ALLIANCE REAL ESTATE INVESTMENT FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE REAL ESTATE INVESTMENT FUND
_______________________________________________________________________________
March 10, 1997
Dear Shareholder:
First, allow us to welcome you as a shareholder of Alliance Real Estate
Investment Fund. As you will see from this initial report, which covers the
five month period from the Fund's inception on October 1, 1996 through February
28, 1997, the Fund has performed extremely well.
Alliance Real Estate Investment Fund seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
FUND PERFORMANCE
This was an exceptional period for the stock market as a whole with the S&P 500
Stock Index producing a total return of 16%. Real estate equities outperformed
the overall market during this period which can be seen in the performance of
the National Association of Real Estate Investment Trusts (NAREIT) Equity
Index, which produced a total return of 19.90%. As you can see in the table
below, your Fund did even better than its comparative indices, generating net
returns to shareholders of 21.30% for Class A shares.
INVESTMENT RESULTS*
TOTAL RETURN
OCTOBER 1, 1996-FEBRUARY 28, 1997
---------------------------------
ALLIANCE REAL ESTATE INVESTMENT FUND
Class A 21.30%
Class B 20.99%
Class C 20.99%
S&P 500 STOCK INDEX 16.00%
NAREIT INDEX 19.90%
* THE FUND'S INVESTMENT RESULTS REPRESENT CUMULATIVE TOTAL RETURNS SINCE THE
FUND'S INCEPTION ON OCTOBER 1, 1996 AND ARE BASED ON THE NET ASSET VALUE OF
EACH CLASS OF SHARES AS OF FEBRUARY 28, 1997. TOTAL RETURNS FOR ADVISOR CLASS
SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES ASSOCIATED WITH THAT CLASS. ALL
FEES AND EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT
NO ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN SHARES ARE
PURCHASED OR REDEEMED. THE S&P 500 IS AN UNMANAGED INDEX OF 500 U.S. COMPANIES.
NAREIT REPRESENTS RETURNS FOR THE NATIONAL ASSOCIATION OF REAL ESTATE
INVESTMENT TRUSTS EQUITY INDEX. AN INVESTOR CANNOT INVEST DIRECTLY IN EITHER OF
THESE INDICES. INDEX RETURNS ARE NOT ADJUSTED FOR SALES CHARGES OR OPERATING
EXPENSES.
MARKET OVERVIEW
The marketplace for publicly traded real estate companies in the United States
is relatively immature. Real Estate Investment Trusts (REITs), the primary
investment vehicle in this arena, were created by an act of Congress in 1961 in
order to allow individual investors access to the commercial real estate
market. Real estate remained a stock market backwater until 1991 when a wave of
companies went public in response to a severe cyclical decline in real estate
values brought about by over-building and over-leveraging in the late 1980's.
In the ensuing six years, the market has grown more than fifteen-fold from $5.5
billion to a current market valuation of $83.5 billion. We believe this growth
will continue into the future as more private and institutional owners of real
estate liquify their assets by creating new public entities or merging with
existing ones. We anticipate the market for public real estate companies will
grow to $300 billion by the end of this decade. Those companies with the most
competitive cost of capital, and whose managements are most capable of setting
strategic direction, should outperform their competitors in this environment.
In addition to dramatic growth in the public sector, the real estate market is
undergoing a significant shift in underlying investment appeal. The ongoing
economic expansion and slowly growing population of the United States have
contributed to a steadily increasing demand for commercial, retail and
residential real estate throughout the country. Supply growth, on the other
hand, has been minimal over the past five years. As a result, real estate
markets are currently tight, allowing landlords substantial leeway in raising
rents. This, in turn, fuels unprecedented cash flow and earnings growth for
publicly traded real estate companies. Consequently, those companies that own
properties in the most dynamic real estate markets should outperform their
competitors in this environment.
INVESTMENT STRATEGY
Your Fund was designed to identify and invest in those companies which have
optimal exposure to the country's strongest real estate markets and which will
most likely benefit from the significant shifts in real estate financing and
ownership which are sweeping across the United States today.
1
ALLIANCE REAL ESTATE INVESTMENT FUND
_______________________________________________________________________________
The ongoing involvement of Koll Real Estate Services as a consultant to
Alliance, the Fund's advisor, gives us timely insights into emerging real
estate trends in nearly 400 property-specific geographic markets across the
country. Our capital markets expertise with regard to debt and equity
financing, as well as our analytical understanding of tenant industry trends,
place us in an advantageous position. These resources help us to determine
which companies appear to be at the forefront of industry consolidation and
which companies may be suitable for investing.
The result of our investment approach is a growth-oriented portfolio with
specific divergence from our benchmarks with respect to property-type and
geographic diversification. We expect the companies in our portfolio to show
higher cash flow growth over the next few years compared with the average real
estate company. We are overweighted in suburban office and full service hotel
companies and in California in general. We are underweighted in sunbelt
apartment companies and retail properties in general.
MARKET OUTLOOK AND CONCLUSIONS
Our outlook for real estate overall remains positive. By and large, new
construction remains constrained and demand continues to grow. This should
allow rental income and occupancy levels to modestly increase over time. We are
optimistic that we can deploy our assets in markets growing faster than average
and, hence, continue to produce positive investment results.
In conclusion, we would like to thank you for the confidence you have shown in
us by investing in Alliance Real Estate Investment Fund. We will continue to do
everything we can to justify that confidence by providing you with continued
good results.
Sincerely,
John D. Carifa
Chairman
Daniel G. Pine
Senior Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE REAL ESTATE INVESTMENT FUND
_______________________________________________________________________________
Alliance Real Estate Investment Fund seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
INVESTMENT RESULTS
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* 21.30% 16.19%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* 20.99% 16.99%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* 20.99% 19.99%]
The average annual total returns reflect reinvestment of dividends and/or
capital gains distributions in additional shares with and without the effect of
the 4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total return for Advisor Class shares will differ due to
different expenses associated with that class.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception: 10/1/96 for all share classes.
3
TEN LARGEST HOLDINGS
FEBRUARY 28, 1997 (UNAUDITED) ALLIANCE REAL ESTATE INVESTMENT FUND
_______________________________________________________________________________
COMPANY U.S. $ VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
Starwood Lodging Trust $ 5,438,375 4.3%
Crescent Real Estate Equities Co. 5,365,500 4.3
Security Capital Industrial Trust 5,104,000 4.1
Excel Realty Trust, Inc. 4,998,000 4.0
Beacon Properties Corp. 4,916,250 3.9
Duke Realty Investments, Inc. 4,855,125 3.9
Bay Apartment Communities, Inc. 4,843,125 3.9
Glenborough Realty Trust, Inc. 4,756,500 3.8
Essex Property Trust, Inc. 4,680,000 3.7
Storage USA, Inc. 4,578,125 3.7
$49,535,000 39.6%
MAJOR PORTFOLIO CHANGES
OCTOBER 1, 1996# TO FEBRUARY 28, 1997 (UNAUDITED)
_______________________________________________________________________________
SHARES*
--------------------------------
PURCHASES BOUGHT HOLDINGS 2/28/97
- -------------------------------------------------------------------------------
Starwood Lodging Trust 108,000 139,000
Crescent Real Estate Equities Co. 98,000 98,000
Security Capital Industrial Trust 232,000 232,000
Excel Realty Trust, Inc. 204,000 204,000
Beacon Properties Corp. 138,000 138,000
Duke Realty Investments, Inc. 121,000 121,000
Bay Apartment Communities, Inc. 135,000 135,000
Glenborough Realty Trust, Inc. 252,000 252,000
Essex Property Trust, Inc. 156,000 156,000
Storage USA, Inc. 125,000 125,000
SALES SOLD HOLDINGS 2/28/97
- -------------------------------------------------------------------------------
Post Properties, Inc. 45,000 -0-
Boykin Lodging Co. 59,500 -0-
Liberty Property Trust 25,000 47,000
Smith (Charles E.) Residential Realty, Inc. 21,000 -0-
National Golf Properties, Inc. 14,500 -0-
Weeks Corp. 9,500 -0-
Storage Trust Realty 10,500 -0-
FelCor Suite Hotels, Inc. 7,000 -0-
# Commencement of operations.
* Adjusted for stock splits.
4
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1997 (UNAUDITED) ALLIANCE REAL ESTATE INVESTMENT FUND
______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-93.2%
REAL ESTATE INVESTMENT TRUSTS-89.9%
APARTMENTS-12.8%
Ambassador Apartments, Inc. 147,000 $ 3,564,750
Avalon Properties, Inc. 106,000 2,954,750
Bay Apartment Communities, Inc. 135,000 4,843,125
Essex Property Trust, Inc. 156,000 4,680,000
------------
16,042,625
DIVERSIFIED-5.8%
Glenborough Realty Trust, Inc. 252,000 4,756,500
Golf Trust of America, Inc. (a) 23,000 557,750
Pacific Gulf Properties, Inc. 83,000 1,888,250
------------
7,202,500
HOTELS & RESTAURANTS-13.9%
American General Hospitality Corp. 141,200 3,865,350
Innkeepers USA Trust 284,000 3,976,000
Patriot American Hospitality, Inc. 92,000 4,163,000
Starwood Lodging Trust 139,000 5,438,375
------------
17,442,725
OFFICE - INDUSTRIAL-14.6%
Arden Realty Group, Inc. 139,000 3,839,875
Beacon Properties Corp. 138,000 4,916,250
Crescent Real Estate Equities Co. 98,000 5,365,500
Highwoods Properties, Inc. 121,000 4,174,500
------------
18,296,125
OFFICE - MIX-15.0%
Brandywine Realty Trust 198,900 $4,102,313
Duke Realty Investmen 121,000 4,855,125
Kilroy Realty Corp. (a) 31,500 826,875
Liberty Property Trust 47,000 1,116,250
Reckson Associates Realty Cor 95,000 4,346,250
Spieker Properties, Inc. 98,000 3,564,750
------------
18,811,563
REGIONAL MALLS-4.8%
J. P. Realty, Inc. 138,000 3,553,500
Simon DeBartolo Group, Inc. 80,000 2,410,000
------------
5,963,500
SHOPPING CENTERS-9.4%
Developers Diversified Realty Corp. 112,000 4,102,000
Excel Realty Trust, Inc. 204,000 4,998,000
IRT Property Co. 233,000 2,621,250
------------
11,721,250
STORAGE-6.6%
Public Storage, Inc. 138,000 3,708,750
Storage USA, Inc. 125,000 4,578,125
------------
8,286,875
WAREHOUSE & INDUSTRIAL-7.0%
Meridian Industrial Trust, Inc. 165,000 3,650,625
Security Capital Industr 232,000 5,104,000
------------
8,754,625
------------
112,521,788
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE REAL ESTATE INVESTMENT FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
REAL ESTATE DEVELOPMENT & MANAGEMENT-3.3%
Rouse Co. 139,000 $ 4,065,750
Total Common Stocks
(cost $111,484,456) 116,587,538
SHORT-TERM INVESTMENTS-7.2%
American Express Co. 5.25%, 3/03/97 $ 427 427,000
Ford Motor Co. 5.30%, 3/04/97 4,000 3,999,411
------------
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
Prudential Funding 5.23%, 3/03/97 $2,280 $ 2,280,000
Prudential Funding 5.30%, 3/05/97 2,314 2,313,319
Total Short-Term Investments
(amortized cost $9,019,730) 9,019,730
TOTAL INVESTMENTS-100.4%
(cost $120,504,186) 125,607,268
Other assets less liabilities-(0.4%) (478,836)
NET ASSETS-100% $125,128,432
(a) Non income producing.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1997 (UNAUDITED) ALLIANCE REAL ESTATE INVESTMENT FUND
______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $120,504,186) $125,607,268
Cash 1,675
Receivable for capital stock sold 7,343,830
Receivable for investment securities sold 5,456,000
Deferred organizational expenses 317,642
Dividends and interest receivable 255,117
Total assets 138,981,532
LIABILITIES
Payable for investment securities purchased 13,334,971
Payable for capital stock redeemed 118,734
Advisory fee payable 105,432
Distribution fee payable 77,295
Accrued expenses and other liabilities 216,668
Total liabilities 13,853,100
NET ASSETS $125,128,432
COMPOSITION OF NET ASSETS
Capital stock, at par $ 104,463
Additional paid-in capital 119,215,626
Undistributed net investment income 279,175
Accumulated net realized gain on investments 426,086
Net unrealized appreciation of investments 5,103,082
------------
$125,128,432
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($19,711,478/
1,644,671 shares of capital stock issued and outstanding) $11.99
Sales charge--4.25% of public offering price .53
Maximum offering price $12.52
CLASS B SHARES
Net asset value and offering price per share($85,854,403/
7,168,432 shares of capital stock issued and outstanding) $11.98
CLASS C SHARES
Net asset value and offering price per share($18,411,337/
1,537,339 shares of capital stock issued and outstanding) $11.98
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share($1,151,214
/95,888 shares of capital stock issued and outstanding) $12.01
See notes to financial statements.
7
STATEMENT OF OPERATIONS
OCTOBER 1, 1996* TO FEBRUARY 28, 1997 (UNAUDITED)
ALLIANCE REAL ESTATE INVESTMENT FUND
______________________________________________________________________________
INVESTMENT INCOME
Dividends $1,003,644
Interest 88,204 $1,091,848
EXPENSES
Advisory fee 178,664
Distribution fee - Class A 11,345
Distribution fee - Class B 133,366
Distribution fee - Class C 24,725
Administrative 52,917
Amortization of organization expenses 27,633
Audit and legal 26,973
Custodian 28,598
Transfer agency 16,041
Directors' fees 15,000
Printing 13,700
Registration 3,095
Miscellaneous 3,272
Total expenses 535,329
Less: expenses waived by Adviser (see Note B) (52,917)
Net expenses 482,412
Net investment income 609,436
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investment transactions 426,086
Net unrealized appreciation of investments 5,103,082
Net gain on investments 5,529,168
NET INCREASE IN NET ASSETS FROM OPERATIONS $6,138,604
* Commencement of operations.
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE REAL ESTATE INVESTMENT FUND
______________________________________________________________________________
OCTOBER 1, 1996*
TO
FEBRUARY 28, 1997
(UNAUDITED)
-----------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 609,436
Net realized gain on investment transactions 426,086
Net unrealized appreciation of investments 5,103,082
Net increase in net assets from operations 6,138,604
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (85,847)
Class B (210,807)
Class C (29,228)
Advisor Class (4,379)
CAPITAL STOCK TRANSACTIONS
Net increase 119,219,789
Total increase 125,028,132
NET ASSETS
Beginning of period 100,300
End of period(including undistributed net investment
income of $279,175) $125,128,432
* Commencement of operations.
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1997 (UNAUDITED) ALLIANCE REAL ESTATE INVESTMENT FUND
______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Real Estate Investment Fund (the "Fund") was incorporated in the
state of Maryland on July 15, 1996 as a diversified, open-end management
investment company. Prior to commencement of operations on October 1, 1996,
the Fund had no operations other than the sale to Alliance Capital Management
L.P. (the "Adviser") of 10 shares each of Class A, Class B and Class C and
10,000 shares of Advisor Class for the aggregate amount of $100 each on Class
A, Class B and Class C shares and $100,000 on the Advisor Class shares on
August 22, 1996. The Fund offers Class A, Class B, Class C and Advisor Class
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 will
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. Advisor Class shares are sold without an initial or contingent
deferred sales charge and are not subject to ongoing distribution expenses.
Advisor Class shares are offered solely to investors participating in fee
based programs. All four classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange and
over-the-counter securities listed on the NASDAQ National Market System are
valued at the last reported sales price at the regular close of the New York
Stock Exchange. Over-the-counter securities not listed on the NASDAQ National
Market System are valued at the mean of the closing bid and asked price.
Securities for which current market quotations are not readily available
(including investments which are subject to limitations as to their resale)
are valued at their fair value as determined in good faith by the Board of
Directors. Securities which mature in 60 days or less are valued at amortized
cost, which approximates market value, unless this method does not represent
fair value.
2. 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 applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. ORGANIZATION EXPENSES
Organization costs of approximately $345,275 have been deferred and are being
amortized on a straight-line basis through October, 2001.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is
accrued daily. Investment transactions are accounted for on the date the
securities are purchased or sold. Investment gains and losses are determined
on the identified cost basis. The Fund accretes discounts as adjustments to
interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the advisory agreement, the Fund pays the Adviser a monthly
fee equal to the annualized rate of .90% of 1% of the average daily net assets
of the Fund. Such fee is accrued daily and paid monthly.
Pursuant to the Advisory Agreement, the Adviser provides certain legal and
accounting services for the Fund. For the period ended February 28, 1997, the
Adviser volunatarily agreed to waive its fees for such services.
10
ALLIANCE REAL ESTATE INVESTMENT FUND
_______________________________________________________________________________
The Fund compensates Alliance Fund Services, Inc. (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. Such compensation
amounted to $10,083 for the period ended February 28, 1997.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $20,155 from the sale of Class A shares and $15,401
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the period ended February 28, 1997.
Brokerage commissions paid for the period ended February 28, 1997 on
securities transactions amounted to $216,225, none of which was paid to
brokers utilizing the services of the Pershing Division of Donaldson, Lufkin
& Jenrette Securities Corp. ("DLJ") nor to DLJ directly, an affiliate of the
Adviser.
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 a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable
to Class A shares and 1% of the average daily net assets attributable to both
Class B and Class C shares. There is no distribution fee on the Advisor Class
shares. Such fee is 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
$3,199,081 and $197,520, for Class B and C 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) aggregated $116,765,525 and $5,707,155, respectively, for the
period ended February 28, 1997. At February 28, 1997, the cost of securities
for federal income tax purposes was the same as the cost for financial
reporting purposes. Accordingly, gross unrealized appreciation of investments
was $5,414,038 and gross unrealized depreciation of investments was $310,956
resulting in net unrealized appreciation of $5,103,082.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
ALLIANCE REAL ESTATE INVESTMENT FUND
______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $0.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each consists of 3,000,000,000 authorized shares. Transactions
in capital stock were as follows:
SHARES AMOUNT
------------- -------------
OCT. 1, 1996* OCT. 1, 1996*
TO TO
FEB. 28, 1997 FEB. 28, 1997
(UNAUDITED) (UNAUDITED)
------------- -------------
CLASS A
Shares sold 1,733,770 $19,474,565
Shares issued in reinvestment of dividends 4,197 45,833
Shares converted from Class B 3,040 36,417
Shares redeemed (96,346) (1,100,793)
Net increase 1,644,661 $18,456,022
CLASS B
Shares sold 7,255,232 $83,006,552
Shares issued in reinvestment of dividends 8,800 96,184
Shares converted to Class A (3,042) (36,417)
Shares redeemed (92,568) (1,069,282)
Net increase 7,168,422 $81,997,037
CLASS C
Shares sold 1,559,938 $18,082,651
Shares issued in reinvestment of dividends 1,131 12,363
Shares redeemed (23,740) (278,496)
Net increase 1,537,329 $17,816,518
ADVISOR CLASS
Shares sold 91,552 $ 1,016,943
Shares issued in reinvestment of dividends 401 4,378
Shares redeemed (6,065) (71,109)
Net increase 85,888 $ 950,212
* Commencement of operations.
12
FINANCIAL HIGHLIGHTS ALLIANCE REAL ESTATE INVESTMENT FUND
______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR
CLASS A CLASS B CLASS C CLASS
------------ ------------ ------------ ------------
OCTOBER 1, OCTOBER 1, OCTOBER 1, OCTOBER 1,
1996(A) 1996(A) 1996(A) 1996(A)
TO TO TO TO
FEBRUARY 28, FEBRUARY 28, FEBRUARY 28, FEBRUARY 28,
1997 1997 1997 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .18 .13 .12 .21
Net realized and unrealized gain on
investments 1.94 1.96 1.97 1.94
Net increase in net asset value from
operations 2.12 2.09 2.09 2.15
LESS: DIVIDENDS
Dividends from net investment income (.13) (.11) (.11) (.14)
Net asset value, end of period $11.99 $11.98 $11.98 $12.01
TOTAL RETURN
Total investment return based on net
asset value (c) 21.30% 20.99% 20.99% 21.59%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $19,711 $85,854 $18,411 $1,151
Ratio to average net assets:
Expenses, net of
waivers/reimbursements (d) 2.00% 2.55% 2.51% 1.55%
Expenses, before
waivers/reimbursements (d) 2.27% 2.82% 2.78% 1.82%
Net investment income, net of
waivers/reimbursements (d) 3.54% 2.97% 2.80% 4.21%
Portfolio turnover rate 12% 12% 12% 12%
Average commission rate (e) $.0499 $.0499 $.0499 $.0499
</TABLE>
(a) Commencement of operations.
(b) Based on average shares outstanding.
(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 investment return calculated for a period of less than one year
is not annualized.
(d) Annualized.
(e) For fiscal year beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
13
ALLIANCE REAL ESTATE INVESTMENT FUND
_______________________________________________________________________________
DIRECTORS
JOHN D. CARIFA, CHAIRMAN
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
HOWARD E. HASSLER (1)
JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
DONALD J. ROBINSON (1)
OFFICERS
DANIEL G. PINE, SENIOR VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
EDMUND P. BERGAN, SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
CUSTODIAN
THE BANK OF NEW YORK
48 Wall Street
New York, NY 10286
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-free 1-(800) 221-5672
(1) Member of the Audit Committee.
14
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
15
ALLIANCE REAL ESTATE INVESTMENT FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
REISR
