession levels, tax
receipts are increasing, which, combined with expenditure cuts, is improving the
sector's outlook. Local governments, generally more dependent on property
taxes, have benefited from soaring property values. Overall, the outlook is
better, although escalating state pension and other benefit costs are offsetting
the broad optimism.
ALPINE TAX OPTIMIZED INCOME FUND
The environment for all short to intermediate fixed income securities was
fairly volatile for much of the past six months due to the multiple increases in
the fed funds rate. While the Fund was able to maintain a steady, positive
income stream for the period, the overall total return was negatively affected
when the market began to anticipate the possibility of rate hikes of 25 basis
points at each Federal Open Market Committee meeting through the remainder of
the year. This resulted in the underperformance of short-term securities
relative to longer-term securities as mentioned earlier.
During the period, we over weighted very short-term maturities in variable
rate demand notes and 12 to18 month securities, which helped protect the Fund
from the increase in interest rates. As a result, the average weighted maturity
of the fund decreased to about 1.5 years. However, we did add select positions
in corporate bonds in the three year range when opportunities became available.
Since the Fund's inauguration, the corporate market has been the one area of
the taxable sector that has offered high after-tax yields with good total return
potential. One such name that we purchased towards the end of our reporting
period was Marsh & McLennan Inc. Their corporate bonds had been greatly affected
by negative sentiment in the marketplace, thus making them very cheap relative
to similarly rated securities. We feel that as the company restructures its
business plan, the bonds should return to a more normal trading spread.
Unfortunately, attractive opportunities in the corporate marketplace have
somewhat diminished over the last year as demand for higher yielding product has
outpaced the supply thus lowering the yields on these securities.
We also purchased taxable commercial paper from GMAC in the 35-60 day range.
Once again, we were able to take advantage of a less desirable name while at the
same time maintaining a very short maturity structure.
Going forward, we believe the fed funds rate and other short-term rates
should continue to move higher, but we expect them to have less of an impact
because additional tightening is already built into the pricing of the
securities. We will maintain a cautious posture in terms of maturity and
interest rate exposure, but we may take the opportunity to add some credit risk
if we believe credit quality will continue to improve and spreads will tighten
further in the coming year.
ALPINE MUNICIPAL MONEY MARKET FUND
The three rate hikes that occurred during this reporting period have slowly
been assimilated into the municipal money market. While taxable money market
yields immediately reflected these changes in short-term interest rates, supply
and demand imbalances, which occasionally affect the municipal money market,
delayed the impact on municipal rates. As a result, the extremely favorable tax
relationship of municipal yields to taxable yields has eased somewhat.
Average rates for overnight and seven-day variable-rate paper did not deviate
substantially for most of the six-month period due to strong demand for
municipal paper through much of June and July. Since the beginning of May,
variable-rate product averaged yields of between 1.25% and 1.50%. It is in the
longer maturity issues that the recent rate increases have made themselves felt.
Six-month note yields have increased about 50 basis points since early May while
one-year yields have increased as least 75 basis points over the same period.
With the Federal Reserve committed to a "measured" pace of tightening, we
dramatically shortened our average maturity during the past six-months from 56
days to 25 days. We continued to maintain a large position in variable rate
demand notes with about 80% of the Fund invested in this type of security. Only
in late October, as we saw longer maturity yields begin to adjust to very
attractive levels, did we resume purchases in the longer end of our maturity
spectrum. The Fund's fixed-rate issues are currently structured with a
"laddered" approach, so that the maturities of the various issues are
distributed across the money market yield curve.
Looking forward, we believe bond market volatility will remain fairly high.
We expect to continue to take a defensive position towards rising rates.
Although rates may not rise as much as we anticipate, we expect to be
comfortable continuing to hold our short, defensive positioning with respect to
interest rates as we enter the current period. Furthermore, both Funds are well
positioned to take advantage of higher yields as opportunities arise.
We appreciate your investment in the Alpine Income Funds.
Steven C. Shachat
Portfolio Manager
An investment in these Funds are neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Funds seek 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. INVESTMENTS IN DEBT SECURITIES TYPICALLY DECREASE IN VALUE WHEN
INTEREST RATES RISE. THIS RISK IS USUALLY GREATER FOR LONGER-TERM DEBT
SECURITIES.
Please refer to the Schedule of 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.
Any tax or legal information provided is merely a summary of our understanding
and interpretation 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, 2004
SHARES/ SECURITY
PAR VALUE DESCRIPTION VALUE
--------- ----------- -----
COMMON STOCKS -- 73.7%
Automotive Equipment -- 1.2%
20,000 Autoliv, Inc. $ 855,000
-----------
Commercial Products & Services -- 4.7%
6,000 The Black & Decker Corporation 481,680
10,000 Briggs & Stratton Corporation 718,100
15,000 Deere & Company 896,700
2,443 Eagle Materials Inc. 168,836
11,290 Eagle Materials Inc. -- Class B 754,398
2,500 Hubbell Incorporated -- Class A 105,975
4,500 Hubbell Incorporated -- Class B 205,740
-----------
3,331,429
-----------
Construction -- Homebuilder -- 7.3%
30,000 Hovnanian Enterprises,
Inc. -- Class A (a)<F6> 1,126,200
5,500 M.D.C. Holdings, Inc. 422,125
25,000 Pulte Homes, Inc. 1,372,000
8,500 The Ryland Group, Inc. 810,815
25,700 Standard Pacific Corp. 1,443,055
-----------
5,174,195
-----------
Consumer Products & Services -- 5.3%
10,000 Avery Dennison Corporation 608,400
10,000 Colgate-Palmolive Company 446,200
21,000 Kimberly-Clark Corporation 1,253,070
18,000 The Procter & Gamble Company 921,240
28,000 RPM International, Inc. 493,640
-----------
3,722,550
-----------
Energy -- 2.7%
37,000 CONSOL Energy Inc. 1,309,800
16,000 Penn Virginia Corporation 576,000
-----------
1,885,800
-----------
Financial -- Banks -- 14.9%
12,360 Arrow Financial Corporation 359,799
18,000 Bancorp Rhode Island, Inc. 688,500
6,000 Bancshares of Florida, Inc. (a)<F6> 85,800
15,000 Banknorth Group, Inc. 529,050
25,000 Comerica Incorporated 1,537,750
31,000 Doral Financial Corp. (b)<F7> 1,301,380
10,000 Golden West Financial Corporation 1,169,200
10,000 Hudson United Bancorp 398,000
40,000 J.P. Morgan Chase & Co. 1,544,000
26,500 New York Community Bancorp, Inc. 486,540
17,000 North Fork Bancorporation, Inc. 749,700
3,200 Penns Woods Bancorp, Inc. 151,232
11,000 PNC Financial Services Group 575,300
5,500 Rurban Financial Corp. (a)<F6> 74,085
5,591 Southside Bancshares, Inc. 112,435
13,000 Sovereign Bancorp, Inc. 281,450
15,000 Susquehanna Bancshares, Inc. 373,050
4,000 Taylor Capital Group, Inc. 117,400
-----------
10,534,671
-----------
Financial Services -- 8.4%
14,000 Ambac Financial Group, Inc. 1,092,840
13,000 American International Group, Inc. 789,230
22,000 Fannie Mae 1,543,300
12,000 Lincoln National Corporation 525,600
10,000 Marsh & McLennan Companies, Inc. 276,600
41,000 MBNA Corporation 1,050,830
3,500 The Student Loan Corporation 512,750
4,000 Unitrin, Inc. 172,720
-----------
5,963,870
-----------
Medical Instruments -- 2.0%
12,200 Beckman Coulter, Inc. 725,900
10,000 Guidant Corporation 666,200
-----------
1,392,100
-----------
Pharmaceutical -- 4.8%
20,000 Bristol-Myers Squibb Company 468,600
22,000 Johnson & Johnson 1,284,360
10,000 Merck & Co. Inc. 313,100
25,000 Pfizer Inc. 723,750
15,000 Wyeth 594,750
-----------
3,384,560
-----------
Printing -- 1.0%
23,000 R.R. Donnelley & Sons Company 723,350
-----------
Real Estate Investment Trusts -- 10.8%
15,000 Boston Properties, Inc. 895,800
10,000 Developers Diversified
Realty Corporation 418,000
20,000 General Growth Properties, Inc. 659,800
45,000 Impac Mortgage Holdings, Inc. 1,017,450
10,000 Mack-Cali Realty Corporation 441,700
15,000 Maguire Properties, Inc. 392,250
38,000 Origen Financial, Inc. 285,950
15,000 Prime Group Realty Trust (a)<F6> 95,700
18,000 Simon Property Group, Inc. 1,049,760
50,000 Sunstone Hotel Investors, Inc. (a)<F6> 842,500
7,000 Town & Country Trust 193,340
20,000 Vornado Realty Trust 1,344,000
-----------
7,636,250
-----------
Retail -- 1.6%
10,000 The Home Depot, Inc. 410,800
20,000 J. C. Penney Company, Inc. 691,800
-----------
1,102,600
-----------
Software -- 1.6%
40,000 Microsoft Corporation 1,119,600
-----------
Transportation -- 0.9%
10,000 Union Pacific Corporation 629,700
-----------
Transportation Services -- 2.6%
20,000 FedEx Corp. 1,822,400
-----------
Utilities -- 3.9%
61,000 Allegheny Energy, Inc. (a)<F6> 1,116,910
10,000 DTE Energy Company 427,100
12,000 NUI Corporation (a)<F6> 161,520
15,600 SJW Corp. 528,216
30,550 Xcel Energy, Inc. 522,405
-----------
2,756,151
-----------
Total Common Stocks
(Cost $44,616,334) 52,034,226
-----------
WARRANTS -- 0%
2,000 General Growth Properties, Inc.
Expiration November 2004
Exercise Price $32.23
(Acquired 4/06/2004, Cost $0) 1,520
-----------
Total Warrants (Cost $0) 1,520
-----------
BONDS AND NOTES -- 21.5%
U.S. Government Agencies -- 3.2%
2,000,000 Federal National
Mortgage Association,
6.250%, 5/15/2029 2,275,594
-----------
U.S. Government Obligations -- 18.3%
1,000,000 U.S. Treasury Bond,
7.250%, 5/15/2016 1,268,907
5,000,000 U.S. Treasury Bond,
6.000%, 2/15/2026 5,772,465
500,000 U.S. Treasury Bond,
5.250%, 11/15/2028 527,227
3,000,000 U.S. Treasury Note,
5.000%, 02/15/2011 3,240,471
2,000,000 U.S. Treasury Note,
5.000%, 08/15/2011 2,160,548
-----------
12,969,618
-----------
Total Bonds and Notes
(Cost $14,331,564) 15,245,212
-----------
SHORT-TERM INVESTMENTS -- 11.3%
$1,094,019 Alpine Municipal
Money Market Fund 1,094,019
3,330,000 Federated Government
Obligations Fund 3,330,000
249,898 Federated Prime
Obligations Fund 249,898
3,330,000 Fidelity Institutional
Government Portfolio 3,330,000
-----------
Total Short-Term Investments
(Cost $8,003,917) 8,003,917
-----------
Total Investments
(Cost $66,951,816) 106.5% 75,284,875
Other Assets,
less Liabilities (6.5)% (4,579,865)
-----------
TOTAL NET ASSETS 100.0% $70,705,010
-----------
-----------
(a)<F6> Non-income producing securities.
(b)<F7> Foreign security which trades on U.S. exchange.
See notes to financial statements.
ALPINE MUTUAL FUNDS
DYNAMIC DIVIDEND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
OCTOBER 31, 2004
SHARES/ SECURITY
PAR VALUE DESCRIPTION VALUE
--------- ----------- -----
COMMON STOCKS -- 90.5%
Aerospace -- 3.0%
15,200 Lockheed Martin Corporation $ 837,368
9,000 Northrop Grumman Corporation 465,750
-----------
1,303,118
-----------
Apparel -- 1.2%
4,600 Kellwood Company 144,716
14,000 Kenneth Cole Productions,
Inc. -- Class A 371,000
-----------
515,716
-----------
Building -- Maintenance & Service -- 1.5%
17,972 Healthcare Services Group, Inc. 333,021
8,213 McGrath Rentcorp 319,732
-----------
652,753
-----------
Chemicals -- 3.7%
19,000 The Dow Chemical Company 853,860
33,500 Lyondell Chemical Company 769,830
-----------
1,623,690
-----------
Computers -- 0.4%
6,000 Imation Corp. 187,620
-----------
Commercial Products & Services -- 3.4%
9,700 Craftmade International, Inc. 202,148
25,600 Lincoln Electric Holdings, Inc. 854,528
15,800 Mueller Industries, Inc. 421,228
-----------
1,477,904
-----------
Conglomerate -- 1.5%
19,000 General Electric Company 648,280
-----------
Construction -- Homebuilder -- 0.3%
6,750 The Berkeley Group plc (c)<F10> 147,180
-----------
Construction -- Services -- 1.6%
17,500 Bouygues SA (c)<F10> 687,415
-----------
Consumer Products & Services -- 4.1%
15,000 Angelica Corporation 360,000
46,512 CCA Industries, Inc. 436,748
4,800 Ennis Inc 97,104
24,000 Lifetime Hoan Corporation 334,320
29,000 Nu Skin Enterprises, Inc. -- Class A 560,860
-----------
1,789,032
-----------
Energy -- 6.0%
6,000 BP p.l.c. -- ADR (b)<F9> 349,500
129,600 Centrica plc 571,700
11,000 ChevronTexaco Corporation 583,660
6,000 Equitable Resources, Inc. 331,800
12,000 Kinder Morgan, Inc. 772,440
-----------
2,609,100
-----------
Entertainment -- 3.5%
11,700 Harrah's Entertainment, Inc. 684,684
41,700 Regal Entertainment
Group -- Class A 830,247
-----------
1,514,931
-----------
Financial -- Banks -- 9.4%
19,800 Citigroup Inc. 878,526
10,000 Comerica Incorporated 615,100
5,000 First Horizon National Corporation 216,400
2,200 The Goldman Sachs Group, Inc. 216,436
21,200 J.P. Morgan Chase & Co. 818,320
12,000 New York Community Bancorp, Inc. 220,320
9,500 Wachovia Corporation 467,495
11,000 Wells Fargo & Company 656,920
-----------
4,089,517
-----------
Financial Services -- 0.4%
7,000 Marsh & McLennan Companies, Inc. 193,620
-----------
Food & Beverages -- 7.7%
15,000 ConAgra Foods, Inc. 396,000
5,000 The J.M. Smucker Company 222,500
22,000 Lance, Inc. 371,360
10,000 PepsiCo, Inc. 495,800
20,500 Ralcorp Holdings, Inc. (a)<F8> 753,375
33,273 Rocky Mountain
Chocolate Factory, Inc. 428,223
21,000 Sanderson Farms, Inc. 682,290
-----------
3,349,548
-----------
Lodging -- 0.8%
28,000 InterContinental Hotels Group plc 341,944
-----------
Lottery Services -- 0.8%
15,000 GTECH Holdings Corporation 355,050
-----------
Manufacturing -- Diversified -- 5.6%
21,000 American Power
Conversion Corporation 404,880
9,000 Caterpillar Inc. 724,860
13,000 Honeywell International Inc. 437,840
12,000 Hubbell Incorporated -- Class B 548,640
12,300 Twin Disc, Incorporated 298,263
-----------
2,414,483
-----------
Medical Supplies -- 3.4%
11,850 Datascope Corp. 384,651
39,500 Meridian Bioscience, Inc. 529,300
16,500 PolyMedica Corporation 577,500
-----------
1,491,451
-----------
Pharmaceutical -- 4.5%
21,000 Abbott Laboratories 895,230
11,000 Johnson & Johnson 642,180
14,500 Pfizer Inc. 419,775
-----------
1,957,185
-----------
Restaurants -- 1.4%
21,300 McDonald's Corporation 620,895
-----------
Retail -- 5.2%
44,958 Bassett Furniture Industries,
Incorporated 831,723
15,000 Claire's Stores, Inc. 390,300
9,133 Deb Shops, Inc. 221,293
10,000 Weis Markets, Inc. 367,600
8,000 Wal-Mart Stores, Inc. 431,360
-----------
2,242,276
-----------
Software -- 2.7%
42,000 Microsoft Corporation 1,175,580
-----------
Telecommunications -- 3.7%
11,200 Atlantic Tele-Network, Inc. 336,000
54,500 Citizens Communications
Company 730,300
17,000 Telecom Corporation of New
Zealand Limited -- ADR (b)<F9> 540,430
-----------
1,606,730
-----------
Transportation -- 8.0%
4,000 Burlington Northern
Santa Fe Corporation 167,240
17,500 Frontline Limited (b)<F9> 876,400
20,100 Ship Finance
International Limited (b)<F9> 404,010
15,000 Teekay Shipping Corporation (b)<F9> 693,000
31,500 Tsakos Energy Navigation Ltd. (b)<F9> 1,178,100
2,500 Union Pacific Corporation 157,425
-----------
3,476,175
-----------
Utilities -- 6.7%
3,000 Ameren Corporation 144,000
9,000 DTE Energy Company 384,390
22,000 Duke Energy Corporation 539,660
17,000 Enel S.p.A. (c)<F10> 153,320
9,000 Exelon Corporation 356,580
5,000 OGE Energy Corp. 126,850
17,000 The Southern Company 537,030
10,800 TXU Corp. 661,176
-----------
2,903,006
-----------
Total Common Stocks
(Cost $37,526,287) 39,374,199
-----------
SHORT-TERM INVESTMENTS -- 12.2%
$1,987,684 Federated Government
Obligations Fund 1,987,684
1,337,503 Federated Prime
Obligations Fund 1,337,502
1,987,684 Fidelity Institutional
Government Portfolio 1,987,684
-----------
Total Short-Term Investments
(Cost $5,312,871) 5,312,870
-----------
Total Investments
(Cost $42,839,158) 102.7% 44,687,069
Other Assets,
less Liabilities (2.7)% (1,156,650)
-----------
TOTAL NET ASSETS 100.0% $43,530,419
-----------
-----------
ADR -- American Depository Receipt
(a)<F8> Non-income producing securities.
(b)<F9> Foreign security which trades on U.S. exchange.
(c)<F10> Foreign security.
See notes to financial statements.
ALPINE MUTUAL FUNDS
MUNICIPAL MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
OCTOBER 31, 2004
SHARES/ SECURITY
PAR VALUE DESCRIPTION VALUE
--------- ----------- -----
MUNICIPAL BONDS -- 98.4%
Alabama -- 1.2%
Alabaster Alabama Sewer Revenue
Warrants (CS: MBIA)
435,000 2.000%, 4/01/2005 $ 436,245
Dothan Houston County Alabama
Airport Authority Airport Revenue,
Pemco Aviation Group Project
(LOC: Southtrust Bank N.A.)
1,160,000 2.005%, 11/05/2004 (a)<F11> (b)<F12> 1,160,000
------------
1,596,245
------------
Arizona -- 2.7%
Fort McDowell Arizona
Yavapai Nation Gaming
Revenue -- Class A
3,500,000 1.945%, 11/05/2004 (a)<F11> (b)<F12> 3,500,000
------------
California -- 4.6%
California Pollution Control
Financing Authority
Environmental Impact Revenue,
Atlantic Richfield
6,075,000 1.775%, 11/05/2004 (a)<F11> (b)<F12> 6,075,000
------------
Colorado -- 12.3%
Bachelor Gulch Metropolitan
District General Obligation
(LOC: Compass Bank)
2,865,000 1.197%, 12/01/2004 (a)<F11> (b)<F12> 2,865,000
Broomfield Colorado Village
Metropolitan District 2,
Colorado Special Obligation
Revenue (LOC: Compass Bank)
2,000,000 2.104%, 11/05/2004 (a)<F11> (b)<F12> 2,000,000
Cherry Creek Colorado South
Metropolitan District 1 --
Series B (LOC: Compass Bank)
2,000,000 1.400%, 11/05/2004 (a)<F11> (b)<F12> 2,000,000
Denver Colorado City & County
Airport Revenue Series A
3,130,000 0.000%, 11/15/2004 (c)<F13> 3,128,049
Triview Colorado Metropolitan
District REF & IMPT -
Series A (LOC: Compass Bank)
2,000,000 1.375%, 10/29/2005 (a)<F11> (b)<F12> 2,000,000
Vail Colorado Multifamily
Housing Revenue, Middle
Creek Village Apartments Project
(LOC: California Bank & Trust)
3,000,000 2.034%, 11/05/2004 (a)<F11> (b)<F12> 3,000,000
Wildgrass Metropolitan District
Colorado (LOC: Compass Bank)
1,000,000 1.600%, 12/01/2004 (b)<F12> 1,000,000
------------
15,993,049
------------
Connecticut -- 2.3%
Connecticut State Health &
Educational Facilities Authority
Revenue Connecticut State
University System -- D 2
3,065,000 4.000%, 11/01/2004 3,065,000
------------
Florida -- 1.2%
Capital Trust Agency Florida
Revenue, Seminole Tribe Resort --
B (LOC: JP Morgan Chase Bank)
1,000,000 1.925%, 11/05/2004 1,000,000
Northern Palm Beach County
Improvement District Florida,
Water Control & Improvement
(CS: Radian)
565,000 1.500%, 11/01/2004 565,000
------------
1,565,000
------------
Georgia -- 6.7%
De Kalb County Development
Authority Industrial Development
Revenue, Noland Company Project
(LOC: Wachovia Bank N.A.)
1,500,000 2.005%, 11/05/2004 (a)<F11> (b)<F12> 1,500,000
De Kalb County Housing Authority
Multifamily Housing, Stone Mill
Run Apartments Project,
(LOC: First Tennessee Bank)
1,310,000 2.054%, 11/05/2004 1,310,000
Douglas County Development
Authority Industrial Development
Revenue, Denyse Signs Inc. Project
(LOC: Bank of North Georgia)
1,700,000 2.005%, 11/05/2004 (a)<F11> (b)<F12> 1,700,000
Fulton County Development
Authority Pollution Control
Revenue, General Motors
Corporation Project
200,000 2.144%, 11/05/2004 (a)<F11> (b)<F12> 200,000
Georgia State Series F
250,000 6.500%, 12/01/2004 250,870
Macon-Bibb County Georgia
Industrial Authority Industrial
Revenue, IBC Partnership No. 1
Project (LOC: Regions Bank)
45,000 2.772%, 11/05/2004 (a)<F11> (b)<F12> 45,000
Rockdale County Georgia
Development Authority Revenue,
Great Southern Wood Project
(LOC: Southtrust Bank, N.A.)
1,485,000 1.995%, 11/05/2004 (a)<F11> (b)<F12> 1,485,000
Walton County Georgia Industrial
Building Authority Industrial
Development Revenue, Leggett &
Platt Inc. Project (LOC: Wachovia
Bank N.A.)
2,300,000 1.985%, 11/05/2004 (a)<F11> (b)<F12> 2,300,000
------------
8,790,870
------------
Hawaii -- 1.0%
Hawaii State Housing Finance &
Development Corp., Hawaii Rental
Housing Systems -- Series A
(LOC: Industrial Bank of Japan)
300,000 2.453%, 11/05/2004 (a)<F11> (b)<F12> 300,000
Hawaii State Housing Finance &
Development Corp., Hawaii Rental
Housing Systems -- Series B
(LOC: Industrial Bank of Japan)
600,000 2.453%, 11/05/2004 (a)<F11> (b)<F12> 600,000
------------
900,000
------------
Illinois -- 7.4%
Chicago Illinois Solid Waste
Disposal Facility Revenue,
Groot Industries Inc. Project
(LOC: Bank One N.A.)
2,200,000 1.915%, 11/05/2004 (a)<F11> (b)<F12> 2,200,000
Coles Clark Etc Counties
Community College District No. 517,
Lake Land Community College
700,000 3.500%, 12/01/2004 701,156
Harvard Illinois Healthcare Facility
Revenue, Harvard Memorial
Hospital Inc. Project
(LOC: M&I Bank)
1,355,000 1.995%, 11/05/2004 (a)<F11> (b)<F12> 1,355,000
Illinois Development Finance
Authority Industrial Development
Revenue, Florence Corp. Project
(LOC: Bank One N.A.)
2,235,000 1.915%, 11/05/2004 (a)<F11> (b)<F12> 2,235,000
Illinois Development Finance
Authority Multifamily Revenue,
Butterfield Creek Project
(LOC: LaSalle Bank N.A.)
800,000 1.995%, 11/05/2004 (a)<F11> (b)<F12> 800,000
Peoria County Illinois Sewage
Facilities Revenue, Caterpillar
Inc. Project
2,300,000 2.005%, 11/05/2004 (a)<F11> (b)<F12> 2,300,000
------------
9,591,156
------------
Indiana -- 2.8%
Monroe County Industrial
Economic Development
Revenue, Textillery Weavers Project
(LOC: Old National Bank)
500,000 2.364%, 11/05/2004 (a)<F11> (b)<F12> 500,000
Tippecanoe County Industrial
Economic Development Revenue,
Lafayette Venetian Blind
3,200,000 1.915%, 11/05/2004 (a)<F11> (b)<F12> 3,200,000
------------
3,700,000
------------
Iowa -- 4.6%
Sergeant Bluff Industrial
Development Revenue, Sioux City
Brick & Tile Project
(LOC: Firstar Bank Milwaukee)
6,000,000 1.915%, 11/05/2004 6,000,000
------------
Kentucky -- 1.5%
Kentucky Economic Development
Financial Authority Revenue,
Pooled Hospital Loan
1,900,000 2.044%, 11/05/2004 (a)<F11> (b)<F12> 1,900,000
------------
Louisiana -- 1.5%
Ascension Parish Louisiana
Solid Waste Disposal,
Allied Signal Inc. Project
2,000,000 2.104%, 11/05/2004 (a)<F11> (b)<F12> 2,000,000
------------
Maine -- 1.7%
Dover & Foxcroft Maine
Revenue, Pleasant River,
(LOC: National Bank of Canada)
2,200,000 2.005%, 11/05/2004 (a)<F11> (b)<F12> 2,200,000
------------
Michigan -- 3.2%
Michigan State Strategic Fund
Limited Obligation Revenue
Rudolph Etta DeJong 1982
(LOC: Farm Credit Services
of America; Bank of the West)
4,000,000 2.005%, 11/05/2004 (a)<F11> (b)<F12> 4,000,000
Michigan State Strategic Fund
Pollution Control, General
Motors Corporation Project
220,000 2.493%, 11/05/2004 220,000
------------
4,220,000
------------
Minnesota -- 2.6%
Elk River Minnesota Multifamily
Housing Revenue, Elk River Estates
Project (LOC: Associated Bank)
800,000 2.064%, 11/05/2004 (a)<F11> (b)<F12> 800,000
Plymouth Minnesota Industrial
Development Revenue Daily
Printing Inc. Project
(LOC: U.S. Bank N.A.)
740,000 1.965%, 11/05/2004 (a)<F11> (b)<F12> 740,000
St. Cloud Minnesota Housing &
Redevelopment Authority Industrial
Development Revenue, CMMB LLP
Project (LOC: Bremer Bank N.A.)
1,000,000 2.314%, 11/05/2004 (a)<F11> (b)<F12> 1,000,000
Stewartville Minnesota Industrial
Development Revenue, Halcon
Corp Project (LOC: U.S. Bank N.A.)
800,000 1.197%, 11/05/2004 (a)<F11> (b)<F12> 800,000
------------
3,340,000
------------
Missouri -- 0.6%
Springfield Center Missouri City
Development Corporation Bond
Anticipation Notes -- Series A
825,000 2.000%, 4/30/2005 825,000
------------
Nevada -- 1.6%
Clark County Nevada Passenger Fac
Charge Revenue Las Vegas/Macarran
International Airport -- A
2,000,000 5.750%, 07/01/2005 (b)<F12> 2,086,116
------------
New Jersey -- 0.8%
Essex County New Jersey Utilities
Authority Water, Notes Project
1,000,000 2.375%, 11/23/2004 999,593
------------
New York -- 3.5%
Haverstraw Stony Point New York
Central School District Bond
Anticipation Notes
(CS: State Aid Withholding)
4,100,000 2.000%, 1/21/2005 4,106,224
New York State Dorm Authority
Revenue Mental Health Services
& Facilities Series C
500,000 4.75%, 2/15/2005 504,699
------------
4,610,923
------------
North Carolina -- 0.8%
Mecklenburg County Industrial
Facilities and Pollution Control
Financing Authority Industrial
Revenue, Okaya Shinnichi America
(LOC: Tokai Bank Ltd.)
1,000,000 2.750%, 11/05/2004 (a)<F11> (b)<F12> 1,000,000
------------
Ohio -- 5.7%
Clyde Ohio Election
System Limited Tax
455,000 2.000%, 11/15/2004 455,103
Cleveland Ohio Apartment System
Revenue, Series C
(SPA: WestDeutsche Landesbank
Girozentrale & Dexia Credit Local)
5,400,000 1.765%, 11/05/2004 (a)<F11> (b)<F12> 5,400,000
Eastlake Ohio Industrial
Development Revenue, Astro
Model Development Corp. Project
(LOC: National City Bank)
1,590,000 1.915%, 11/05/2004 (a)<F11> (b)<F12> 1,590,000
------------
7,445,103
------------
Pennsylvania -- 1.5%
Philadelphia Pennsylvania
Redevelopment Authority Revenue
Cap Fund -- Series C (CS: FSA)
400,000 1.500%, 12/01/2004 400,000
Somerset County Pennsylvania
Hospital Authority Hospital
Revenue, Somerset
Community Hospital Project
(SPA: PNC Bank N.A.)
1,615,000 1.300%, 3/01/2005 (a)<F11> (b)<F12> 1,615,000
------------
2,015,000
------------
Rhode Island -- 0.9%
Rhode Island Housing &
Mortgage Finance Corporation
Homeownership Opportunity
NT-39C
1,100,000 4.000%, 03/24/2005 1,110,354
------------
Tennessee -- 0.2%
Jackson Tennessee Health
Educational & Housing Facility
Board Multifamily Revenue,
Creekside Apartments Project
(LOC: First Tennessee Bank)
330,000 2.000%, 11/05/2004 (a)<F11> (b)<F12> 330,000
------------
Texas -- 2.7%
Montgomery County Texas
Industrial Development
Corporation Industrial Development
Revenue, Medical Manufacturing
Partners Project (LOC: Bank One
Texas N.A.)
2,000,000 1.950%, 11/05/2004 (a)<F11> (b)<F12> 2,000,000
Port Corpus Christi Authority Texas
Nueces County Solid Waste Disposal,
Flint Hills Project
1,500,000 2.084%, 11/05/2004 (a)<F11> (b)<F12> 1,500,000
------------
3,500,000
------------
Utah -- 1.9%
Utah Housing Corporation
Multifamily Revenue Todd Hollow
Apartments -- A (CS: AIG)
2,500,000 2.005%, 11/05/2004 2,500,000
------------
Virginia -- 1.5%
Orange County Virginia Industrial
Development Authority Revenue,
Zamma Corp. Project
(LOC: Southtrust Bank N.A.)
2,000,000 1.955%, 11/05/2004 (a)<F11> (b)<F12> 2,000,000
------------
Washington -- 4.0%
Washington State Economic
Development Finance Authority
Economic Development Revenue,
B&H Dental Laboratory Project
(LOC: Washington Mutual Bank)
2,105,000 2.154%, 11/05/2004 (a)<F11> (b)<F12> 2,105,000
Washington State Economic
Development Finance Authority
Economic Development Revenue,
Belina Interiors Inc. -- Series F
(LOC: Keybank N.A.)
1,110,000 1.995%, 11/05/2004 (a)<F11> (b)<F12> 1,110,000
Washington State Economic
Development Finance Authority
Economic Development Revenue,
Hillstrom Ventures LLC Project
(LOC: Washington Mutual Bank)
2,000,000 2.154%, 11/05/2004 (a)<F11> (b)<F12> 2,000,000
------------
5,215,000
------------
Wisconsin -- 3.8%
Marshfield Wisconsin Industrial
Development Revenue, Beatrice
Cheese Project (LOC: Wachovia
Bank & Trust)
2,500,000 2.104%, 11/05/2004 (a)<F11> (b)<F12> 2,500,000
Neenah Wisconsin Industrial
Development Revenue,
Galloway Co. Project
(LOC: Bank One Wisconsin)
1,000,000 2.014%, 11/05/2004 1,000,000
Sheboygan Wisconsin Industrial
Development, Polyfab and
Gill-Janssen Project
(LOC: Associated Bank Lakeshore)
1,300,000 2.094%, 11/05/2004 1,300,000
Sturgeon Bay Wisconsin Industrial
Development Revenue, Midwest
Wire Realty Project
(LOC: Associated Bank)
200,000 2.064%, 11/05/2004 (a)<F11> (b)<F12> 200,000
------------
5,000,000
------------
Multistate -- 11.6%
Charter Mac Floater Certificate
Trust I, Low Floater Certificates
National 5, (CS: MBIA)
1,000,000 1.925%, 11/05/2004 (a)<F11> (b)<F12> 1,000,000
Class B Revenue Bond Certificates
Series Trust 2004-1
(CS: AIG Retirement Services, Inc.)
3,740,000 2.104%, 11/05/2004 (a)<F11> (b)<F12> 3,740,000
Revenue Bond Certificate
Series Trust, Castlegate 1
(CS: AIG Retirement Services, Inc.)
2,000,000 2.054%, 11/05/2004 (a)<F11> (b)<F12> 2,000,000
Revenue Bond Certificate
Series Trust, Castlegate 2
(CS: AIG Retirement Services, Inc.)
2,000,000 2.054%, 11/05/2004 (a)<F11> (b)<F12> 2,000,000
Revenue Bond Certificate Series
Trust, Centennial (CS: AIG)
3,115,000 2.054%, 11/05/2004 (a)<F11> (b)<F12> 3,115,000
Roaring Fork Municipal Products LLC,
Series 2002-9 CTF Class A
(SPA: Bank of New York)
3,250,000 2.054%, 11/05/2004 3,250,000
------------
15,105,000
------------
Total Municipal Bonds
(cost $128,178,409) 128,178,409
------------
MONEY MARKET FUNDS -- 0.0%
24,457 Federated Government
Obligations Fund -- Class I 24,457
------------
Total Money Market Funds
(cost $24,457) 24,457
------------
Total Investments
(cost $128,202,866) 98.4% 128,202,866
Other Assets, less Liabilities 1.6% 2,024,610
------------
NET ASSETS 100.0% $130,227,476
------------
------------
(a)<F11> Variable Rate Security - The rate reported is the rate in effect as of
October 31, 2004. The date shown is the next reset date.
(b)<F12> Maturity date represents first available put date.
(c)<F13> Zero Coupon - Bonds that make no interest payments.
CS - Credit Support
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, 2004
SHARES/ SECURITY
PAR VALUE DESCRIPTION VALUE
--------- ----------- -----
CORPORATE BONDS -- 40.4%
Boeing Capital Corporation
1,800,000 5.750%, 2/15/2007 $ 1,906,675
CIT Group Inc.
1,150,000 4.000%, 5/08/2008 1,185,380
500,000 5.910%, 11/23/2005 505,638
Daimler-Chrysler NA Holding Co.
2,000,000 4.750%, 1/15/2008 2,062,044
Ford Motor Credit Company
2,400,000 6.875%, 2/01/2006 2,495,966
General Motors
Acceptance Corporation
1,200,000 6.125%, 8/28/2007 1,252,478
GMAC Commercial Holding Trust
2,500,000 3.010%, 10/30/2004 (b)<F15> 2,489,549
Household Finance Corporation
2,000,000 4.625%, 1/15/2008 2,071,898
International Lease
Finance Corporation
3,000,000 4.750%, 2/15/2008 3,105,243
Marsh & McLennan Companies, Inc.
2,500,000 5.375%, 03/15/2007 2,557,498
Time Warner Inc.
1,000,000 6.150%, 5/01/2007 1,070,309
-----------
Total Corporate Bonds
(Cost $20,116,563) 20,702,678
-----------
MUNICIPAL BONDS -- 58.7%
Alabama -- 0.9%
University of Alabama University
Revenue, Huntsville General
Fees -- Series A (CS:FSA)
460,000 2.050%, 12/01/2004 460,092
-----------
Alaska -- 2.7%
Alaska Industrial Development &
Export Authority, Revolving
Fund -- Series A (CS: GO OF Auth.)
1,400,000 4.500%, 4/01/2005 1,410,528
-----------
Arizona -- 1.9%
Maricopa County Arizona Pollution
Control Corporation Pollution
Control Revenue, Arizona Public
Service Company -- Series D
1,000,000 1.875%, 3/01/2005 (a)<F14> (b)<F15> 998,010
-----------
Arkansas -- 3.9%
Searcy Arkansas Industrial
Development Revenue, Yarnell Ice
Cream Co. Project (SPA: AmSouth
Bank of Alabama)
2,000,000 2.842%, 1/01/2010 (a)<F14> 2,000,000
-----------
California -- 5.8%
California Pollution Control
Financing Authority Solid Waste
Disposal Revenue, Republic
Services Inc. Project
1,000,000 2.000%, 12/01/2004 (a)<F14> (b)<F15> 999,520
California Statewide Communities
Development Authority Solid
Waste Facilities Revenue, Waste
Management Inc. Project
(CS: Waste Management Inc.)
1,000,000 2.900%, 4/01/2007 (a)<F14> (b)<F15> 990,780
Stockton California Certificates
Partner United Christian Schools,
(LOC: Pacific Capital Bank, N.A.)
1,000,000 2.094%, 11/05/2004 (a)<F14> (b)<F15> 1,000,000
-----------
2,990,300
-----------
Indiana -- 5.0%
Monroe County Industrial Economic
Development Revenue, Textillery
Weavers Project
590,000 2.364%, 11/05/2004 (a)<F14> (b)<F15> 590,000
Vigo County Indiana Industrial
Development Revenue, Republic
Services Inc. Project
2,000,000 2.483%, 11/05/2004 (a)<F14> (b)<F15> 2,000,000
-----------
2,590,000
-----------
Illinois -- 2.4%
Cook County Illinois School District
No. 159, Tax Antic WTS-
Education Purpose
1,250,000 3.750%, 04/01/2005 1,258,612
-----------
Massachusetts -- 5.4%
Massachusetts State Development
Finance Agency Environmental
Improvement Revenue, Mead Corp.
Project -- Series A
1,500,000 2.250%, 11/01/2004 (a)<F14> (b)<F15> 1,500,000
Massachusetts State Industrial
Financing Agency Industrial
Revenue, Asahi/America Inc.
(LOC: Citizens Bank of MA)
1,250,000 3.125%, 3/01/2009 (a)<F14> (b)<F15> 1,249,713
-----------
2,749,713
-----------
Michigan -- 5.9%
Michigan State Strategic Fund,
Dow Chemical Project
1,000,000 3.100%, 12/01/2004 (a)<F14> (b)<F15> 1,000,490
1,000,000 3.800%, 6/01/2006 (a)<F14> (b)<F15> 1,018,110
Michigan State Strategic Fund
Solid Waste Disposal Revenue,
Waste Management
1,000,000 2.200%, 2/01/2005 (a)<F14> (b)<F15> 998,260
-----------
3,016,860
-----------
Missouri -- 1.6%
St. Louis County Missouri
Industrial Development Authority
Multifamily Housing Revenue,
Pinetree Apartments -- Series A
825,000 5.200%, 11/15/2004 (a)<F14> (b)<F15> 825,165
-----------
New Hampshire -- 2.0%
New Hampshire State Business
Finance Authority
Pollution Control Revenue
1,000,000 2.050%, 2/01/2005 (b)<F15> 1,000,170
-----------
New Jersey -- 9.0%
Essex County New Jersey Utilities
Authority Water System Revenue
4,600,000 2.375%, 11/23/2004 4,600,782
-----------
North Carolina -- 4.9%
Mecklenburg County North Carolina
Industrial Facilities & Pollution
Control Financing Authority
Industrial Revenue, Okaya Shinnichi
America (LOC: Tokai Bank Ltd.)
2,490,000 2.750%, 11/05/2004 (a)<F14> (b)<F15> 2,490,000
-----------
Oklahoma -- 0.5%
Oklahoma Development Finance
Authority Hospital Revenue,
Duncan Regional Hospital
Project -- Series A
250,000 2.500%, 12/01/2004 250,005
-----------
Texas -- 6.8%
Brazoria County Texas Health
Facilities Development Corporate
Hospital Revenue Brazosport
Memorial Hospital
200,000 4.000%, 07/01/2005 202,716
Brazos Harbor Industrial
Development Corp
Environmental Facilities
Revenue, Conoco
1,000,000 1.800%, 8/01/2005 (a)<F14> (b)<F15> 1,001,030
Cypress-Fairbanks Texas
Independent School District,
Schoolhouse-Series B
(SPA: Toronto-Dominion Bank)
1,200,000 5.000%, 8/15/2007(a)<F14> (b)<F15> 1,289,856
Matagorda County Texas Navigation
District No. 1 Pollution Control
Revenue, Central Power & Light
1,000,000 2.350%, 11/01/2004 (a)<F14> (b)<F15> 1,000,000
-----------
3,493,602
-----------
TOTAL MUNICIPAL BONDS
(cost $30,112,477) 30,133,839
-----------
MONEY MARKET -- 0.0%
25,257 Federated Government
Obligations Fund
(cost $25,257) -- 0.1% 25,257
-----------
Total Investments
(cost $50,254,297) 99.1% 50,861,774
Other Assets,
less Liabilities 0.9% 462,093
-----------
NET ASSETS 100.0% $51,323,867
-----------
-----------
(a)<F14> Variable Rate Security -- The rate reported is the rate in effect as
of October 31, 2004. The date shown is the next reset date.
(b)<F15> Maturity date represents first available put date.
CS - Credit Support
LOC - Letter of Credit
SPA - Standby Purchase Agreement
See notes to financial statements.
ALPINE MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
DYNAMIC DYNAMIC
BALANCE DIVIDEND
FUND FUND
------- --------
ASSETS:
Investments, at value(1)<F16> $75,284,875 $44,687,069
Cash -- 137,156
Dividends receivable 79,421 149,292
Interest receivable 207,607 6,086
Receivable for capital shares issued 128,570 445,208
Receivable for investment securities sold 1,585,167 1,185,889
Prepaid expenses and other assets 9,424 17,255
----------- -----------
Total assets 77,295,064 46,627,955
----------- -----------
LIABILITIES:
Payable for investment securities purchased 6,403,513 2,949,940
Payable for capital shares redeemed -- 15,762
Accrued expenses and other liabilities:
Investment advisory fees 121,980 55,308
Other 64,561 76,525
----------- -----------
Total liabilities 6,590,054 3,097,535
----------- -----------
NET ASSETS $70,705,010 $43,530,420
----------- -----------
----------- -----------
NET ASSETS REPRESENTED BY
Capital Stock $58,633,091 $39,955,952
Accumulated undistributed net investment income 79,511 259,626
Accumulated net realized gains on investments
sold and foreign currency related transactions 3,659,348 1,467,012
Net unrealized appreciation/depreciation on:
Investments 8,333,060 1,847,911
Foreign currency translation -- (81)
----------- -----------
TOTAL NET ASSETS $70,705,010 $43,530,420
----------- -----------
----------- -----------
NET ASSET VALUE
Net assets $70,705,010 $43,530,420
Shares of beneficial interest
issued and outstanding 5,683,054 3,528,294
Net asset value, offering price
and redemption price per share $12.44 $12.34
(1)<F16> Cost of Investments $66,951,816 $42,839,158
See notes to financial statements.
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
MUNICIPAL TAX OPTIMIZED
MONEY MARKET INCOME
FUND FUND
------------ -------------
ASSETS:
Investments, at value (1)<F17> $128,202,866 $50,861,774
Cash 387 --
Interest receivable 535,771 507,791
Receivable for capital shares issued 2,905,926 --
Prepaid expenses and other assets 17,116 12,870
------------ -----------
Total assets 131,662,066 51,382,435
------------ -----------
LIABILITIES:
Payable for investment securities purchased 1,257,641 --
Payable for capital shares redeemed 70,000 298
Dividends payable to shareholders 28,577 964
Accrued expenses and other liabilities:
Investment advisory fees 8,449 14,470
Other 69,923 42,836
------------ -----------
Total liabilities 1,434,590 58,568
------------ -----------
NET ASSETS $130,227,476 $51,323,867
------------ -----------
------------ -----------
NET ASSETS REPRESENTED BY
Capital Stock $130,227,476 $50,740,198
Accumulated undistributed
net investment income 2,815 11,645
Accumulated net realized
losses from investments sold (2,815) (35,452)
Net unrealized appreciation on investments -- 607,476
------------ -----------
Total Net Assets $130,227,476 $51,323,867
------------ -----------
------------ -----------
NET ASSET VALUE
Adviser Class Shares
Net assets $ 80,114 $ 22,159
Shares of beneficial interest
issued and outstanding 80,114 2,183
Net asset value, offering price
and redemption price per share $1.00 $10.15
Investor Class Shares
Net assets $130,147,362 $51,301,708
Shares of beneficial interest
issued and outstanding 130,147,362 5,053,857
Net asset value, offering price
and redemption price per share $1.00 $10.15
(1)<F17> Cost of Investments $128,202,866 $50,254,297
See notes to financial statements.
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 2004
DYNAMIC DYNAMIC
BALANCE DIVIDEND
FUND FUND
------- --------
INVESTMENT INCOME:
Interest income $ 599,673 $ 18,809
Dividend income*<F18> 1,279,110 2,817,212
---------- ----------
Total investment income 1,878,783 2,836,021
---------- ----------
EXPENSES:
Investment advisory fees 601,213 272,569
Administration fees 35,703 21,338
Fund accounting fees 34,294 28,801
Audit fees 16,700 19,700
Custodian fees 14,816 17,512
Interest expense 370 --
Legal fees 2,170 2,636
Registration and filing fees 21,834 32,510
Printing fees 5,031 9,048
Transfer agent fees 19,297 15,291
Trustee fees 3,317 3,327
Other fees 5,673 1,723
---------- ----------
Total expenses before expense
recovery (reimbursement) by Adviser 760,418 424,455
Expense recovery (reimbursement) by Adviser 51,589 (56,488)
---------- ----------
Net expenses 812,007 367,967
---------- ----------
Net investment income 1,066,776 2,468,054
---------- ----------
REALIZED/UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments 3,750,643 1,483,063
Foreign currencies -- (6,398)
---------- ----------
Net realized gain 3,750,643 1,476,665
---------- ----------
Change in unrealized
appreciation/depreciation on investments
Investments 3,043,286 1,067,523
Foreign currency translation -- (81)
---------- ----------
Net change in unrealized
appreciation/depreciation 3,043,286 1,067,442
---------- ----------
Net realized/unrealized gain on investments 6,793,929 2,544,107
---------- ----------
Change in net assets resulting from operations $7,860,705 $5,012,161
---------- ----------
---------- ----------
*<F18> Net of foreign taxes withheld $ 216 $ 37,125
---------- ----------
---------- ----------
See notes to financial statements.
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 2004
MUNICIPAL TAX OPTIMIZED
MONEY MARKET INCOME
FUND FUND
------------ -------------
INVESTMENT INCOME:
Interest income $1,263,981 $1,733,463
---------- ----------
Total investment income 1,263,981 1,733,463
---------- ----------
EXPENSES:
Investment advisory fees 395,139 404,606
Administration fees 46,059 29,823
Distribution fees -- Adviser Class 27 18
Fund accounting fees 47,059 30,823
Audit fees 13,868 13,868
Custodian fees 12,023 9,565
Interest expense 2,081 15
Legal fees 5,946 5,157
Registration and filing fees 35,559 28,266
Printing fees 5,368 1,060
Transfer agent fees 40,493 26,776
Trustee fees 3,287 3,287
Other fees 4,844 4,087
---------- ----------
Total expenses before
expense reimbursement by Adviser 611,753 557,351
Less: Reimbursement by Adviser (311,122) (233,633)
---------- ----------
Net expenses 300,631 323,718
---------- ----------
Net investment income 963,350 1,409,745
---------- ----------
REALIZED/UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments -- (35,452)
Change in unrealized
appreciation/depreciation on investments -- (60,107)
---------- ----------
Net realized/unrealized loss on investments -- (95,559)
---------- ----------
Change in net assets resulting from operations $ 963,350 $1,314,186
---------- ----------
---------- ----------
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
DYNAMIC BALANCE FUND
------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ----------------
OPERATIONS:
Net investment income $ 1,066,776 $ 1,057,657
Net realized gain (loss) on investments 3,750,643 (30,104)
Change in unrealized appreciation/depreciation on investments 3,043,286 9,058,775
----------- -----------
Change in net assets resulting from operations 7,860,705 10,086,328
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to Shareholders:
From net investment income (1,016,661) (1,020,091)
----------- -----------
Change in net assets resulting from distributions to shareholders (1,016,661) (1,020,091)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 10,731,576 1,436,616
Dividends reinvested 898,869 896,893
Cost of shares redeemed (1,525,813) (670,726)
----------- -----------
Change in net assets from shares of beneficial interest transactions 10,104,632 1,662,783
----------- -----------
Total change in net assets 16,948,676 10,729,020
----------- -----------
NET ASSETS:
Beginning of period 53,756,334 43,027,314
----------- -----------
End of period*<F19> $70,705,010 $53,756,334
----------- -----------
----------- -----------
*<F19> Including undistributed net investment income of $ 79,511 $ 106,697
----------- -----------
----------- -----------
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
DYNAMIC DIVIDEND FUND
-----------------------------------------
FOR THE PERIOD
SEPTEMBER 22, 2003(1)<F21>
YEAR ENDED THROUGH
OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ----------------
OPERATIONS:
Net investment income $ 2,468,054 $ 71,597
Net realized gain (loss) on:
Investments 1,483,063 (31,416)
Foreign currencies (6,398) --
Change in unrealized appreciation/depreciation on:
Investments 1,067,523 780,388
Foreign currency translation (81) --
----------- -----------
Change in net assets resulting from operations 5,012,161 820,569
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to Shareholders:
From net investment income (2,259,008) --
----------- -----------
Change in net assets resulting from distributions to shareholders (2,259,008) --
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 29,533,128 12,717,086
Dividends reinvested 1,883,922 --
Redemption fees 7,373 --
Cost of shares redeemed (4,174,516) (10,295)
----------- -----------
Change in net assets from shares of beneficial interest transactions 27,249,907 12,706,791
----------- -----------
Total change in net assets 30,003,060 13,527,360
----------- -----------
NET ASSETS:
Beginning of period 13,527,360 --
----------- -----------
End of period*<F20> $43,530,420 $13,527,360
----------- -----------
----------- -----------
*<F20> Including undistributed net investment income of $ 259,626 $ 72,343
----------- -----------
----------- -----------
(1)<F21> Commencement of Operations.
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
MUNICIPAL MONEY MARKET FUND
-----------------------------------------
FOR THE PERIOD
DECEMBER 5, 2002(1)<F23>
YEAR ENDED THROUGH
OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ----------------
OPERATIONS:
Net investment income $ 963,350 $ 468,679
Net realized loss on investments -- (36)
Change in unrealized appreciation/depreciation on investments -- --
------------ ------------
Change in net assets resulting from operations 963,350 468,643
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to Adviser Class Shareholders:
From net investment income (115) --
Distributions to Investor Class Shareholders:
From net investment income (963,235) (468,643)
------------ ------------
Change in net assets resulting from distributions to shareholders (963,350) (468,643)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 166,115,193 102,670,596
Dividends reinvested 866,133 466,068
Cost of shares redeemed (95,880,229) (44,010,285)
------------ ------------
Change in net assets from shares of beneficial interest transactions 71,101,097 59,126,379
------------ ------------
Total change in net assets 71,101,097 59,126,379
------------ ------------
NET ASSETS:
Beginning of period 59,126,379 --
------------ ------------
End of period*<F22> $130,227,476 $ 59,126,379
------------ ------------
------------ ------------
*<F22> Including undistributed net investment income of $ 2,815 $ 11,645
------------ ------------
------------ ------------
(1)<F23> Commencement of Operations.
See notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
TAX OPTIMIZED INCOME FUND
----------------------------------------
FOR THE PERIOD
DECEMBER 6, 2002(1)<F25>
YEAR ENDED THROUGH
OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ----------------
OPERATIONS:
Net investment income $ 1,409,745 $ 1,060,845
Net realized gain (loss) on investments (35,452) 54,913
Change in unrealized appreciation/depreciation on investments (60,107) 667,583
----------- -----------
Change in net assets resulting from operations 1,314,186 1,783,341
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to Adviser Class Shareholders
From net investment income (197) --
Distributions to Investor Class Shareholders:
From net investment income (1,397,873) (1,060,845)
From net realized gain on investments (31,474) (23,469)
----------- -----------
Change in net assets resulting from distributions to shareholders (1,429,544) (1,084,314)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 9,292,083 57,078,436
Dividends reinvested 1,412,683 1,083,329
Cost of shares redeemed (14,856,164) (3,270,169)
----------- -----------
Change in net assets from shares of beneficial interest transactions (4,151,398) 54,891,596
----------- -----------
Total change in net assets (4,266,756) 55,590,623
----------- -----------
NET ASSETS:
Beginning of period 55,590,623 --
----------- -----------
End of period*<F24> $51,323,867 $55,590,623
----------- -----------
----------- -----------
*<F24> Including undistributed net investment income of $ 11,645 $ --
----------- -----------
----------- -----------
(1)<F25> Commencement of Operations.
See notes to financial statements.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
DYNAMIC BALANCE FUND
-------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2002 OCTOBER 31, 2001 (A)<F26>
---------------- ---------------- ---------------- -------------------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $11.08 $ 9.17 $10.10 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.19 0.22 0.24 0.09
Net realized/unrealized
gains (losses) on investments 1.37 1.91 (0.91) 0.07
------ ------ ------ ------
Total from investment operations 1.56 2.13 (0.67) 0.16
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.20) (0.22) (0.25) (0.06)
Net realized gains on investments -- -- (0.01) --
------ ------ ------ ------
Total distributions (0.20) (0.22) (0.26) (0.06)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $12.44 $11.08 $ 9.17 $10.10
------ ------ ------ ------
------ ------ ------ ------
TOTAL RETURN 14.19% 23.50% (6.82)% 1.64%(b)<F27>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $70,705 $53,756 $43,027 $38,203
Ratio of expenses to average net assets:
Before waivers and recoveries 1.27% 1.51% 1.50% 1.40%(c)<F28>
After waivers and recoveries 1.35% 1.35% 1.35% 1.35%(c)<F28>
Ratio of net investment
income to average net assets 1.78% 2.26% 2.45% 2.55%(c)<F28>
Portfolio turnover 56% 39% 42% 9%
(a)<F26> For the period from June 7, 2001 (commencement of operations) to
October 31, 2001.
(b)<F27> Not Annualized.
(c)<F28> Annualized.
See notes to financial statements.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
DYNAMIC DIVIDEND FUND
---------------------------------------------
YEAR ENDED PERIOD ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003(A)<F29>
---------------- ------------------------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $10.69 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.09(b)<F30> 0.06
Net realized/unrealized gains on investments 1.51 0.63
------ ------
Total from investment operations 2.60 0.69
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.95) --
Net realized gains on investments -- --
------ ------
Total distributions (0.95) --
------ ------
NET ASSET VALUE, END OF PERIOD $12.34 $10.69
------ ------
------ ------
TOTAL RETURN 24.90% 6.90%(c)<F31>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $43,530 $13,527
Ratio of expenses to average net assets:
Before waivers and reimbursements 1.56% 3.11%(d)<F32>
After waivers and reimbursements 1.35% 1.35%(d)<F32>
Ratio of net investment income to average net assets 9.08% 5.69%(d)<F32>
Portfolio turnover 194% 9%
(a)<F29> For the period from September 22, 2003 (commencement of operations)
to October 31, 2003.
(b)<F30> Net investment income is calculated using average shares outstanding
during the period.
(c)<F31> Not Annualized.
(d)<F32> Annualized.
See notes to financial statements.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
MUNICIPAL MONEY
MARKET FUND
---------------
PERIOD ENDED
OCTOBER 31, 2004(A)<F33>
------------------------
ADVISER CLASS SHARES:
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 0.89%(b)<F34>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period $80,114
Ratio of expenses to average net assets:
Before waivers and reimbursements 0.93%(c)<F35>
After waivers and reimbursements 0.59%(c)<F35>
Ratio of net investment income to average net assets 0.90%(c)<F35>
(a)<F33> For the period from March 30, 2004 (commencement of operations) to
October 31, 2004.
(b)<F34> Not Annualized.
(c)<F35> Annualized.
See notes to financial statements.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
MUNICIPAL MONEY MARKET FUND
---------------------------------------------
YEAR ENDED PERIOD ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003(A)<F36>
---------------- ------------------------
INVESTOR CLASS SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.01 0.01
Net realized/unrealized gains on investments -- --
----- -----
Total from investment operations 0.01 0.01
----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (0.01) (0.01)
Net realized gains on investments -- --
----- -----
Total distributions (0.01) (0.01)
----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
----- -----
----- -----
TOTAL RETURN 1.09% 1.00%(b)<F37>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $130,147 $59,126
Ratio of expenses to average net assets:
Before waivers and reimbursements 0.70% 0.73%(c)<F38>
After waivers and reimbursements 0.34% 0.32%(c)<F38>
Ratio of net investment income to average net assets 1.10% 1.09%(c)<F38>
(a)<F36> For the period from December 5, 2002 (commencement of operations) to
October 31, 2003.
(b)<F37> Not Annualized.
(c)<F38> Annualized.
See notes to financial statements.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
TAX OPTIMIZED
INCOME FUND
-------------
PERIOD ENDED
OCTOBER 31, 2004(A)<F39>
------------------------
ADVISER CLASS SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD $10.26
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.16(b)<F40>
Net realized/unrealized losses on investments (0.11)
------
Total from investment operations 0.05
------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.16)
Net realized gains on investments --
------
Total distributions (0.16)
------
NET ASSET VALUE, END OF PERIOD $10.15
------
------
TOTAL RETURN 0.55%(c)<F41>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period $22,159
Ratio of expenses to average net assets:
Before waivers and reimbursements 1.25%(d)<F42>
After waivers and reimbursements 0.85%(d)<F42>
Ratio of net investment income to average net assets 2.41%(d)<F42>
Portfolio turnover 55%(e)<F43>
(a)<F39> For the period from March 30, 2004 (commencement of operations) to
October 31, 2004.
(b)<F40> Net investment income per share is calculated using ending balances
prior to consideration of adjustments for permanent book and tax
differences.
(c)<F41> Not Annualized.
(d)<F42> Annualized.
(e)<F43> Portfolio turnover is calculated on the basis of the Fund as a
whole, without distinguishing between the classes of shares issued.
See notes to financial statements.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
TAX OPTIMIZED INCOME FUND
---------------------------------------------
YEAR ENDED PERIOD ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003(A)<F44>
---------------- ------------------------
INVESTOR CLASS SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD $10.18 $10.00
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.27 0.23
Net realized/unrealized gains (losses) on investments (0.02) 0.18
------ ------
Total from investment operations 0.25 0.41
------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.27) (0.23)
Net realized gains on investments (0.01) --(d)<F47>
------ ------
Total distributions (0.28) (0.23)
------ ------
NET ASSET VALUE, END OF PERIOD $10.15 $10.18
------ ------
------ ------
TOTAL RETURN 2.42% 4.12%(b)<F45>
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $51,302 $55,591
Ratio of expenses to average net assets:
Before waivers and reimbursements 1.04% 1.02%(c)<F46>
After waivers and reimbursements 0.60% 0.60%(c)<F46>
Ratio of net investment income to average net assets 2.62% 2.48%(c)<F46>
Portfolio turnover(e)<F48> 55% 46%
(a)<F44> For the period from December 6, 2002 (commencement of operations) to
October 31, 2003.
(b)<F45> Not Annualized.
(c)<F46> Annualized.
(d)<F47> Amount is less than $0.005.
(e)<F48> Portfolio turnover is calculated on the basis of the Fund as a
whole, without distinguishing between the classes of shares issued.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004
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. Effective March 30, 2004, the Alpine
Municipal Money Market Fund and the Alpine Tax Optimized Income Fund began
to offer both Investor Class and Adviser Class shares.
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 the 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 market
quotations are not readily available or whose values have been materially
affected by events occurring before the close of U.S. markets but after the
close of the securities' primary markets, are valued at fair value as
determined in good faith according to procedures approved by the Board of
Trustees. 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. SECURITY TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on the date a security is purchased or
sold (i.e. on the trade date). Realized gains and losses are computed on
the identified cost basis. Interest income is recorded on the accrual basis
and includes accretion of discounts and amortization of premiums, where
applicable. Dividend income is recorded on the ex-dividend date or in the
case of some foreign securities, on the date thereafter when the Funds are
made aware of the dividend. Foreign income may be subject to foreign
withholding taxes, which are accrued as applicable. Capital gains realized
on some foreign securities are subject to foreign taxes, which are accrued
as applicable.
C. SHORT SALE TRANSACTIONS:
The 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. The Funds did not engage in short sales for the year
ended October 31, 2004.
D. 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, Municipal Money
Market Fund and the Tax Optimized Income Fund incurred interest expense
totaling $370, $2,081 and $15, respectively for the year ended October 31,
2004.
E. INCOME TAXES:
It is each Fund's policy to comply with the requirements of Subchapter M of
the Internal Revenue Code applicable to regulated investment companies and
to distribute timely, all of its investment company taxable income and net
realized capital gains to shareholders. Therefore, no federal income tax
provision is recorded.
Under applicable foreign tax laws, a withholding tax may be imposed on
interest, dividends and capital gains earned on foreign investments. Where
available, the Funds will file for claims on foreign taxes withheld.
F. DIVIDENDS AND DISTRIBUTIONS:
The Dynamic Balance Fund, the Dynamic Dividend Fund and the Tax Optimized
Income 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
declares and accrues dividends daily on each business day based upon the
Fund's net income, and pays 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.
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.
G. CLASS ALLOCATIONS:
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses of the Tax Optimized Income Fund and Municipal
Money Market Fund are allocated among the classes of each respective Fund
based on the relative net assets of each class. Class specific expenses
are allocated to the class to which they relate. Currently, class specific
expenses are limited to those incurred under the Distribution Plan for
Adviser Class shares.
H. FOREIGN EXCHANGE TRANSACTIONS:
The Dynamic Balance and Dynamic Dividend Funds may invest up to 15% and
25%, respectively 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, 2004 OCTOBER 31, 2003
-------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold 880,345 $10,731,576 138,742 $1,436,616
Shares issued in reinvestment of dividends 74,954 898,869 91,251 896,893
Shares redeemed (125,979) (1,525,813) (68,511) (670,726)
-------- ----------- ------- ----------
Total net change 829,320 $10,104,632 161,482 $1,662,783
-------- ----------- ------- ----------
-------- ----------- ------- ----------
DYNAMIC DIVIDEND FUND
FOR THE PERIOD
SEPTEMBER 22, 2003(1)<F49>
YEAR ENDED THROUGH
OCTOBER 31, 2004 OCTOBER 31, 2003
-------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Shares sold 2,450,382 $29,533,128 1,266,615 $12,717,086
Shares issued in reinvestment of dividends 156,598 1,883,922 -- --
Redemption fees -- 7,373 -- --
Shares redeemed (344,339) (4,174,516) (962) (10,295)
--------- ----------- --------- -----------
Total net change 2,262,641 $27,249,907 1,265,653 $12,706,791
--------- ----------- --------- -----------
--------- ----------- --------- -----------
(1)<F49> Commencement of operations.
MUNICIPAL MONEY MARKET FUND
FOR THE PERIOD
DECEMBER 5, 2002(1)<F50>
YEAR ENDED THROUGH
OCTOBER 31, 2004 OCTOBER 31, 2003
-------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Investor Class
Shares sold 166,030,693 $166,030,693 102,670,596 $102,670,596
Shares issued in reinvestment of dividends 866,018 866,018 466,068 466,068
Shares redeemed (95,875,729) (95,875,729) (44,010,285) (44,010,285)
----------- ------------ ----------- ------------
Total net change 71,020,982 $ 71,020,982 59,126,379 $ 59,126,379
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
Adviser Class
Shares sold 84,500 $ 84,500 -- $ --
Shares issued in reinvestment of dividends 115 115 -- --
Shares redeemed (4,500) (4,500) -- --
----------- ------------ ----------- ------------
Total net change 80,115 $ 80,115 -- $ --
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
(1)<F50> Commencement of operations.
TAX OPTIMIZED INCOME FUND
FOR THE PERIOD
DECEMBER 6, 2002(1)<F51>
YEAR ENDED THROUGH
OCTOBER 31, 2004 OCTOBER 31, 2003
-------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Investor Class
Shares sold 910,320 $9,270,083 5,668,318 $57,078,436
Shares issued in reinvestment of dividends 138,854 1,412,486 115,511 1,083,329
Shares redeemed (1,455,861) (14,856,164) (323,286) (3,270,169)
---------- ------------ --------- -----------
Total net change (406,687) $ (4,173,595) 5,460,543 $54,891,596
---------- ------------ --------- -----------
---------- ------------ --------- -----------
Adviser Class
Shares sold 2,164 $ 22,000 -- $ --
Shares issued in reinvestment of dividends 20 197 -- --
Shares redeemed -- -- -- --
---------- ------------ --------- -----------
Total net change 2,184 $ 22,197 -- $ --
---------- ------------ --------- -----------
---------- ------------ --------- -----------
(1)<F51> Commencement of operations.
4. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended October 31, 2004 are as follows:
NON-U.S. GOVERNMENT U.S. GOVERNMENT
-------------------------- -------------------------
PURCHASES SALES PURCHASES SALES
----------- ----------- ---------- ----------
Dynamic Balance Fund $33,446,422 $29,883,731 $6,951,367 $2,124,844
Dynamic Dividend Fund 73,839,563 50,492,311 -- --
Tax Optimized Income Fund 18,294,565 20,482,430 -- --
5. DISTRIBUTION PLANS:
Quasar Distributors, LLC ("Quasar") serves as the Funds' distributor. The
Municipal Money Market Fund and the Tax Optimized Income Fund have each
adopted a distribution plan (the "Plan") for its Adviser Class shares as
allowed by Rule 12b-1 under the 1940 Act. The Plan authorizes payments by
the Fund in connection with the distribution and servicing of its shares at
an annual rate, as determined from time to time by the Board of Trustees,
of up to 0.25% of the Fund's average daily net assets. Amounts paid under
the plan by the Funds may be spent by the Funds on any activities or
expenses primarily intended to result in the sale of shares of the Funds,
including but not limited to, advertising, compensation for sales and
marketing activities of financial institutions and others such as dealers
and distributors, shareholder account servicing, the printing and mailing
of prospectuses to other than current shareholders and the printing and
mailing of sales literature. The Municipal Money Market Fund incurred $27
and the Tax Optimized Income Fund incurred $18 pursuant to the plan for the
period ended October 31, 2004.
The plan for the Municipal Money Market Fund and the Tax Optimized Income
Fund may be terminated at any time by vote of the Trustees of the Income
Trust who are not "interested persons," as defined by the 1940 Act, of the
Income Trust, or by vote of a majority of the outstanding voting shares of
the respective class.
6. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS:
Alpine Management & Research, LLC ("Alpine") provides investment advisory
services to the Funds. Pursuant to the investment adviser's agreement with
the 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, Dynamic Dividend
Fund and Tax Optimized Income Fund-Investor Class, to the extent necessary,
to ensure that the Funds' total operating expenses (excluding 12b-1 fees,
interest, brokerage commissions and extraordinary expenses) did not exceed
1.35%, 1.35% and 0.60% of the Funds' average daily net assets,
respectively. For the year ended October 31, 2004, the Adviser agreed to
reimburse the Municipal Money Market Fund-Investor Class to the extent
necessary to ensure that the Fund's total operating expenses (excluding
12b-1 fees, interest, brokerage commissions and extraordinary expenses) did
not exceed certain limits. The limits ranged from 0.32% to 0.37% of the
Fund's average daily net assets during 2004. The expense caps for the
Adviser Class shares of the Municipal Money Market Fund and Tax Optimized
Income Fund are 0.25% higher than the Investor Class shares. 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 year ended October
31, 2004, the Adviser waived investment advisory fees totaling $56,488,
$311,122 and $233,633 for the Dynamic Dividend Fund, Municipal Money Market
Fund and Tax Optimized Income Fund, respectively. For the year ended
October 31, 2004, the Adviser recovered previous reimbursed/absorbed
expenses totaling $51,589 for the Dynamic Balance Fund. The expense
limitations will remain in effect unless and until the Board of Trustees of
the Series and Income Trusts approve their modification or termination.
Reimbursed/absorbed expenses subject to potential recovery by year of
expiration are as follows:
Year of Expiration Dynamic Balance Fund Dynamic Dividend Fund
------------------ -------------------- ---------------------
10/31/05 $18,417 $ --
10/31/06 $73,377 $22,179
10/31/07 $ -- $56,488
Year of Expiration Municipal Money Market Fund Tax Optimized Income Fund
------------------ --------------------------- -------------------------
10/31/06 $175,958 $181,472
10/31/07 $311,122 $233,633
At October 31, 2004, the Dynamic Balance Fund had $1,094,019 invested in
the Municipal Money Market Fund.
7. FEDERAL INCOME TAX INFORMATION:
At October 31, 2004, 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 $66,902,806 $42,867,027 $128,202,866 $50,254,297
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Gross unrealized appreciation $ 9,476,405 $ 2,954,624 $ -- $ 632,653
Gross unrealized depreciation (1,094,336) (1,134,582) -- (25,177)
----------- ----------- ------------ -----------
Net unrealized appreciation/(depreciation) $ 8,382,069 $ 1,820,042 $ -- $ 607,476
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Undistributed ordinary income $ 448,731 $ 1,542,455 $ -- $ 6,041
Undistributed exempt interest income -- -- 2,815 5,604
Undistributed long-term capital gain 3,241,119 212,052 -- --
----------- ----------- ------------ -----------
Total distributable earnings $ 3,689,850 $ 1,754,507 $ 2,815 $ 11,645
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Other accumulated gains/(losses) $ -- $ -- $ (2,815) $ (35,452)
----------- ----------- ------------ -----------
Total accumulated earnings/(losses) $12,071,919 $ 3,574,549 $ -- $ 583,669
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
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, 2004 and 2003 were as follows:
DYNAMIC BALANCE FUND 2004 2003
---- ----
Ordinary income $1,016,661 $1,020,091
Long-term capital gain -- --
---------- ----------
$1,016,661 $1,020,091
---------- ----------
---------- ----------
DYNAMIC DIVIDEND FUND
Ordinary income $2,259,008 --
Long-term capital gain -- --
---------- ----------
$2,259,008 --
---------- ----------
---------- ----------
MUNICIPAL MONEY MARKET FUND
Exempt interest dividends $ 963,350 $ 468,643
Long-term capital gain -- --
---------- ----------
$ 963,350 $ 468,643
---------- ----------
---------- ----------
TAX OPTIMIZED INCOME FUND
Ordinary income $ 758,470 $ 574,675
Exempt interest dividends 671,074 509,639
Long-term capital gain -- --
---------- ----------
$1,429,544 $1,084,314
---------- ----------
---------- ----------
Capital loss carryovers as of October 31, 2004 are as follows:
Net Capital Capital Loss
Loss Carryover*<F52> Carryover Expiration
-------------------- --------------------
Municipal Money Market Fund $2,815 10/31/12
Tax Optimized Income Fund $35,452 10/31/12
*<F52> Capital gain distributions will resume in the future to the extent
gains are realized in excess of the available carryovers.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Boards of Trustees
of Alpine Series Trust and Alpine Income Trust:
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments of Alpine Series Trust, comprising the
Alpine Dynamic Balance Fund and Alpine Dynamic Dividend Fund and Alpine Income
Trust, comprising the Alpine Municipal Money Market Fund and Alpine Tax
Optimized Income Fund (collectively, the "Funds"), as of October 31, 2004, the
related statements of operations, statements of changes in net assets and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The Funds' financial statements and
financial highlights for the periods ended prior to October 31, 2004 were
audited by other auditors whose report, dated December 19, 2003, expressed an
unqualified opinion on those statements and highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 2004, by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Funds as of October 31, 2004, the results of their operations, changes in
their net assets and the financial highlights for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Milwaukee, WI
December 23, 2004
ADDITIONAL INFORMATION (UNAUDITED)
EXPENSE EXAMPLES
OCTOBER 31, 2004
As a shareholder of the Dynamic Balance Fund and the Municipal Money Market
Fund, Adviser & Investor Class, you will incur ongoing costs, including
management fees; distribution and/or service fees; and other Fund expenses. As
a shareholder of the Dynamic Dividend Fund and the Tax Optimized Income Fund,
Adviser & Investor Class, you will incur two types of costs: (1) redemption fees
and (2) ongoing costs. The examples below are intended to help you understand
your ongoing costs (in dollars) of investing in the Funds and to compare these
costs with the ongoing costs of investing in other mutual funds. The examples
are based on an investment of $1,000 for the period 5/1/04 - 10/31/04.
ACTUAL EXPENSES
The first line of the tables below provides information about actual account
values and actual expenses. The Funds charge no sales load or transaction fees,
but do assess shareholders for outgoing wire transfers, returned checks and stop
payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC,
the Funds' transfer agent. If you request that a redemption be made by wire
transfer, currently a $15.00 fee is charged by the Funds' transfer agent.
Shareholders in the Dynamic Dividend Fund will be charged a redemption fee equal
to 1.00% of the net amount of the redemption if they redeem their shares less
than 60 calendar days after purchase. Shareholders in the Tax Optimized Income
Fund, Adviser & Investor Class, will be charged a redemption fee equal to 0.25%
of the net amount of the redemption if they redeem their shares less than 30
calendar days after purchase. IRA accounts will be charged a $15.00 annual
maintenance fee. To the extent the Funds invest in shares of other investment
companies as part of their investment strategies, you will indirectly bear your
proportionate share of any fees and expenses charged by the underlying funds in
which the Funds invest in addition to the expenses of the Fund. Actual expenses
of the underlying funds are expected to vary among the various underlying funds.
These expenses are not included in the example below. The example below
includes, but is not limited to, management fees, shareholder servicing fees,
fund accounting, custody and transfer agent fees. However, the example below
does not include portfolio trading commissions, related expenses and other
extraordinary expenses as determined under generally accepted accounting
principles. You may use the information in this line, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading entitled "Expenses Paid During Period'' to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Funds' actual expense
ratios and an assumed rate of return of 5% per year before expenses, which does
not the represent the Funds' actual returns. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Funds and other funds. To do so, compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds. Please note that the expenses shown in
the table are meant to highlight your ongoing costs only and do not reflect any
transactional costs, such as redemption fees. Therefore, the second line of the
table is useful in comparing ongoing costs only, and will not help you determine
the relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
ALPINE DYNAMIC BALANCE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period
5/01/2004 10/31/2004 5/1/04 - 10/31/04
------------- ------------- -----------------
Actual(1)<F53> $1,000.00 $1,080.30 $7.06
Hypothetical(2)<F54> $1,000.00 $1,018.21 $6.85
(1)<F53> Ending account values and expenses paid during period based on a 8.03%
return. The return is considered after expenses are deducted from the
fund.
(2)<F54> Ending account values and expenses paid during period based on a 2.50%
return. The return is considered before expenses are deducted from
the fund.
ALPINE DYNAMIC DIVIDEND FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period
5/01/2004 10/31/2004 5/1/04 - 10/31/04
------------- ------------- -----------------
Actual(1)<F55> $1,000.00 $1,082.20 $7.07
Hypothetical(2)<F56> $1,000.00 $1,018.21 $6.85
(1)<F55> Ending account values and expenses paid during period based on a 8.22%
return. The return is considered after expenses are deducted from the
fund.
(2)<F56> Ending account values and expenses paid during period based on a 2.50%
return. The return is considered before expenses are deducted from
the fund.
ALPINE MUNICIPAL MONEY MARKET FUND
ADVISER CLASS SHARES
Beginning Ending Expenses Paid
Account Value Account Value During Period
5/01/2004 10/31/2004 5/1/04 - 10/31/04
------------- ------------- -----------------
Actual(1)<F57> $1,000.00 $1,004.50 $2.97
Hypothetical(2)<F58> $1,000.00 $1,022.03 $3.00
(1)<F57> Ending account values and expenses paid during period based on a 0.45%
return. The return is considered after expenses are deducted from the
fund.
(2)<F58> Ending account values and expenses paid during period based on a 2.50%
return. The return is considered before expenses are deducted from
the fund.
ALPINE MUNICIPAL MONEY MARKET FUND
INVESTOR CLASS SHARES
Beginning Ending Expenses Paid
Account Value Account Value During Period
5/01/2004 10/31/2004 5/1/04 - 10/31/04
------------- ------------- -----------------
Actual(1)<F59> $1,000.00 $1,005.80 $1.71
Hypothetical(2)<F60> $1,000.00 $1,023.29 $1.73
(1)<F59> Ending account values and expenses paid during period based on a 0.58%
return. The return is considered after expenses are deducted from the
fund.
(2)<F60> Ending account values and expenses paid during period based on a 2.50%
return. The return is considered before expenses are deducted from
the fund.
ALPINE TAX OPTIMIZED INCOME FUND
ADVISER CLASS SHARES
Beginning Ending Expenses Paid
Account Value Account Value During Period
5/01/2004 10/31/2004 5/1/04 - 10/31/04
------------- ------------- -----------------
Actual(1)<F61> $1,000.00 $1,011.70 $4.30
Hypothetical(2)<F62> $1,000.00 $1,020.73 $4.32
(1)<F61> Ending account values and expenses paid during period based on a 1.17%
return. The return is considered after expenses are deducted from the
fund.
(2)<F62> Ending account values and expenses paid during period based on a 2.50%
return. The return is considered before expenses are deducted from
the fund.
ALPINE TAX OPTIMIZED INCOME FUND
INVESTOR CLASS SHARES
Beginning Ending Expenses Paid
Account Value Account Value During Period
5/01/2004 10/31/2004 5/1/04 - 10/31/04
------------- ------------- -----------------
Actual(1)<F63> $1,000.00 $1,013.20 $3.04
Hypothetical(2)<F64> $1,000.00 $1,021.98 $3.05
(1)<F63> Ending account values and expenses paid during period based on a 1.32%
return. The return is considered after expenses are deducted from the
fund.
(2)<F64> Ending account values and expenses paid during period based on a 2.50%
return. The return is considered before expenses are deducted from
the fund.
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 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*<F65> HELD BY TRUSTEE
- -------------- ----------- ----------- ---------------------- ------------------------ ---------------
Laurence B. Independent Indefinite, Real estate developer and construction 7 Trustee of Alpine
Ashkin (76), Trustee since consultant since 1980; Founder and Equity Trust
2500 Westchester inception President of Centrum Equities since (formerly Evergreen
Ave., 1987 and Centrum Properties, Inc. Global Equity
Purchase, NY since 1980. Trust); Trustee
10577 Emeritus of
Evergreen Fund
complex
H. Guy Independent Indefinite, Chief Operating Officer of L&L 7 Director and
Leibler (50), Trustee since Acquisitions, LLC since 2003; President, Chairman, White
2500 Westchester inception Skidmore, Owings & Merrill LLP, (2001- Plains Hospital
Ave., 2003), Chairman and President of Center; Director,
Purchase, NY Pailatus, a news media company (1997- Dressage for Kids;
10577 1999); Director of Brand Space Inc., a Trustee of Alpine
brand marketing/advertising company Equity Trust
(1997-1999).
Jeffrey E. Independent Indefinite, Partner, Loeb, Block & Partners LLP, 7 Director, Adair
Wacksman (41) Trustee since 2004 since 1994. International
2500 Westchester Limited; Director,
Ave., Cable Beach
Purchase, NY Properties, Inc.;
10577 Director, Bondi
Icebergs Inc.;
Trustee, Larchmont
Manor Park
Society; Trustee of
Alpine Equity Trust
*<F65> The term "Fund Complex" refers to the Funds in the Alpine Equity Trust,
Alpine Series Trust and Alpine Income Trust.
INTERESTED TRUSTEES & OFFICERS
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**<F67> HELD BY TRUSTEE
- -------------- ----------- ----------- ---------------------- ------------------------ ---------------
Samuel A. Interested Indefinite, CEO of Alpine Management & Research, 7 Trustee of Alpine
Lieber*<F66> (48) Trustee, since LLC since November 1997. Formerly, Equity Trust
2500 Westchester Portfolio inception Senior Portfolio Manager with
Ave. Manager, and Evergreen Asset Management Corp.
Purchase, NY President (1985 - 1997)
10577
Stephen A. Vice Indefinite, Chairman and Senior Portfolio Manager, N/A None
Lieber (79) President since Saxon Woods Advisors, LLC (October
2500 Westchester inception 1999 - Present). Formerly President,
Ave. Evergreen Asset Management Corp.
Purchase, NY (1971 - 1999). Chairman and Chief
10577 Executive Officer, Lieber &
Company (February 1969 - July 1999).
Steven C. Vice Indefinite, Managing Director of Alpine N/A None
Shachat (43) President since 2002 Management and Research, LLC since
2500 Westchester September 2002. Formerly, a Senior
Ave. Portfolio Manager with Evergreen Asset
Purchase, NY Management Corp. (1989 - 2001).
10577
Oliver Sun (40) Secretary Indefinite, Controller of Alpine Management and N/A None
2500 Westchester since 2002 Research, LLC, 1998 to Present.
Ave.
Purchase, NY
10577
Sheldon R. Treasurer/ Indefinite, Chief Financial Officer, Saxon Woods N/A None
Flamm (56) Chief since 2002 Advisors, LLC, 1999 to Present, Chief
2500 Westchester Compliance Financial Officer, Lieber & Co. (a
Ave. Officer 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.
*<F66> Denotes Trustee who is an "interested person" of the Trust or Fund by
virtue of his relationship with the Adviser.
**<F67> The term "Fund Complex" refers to the Funds in the Alpine Equity
Trust, Alpine Series Trust and Alpine Income Trust.
TAX INFORMATION
The percentage of dividend income received by the Funds for the fiscal year
ended October 31, 2004 that qualified for the 15% tax rate was:
Dynamic Balance Fund 65.88%
Dynamic Dividend Fund 96.50%
The Funds designated the following percentages of distributions declared from
ordinary income and short-term capital gains for the fiscal year ended October
31, 2004 as qualified dividend income under Internal Revenue Code Section 1 (h)
(11) (B):
Dynamic Balance Fund 62.18%
Dynamic Dividend Fund 73.95%
The Municipal Money Market Fund and the Tax Optimized Income Fund designated
100% and 48%, respectively, of their dividends declared from ordinary dividends
as exempt interest dividends.
AVAILABILITY OF PROXY VOTING INFORMATION
Information regarding how the Fund votes proxies relating to portfolio
securities is available without charge upon request by calling toll-free at
1-888-785-5578 and on the SEC's website at www.sec.gov. Information regarding
how the Fund voted proxies relating to portfolio securities during the period
ending June 30, 2004 is available on the SEC's website at www.sec.gov or by
calling the toll-free number listed above.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
Beginning with the Funds' fiscal quarter ended July 31, 2004, the Funds filed
their complete schedules of portfolio holdings on Form N-Q with the SEC. Going
forward, the Funds will file Form N-Q for the first and third quarters of each
fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC's
website at www.sec.gov and may be reviewed and copied at the SEC's Public
-----------
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
(ALPINE LOGO)
TRUSTEES
Samuel A. Lieber
Laurence B. Ashkin
H. Guy Leibler
Jeffrey E. Wacksman
INVESTMENT ADVISER
Alpine Management & Research, LLC
2500 Westchester Avenue, Suite 215
Purchase, NY 10577
CUSTODIAN
U.S. Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
SUB-CUSTODIAN
The Bank of New York
One Wall Street
New York, NY 10286
TRANSFER AGENT & ADMINISTRATOR
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
555 East Wells Street
Milwaukee, WI 53202
FUND COUNSEL
Blank Rome LLP
The Chrysler Building
405 Lexington Avenue
New York, NY 10174
DISTRIBUTOR
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, WI 53202
SHAREHOLDER/INVESTOR INFORMATION
(888) 785-5578
www.alpinefunds.com
ALPINE FUNDS
2500 WESTCHESTER AVENUE, SUITE 215
PURCHASE, NY 10577
(914) 251-0880
ITEM 2. CODE OF ETHICS.
- -----------------------
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer and principal financial officer. The registrant has
not made any amendments to its code of ethics during the period covered by this
report. The registrant has not granted any waivers from any provisions of the
code of ethics during the period covered by this report.
A copy of the registrant's Code of Ethics is filed herewith.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ----------------------------------------
The registrant's board of trustees has determined that there is at least one
audit committee financial expert serving on its audit committee. Laurence
Ashkin is the "audit committee financial expert" and is considered to be
"independent" as each term is defined in Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- -----------------------------------------------
The registrant has engaged its principal accountant to perform audit services,
audit-related services, tax services and other services during the past two
fiscal years. "Audit services" refer to performing an audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years. "Audit-related services" refer to the assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit. "Tax services" refer to professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning.
"Other services" provided by the principal accountant were not applicable. The
following table details the aggregate fees billed for each of the last two
fiscal years for audit fees, audit-related fees, tax fees and other fees by the
principal accountant.
FYE 10/31/2004 FYE 10/31/2003
--------------- ---------------
Audit Fees $22,500 $27,000
Audit-Related Fees 0 0
Tax Fees $5,500 $7,500
All Other Fees 0 0
The audit committee has adopted pre-approval policies and procedures that
require the audit committee to pre-approve all audit and non-audit services of
the registrant, including services provided to any entity affiliated with the
registrant. All of the principal accountant's hours spent on auditing the
registrant's financial statements were attributed to work performed by full-time
permanent employees of the principal accountant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Not applicable to open-end investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS.
- --------------------------------
Schedule of Investments is included as part of the report to shareholders filed
under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
- -------------------------------------------------------------------------
MANAGEMENT INVESTMENT COMPANIES.
- --------------------------------
Not applicable to open-end investment companies.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
- ---------------------------------------------------------------------------
COMPANY AND AFFILIATED PURCHASES.
- ---------------------------------
Not applicable to open-end investment companies.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
Not Applicable.
ITEM 10. CONTROLS AND PROCEDURES.
- ---------------------------------
(a) The Registrant's President and Treasurer have concluded that the
Registrant's disclosure controls and procedures (as defined in Rule 30a-
3(c) under the Investment Company Act of 1940 (the "1940 Act")) are
effective as of a date within 90 days of the filing date of the report that
includes the disclosure required by this paragraph, based on the evaluation
of these controls and procedures required by Rule 30a-3(b) under the 1940
Act and Rules 15d-15(b) under the Securities Exchange Act of 1934, as
amended.
(b) There were no significant changes in the Registrant's internal controls
over financial reporting that occurred during the Registrant's last fiscal
half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
- -----------------
(a) (1) Any code of ethics or amendment thereto, that is subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy Item 2 requirements through filing an exhibit. Filed herewith.
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith.
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
--------------------------------------
By (Signature and Title) /s/Samuel A. Lieber
---------------------------
Samuel A. Lieber, President
Date January 10, 2005
---------------------------------------------
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)*<F68> /s/Samuel A. Lieber
---------------------------
Samuel A. Lieber, President
Date January 10, 2005
------------------------------------------------------
By (Signature and Title)*<F68> /s/Sheldon Flamm
---------------------------
Sheldon Flamm, Treasurer
Date January 10, 2005
------------------------------------------------------
*<F68> Print the name and title of each signing officer under his or her
signature.