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: 811-07707
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND, INC.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
AllianceBernstein L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: November 30, 2006
Date of reporting period: November 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
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ANNUAL REPORT
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AllianceBernstein Real Estate Investment Fund
Annual Report
November 30, 2006
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
The investment return and principal value of an investment in the Fund will
fluctuate as the prices of the individual securities in which it invests
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our web
site at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein(R) at (800) 227-4618. Please read the prospectus carefully
before you invest.
You may obtain performance information current to the most recent month-end by
visiting www.alliancebernstein.com.
This shareholder report must be preceded or accompanied by the Fund's
prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund's proxy voting policies and
procedures, and information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30,
without charge. Simply visit AllianceBernstein's web site at
www.alliancebernstein.com, or go to the Securities and Exchange Commission's
(the "Commission") web site at www.sec.gov, or call AllianceBernstein at (800)
227-4618.
The Fund files its complete schedule of portfolio holdings with the Commission
for the first and third quarters of each fiscal year on Form N-Q. The Fund's
Forms N-Q are available on the Commission's web site at www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the Commission's Public Reference
Room in Washington, DC; information on the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330. AllianceBernstein publishes
full portfolio holdings for the Fund monthly at www.alliancebernstein.com.
AllianceBernstein Investments, Inc. is an affiliate of AllianceBernstein L.P.,
the manager of the AllianceBernstein funds, and is a member of the NASD.
AllianceBernstein(R) and the AB Logo are registered trademarks and service
marks used by permission of the owner, AllianceBernstein L.P.
January 26, 2007
Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Real Estate Investment Fund (the "Fund") for the annual
reporting period ended November 30, 2006.
Investment Objective and Policies
The Fund's investment objective is total return from long-term growth of
capital and income. Under normal circumstances, the Fund invests at least 80%
of its net assets in "REITs" and other real estate industry companies. The Fund
invests in real estate companies that AllianceBernstein believes have strong
property fundamentals and management teams. The Fund seeks to invest in real
estate companies whose underlying portfolios are diversified geographically and
by property type.
The Fund may invest in mortgage-backed securities, which are securities that
directly or indirectly represent participations in, or are collateralized by
and payable from, mortgage loans secured by real property. These securities
include mortgage pass-through certificates, real estate mortgage investment
conduit certificates ("REMICs") and collateralized mortgage obligations
("CMOs"). The Fund also may invest in short-term investment grade debt
securities and other fixed-income securities.
Investment Results
The table on page 5 shows the Fund's performance compared to its benchmark, the
Financial Times Stock Exchange (FTSE) National Association of Real Estate
Investment Trusts (NAREIT) Equity Index, and the broad market, as represented
by the Standard & Poor's (S&P) 500 Stock Index, for the six- and 12-month
periods ended November 30, 2006.
Please note, since March 6, 2006, FTSE, the global index provider, took over
the calculations of the NAREIT Domestic Real Estate Index Series, which have
been renamed the FTSE NAREIT US Real Estate Index Series. The new series adopts
FTSE's standard index methodology, including free float adjustments and minimum
liquidity and size criteria.
The Fund's Class A shares outperformed its benchmark and outperformed the S&P
500 Stock Index for the 12-month period ended November 30, 2006.
During the 12-month period under review, security selection drove most of the
Fund's outperformance. Sector selection was also a contributor to Fund's
performance versus the FTSE NAREIT Equity Index, but not to the same degree. In
particular, security selection within the industrial/office sector made a
meaningful contribution. Niche office names were strong contributors throughout
the annual reporting period. These names have enjoyed an evolution in
fundamentals that, in general, has been better than expected. Security
selection in retail was also strong. Here the Fund benefited from exposure to
two successful shopping centers. One of them has restructured its portfolio,
divesting lower-end assets. The Fund's lodging names detracted from
performance, somewhat offsetting positive security
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 1
selection in the office sector. Hotel names that are viewed as somewhat more
exposed to leisure travel and those that were involved in a meaningful
corporate action, like an acquisition, were penalized by investors.
The Fund's overweight in lodging stocks and underweight in health care were key
detractors from performance. The lodging sector, one of the Fund's largest
overweights, significantly underperformed the FTSE NAREIT Equity Index. This
poor performance occurred despite continued solid fundamentals for this
property type. In the latter part of the reporting period, investor anxiety
related to consumer spending translated into concerns about a meaningful
slowdown in leisure travel. Other than some localized deceleration of leisure
travel in lower-priced hotels, there has been little data so far to support
this concern. Upscale, Upper-Upscale and Luxury properties have continued to
enjoy strong revenue per average room (RevPAR) growth. Fund holdings in lodging
stocks are estimated to derive 70% or more of hotel revenues from corporate
(business) travel. Lodging fundamentals continue to be strong and are
characterized by limited supply growth, strong overall demand and tight
conditions in the major cities. The Global Real Estate Investment Policy Group
(the "Group") expects strong top-line growth in lodging to continue, although
growth rates will see a modest deceleration from the growth rates experienced
over the last three years.
In the lodging sector, a number of Fund holdings tend to be smaller,
attractively valued hotels that are transforming their asset base through
redevelopment and upgrades. These names performed poorly as investor anxiety
about the fundamentals of the sector was exacerbated by the risk involved in
the upgrading process. The Group believes a longer cycle will reward these
owners for the upgrades to their asset base. Lodging fundamentals have
continued to improve and RevPAR growth has exceeded expectations during this
year. Underpinning solid lodging fundamentals is a healthy supply/demand
balance. Supply growth under 1.5% for 2006 and 2% for 2007 is expected to lag
lodging demand. This should lend support to strong occupancy and pricing over
the near to medium term.
The Fund's underweight in health care REITs also detracted from performance.
Health care is viewed as a defensive sector because rental cash flows are
fairly predictable: tenants typically cover all the property expenses during
the rental period and contracts are long dated. Given this, health care stocks
performed well as worries about a potential economic slowdown weighed on
investors' sentiment during most of the annual reporting period.
The Fund's Class A shares underperformed its benchmark for the six-month period
ended November 30, 2006, but outperformed the S&P 500 Stock Index over the same
period. The underperformance versus the benchmark was driven by unfavorable
sector and security selection. Security selection was also poor in residential,
where one of the Fund's holdings has traded poorly on fears that management is
contemplating a meaningful acquisition.
2 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
However, security selection was positive in retail, industrial/office and
diversified. In retail, the Fund derived most of its relative performance from
both shopping center overweights and regional mall positions. Shopping centers,
especially those anchored by a strong supermarket name, benefit from exposure
to a tenant roster that caters primarily to non-discretionary consumer
spending. These shopping centers are likely to fare better than other retail
formats in a consumer spending slowdown, and real estate investors are
beginning to anticipate that trend. Stock selection was also strong in the
diversified sector, driven primarily by a company that focuses on
data-storage-specialized real estate. This space is in high demand and
occupancy rates have increased significantly as of late.
Market Review and Investment Strategy
REITs, as measured by the FTSE NAREIT Equity Index, gained 36.93% during the
12-month period ended November 30, 2006, exceeding the S&P 500 Stock Index
return of 14.22%, as real estate fundamentals continued to improve during the
period. The U.S. economy and consumer spending were robust for the 12-month
period. Industrial/office and residential sectors posted strong performance,
ahead of the FTSE NAREIT Equity Index, while specialty, health care and retail
sectors lagged the Index. Throughout most of the 12-month period, the Fund held
overweight positions in the industrial/office, residential and lodging sectors
and underweight positions in the health care, specialty and diversified sectors.
During the six-month period ended November 30, 2006, the FTSE NAREIT Equity
Index returned 27.83%, outperforming the S&P 500 Index return of 11.32%.
Overall, REITs' trading environment during this six-month period was dominated
by interest rate concerns earlier in the period, and then by fears of a
consumer led economic slowdown. REIT privatizations continue providing support
to public real estate markets valuations. During the most recent six months
lodging, retail and specialty underperformed the FTSE NAREIT Equity Index.
Other sectors were strong. During this period, the Fund held overweight
positions in lodging, industrial/office, residential and self storage
properties. The Fund had underweight positions in health care, diversified and
specialty REITs. The Group continues to focus on investing in companies with
the most attractively valued cash flows.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 3
HISTORICAL PERFORMANCE
An Important Note About the Value of Historical Performance
The performance shown on the following pages represents past performance and
does not guarantee future results. Current performance may be lower or higher
than the performance information shown. You may obtain performance information
current to the most recent month-end by visiting www.alliancebernstein.com.
The investment return and principal value of an investment in the Fund will
fluctuate, so that your shares, when redeemed, may be worth more or less than
their original cost. You should consider the investment objectives, risks,
charges and expenses of the Fund carefully before investing. For a free copy of
the Fund's prospectus, which contains this and other information, visit our
website at www.alliancebernstein.com or call your financial advisor or
AllianceBernstein Investments at 800.227.4618. You should read the prospectus
carefully before you invest.
All fees and expenses related to the operation of the Fund have been deducted.
NAV returns do not reflect sales charges; if sales charges were reflected, the
Fund's quoted performance would be lower. SEC returns reflect the applicable
sales charges for each share class: a 4.25% maximum front-end sales charge for
Class A shares; the applicable contingent deferred sales charge for Class B
shares (4% year 1, 3% year 2, 2% year 3, 1% year 4); a 1% 1 year contingent
deferred sales charge for Class C shares. Returns for different share classes
will vary due to different expenses associated with each class. Performance
assumes reinvestment of distributions and does not account for taxes.
Benchmark Disclosure
The unmanaged Financial Times Stock Exchange (FTSE) National Association of
Real Estate Investment Trusts (NAREIT) Equity Index and the unmanaged Standard
& Poor's (S&P) 500 Stock Index do not reflect fees and expenses associated with
the active management of a mutual fund portfolio. The FTSE NAREIT Equity Index
is a market value-weighted index based upon the last closing price of the month
for tax-qualified real estate investment trusts (REITs) listed on the NYSE,
AMEX and the NASDAQ. The S&P 500 Stock Index includes 500 U.S. stocks and is a
common measure of the performance of the overall U.S. stock market. An investor
cannot invest directly in an index, and its results are not indicative of the
performance for any specific investment, including the Fund.
A Word About Risk
While the Fund invests principally in the equity securities of real estate
investment trusts, in order to achieve its investment objectives, the Fund may
invest up to 20% of its total assets in mortgage-backed securities which
involve risks described in the prospectus. An investment in the Fund is subject
to certain risks associated with the direct ownership of real estate and with
the real estate industry in general, including declines in the value of real
estate, general and local economic conditions and interest rates. The Fund
concentrates its investments in real estate related investments and may
therefore be subject to greater risks and volatility than a fund with a more
diversified portfolio. While the Fund invests principally in common stocks and
other equity securities, in order to achieve its investment objectives, the
Fund may at times use certain types of investment derivatives, such as options,
futures, forwards and swaps. These instruments involve risks different from,
and in certain cases, greater than, the risks presented by more traditional
investments. These risks are fully discussed in the Fund's prospectus.
(Historical Performance continued on next page)
4 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
HISTORICAL PERFORMANCE
(continued from previous page)
Returns
THE FUND VS. ITS BENCHMARK -----------------------------
PERIODS ENDED NOVEMBER 30, 2006 6 Months 12 Months
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AllianceBernstein Real Estate Investment Fund
Class A 26.18% 37.50%
Class B 25.76% 36.70%
Class C 25.77% 36.57%
Advisor Class* 26.38% 37.98%
Class R* 26.07% 37.27%
Class K* 26.18% 37.55%
Class I* 26.39% 38.04%
FTSE NAREIT Equity Index 27.83% 36.93%
S&P 500 Stock Index 11.32% 14.22%
* Please note that these share classes are for investors purchasing shares
through accounts established under certain fee-based programs sponsored and
maintained by certain broker-dealers and financial intermediaries,
institutional pension plans and/or investment advisory clients of, and certain
other persons associated with, the Adviser and its affiliates or the Funds.
GROWTH OF A $10,000 INVESTMENT IN THE FUND
11/30/96 TO 11/30/06
AllianceBernstein Real Estate Investment Fund Class A: $40,061
S&P 500 Stock Index: $21,695
FTSE NAREIT Equity Index: $43,359
[THE FOLLOWING DATA WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL]
AllianceBernstein
Real Estate Investment S&P 500 FTSE NAREIT
Fund Class A Stock Index Equity Index
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11/30/96 $ 9,575 $ 10,000 $ 10,000
11/30/97 $ 12,928 $ 12,850 $ 12,970
11/30/98 $ 10,745 $ 15,894 $ 11,236
11/30/99 $ 9,385 $ 19,214 $ 10,125
11/30/00 $ 11,829 $ 18,403 $ 12,333
11/30/01 $ 13,293 $ 16,155 $ 14,682
11/30/02 $ 13,937 $ 13,488 $ 15,500
11/30/03 $ 18,800 $ 15,523 $ 20,689
11/30/04 $ 24,946 $ 17,517 $ 26,871
11/30/05 $ 29,144 $ 18,994 $ 31,665
11/30/06 $ 40,061 $ 21,695 $ 43,359
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Real Estate Investment Fund Class A shares (from 11/30/96 to
11/30/06) as compared to the performance of the Fund's benchmark, the FTSE
NAREIT Equity Index, and the broad market, as represented by the S&P 500 Stock
Index. The chart reflects the deduction of the maximum 4.25% sales charge from
the initial $10,000 investment in the Fund and assumes the reinvestment of
dividends and capital gains distributions.
See Historical Performance and Benchmark disclosures on previous page.
(Historical Performance continued on next page)
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 5
HISTORICAL PERFORMANCE
(continued from previous page)
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2006
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NAV Returns SEC Returns
Class A Shares
1 Year 37.50% 31.64%
5 Years 24.70% 23.62%
10 Years 15.39% 14.89%
Class B Shares
1 Year 36.70% 32.70%
5 Years 23.84% 23.84%
10 Years(a) 14.74% 14.74%
Class C Shares
1 Year 36.57% 35.57%
5 Years 23.82% 23.82%
10 Years 14.60% 14.60%
Advisor Class Shares+
1 Year 37.98% 37.98%
5 Years 25.08% 25.08%
10 Years 15.74% 15.74%
Class R Shares+
1 Year 37.27% 37.27%
Since Inception* 31.07% 31.07%
Class K Shares+
1 Year 37.55% 37.55%
Since Inception* 31.40% 31.40%
Class I Shares+
1 Year 38.04% 38.04%
Since Inception* 31.81% 31.81%
(a) Assumes conversion of Class B shares into Class A shares after eight years.
* Inception dates: 3/1/05 for Class R, Class K and Class I shares.
+ These share classes are offered at net asset value (NAV) to eligible
investors and their SEC returns are the same as the NAV returns. Please note
that these share classes are for investors purchasing shares through accounts
established under certain fee-based programs sponsored and maintained by
certain broker-dealers and financial intermediaries, institutional pension
plans and/or investment advisory clients of, and certain other person
associated with, the Adviser and its affiliates or the Funds. The inception
dates for Class R, Class K and Class I shares are listed above.
See Historical Performance disclosures on page 4.
(Historical Performance continued on next page)
6 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
HISTORICAL PERFORMANCE
(continued from previous page)
SEC AVERAGE ANNUAL RETURNS (WITH ANY APPLICABLE SALES CHARGES)
AS OF THE MOST RECENT CALENDAR QUARTER-END (DECEMBER 31, 2006)
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SEC Returns
Class A Shares
1 Year 28.88%
5 Years 22.55%
10 Years 13.41%
Class B Shares
1 Year 29.68%
5 Years 22.76%
10 Years(a) 13.27%
Class C Shares
1 Year 32.61%
5 Years 22.77%
10 Years 13.12%
Advisor Class Shares+
1 Year 35.49%
5 Years 24.10%
10 Years 14.28%
Class R Shares+
1 Year 34.25%
Since Inception* 28.30%
Class K Shares+
1 Year 34.55%
Since Inception* 28.64%
Class I Shares+
1 Year 35.01%
Since Inception* 29.04%
(a) Assumes conversion of Class B shares into Class A shares after eight years.
* Inception dates: 3/1/05 for Class R, Class K and Class I shares.
+ Please note that these share classes are for investors purchasing shares
through accounts established under certain fee-based programs sponsored and
maintained by certain broker-dealers and financial intermediaries,
institutional pension plans and/or investment advisory clients of, and certain
other person associated with, the Adviser and its affiliates or the Funds. The
inception dates for Class R, Class K and Class I shares are listed above.
See Historical Performance disclosures on page 4.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 7
FUND EXPENSES
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, contingent
deferred sales charges on redemptions and (2) ongoing costs, including
management fees; distribution (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of
the period and held for the entire period as indicated below.
Actual Expenses
The table below provides information about actual account values and actual
expenses. You may use the information, 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 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 table below also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
annual rate of return of 5% before expenses, which is not the Fund's actual
return. 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
Fund and other funds by comparing this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), or contingent deferred sales charges on redemptions.
Therefore, the hypothetical example 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.
Beginning Ending
Account Value Account Value Expenses Paid
June 1, 2006 November 30, 2006 During Period*
------------------------------ ------------------------------- ---------------------------
Actual Hypothetical Actual Hypothetical** Actual Hypothetical
----------- ---------------- ----------- ----------------- ----------- -------------
Class A $1,000 $1,000 $1,261.83 $1,019.20 $ 6.63 $5.92
Class B $1,000 $1,000 $1,257.60 $1,015.54 $10.75 $9.60
Class C $1,000 $1,000 $1,257.68 $1,015.64 $10.64 $9.50
Advisor
Class $1,000 $1,000 $1,263.84 $1,020.71 $ 4.94 $4.41
Class R $1,000 $1,000 $1,260.72 $1,017.65 $ 8.39 $7.49
Class K $1,000 $1,000 $1,261.83 $1,019.30 $ 6.52 $5.82
Class I $1,000 $1,000 $1,263.89 $1,020.81 $ 4.82 $4.31
* Expenses are equal to the classes' annualized expense ratios of 1.17%,
1.90%, 1.88%, 0.87%, 1.48%, 1.15% and 0.85%, respectively, multiplied by the
average account value over the period, multiply by 183/365 (to reflect the one
half year period).
** Assumes 5% return before expenses.
8 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
PORTFOLIO SUMMARY
November 30, 2006
PORTFOLIO STATISTICS
Net Assets ($mil): $369.1
SECTOR BREAKDOWN*
[ ] 19.0% Apartments
[ ] 15.5% Office
[ ] 12.4% Diversified & Others
[ ] 11.9% Lodging
[ ] 11.7% Regional Malls
[ ] 9.1% Shopping Centers
[ ] 7.6% Warehouse & Industrial
[ ] 5.6% Self Storage
[ ] 4.0% Health Care
[ ] 1.0% Restaurants & Lodging
[ ] 0.3% Specialty
[ ] 1.9% Short-Term
TEN LARGEST HOLDINGS
November 30, 2006
Percent of
Company U.S. $ Value Net Assets
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Simon Property Group, Inc. $ 26,106,880 7.1%
ProLogis 21,962,290 6.0
Public Storage, Inc. 20,536,524 5.6
Vornado Realty Trust 18,639,058 5.0
Boston Properties, Inc. 17,428,745 4.7
Equity Residential 14,188,464 3.8
Kimco Realty Corp. 14,150,538 3.8
Host Hotels & Resorts, Inc. 12,862,982 3.5
Archstone-Smith Trust 12,427,856 3.4
AvalonBay Communities, Inc. 12,043,740 3.3
$ 170,347,077 46.2%
* All data are as of November 30, 2006. The Fund's sector breakdown is
expressed as a percentage of total investments and may vary over time.
Please Note: The sector classifications presented herein are based on the
sector categorization methodology of the Adviser. These sector classifications
are broadly defined. The "Portfolio of Investments" section of the report
reflects more specific industry information and is consistent with the
investment restrictions discussed in the Fund's prospectus.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 9
PORTFOLIO OF INVESTMENTS
November 30, 2006
Company Shares U.S. $ Value
- -------------------------------------------------------------------------------
COMMON STOCKS-97.0%
Real Estate Investment Trusts-97.0%
Apartments-18.8%
Archstone-Smith Trust 207,200 $ 12,427,856
AvalonBay Communities, Inc. 90,500 12,043,740
Camden Property Trust 132,900 10,596,117
Equity Residential 266,400 14,188,464
Essex Property Trust, Inc. 25,500 3,367,020
Mid-America Apartment Communities, Inc. 143,400 8,604,000
United Dominion Realty Trust, Inc. 238,562 8,010,912
-------------
69,238,109
Diversified & Others-12.2%
Alexandria Real Estate Equities, Inc. 73,700 7,596,996
Digital Realty Trust, Inc. 282,300 10,287,012
Forest City Enterprises, Inc. Class A 148,600 8,657,436
Vornado Realty Trust 147,800 18,639,058
-------------
45,180,502
Health Care-4.0%
Health Care Property Investors, Inc. 90,000 3,264,300
Ventas, Inc. 290,954 11,332,658
-------------
14,596,958
Lodging-11.7%
Equity Inns, Inc. 223,000 3,630,440
FelCor Lodging Trust, Inc. 391,400 8,614,714
Host Hotels & Resorts, Inc. 510,031 12,862,982
LaSalle Hotel Properties 130,400 5,750,640
Strategic Hotels & Resorts, Inc. 259,200 5,637,600
Sunstone Hotel Investors, Inc. 246,700 6,877,996
-------------
43,374,372
Office-15.3%
Boston Properties, Inc. 148,900 17,428,745
Brookfield Properties Corp. 117,850 4,731,678
Corporate Office Properties Trust 172,775 8,588,645
Douglas Emmett, Inc.(a) 61,000 1,604,300
Equity Office Properties Trust 106,100 5,114,020
Maguire Properties, Inc. 207,900 8,908,515
PS Business Parks, Inc. 8,000 570,000
SL Green Realty Corp. 69,550 9,405,942
-------------
56,351,845
Regional Malls-11.5%
General Growth Properties, Inc. 179,700 9,872,718
Simon Property Group, Inc. 256,000 26,106,880
Taubman Centers, Inc. 134,500 6,652,370
-------------
42,631,968
10 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
Shares or
Principal
Amount
Company (000) U.S. $ Value
- -------------------------------------------------------------------------------
Restaurants & Lodging-1.0%
Starwood Hotels & Resorts Worldwide, Inc. 56,700 $ 3,638,439
Self Storage-5.6%
Public Storage, Inc. 213,300 20,536,524
Shopping Centers-9.0%
Developers Diversified Realty Corp. 112,600 7,294,228
Federal Realty Investment Trust 44,400 3,781,992
Kimco Realty Corp. 305,100 14,150,538
Ramco-Gershenson Properties 49,580 1,833,468
Tanger Factory Outlet Centers, Inc. 152,802 6,023,455
-------------
33,083,681
Specialty-0.3%
CBRE Realty Finance, Inc. 79,900 1,290,385
Warehouse & Industrial-7.6%
AMB Property Corp. 46,900 2,873,563
First Potomac Realty Trust 99,900 3,067,929
ProLogis 337,000 21,962,290
-------------
27,903,782
Total Common Stocks
(cost $212,426,191) 357,826,565
SHORT-TERM INVESTMENT-1.8%
Time Deposit-1.8%
The Bank of New York
4.25%, 12/01/06
(cost $6,770,000) $ 6,770 6,770,000
Total Investments-98.8%
(cost $219,196,191) 364,596,565
Other assets less liabilities-1.2% 4,512,491
Net Assets-100% $ 369,109,056
(a) Non-income producing security.
See notes to financial statements.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 11
STATEMENT OF ASSETS & LIABILITIES
November 30, 2006
Assets
Investments in securities, at value (cost $219,196,191) $ 364,596,565
Cash 517
Receivable for investment securities sold 5,816,220
Receivable for capital stock sold 1,869,143
Dividends and interest receivable 48,490
Total assets 372,330,935
Liabilities
Payable for capital stock redeemed 1,860,150
Payable for investment securities purchased 790,470
Advisory fee payable 160,588
Distribution fee payable 159,936
Transfer Agent fee payable 44,165
Administrative fee payable 41,665
Accrued expenses 164,905
Total liabilities 3,221,879
Net Assets $ 369,109,056
Composition of Net Assets
Capital stock, at par $ 123,357
Additional paid-in capital 194,743,641
Accumulated net realized gain on investment transactions 28,841,684
Net unrealized appreciation of investments 145,400,374
$ 369,109,056
Net Asset Value Per Share--21 billion shares of capital stock authorized, $.01
par value
Shares Net Asset
Class Net Assets Outstanding Value
- ----------------------------------------------------------------------------
A $ 222,700,663 7,422,911 $ 30.00*
B $ 65,863,048 2,212,406 $ 29.77
C $ 68,638,432 2,302,147 $ 29.81
Advisor $ 6,528,289 218,774 $ 29.84
R $ 670,927 22,390 $ 29.97
K $ 387,080 12,919 $ 29.96
I $ 4,320,617 144,146 $ 29.97
* The maximum offering price per share for Class A shares was $31.33 which
reflects a sales charge of 4.25%.
See notes to financial statements.
12 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
STATEMENT OF OPERATIONS
Year Ended November 30, 2006
Investment Income
Dividends (net of foreign taxes withheld
of $17,343) $ 5,608,832
Interest 305,900 $ 5,914,732
Expenses
Advisory fee 1,636,819
Distribution fee--Class A 487,944
Distribution fee--Class B 691,527
Distribution fee--Class C 575,517
Distribution fee--Class R 1,361
Distribution fee--Class K 305
Transfer agency--Class A 274,932
Transfer agency--Class B 138,852
Transfer agency--Class C 101,666
Transfer agency--Advisor Class 8,101
Transfer agency--Class R 701
Transfer agency--Class K 236
Transfer agency--Class I 3,777
Custodian 162,405
Registration 104,627
Administrative 94,720
Audit 72,234
Legal 52,980
Directors' fees 34,567
Printing 16,731
Miscellaneous 18,904
Total expenses 4,478,906
Less: expense offset arrangement
(see Note B) (18,272)
Net expenses 4,460,634
Net investment income 1,454,098
Realized and Unrealized Gain
on Investment Transactions
Net realized gain on investment
transactions 39,823,869
Net change in unrealized
appreciation/depreciation
of investments 54,369,696
Net gain on investment transactions 94,193,565
Net Increase in Net Assets
from Operations $ 95,647,663
See notes to financial statements.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 13
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
November 30, November 30,
2006 2005
-------------- --------------
Increase (Decrease) in Net Assets
from Operations
Net investment income $ 1,454,098 $ 4,412,401
Net realized gain on investment
transactions 39,823,869 105,963,419
Net change in unrealized
appreciation/depreciation
of investments 54,369,696 (55,680,334)
Net increase in net assets
from operations 95,647,663 54,695,486
Dividends to Shareholders from
Net investment income
Class A (1,516,053) (1,525,438)
Class B (215,157) (914,412)
Class C (150,605) (493,416)
Advisor Class (61,420) (2,099,245)
Class R (1,337) (194)
Class K (927) (103)
Class I (33,305) (3,330)
Capital Stock Transactions
Net increase (decrease) 11,187,238 (197,375,490)
Total increase (decrease) 104,856,097 (147,716,142)
Net Assets
Beginning of period 264,252,959 411,969,101
End of period (including distributions
in excess of net investment income
of $0 and $0, respectively) $ 369,109,056 $ 264,252,959
See notes to financial statements.
14 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
NOTES TO FINANCIAL STATEMENTS
November 30, 2006
NOTE A
Significant Accounting Policies
AllianceBernstein Real Estate Investment Fund, Inc. (the "Fund") was
incorporated in the state of Maryland on July 15, 1996 as a diversified,
open-end management investment company. The Fund offers Class A, Class B, Class
C, Advisor Class, Class R, Class K and Class I shares. Class A shares are sold
with a front-end sales charge of up to 4.25% for purchases not exceeding
$1,000,000. With respect to purchases of $1,000,000 or more, Class A shares
redeemed within one year of purchase may be subject to a contingent deferred
sales charge of 1%. Class B shares are currently sold with a contingent
deferred sales charge which declines from 4% to zero depending on the period of
time the shares are held. Class B shares will automatically convert to Class A
shares eight years after the end of the calendar month of purchase. Class C
shares are subject to a contingent deferred sales charge of 1% on redemptions
made within the first year after purchase. Class R and Class K shares are sold
without an initial or contingent deferred sales charge. Advisor Class and Class
I shares are sold without an initial or contingent deferred sales charge and
are not subject to ongoing distribution expenses. All seven classes of shares
have identical voting, dividend, liquidation and other rights, the classes bear
different distribution and transfer agency expenses. Each class has exclusive
voting rights with respect to its distribution plan, if any. The financial
statements have been prepared in conformity with U.S. generally accepted
accounting principles, which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities are valued at their current market value determined on the
basis of market quotations or, if market quotations are not readily available
or are deemed unreliable, at "fair value" as determined in accordance with
procedures established by and under the general supervision of the Fund's Board
of Directors.
In general, the market value of securities which are readily available and
deemed reliable are determined as follows. Securities listed on a national
securities exchange (other than securities listed on The NASDAQ Stock Market,
Inc. ("NASDAQ")) or on a foreign securities exchange are valued at the last
sale price at the close of the exchange or foreign securities exchange. If
there has been no sale on such day, the securities are valued at the mean of
the closing bid and asked prices on such day. Securities listed on more than
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities listed only on NASDAQ are valued in
accordance with the NASDAQ Official Closing Price; listed put or call options
are valued at the last sale price. If there has been no sale on that day, such
securities will be valued at the closing bid
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 15
prices on that day; open futures contracts and options thereon are valued using
the closing settlement price or, in the absence of such a price, the most
recent quoted bid price. If there are no quotations available for the day of
valuation, the last available closing settlement price is used; securities
traded in the over-the-counter market, ("OTC") are valued at the mean of the
current bid and asked prices as reported by the National Quotation Bureau or
other comparable sources; U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at amortized cost if
their original maturity was 60 days or less; or by amortizing their fair value
as of the 61st day prior to maturity if their original term to maturity
exceeded 60 days; fixed-income securities, including mortgage backed and asset
backed securities, may be valued on the basis of prices provided by a pricing
service or at a price obtained from one or more of the major broker/dealers. In
cases where broker/dealer quotes are obtained, AllianceBerstein L.P. (prior to
February 24, 2006, known as Alliance Capital Management L.P. (the "Adviser")
may establish procedures whereby changes in market yields or spreads are used
to adjust, on a daily basis, a recently obtained quoted price on a security;
and OTC and other derivatives are valued on the basis of a quoted bid price or
spread from a major broker/dealer in such security.
Securities for which market quotations are not readily available (including
restricted securities) or are deemed unreliable are valued at fair value.
Factors considered in making this determination may include, but are not
limited to, information obtained by contacting the issuer, analysts, analysis
of the issuer's financial statements or other available documents. In addition,
the Fund may use fair value pricing for securities primarily traded in non-U.S.
markets because, most foreign markets close well before the Fund values its
securities at 4:00 p.m., Eastern Time. The earlier close of these foreign
markets gives rise to the possibility that significant events, including broad
market moves, may have occurred in the interim and may materially affect the
value of those securities. To account for this, the Fund may frequently value
many of its foreign equity securities using fair value prices based on third
party vendor modeling tools to the extent available.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward currency exchange contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
16 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation and depreciation of investments
and foreign currency denominated assets and liabilities.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required. The Fund may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned
or repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation/depreciation as such income
and/or gains are earned.
4. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date or as soon as the Fund is
informed of the dividend. Interest income is accrued daily. Investment
transactions are accounted for on the date securities are purchased or sold.
Investment gains and losses are determined on the identified cost basis. The
Fund amortizes premiums and accretes discounts as adjustments to interest
income.
5. Class Allocations
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except for class
specific expenses which are allocated to the respective class. Realized and
unrealized gains and losses are allocated among the various share classes based
on their respective net assets.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, are recorded on the
ex-dividend date. Income and capital gains distributions are determined in
accordance with federal tax regulations and may differ from those determined in
accordance with U.S. generally accepted accounting principles. To the extent
these differences are permanent, such amounts are reclassified within the
capital accounts based on their federal tax basis treatment; temporary
differences do not require such reclassification.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 17
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of the investment advisory agreement, the Fund pays the Adviser
an advisory fee at an annual rate of .55% of the first $2.5 billion, .45% of
the next $2.5 billion and .40% in excess of $5 billion, of the Fund's average
daily net assets. Prior to September 7, 2004, the Fund paid the Adviser an
advisory fee at an annual rate of .90% of the Fund's average daily net assets.
The fee is accrued daily and paid monthly.
Pursuant to the advisory agreement, the Adviser provides certain legal and
accounting services to the Fund. For the year ended November 30, 2006, such
fees amounted to $94,720.
The Fund compensates AllianceBerstein Investor Services, Inc. (prior to
February 24, 2006 known as Alliance Global Investor Services, Inc.) ("ABIS"), a
wholly-owned subsidiary of the Adviser, under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. ABIS may make payments to intermediaries that provide omnibus account
services, sub-accounting services and/or networking services. Such compensation
retained by ABIS amounted to $255,417 for the year ended November 30, 2006.
For the year ended November 30, 2006, the Fund's expenses were reduced by
$18,272 under an expense offset arrangement with ABIS.
AllianceBernstein Investments, Inc., (prior to February 24, 2006 known as
AllianceBernstein Investment Research and Management, Inc.) (the
"Distributor"), a wholly-owned subsidiary of the Adviser, serves as the
distributor of the Fund's shares. The Distributor has advised the Fund that it
has retained front-end sales charges of $13,504 from the sale of Class A shares
and received $6,599, $42,601 and $5,499 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the year ended November 30, 2006.
Brokerage commissions paid on investment transactions for the year ended
November 30, 2006, amounted to $107,780, none of which was paid to Sanford C.
Bernstein Co., LLC and Sanford C. Bernstein Limited, affiliates of the Adviser.
18 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays distribution and servicing fees to the Distributor at
an annual rate of up to .30% of the Fund's average daily net assets
attributable to Class A shares, 1% of the Fund's average daily net assets
attributable to both Class B and Class C shares, .50% of the Fund's average
daily net assets attributable to Class R shares and .25% of the Fund's average
daily net assets attributable to Class K shares. There are no distribution and
servicing fees on the Advisor Class and Class I shares. The fees are accrued
daily and paid monthly. The Agreement provides that the Distributor will use
such payments in their entirety for distribution assistance and promotional
activities. The Distributor has incurred expenses in excess of the distribution
costs reimbursed by the Fund in the amount of $9,515,721, $1,850,225, $10,894
and $1,906 for Class B, Class C, Class R and Class K shares, respectively; such
costs may be recovered from the Fund in future periods so long as the Agreement
is in effect. In accordance with the Agreement, there is no provision for
recovery of unreimbursed distribution costs incurred by the Distributor beyond
the current fiscal year for Class A shares. The Agreement also provides that
the Adviser may use its own resources to finance the distribution of the Fund's
shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments)
for the year ended November 30, 2006 were as follows:
Purchases Sales
-------------- --------------
Investment securities (excluding
U.S. government securities) $ 150,519,474 $ 143,482,960
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation are as follows:
Cost $ 219,569,956
Gross unrealized appreciation $ 145,026,609
Gross unrealized depreciation -0-
Net unrealized appreciation $ 145,026,609
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 19
NOTE E
Capital Stock
Each class consists of 3,000,000,000 authorized shares. Transactions in capital
shares for each class were as follows:
Shares Amount
-------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
2006 2005 2006 2005
------------ ------------ -------------- --------------
Class A
Shares sold 2,747,570 1,965,153 $ 72,822,152 $ 39,238,204
Shares issued in
reinvestment of
dividends 53,250 64,601 1,293,137 1,287,159
Shares converted
from Class B 931,668 1,003,046 23,211,191 20,335,242
Shares redeemed (2,158,868) (1,788,277) (55,176,658) (35,752,469)
Net increase 1,573,620 1,244,523 $ 42,149,822 $ 25,108,136
Class B
Shares sold 304,148 493,981 $ 7,756,193 $ 9,768,677
Shares issued in
reinvestment of
dividends 7,398 34,992 169,918 688,975
Shares converted
to Class A (938,674) (1,010,587) (23,211,191) (20,335,242)
Shares redeemed (786,856) (1,569,620) (19,474,587) (31,087,235)
Net decrease (1,413,984) (2,051,234) $ (34,759,667) $ (40,964,825)
Class C
Shares sold 356,627 283,150 $ 9,149,945 $ 5,580,550
Shares issued in
reinvestment of
dividends 3,596 13,651 83,238 269,261
Shares redeemed (429,363) (896,204) (10,634,469) (17,804,921)
Net decrease (69,140) (599,403) $ (1,401,286) $ (11,955,110)
Advisor Class
Shares sold 170,624 641,667 $ 4,361,681 $ 12,454,050
Shares issued in
reinvestment of
dividends 2,166 106,902 52,935 2,093,525
Shares redeemed (95,367) (8,975,690) (2,334,632) (185,245,938)
Net increase (decrease) 77,423 (8,227,121) $ 2,079,984 $(170,698,363)
20 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
Shares Amount
-------------------------- ------------------------------
March 1, March 1,
Year Ended 2005(a) to Year Ended 2005(a) to
November 30, November 30, November 30, November 30,
2006 2005 2006 2005
------------ ------------ -------------- --------------
Class R
Shares sold 35,722 2,786 $ 928,733 $ 57,428
Shares issued in
reinvestment of
dividends 51 5 1,299 106
Shares redeemed (16,014) (160) (411,748) (3,441)
Net increase 19,759 2,631 $ 518,284 $ 54,093
Class K
Shares sold 11,328 1,901 $ 304,276 $ 38,577
Shares issued in
reinvestment of
dividends 31 -0- 781 -0-
Shares redeemed (332) (9) (8,956) (195)
Net increase 11,027 1,892 $ 296,101 $ 38,382
Class I
Shares sold 157,053 53,614 $ 3,844,943 $ 1,158,804
Shares issued in
reinvestment of
dividends 1,344 152 33,248 3,199
Shares redeemed (62,371) (5,646) (1,574,191) (119,806)
Net increase 96,026 48,120 $ 2,304,000 $ 1,042,197
(a) Commencement of distribution.
NOTE F
Risks Involved in Investing in the Fund
Concentration of Risk--Although the Fund does not invest directly in real
estate, it invests primarily in Real Estate Equity Securities and has a policy
of concentration of its investments in the real estate industry. Therefore, an
investment in the Fund is subject to certain risks associated with the direct
ownership of real estate and with the real estate industry in general. To the
extent that assets underlying the Fund's investments are concentrated
geographically, by property type or in certain other respects, the Fund may be
subject to additional risks.
In addition, investing in Real Estate Investment Trusts ("REITs") involves
certain unique risks in addition to those risks associated with investing in
the real estate industry in general. REITs are dependent upon management
skills, are not diversified, and are subject to heavy cash flow dependency,
default by borrowers and self-liquidation. REITs are also subject to the
possibilities of failing to qualify for tax-free pass-through of income under
the Code and failing to maintain their exemptions from registration under the
1940 Act. REITs (especially mortgage REITs) also are subject to interest rate
risks.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 21
Indemnification Risk--In the ordinary course of business, the Fund enters into
contracts that contain a variety of indemnifications.The Fund's maximum
exposure under these arrangements is unknown. However, the Fund has not had
prior claims or losses pursuant to these indemnification provisions and expects
the risk of loss thereunder to be remote.
NOTEG
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $250 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended November 30, 2006.
NOTE H
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended November
30, 2006 and November 30, 2005 were as follows:
2006 2005
-------------- --------------
Distributions paid from:
Ordinary income $ 1,454,098 $ 5,036,138
Long-term capital gains 524,706 -0-
Total taxable distributions 1,978,804 5,036,138
Total distributions paid $ 1,978,804 $ 5,036,138
As of November 30, 2006, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Long-term capital gains $ 29,215,449(a)
Unrealized appreciation/(depreciation) 145,026,609(b)
Total accumulated earnings/(deficit) $ 174,242,058
(a) During the fiscal year, the Fund utilized loss carryforward of $9,908,139.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
During the current fiscal year, permanent differences primarily due to a
redesignation of dividends resulted in a net decrease in distributions in
excess of net investment income, and a net decrease in accumulated net realized
gain on investments and foreign currency transactions. This reclassification
had no effect on net assets.
22 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
NOTE I
Legal Proceedings
As has been previously reported, the staff of the U.S. Securities and Exchange
Commission ("SEC") and the Office of New York Attorney General ("NYAG") have
been investigating practices in the mutual fund industry identified as "market
timing" and "late trading" of mutual fund shares. Certain other regulatory
authorities have also been conducting investigations into these practices
within the industry and have requested that the Adviser provide information to
them. The Adviser has been cooperating and will continue to cooperate with all
of these authorities.
On December 18, 2003, the Adviser confirmed that it had reached terms with the
SEC and the NYAG for the resolution of regulatory claims relating to the
practice of "market timing" mutual fund shares in some of the AllianceBernstein
Mutual Funds. The agreement with the SEC is reflected in an Order of the
Commission ("SEC Order"). The agreement with the NYAG is memorialized in an
Assurance of Discontinuance dated September 1, 2004 ("NYAG Order"). Among the
key provisions of these agreements are the following:
(i) The Adviser agreed to establish a $250 million fund (the "Reimbursement
Fund") to compensate mutual fund shareholders for the adverse effects of market
timing attributable to market timing relationships described in the SEC Order.
According to the SEC Order, the Reimbursement Fund is to be paid, in order of
priority, to fund investors based on (i) their aliquot share of losses suffered
by the fund due to market timing, and (ii) a proportionate share of advisory
fees paid by such fund during the period of such market timing;
(ii) The Adviser agreed to reduce the advisory fees it receives from some of
the AllianceBernstein long-term, open-end retail funds until December 31, 2008;
and
(iii) The Adviser agreed to implement changes to its governance and compliance
procedures. Additionally, the SEC Order and the NYAG Order contemplate that the
Adviser's registered investment company clients, including the Fund, will
introduce governance and compliance changes.
In anticipation of final, definitive documentation of the NYAG Order and
effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee. On September 7, 2004, the Fund's investment advisory agreement was amended
to reflect the reduced advisory fee. For more information on this waiver and
amendment to the Fund's investment advisory agreement, please see "Advisory Fee
and Other Transactions with Affiliates" above.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 23
A special committee of the Adviser's Board of Directors, comprised of the
members of the Adviser's Audit Committee and the other independent member of
the Adviser's Board, directed and oversaw an internal investigation and a
comprehensive review of the facts and circumstances relevant to the SEC's and
the NYAG's investigations.
In addition, the Independent Directors of the Fund ("the Independent
Directors") have conducted an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel.
On October 2, 2003, a purported class action complaint entitled Hindo, et al.
v. AllianceBernstein Growth & Income Fund, et al. ("Hindo Complaint") was filed
against the Adviser, Alliance Capital Management Holding L.P. ("Alliance
Holding"), Alliance Capital Management Corporation, AXA Financial, Inc., the
AllianceBernstein Funds, certain officers of the Adviser ("Alliance
defendants"), and certain other defendants not affiliated with the Adviser, as
well as unnamed Doe defendants. The Hindo Complaint was filed in the United
States District Court for the Southern District of New York by alleged
shareholders of two of the AllianceBernstein Funds. The Hindo Complaint alleges
that certain of the Alliance defendants failed to disclose that they improperly
allowed certain hedge funds and other unidentified parties to engage in "late
trading" and "market timing" of AllianceBernstein Fund securities, violating
Sections 11 and 15 of the Securities Act, Sections 10(b) and 20(a) of the
Exchange Act and Sections 206 and 215 of the Advisers Act. Plaintiffs seek an
unspecified amount of compensatory damages and rescission of their contracts
with the Adviser, including recovery of all fees paid to the Adviser pursuant
to such contracts.
Since October 2, 2003, 43 additional lawsuits making factual allegations
generally similar to those in the Hindo Complaint were filed in various federal
and state courts against the Adviser and certain other defendants. The
plaintiffs in such lawsuits have asserted a variety of theories for recovery
including, but not limited to, violations of the Securities Act, the Exchange
Act, the Advisers Act, the Investment Company Act, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), certain state securities
laws and common law. All state court actions against the Adviser either were
voluntarily dismissed or removed to federal court. On February 20, 2004, the
Judicial Panel on Multidistrict Litigation transferred all actions to the
United States District Court for the District of Maryland (the "Mutual Fund
MDL").
On September 29, 2004, plaintiffs filed consolidated amended complaints with
respect to four claim types: mutual fund shareholder claims; mutual fund
derivative claims; derivative claims brought on behalf of Alliance Holding; and
claims brought under ERISA by participants in the Profit Sharing Plan for
Employees of the Adviser. All four complaints include substantially identical
factual allegations, which appear to be based in large part on the SEC Order
and the NYAG Order.
24 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
On April 21, 2006, the Adviser and attorneys for the plaintiffs in the mutual
fund shareholder claims, mutual fund derivative claims, and ERISA claims
entered into a confidential memorandum of understanding ("MOU") containing
their agreement to settle these claims. The agreement will be documented by a
stipulation of settlement and will be submitted for court approval at a later
date. The derivative claims brought on behalf of Alliance Holding remain
pending.
On February 10, 2004, the Adviser received (i) a subpoena duces tecum from the
Office of the Attorney General of the State of West Virginia and (ii) a request
for information from West Virginia's Office of the State Auditor, Securities
Commission (the "West Virginia Securities Commissioner") (together, the
"Information Requests"). Both Information Requests require the Adviser to
produce documents concerning, among other things, any market timing or late
trading in the Adviser's sponsored mutual funds. The Adviser responded to the
Information Requests and has been cooperating fully with the investigation.
On April 11, 2005, a complaint entitled The Attorney General of the State of
West Virginia v. AIM Advisors, Inc., et al. ("WVAG Complaint") was filed
against the Adviser, Alliance Holding, and various other defendants not
affiliated with the Adviser. The WVAG Complaint was filed in the Circuit Court
of Marshall County, West Virginia by the Attorney General of the State of West
Virginia. The WVAG Complaint makes factual allegations generally similar to
those in the Hindo Complaint. On October 19, 2005, the WVAG Complaint was
transferred to the Mutual Fund MDL.
On August 30, 2005, the West Virginia Securities Commissioner signed a Summary
Order to Cease and Desist, and Notice of Right to Hearing addressed to the
Adviser and Alliance Holding. The Summary Order claims that the Adviser and
Alliance Holding violated the West Virginia Uniform Securities Act, and makes
factual allegations generally similar to those in the Commission Order and the
NYAGOrder. On January 26, 2006, the Adviser, Alliance Holding, and various
unaffiliated defendants filed a Petition for Writ of Prohibition and Order
Suspending Proceedings in West Virginia state court seeking to vacate the
Summary Order and for other relief. The court denied the writ and in September
2006 the Supreme Court of Appeals declined the defendants' petition for appeal.
On September 22, 2006, Alliance and Alliance Holding filed an answer and motion
to dismiss the Summary Order with the Securities Commissioner.
On June 22, 2004, a purported class action complaint entitled Aucoin, et al. v.
Alliance Capital Management L.P., et al. ("Aucoin Complaint") was filed against
the Adviser, Alliance Holding, Alliance Capital Management Corporation, AXA
Financial, Inc., AllianceBernstein Investment Research & Management, Inc.,
certain current and former directors of the AllianceBernstein Mutual Funds, and
unnamed Doe defendants. The Aucoin Complaint names certain of the
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 25
AllianceBernstein mutual funds as nominal defendants. The Aucoin Complaint was
filed in the United States District Court for the Southern District of New York
by alleged shareholders of an AllianceBernstein mutual fund. The Aucoin
Complaint alleges, among other things, (i) that certain of the defendants
improperly authorized the payment of excessive commissions and other fees from
fund assets to broker-dealers in exchange for preferential marketing services,
(ii) that certain of the defendants misrepresented and omitted from
registration statements and other reports material facts concerning such
payments, and (iii) that certain defendants caused such conduct as control
persons of other defendants. The Aucoin Complaint asserts claims for violation
of Sections 34(b), 36(b) and 48(a) of the Investment Company Act, Sections 206
and 215 of the Advisers Act, breach of common law fiduciary duties, and aiding
and abetting breaches of common law fiduciary duties. Plaintiffs seek an
unspecified amount of compensatory damages and punitive damages, rescission of
their contracts with the Adviser, including recovery of all fees paid to the
Adviser pursuant to such contracts, an accounting of all fund-related fees,
commissions and soft dollar payments, and restitution of all unlawfully or
discriminatorily obtained fees and expenses.
Since June 22, 2004, nine additional lawsuits making factual allegations
substantially similar to those in the Aucoin Complaint were filed against the
Adviser and certain other defendants. All nine of the lawsuits (i) were brought
as class actions filed in the United States District Court for the Southern
District of New York, (ii) assert claims substantially identical to the Aucoin
Complaint, and (iii) are brought on behalf of shareholders of the Funds.
On February 2, 2005, plaintiffs filed a consolidated amended class action
complaint ("Aucoin Consolidated Amended Complaint") that asserts claims
substantially similar to the Aucoin Complaint and the nine additional lawsuits
referenced above. On October 19, 2005, the District Court dismissed each of the
claims set forth in the Aucoin Consolidated Amended Complaint, except for
plaintiffs' claim under Section 36(b) of the Investment Company Act. On January
11, 2006, the District Court granted defendants' motion for reconsideration and
dismissed the remaining Section 36(b) claim. On May 31, 2006 the District Court
denied plaintiffs' motion for leave to file an amended complaint. On July 5,
2006, plaintiffs filed a notice of appeal. On October 4, 2006 the appeal was
withdrawn by stipulation, with plaintiffs reserving the right to reinstate it
at a later date.
It is possible that these matters and/or other developments resulting from
these matters could result in increased redemptions of the AllianceBernstein
Mutual Funds' shares or other adverse consequences to the AllianceBernstein
Mutual Funds. This may require the AllianceBernstein Mutual Funds to sell
investments held by those funds to provide for sufficient liquidity and could
also have an
26 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
adverse effect on the investment performance of the AllianceBernstein Mutual
Funds. However, the Adviser believes that these matters are not likely to have
a material adverse effect on its ability to perform advisory services relating
to the AllianceBernstein Mutual Funds.
NOTE J
Recent Accounting Pronouncements
On July 13, 2006, the Financial Accounting Standards Board ("FASB") released
FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in
the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded in the current period. Adoption of FIN 48 is required for
fiscal years beginning after December 15, 2006 and is to be applied to all open
tax years as of the effective date. At this time, management is evaluating the
implications of FIN 48 and its impact on the financial statements has not yet
been determined.
On September 20, 2006, the FASB released Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an
authoritative definition of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair-value measurements. The
application of FAS 157 is required for fiscal years beginning after November
15, 2007 and interim periods within those fiscal years. At this time,
management is evaluating the implications of FAS 157 and its impact on the
financial statements has not yet been determined.
NOTE K
Subsequent Event Note
Beginning March 1, 2007, the Fund intends to begin pursuing global investment
strategies. In connection with this, the Fund's Board of Directors approved
renaming the Fund as "AllianceBernstein Global Real Estate Investment Fund,
Inc." The Fund's name change will become effective as of March 1, 2007.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 27
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
2006 2005 2004 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $22.04 $19.15 $14.90 $11.52 $11.47
Income From Investment
Operations
Net investment income(a) .15 .32 .27(b) .37 .34
Net realized and unrealized gain
on investment transactions 8.06 2.87 4.50 3.53 .23
Net increase in net asset value
from operations 8.21 3.19 4.77 3.90 .57
Less: Dividends and
Distributions
Dividends from net
investment income (.25) (.30) (.52) (.52) (.32)
Tax return of capital -0- -0- -0- -0- (.20)
Total dividends
and distributions (.25) (.30) (.52) (.52) (.52)
Net asset value,
end of period $30.00 $22.04 $19.15 $14.90 $11.52
Total Return
Total investment return
based on net asset value(c) 37.50% 16.83% 32.70% 34.89% 4.85%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $222,701 $128,890 $88,162 $57,701 $35,626
Ratio to average net assets of:
Expenses, net of
waivers/reimbursements 1.20%(d) 1.35% 1.31% 1.74% 1.75%
Expenses, before
waivers/reimbursements 1.20%(d) 1.35% 1.55% 1.74% 1.75%
Net investment income .59%(d) 1.58% 1.67%(b) 2.84% 2.87%
Portfolio turnover rate 49% 46% 39% 30% 37%
See footnote summary on page 34.
28 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
2006 2005 2004 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $21.84 $19.01 $14.84 $11.48 $11.44
Income From Investment
Operations
Net investment income(a) .12 .18 .20(b) .30 .28
Net realized and unrealized gain
on investment transactions 7.88 2.82 4.42 3.51 .21
Net increase in net asset value
from operations 8.00 3.00 4.62 3.81 .49
Less: Dividends and
Distributions
Dividends from net
investment income (.07) (.17) (.45) (.45) (.28)
Tax return of capital -0- -0- -0- -0- (.17)
Total dividends
and distributions (.07) (.17) (.45) (.45) (.45)
Net asset value,
end of period $29.77 $21.84 $19.01 $14.84 $11.48
Total Return
Total investment return
based on net asset value(c) 36.70% 15.89% 31.69% 34.05% 4.15%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $65,863 $79,207 $107,943 $106,147 $99,370
Ratio to average net assets of:
Expenses, net of
waivers/reimbursements 1.94%(d) 2.05% 2.03% 2.47% 2.47%
Expenses, before
waivers/reimbursements 1.94%(d) 2.06% 2.27% 2.47% 2.47%
Net investment income .47%(d) .91% 1.22%(b) 2.40% 2.35%
Portfolio turnover rate 49% 46% 39% 30% 37%
See footnote summary on page 34.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 29
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
2006 2005 2004 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $21.89 $19.03 $14.86 $11.49 $11.46
Income From Investment
Operations
Net investment income(a) .04 .18 .18(b) .29 .28
Net realized and unrealized gain
on investment transactions 7.95 2.85 4.44 3.53 .20
Net increase in net asset value
from operations 7.99 3.03 4.62 3.82 .48
Less: Dividends and
Distributions
Dividends from net
investment income (.07) (.17) (.45) (.45) (.28)
Tax return of capital -0- -0- -0- -0- (.17)
Total dividends
and distributions (.07) (.17) (.45) (.45) (.45)
Net asset value,
end of period $ 29.81 $21.89 $19.03 $14.86 $11.49
Total Return
Total investment return
based on net asset value(c) 36.57% 16.04% 31.65% 34.10% 4.06%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $68,638 $51,900 $56,543 $47,698 $35,845
Ratio to average net assets of:
Expenses, net of
waivers/reimbursements 1.91%(d) 2.04% 2.02% 2.46% 2.46%
Expenses, before
waivers/reimbursements 1.91%(d) 2.04% 2.26% 2.46% 2.46%
Net investment income .16%(d) .91% 1.11%(b) 2.31% 2.35%
Portfolio turnover rate 49% 46% 39% 30% 37%
See footnote summary on page 34.
30 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
2006 2005 2004 2003 2002
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $21.91 $19.04 $14.83 $11.48 $11.46
Income From Investment
Operations
Net investment income(a) .25 .29 .32(b) .40 .21
Net realized and unrealized gain
on investment transactions 8.00 2.94 4.47 3.53 .39
Net increase in net asset value
from operations 8.25 3.23 4.79 3.93 .60
Less: Dividends and
Distributions
Dividends from net
investment income (.32) (.36) (.58) (.58) (.36)
Tax return of capital -0- -0- -0- -0- (.22)
Total dividends
and distributions (.32) (.36) (.58) (.58) (.58)
Net asset value,
end of period $29.84 $21.91 $19.04 $14.83 $11.48
Total Return
Total investment return
based on net asset value(c) 37.98% 17.17% 33.07% 35.40% 5.12%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) $6,528 $3,097 $159,321 $102,135 $59,459
Ratio to average net assets of:
Expenses, net of
waivers/reimbursements .90%(d) .95% 1.00% 1.44% 1.51%
Expenses, before
waivers/reimbursements .90%(d) .95% 1.25% 1.44% 1.51%
Net investment income 1.00%(d) 1.54% 1.97%(b) 3.17% 1.73%
Portfolio turnoverate 49% 46% 39% 30% 37%
See footnote summary on page 34.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 31
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class R
-----------------------
March 1,
Year Ended, 2005(e) to
November 30, November
2006 30, 2005
---------- ----------
Net asset value, beginning of period $22.01 $18.97
Income From Investment Operations
Net investment income (loss)(a) (.22)+ .39
Net realized and unrealized gain on investment
transactions 8.38 2.81
Net increase in net asset value from operations 8.16 3.20
Less: Dividends
Dividends from net investment income (.20) (.16)
Net asset value, end of period $29.97 $22.01
Total Return
Total investment return based on net asset value(c) 37.27% 16.99%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $671 $58
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.48%(d) 1.69%(f)
Expenses, before waivers/reimbursements 1.48%(d) 1.70%(f)
Net investment income (loss) (.81)%(d) 2.89%(f)
Portfolio turnover rate 49% 46%
See footnote summary on page 34.
32 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class K
-----------------------
March 1,
Year Ended, 2005(e) to
November 30, November
2006 30, 2005
---------- ----------
Net asset value, beginning of period $22.03 $18.97
Income From Investment Operations
Net investment income (loss)(a) (.07)+ .38
Net realized and unrealized gain on investment
transactions 8.28 2.87
Net increase in net asset value from operations 8.21 3.25
Less: Dividends
Dividends from net investment income (.28) (.19)
Net asset value, end of period $29.96 $22.03
Total Return
Total investment return based on net asset value(c) 37.55% 17.27%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $387 $42
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.16%(d) 1.37%(f)
Expenses, before waivers/reimbursements 1.16%(d) 1.37%(f)
Net investment income (loss) (.30)%(d) 2.72%(f)
Portfolio turnover rate 49% 46%
See footnote summary on page 34.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 33
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class I
-----------------------
March 1,
Year Ended, 2005(e) to
November 30, November
2006 30, 2005
---------- ----------
Net asset value, beginning of period $22.01 $18.97
Income From Investment Operations
Net investment income(a) .21 .53
Net realized and unrealized gain on investment
transactions 8.08 2.76
Net increase in net asset value from operations 8.29 3.29
Less: Dividends
Dividends from net investment income (.33) (.25)
Net asset value, end of period $29.97 $22.01
Total Return
Total investment return based on net asset value(c) 38.04% 17.48%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) $4,321 $1,059
Ratio to average net assets of:
Expenses, net of waivers/reimbursements .86%(d) 1.15%(f)
Expenses, before waivers/reimbursements .86%(d) 1.15%(f)
Net investment income .81%(d) 4.03%(f)
Portfolio turnover rate 49% 46%
+ Due to the timing of sales and repurchases of capital shares, the net
investment income per share is not in accord with the fund's change in net
investment income for the period.
(a) Based on average shares outstanding.
(b) Net of expenses waived by the Adviser and Transfer Agent.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total return does not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares. Total
investment return calculated for a period of less than one year is not
annualized.
(d) The ratio includes expenses attributable to costs of proxy solicitation.
(e) Commencement of distribution.
(f) Annualized.
34 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
AllianceBernstein Real Estate Investment Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
AllianceBernstein Real Estate Investment Fund, Inc. (the "Fund"), including the
portfolio of investments, as of November 30, 2006, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of November 30, 2006 by correspondence with
the custodian and others, or by other appropriate auditing procedures where
replies from others were not received. 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
AllianceBernstein Real Estate Investment Fund, Inc. at November 30, 2006, and
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated periods, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
January 22, 2007
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 35
TAX INFORMATION
(unaudited)
For the fiscal year ended November 30, 2006, certain dividends paid by the Fund
may be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Fund designates a maximum
amount of $189,363 as qualified dividend income, which is taxed at a maximum
rate of 15%.
The Fund designates $524,706 from distribution paid in the fiscal year ended
November 30, 2006 as capital gain dividend.
Shareholders should not use the above information to prepare their tax returns.
The information necessary to complete your income tax returns, will be included
with your Form 1099-DIV which will be sent to you separately in January 2007.
36 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
David H. Dievler(1)
John H. Dobkin(1)
Michael J. Downey(1)
D. James Guzy(1)
Nancy P. Jacklin(1)
Marshall C. Turner, Jr.(1)
Earl D. Weiner(1)
OFFICERS(2)
Philip L. Kirstein, Senior Vice President and Independent Compliance Officer
Teresa Marziano, Senior Vice President
Joseph G.Paul, Senior Vice President
Emilie D. Wrapp, Secretary
Joseph J. Mantineo, Treasurer and Chief Financial Officer
Vincent S. Noto, Controller
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Principal Underwriter
AllianceBernstein Investments, Inc.
1345 Avenue of the Americas
New York, NY 10105
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Independent Registered Public Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036
Transfer Agent
AllianceBernstein Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
Toll-free (800) 221-5672
(1) Member of the Audit Committee, the Independent Directors Committee and the
Governance and Nominating Committee.
(2) The day-to-day management of and investment decisions for the Fund are
made by the REIT Investment Policy Group.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 37
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS+, PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OCCUPATION(S) OVERSEEN HELD
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS BY DIRECTOR BY DIRECTOR
- ---------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS
Marc O. Mayer, ** Executive Vice President of the 108 SCB Partners,
1345 Avenue of the Adviser since prior to 2002 and Inc. and
Americas Executive Managing Director of SCB, Inc.
New York, NY 10105 AllianceBernsteinInvestments, Inc.
49 ("ABI") since 2003; prior thereto he
(2003) was head of AllianceBernstein
Institutional Investments, a unit of the
Adviser, from 2001-2003. Prior thereto,
Chief Executive Officer of Sanford C.
Bernstein & Co., LLC (institutional
research and brokerage arm of
Bernstein and Co., LLC) and its
predecessor since prior to 2002.
DISINTERESTED DIRECTORS
William H. Foulk, Jr., # Investment adviser and an 110 None
Chairman of the Board independent consultant. He
74 was formerly Senior Manager
(1996) of Barrett Associates, Inc., a
registered investment adviser,
with which he had been associated
since prior to 2002. He was
formerly Deputy Comptroller and
Chief Investment Officer of the
State of New York and, prior
thereto, Chief Investment Officer of
the New York Bank for Savings.
David H. Dievler, # Independent consultant. Until 109 None
77 December 1994 he was Senior
(1996) Vice President of AllianceBernstein
Corporation ("AB Corp", formerly
Alliance Capital Management
Corporation ("ACMC")) responsible
for mutual fund administration. Prior
to joining AB Corp in 1984, he was
Chief Financial Officer of Eberstadt
Asset Management since 1968.
Prior to that, he was a Senior
Manager at Price Waterhouse &
Co. Member of American Institute
of Certified Public Accountants
since 1953.
38 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS+, PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OCCUPATION(S) OVERSEEN HELD
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS BY DIRECTOR BY DIRECTOR
- ---------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, # Consultant. Formerly President 108 None
64 of Save Venice, Inc. (preservation
(1996) organization) from 2001-2002,
Senior Advisor from June 1999 -
June 2000 and President of Historic
Hudson Valley (historic preservation)
from December 1989 - May 1999.
Previously, Director of the National
Academy of Design and during 1988-
1992, Director and Chairman of the
Audit Committee of AB Corp (formerly
ACMC).
Michael J. Downey, # Consultant since January 2004. 108 Asia
63 Formerly managing partner of Pacific
(2005) Lexington Capital, LLC (investment Fund, Inc.
advisory firm) from December 1997 and The
until December 2003. Prior thereto, Merger
Chairman and CEO of Prudential Fund
Mutual Fund Management from
1987to1993.
D. James Guzy, # Chairman of the Board of PLX 108 Intel Corporation
70 Technology (semi-conductors) (semi-conductors),
(2005) and of SRC Computers, Inc., and
with which he has been associated Cirrus Logic
since prior to 2002. He is also Corporation
President of the Arbor Company (semi-conductors).
(private family investments).
Nancy P. Jacklin, # Formerly US Executive Director of 108 None
58 the International Monetary Fund
(2006) (December 2002-May 2006); partner,
Clifford Chance (1992-2002); Senior
Counsel, International Banking and
Finance, and Associate General
Counsel, Citicorp (1985-1992);
Assistant General Counsel
(International), Federal Reserve
Board of Govenors (1982-1985);
and Attorney Advisor, US
Department of the Treasury (1973-
1982). Member of the Bar of the
District of Columbia and of New York;
member of the Council on Foreign
Relations.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 39
PORTFOLIOS
IN FUND OTHER
NAME, ADDRESS+, PRINCIPAL COMPLEX DIRECTORSHIPS
AGE OCCUPATION(S) OVERSEEN HELD
(FIRST YEAR ELECTED*) DURING PAST 5 YEARS BY DIRECTOR BY DIRECTOR
- ---------------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
Marshall C. Turner, Jr., # Principal of Turner Venture 108 The George
65 Associates (venture capital and Lucas
(2005) consulting) since prior to 2002. Educational
From 2003 until May 31, 2006, he Foundation and
was CEO of Toppan Photomasks, Inc., National
Austin, Texas (semi-conductor Datacast, Inc.
manufacturing services).
Earl D. Weiner, # Of-counsel, and partner from 107 None
67 1976-2006, of the law firm
(2007) Sullivan & Cromwell LLP,
specializing in investment
management, corporate and
securities law.
+ The address for each of the Fund's Disinterested Directors is
AllianceBernstein L.P., c/o Philip L. Kirstein, 1345 Avenue of the Americas,
New York, NY 10105.
* There is no stated term of office for the Fund's Directors.
** Mr. Mayer is an "interested person", as defined in the 1940 Act, due to his
position as an Executive Vice President of the Adviser.
# Member of the Audit Committee, the Governance and Nominating Committee and
the Independent Directors Committee.
40 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
Officer Information
Certain information concerning the Fund's officers is set forth below.
NAME, ADDRESS,* POSITION(S) PRINCIPAL OCCUPATION
AND AGE HELD WITH FUND DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------
Marc O. Mayer President See biography above.
49
Philip L. Kirstein Senior Vice President Senior Vice President and Independent
61 and Independent Compliance Officer of the
Compliance AllianceBernstein Funds, with which he
has been associated since October
2004. Prior thereto, he was Of Counsel
to Kirkpatrick & Lockhart, LLP from
October 2003 to October 2004, and
General Counsel of Merrill Lynch
Investment Managers, L.P. since prior to
2002 until March 2003.
Teresa Marziano Senior Vice President Senior Vice President of the Adviser**,
52 with which she has been associated
since prior to 2002.
Joseph G. Paul Senior Vice President Senior Vice President of the Adviser**,
46 with which he has been associated
since prior to 2002.
Emilie D. Wrapp Secretary Senior Vice President, Assistant
51 General Counsel and Assistant
Secretary of ABI**, with which she has
been associated since prior to 2002.
Joseph J. Mantineo Treasurer and Chief Senior Vice President of
47 Financial Officer AllianceBernstein Investor Services, Inc.
("ABIS")**, with which he has been
associated since prior to 2002.
Vincent S. Noto Controller Vice President of ABIS**, with which he
42 has been associated since prior to 2002.
* The address for each of the Fund's Officers is 1345 Avenue of the Americas,
New York, NY 10105.
** The Adviser, ABI and ABIS are affiliates of the Fund.
The Fund's Statement of Additional Information ("SAI") has additional
information about the Fund's Directors and Officers and is available without
charge upon request. Contact your financial representative or AllianceBernstein
at (800) 227-4618 for a free prospectus or SAI.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 41
Information Regarding the Review and Approval of the Fund's Advisory Agreement
The Fund's disinterested directors (the "directors") unanimously approved the
continuance of the Advisory Agreement between the Fund and the Adviser at a
meeting held on June 14, 2006.
In preparation for the meeting, the directors had requested from the Adviser
and received and evaluated extensive materials, including performance and
expense information for other investment companies with similar investment
objectives as the Fund derived from data compiled by Lipper Inc. ("Lipper"),
which is not affiliated with the Adviser. The directors also reviewed an
independent evaluation from the Fund's Senior Officer (who is also the Fund's
Independent Compliance Officer) of the reasonableness of the advisory fees in
the Fund's Advisory Agreement (as contemplated by the September 2004 Assurance
of Discontinuance between the Adviser and the New York Attorney General)
wherein the Senior Officer concluded that such fees were reasonable. In
addition, the directors received a presentation from the Adviser and had an
opportunity to ask representatives of the Adviser various questions relevant to
the proposed approval. The directors noted that the Senior Officer's evaluation
considered the following factors: management fees charged to institutional and
other clients of the Adviser for like services; management fees charged by
other mutual fund companies for like services; cost to the Adviser and its
affiliates of supplying services pursuant to the Advisory Agreement, excluding
any intra-corporate profit; profit margins of the Adviser and its affiliates
from supplying such services; possible economies of scale as the Fund grows
larger; and nature and quality of the Adviser's services including the
performance of the Fund.
Prior to voting, the directors reviewed the proposed continuance of the
Advisory Agreement with management and with experienced counsel who are
independent of the Adviser and received a memorandum from such counsel
discussing the legal standards for their consideration of the proposed
continuance. The directors also discussed the proposed continuance in two
private sessions at which only the directors, their independent counsel and the
Fund's Independent Compliance Officer were present. In reaching their
determinations relating to continuance of the Advisory Agreement, the directors
considered all factors they believed relevant, including the following:
1. information comparing the performance of the Fund to other investment
companies with similar investment objectives and to an index;
2. the nature, extent and quality of investment, compliance, administrative
and other services rendered by the Adviser;
3. payments received by the Adviser from all sources in respect of the Fund
and all investment companies in the AllianceBernstein Funds complex;
42 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
4. the costs borne by, and profitability of, the Adviser and its affiliates in
providing services to the Fund and to all investment companies in the
AllianceBernstein Funds complex;
5. comparative fee and expense data for the Fund and other investment
companies with similar investment objectives;
6. the extent to which economies of scale would be realized to the extent the
Fund grows and whether fee levels reflect any economies of scale for the
benefit of investors;
7. the Adviser's policies and practices regarding allocation of portfolio
transactions of the Fund, including the extent to which the Adviser benefits
from soft dollar arrangements;
8. information about "revenue sharing" arrangements that the Adviser has
entered into in respect of the Fund;
9. portfolio turnover rates for the Fund compared to other investment
companies with similar investment objectives;
10. fall-out benefits that the Adviser and its affiliates receive from their
relationships with the Fund;
11. information about fees charged by the Adviser to other clients with a
substantially similar investment style as the Fund;
12. the Senior Officer's evaluation of the reasonableness of the fee payable
to the Adviser in the Advisory Agreement;
13. the professional experience and qualifications of the Fund's portfolio
management team and other senior personnel of the Adviser; and
14. the terms of the Advisory Agreement.
The directors also considered their knowledge of the nature and quality of the
services provided by the Adviser to the Fund gained from their experience as
directors or trustees of most of the registered investment companies advised by
the Adviser, their overall confidence in the Adviser's integrity and competence
they have gained from that experience and the Adviser's responsiveness to
concerns raised by them in the past, including the Adviser's willingness to
consider and implement organizational and operational changes designed to
improve investment results and the services provided to the AllianceBernstein
Funds.
In their deliberations, the directors did not identify any particular
information that was all-important or controlling, and different directors may
have attributed different weights to the various factors.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 43
The directors determined that the overall arrangements between the Fund and the
Adviser, as provided in the Advisory Agreement, were fair and reasonable in
light of the services performed, expenses incurred and such other matters as
the directors considered relevant in the exercise of their business judgment.
The material factors and conclusions that formed the basis for the directors
reaching their determinations to approve the continuance of the Advisory
Agreement (including their determinations that the Adviser should continue to
be the investment adviser for the Fund, and that the fees payable to the
Adviser pursuant to the Advisory Agreement are appropriate) were separately
discussed by the directors.
Nature, Extent and Quality of Services Provided by the Adviser
The directors noted that, under the Advisory Agreement, the Adviser, subject to
the oversight of the directors, administers the Fund's business and other
affairs. The Adviser manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent with
the Fund's investment objective and policies. Under the Advisory Agreement, the
Adviser also provides the Fund with such office space, administrative and other
services (exclusive of, and in addition to, any such services provided by any
others retained by the Fund) and executive and other personnel as are necessary
for the Fund's operations. The Adviser pays all of the compensation of
directors of the Fund who are affiliated persons of the Adviser and of the
officers of the Fund.
The directors also considered that the Advisory Agreement provides that the
Fund will reimburse the Adviser for the cost of certain clerical, accounting,
administrative and other services provided at the Fund's request by employees
of the Adviser or its affiliates. Requests for these "at no more than cost"
reimbursements are approved by the directors on a quarterly basis and (to the
extent requested and paid) result in a higher rate of total compensation from
the Fund to the Adviser than the fee rates stated in the Fund's Advisory
Agreement.
The directors considered the scope and quality of services provided by the
Adviser under the Advisory Agreement and noted that the scope of services
provided by advisers of funds had expanded over time as a result of regulatory
and other developments. The directors noted, for example, that the Adviser is
responsible for maintaining and monitoring its own and, to varying degrees, the
Fund's compliance programs, and that these compliance programs have recently
been refined and enhanced in light of new regulatory requirements. The
directors considered the quality of the in-house investment research
capabilities of the Adviser and the other resources it has dedicated to
performing services for the Fund. The quality of administrative and other
services, including the Adviser's role in coordinating the activities of the
Fund's other service providers, also were considered. The directors also
considered the Adviser's response to recent regulatory compliance issues
affecting a number of the investment companies in the
44 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
AllianceBernstein Funds complex. The directors concluded that, overall, they
were satisfied with the nature, extent and quality of services provided to the
Fund under the Advisory Agreement.
Costs of Services Provided and Profitability to the Adviser
The directors reviewed a schedule of the revenues, expenses and related notes
indicating the profitability of the Fund to the Adviser for calendar years 2004
and 2005 that had been prepared with an updated expense allocation methodology.
The directors noted that the updated expense allocation methodology differed in
various respects from the methodology used in prior years. The directors
reviewed the assumptions and methods of allocation used by the Adviser in
preparing fund-specific profitability data, and noted the Adviser's
representation to them that it believed that the methods of allocation used in
preparing the profitability information were reasonable and appropriate and
that the Adviser had previously discussed with the directors that there is no
generally accepted allocation methodology for information of this type.
The directors recognized that it is difficult to make comparisons of
profitability from fund advisory contracts because comparative information is
not generally publicly available and is affected by numerous factors, including
the structure of the particular adviser, the types of funds it manages, its
business mix, numerous assumptions regarding allocations and the adviser's
capital structure and cost of capital. In considering profitability
information, the directors considered the effect of fall-out benefits on the
Adviser's expenses, as well as the "revenue sharing" arrangements the Adviser
has entered into with certain entities that distribute shares of the Fund. The
directors focused on the profitability of the Adviser's relationship with the
Fund before taxes and distribution expenses. The directors recognized that the
Adviser should generally be entitled to earn a reasonable level of profits for
the services it provides to the Fund and, based on their review, concluded that
they were satisfied that the Adviser's level of profitability from its
relationship with the Fund was not excessive.
Fall-Out Benefits
The directors considered that the Adviser benefits from soft dollar
arrangements whereby it receives brokerage and research services from many of
the brokers and dealers that execute purchases and sales of securities on
behalf of its clients on an agency basis. They noted that the Adviser makes
annual presentations to the directors regarding its trading practices and
brokerage allocation policies, including its policies with respect to soft
dollar arrangements. The directors noted that the Adviser has represented to
them that all of its soft dollar arrangements are consistent with applicable
legal requirements including the achievement of best execution.
The directors also considered that the Distributor, which is a wholly-owned
subsidiary of the Adviser, receives 12b-1 fees from the Fund in respect of
classes of
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 45
shares of the Fund that are subject to the Fund's 12b-1 plan and retains a
portion of such 12b-1 fees, and receives all or a portion of the sales charges
on sales or redemptions of certain classes of shares. The directors also noted
that certain affiliates of the Adviser distribute shares of the Fund and
receive compensation in that connection, that a subsidiary of the Adviser
provides transfer agency services to the Fund and receives compensation from
the Fund for such services, and that brokers who are affiliated with the
Adviser are permitted to execute brokerage transactions for the Fund subject to
satisfaction of certain requirements and receive brokerage commissions from the
Fund and liquidity rebates from electronic communication networks in connection
with certain of such transactions.
The directors recognized that the Adviser's profitability would be somewhat
lower if it did not receive research for soft dollars or if the Adviser's
affiliates did not receive the other benefits described above. The directors
understood that the Adviser also might derive reputational and other benefits
from its association with the Fund.
Investment Results
In addition to the information reviewed by the directors in connection with the
meeting, the directors receive detailed comparative performance information for
the Fund at each regular Board meeting during the year. At the meeting, the
directors reviewed information from a report prepared by Lipper showing
performance for Class A shares of the Fund as compared to a group of 14 to 11
funds (depending on the year) in its Lipper category selected by Lipper (the
"Performance Group") and as compared to a universe of 43 to 21 funds (depending
on the year) in its Lipper category selected by Lipper (the "Performance
Universe") for periods ended December 31, 2005 over the 1-, 3- and 5-year
periods, and information prepared by the Adviser showing performance of the
Class A Shares of the Fund as compared to the National Association of Real
Estate Investment Trusts Equity Index (the "Index") for periods ended December
31, 2005 over the 1-, 3-, 5-year and since inception periods (September 1996
inception). The directors noted that in the Performance Group comparison the
Fund was in the 4th quintile in the 1-year period and 3rd quintile in the 3-
and 5-year periods, and in the Performance Universe comparison the Fund was in
the 4th quintile in the 1-year period, 2nd quintile in the 3-year period and
3rd quintile in the 5-year period. The comparative information showed that the
Fund outperformed the Index in the 3-year period and underperformed the Index
in all other periods reviewed. Based on their review and their discussion of
the reasons for the Fund's recent underperformance with the Adviser, the
directors retained confidence in the Adviser's ability to continue to advise
the Fund and concluded that the Fund's investment performance was
understandable. The directors informed the Adviser that they planned to closely
monitor the Fund's performance.
46 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
Advisory Fees and Other Expenses
The directors considered the advisory fee rate paid by the Fund to the Adviser
and information prepared by Lipper concerning fee rates paid by other funds in
the same Lipper category as the Fund at a common asset level. The directors
recognized that it is difficult to make comparisons of advisory fees because
there are variations in the services that are included in the fees paid by
other funds.
The directors also considered the fees the Adviser charges other clients with a
substantially similar investment style as the Fund. For this purpose, they
reviewed information in the Adviser's Form ADV and a chart prepared by the
Adviser disclosing the institutional fee schedule for institutional products
managed by it that have a substantially similar investment style as the Fund.
They had previously received an oral presentation from the Adviser that
supplemented such information. The directors noted that the institutional fee
schedule for clients with a substantially similar investment style as the Fund
had breakpoints at much lower asset levels than those in the fee schedule
applicable to the Fund and that the application of such fee schedule to the
level of assets of the Fund would result in a fee rate that would be materially
lower than that in the Fund's Advisory Agreement. The directors noted that the
Adviser may, in some cases, negotiate fee rates with large institutional
clients that are lower than those reviewed by the directors and that they had
previously discussed with the Adviser its policies in respect of such
negotiated arrangements. The directors also noted that the Adviser advises two
other AllianceBernstein funds with a substantially similar investment style as
the Fund for the same fee schedule as the Fund.
The Adviser reviewed with the directors the significant differences in the
scope of services it provides to institutional clients and to the Fund. For
example, the Advisory Agreement requires the Adviser to provide, in addition to
investment advice, office facilities and officers (including officers to
provide required certifications). The Adviser also coordinates the provision of
services to the Fund by non-affiliated service providers and is responsible for
the compensation of the Fund's Independent Compliance Officer and certain
related expenses. The provision of these non-advisory services involves costs
and exposure to liability. The Adviser explained that many of these services
normally are not provided to non-investment company clients, and that fees
charged to the Fund reflect the costs and risks of the additional obligations.
The Adviser also noted that since the Fund is constantly issuing and redeeming
its shares, it is more difficult to manage than an institutional account, where
the assets are relatively stable. In light of these facts, the directors did
not place significant weight on these fee comparisons.
The directors also considered the total expense ratio of the Class A shares of
the Fund in comparison to the fees and expenses of funds within two comparison
groups created by Lipper: an Expense Group and an Expense Universe. Lipper
described an Expense Group as a representative sample of comparable funds and
an Expense Universe as a broader group, consisting of all funds in the Fund's
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 47
investment classification/ objective with a similar load type as the Fund. The
Class A expense ratio of the Fund was based on the Fund's latest fiscal year
expense ratio. The directors recognized that the expense ratio information for
the Fund potentially reflected on the Adviser's provision of services, as the
Adviser is responsible for coordinating services provided to the Fund by
others. The directors noted that it was likely that the expense ratios of some
funds in the Fund's Lipper category also were lowered by waivers or
reimbursements by those funds' investment advisers, which in some cases were
voluntary and perhaps temporary.
The directors noted that the Fund's at approximate current size contractual
effective fee rate of 55 basis points was significantly lower than the Expense
Group median. The directors noted that the latest fiscal year administrative
expense reimbursement by the Fund pursuant to the Advisory Agreement was 2
basis points. The directors also noted that the Fund's expense ratio was
slightly higher than the Expense Group median and somewhat lower than the
Expense Universe median. The directors concluded that the Fund's expense ratio
was satisfactory.
Economies of Scale
The directors noted that the advisory fee schedule for the Fund contains
breakpoints so that, if assets were to increase over the breakpoint levels, the
fee rates would be reduced on the incremental assets. The directors also
considered a presentation by an independent consultant discussing economies of
scale issues in the mutual fund industry. The directors believe that economies
of scale are realized (if at all) by the Adviser across a variety of products
and services, and not only in respect of a single fund. The directors noted
that there is no uniform methodology for establishing breakpoints that give
effect to fund-specific services provided by the Adviser and to the economies
of scale that the Adviser may realize in its overall mutual fund business or
those components of it which directly or indirectly affect the Fund's
operations. The directors observed that in the mutual fund industry as a whole,
as well as among funds similar to the Fund, there is no uniformity or pattern
in the fees and asset levels at which breakpoints (if any) apply. Depending on
the age and size of a particular fund and its adviser's cost structure,
different conclusions can be drawn as to whether there are economies of scale
to be realized at any particular level of assets, notwithstanding the intuitive
conclusion that such economies exist, or will be realized at some level of
total assets. Moreover, because different advisers have different cost
structures and service models, it is difficult to draw meaningful conclusions
from the comparison of a fund's advisory fee breakpoints with those of
comparable funds. The directors also noted that the advisory agreements for
many funds do not have breakpoints at all. Having taken these factors into
account, the directors concluded that the Fund's breakpoint arrangements would
result in a sharing of economies of scale in the event of a very significant
increase in the Fund's net assets.
48 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
THE FOLLOWING IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
SUMMARY OF SENIOR OFFICER'S EVALUATION OF
INVESTMENT ADVISORY AGREEMENT(1)
The following is a summary of the evaluation of the Investment Advisory
Agreement between AllianceBernstein L.P. (the "Adviser") and AllianceBernstein
Real Estate Investment Fund, Inc. (the "Fund"), prepared by Philip L. Kirstein,
the Senior Officer of the Fund for the Directors of the Fund, as required by an
August 2004 agreement between the Adviser and the New York State Attorney
General (the "NYAG").(2) The Senior Officer's evaluation of the Investment
Advisory Agreement is not meant to diminish the responsibility or authority of
the Board of Directors of the Fund to perform its duties pursuant to Section 15
of the Investment Company Act of 1940 (the "40 Act") and applicable state law.
The purpose of the summary is to provide shareholders with a synopsis of the
independent evaluation of the reasonableness of the advisory fees proposed to
be paid by the Fund which was provided to the Directors in connection with
their review of the proposed approval of the continuance of the Investment
Advisory Agreement. The Senior Officer's evaluation considered the following
factors:
1. Management fees charged to institutional and other clients of the Adviser
for like services;
2. Management fees charged by other mutual fund companies for like services;
3. Costs to the Adviser and its affiliates of supplying services pursuant to
the advisory agreement, excluding any intra-corporate profit;
4. Profit margins of the Adviser and its affiliates from supplying such
services;
5. Possible economies of scale as the Fund grows larger; and
6. Nature and quality of the Adviser's services including the performance of
the Fund.
FUND ADVISORY FEES, EXPENSE REIMBURSEMENTS & RATIOS
The Adviser proposed that the Fund pay the advisory fee set forth in the table
below for receiving the services to be provided pursuant to the Investment
Advisory Agreement. The fee schedule below, implemented in January 2004 in
connection with the Adviser's settlement with the NYAG in December 2003, is
(1) It should be noted that the information in the fee summary was completed
on June 2, 2006 and presented to the Board of Directors on June 14, 2006 in
accordance with the Assurance of Discontinuance between the NYAG and the
Adviser. It also should be noted that references in the fee summary pertaining
to performance and expense ratios refer to Class A shares of the Fund.
(2) Future references to the Fund do not include "AllianceBernstein."
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 49
based on a master schedule that contemplates eight categories of funds with
almost all funds in each category having the same advisory fee schedule.(3)
Net Assets Advisory Fee
02/28/06 Based on % of Average
Category (million) Daily Net Assets Fund
- -------------------------------------------------------------------------------
Value $282.3 55 bp on 1st $2.5 billion Real Estate Investment
45 bp on next $2.5 billion Fund, Inc.
40 bp on the balance
The Adviser is reimbursed as specified in the Investment Advisory Agreement for
certain clerical, legal, accounting, administrative and other services provided
to the Fund. Indicated below is the reimbursement amount, which the Adviser
received from the Fund in the Fund's most recently completed fiscal year,
expressed in dollars and as a percentage of average daily net assets:
As a % of Average
Fund Amount Daily Net Assets
- -------------------------------------------------------------------------------
Real Estate Investment Fund, Inc. $82,142 0.02%
Set forth below are the Fund's total expense ratios for the most recently
completed fiscal year:
Fund Total Expense Ratio Fiscal Year End
- -------------------------------------------------------------------------------
Real Estate Investment Class A 1.35% November 30
Fund, Inc. Class B 2.05%
Class C 2.04%
Class R 1.70%
Class K 1.37%
Class I 1.15%
Adv. Class 0.95%
I. MANAGEMENT FEES CHARGED TO INSTITUTIONAL AND OTHER CLIENTS
The management fees charged to investment companies which the Adviser manages
and sponsors are normally higher than those charged to similar sized
institutional accounts, including pension plans and sub-advised investment
companies. The fee differential reflects, among other things, different
services provided to such clients, and different liabilities assumed. Services
provided by the Adviser to the Fund that are not provided to non-investment
company clients include providing office space and personnel to serve as Fund
Officers, who among other responsibilities make the certifications required
under the Sarbanes-Oxley Act of 2002, and coordinating with and monitoring the
Fund's third party service providers such as Fund counsel, auditors,
custodians, transfer agents and pricing services. The accounting,
administrative, legal and compliance require-
(3) Most of the AllianceBernstein Mutual Funds, which the Adviser manages,
were affected by the Adviser's settlement with the NYAG.
50 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
ments for the Fund are more costly than those for institutional assets due to
the greater complexities and time required for investment companies, although
as previously noted, a portion of these expenses is reimbursed by the Fund to
the Adviser. Also, retail mutual funds managed by the Adviser are widely held.
Servicing the Fund's investors is more time consuming and labor intensive
compared to institutional clients since the Adviser needs to communicate with a
more extensive network of financial intermediaries and shareholders. In
addition, managing the cash flow of an investment company may be more difficult
than that of a stable pool of assets, such as an institutional account with
little cash movement in either direction, particularly, if the Fund is in net
redemption and the Adviser is frequently forced to sell securities to raise
cash for redemptions. However, managing a fund with positive cash flow may be
easier at times than managing a stable pool of assets. Finally, in recent
years, investment advisers have been sued by institutional clients and have
suffered reputational damage both by the attendant publicity and outcomes other
than complete victories. Accordingly, the legal and reputational risks
associated with institutional accounts are greater than previously thought,
although still not equal to those related to the mutual fund industry.
Notwithstanding the Adviser's view that managing an investment company is not
comparable to managing other institutional accounts because the services
provided are different, it is worth considering information regarding the
advisory fees charged to institutional accounts with a substantially similar
investment style as the Fund. It should be noted that the Adviser has indicated
that with respect to institutional accounts with assets greater than $300
million, it will negotiate a fee schedule. Discounts that are negotiated vary
based upon each client relationship. In addition to the AllianceBernstein
Institutional fee schedule, set forth below is what would have been the
effective advisory fee of the Fund had the AllianceBernstein Institutional fee
schedule been applicable to the Fund versus the Fund's advisory fee:
Net Assets AllianceBernstein ("AB") Effective Fund
02/28/06 Institutional ("Inst.") AB Inst. Advisory
Fund ($MIL) Fee Schedule Adv. Fee Fee(4)
- -------------------------------------------------------------------------------
Real Estate $282.3 Domestic REIT Strategy 0.453% 0.550%
Investment 70 bp on 1st $25 million
Fund, Inc. 60 bp on next $25 million
50 bp on next $25 million
Negotiable on the balance
Minimum Account Size: $10 m
The AllianceBernstein Variable Products Series Fund, Inc. ("AVPS"), which is
managed by the Adviser and is available through variable annuity and variable
life contracts offered by other financial institutions, offers investors the
option to
(4) Fund advisory fee information was provided by Lipper. See Section II for
additional discussion.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 51
invest in a portfolio that has a substantially similar investment style as the
Fund. The following table shows the fee schedule of such AVPS portfolio:
Fund AVPS Portfolio Fee Schedule
- -------------------------------------------------------------------------------
Real Estate Investment Real Estate Investment 55 bp on first $2.5 billion
Fund, Inc. Portfolio 45 bp on next $2.5 billion
40 bp on the balance
The Adviser also manages and sponsors retail mutual funds, which are organized
in jurisdictions outside the United States, generally Luxembourg and Japan, and
sold to non-United States resident investors. The Adviser charges the following
"all-in" fee(5) for the Luxembourg fund that has a similar investment strategy
as the Fund:
Fund Fee
- -------------------------------------------------------------------------------
Real Estate 1.75%
The Adviser represented that it does not sub-advise any registered investment
company with a substantially similar investment style as the Fund.
II. MANAGEMENT FEES CHARGED BY OTHER MUTUAL FUND COMPANIES FOR LIKE SERVICES.
Lipper, Inc. ("Lipper"), an analytical service that is not affiliated with the
Adviser, compared the fees charged to the Fund with fees charged to other
investment companies for similar services by other investment advisers.
Lipper's analysis included the Fund's ranking with respect to the proposed
management fee relative to the Lipper group median at the approximate current
asset level of the Fund.(6)
Effective Lipper
Management Group
Fund Fee(7) Median Rank
- -------------------------------------------------------------------------------
Real Estate Investment Fund, Inc. 0.550 0.814 1/14
(5) The "all-in" fee shown is for the class A shares of Real Estate. This
includes a fee for investment advisory services and a separate fee for
distribution related services.
(6) The effective management fee is calculated by Lipper using the Fund's
contractual management fee rate at a hypothetical asset level. The hypothetical
asset level is based on the combined net assets of all classes of the Fund,
rounded up to the next $25 million. Lipper's total expense ratio information is
based on the most recent annual report except as otherwise noted. A ranking of
"1" means that the Fund has the lowest effective fee rate in the Lipper peer
group.
(7) The effective management fee rate for the Fund does not reflect the
aforementioned payments made by the Fund to the Adviser for certain clerical,
legal, accounting, administrative, and other services.
52 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
Lipper also analyzed the total expense ratio of the Fund in comparison to its
Lipper Expense Group(8) and Lipper Expense Universe.(9) Lipper describes a
Lipper Expense Group as a representative sample of comparable funds and a
Lipper Expense Universe as a broader group, consisting of all funds in the same
investment classification/objective with a similar load type as the subject
Fund. The result of that analysis is set forth below:
Expense Lipper Lipper Lipper Lipper
Ratio Group Group Universe Universe
Fund (%)(10) Median (%) Rank Median (%) Rank
- -------------------------------------------------------------------------------
Real Estate Investment
Fund, Inc. 1.348 1.332 8/14 1.465 15/36
Based on this analysis, the Fund has a more favorable ranking on a management
fee basis than it does on a total expense ratio basis.
III. COSTS TO THE ADVISER AND ITS AFFILIATES OF SUPPLYING SERVICES PURSUANT TO
THE MANAGEMENT FEE ARRANGEMENT, EXCLUDING ANY INTRA-CORPORATE PROFIT.
A consultant was retained by the Senior Officer to work with the Adviser's
personnel to align the Adviser's two profitability reporting systems. The
alignment, which now has been completed, allows the Adviser's management and
the Directors to receive consistent presentations of the financial results and
profitability although the two profitability reporting systems operate
independently. See Section IV for additional discussion.
IV. PROFIT MARGINS OF THE ADVISER AND ITS AFFILIATES FOR SUPPLYING SUCH
SERVICES.
The profitability information for the Fund prepared by the Adviser for the
Board of Directors was reviewed by the Senior Officer. The Adviser's
profitability from providing investment advisory services to the Fund decreased
during calendar year 2005 relative to 2004.
In addition to the Adviser's direct profits from managing the Fund, certain of
the Adviser's affiliates have business relationships with the Fund and may earn
a profit from providing other services to the Fund. The courts have referred to
this type of business opportunity as "fall-out benefits" to the Adviser and
indicated
(8) Lipper uses the following criteria in screening funds to be included in
the Fund's expense group: fund type, investment classification/objective, load
type and similar 12b-1/non-12b-1 service fees, asset (size) comparability, and
expense components and attributes. A Lipper Expense Group will typically
consist of seven to twenty funds.
(9) Except for asset (size) comparability, Lipper uses the same criteria for
selecting a Lipper Expense Group when selecting a Lipper Expense Universe.
Unlike the Lipper Expense Group, the Lipper Expense Universe allows for the
same adviser to be represented by more than just one fund.
(10) The total expense ratio shown is for the Fund's Class A shares.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 53
that they should be factored into the evaluation of the total relationship
between the Fund and the Adviser. Neither case law nor common business practice
precludes the Adviser's affiliates from earning a reasonable profit on this
type of relationship. These affiliates provide transfer agent, distribution,
and brokerage related services to the Fund and receive transfer agent fees,
Rule 12b-1 payments, front-end sales loads, contingent deferred sales charges
("CDSC") and commissions for providing brokerage services. In addition, the
Adviser benefits from soft dollar arrangements which offset expenses the
Adviser would otherwise incur. Additional information regarding distribution
related fees can be found in the prospectus of the Fund.
AllianceBernstein Investments, Inc. ("ABI"), an affiliate of the Adviser, is
the Fund's principal underwriter. ABI and the Adviser have disclosed in the
Fund's prospectus that they may make revenue sharing payments from their own
resources, in addition to resources derived from sales loads and Rule 12b-1
fees, to firms that sell shares of the Fund. In 2005, ABI paid approximately
0.042% of the average monthly assets of the AllianceBernstein Mutual Funds or
approximately $18.0 million for distribution services and educational support
(revenue sharing payments). For 2006, it is anticipated, ABI will pay
approximately 0.04% of the average monthly assets of the AllianceBernstein
Mutual Funds or approximately $17.5 million.(11)
After payments to third party intermediaries, ABI retained the following
amounts for Class A front-end load sales charges from sales of the Fund's Class
A shares during the Fund's most recently completed fiscal year:
Fund Amount Received
- -------------------------------------------------------------------------------
Real Estate Investment Fund, Inc. $15,361
ABI received the amounts set forth below in Rule 12b-1 fees and CDSC for the
Fund during the Fund's most recent fiscal year:
12b-1 Fees CDSC
Fund Received Received
- -------------------------------------------------------------------------------
Real Estate Investment Fund, Inc. $1,809,100 $88,042
Fees and reimbursements for out of pocket expenses charged by AllianceBernstein
Investor Services, Inc. ("ABIS"), the affiliated transfer agent, are based on
the level of the network account and the class of share held by the account.
ABIS also receives a fee per shareholder sub-account for each account
(11) ABI currently inserts the "Advance" in quarterly account statements and
pays the incremental costs associated with the mailing. The incremental cost is
less than what an "independent mailing" would cost.
54 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
maintained by an intermediary on an omnibus basis. ABIS' after-tax
profitability increased in 2005 in comparison to 2004. ABIS received the
following fee from the Fund in the most recent fiscal year:
Fund ABIS Fee(12)
- -------------------------------------------------------------------------------
Real Estate Investment Fund, Inc. $476,149
The Fund effected brokerage transactions through the Adviser's affiliate,
Sanford C. Bernstein & Co. LLC ("SCB & Co.") and/or its U.K. affiliate, Sanford
C. Bernstein Limited ("SCB Ltd."), collectively "SCB," and paid commissions for
such transactions during the Fund's most recently completed fiscal year. The
Adviser represented that SCB's profitability from business conducted with the
Fund is comparable to the profitability of SCB's dealings with other similar
third party clients. In the ordinary course of business, SCB receives and pays
liquidity rebates from electronic communications networks ("ECNs") derived from
trading for its clients, including the Fund. These credits and charges are not
being passed on to any SCB client. The Adviser also receives certain soft
dollar benefits from brokers that execute agency trades for the Fund and other
clients. These soft dollar benefits reduce the Adviser's cost of doing business
and increase its profitability.
V. POSSIBLE ECONOMIES OF SCALE
The Adviser has indicated that the breakpoints in the fee schedule in the
Investment Advisory Agreement reflect a sharing of economies of scale to the
extent the breakpoints are reached. Based on some of the professional
literature that has considered economies of scale in the mutual fund industry
it is thought that to the extent economies of scale exist, they may more often
exist across a fund family as opposed to a specific fund. This is because the
costs incurred by the Adviser, such as investment research or technology for
trading or compliance systems can be spread across a greater asset base as the
fund family increases in size. It is also possible that as the level of
services required to operate a successful investment company has increased over
time, and advisory firms have made such investments in their business to
provide improved services, there may be a sharing of economies of scale without
a reduction in advisory fees.
An independent consultant made a presentation to the Board of Directors and the
Senior Officer regarding possible economies of scale or scope in the mutual
fund industry. Based on the presentation, it was evident that fund management
companies benefit from economies of scale. However, due to lack of cost data,
(12) The fee disclosed is net of any waivers or any other expense offset
arrangement with ABIS. An expense offset is created by the interest earned on
the positive cash balance that occurs within the transfer agent account as
there is a one day lag with regards to money movement from the shareholder's
account to the transfer agent's account and then from the transfer agent's
account to the Fund's account.
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 55
researchers had to infer facts about the costs from the behavior of fund
expenses; there was a lack of consensus among researchers as to whether
economies of scale were being passed on to the shareholders. It is contemplated
that additional work will be performed to determine if the benefits of
economies of scale or scope are being passed to shareholders by the Adviser. In
the meantime, it is clear that to the extent a fund's assets exceeds its
initial breakpoint its shareholders benefit from a lower fee rate.
VI. NATURE AND QUALITY OF THE ADVISER'S SERVICES INCLUDING THE PERFORMANCE OF
THE FUND.
With assets under management of $635 billion as of April 30, 2006, the Adviser
has the investment experience to manage and provide non-investment services
(described in Section I) to the Fund.
The information below, prepared by Lipper, shows the 1, 3, and 5 year
performance ranking of the Fund(13) relative to its Lipper Performance
Group(14) and Lipper Performance Universe(15) for the periods ended December
31, 2005:
Real Estate Investment Fund, Inc. Group Universe
- -------------------------------------------------------------------------------
1 year 9/14 28/43
3 year 7/13 11/30
5 year 6/11 9/21
Set forth below are the 1, 3, 5 year and since inception performance returns of
the Fund (in bold)(16) versus its benchmark:(17)
Periods Ending December 31, 2005
Annualized Performance
- -------------------------------------------------------------------------------
1 3 5 Since
Fund Year Year Year Inception
- -------------------------------------------------------------------------------
Real Estate Investment Fund, Inc. 11.61 27.75 18.70 13.54
NAREIT Equity Index 12.16 26.49 19.08 13.93
(13) The performance rankings are for the Class A shares of the Fund.
(14) The Lipper Performance Group is identical to the Lipper Expense Group.
(15) For the Lipper Performance Universe, Lipper included the Fund and all of
the funds of the same Lipper Classification/Objective and load type, regardless
of asset size.
(16) The performance returns shown are for the Class A shares of the Fund.
(17) The Adviser provided Fund and benchmark performance return information
for periods through December 31, 2005 in order to maintain consistency with
Lipper's performance rankings in the analysis.
56 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
CONCLUSION:
Based on the factors discussed above the Senior Officer's conclusion is that
the proposed fee for the Fund is reasonable and within the range of what would
have been negotiated at arms-length in light of all the surrounding
circumstances. This conclusion in respect of the Fund is based on an evaluation
of all of these factors and no single factor was dispositive.
Dated: July 17, 2006
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 57
ALLIANCEBERNSTEIN FAMILY OF FUNDS
THIS PAGE IS NOT PART OF THE SHAREHOLDER REPORT OR THE FINANCIAL STATEMENTS
- --------------------------------------------
Wealth Strategies Funds
- --------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy
- --------------------------------------------
Blended Style Funds
- --------------------------------------------
U.S. Large Cap Portfolio
International Portfolio
Tax-Managed International Portfolio
- --------------------------------------------
Growth Funds
- --------------------------------------------
Domestic
Growth Fund
Mid-Cap Growth Fund
Large Cap Growth Fund
Small Cap Growth Portfolio
Global & International
Global Health Care Fund
Global Research Growth Fund
Global Technology Fund
Greater China '97 Fund
International Growth Fund
International Research Growth Fund
- --------------------------------------------
Value Funds
- --------------------------------------------
Domestic
Balanced Shares
Focused Growth & Income Fund
Growth & Income Fund
Real Estate Investment Fund
Small/Mid-Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
- --------------------------------------------
Taxable Bond Funds
- --------------------------------------------
Global Government Income Trust*
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Intermediate Bond Portfolio*
Short Duration Portfolio
U.S. Government Portfolio
- --------------------------------------------
Municipal Bond Funds
- --------------------------------------------
National Michigan
Insured National Minnesota
Arizona New Jersey
California New York
Insured California Ohio
Florida Pennsylvania
Massachusetts Virginia
- --------------------------------------------
Intermediate Municipal Bond Funds
- --------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
- --------------------------------------------
Closed-End Funds
- --------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
- --------------------------------------------
Retirement Strategies Funds
- --------------------------------------------
2000 Retirement Strategy
2005 Retirement Strategy
2010 Retirement Strategy
2015 Retirement Strategy
2020 Retirement Strategy
2025 Retirement Strategy
2030 Retirement Strategy
2035 Retirement Strategy
2040 Retirement Strategy
2045 Retirement Strategy
We also offer Exchange Reserves,** which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our website at
www.alliancebernstein.com or call us at 800.227.4618 for a current prospectus.
You should read the prospectus carefully before you invest.
* Prior to February 1, 2006, Global Government Income Trust was named Americas
Government Income Trust and Intermediate Bond Portfolio was named Quality Bond
Portfolio.
** An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
58 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
NOTES
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND o 59
NOTES
60 o ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
ALLIANCEBERNSTEIN REAL ESTATE INVESTMENT FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
[LOGO]
ALLIANCEBERNSTEIN
INVESTMENTS
RE-0151-1106
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting
officer. A copy of the registrant's code of ethics is filed herewith as
Exhibit 12(a)(1).
(b) During the period covered by this report, no material amendments were made
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers
to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (c) The following table sets forth the aggregate fees billed by the
independent registered public accounting firm Ernst & Young LLP, for the Fund's
last two fiscal years for professional services rendered for: (i) the audit of
the Fund's annual financial statements included in the Fund's annual report to
stockholders; (ii) assurance and related services that are reasonably related
to the performance of the audit of the Fund's financial statements and are not
reported under (i), which include advice and education related to accounting
and auditing issues and quarterly press release review (for those Funds which
issue press releases), and preferred stock maintenance testing (for those Funds
that issue preferred stock); and (iii) tax compliance, tax advice and tax
return preparation.
Audit Audit-Related Tax
Fees Fees Fees
--------- ------------- --------
2005 $ 50,000 $ 4,047 $ 17,704
2006 $ 52,500 $ 5,496 $ 24,750
(d) Not applicable.
(e) (1) Beginning with audit and non-audit service contracts entered into on or
after May 6, 2003, the Fund's Audit Committee policies and procedures require
the pre-approval of all audit and non-audit services provided to the Fund by
the Fund's independent registered public accounting firm. The Fund's Audit
Committee policies and procedures also require pre-approval of all audit and
non-audit services provided to the Adviser and Service Affiliates to the extent
that these services are directly related to the operations or financial
reporting of the Fund.
(e) (2) All of the amounts for Audit Fees, Audit-Related Fees and Tax Fees in
the table under Item 4 (a) - (c) are for services pre-approved by the Fund's
Audit Committee.
(f) Not applicable.
(g) The following table sets forth the aggregate non-audit services provided to
the Fund, the Fund's Adviser and entities that control, are controlled by or
under common control with the Adviser that provide ongoing services to the
Fund, which include preparing an annual internal control report pursuant to
Statement on Auditing Standards No. 70 ("Service Affiliates"):
Total Amount of
Foregoing Column Pre-
approved by the Audit
All Fees for Committee
Non-Audit Services (Portion Comprised of
Provided to the Audit Related Fees)
Portfolio, the Adviser (Portion Comprised of
and Service Affiliates Tax Fees)
- -------------------------------------------------------------------------------
2005 $900,747 [ $ 189,454 ]
( $ 171,750 )
( $ 17,704 )
2006 $1,061,568 [ $ 161,761 ]
( $ 137,011 )
( $ 24,750 )
(h) The Audit Committee of the Fund has considered whether the provision of any
non-audit services not pre-approved by the Audit Committee provided by the
Fund's independent registered public accounting firm to the Adviser and Service
Affiliates is compatible with maintaining the auditor's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. SCHEDULE OF INVESTMENTS.
Please see Schedule of Investments contained in the Report to Shareholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Directors since the Fund last
provided disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-3 (c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
12 (a) (1) Code of Ethics that is subject to the disclosure of
Item 2 hereof
12 (b) (1) Certification of Principal Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (b) (2) Certification of Principal Financial Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
12 (c) Certification of Principal Executive Officer and
Principal Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
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): AllianceBernstein Real Estate Investment Fund, Inc.
By: /s/ Marc O. Mayer
----------------------
Marc O. Mayer
President
Date: January 29, 2007
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: /s/ Marc O. Mayer
----------------------
Marc O. Mayer
President
Date: January 29, 2007
By: /s/ Joseph J. Mantineo
----------------------
Joseph J. Mantineo
Treasurer and Chief Financial Officer
Date: January 29, 2007