10-Q

As filed with the Securities and Exchange Commission on December 15, 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549 Form 10-Q Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934 For Quarter Ended October 31, 2003 Commission File Number 0-14851  INVESTORS REAL ESTATE TRUST
(Exact name of registrant as specified in its charter)

North Dakota (State or other jurisdiction of incorporation or organization)	45-0311232  (I.R.S. Employer Identification No.)
Post Office Box 1988 12 South Main Street Minot, ND  (Address of principal executive offices)	58702-1988  (Zip code)

 (701) 837-4738
(Registrant's telephone number, including area code)  N/A
 (Former name, former address, and former fiscal year, if changed since last report.)

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).                                   

Yes x      No o

      Registrant is a North Dakota Real Estate Investment Trust.  As of December 8, 2003, it had 40,677,880 shares of beneficial interest outstanding.

TABLE OF CONTENTS

Part I	Financial Information	Page
Item 1.	Financial Statements - Second Quarter - Fiscal 2004
	Consolidated Balance Sheets       October 31, 2003 (unaudited) and April 30, 2003	3
	Consolidated Statements of Operations (unaudited)        For the Three Months and Six Months ended October 31, 2003        and 2002	4
	Consolidated Statements of Cash Flows (unaudited)        For the Six Months ended October 31, 2003 and 2002	5
	Consolidated Statement of Shareholders’ Equity (unaudited)        For the Six Months ended October 31, 2003	6
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and       Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
Part II	Other Information
Item 1.	Legal Proceedings	37
Item 2.	Changes in Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities - None	37
Item 4.	Submission of Matters to a Vote of Security Holders	37
Item 5.	Other Information - None	37
Item 6.	Exhibits and Reports on Form 8-K	38
Signatures		38

PART I

Item 1.  Financial Statements - - Second Quarter  - Fiscal 2004

INVESTORS REAL ESTATE TRUST
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS

ASSETS	(unaudited) October 31, 2003	April 20, 2003
Real Estate Investments
Property Owned	999,792,737	919,780,802
Less Accumulated Depreciation	(86,912,556	(75,638,772
	912,880,181	844,142,030
Mortgage Loans Receivable	2,054,660	1,182,940
Total Real Estate Investments	914,934,841	845,324,970
OTHER ASSETS
Cash	21,843,527	15,564,714
Marketable Securities - Available for Sale	2,703,032	3,077,260
Rent Receivable, Net of Allowance	5,366,473	4,604,150
Real Estate Deposits	1,004,207	353,600
Prepaid Expenses and Other Assets	2,410,420	1,086,620
Tax, Insurance and Other Escrow	7,936,942	7,433,923
Deferred Charges and Leasing Costs	5,633,714	4,706,393
Property & Equipment, Net	2,272,652	2,088,074
Goodwill	1,440,817	1,440,817
TOTAL ASSETS	965,546,625	885,680,521
LIABILITIES
Accounts Payable and Accrued Expenses	16,231,954	16,638,506
Notes Payable	0	11,247,531
Mortgages Payable	583,159,585	539,397,202
Investment Certificates Issued	8,263,005	9,034,696
Total Liabilities	607,654,544	576,317,935
COMMITMENTS AND CONTINGENCIES (NOTE 7)
MINORITY INTEREST IN PARTNERSHIPS	15,579,794	14,224,628
MINORITY INTEREST OF UNIT HOLDERS IN OPERATING PARTNERSHIP        11,549,252 on 10/31/03        10,206,036 on 04/30/03	92,057,621	80,376,853
SHAREHOLDERS' EQUITY      Shares of Beneficial Interest         40,595,779 on 10/31/03         36,166,351 on 04/30/03	282,157,776	240,645,207
Accumulated Distributions in Excess of Net Income	(31,903,110	(25,884,102
Total Shareholders’ Equity	250,254,666	214,761,105
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	965,546,625	885,680,521

The accompanying notes are an integral part of these consolidated financial statements. 3 INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the Three Months and Six Months ended October 31, 2003 and 2002

		Three Months Ended  October 31						Six Months Ended  October 31
		2003			2002			2003			2002
REVENUE
Real Estate Rentals	$	29,095,171		$	25,742,486		$	57,253,031		$	50,110,157
Tenant Reimbursements		4,832,420			3,477,477			9,599,999			6,645,030
Discounts and Fees		55,505			59,136			112,884			122,970
Total Revenue		33,983,096			29,279,099			66,965,914			56,878,157
OPERATING EXPENSE
Interest		10,407,764			8,960,688			20,557,048			17,628,473
Depreciation		5,775,693			4,755,045			11,351,721			9,109,684
Utilities		2,300,003			1,883,244			4,256,128			3,493,047
Maintenance		3,524,623			2,966,086			7,017,802			5,670,644
Taxes		4,183,825			3,280,777			8,190,943			6,404,609
Insurance		724,319			522,946			1,396,962			1,016,422
Property Management Expenses		2,219,118			1,904,743			4,293,134			3,859,795
Property Management Related Party		200,629			120,291			329,644			245,440
Administrative Expense		586,672			452,031			1,215,864			898,163
Advisory and Trustee Services		29,375			28,456			56,975			57,056
Operating Expenses		383,065			245,267			531,393			489,848
Amortization		187,138			160,386			372,632			283,210
Amortization of Related Party Costs		19,353			7,142			33,463			12,587
Total Operating Expense		30,541,577			25,287,102			59,603,709			49,168,978
Operating Income		3,441,519			3,991,997			7,362,205			7,709,179
Non-Operating Income		92,867			239,723			185,473			38,480
Income Before Gain/Loss on      Properties and Minority Interest		3,534,386			4,231,720			7,547,678			8,247,659
Gain on Sale of Investment		0			52,774			0			315,342
Minority Interest Portion of Other      Partnerships’ Income		( 212,217	)		(180,291	)		( 469,229	)		(462,777	)
Minority Interest Portion of Operating     Partnership Income		(811,241	)		(1,002,392	)		(1,652,291	)		(2,019,414	)
Income From Continuing Operations		2,510,928			3,101,811			5,426,158			6,080,810
Discontinued Operations, net		104,124			(33,589	)		109,078			(84,587	)
Net Income	$	2,615,052		$	3,068,222		$	5,535,236		$	5,996,223
Net Income Per Share (basic and diluted)	$	.07		$	.10		$	.15		$	.19

The accompanying notes are an integral part of these consolidated financial statements. 4

CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
For the Six Months ended October 31, 2003 and 2002

		Six Months Ended October 31
		2003		2002
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME	$	5,535,236	$	5,996,223
Adjustments to reconcile net income to net cash         provided by operating activities
Depreciation and amortization		11,759,636		9,531,739
Minority interest portion of income		2,123,303		2,454,016
Gain on sale of investments and discontinued operations		(103,045)		(315,342)
Capitalized Interest Income		(66,417)		(1,295)
Interest reinvested in investment certificates		169,148		185,021
Changes in other assets and liabilities:
(Increase) decrease in real estate deposits		(1,672,530)		(2,590)
(Increase) decrease in other assets		(1,141,046)		1,981,603
(Increase) decrease in rent receivable		(762,323)		(846,583)
(Increase) decrease in tax, insurance and other escrow		(411,066)		(900,547)
(Increase) decrease in deferred charges		(1,159,309)		(1,462,194)
Increase (decrease) in accounts payable & accrued expenses		(1,541,905)		83,196
Net cash provided by operating activities	$	12,729,682	$	16,703,247
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities - available-for-sale	$	15,374,228	$	33,500,000
Proceeds from notes receivable		0		3,500,000
Proceeds from sale of property		50,847		1,003,004
Principal payments on mortgage loans receivable		37,669		372,631
Payments for acquisition and improvements of properties		(47,678,715)		(50,206,255)
Purchase of marketable securities - available-for-sale		(15,000,000)		(25,652,269)
Investment in mortgage loan receivable		(1,000,000)		(32,956)
Net cash used for investing activities	$	(48,215,971)	$	(37,515,845)

 continued The remainder of this page has been left blank intentionally. 5
CONSOLIDATED STATEMENT OF CASH FLOWS  - continued

		Six Months Ended October 31
		2003		2002
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares, net of issue costs	$	35,416,358	$	31,663,100
Proceeds from mortgages payable		54,887,261		16,300,000
Proceeds from notes payable		10,851		0
Repurchase of shares and minority interest units		(2,963)		(9,527)
Distributions paid to shareholders		(6,771,746)		(5,516,228)
Distributions paid to unit-holders of operating partnership		(3,042,856)		(2,734,138)
Distributions paid to other minority partners		(407,704)		(522,379)
Redemption of investment certificates		(940,838)		(10,962,534)
Principal payments on mortgages payable		(26,124,878)		(4,996,362)
Principal payments on notes payable		(11,258,383)		0
Net cash provided by financing activities		41,765,102		23,221,932
NET INCREASE (DECREASE) IN CASH		6,278,813		2,409,334
CASH AT BEGINNING OF PERIOD		15,564,714		12,333,426
CASH AT END OF PERIOD	$	21,843,527	$	14,742,760
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND    FINANCING ACTIVITIES FOR THE PERIOD
Distribution reinvestment plan	$	5,169,275	$	4,595,130
Proceeds from sale of properties deposited directly         with escrow agent		368,353		1,208,988
Properties acquired through the issuance of minority         interest units in the operating partnership		14,386,226		8,049,117
Interest reinvested directly in investment certificates		169,148		185,021
Operating Partnership units converted to shares		929,899		1,163,206
Real estate investment acquired through assumption of      mortgage loans payable and accrual of costs		15,000,000		27,803,654
Minority partner interest in IRET-BD		0		1,486,108
Minority partner interest in Golden Hills		1,293,640		0
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest paid on mortgages	$	19,856,018	$	17,007,664
Interest paid on investment certificates		197,494		568,508
Interest paid on margin account and other		299,279		0
	$	20,352,791	$	17,576,172

The accompanying notes are an integral part of these consolidated financial statements. 6
Consolidated Statement of Shareholders’ Equity
For the Six Months ended October 31, 2003 (unaudited)

	NUMBER OF SHARES		BENEFICIAL INTEREST		DISTRIBUTIONS IN EXCESS OF NET INCOME		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		TOTAL SHAREHOLDERS’ EQUITY
Balance May 1, 2003	36,166,351	$	240,645,207	$	(25,884,102)	$	--	$	214,761,105
Comprehensive Income
Net income					5,535,236				5,535,236
Totalcomprehensive income								$	5,535,236
Distributions					(11,554,244)				(11,554,244)
Distribution reinvestment plan	548,810		5,169,275						5,169,275
Sale of shares	3,880,911		36,346,257						36,346,257
Fractional shares repurchased	(293)		(2,963)		--		--		(2,963)
Balance October 31, 2003	40,595,779	$	282,157,776	$	(31,903,110)	$	--	$	250,254,666

 The accompanying notes are an integral part of these consolidated financial statements. 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the Six Months ended October 31, 2003 and 2002 (unaudited)

Note 1  - Organization
      Investors Real Estate Trust ("IRET") is a self-advised real estate investment trust engaged in acquiring, owning and leasing multi-family and commercial real estate.  IRET has elected to be taxed as a Real Estate Investment Trust ("REIT") under Sections 856-860 of the Internal Revenue Code of 1986, as amended.  REITs are subject to a number of organizational and operational requirements, including a requirement to distribute 90% of ordinary taxable income to shareholders, and, generally, are not subject to federal income tax on net income.  IRET’s residential apartment communities and commercial properties are located mainly in the states of North Dakota and Minnesota, but also in the states of Colorado, Idaho, Iowa, Georgia, Kansas, Montana, Nebraska, South Dakota, Texas, Michigan, Washington and Wisconsin.  IRET conducts a majority of its business activities through its operating partnership, IRET Properties, a North Dakota Limited Partnership (the "Operating Partnership"), as well as through a number of other subsidiary entities.

       All references to IRET or the Company refer to Investors Real Estate Trust and its consolidated subsidiaries.

Note 2 - Basis of Presentation and Significant Accounting Policies

Basis of Presentation
      The accompanying consolidated financial statements include the accounts of IRET and all its subsidiaries in which it maintains a controlling interest.

      The accompanying consolidated financial statements include the accounts of IRET and its general partnership interest in the Operating Partnership as of October 31, 2003, and April 30, 2003.  The Company’s interest in the Operating Partnership was 77.9% and 78.0%, respectively, as of October 31, 2003, and April 30, 2003.  Such interest has been calculated as the percentage of outstanding common shares of beneficial interest of IRET divided by the total outstanding common shares of beneficial interest and Operating Partnership units ("UPREIT Units") outstanding.  The remaining ownership percentage is reflected as Minority Interest of Unit Holders in Operating Partnership in these consolidated financial statements.  The limited partners have exchange rights that enable them to cause the Operating Partnership to exchange their UPREIT Units for cash, or, at the option of the Company, for shares of beneficial interest, on a one-for-one basis.  The exchange may, generally, be exercised by the limited partners at any time after the first anniversary of the date of the acquisition of the UPREIT Units (provided, however, that not more than two exchanges may occur during each calendar year, and each limited partner may not exercise the exchange for less than 1,000 Units, or, if such limited partner holds less than 1,000 Units, for all of the Units held by such limited partner).  Some limited partners have contractually agreed to a holding period of greater than one year.

8

 Note 2 - continued

       The consolidated financial statements also include the ownership by the Operating Partnership of:  (1) a 60.31% ownership interest in Minnesota Medical Investors LLC, SMB Operating Company LLC, and SMB MM LLC, collectively known as Southdale Medical Center; (2) a 51% ownership interest in Mendota Properties, LLC, a Minnesota limited liability company, the holder of all of the issued and outstanding membership interests in Mendota Office Holding LLC, a Minnesota limited liability company, and Mendota Office Three and Four, LLC, a Minnesota limited liability company, which are the owners of five multi-tenant commercial real estate properties in Dakota County, Minnesota, (3) a 51% ownership interest in IRET-BD, LLC, a Minnesota limited liability company, the holder of all of the issued and outstanding membership interests in IRET - DMS, LLC and IRET - Brenwood, LLC, which are the owners of a warehouse facility in Des Moines, Iowa and a four-building office complex in Minnetonka, Minnesota, respectively, and (4) a 90% ownership in IRET-Golden Jack, LLC, a Delaware limited liability company, which owns a 190,758 square foot multi-tenant commercial office building in Golden Valley, MN, known as Golden Hills Office Center.   These companies are consolidated into IRET's financial statement with minority interests reflecting the minority partners’ share of ownership and net income. 

    All material inter-company transactions and balances have been eliminated in the consolidated financial statements.

Unaudited Interim Financial Statements
      The interim consolidated financial statements of IRET have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission ("SEC").  Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America are omitted.  The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.  In the opinion of management, all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods have been included. 

      The current period's results of operations are not necessarily indicative of results, which ultimately may be achieved for the year.  The interim consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2003, filed with the SEC.

 9

Note 2 - continued

 Reclassifications
      Certain reclassifications have been made to the consolidated financial statements for the six months ended October 31, 2002, to conform to the classifications used in the six months ended October 31, 2003.  The reclassifications had no effect on net income, retained earnings, or cash flows as previously reported.

 Recent Accounting Pronouncements
      In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others".  FIN No. 45 clarifies the requirements for a guarantor’s accounting for and disclosure of certain guarantees issued and outstanding.  The initial recognition and the initial measurement provisions of FIN No. 45 are applicable to guarantees issued or modified after December 31, 2002.  The disclosure requirements of FIN No. 45 are effective for financial statements of interim or annual periods after December 15, 2002.  The adoption of FIN No. 45 did not have a significant impact on the Company’s financial statements.

      In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51".  FIN No. 46 explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity.  This Interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved.  FIN No. 46 is effective immediately for variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date.  In October, 2003, the FASB deferred the effective date of FIN No. 46 to the first interim or annual period ending after December 15, 2003, for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.  Management believes the adoption of FIN No. 46 will not have a significant impact on the Company's financial statements.

      In May, 2003, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity".  SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity.  SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.  The Company adopted SFAS No. 150 on August 1, 2003 and the adoption did not have a significant impact on the Company’s financial statements.

Note 3 - Goodwill
      There was no change in the carrying amount of goodwill for the six months ended October 31, 2003.  Goodwill is tested on an annual basis the first day of each fiscal year, and any impairment adjustments are reflected at that time.  SFAS No. 142 has no significant impact on IRET’s net income or earnings per share when comparing the six months ended October 31, 2003, to October 31, 2002.

10

Note 4 - Earnings Per Share
      Earnings per share  ("EPS") is computed as net income available to common shareholders divided by the weighted average number of common shares of beneficial interest outstanding for the period.  The Company has no outstanding warrants, convertible stock, or other contractual obligations requiring issuance of additional common shares of beneficial interest that would result in a dilution of earnings. 

      The exchange of outstanding UPREIT Units for common shares of beneficial interest would have no effect on EPS as unit-holders and shareholders presently share equally in the net income of the Operating Partnership. 

      The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share for the three months and six months ended October 31, 2003, and 2002, as required by SFAS No. 128, "Earnings per Share."

		Three Months Ended October 31				Six Months Ended October 31
		2003		2002		2003		2002
NUMERATOR         Income from continuing operations	$	2,510,928	$	3,101,811	$	5,426,158	$	6,080,810
Gain (Loss) from discontinued Operations		104,124		(33,589)		109,078		(84,587)
Net Income	$	2,615,052	$	3,068,222	$	5,535,236	$	5,996,223
DENOMINATOR         Weighted average shares		38,326,708		31,885,130		37,342,362		31,141,311
Earnings per share from continuing operations	$	.07	$	.10	$	.15	$	.19
Earnings per share from discontinued operations		--		--		--		--
Net income per share (basic and diluted)	$	.07	$	.10	$	.15	$	.19

Note 5 - Shareholders' Equity
      During the three months ended October 31, 2003, we issued 3,758,793 shares of beneficial interest at $10.00 per share, for gross proceeds of $35,416,358.  Offering costs and selling commissions were approximately $2,096,358.  IRET plans to use the net proceeds from the offering for general business purposes, including the acquisition, development, renovation, expansion or improvement of income-producing properties.  We also issued 272,035 shares on July 1, 2003, and 276,775 shares on October 1, 2003, pursuant to our distribution reinvestment plan, for total proceeds of $5,169,275.  In addition, as of October 31, 2003, 114,439 UPREIT units have been converted to shares during fiscal year 2004, with a total value of $929,899 included in shareholders' equity.

11

Note 6 - Segment Reporting
      IRET is engaged in acquiring, owning and leasing multi-family residential and commercial real estate.  Each property is considered a separate operating segment.  Each segment on a stand-alone basis is less than 10% of the revenues, profit or loss, and assets of the combined reported operating segments, and meets the majority of the aggregation criteria under SFAS 131.  IRET’s operating segments are aggregated and classified as multi-family residential and commercial properties for purposes of producing reportable segments.  The revenues, profit (loss) and assets for both of these reportable segments are summarized as follows as of and for the six and three-month periods ended October 31, 2003 and 2002, along with reconciliations to the consolidated financial statements:

Three Months Ended October 31, 2003

		Commercial		Residential		Total
Real Estate Revenue	$	17,889,706	$	16,037,885	$	33,927,591
Expenses
Mortgage Interest		5,516,029		4,521,329		10,037,358
Depreciation		2,949,003		2,787,762		5,736,765
Utilities and Maintenance		2,732,781		3,091,845		5,824,626
Real Estate Taxes		2,402,069		1,781,756		4,183,825
Insurance		194,561		529,758		724,319
Property Management		717,792		1,701,955		2,419,747
Total Segment Expense		14,512,235		14,414,405		28,926,640
Segment Operating Profit		3,377,471	$	1,623,480	$	5,000,951
Reconciliation to consolidated operations:
Interest Discounts and Fee Revenue					$	148,372
Other Interest Expense						(370,406)
Depreciation - Furniture and Fixtures						(38,928)
Administrative, Advisory and Trustee Fees						(616,047)
Operating Expenses						(383,065)
Amortization						(206,491)
Income Before Gain/Loss on Properties and Minority Interest					$	3,534,386

The remainder of this page has been intentionally left blank. 12

Note 6 - continued

Three Months Ended October 31, 2002

		Commercial		Residential		Total
Real Estate Revenue	$	13,960,169	$	15,259,794	$	29,219,963
Expenses
Mortgage Interest		4,389,507		4,317,019		8,706,526
Depreciation		2,182,828		2,550,331		4,733,159
Utilities and Maintenance		1,915,832		2,933,498		4,849,330
Real Estate Taxes		1,582,371		1,698,406		3,280,777
Insurance		131,641		391,305		522,946
Property Management		491,961		1,533,073		2,025,034
Total Segment Expense		10,694,140		13,423,632		24,117,772
Segment Operating Profit	$	3,266,029	$	1,836,162	$	5,102,191
Reconciliation to consolidated operations:
Interest Discounts and Fee Revenue					$	298,859
Other Interest Expense						(254,162)
Depreciation - Furniture and Fixtures						(21,886)
Administrative, Advisory and Trustee Fees						(480,487)
Operating Expenses						(245,267)
Amortization						(167,528
Income Before Gain/Loss on Properties and Minority Interest					$	4,231,720

Six Months Ended October 31, 2003

		Commercial		Residential		Total
Real Estate Revenue	$	36,040,106	$	30,812,924	$	66,853,030
Expenses
Mortgage Interest		10,978,618		8,924,771		19,903,389
Depreciation		5,925,139		5,349,945		11,275,084
Utilities and Maintenance		5,286,394		5,987,536		11,273,930
Real Estate Taxes		4,749,827		3,441,116		8,190,943
Insurance		373,357		1,023,605		1,396,962
Property Management		1,353,143		3,269,635		4,622,778
Total Segment Expense		28,666,478		27,996,608		56,663,086
Segment Operating Profit	$	7,373,628	$	2,816,316	$	10,189,944
Reconciliation to consolidated operations:
Interest Discounts and Fee Revenue					$	298,357
Other Interest Expense						(653,659)
Depreciation - Furniture and Fixtures						(76,637)
Administrative, Advisory and Trustee Fees						(1,272,839)
Operating Expenses						(531,393)
Amortization						(406,095)
Income Before Gain/Loss on Properties and Minority Interest					$	7,547,678

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Note 6 - continued

Six Months Ended October 31, 2002

		Commercial		Residential		Total
Real Estate Revenue	$	26,658,110	$	30,097,077	$	56,755,187
Expenses
Mortgage Interest		8,374,796		8,670,956		17,045,752
Depreciation		4,075,677		4,985,713		9,061,390
Utilities and Maintenance		3,485,074		5,678,617		9,163,691
Real Estate Taxes		3,024,776		3,379,833		6,404,609
Insurance		245,000		771,422		1,016,422
Property Management		1,127,979		2,977,256		4,105,235
Total Segment Expense		20,333,302		26,463,797		46,797,099
Segment Operating Profit	$	6,324,808	$	3,633,280	$	9,958,088
Reconciliation to consolidated operations:
Interest Discounts and Fee Revenue					$	661,450
Other Interest Expense						(582,721)
Depreciation - Furniture and Fixtures						(48,294)
Administrative, Advisory and Trustee Fees						(955,219)
Operating Expenses						(489,848)
Amortization						(295,797)
Income Before Gain/Loss on Properties and Minority Interest					$	8,247,659

Segment Assets and Accumulated Depreciation

October 31, 2003

	Commercial	Residential	Total
Segment Assets
Property Owned	$561,306,322	$438,486,415	$999,792,737
Less Accumulated Depreciation	(31,011,498)	(55,901,058)	(86,912,556)
Total Property Owned	$530,294,824	$  382,585,357	$912,880,181

April 30, 2003

	Commercial	Residential	Total
Segment Assets
Property Owned	$520,864,186	$398,916,616	$919,780,802
Less Accumulated Depreciation	(25,086,219)	(50,552,553)	(75,638,772)
Total Property Owned	$495,777,967	$  348,364,063	$844,142,030

 

Note 7 - Commitments and Contingencies

      Litigation - IRET is involved in various lawsuits arising in the normal course of business.  Management believes that such matters will not have a material effect on the Company’s financial condition or results of operations.

14

      Insurance - IRET carries insurance coverage on its properties of types and in amounts that the Company believes are customarily obtained by owners of similar properties.

      Purchase Options - The Company has granted options to purchase certain Company properties to various parties.  The options grant the parties the right to purchase these properties at the greater of their appraised value or an annual compounded increase of 2% to 2.5% of the initial cost of the property to the Company.  The total property cost of the eighteen properties subject to purchase options is $67,756,342.  The cost to the option holder to purchase a property will be determined at the time the option is exercised.

      Real Estate Expansions and Development; Tenant Improvements - - IRET is financing a $5.1 million addition to its existing Edgewood Vista facility in Virginia, Minnesota.  IRET has paid approximately $1.8 million in respect of this addition as of October 31, 2003.  IRET is committed to loan up to $3.6 million to fund construction of the Nebraska Orthopedic Facility in Omaha, Nebraska.  IRET had outstanding contractual construction commitments of $7.9 million relating to property expansions, development and tenant improvements in progress as of October 31, 2003 (including the Edgewood Vista expansion and the Nebraska Orthopedic Facility specified above).

      Environmental Matters - Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around or under property.  IRET has no knowledge of any violation of environmental laws, ordinances or regulations at any of its properties.

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Note 8 - Discontinued Operations

      Below is a summary of the results of operations of the properties disposed of through their respective disposition dates:

		Three Months Ended  October 31				Six Months Ended  October 31
		2003		2002		2003		2002
REVENUE
Real Estate Rentals	$	2,032	$	292,539	$	11,032	$	551,413
Tenant Reimbursements		0		337		0		4,101
Discounts and Fees		--		78		--		184
Total Revenue		2,032		292,954		11,032		555,698
OPERATING EXPENSE
Interest		129		127,347		1,270		255,624
Depreciation		455		63,129		1,820		126,258
Utilities & Maintenance		0		84,359		0		163,703
Taxes		0		33,417		0		66,621
Insurance		31		8,530		126		17,061
Property Management Expenses		0		20,595		0		39,193
Total Operating Expense		615		337,377		3,216		668,460
Income Before Gain/Loss on      Properties and Minority Interest	$	1,417		(44,423)		7,816		(112,762)
Minority Interest Portion of      Operating Partnership Loss		(338)		10,8 34		(1,783)		28,175
Gain (Loss) from Operations		1,079		(33,589)		6,033		(84,587)
Gain (Loss) on Sale of Discontinued Operations		103,045		0		103,045		0
Discontinued Operations, Net	$	104,124	$	(33,589)	$	109,078	$	(84,587)

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Note 9 - Acquisitions and Dispositions
      During the three months ended October 31, 2003, IRET acquired two commercial properties and one apartment complex.  For the six months ended October 31, 2003, IRET has acquired in total four commercial properties and four apartment complexes, and has sold one commercial property:

 Acquisitions

		Acquisition Cost
Commercial Property
30,464 sq. ft. - Benton Business Park - Sauk Rapids, MN	$	1,610,730
24,000 sq. ft. - West River Business Park - Waite Park, MN		1,509,276
213,271 sq. ft. - Buffalo Mall - Jamestown, ND		4,275,150
190,758 sq. ft. - Golden Hills Office Center - Golden Valley, MN		27,500,000
		34,895,156
Apartments
240 units - Connelly Estates - Burnsville, MN		13,855,790
115 units - Remada Court Apartments - Eagan, MN		6,602,890
151 units - Winchester/Village Townhouses - Rochester, MN		8,903,810
160 units - Brookfield Village - Topeka, KS		7,252,607
		36,615,097
Total Property Acquisitions	$	71,510,253

      The four commercial properties were acquired in exchange for the issuance of 85,472 UPREIT Units with an agreed value of $580,437, plus $34,314,719 of cash and cash equivalents.

     The four apartment complexes were acquired in exchange for the issuance of 1,372,183 UPREIT Units with an agreed value of $13,535,779 plus $23,079,318 cash and cash equivalents.

Disposition

      On August 22, 2003, IRET sold a 6,225 square foot commercial building, known as Interstate Bakery, in St. Paul, MN.  The sales price was $420,000, with an approximate gain on sale of $103,000.

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements included in this report, as well as the Company’s audited financial statements for the year ended April 30, 2003, which financial statements were attached to the Company’s Form 10-K filed with the Securities and Exchange Commission.

       Forward Looking Statements - Certain matters included in this discussion are forward looking statements within the meaning of the federal securities laws.  Although we believe that the expectations reflected in the following statements are based on reasonable assumptions, we can give no assurance that the expectations expressed will actually be achieved.  Many factors may cause actual results to differ materially from our current expectations, including general economic conditions, local real estate conditions, the general level of interest rates and the availability of financing, timely completion and lease-up of properties under construction and various other economic risks inherent in the business of owning and operating investment real estate. 

       Critical Accounting Policies - In preparing the consolidated financial statements management has made estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements. The summary should be read in conjunction with the more complete discussion of the Company's accounting policies included in Note 2 to the consolidated financial statements in the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2003, on file with the Securities and Exchange Commission.

       Real Estate - Real estate is carried at cost, net of accumulated depreciation and amortization. As of October 31, 2003, the Company's carrying amount of its real estate, net of accumulated depreciation, is $913 million. Maintenance and repairs are charged to operations as incurred. Depreciation requires an estimate by management of the useful life of each property as well as an allocation of the costs associated with a property to its various components. If the Company does not allocate these costs appropriately or incorrectly estimates the useful lives of its real estate, depreciation expense may be misstated.

       Upon acquisitions of real estate, the Company assesses the fair value of acquired tangible assets (including land, buildings, and tenant improvements) and considers whether there were significant intangible assets acquired (for example, above- and below-market leases, the value of acquired in-place leases, and tenant relationships, in accordance with SFAS No. 141) and acquired liabilities, and allocates the purchase price based on these assessments. The Company assesses fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. The Company's properties are

18

reviewed for impairment if events or circumstances change indicating that the carrying amount of the assets may not be recoverable.  If the Company incorrectly estimates the values at acquisition or the undiscounted cash flows, initial allocations of purchase price and future impairment charges may be different. The impact of the Company's estimates in connection with acquisitions and future impairment analysis could be material to the Company's financial statements.

       Mortgage Loans Receivable - The Company evaluates the collectibility of both interest and principal of each of its mortgage loans receivable ($2 million as of October 31, 2003) if circumstances warrant to determine whether it is impaired. If the Company fails to identify that the borrower is unable to perform, the Company's bad debt expense may be different.

       Allowance for Doubtful Accounts - The Company periodically evaluates the collectibility of amounts due from tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under the lease agreement. The Company also maintains an allowance for receivables arising from the straight-lining of rents. This receivable arises from earnings recognized in excess of amounts currently due under the lease agreements. Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates. If estimates differ from actual results this would impact reported results.

       Revenue Recognition - The Company has the following revenue sources and revenue recognition policies:

• Base Rents - income arising from tenant leases. These rents are recognized over the non-cancelable term of the related leases on a straight-line basis, which includes the effects of rent steps and free rent abatements under the leases.
  
• Percentage Rents - income arising from retail tenant leases which are contingent upon the sales of the tenant exceeding a defined threshold. These rents are recognized in accordance with SAB 101, which states that this income is to be recognized on after the contingency has been removed (i.e. sales thresholds have been achieved).
  
• Expense Reimbursement Income - income arising from tenant leases, which provide for the recovery of all or a portion of the operating expenses and real estate taxes of the respective property. This income is accrued in the same periods as the expenses are incurred.

       Before the Company recognizes revenue, it assesses, among other things, its collectibility. If the Company incorrectly determines the collectibility of its revenue, its net income and assets could be overstated.

       Income Taxes - The Company operates in a manner intended to enable it to continue to qualify as a Real Estate Investment Trust ("REIT") under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as a distribution to its shareholders each year and which meets certain

19

other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. The Company intends to distribute to its shareholders 100% of its taxable income. Therefore, no provision for Federal income taxes is required. If the Company fails to distribute the required amount of income to its shareholders, it would fail to qualify as a REIT and substantial adverse tax consequences may result.

Results of Operations
For the Three Months and Six Months ended October 31, 2003 and 2002

       Throughout this section, we have provided certain information on a "stabilized property" basis.  Information provided on a stabilized property basis is provided only for those properties owned for the entirety of both periods being compared, and includes properties, which were redeveloped or expanded during the periods being compared.  Properties purchased or sold, and properties under development during the periods being compared are excluded from our stabilized property analysis.

Revenues
Total IRET revenues for the second quarter of Fiscal 2004 ended October 31, 2003, were $33,983,096 compared to $29,279,099 received in the second quarter of the prior fiscal year ended October 31, 2002.  This is an increase of $4,703,997, or 16%.  Total revenues for the first six months of Fiscal 2004 ended October 31, 2003, were $66,965,914 compared to $56,878,157 for the same period of the prior year, an increase of $10,087,757, or 18%.  These increases in revenue resulted primarily from the additional investments in real estate made by IRET as well as other factors shown by the following analysis for the first two quarters of Fiscal 2004:

		Increase in Total Revenue Three months ended October 31, 2003		Increase in Total Revenue Six months ended  October 31, 2003
Rent from 64 properties acquired in Fiscal 2003 in excess      of that received in 2003 from the same 64 properties	$	4,241,177	$	9,435,858
Rent from eight properties acquired in Fiscal 2004		1,142,222		1,176,481
Decrease in rental receipts and accruals on existing      properties due to changes in scheduled rent and lease renewals/termination		(675),771		(514,496)
Decrease in ancillary income		(3,631)		(10,086)
Net increase in total revenue	$	4,703,997	$	10,0 87,757

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Segment Expenses and Operating Profit
The following table shows the changes in revenues, operating expenses, interest, and depreciation by reportable operating segment for the six months and three months ended October 31, 2003, as compared to the six months and three months ended October 31, 2002:

 Three Months Ended October 31

Commercial:		2003		2002		Change	%
Real Estate Revenue	$	17,889,706	$	13,960,169	$	3,929,537	28.1
Expenses
Mortgage Interest		5,516,029		4,389,507		1,126,522	25.7
Depreciation		2,949,003		2,182,828		766,175	35.1
Utilities and Maintenance		2,732,781		1,915,832		816,949	42.6
Real Estate Taxes		2,402,069		1,582,371		819,698	51.8
Insurance		194,561		131,641		62,920	47.8
Property Management		717,792		491,961		225,831	45.9
Total Segment Expense		14,512,235		10,694,140		3,818,095	35.7
Segment Operating Profit	$	3,377,471	$	3,266,029	$	111,442	3.4

Residential:		2003		2002		Change		%
Real Estate Revenue	$	16,037,885	$	15,259,794	$	778,091		5.1
Expenses
Mortgage Interest		4,521,329		4,317,019		204,310		4.7
Depreciation		2,787,762		2,550,331		237,431		9.3
Utilities and Maintenance		3,091,845		2,933,498		158,347		5.4
Real Estate Taxes		1,781,756		1,698,406		83,350		4.9
Insurance		529,758		391,305		138,453		35.4
Property Management		1,701,955		1,533,073		168,882		11.0
Total Segment Expense		14,414,405		13,423,632		990,773		7.4
Segment Operating Profit	$	1,623,480	$	1,836,162	$	(212,682	)	(11.6	)

 Six Months Ended October 31

Commercial:		2003		2002		Change	%
Real Estate Revenue	$	36,040,106	$	26,658,110	$	9,381,996	35.2
Expenses
Mortgage Interest		10,978,618		8,374,796		2,603,822	31.1
Depreciation		5,925,139		4,075,677		1,849,462	45.4
Utilities and Maintenance		5,286,394		3,485,074		1,801,320	51.7
Real Estate Taxes		4,749,827		3,024,776		1,725,051	57.0
Insurance		373,357		245,000		128,357	52.4
Property Management		1,353,143		1,127,979		225,164	20.0
Total Segment Expense		28,666,478		20,333,302		8,333,176	41.0
Segment Operating Profit	$	7,373,628	$	6,324,808	$	1,048,820	16.6

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 Segment Expenses and Operating Profit - continued

 Six Months Ended October 31

Residential:		2003		2002		Change		%
Real Estate Revenue	$	30,812,924	$	30,097,077	$	715,847		2.4
Expenses
Mortgage Interest		8,924,771		8,670,956		253,815		2.9
Depreciation		5,349,945		4,985,713		364,232		7.3
Utilities and Maintenance		5,987,536		5,678,617		308,919		5.4
Real Estate Taxes		3,441,116		3,379,833		61,283		1.8
Insurance		1,023,605		771,422		252,183		32.7
Property Management		3,269,635		2,977,256		292,379		9.8
Total Segment Expense		27,996,608		26,463,797		1,532,811		5.8
Segment Operating Profit	$	2,816,316	$	3,633,280	$	(816,964	)	(22.5	)

Factors Impacting Net Income
      During the first three months and six months of Fiscal 2004 ended October 31, 2003, the same factors that combined to reduce our net income per share during the previous fiscal year continue to limit the growth of our total revenue and ultimately negatively impacted our net income per share:

• Increased Economic Vacancy & Concessions - During the second quarter of Fiscal 2004, vacancy levels continued to increase throughout our entire portfolio. Our stabilized apartment vacancy increased to 8.2% from 7.6% for the three months ended October 31, 2003 and 2002, respectively.  Likewise, vacancy levels at our stabilized commercial properties increased to 5.6% from 2.9% for the three months ended October 31, 2003 and 2002, respectively.  Our stabilized apartment vacancy increased to 8.9% from 8.0% for the six months ended October 31, 2003 and 2002, respectively.  Likewise, vacancy levels at our stabilized commercial properties increased to 5.5% from 2.9% for the six months ended October 31, 2003 and 2002, respectively.

Our residential vacancy increase on stabilized properties does not reflect the concessions, such as free rent, that have been granted to attract new tenants to our residential properties.  Our stabilized apartment concessions were $651,439 and $278,393 for the three months ended October 31, 2003 and 2002, respectively, an increase of 134%.  For the six months ended October 31, 2003 and 2002, respectively, our concessions were $1,208,264 compared to $589,939 for the same period in the prior years, an increase of 105%.

Our commercial vacancy levels are primarily due to our inability to either renew existing leases or to re-lease space being vacated by tenants at the expiration of their lease.  As we previously reported to our shareholders, despite some positive economic developments, we have yet to see an increase in demand for apartments or for commercial space.  For the balance of fiscal 2004, we consider that demand for both commercial space and apartments will be further reduced by a general decline in overall rental activity due to winter.  Our expectation is that demand in IRET’s markets for both apartments and

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commercial space will continue to remain weak through the balance of fiscal 2004.  As a result, we do not expect our occupancy levels to improve or a reduction in the level of rent concessions during our fiscal 2004, which ends April 30, 2004.

• Increased Maintenance Expense - The maintenance expense category increased by $558,537, or 18.8% for the three months ended October 31, 2003, and $1,347,158, or 23.8%, for the six months ended October 31, 2003, as compared to the corresponding periods of Fiscal 2003.  Of the increased maintenance costs for the three months ended October 31, 2003, $669,693, or 119.9%, is attributable to the addition of new real estate.   Of this amount $413,211, or 61.7%, is recoverable from commercial tenants.  Existing real estate assets saw a decrease in maintenance costs of $111,156, or 19.9%.  Of the increased maintenance costs for the six months ended October 31, 2003, $1,196,722, or 88.8%, is attributable to the addition of new real estate.   Of  this amount, $874,352, or 73.1%, is recoverable from commercial tenants.  The remaining $150,436, or 11.2%, is due to increased costs for maintenance on existing real estate assets.
  
• Increased Utility Expense - The utility expense category increased by $416,759, or 22.1%, for the three months ended October 31, 2003, and $763,081, or 21.8%, for the six months ended October 31, 2003, as compared to the corresponding period of Fiscal 2003.  Of the increased utility costs for the three months ended October 31, 2003, $347,237, or 83.3%, is attributable to the addition of new real estate, while $69,522, or 16.7%, is due to increased costs for utilities on existing real estate assets.  Our Park Meadows and West Stonehill properties in St. Cloud, Minnesota, account for, respectively, $22,210, or 32%, and $31,145, or 45%, of the three months ended October 31, 2003, increased costs for utilities on existing real estate assets, because of significant water, sewer and garbage disposal rate increases imposed by the City of Cloud.  Of the increased utility costs for the six months ended October 31, 2003, $589,640, or 77.3%, is attributable to the addition of new real estate, while $173,441, or 22.7%, is due to increased costs for utilities on existing real estate assets.
  
• Increased Administrative and Operating Expense - Administrative and operating expenses increased by $272,439, or 28.1%, for the three months ended October 31, 2003, and $359,246, or 20.6%, for the six months ended October 31, 2003, as compared to the corresponding period of Fiscal 2003, primarily because of increased salary and other expense resulting from our merger with the T. F. James Company located in Minneapolis, Minnesota.  As a result of the merger, we opened an office in Minneapolis and acquired six additional employees.  In addition, the increase includes costs related to the 3.7 million shares issued during the three months ended October 31, 2003, and the Annual Meeting of the Shareholders in September, 2003.
  
• Increased Insurance Premiums - Insurance expense increased by $201,373, or 38.5%, for the three months ended October 31, 2003, and $380,540, or 37.4%, for the six months ended October 31, 2003, as compared to the corresponding period of Fiscal 2003.  Of the increased insurance costs for the three months ended October 31, 2003, $85,594, or 42.5%, is attributable to the addition of new real estate, while $115,779, or 57.5%, is due to increased premium costs for coverage on existing real estate assets. Of the increased

23

insurance costs for the six months ended October 31, 2003, $150,809, or 39.6%, is attributable to the addition of new real estate while $229,731, or 60.4%, is due to increased costs for insurance on existing real estate assets.  Under the terms of most of our commercial leases, the full costs of insurance are paid by the tenant as additional rent. For our other real estate properties, any increase in our insurance costs must be collected from tenants in the form of a general rent increase.  While we continue to implement portfolio wide rent increases wherever possible, the current economic conditions and increased vacancy levels have prevented us from raising rents in the amount necessary to fully recover our increased insurance costs. We expect our insurance expense to continue at its current level for the remaining six months of this fiscal year as well as for the next fiscal year.

• Increased Mortgage Interest Expense - Our mortgage debt increased $43,762,383, or 8.1%, to $583,159,585 as of October 31, 2003, as compared to April 30, 2003.  Our mortgage interest expense increased by $1,003,606, or 21.2%, for the three months ended October 31, 2003, and $2,857,637, or 16.8%, for the six months ended October 31, 2003.  Of the increased mortgage interest expense for the three months ended October 31, 2003, $1,609,992 is attributable to the addition of new real estate, while mortgage interest expenses on existing real estate assets declined by $279,160.  Of the increased mortgage interest expense for the six months ended October 31, 2003, $3,340,783 is attributable to the addition of new real estate, while mortgage interest expenses on existing real estate assets declined by $483,146.  Our overall weighted average interest rate on all outstanding mortgage debt is 7.44% as of October 31, 2003.
  
• Increased Minority Partnership Interests - In addition to the factors discussed above that have negatively impacted our earnings despite an overall increase in gross revenue, the increase in the number of limited partnership units (“UPREIT Units”) issued by the Operating Partnership has also impacted our net income.  Even though our real estate revenue increased by $4,707,628, or 16.1%, for the quarter ending October 31, 2003, and increased $10,097,843, or 17.8%, for the six months ending October 31, 2003, our net income decreased $453,170, or 14.8%, and $460,987, or 7.7%, respectively.  During the six months ending October 31, 2003, outstanding UPREIT Units in the Operating Partnership increased by 1,343,216 units. Under the terms of the Operating Partnership, each limited partner is entitled to an equal allocation of net income or net loss. We issue UPREIT Units in exchange for the contribution of an interest in real estate.  If capital gain income and the limited partnership ownership interest reflected as minority interests on the financial statements are excluded, the increase in net income is more closely related to the increase in revenue, as shown in the following chart.

For the Three Months Ended October 31		2003		2002	% Change
Net Income	$	2,615,052	$	3,068,222	(14.8%)
Add back portion allocated to:
Minority interests - other partnerships		12,217		180,291
Minority interests - operating partnerships		811,241		1,002,392
Add back Discontinued Operations		(104,124)		33,589
Subtract capital gain income		0		(52,774)	--
Income before gain (loss) on properties,    minority interest and discontinued operations	$	3,534,386	$	4,231,720	(16.5%)

24

For the Six Months Ended October 31		2003		2002	% Change
Net Income	$	5,535,236	$	5,996,223	(7.7%)
Add back portion allocated to:
Minority interests - other partnerships		469,229		462,777
Minority interests - operating partnerships		1,652,291		2,019,414
Add back Discontinued Operations		(109,078)		84,587
Subtract capital gain income		0		(315,342)	--
Income before gain (loss) on properties,    minority interest and discontinued operations	$	7,547,678	$	8,247,659	(8.5%)

Results on a "Stabilized Property" Basis
The following table presents results on a stabilized property basis for the three months and six months ended October 31, 2003, for multi-family residential and commercial properties. Property Segment Operating Profit should not be considered as an alternative to operating net income as determined in accordance with GAAP as a measure of IRET's performance.

For the Three Months Ended October 31		2003		2002	% Change
Multi-Family Residential
Real Estate Revenue	$	14,860,130	$	15,093,512	(1.5%	)
Expenses:
Utilities & Maintenance		2,865,791		2,897,446	(1.1%	)
Property Management		1,565,617		1,883,643	(16.9%	)
Real Estate Taxes		1,670,456		1,675,708	(0.3%	)
Insurance		463,586		365,049	27.0%
Mortgage Interest		4,333,696		4,310,997	0.5%
Total Expenses		10,899,146		11,132,843	(2.1%	)
Property Segment Operating Profit	$	3,960,984	$	3,960,669	0.0%

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Results on a "Stabilized Property" Basis - continued

For the Three Months Ended October 31		2003			2002		% Change
Commercial
Real Estate Revenue	$	12,126,300		$	12,380,969		(2.1%	)
Expenses:
Utilities & Maintenance		1,685,353			1,678,639		0.4%
Property Management		463,863			436,925		6.2%
Real Estate Taxes		1,436,462			1,405,861		2.2%
Insurance		124,954			109,848		13.8%
Mortgage Interest		3,912,469			4,031,735		(0.5%	)
Total Expenses	$	7,623,101		$	7,663,008		(2.1%	)
Property Segment Operating Profit		4,503,199			4,717,961		(4.6%	)
Total Stabilized Segment Operating Profit		8,464,183			8,678,630
Reconciliation to Segment Operating Profit
Real Estate Revenue - Non-Stabilized		6,941,161			1,745,482
Expenses - Non-Stabilized
Utilities & Maintenance		(1,273,482	)		(273,245	)
Property Management		(390,267	)		295,534
Real Estate Taxes		(1,076,907	)		(199,208	)
Insurance		(135,779	)		(48,049	)
Depreciation		(5,736,765	)		(4,733,159	)
Mortgage Interest		(1,791,193	)		(363,794	)
Total Segment Operating Profit		5,000,951			5,102,191

For the Six Months Ended October 31		2003		2002	% Change
Multi-Family Residential
Total Receipts	$	29,465,768	$	29,882,371	(1.4%	)
Expenses:
Utilities & Maintenance		5,714,837		5,629,165	1.5%
Property Management		3,109,582		3,322,723	(6.4%	)
Taxes		3,310,496		3,349,418	(1.2%	)
Insurance		927,171		730,628	26.9%
Mortgage Interest		8,660,373		8,633,330	0.3%
Total Expenses		21,722,459		21,665,264	0.3%
Property Segment Operating Profit	$	7,743,309	$	8,217,107	(5.8%	)

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Results on a "Stabilized Property" Basis - continued

For the Six Months Ended October 31		2003			2002		% Change
Commercial
Total Receipts	$	24,693,363		$	24,548,504		0.6%
Expenses:
Utilities & Maintenance		3,471,519			3,204,415		8.3%
Property Management		952,971			1,060,525		(10.1%	)
Taxes		2,868,684			2,779,583		3.2%
Insurance		245,648			216,465		13.5%
Mortgage Interest		7,834,647			7,970,362		(1.7%	)
Total Expenses	$	15,373,469		$	15,231,350		0.9%
Property Segment Operating Profit		9,319,894			9,317,154		--
Total Stabilized Segment Operating Profit		17,063,203			17,534,261
Reconciliation to Segment Operating Profit
Real Estate Revenue - Non-Stabilized		12,693,899			2,324,312
Expenses - Non-Stabilized
Utilities & Maintenance		(2,087,574	)		(330,111	)
Property Management		(560,225	)		278,013
Real Estate Taxes		(2,011,763	)		(275,608	)
Insurance		(224,143	)		(69,329	)
Depreciation		(11,275,084	)		(9,061,390	)
Mortgage Interest		(3,408,369	)		(442,060	)
Total Segment Operating Profit		10,189,944			9,958,088

Economic Occupancy Rates
      IRET monitors both physical vacancy rates and economic vacancy rates at each of its properties.  Physical vacancy for multi-family residential properties is calculated as the number of total habitable units that are vacant divided by the total number of units in the property.  Physical vacancy for commercial buildings is calculated as the total number of vacant square feet in a particular building, divided by the total number of square feet (vacant and occupied) in the building.  Economic vacancy is defined as total possible revenue less vacancy loss as a percentage of total possible revenue.  Total possible revenue is determined by valuing occupied units or square footage at contract rates, and vacant units or square footage at market rates.

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      Economic occupancy rates are calculated as a percentage of the actual rent paid to IRET versus the scheduled rent charged by IRET for the period of time presented.  The following tables compare economic occupancy rates on a "stabilized property" basis for the three months and six months ended October 31, 2003 and 2002: 

	Three Months Ended October 31			Six Months Ended October 31
	2003	2002	Percent Change	2003	2002	Percent Change
Residential	91.81%	92.42%	(0.6%)	91.07%	91.98%	(0.9%)
Commercial	94.40%	97.12%	(2.7%)	94.46%	97.12%	(2.7%)

 Credit Risk
      The following table lists our top ten commercial tenants on October 31, 2003, for all commercial properties owned by us.  No single tenant accounted for more than 10% of revenues from commercial properties during the second quarter of Fiscal 2004.

Lessee		Monthly Rent	% of Total Rental  Income from Commercial Properties
Edgewood Living Communities, Inc.	$	312,513	6.5%
Health East - Woodbury & Maplewood		159,720	3.3%
Microsoft - Great Plains		156,250	3.3%
Allina Health		155,970	3.3%
Northland Insurance Company		146,749	3.1%
Smurfit - Stone Container Corp.		128,305	2.7%
State of Idaho - Department of Health & Welfare		118,925	2.5%
Wilson’s the Leather Experts, Inc.		116,594	2.4%
Alliant Techsystems, Inc.		101,098	2.1%
Miracle Ear, Inc. & Miracle Ear Manufacturing Services, Inc.		97,163	2.0%
All Others		3,283,264	68.8%
Total Monthly Rent as of October 31, 2003	$	4,776,551	100.0%

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Property Acquisitions
      During the six months ended October 31, 2003, IRET acquired four commercial properties and four apartment complexes:

Commercial Property		Acquisition Cost
30,464 sq. ft. - Benton Business Park - Sauk Rapids, MN	$	1,610,730
24,000 sq. ft. - West River Business Park - Waite Park, MN		1,509,276
213,271 sq. ft. - Buffalo Mall - Jamestown, ND		4,275,150
190,758 sq. ft. - Golden Hills Office Center - Golden Valley, MN		27,500,000
		34,895,156
Apartments
240 units - Connelly Estates - Burnsville, MN		13,855,790
115 units - Remada Court Apartments - Eagan, MN		6,602,890
151 units - Winchester/Village Townhouses - Rochester, MN		8,903,810
160 units - Brookfield Village - Topeka, KS		7,252,607
		36,615,097
Total Property Acquisitions	$	71,510,253

      The four commercial properties were acquired in exchange for the issuance of 85,472 UPREIT Units with an agreed value of $580,437 plus $34,314,719 of cash and cash equivalents.

      These four apartment complexes were acquired in exchange for the issuance of 1,372,183 UPREIT Units with an agreed value of $13,535,779 plus $23,079,318 cash and cash equivalents.

 Funds From Operations
      IRET considers Funds from Operations ("FFO") a useful measure of performance for an equity REIT.  IRET uses the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT") in 1991, as clarified in 1995, 1999 and 2002.  NAREIT defines FFO to mean "net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.  Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis."

       While IRET uses the NAREIT definition of FFO, the components of that definition in many cases require interpretation, and IRET accordingly has made certain interpretations in applying the definition.  In particular, in calculating FFO per share, IRET "adds back" to net income computed in accordance with GAAP the allocations made to limited partners, and divides this amount by the total number of IRET shares of beneficial interest and UPREIT Units outstanding. 

       The NAREIT definition of FFO per share calculates FFO per common shareholder by dividing GAAP net income by the total number of common shares of beneficial interest outstanding, ignoring the UPREIT Units.  However, IRET considers that it is a more accurate measure of IRET’s performance to divide the net income amount by the sum of all outstanding shares of beneficial interest and UPREIT Units.  Under the partnership agreement pursuant to which IRET’s UPREIT Units are issued, UPREIT Unit-holders effectively have the same claim

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on the earnings and assets of IRET as do IRET’s shares of beneficial interest shareholders, and therefore IRET considers that the UPREIT Units also should be included with the shares of beneficial interest in calculating FFO per share.  To omit the UPREIT units in calculating FFO per share would, in IRET’s view, result in the net income amount being allocated across a misleadingly small number of shares, and could accordingly result in a misleadingly high FFO per share number.  IRET believes that, while this particular adjustment made by IRET in calculating FFO is not specifically provided for in the NAREIT definition, it is consistent with the definition.

      While FFO is widely used by REITs as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO in the same way.  Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies.

      FFO should not be considered as an alternative to net income as determined in accordance with GAAP as a measure of IRET’s performance, but rather should be considered as an additional, supplemental measure, and should be viewed in conjunction with net income as presented in the consolidated financial statements included in this report.   FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles, and is not necessarily indicative of sufficient cash flow to fund all of IRET’s needs or its ability to service indebtedness or make distributions.

      FFO for IRET for the three and six months ended October 31, 2003 increased to $9,118,445 and $18,458,979, respectively, compared to $8,826,235 and $16,899,097 for the comparable periods ended October 31, 2002, an increase of 3.3% and 9.2%, respectively.

      The calculation of FFO and reconciliation to GAAP net income available to common shareholders for the three and six months ended October 31, 2003 and 2002 are presented below:

		Three Months Ended October 31, 2003						Three Months Ended October 31, 2002
		Amount		Weighted Avg Shares and Units(2)		Per Share and Unit(4)		Amount		Weighted Avg Shares and Units(2)		Per Share and Unit(4)
Net income	$	2,615,052		38,326,707	$	.07	$	3,068,222		31,885,130	$	.10
Adjustments:
Minority interest in earnings of      Unit-holders		811,579		11,547,107				991,558		10,562,792
Depreciation and Amortization(1)		5,794,859						4,819,229
(Earnings)loss from depreciable     property  sales		(103,045	)					(52,774	)
Funds from operations applicable to all     shareholders and unit-holders	$	9,118,445		49,873,814	$	.18	$	8,826,235		42,447,922	$	.21
Total distributions paid to shareholders/     unit-holders(3)	$	7,633,423					$	6,347,079

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		Six Months Ended October 31, 2003						Six Months Ended October 31, 2002
		Amount		Weighted Avg Shares and Units(2)		Per Share and Unit(4)		Amount		Weighted Avg Shares and Units(2)		Per Share and Unit(4)
Net income	$	5,535,236		37,342,362	$	.15	$	5,996,223		31,141,311	$	.19
Adjustments:
Minority interest in earnings of            Unit-holders		1,654,074		10,848,136				1,991,239		9,901,272
Depreciation and Amortization(1)		11,372,714						9,226,977
(Earnings)loss from depreciable     property  sales		(103,045	)					(315,342	)
Funds from operations applicable to all    shareholders and unit-holders	$	18,458,979		48,190,498	$	.38	$	16,899,097		41,042,583	$	.41
Total distributions paid to shareholders/     unit-holders(3)	$	14,983,877					$	12,692,151

(1) Depreciation on office equipment and other assets used by us are excluded.  Amortization of financing and other expenses are excluded, except for amortization of leasing commissions which is included.

(2)  UPREIT Units of the Operating Partnership are exchangeable for shares of beneficial interest on a one-for-one basis.

(3)  Cash distributions are paid equally on shares of beneficial interest and UPREIT Units.  It is our intent to distribute approximately 65.0% to 80.0% of FFO to our shareholders and the holders of UPREIT Units of the Operating Partnership

(4)  Net income is calculated on a per share basis.  Funds From Operations is calculated on a per share and unit basis.

Distributions
      The following distributions per share and unit were paid during the six months ended October 31st of Fiscal year 2004 and 2003:

Date		2004		2003		Percent Change
July 1	$	.1585	$	.1540		2.9%
October 1		.1590		.1560		1.9%
Total	$	.3175	$	.3100	$	2.4%

Liquidity and Capital Resources
      The Company’s principal liquidity demands are distributions to the holders of the Company’s shares of beneficial interest and UPREIT Units, capital improvements and repairs and maintenance for the properties, redemption of outstanding investment certificates, acquisition of additional properties, property development and debt repayments.

      The Company expects to meet its short-term liquidity requirements through net cash flows provided by its operating activities, and through draws from time to time on its unsecured lines of credit.  The Company considers its ability to generate cash to be adequate to meet all

31

operating requirements and to make distributions to its shareholders in accordance with the provisions of the Internal Revenue Code, as amended, applicable to REITs.

      As of October 31, 2003, the Company had three unsecured lines of credit in the amounts of $10 million dollars, $10 million dollars, and $4.4 million dollars from (1) Bremer Bank, (2) First Western Bank and Trust, and (3) First International Bank and Trust, respectively.  The Company had no outstanding balances under these lines of credit as of October 31, 2003.  Borrowings under the lines of credit bear interest currently at 4.00% which is (1) Bremer Financial Corporation Reference Rate, (2) highest New York Prime as published in the Wall Street Journal, and (3) highest New York Prime as published in the Wall Street Journal, respectively.  Accordingly, increases in interest rates will increase the Company’s interest expense on its lines of credit and as a result will affect the Company’s results of operations and financial condition.  The lines of credit expire on September 15, 2004, September 1, 2004, and December 12, 2003, respectively.

      To the extent the Company does not satisfy its long-term liquidity requirements, which consist primarily of maturities under the Company’s long-term debt, development and redevelopment costs and potential acquisition opportunities, through net cash flows provided by operating activities and its credit facilities, it intends to satisfy such requirements through a combination of funding sources which the Company believes will be available to it, including the issuance of UPREIT Units, additional equity, proceeds from the Company’s Distribution Reinvestment Plan, proceeds from the sale of properties, and additional long-term secured or unsecured indebtedness.

      As of October 31, 2003, the Company has issued 3,758,793 shares of beneficial interest at $10.00 per share, for aggregate net proceeds, after offering costs and selling commissions, of approximately $33,320,000.  IRET plans to use the net proceeds from the offering for general business purposes, including the acquisition, development, renovation, expansion or improvement of income-producing properties.

      The Company’s sources and uses of cash for the six months ended October 31, 2003, compared to the six months ended October 31, 2002, are as follows:

Six Months Ended October 31, 2003
      Cash flows provided by operating activities of $12,729,682 were comprised of (i) income of $5,535,236, and (ii) adjustments for non-cash items of $13,882,625 partially offset by (iii) the net change in operating assets and liabilities of $6,688,179.  The adjustments for non-cash items are primarily comprised of (i) depreciation and amortization of $11,759,636, and (ii) minority interest of $2,123,303.

      Net cash used in investing activities of $48,215,971 was primarily comprised of acquisition and improvements of properties of $47,678,715, and investment in loan receivable of $1,000,000.

      Net cash provided by financing activities of $41,765,102 was primarily comprised of (i) proceeds from borrowings of $54,887,261, (ii) proceeds from sale of shares $35,416,358,

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partially offset by (iii) repayments of borrowings of $37,383,261, (iv) distributions paid to shareholders/unit holders of $9,814,602, (v) redemption of investment certificates of $940,838, and (vi) distributions to minority partners of $407,704.

Six Months Ended October 31, 2002
      Cash flow provided by operating activities of $16,703,247 was comprised of (i) income of $5,996,223, (ii) adjustments for non-cash items of $11,855,433, partially offset by (iii) the net change in operating assets and liabilities of $1,148,409.  The adjustments for non-cash items were primarily comprised of (i) depreciation and amortization of $9,531,739, and (ii) minority interest of $2,454,016, partially offset by the loss on sale of properties of $315,342.

      Net cash used in investing activities of $37,515,845 was comprised of (i) acquisition and improvements on properties of $50,206,255, and (ii) purchase of marketable securities of $25,652,269, partially offset by (iii) proceeds from sale of marketable securities of $33,500,000, (iv) proceeds from notes receivable $3,500,000, (v) proceeds from sale of property of $1,003,004, and (vi) repayments on mortgage loans receivable of $372,631.

      Net cash provided by financing activities of $23,221,932 was primarily comprised of (i) the issuance of common shares of $31,663,100, (ii) notes and mortgages payable of $16,300,000, partially offset by (iii) redemption of investment certificates of $10,962,534, (iv) distributions paid to holders/unit holders of $8,250,366, (v) repayments of borrowings of $4,996,362, and (vi) distributions to minority partners of $522,379.

Financial Condition
The important changes in IRET’s balance sheet during the six months of Fiscal 2004 ended October 31, 2003, were:

• Real Estate Owned  - Real estate owned increased to $999,792,737 at October 31, 2003, from the April 30, 2003 figure of $919,780,802.  The increase resulted primarily from the acquisition of additional investment properties net of dispositions as described below:

Acquired
Benton Business Park - Sauk Rapids, MN	$	1,610,730
West River Business Park - Waite Park, MN		1,509,276
Connelly Estates - Burnsville, MN		13,855,790
Remada Court Apartments - Eagan, MN		6,602,890
Winchester/Village Townhouses - Rochester, MN		8,903,810
Brookfield Village - Topeka, KS		7,252,607
Buffalo Mall - Jamestown, ND		4,275,150
Golden Hills Office Center - Golden Valley, MN		27,500,000
Disposed
Interstate Bakery - St. Paul, MN		(320,000	)

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• Mortgage Loans Receivable - Mortgage loans receivable increased to $2,054,660 at October 31, 2003, from $1,182,940 at April 30, 2003.  This increase resulted from a construction loan to the tenant for an addition to Edgewood Vista facility in Virginia, MN, net of scheduled payments received, and a reclassification of an amount to other assets.
  
• Cash - Cash on hand on October 31, 2003, was $21,843,527 compared to $15,564,714 on April 30, 2002.  This increase was due primarily to cash flows from operations, refinancing, sale of shares, and new mortgage loans.
  
• Marketable Securities - During the six months ended October 31, 2003, IRET decreased its investment in marketable securities classified as available-for-sale to $2,703,032 from $3,077,260 on April 30, 2003.  This decrease was primarily due to the sale of marketable securities.
  
• Mortgages Payable - Mortgages payable on October 31, 2003, totaled $583,159,585, compared to $539,397,202 at April 30, 2003.  This increase resulted from refinancing of mortgages and the placement of new mortgages.  The weighted average interest rate payable on the outstanding indebtedness on October 31, 2003, was 7.44%.
  
• Investment Certificates - Investment Certificates outstanding on October 31, 2003, totaled $8,263,005, compared to $9,034,696 on April 30, 2003.  This decrease resulted from the redemption of maturing investment certificates during the six months ended October 31, 2003.
  
• Operating Partnership Units - Outstanding UPREIT Units in the Operating Partnership increased to 11,549,252 Units on October 31, 2003, as compared to the 10,206,036 Units outstanding on April 30, 2003.  The increase resulted primarily from the issuance of additional UPREIT Units to acquire the Benton Business Park, West River Business Park, Connelly Estates, Remada Court Apartments, Winchester and Village Townhouses, and Brookfield Village.
  
• Shares of Beneficial Interest - Shares of beneficial interest outstanding on October 31, 2003, totaled 40,595,779, as compared to 36,166,351 shares outstanding on April 30, 2003.  This increase in shares outstanding was primarily due to the issuance of 3,758,793 shares of beneficial interest gross proceeds of $35,416,358, and the issuance of shares pursuant to our distribution reinvestment plan consisting of 272,035 shares issued on July 1, 2003, and 276,775 on October 1, 2003, for total proceeds of $5,169,275, and UPREIT conversions of 114,439 for $929,899 in shareholder' equity.

Pending Acquisitions and Dispositions
      As of October 31, 2003, IRET was a party to purchase agreements to acquire two commercial properties for purchase prices totaling approximately $25,932,000.  The Company will finance approximately $16,855,000 of the total purchase price for these two properties with bank or other financial institution loans, and will require approximately $9,076,000 in cash to

34

close these acquisitions. Also as of October 31, 2003, IRET was a party to contracts to sell four properties and a parcel of vacant land, for sale prices totaling $3,286,420.  The Company expects to complete these pending acquisitions and dispositions over the next several months; however, the purchase or sale of each of these properties is subject to the Company’s or the buyer’s completion of due diligence and the satisfaction of other customary closing conditions, and there can be no assurance that any or all of these pending acquisitions and dispositions will be completed.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risk is limited to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations. Even though our philosophy is to maintain a fairly low exposure to interest rate fluctuation risk, we are still vulnerable to significant fluctuations in interest rates on variable rate debt, on any future repricing or refinancing of fixed rate debt and on future debt.

We primarily use long-term (more than nine years) and medium-term (five to seven years) debt as a source of capital. We do not currently use derivative securities, interest-rate swaps or any other type of hedging activity to manage our interest rate risk. As of October 31, 2003, we had the following amount of future principal payments on mortgages secured by our real estate: 

Long Term Debt		2004		2005		2006		2007		2008		Thereafter		Total
Fixed Rate	$	12,434,124	$	16,944,122	$	14,453,093	$	17,097,194	$	36,571,938	$	458,354,753	$	555,855,224
Variable Rate		938,911		1,970,673		3,785,189		2,016,727		2,070,661		16,522,200		27,304,361
													$	583,159,585	(1)

(1)The weighted average interest rate as of October 31, 2003, was 7.44%. Any fluctuations on the variable interest rates could increase or decrease our interest expenses. For example, an increase of one percent per annum on our $27,304,361  of variable rate indebtedness would increase our annual interest expense by $273,044.

Item 4.  Controls and Procedures  

IRET carried out an evaluation, under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of IRET’s disclosure controls and procedures as of the end of the period covered by this report.  Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that IRET’s disclosure controls and procedures are effective in timely alerting them to material information required to be disclosed in our periodic reports filed with the Securities and Exchange Commission.

       There were no changes in IRET’s internal control over financial reporting that occurred during IRET’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The remainder of this page has been left blank intentionally. 36
PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

      In the course of our operations, we become involved in litigation.  At this time, we know of no pending or threatened proceedings that would have a material impact upon us.

Item 2.  Changes in Securities and Use of Proceeds.

      At the Company’s Annual Meeting of Shareholders on September 23, 2003, the Company’s shareholders approved the adoption of the Articles of Amendment and Third Restated Declaration of Trust, which, among other things, incorporates modified provisions regarding the capitalization of the Company and regarding transfer restrictions and ownership limitations on the Company’s shares of beneficial interest.  The Articles of Amendment and Third Restated Declaration of Trust were filed with the SEC on August 13, 2003, with the Company’s Definitive Proxy Statement on Schedule 14A for the 2003 Annual Meeting of Shareholders. 

Items 3 and 5 are not applicable and have been omitted.

Item 4.  Submission of Matters to a Vote of Security Holders.

      At the Company’s Annual Meeting of Shareholders, held on September 23, 2003, the following action was taken:

      The shareholders elected the nine individuals nominated to serve as trustees of the Company until the 2004 Annual Meeting or until the election and qualification of their successors, as set forth in Proxy Item No. 1 in the Company’s Notice of the Annual Meeting and the Proxy Statement relating to the Annual Meeting.  The nine individuals elected, and the number of votes cast for, or withheld, with respect to each of them, follows: 

Trustees	For	Withheld
John F. Decker	29,062,235	909,367
Daniel L. Feist	29,644,484	327,118
Steven B. Hoyt	27,988,900	1,982,702
Charles Wm. James	27,959,996	1,998,791
Patrick G. Jones	29,673,566	298,036
Timothy P. Mihalick	28,036,721	1,933,830
Jeffrey L. Miller	29,677,811	293,791
Stephen L. Stenehjem	29,656,256	315,347
Thomas A. Wentz, Jr.	27,866,576	2,105,026

      The shareholders approved the proposal to adopt the Articles of Amendment and Third Restated Declaration of Trust, as set forth in Proxy Item No. 2 in the Company’s Notice of the Annual Meeting and the Proxy Statement relating to the Annual Meeting.  The shareholders approved the proposal with 19,886,136 votes for, 3,309,705 votes against and 356,302 abstentions.

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Item 6.  Exhibits and Reports on Form 8-K

(a)Exhibits:

Exhibit No.	Description
3(ii)	Second Restated Trustees’ Regulations (Bylaws), as adopted on September 24, 2003.
31.1	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)Reports on Form 8-K during the quarter ended October 31, 2003:  During the quarter ended October 31, 2003, the Company did not file any current reports on Form 8-K.

Signatures

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INVESTORS REAL ESTATE TRUST
(Registrant)

By:  /S/ Thomas A. Wentz, Sr.
      Thomas A. Wentz, Sr., President & Chief
      Executive Officer

By:  /S/ Diane K. Bryantt
     Diane K. Bryantt, Senior Vice President &
      Chief Financial Officer

 Date:  December 15, 2003

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EX-31 3 exh3111003.htm CEO CERTIFICATION - THOMAS A. WENTZ, SR.

Exhibit 31.1

Certifications

I, Thomas A. Wentz, Sr., certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;

2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a)         designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)         evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)         disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)         all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)         any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    December 15, 2003

By: /S/ Thomas A. Wentz, Sr.
      Thomas A. Wentz, Sr., President & CEO EX-31 4 exh3121003.htm CFO CERTIFICATION - DIANE K. BRYANTT

Exhibit 31.2

I, Diane K. Bryantt, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;

2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a)         designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)         evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)         disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)         all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)         any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:    December 15, 2003

By: /S/ Diane K. Bryantt
      Diane K. Bryantt, Senior Vice President & CFO EX-32 5 exh321003.htm CERTIFICATIONS - WENTZ & BRYANTT

Exhibit 32

Certification by the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, we, Thomas A. Wentz, Sr., and Diane K. Bryantt, hereby certify that, to the best of our knowledge, the Quarterly Report of Investors Real Estate Trust on Form 10-Q for the quarter ended October 31, 2003 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, and that the information contained in that Report fairly presents, in all material respects, the financial condition and results of operations of Investors Real Estate Trust.

/S/ Thomas A. Wentz, Sr.
Thomas A. Wentz, Sr.
President and Chief Executive Officer
December 15, 2003

/S/ Diane K. Bryantt
Diane K. Bryantt
Senior Vice President and Chief Financial Officer
December 15, 2003

A signed original of this written statement required by Section 906 has been provided to Investors Real Estate Trust and will be retained by Investors Real Estate Trust and furnished to the Securities and Exchange Commission or its staff upon request. EX-3 6 exh3ii.htm SECOND RESTATED TRUSTEE'S REGULATIONS (BYLAWS)

Exhibit 3(ii)

Second Restated Trustees’ Regulations (Bylaws)

INVESTORS REAL ESTATE TRUST
Second Restated Trustees’ Regulations (Bylaws)
(Adopted September 24, 2003) ARTICLE I - OFFICE AND RECORDS

      Section 1.  The principal office of the Trust shall be in Minot, North Dakota.  The Trust may also have offices at such other places as the trustees may from time to time designate.

      Section 2.  The original or a certified copy of these Regulations, including all amendments, shall be kept at the principal office of the Trust and be available during usual business hours for inspection and copying.

      Section 3.  The Trust shall keep correct and complete books and records of accounts of its transactions, and minutes and other records of the proceedings of its trustees or other actions and of any committees of such trustees.

      Section 4.  The Trust shall maintain at its principal office or at such other office or agency of the Trust, as may be specified by the trustees, the original Certificate of Beneficial Interest or Share Ledger containing the names and addresses of all Shareholders and the number of Shares held by each Shareholder.

ARTICLE II - TRUSTEES

      Section 1.  The number of trustees shall be not less than five nor more than fifteen as from time to time determined by the Board.

      Section 2.  The trustees shall elect one of their number as Chairman of the Trustees, who shall act as chairman at all meetings of the trustees, shall have the power to appoint committees of the trustees and to perform all administrative acts on behalf of the trustees, except to the extent that the Declaration of the Trust specifically requires such acts to be performed by a majority of all of the trustees.

      The trustees may elect one or more of their number as a Vice Chairman of the trustees.  The First Vice Chairman shall exercise the power and duties of the Chairman of the trustees in his absence or, in the case of a vacancy in that office, until a new Chairman of the trustees shall be elected.

      Section 3.  The trustees shall elect a Secretary, who need not be a trustee, who shall keep minutes and have the usual responsibilities of a secretary.

      Section 4.  Regular meetings of the trustees shall be held at such times as the trustees shall determine, but not less frequently than quarter-annually.

      Section 5.  Special meetings of the trustees shall be held whenever called by the Chairman or by any three other trustees at such time and place as may be designated in the notice of the meeting.

      Section 6.  At least three days’ written notice shall be given of the time and place of any regular or special meeting of the trustees.  If the notice is sent by mail or fax, it shall be deemed to have been given when deposited in the mail or transmitted by fax.  Notice of an adjourned meeting need not be given if the time and place of the adjourned meeting are announced at the meeting at which such adjournment action is taken.

      Section 7.  A majority of the trustees in office shall constitute a quorum for the transaction of business.  The acts of a majority of the trustees present at a meeting at which a quorum is present shall be the acts of the trustees.  The trustees may, in lieu of a meeting, take any action which would be lawful if done at a meeting by having a certificate describing such action signed by all of the trustees in office and depositing such certificate in the minute book of the Trust.

      Section 8.  Trustees must be individuals at least 21 years of age and less than 74 years of age upon the date of the annual shareholder meeting at which such individual is elected as a trustee.

ARTICLE III - SHAREHOLDERS

      Section 1.  Meetings of the Shareholders shall be held at such place in Minot or elsewhere as may be fixed by the trustees.

      Section 2.  The Annual Meeting of Shareholders for the election of trustees shall be held within six months of the end of the Trust’s fiscal year, at such time and place as the trustees shall, by resolution, from time to time fix.

      Section 3.  Written notice setting forth the time, place, and purpose of each such Annual Meeting shall be given to each Shareholder of record at least 15 days prior to the date fixed for the meeting.  Notice sent by mail shall be deemed given when it is deposited in the mail addressed to the Shareholder at the address appearing on the records of the Trust.  Notice of an adjourned meeting need not be given if the time and place of the adjourned meeting is announced at the meeting at which adjournment action is taken.

      Section 4.  The Chairman of the Board of Trustees, or such other person as may be designated by the trustees, shall preside and the Secretary shall take the minutes at every meeting of the Shareholders.  In the absence of the Secretary, the trustees shall appoint one of their number, or such other person as they may select, to act as Secretary of the meeting.

      Section 5.  Thirty-three and one-third percent (33 1/3%) of the outstanding Shares entitled to vote at any meeting represented in person or by proxy shall constitute a quorum at such meeting.

      Section 6.  Proxies shall be executed in writing and filed with such officer or office of the Trust as may be designated in the notice of the meeting.  No revocation of a proxy, whether by voluntary action, death, or incapacity of the Shareholder granting it or otherwise, shall be effective until notice thereof has been received by the Trust.

      Section 7.  The trustees may appoint one or more judges of election, who need not be Shareholders, to act at meetings of Shareholders.  If a judge of election fails to appear or refuses to act at a meeting, the Chairman of the trustees or other person designated to preside at the meeting of the Shareholders shall appoint a substitute judge of election.  The judge of election shall determine the number of Shares in the Trust as of the applicable record date, the number of Shares represented at the meeting, the existence of a quorum, and all questions relating to voting, and shall count the votes and shall determine the results of any voting.

      Section 8.  For any lawful purpose, including but without being limited thereto, the determination of the Shareholders who are entitled to (a) receive notice of and vote at a meeting of the Shareholders; (b) receive payment of a distribution; and (c) participate in the execution of written approvals, the trustees may fix a record date which shall not be earlier than the date on which the record date is fixed, and shall not be more than 90 days preceding the meeting, payment, final date of written approvals or waivers, or other event to which the record date relates.  If no record date is fixed, the record date for determining the Shareholders who are entitled to receive notice of or to vote at a meeting of the Shareholders shall be the close of business on the twentieth day prior to the date of the meeting.

 ARTICLE IV - OFFICERS

      Section 1.  The Board shall appoint and designate the following officers (hereinafter sometimes defined as "Executive Officers"):  Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, President, one or more Senior Vice Presidents, and a Secretary.  The Board may also appoint and designate such other officers, assistant officers, and agents, as necessary, in such manner as may be prescribed by the Board.

      Section 2.  All officers and agents of the Trust, as between themselves and the Trust, have such authority and must perform such duties in the management of the Trust as may be provided in the Bylaws, or as may be determined by resolution of the Board not inconsistence with the Bylaws.

      Section 3.  Any number of offices or functions of those offices may be held or exercised by the same person.  If a document must be signed by persons holding different offices or functions and a person holds or exercises more than one of those offices or functions, that person may sign the documents in more than one capacity, but only if the document indicates each capacity in which the person signs.

      Section 4.  The appointment of a person as an officer or agent does not, of itself, create contract rights.  However, the Trust may enter into a contract with an officer or agent.  The resignation or removal of an officer or agent is without prejudice to any contractual rights or obligations.

      Section 5.  An officer may resign at any time by giving written notice to the Trust.  The resignation is effective without acceptance when the notice is given to the Trust, unless a later effective date is specified in the notice.

      An officer may be removed at any time, with or without cause, by a resolution approved by the affirmative vote of a majority of the entire Board of Trustees.

A vacancy in an office because of death, resignation, removal, disqualification, or other cause may be filled in any manner by the Board.

      Section 6.  Unless prohibited by a resolution approved by the affirmative vote of a majority of the entire Board, an officer appointed by the Board may, without the approval of the Board, delegate some or all of the duties and powers of an office to other persons.  An officer who delegates the duties or powers of an office remains subject to the standard of conduct for an officer with respect to the discharge of all duties and powers so delegated.

      Section 7.  Unless prohibited by a resolution of the Board, any Executive Officer may execute any contracts, leases, or other documents requiring execution by the Trust.

      Section 8.  The Secretary shall keep the minutes of all meetings of the trustees and the Shareholders in appropriate minute books and shall give all notices on behalf of the Trust including notice of the meetings of the trustees and the Shareholders and shall perform all of the customary duties of a secretary.

ARTICLE V - COMMITTEES

      Section 1.  Executive Committee.  At least annually, the trustees shall elect an Executive Committee consisting of three (3) trustees.  The Executive Committee shall have the authority and duties prescribed in these regulations and such other authority and duties as may be prescribed by the trustees.  The trustees may also appoint other agents for the performance of the business of the Trust, and each shall have such authority and duties as the trustees prescribe.  The Executive Committee may act on behalf of the Board.

      Section 2.  Audit Committee.       At least annually, the trustees shall elect an Audit Committee consisting of three (3) Independent Trustees.  The Audit Committee shall perform all duties as set forth in the written audit committee charter as amended by the trustees from time to time and such other duties and tasks as the trustees may prescribe.

      Section 3.  Nominating Committee.        The Board shall have a Nominating Committee, comprised of all of the Independent Trustees.  The Nominating Committee shall nominate the persons that will stand for election as trustees at the Trust’s next annual meeting.  The Nominating Committee shall consider candidates for nominations from Shareholders, provided

such suggested nominations are received by the Chairman and the Secretary in writing on or before the first day of June of each year.

      Section 4.  Compensation Committee.  The Board shall have a Compensation Committee, comprised of all of the Independent Trustees.  The compensation of the Chief Executive Officer and Chief Operating Officer shall be determined by the Compensation Committee meeting in executive session.  The compensation of the other Executive Officers shall be determined by the Compensation Committee meeting in executive session, at which meeting the Chief Executive Officer and Chief Operating Officer may be present.  The Chief Executive Officer and Chief Operating Officer shall determine the compensation of the other officers, agents, and representatives of the Trust.

ARTICLE VI - SHARES

      Section 1.  Each Certificate of Beneficial Interest or Share shall state (a) that it represents units of Beneficial Interest in the Trust; (b) the name of the registered owner of the units of Beneficial Interest represented thereby; and (c) the number of Shares or units of Beneficial Interest which the certificate represents.

      Section 2.  Each share certificate shall be signed by a duly authorized agent of the Trust provided, however, that such signature may be a facsimile signature on any certificate which contains the manual signature of a person authorized to sign on behalf of a transfer agent acting for the Trust.

      Section 3.  Shares may be transferred only by the registered owner of the Shares as reflected on the Share Ledger of the Trust, or by an attorney duly authorized in writing by the registered owner, and only upon surrender of the Share certificate properly endorsed, which certificate shall be canceled at the time of transfer.  The trustees may prescribe the requirements for any transfer of Shares otherwise than by an assignment validly executed by the registered owner or his attorney duly authorized as herein provided.

      Section 4.  The trustees may establish transfer offices each in the charge of a transfer agent appointed by the trustees, where the Shares of the Trust shall be transferable, and a registry office in the charge of a registrar appointed by the trustees where the Shares shall be registered.  If a transfer agent shall be appointed, no certificate for a Share will be valid unless countersigned by such transfer agent.

      Section 5.  The holder of any Share or Certificate of Beneficial Interest shall immediately notify the Trust or its transfer agent of any mutilation, loss, or destruction thereof.  The trustees shall cause one or more new certificates for the same number of Shares or units in the aggregate to be issued to such beneficiary upon surrender of the mutilated certificate, or in the case of loss or destruction of a certificate, upon satisfactory proof of such loss or destruction of certificate and the deposit of indemnity by way of a bond or otherwise in such form and amount and with such surety as the trustees may require, to indemnify the Trust against loss or liability by reason of the issuance of such new certificate or certificates.

      Section 6.  The Certificates of Beneficial Interest issued by the trustees hereunder shall be in substantially the following form:

Share or Certificate of Beneficial Interest

______ Shares

Investors Real Estate Trust

     This certifies that ________________ is the owner of _________ fully paid Shares in Investors Real Estate Trust, a North Dakota Business Trust, which are held subject to the Second Restated Declaration of Trust made on February 9, 1999, which, together with any subsequent amendments thereto, is hereby incorporated in and made a part of this certificate.

     The holder hereof has no interest, legal, or equitable, in any specific property of the Trust and no transfer of this certificate will affect Investors Real Estate Trust until this certificate has been surrendered at the offices of the Trust, or transfer agent, and the transfer recorded on the books of the Trust.

     In Witness Whereof, the trustees have caused this certificate to be signed by their duly authorized agents.

Dated:

___________________________           _____________________________
Secretary or Vice President                           President or Vice President

The Certificates of Beneficial Interest issued by the trustees hereunder shall also contain any Legend required by the Declaration of Trust

ARTICLE VII - POLICIES

Section 1.  Definitions.  Terms not otherwise defined in the Declaration of Trust shall have the following definitions:

            A.        ACQUISITION EXPENSES: Expenses including but not limited to legal fees and expenses, travel and communications expenses, costs of appraisals, nonrefundable option payments on property not acquired, accounting fees and expenses, title insurance, and miscellaneous expenses related to selection and acquisition of properties, whether or not acquired.

            B.        ACQUISITION FEE: The total of all fees and commissions paid by any party to any party in connection with making or investing in mortgage loans or the purchase, development or construction of property by IRET. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, development fee, construction fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however

designated. Excluded shall be development fees and construction fees paid to persons not affiliated with IRET in connection with the actual development and construction of a project.

            C.        AVERAGE INVESTED ASSETS: For any period the average of the aggregate book value of the assets of the Trust invested, directly or indirectly, in equity interests in and loans secured by real estate, before reserves for depreciation or bad debts or other similar non-cash reserves computed by taking the average of such values at the end of each month during such period.

            D.        NET ASSETS: The total assets at cost before deducting depreciation or other non-cash reserves less total liabilities, calculated at least quarterly on a basis consistently applied.

            E.         NET INCOME: For any period total revenues applicable to such period, less the expenses applicable to such period other than additions to reserves for depreciation or bad debts or other similar non-cash reserves.

            F.         ORGANIZATION AND OFFERING EXPENSES: All expenses incurred by and to be paid from the assets of IRET in connection with and in preparing IRET for registration and subsequently offering and distributing it to the public, including, but not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters' attorneys), expenses for printing, engraving, mailing, salaries of employees while engaged in sales activity, charges of transfer agents, registrars, Trustees, escrow holders, depositories, experts, expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants' and attorneys' fees.

           G.        TOTAL OPERATING EXPENSES: Aggregate expenses of every character paid or incurred by IRET as determined under Generally Accepted Accounting Principles, but excluding:  (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and such other expenses, and tax incurred in connection with the issuance, distribution, transfer, registration, and stock exchange listing of IRET'S Shares; (ii) interest payments; (iii) taxes; (iv) non-cash expenditures such as depreciation, amortization and bad debt reserves; (v) incentive fees; and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on resale of property and other expenses connected with the acquisition, disposition, and ownership of real estate interests, mortgage loans, or other property (such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair, and improvement of property.

Section 2.  Investment Policies.

           A.The primary investment objectives of IRET are to obtain current income and capital appreciation for the Shareholders.

           B.The Independent Trustees shall review the investment policies of IRET with sufficient frequency and at least annually to determine that the policies being followed by IRET at any time are in the best interests of its Shareholders.  Each such determination and the basis therefore shall be set forth in the minutes of the trustees.

           C.IRET shall not invest in equity securities unless a majority of trustees (including a majority of Independent Trustees) not otherwise interested in such transaction approve the transaction as being fair, competitive, and commercially reasonable.

           D.IRET shall not invest more than 10% of its total assets in unimproved real property or mortgage loans on unimproved real property.  For purposes of this subsection, "unimproved real property" shall mean real property that has the following three characteristics:  (i) an equity interest in real property which was not acquired for the purpose of producing rental or other operating income; (ii) has no development or construction in process on such land; and (iii) no development or construction on such land is planned in good faith to commence on such land within one year.

           E.IRET shall not invest in commodities or commodity future contracts. Such limitation is not intended to apply to future contracts, when used solely for hedging purposed in connection with IRET's ordinary business of investing in real estate assets and mortgages.

           F.IRET shall not invest in or make mortgage loans unless an appraisal is obtained concerning the underlying property, except for those loans insured or guaranteed by a government or government agency. In cases in which a majority of the Independent Trustees so determine, and in all cases in which the transaction is with a trustee or Affiliate, such an appraisal must be obtained from an independent expert concerning the underlying property. This appraisal shall be maintained in IRET's records for at least five years, and shall be available for inspection and duplication by any Shareholder. In addition to the appraisal, a mortgagee's or owner's title insurance policy or commitment as to the priority of the mortgage or the condition of the title must be obtained. Further, the Board shall observe the following policies in connection with investing in or making mortgage loans:

           i.IRET shall not invest in real estate contracts of sale, otherwise known as land sale contracts, unless such contracts of sale are in recordable form and appropriately recorded in the chain of title.

           ii.IRET shall not make or invest in mortgage loans, including construction loans, on any one property if the aggregate amount of all mortgage loans outstanding on the property, including the loans of IRET, would exceed an amount equal to 85% of the appraised value of the property as determined by appraisal unless substantial justification exists because of the presence of other underwriting criteria. For purposes of this subsection, the "aggregate amount of all mortgage loans outstanding on the property, including the loans of IRET," shall include all interest (excluding contingent participation in income and/or appreciation in value of the mortgaged property), the current payment of which may be deferred pursuant to the terms of such loans, to the extent that deferred interest on each loan exceeds 5% per annum of the principal balance of the loan.

           iii.IRET shall not make or invest in any mortgage loans that are subordinate to any mortgage or equity interest of a trustee or Affilliate.

           iv.The policies outlined in (i) through (iii) above may be exceeded or avoided for a particular transaction provided a commercially reasonable justification exists and is approved by a majority of the trustees (including a majority of the Independent Trustees) not otherwise interested in the transaction.

      Section 3.  Borrowing Limitations.  The aggregate borrowings of IRET, secured and unsecured, shall be reasonable in relation to the Net Assets of IRET, and shall be reviewed by the trustees at least quarterly. The maximum amount of such borrowings in relation to the Net Assets shall, in the absence of a satisfactory showing that a higher level of borrowing is appropriate, not exceed 300%. Any excess in borrowing over such 300% level shall be approved by a majority of the Independent Trustees and disclosed to Shareholders in the next quarterly report of IRET, along with justification for such excess.

      Section 4.  Policies for Fees, Compensation and Expenses.

           A.The Independent Trustees will determine, from time to time but at least annually, that the total fees and expenses of IRET are reasonable in light of the investment performance of IRET, its Net Assets, its Net Income, and the fees and expenses of other comparable unaffiliated real estate investment trusts. Each such determination shall be reflected in the minutes of the meeting of the trustees.

           B.The total of Acquisition Fees and Acquisition Expenses shall be reasonable, and shall not exceed an amount equal to 7% of the contract price of the property, or in the case of a mortgage loan, 7% of the funds advanced.

           C.Notwithstanding the above, a majority of the trustees (including a majority of the Independent Trustees) not otherwise interested in the transaction may approve fees, compensation and expenses in excess of the limits imposed by this Section 4 if they determine the transaction to be commercially competitive, fair and reasonable to IRET.

           D.The Total Operating Expenses of IRET shall (in the absence of a satisfactory showing to the contrary) be deemed to be excessive if they exceed in any fiscal year the greater of 2% of its Average Invested Assets or 25% of its net income for such year. The Independent Trustees shall have the fiduciary responsibility of limiting such expenses to amounts that do not exceed such limitations unless such Independent Trustees shall have made a finding that, based on such unusual and non-recurring factors which they deem sufficient, a higher level of expenses is justified for such year. Any such finding and the reasons in support thereof shall be reflected in the minutes of the meeting the trustees.

           E.Within 60 days after the end of any fiscal quarter of IRET for which total operating expenses (for the twelve (12) months then ended) exceeded 2% of average invested assets or 25% of net income, whichever is greater, there shall be sent to the Shareholders of IRET a written disclosure of such fact, together with an explanation of the factors the Independent Trustees considered in arriving at the conclusion that such higher operating expenses were justified.

      Section 5.  Policies for Shares and Securities.

           A.IRET shall not issue options or warrants to purchase its Shares to the trustees or any Affiliate, except on the same terms as such options or warrants are sold to the general public.  IRET may issue options or warrants to persons not so connected with IRET but not at exercise prices less than the fair market value of such securities on the date of grant and for consideration (which may include services) that in the judgment of the Independent Trustees has a market value less than the value of such option on the date of grant. Options or warrants issuable to the trustees or any Affiliate shall not exceed an amount equal to 10% of the outstanding Shares of IRET on the date of grant of any options or warrants.

           B.Unless approved by a majority of the Independent Trustees, IRET shall not issue its Shares on a deferred payment basis or other similar arrangement.

           C.Unless approved by a majority of the Independent Trustees, IRET shall not issue equity securities that are redeemable by the owner of the equity security.

           D.IRET shall not issue debt securities unless the historical debt service coverage (in the most recently completed fiscal year) as adjusted for known changes is sufficient to properly service that higher level of debt.

ARTICLE VIII - MISCELLANEOUS

      Section 1.  The fiscal year of the Trust shall begin on May 1 of each year and shall end on April 30th of each year.

      Section 2.  No trustee, representative, or agent of the Trust shall have power or authority to borrow money on the Trust’s behalf, to pledge its credit or to buy, sell, or mortgage its real property or securities except within the scope and to the extent of authority expressly delegated by resolution of the trustees.  Authority given by the trustees for any of the above purposes may be general in scope or limited to specific instances.

      Section 3.  The trustees may, by resolution, designate the representative or representatives of the Trust who shall be authorized to act as signatory or signatories on the Trust’s bank accounts and shall designate the number of signatures required.  Any such signatory may, but need not, be a trustee.

      Section 4.  Whenever any written notice is required to be given to the trustees or the Shareholders, a waiver thereof in writing signed by a person entitled to such notice, shall be deemed equivalent to the giving of such notice.  Attendance of a person either in person or by proxy at a meeting shall constitute a waiver of notice of the meeting unless such person attends such meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened.

      Section 5.  All capitalized terms not otherwise defined in these Bylaws shall have the meanings ascribed to them in the Declaration of Trust.

      Section 6.  In the event that any provision in these regulations shall be construed to be inconsistent with the provision of the Declaration of Trust, the provisions of the Declaration of Trust shall control.

ARTICLE IX - AMENDMENTS

      These Regulations may be amended at any regular or special meeting of the trustees if notice of the proposed amendment is contained in the notice of meeting.  Amendments to these regulations may be made by the trustees with or without a meeting, by written instrument signed by all of the trustees and lodged among the records of the Trust. -----END PRIVACY-ENHANCED MESSAGE-----

EX-31

  
  Investors Real Estate Trust - 10-Q - Exhibit 31.1

EX-31

  
  Investors Real Estate Trust - 10-Q - Exhibit 31.2

EX-32

  
  Investors Real Estate Trust - 10-Q - Exhibit 32

EX-3

  
  Investors Real Estate Trust - 10-Q - Exhibit 3(ii)