<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-K405
Annual Report Pursuant to
Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File No.
April 30, 1999 0-14851
--------------------
INVESTORS REAL ESTATE TRUST
(Exact name of Registrant as specified in its charter)
North Dakota 45-0311232
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12 South Main, Minot, North Dakota 58701
(Address of principal executive offices) (Zip Code)
701-852-1756
(Registrant's Telephone Number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Capital Shares of Beneficial Interest NASDAQ - Small Cap Market
--------------------
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
------ -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
<PAGE>
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ( X )
The aggregate market value of the Registrant's outstanding Capital
Shares of Beneficial Interest held by non-affiliates is $132,298,746 based on
the last reported sale price on May 31, 1999.
The number of shares outstanding as of April 30,1999 was 19,066,514
Shares of Beneficial Interest (no par value).
Portions of the Trust's definitive proxy statement for the 1999 annual
meeting of shareholders are incorporated by reference in Part III hereof.
2
<PAGE>
INVESTORS REAL ESTATE TRUST
(Registrant)
INDEX
<TABLE>
<CAPTION>
Item Page
No. No.
- ---- ----
<S> <C>
Cover Page . . . . . . . . . . . . . . . . . . 1
Index. . . . . . . . . . . . . . . . . . . . . 3
PART I
1. Business . . . . . . . . . . . . . . . . . . . 4
2. Properties . . . . . . . . . . . . . . . . . . 7
3. Legal Proceedings. . . . . . . . . . . . . . . 13
4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . 13
PART II
5. Market for Registrant's Common Stock and
Related Security Holder Matters. . . . . . . . 13
6. Selected Financial Data. . . . . . . . . . . . 15
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 15
8. Financial Statements and Supplementary Data. . 16
9. Disagreements on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . 23
PART III
10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . 23
11. Executive Compensation . . . . . . . . . . . . 25
12. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . 25
13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . 25
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K. . . . . . . . . . . . . . 25
Exhibit Index. . . . . . . . . . . . . . . . . 26
Signatures . . . . . . . . . . . . . . . . . . 28
Report of Independent Certified Public
Accountants. . . . . . . . . . . . . . . . . . F-1
</TABLE>
3
<PAGE>
PART I
Item 1. BUSINESS
Investors Real Estate Trust (hereinafter "IRET"), a North Dakota Real Estate
Investment Trust, was organized under the laws of the State of North Dakota
on July 31, 1970. IRET has qualified and operated as a "real estate
investment trust" under Sections 856-858 of the Internal Revenue Code since
its inception.
On February 1, 1997, the Trust reorganized its structure in order to convert
to Umbrella Partnership Real Estate Investment Trust (UPREIT) status. The
Trust established an operating partnership (IRET Properties, a North Dakota
Limited Partnership) with a wholly owned corporate subsidiary acting as its
sole general partner (IRET, Inc., a North Dakota Corporation). At that date,
the Trust transferred most of its assets and liabilities to the operating
partnership in exchange for general partnership units.
The general partner has full and exclusive management responsibility for the
real estate investment portfolio owned by the operating partnership. The
partnership must be operated in a manner that will allow IRET to continue its
qualification as a real estate investment trust under the Internal Revenue
Code.
All limited partners of the operating partnership have "exchange rights"
allowing them, at their option, to exchange their limited partnership units
for shares of the Trust on a one for one basis. The exchange rights are
subject to certain restrictions including no exchanges for at least one year
following the acquisition of the limited partnership units. The operating
partnership distributes cash on a quarterly basis in the amounts determined
by the Trust which will result in each limited partner receiving the same
distributions as an IRET shareholder.
IRET, pursuant to the requirements of Sections 856-858 of Internal Revenue
Code which govern real estate investment trusts, is engaged in the business
of making passive investments in real estate equities and mortgages.
IRET has its only office in Minot, North Dakota, and operates principally in
the northern plains states with its operating partnership owning real estate
investments in the states of North Dakota, Minnesota, South Dakota, Georgia,
Nebraska, Montana, Michigan, Colorado, Idaho, Washington and Arizona.
IRET operates on a fiscal year ending April 30. For its past three fiscal
years, its sources of operating revenue, total expenses, net real estate
investment income, capital gain income, total income, and dividend
distributions are as follows:
4
<PAGE>
Fiscal Year Ending 4/30
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUE FROM OPERATIONS
Real Estate Rentals $38,785,287 $31,694,586 $22,972,368
Interest, Discount & Fees 1,141,975 712,959 861,613
----------- ----------- -----------
$39,927,262 $32,407,545 $23,833,981
EXPENSE $33,525,586 $27,716,347 $20,334,538
----------- ----------- -----------
NET REAL ESTATE INVESTMENT INCOME $ 6,401,676 $ 4,691,198 $ 3,499,443
GAIN ON SALE OF INVESTMENTS
(CAPITAL GAIN) 1,947,184 465,499 398,424
MINORITY INTEREST OF UNIT HOLDERS
IN OPERATING PARTNERSHIP (744,725) (141,788) (18)
----------- ----------- -----------
NET INCOME $ 7,604,135 $ 5,014,909 $ 3,897,849
----------- ----------- -----------
----------- ----------- -----------
PER SHARE
Net Income $ .44 $ .32 $ .28
Dividends Paid $ .47 $ .42 $ .39
</TABLE>
As indicated above, IRET's principal source of operating revenue is rental
income from real estate properties owned by its operating partnership. A
minor amount of revenue is derived from interest income from mortgages and
contracts for deed secured by real estate, interest on investments in
government securities and interest on savings deposits. In addition to
operating income, the Trust recognizes capital gain income when real estate
properties are sold at a price in excess of the depreciated cost of said
properties.
IRET has no employees. Its business is conducted through the services of an
independent contractor (Odell-Wentz & Associates, LLC, a North Dakota
Limited Liability Company, having as its members Roger R. Odell and Thomas A.
Wentz, Sr.) which serves as the advisor to the Trust. Since the inception of
the Trust and until January 1, 1986, Roger R. Odell, 12 South Main, Minot,
North Dakota, served as advisor to the trust, providing office facilities,
administering day-to-day operations of the Trust, and advising with respect
to investments and investment policy. Effective January 1, 1986, the Trust
entered into a revised advisory agreement with Mr. Odell and Thomas A. Wentz,
Sr.
Mr. Odell is the President of IRET and the Advisor and is a graduate of the
University of Texas, receiving his B.A. degree in 1947. He has been a
resident of Minot, North Dakota
5
<PAGE>
since 1947. From 1947 to 1954, he was employed by Minot Federal Savings &
Loan Association, serving as secretary of the association from 1952 to 1954.
Since 1954, Mr. Odell has been a realtor in Minot, serving as an officer and
stockholder of Watne Realty Company from 1954 to January 1, 1970, and since
that time as the owner of his own realty firm.
Mr. Wentz is Vice-President and Chief Investment Officer of IRET and the
Advisor and is a graduate of Harvard College and Harvard Law School,
receiving his A.B. degree in 1957 and his L.L.B. degree in 1960. He has been
a resident of Minot, North Dakota, since 1962. Until August 1, 1998, Mr.
Wentz' principal occupation was the practice of law as a partner in the firm
of Pringle & Herigstad, P.C., counsel to the Trust.
Timothy P. Mihalick is Vice-President and Chief Operating Officer of IRET and
the Advisor. Mr. Mihalick is a graduate of Minot State University receiving
his B.A. degree in Business Administration in 1981. He has been employed by
Odell-Wentz & Associates since 1981.
Diane K. Bryantt is Secretary and Controller of IRET and the Advisor. She
graduated from Minot State University in 1986, receiving a B.A. degree in
Accounting. Mrs. Bryantt was employed by Bremer Bank in Minot, ND from 1989
to 1996. She has been an employee of Odell-Wentz & Associates since June of
1996.
There have been no material changes in the conduct of the Trust's business
since its inception and none are planned.
Item 2. PROPERTIES
IRET is a qualified "real estate investment trust" under Section 856-858 of
the Internal Revenue Code, and is in the business of making passive
investments in real estate equities and mortgages. These real estate
investments are managed by independent contractors on behalf of IRET.
APRIL 30, 1999
SUMMARY OF INVESTMENT PORTFOLIO
REAL ESTATE INVESTMENTS:
<TABLE>
<CAPTION>
1999
----
<S> <C> <C>
Real Estate Owned $295,825,839
Less Depreciation Reserve (26,112,399)
------------
$269,713,440 92.5%
Mortgage Loans Receivable 10,721,214
Less unearned discounts
And allowances (123,212) 3.6%
------------
Total Real Estate Investments $280,311,442
------------
------------
</TABLE>
6
<PAGE>
OTHER ASSETS:
<TABLE>
<S> <C> <C>
Cash and Marketable securities $ 7,412,236
Deposits and Accruals 3,769,633
------------
Total Other Assets $ 11,181,869 3.9%
------------
TOTAL ASSETS $291,493,311
------------
------------
</TABLE>
SUMMARY OF INDIVIDUAL PROPERTIES
COMMERCIAL PROPERTIES
<TABLE>
<CAPTION>
PROPERTY FISCAL 1999
STATE & CITY TYPE SQ. FEET INVESTMENT OCCUPANCY
<S> <C> <C> <C> <C>
Georgia
- Lithia Springs Wedgewood Retirement
Center - Assisted Living 29,408 $ 3,971,878 100.00%
------- ----------- -------
GEORGIA TOTALS 29,408 $ 3,971,878 100.00%
------- ----------- -------
------- ----------- -------
Idaho
- Boise America's Best Furniture
- Retail 139,198 $ 5,792,182 53.62%
------- ----------- -------
IDAHO TOTALS 139,198 $ 5,792,182 53.62%
------- ----------- -------
------- ----------- -------
Michigan
- Kentwood COMP USA - Retail 16,000 $ 2,113,574 100.00%
------- ----------- -------
MICHIGAN TOTALS 16,000 $ 2,113,574 100.00%
------- ----------- -------
------- ----------- -------
Minnesota
- East Grand Forks Edgewood Vista
- Assisted Living 10,778 $ 899,821 100.00%
- Eden Prairie Lindberg Building
- Office/Whse 40,941 $ 1,455,789 100.00%
Viromed
- Office/Laboratory 48,700 $ 4,863,634 N/A
- Moorhead Pioneer Seed Company
- Office/Whse 75,900 $ 653,876 100.00%
------- ----------- -------
MINNESOTA TOTALS 176,319 $ 7,873,122 100.00%
------- ----------- -------
------- ----------- -------
Montana
- Billings Creekside Office Park
- Office 37,318 $ 1,684,918 88.41%
7
<PAGE>
Edgewood Vista
- Assisted Living 11,971 $ 980,218 100.00%
- Missoula Edgewood Vista
- Assisted Living 10,314 $ 962,428 100.00%
------- ----------- -------
MONTANA TOTALS 59,603 $ 3,627,565 92.05%
------- ----------- -------
------- ----------- -------
Nebraska
- Omaha Ameritrade
- Office 73,774 $ 8,283,977 100.00%
Barnes & Noble
- Retail 27,500 $ 3,699,101 100.00%
------- ----------- -------
NEBRASKA TOTALS 101,274 $11,983,078 100.00%
------- ----------- -------
------- ----------- -------
North Dakota
- Bismarck Lester Chiropractic
- Office 5,400 $ 268,917 100.00%
- Fargo Barnes & Noble
- Retail 30,000 $ 3,292,012 100.00%
Petco
- Retail 18,000 $ 1,278,934 100.00%
Stone Container
- Office/Mfg. 151,850 $ 4,998,485 100.00%
Great Plains Campus
Facility 121,600 $ 408,700* N/A
*Additional costs to be
incurred.
- Grand Forks Carmike Theatre 28,300 $ 2,545,737 100.00%
- Minot Walter's (114 South Main St)
- Retail 3,500 $ 111,940 100.00%
1st Avenue Building
- Office 15,900 $ 838,837 73.61%
401 South Main
- Office 9,200 $ 609,119 62.62%
Arrowhead Shopping Center
- Retail/Office 80,000 $ 2,831,164 98.8%
Corner C Store
- Retail 4,674 $ 1,196,342 N/A
Edgewood Vista
- Assisted Living 97,821 $ 6,275,931 100.00%
408 1st St SE 2,000 $ 46,907 100.00%
Minot Plaza
- Retail 10,020 $ 509,079 100.00%
------- ----------- -------
NORTH DAKOTA TOTALS 578,265 $25,212,104 97.86%
------- ----------- -------
------- ----------- -------
8
<PAGE>
South Dakota
- Sioux Falls Edgewood Vista
- Assisted Living 11,971 $ 974,739 N/A
Hutchinson Technology
- Office/Mfg. 94,176 $ 4,429,026 100.00%
------- ----------- -------
SOUTH DAKOTA TOTALS 106,147 $ 5,403,765 100.00%
------- ----------- -------
------- ----------- -------
Other Commercial Prop.
Crookston, MN Superpumper
- Convenience Store 6,000 $ 428,777 100.00%
Grand Forks, ND Superpumper
- Convenience Store 7,000 $ 485,007 100.00%
Langdon, ND Superpumper
- Convenience Store 5,500 $ 239,212 100.00%
Sidney, MT Superpumper
- Convenience Store 4,000 $ 120,600 100.00%
------- ----------- -------
OTHER COMMERCIAL PROPERTIES 22,500 $ 1,273,596 100.00%
------- ----------- -------
------- ----------- -------
FISCAL 1999
SQ. FEET INVESTMENT OCCUPANCY
TOTAL COMMERCIAL PROPERTIES 1,228,714 $67,250,863 96.54%
--------- ----------- -------
--------- ----------- -------
APARTMENT PROPERTIES
APARTMENT FISCAL 1999
STATE & CITY COMMUNITIES BY IRET UNITS INVESTMENT OCCUPANCY
Colorado
- Colorado Springs - Neighborhood by IRET 192 $ 11,097,183 95.87%
- Fort Collins - MiraMont by IRET 210 $ 14,285,175 97.80%
- Pine Cone by IRET 195 $ 13,216,920 94.20%
----- ------------ ------
COLORADO TOTALS 597 $ 38,599,278 96.03%
----- ------------ ------
----- ------------ ------
9
<PAGE>
Idaho
- Boise - Clearwater 60 $ 3,822,199 N/A
----- ------------ ------
IDAHO TOTALS 60 $ 3,822,199 N/A
----- ------------ ------
----- ------------ ------
Minnesota
- Moorhead - Terrace on the Green 116 $ 2,044,286 96.08%
- Rochester - Woodridge 108 $ 6,534,011 99.69%
- Heritage Manor 182 $ 7,421,977 N/A
- IBM Land - $ 11,871 N/A
- St. Cloud - West Stonehill 313 $ 11,492,684 99.02%
- Waite Park - Park Meadows 360 $ 11,141,014 95.04%
----- ------------ ------
MINNESOTA TOTALS 1079 $ 38,645,843 98.06%
----- ------------ ------
----- ------------ ------
Montana
- Billings - Castle Rock 165 $ 5,673,197 N/A
- Country Meadows 67 $ 6,157,497 98.97%
- Rocky Meadows 98 $ 6,672,694 96.54%
----- ------------ ------
MONTANA TOTALS 330 $ 18,503,389 97.12%
----- ------------ ------
----- ------------ ------
North Dakota
- Bismarck/Mandan - Cottonwood Lake 134 $ 9,961,391 83.59%
- Crestview 152 $ 4,799,607 90.40%
- Hill Park 92 $ 3,024,159 91.85%
- Kirkwood Manor 108 $ 3,587,282 93.48%
- North Pointe 49 49 $ 2,403,175 94.41%
- Pleasantview (Man) 18 $ 289,671 95.99%
- Westwood Park 64 $ 2,127,861 N/A
- Dickinson - 41 East 38 $ 434,579 80.04%
- Century 120 $ 2,124,281 89.96%
- Oak Manor 27 $ 350,484 98.23%
- Fargo - Candlelight 44 $ 899,092 98.77%
- Park East 122 $ 4,951,327 97.06%
- Sunchase 36 $ 1,020,291 95.23%
- Grand Forks - Forest Park 270 $ 7,120,900 97.16%
- Jenner Properties 121 $ 2,513,168 90.00%
- Legacy 183 $ 13,818,179 99.54%
- Southwinds 164 $ 5,712,354 97.18%
- Minot - Chateau 64 $ 2,406,110 92.48%
- Colton Heights 18 $ 926,045 95.48%
10
<PAGE>
- Dakota Arms 18 $ 614,752 97.42%
- Magic City 248 $ 5,428,774 94.17%
- South Pointe 196 $ 10,295,666 96.95%
- Southview 24 $ 713,128 86.02%
- Virginia 15 $ 231,163 79.56%
- Williston - Century 192 $ 3,909,583 78.95%
- Other Communities - Beulah Condominiums 26 $ 471,449 49.26%
- Bison Properties 35 $ 569,783 93.97%
- Carrington &
Cooperstown
- The Meadows - Jamestown - $ 1,954,986 N/A
- Lonetree Manor - Harvey 12 $ 225,709 86.07%
- Parkway - Beulah 36 $ 122,058 56.08%
- Sweetwater Properties
- Devils Lake & Grafton 114 $ 1,838,691 84.09%
----- ------------ ------
NORTH DAKOTA TOTALS 2,740 $ 94,845,697 92.67%
----- ------------ ------
----- ------------ ------
South Dakota
- Rapid City - Pointe West 90 $ 3,957,341 90.55%
- Sioux Falls - Oakwood Estates 160 $ 5,493,266 93.53%
- Oxbow 120 $ 4,989,273 99.44%
- Prairie Winds 48 $ 1,987,675 96.80%
----- ------------ ------
SOUTH DAKOTA TOTALS 418 $ 16,427,555 95.07%
----- ------------ ------
----- ------------ ------
Washington
- Vancouver - Ivy Club 204 $ 11,696,668 N/A
- Van Mall Woods 100 $ 6,034,347 N/A
----- ------------ ------
WASHINGTON TOTALS 304 $ 17,731,015 N/A
----- ------------ ------
----- ------------ ------
<CAPTION>
FISCAL 1999
UNITS INVESTMENT OCCUPANCY
TOTAL APARTMENTS 5,528 $228,574,976 94.79%
----- ------------ ------
----- ------------ ------
</TABLE>
N/A = property held less than 12 months
- TITLE. The title to all of the above properties is
in the name of either IRET Properties, a
North Dakota Limited Partnership, IRET or a wholly-
owned subsidiary of IRET, in fee simple (in each case,
IRET has in its files an attorney's title opinion or
a title insurance policy evidencing its title).
11
<PAGE>
- INSURANCE. In the opinion of management, all of said
properties are adequately covered by casualty and
liability insurance.
- PLANNED IMPROVEMENTS. There are no plans for
material improvements to any of the above properties.
- CONTRACTS OR OPTIONS TO SELL. As of April 30, 1999,
IRET had not entered into any contracts or options to
sell any of the above properties, except the four Superpumper
convenience store locations.
- OCCUPANCY AND LEASES. Occupancy rates shown above are
for the fiscal year ended April 30, 1999. In the
case of apartment properties, lease arrangements with
individual tenants vary from month-to-month to one-
year leases, with the normal term being six months.
Leases on commercial properties vary from one year to
20 years.
SUMMARY OF REAL ESTATE INVESTMENTS BY STATE
<TABLE>
<CAPTION>
PERCENT
STATE TOTAL REAL ESTATE INVESTMENT OF TOTAL
<S> <C> <C> <C>
COLORADO
- Residential $38,599,278 $ 38,599,278 13.04%
-----------
GEORGIA
- Commercial $ 3,971,878 $ 3,971,878 1.34%
-----------
IDAHO
- Commercial $ 5,792,182
- Residential $ 3,822,199 $ 9,614,381 3.25%
-----------
MICHIGAN
- Commercial $ 2,113,574 $ 2,113,574 .71%
-----------
MINNESOTA
- Commercial $ 8,301,899
- Residential $38,645,843 $ 46,947,742 15.87%
-----------
MONTANA
- Commercial $ 3,748,165
- Residential $18,503,389 $ 22,251,554 7.52%
-----------
NEBRASKA
- Commercial $11,983,078 $ 11,983,078 4.05%
-----------
NORTH DAKOTA
- Commercial $25,936,323
- Residential $94,845,697 $120,782,020 40.85%
-----------
12
<PAGE>
SOUTH DAKOTA
- Commercial $ 5,403,765
- Residential $16,427,555 $ 21,831,320 7.38%
-----------
WASHINGTON
- Residential $17,731,015 $ 17,731,015 5.99%
-----------
TOTALS $295,825,839 100.00%
------------ -------
------------ -------
</TABLE>
MORTGAGE LOANS RECEIVABLE:
<TABLE>
<CAPTION>
REAL ESTATE 4/30/99
LOCATION SECURITY BALANCE RATE
<S> <C> <C> <C>
GILBERT, AZ
NE 1/4-27-2-6 Commercial Land $ 742,811 7%
FARGO, ND
Great Plains
Software Office Building $ 9,185,758 9.5%
OTHER MORTGAGES
Over $100,000 $ 682,863 7-9%
$50,000 to $99,999 60,000 8.75%
$20,000 to $49,999 46,500 8-9%
Less than $20,000 3,282 7-9%
-----------
TOTAL $10,721,214
Unearned Discounts (1,898)
Allowance for Losses (120,314)
Deferred Gain (1,000)
-----------
$10,598,002
</TABLE>
Item 3. LEGAL PROCEEDINGS
IRET is not involved in any legal proceedings or litigation other than normal
collection matters that will not have a material impact on financial results.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the August 18, 1998 Annual Shareholders' meeting, the only matters
submitted to a vote of security holders were the election of ten Trustees
and ratification of the re- appointment of the independent certified public
accountants.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
Since October 17, 1997, IRET Shares of Beneficial Interest have traded on the
NASDAQ Small-Cap market under the symbol IRETS.
13
<PAGE>
CLOSING PRICE RANGE
<TABLE>
<CAPTION>
TOTAL TOTAL
FISCAL QUARTER ENDED HIGH LOW VOLUME TRADES
<S> <C> <C> <C> <C>
10-31-97 * $7.125 $6.563 35,154 45
1-31-98 7.313 6.625 339,857 204
4-30-98 7.344 7.031 437,487 196
7-31-98 7.250 7.000 359,835 118
10-31-98 7.500 7.000 489,586 232
1-31-99 7.688 7.000 343,128 249
4-30-99 8.000 7.000 445,900 313
</TABLE>
* From 10-20-97 - First trading day
During Fiscal 1999, IRET also offered primary Shares of Beneficial Interest
for sale to the public under Best Efforts offerings through various brokers
registered with the National Association of Securities Dealers. Primary
shares were sold at $7.45 per share from 1-05-98 through 12-07-98 and at
$7.85 per share from 12-15-98 until 4-20-99. IRET also repurchased its
shares during Fiscal 1999. Following is a summary, by quarter-year, of the
sale of primary shares and repurchase of shares by IRET:
<TABLE>
<CAPTION>
SHARES DOLLARS
<S> <C> <C>
5/01/98 Beginning Balance 16,391,412 $74,708,559
QUARTER ENDED 7/31/98
- Shares sold 573,081 $ 4,075,505
- Commissions paid (148,902)
- Shares repurchased (197,124) (1,389,936)
---------- -----------
16,767,369 $77,245,225
QUARTER ENDED 10/31/98
- Shares sold 768,922 $ 5,565,703
- Commissions paid (290,653)
- Shares repurchased (126,336) (912,133)
---------- -----------
17,409,955 $81,608,143
QUARTER ENDED 1/31/99
- Shares sold 793,599 $ 5,689,642
- Commissions paid (356,872)
- Shares repurchased (68,853) (514,881)
---------- -----------
18,134,701 $86,426,032
QUARTER ENDED 4/30/99
- Shares sold 994,953 $ 7,620,458
- Commissions paid (480,732)
- Shares repurchased (62,700) (469,938)
---------- -----------
19,066,954 $93,095,819
---------- -----------
---------- -----------
</TABLE>
As of May 31, 1999, IRET had 3,972 shareholder accounts, no shareholder held
5% or more of the 18,988,803 Shares of Beneficial Interest outstanding on
5-31-99. IRET has no other classes of stock and there were no warrants,
stock options or other contractual arrangements requiring the issuance of
its stock (other than "exchange rights" of holders of Limited Partnership
Units in IRET Properties, the operating partnership of IRET).
14
<PAGE>
IRET has paid quarterly dividends since July 1, 1971. Dividends Paid during
the past two fiscal years were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
1998 1999
---- ----
<S> <C> <C>
July 1st $.10125 $.11
October 1st .1030 .115
January 16th (15th) .105 .12
April 1st .107 .1225
------- ------
$.41625 $.4675
</TABLE>
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30
--------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
(Restated)
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data
Revenue $ 39,927,262 $ 32,407,545 $ 23,833,981 $ 18,659,665 $ 13,801,123
Operating Income 6,401,676 4,691,198 3,499,443 3,617,807 3,560,318
Gain on repossession/sale
of investments 1,947,184 465,499 398,424 994,163 407,512
Minority interest of unitholders
in operating partnership (744,725) (141,788) (18) 0 0
Net Income 7,604,135 5,014,909 3,897,849 4,611,970 3,967,830
Balance Sheet Data
Total real estate investments $280,311,442 $213,211,369 $177,891,168 $122,377,909 $ 84,005,635
Total assets 291,493,311 224,718,514 186,993,943 131,355,638 94,616,744
Shareholders' equity 85,783,294 68,152,626 59,997,619 50,711,920 37,835,654
Consolidated Per Share Data
Net income $.33 $.29 $.25 $.30 $.34
Gain on repossession/sale
of investments .11 .03 .03 .08 .04
Dividends .47 .42 .39 .37 .34
Tax status of dividend
capital gain 6.3% 2.9% 21.0% 1.6% 11.0%
Ordinary income 76.0% 97.1% 79.0% 98.4% 89.0%
Return of capital 17.7% 0.0% 0.0% 0.0% 0.0%
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL: IRET has operated as a "real estate investment trust" under Sections
856-858 of the Internal Revenue Code since its formation in 1970 and is in
the business of owning income-producing real estate investments.
On February 1, 1997, IRET restructured itself as an Umbrella Partnership Real
Estate Investment Trust (UPREIT). IRET, through
15
<PAGE>
its wholly owned subsidiary, IRET, Inc., is the general partner of IRET
Properties, a North Dakota limited partnership (the "Operating
Partnership"). All business operations for IRET are conducted through the
Operating Partnership. No other material change in IRET's business is
contemplated at this time.
This discussion and analysis should be read in conjunction with the attached
audited financial statements prepared by Brady Martz & Associates, certified
public accountants, which firm has served as the auditor for IRET since its
inception.
Certain matters included in this discussion are forward-looking statements
within the meaning of federal securities laws. Although IRET believes that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that the expectations
expressed will actually be achieved. Many factors may cause actual results
to differ materially from IRET's 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.
RESULTS OF OPERATIONS:
FISCAL YEAR 1999 COMPARED TO FISCAL YEARS 1998 AND 1997.
OVERVIEW.
A continuation of stable occupancy rates for IRET's apartment communities
and good results from newly acquired properties resulted in another year
of significant increases in Funds From Operations and earnings for IRET's
29th year, which ended April 30, 1999. Total assets and shareholder
equity also increased materially.
FUNDS FROM OPERATIONS.
Funds From Operations of the Operating Partnership(taxable income
increased by non-cash deductions of real estate asset depreciation and
amortization, and reduced by capital gain income and other extraordinary
income items) for Fiscal 1999 increased to $11,778,502 ($.6753 per
share), compared to $9,447,425 ($.6042 per share) for Fiscal 1998 and
$7,144,622 ($.51 per share) received in Fiscal 1997. These increases in
Funds From Operations resulted primarily from increased revenues from
existing and newly acquired rental properties as detailed below.
NET INCOME.
The Operating Partnership's income for Fiscal Year 1999 increased to
$7,604,135 from the $5,014,909 earned in Fiscal 1998 and the $3,897,849
earned in Fiscal 1997. On a per share basis, net income was $.33 per
share in Fiscal 1999, compared to $.29 in Fiscal 1998 and $.25 in Fiscal
1997.
16
<PAGE>
These increases in net income resulted from increased capital gains
and rental income, which is detailed below.
REVENUES.
Total revenues of the Operating Partnership for Fiscal 1999 were
$39,927,262, compared to $32,407,545 in Fiscal 1998 (an increase of 23%)
and $23,833,981 in Fiscal 1997. The increase in revenues received during
Fiscal 1999 in excess of the prior year revenues was $7,519,717. This
increase resulted from:
<TABLE>
<S> <C>
Rent from 12 properties acquired/completed
in Fiscal 1999 $3,182,170
Rent from 7 properties acquired in Fiscal 1998
in excess of that received in Fiscal 1998 3,245,774
An increase in rental income on existing properties 1,081,995
An decrease in rent on Smith Home Furnishing
Building (bankruptcy of tenant) (30,877)
A decrease in rent - properties sold during 1999 (388,091)
A decrease in interest income 429,016
----------
$7,519,717
</TABLE>
The increase in revenues received during Fiscal 1998 in excess of
that received during Fiscal 1997 was $8,573,564. This increase
resulted from:
<TABLE>
<S> <C>
Rent from 7 properties acquired in Fiscal 1998 $2,658,085
Rent from 11 properties acquired in Fiscal 1997
in excess of that received in Fiscal 1997 5,310,670
An increase in rental income on existing properties 893,976
A increase in rent on on Smith Home Furnishing
Building (bankruptcy of tenant) 54,021
A decrease in rent - properties sold during 1997 (194,534)
An increase in interest income (148,654)
----------
$8,573,564
</TABLE>
As shown by the above analysis, the Fiscal 1999 and 1998 increases in
revenues resulted primarily from the addition of new real estate
properties to the operating partnership's portfolio. Rents received on
properties owned at the beginning of Fiscal 1998 increased by $893,976
(2.2%) in Fiscal 1998 and another $1,081,995 (2.1%) in Fiscal 1999, and
the occupancy level for those properties increased from 90% during Fiscal
1997 to 94% in Fiscal 1998 and to 95% in Fiscal 1999. Thus, the new
properties acquired during Fiscal Fiscal Years 1998 and 1999 generated
most of the new revenues during
17
<PAGE>
the past two years.
CAPITAL GAINS.
The Operating Partnership realized capital gain income for Fiscal
1999 of $1,947,184.
This compares to $465,499 of capital gain income recognized
in Fiscal 1998 and the $398,424 recognized in Fiscal 1997.
IRET will continue to seek to market several of its older
and smaller apartment properties.
NET INCOME. The $2,589,226 increase in net taxable
income for Fiscal 1999 over the net income earned in the
prior fiscal year resulted from:
<TABLE>
<S> <C>
An increase in gain from sale of investments $ 1,481,685
An increase in net rental income (rents, less utilities,
maintenance, taxes, insurance and management) 4,357,772
A increase in interest income 429,016
An increase in interest expense (1,622,877)
An increase in depreciation expense (1,174,967)
An increase in operating expenses and advisory
trustee services (229,897)
An increase in amortization expense (48,569)
An increase in Minority interest of
Operating Partnership Income (602,937)
-----------
$ 2,589,226
</TABLE>
The $1,117,060 increase in net taxable income for Fiscal 1998 over
the net income earned in the prior fiscal year resulted from:
<TABLE>
<S> <C>
An increase in gain from sale of investments $ 67,075
An increase in net rental income (rents, less utilities,
maintenance, taxes, insurance and amangement) 5,733,442
A decrease in interest income (148,654)
An increase in interest expense (2,840,328)
An increase in depreciation expense (1,207,316)
An increase in operating expenses and advisory
trustee services (299,869)
An increase in amortization expense (45,520)
An increase in Minority interest of
Operating Partnership Income (141,770)
-----------
$ 1,117,060
</TABLE>
RESULTS FROM FULLY STABILIZED PROPERTIES. IRET defines fully
stabilized properties as those both owned at the beginning of
the prior Fiscal Year AND having completed the rent-up phase
(90% occupancy). "Same store" results of these properties for
Fiscal 1999 and 1998 were as follows:
18
<PAGE>
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998 %Increase
----------- ----------- ---------
<S> <C> <C> <C>
Scheduled Rent $28,777,572 $28,237,875 1.91%
Actual Collected Rent 28,501,453 27,230,777 4.67%
Utilities & Maintenance 4,557,793 4,254,657 7.12%
Management 2,361,905 2,204,936 7.12%
Taxes & Insurance 3,009,579 2,912,047 3.35%
----------- ----------- ---------
Total Operating Expense $ 9,929,277 $ 9,371,640 5.95%
"Same Store"
Net Operating Income $18,572,176 $17,859,137 3.99%
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
PROPERTY ACQUISITIONS. The Operating Partnership added
$62,455,508 of real estate investments to its portfolio during
Fiscal 1999, compared to the $39,014,222 added in the prior
year, as detailed below:
FISCAL 1999 PROPERTY ACQUISITIONS
COMMERCIAL:
<TABLE>
<S> <C>
Edgewood Vista, Sioux Falls, SD $ 965,000
(Assisted Living)
Edgewood Vista, Billings, MT $ 965,000
(Assisted Living)
Corner Express, Minot, ND
(Convenience Store) $ 1,190,432
Viromed, Eden Prairie, MN
(Office/Laboratory) $ 4,826,310
Ameritrade Headquarters, Omaha, NE
(Office) $ 8,283,977
</TABLE>
APARTMENTS:
<TABLE>
<CAPTION>
Units Community Name
---- --------------
<S> <C> <C>
182 Heritage Manor, Rochester, MN $ 7,371,208
64 Westwood Park, Bismarck, ND $ 2,025,455
67 **Country Meadows II, Billings, MT $ 1,321,962
60 Clearwater, Boise, ID $ 3,786,463
67 **Legacy III, Grand Forks, ND $ 2,260,345
100 Van Mall Woods, Vancouver, WA $ 6,021,312
27 **The Meadows by IRET, Jamestown, ND $ 1,502,301
165 Castle Rock, Billings, MT $ 5,614,223
67 Cottonwood II, Bismarck, ND $ 4,645,444
204 Ivy Club, Vancouver, WA $11,676,076
----- -----------
1003 $62,455,508
</TABLE>
** Property not in service on 4/30/99. Additional costs to be incurred
19
<PAGE>
FISCAL 1998 PROPERTY ACQUISITIONS
COMMERCIAL:
<TABLE>
<S> <C>
Edgewood Vista, East Grand Forks,
MN (Assisted Living) $ 892,500
Edgewood Vista, Minot, ND $ 6,191,410
(Assisted Living)
</TABLE>
APARTMENTS:
<TABLE>
<CAPTION>
Units Community Name
---- --------------
<S> <C> <C>
125 Jenner Properties-Grand Forks (90),
Devils Lake (18) & Dickinson (17), ND $ 2,350,000
108 Kirkwood Manor-Bismarck, ND 3,175,000
248 Magic City Realty Portfolio 5,270,000
67 Country Meadows-Billings, MT 4,496,134
122 Park East Apartments-Fargo, ND 4,900,000
**67 Legacy Apartments (Phase II)-
Grand Forks, ND 3,489,937
67 Cottonwood Apartments-Bismarck, ND 4,522,347
64 Chateau Apartments-Minot, ND 2,364,090
*67 Cottonwood Apartments (Phase II)
Bismarck, ND 1,362,804
--- -----------
935 Total $39,014,222
</TABLE>
*Property not placed in service at April 30, 1998.
Additional costs are still to be incurred.
**Represents costs to complete a project started in
year ended April 30, 1997.
PROPERTY DISPOSITIONS. Real estate assets sold by the Operating
Partnership dring Fiscal 1998 and 1999 were as follows:
<TABLE>
<CAPTION>
Book Value &
Property Sold Sales Price Sales Costs Gain
------------- ----------- ----------- ----
<S> <C> <C> <C>
(Fiscal 1999)
Fairfield Apts.,
Marshall, MN $ 466,000 $ 385,878 $ 80,122
Superpumper,
Emerado, ND $ 297,000 $ 138,854 $ 158,146
Bison Apts.,
Jamestown, ND $1,760,000 $ 418,101 $1,341,899
Park Place Apts.,
Waseca, MN $ 960,000 $ 593,983 $ 366,017
---------
Installment Sale 1,000
---------
$1,947,184
----------
----------
20
<PAGE>
(Fiscal 1998)
Scottsbluff Apts.,
Scottsbluff, NE $ 940,000 $ 613,862 $ 326,138
Superpumper
Bottineau, ND $ 330,000 $ 246,421 $ 83,579
Superpumper
New Town, ND $ 250,000 $ 224,486 $ 25,414
---------
Installment & Misc. Sales $ 30,365
---------
$ 465,496
---------
---------
</TABLE>
DIVIDENDS. The following dividends were paid during Fiscal Years
1997, 1998 and 1999:
<TABLE>
<CAPTION>
Date 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C>
July 1 $.0975 $.10125 $.11
October 1, $.095 $.1030 $.115
January 15,(16th) $.0975 $.105 $.12
April 1, 1999 $.10 $.107 $.1225
-----------------------------
$.39 $.41625 $.4675
</TABLE>
The Fiscal 1999 dividends increased 12.3% over the
dividends paid during Fiscal Year 1998 and 19.9% over Fiscal 1997.
FUNDS FROM OPERATIONS. The funds derived during Fiscal 1999
by the Trust from its operations increased by 25% over the
prior year and by 65% from the Fiscal 1997 level ($11,778,502
in Fiscal 1999, versus $9,447,425 in 1998 and $7,144,604 in
1997). On a per share basis, Funds From Operations increased
to $.6753 per share from $.6042 in Fiscal 1998 (an increase of
12%) and the $.51 generated in Fiscal 1997. (IRET uses the
definition of "Funds From Operations" recommended by the National
Association of Real Estate Investment Trusts to mean "net income
(computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring
and sales of property, plus depreciation and amortization of
real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures calculated on the same basis." It
is emphasized that funds from operations as so calculated and
presented does not represent cash flows from operations as
defined under generally accepted accounting principles and should
not be considered as an alternative to net income as an
indication of operating performance or to cash flows as a measure
of liquidity or ability to fund all cash needs.) (See the
Consolidated Statements of Cash Flows in the Consolidated
Financial Statements attached hereto.)
The following is a comparison of dividends paid during the
past five fiscal years to Funds From Operations (as defined
above):
21
<PAGE>
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal
Item 1999 1998 1997 1996 1995(Restated)
- ---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C>
Net Income (GAAP) $7,604,135 $5,014,909 $3,897,849 $4,611,970 $3,967,830
Adjustments
Gain from Property
Sales (1,947,184) (465,499) (398,424) (994,163) (407,512)
---------- ---------- ---------- ---------- ----------
Operating Income $5,656,951 $4,549,410 $3,499,425 $3,617,807 $3,560,318
Plus Depreciation 5,966,874 4,791,907 3,584,591 2,261,724 1,767,294
Plus Amortization $ 154,677 106,108 60,588 97,900 20,659
---------- ---------- ---------- ---------- ----------
Funds from Operations $11,778,502 $9,447,425 $7,144,604 $5,977,431 $5,348,271
Dividends Paid $ 8,193,538 $6,518,627 $5,508,689 $4,439,034 $3,660,986
---------- ---------- ---------- ---------- ----------
$ 3,584,964 $2,928,798 $1,635,915 $1,538,397 $1,687,285
</TABLE>
Management expects that the Funds From Operations (as defined above) will
continue to improve during Fiscal 2000 and will continue to exceed
dividends paid in the coming year.
LIQUIDITY AND CAPITAL RESOURCES. Important investment and Financing events
in Fiscal 1999 were:
- The net proceeds from sale of Shares of Beneficial Interest under Best
Efforts offerings were $18,387,260;
- An additional $6,485,927 of equity capital was contributed to the
Operating Partnership in UPREIT transactions for a total increase of
equity capital of $24,873,187;
- Five property loans were refinanced at a lower interest rate than the
old loans. The new loans totalled $11,400,000. The payoff of the
old loans was $8,737,840, resulting in refinancing proceeds of
$2,662,110. At 4-30-99, the weighted interest rate on the
$175,071,069 of mortgage indebtedness owed by IRET was 7.12%.
- Nearly $65,000,000 of new real estate investments were acquired by the
Operating Partnership.
IRET's financial condition at the end of Fiscal 1999 continued at the very
strong level of its prior fiscal year.
- IRET's shareholder equity increased to $85,783,294 from $68,152,626 on
April 30, 1998, a gain of $17,630,668 (26%). Equity capital on April
30, 1997 was $59,997,619. These increases result from the sale of
Shares of Beneficial Interest and the reinvestment of dividends in new
shares.
- Liabilities of the Operating Partnership increased to $191,229,475
from $148,276,615 on April 30, 1998. IRET's liabilities on April 30,
1997, were $126,995,322.
- Total assets of the Operating Partnership increased to $291,493,311
from $224,718,514 on April 30, 1998. Total assets on April 30, 1997,
were $186,993,943.
- Cash and marketable securities were $7,412,236 compared to the year
earlier figure of $6,389,446 and $6,457,182 on April 30, 1997.
- In addition to its cash and marketable securities, IRET Properties has
unsecured line of credit agreements with First International Bank &
Trust, Bremer Bank and First Western Bank & Trust, all of Minot,
22
<PAGE>
North Dakota, of $11,500,000, none of which was in use on
April 30, 1999.
IMPACT OF INFLATION. The costs of utilities and other rental expenses continue
to increase, but in most areas, IRET has been able to increase rental income
sufficiently to cover inflationary increases in rental expense. Increases in
rental income are not precluded by long-term lease obligations except for a few
commercial properties subject to long-term net lease agreements. Thus, as
market conditions allow, rents will be increased to cover inflationary
expenses and to provide a better return to IRET.
ECONOMIC CONDITIONS. Fiscal 1999 saw continued stable economic conditions in
the northern plains states in which IRET operates. Occupancy rates for
residential properties increased slightly from the year earlier level.
However, the current economic outlook for much of IRET's trade area is guarded
due to a depressed farm economy. Continued low commodity prices and uncertain
weather will impact IRET's operating results.
YEAR 2000 COSTS. IRET has requested its principal vendors to inform it of
any anticipated problems associated with the Year 2000 issue for computer
hardware and software. IRET itself does not own or operate computer systems
and will have no direct costs to up-date such systems. However, IRET could
be impacted by computer failures of its third-party vendors. IRET has been
informed by these service providers (including its Advisor - Odell-Wentz &
Associates, LLC) that computer systems are now Year 2000 compliant. IRET
does not anticipate that the Year 2000 problem will have any material cost
to it.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in
the accompanying Index to Financial Statements and
Supplementary Data are incorporated herein by reference and
filed as a part of this report.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and Trustees of IRET as of April 30, 1999, were:
23
<PAGE>
<TABLE>
<CAPTION>
Name, Age Business Experience During Year Position
and Position Past Five Years Commenced
- ------------ --------------- ---------
<S> <C> <C>
*C. Morris Anderson President of North Hill Bowl, Inc.; 1970
Age 70 Director of Dakota Boys Ranch (25 yrs.);
Trustee Chairman of the Board, International Inn,
Inc. and Director, Norwest Bank - Minot,
N.A.
*Ralph A. Christensen Retired rancher; former 1970
Age 70 Director of First Bank - Minot, N.A.
Trustee and Chairman Chairman of IRET.
*John F. Decker Investment Advisor and 1998
Age 56 Managing Director, Piper Jaffray, Inc.
Trustee
*Mike F. Dolan Investor; Vice-Chairman of IRET. 1978
Age 88
Trustee & Vice-Chairman
*J. Norman Ellison, Jr. Businessman; Managing Partner of 1970
Age 76 Ellison Realty Co.; Former Director
Trustee of First Bank - Minot, N.A.
*Daniel L. Feist Realtor; Broker; Real Estate Developer; 1985
Age 67 Builder; General Contractor; President -
Trustee Owner Feist Construction & Realty;
Investor; Businessman, former Director
of First Bank - Minot, N.A.; Director,
N.D. Holdings, Inc. - Minot.
*Patrick G. Jones Investor 1986
Age 51
Trustee
*Jeff L. Miller Investor; Businessman; President of 1985
Age 55 M&S Concessions, Inc. and former
Trustee & Vice-Chairman president of Coca-Cola Bottling Co. of
Minot; former Director of First Bank -
Minot.
Roger R. Odell Realtor; President of IRET; Member in 1970
Age 73 Odell-Wentz & Associates, LLC (Advisor
Trustee, President to IRET); Director of Investors
and Advisor Management & Marketing, Inc. and Inland
National Securities, Inc.
Thomas A. Wentz, Sr. Attorney, Pringle & Herigstad, P.C.; 1970
Age 64 Member in Odell-Wentz & Associates, LLC
Vice-President (Advisor to IRET).
Thomas A. Wentz, Jr. Attorney, Pringle & Herigstad, P.C.; 1996
Age 33 General Partner of WENCO, a North Dakota
Trustee Limited Partnership.
Timothy P. Mihalick Realtor; Operations Manager of 1988
Age 40 Odell-Wentz & Associates, LLC (Advisor
Vice-President to IRET); Vice-President and Chief
Operating Officer of IRET.
24
<PAGE>
Diane K. Bryantt Controller of Odell-Wentz & Associates, 1997
Age 35 LLC (Advisor to IRET); Secretary of
Secretary IRET.
</TABLE>
* Unaffiliated Trustees.
Item 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information under the caption
"Remuneration and Transactions with Trustees and Advisor" in the Registrant's
definitive proxy statement relating to its annual meeting of shareholders to be
held on August 17, 1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
As of May 31, 1999, no person, nor any trustee or officer individually was
known by the Trust to own beneficially more than 5% of the outstanding Shares of
Beneficial Interest.
Collectively, the Trustees owned 8.23% of such shares on said date.
Additional information regarding security ownership is to be found in portions
of the Trust's definitive proxy statement for the 1999 annual meeting of
shareholders, incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information under the caption
"Remuneration and Transactions with Trustees and Advisor" in the Registrant's
definitive proxy statement relating to its annual meeting of shareholders to be
held August 17, 1999.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
See the Table of Contents to Financial Statements
and Supplemental Data.
2. Financial Statement Schedules
The following financial statement schedules should
be read in conjunction with the financial
statements incorporated by reference in Item 8 of
this Annual Report on Form 10-K405:
25
<PAGE>
I Marketable Securities - Other Investments
IV Noncurrent Indebtedness of Related Parties -
Mortgage Loans Receivable
X Supplemental Income Statement Information
XI Real Estate Owned and Accumulated
Depreciation
XII Investments in Mortgage Loans on Real Estate
XIII Other Investments - Partnerships
See the Table of Contents to Financial Statements
and Supplemental Data.
3. Documents Incorporated by Reference
Part of Form 10-K405
into which Document
Document is Incorporated
----------------------------- --------------------
Proxy Statement to be filed Part III
in connection with the annual
meeting of shareholders to be
held August 17, 1999
4. Exhibits
See the following list of exhibits.
(b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Date Filed Subject Matter
---------- --------------
<S> <C>
8/07/98 Sales Report for
Best Efforts Offering
Of Shares of Beneficial
Interest
10/13/98 Sales Report for
Best Efforts Offering
Of Shares of Beneficial
Interest
12/09/98 Sales Report for
Best Efforts Offering
Of Shares of Beneficial
Interest
4/15/99 Sales Report for
Best Efforts Offering
Of Shares of Beneficial
Interest
</TABLE>
26
<PAGE>
(c) The following is a list of Exhibits to the
Registrant's Annual Report on Form 10-K405 for the fiscal year
ended April 30, 1999. The Registrant will furnish a copy of
any exhibit listed below to any security holder of the
Registrant who requests it upon payment of a fee of 15 cents
per page. All Exhibits are either contained in this Annual
Report on Form 10-K405 or are incorporated by reference as
indicated below.
3(i) Second Restated Declaration of Trust of Investors Real
Estate Trust, dated February 10, 1999, and filed as
Exhibit 3(i) to Form S-11 Registration Statement
effective June 4, 1999 (SEC File No. 333-21945)
filed for the Registrant (File No. 0-14851) and
incorporated herein by reference.
3(ii) IRET Properties Partnership Agreement filed as
Exhibit 3(ii) to Form S-11 Registration Statement
effective March 14, 1997 (SEC File No. 333-21945)
filed for the Registrant (File No. 0-14851) and
incorporated herein by reference.
10 Advisory Agreement between the Registrant and
Odell-Wentz & Associates, L.L.C., filed as Exhibit
10 to said Form 10 and incorporated herein by
reference.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: July 20, 1999 By: /s/ Thomas A. Wentz, Sr.
-------------------------------------
Thomas A. Wentz, Sr.
Vice-President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Roger R. Odell President, Trustee and July 20, 1999
- --------------------------- Principal Executive Officer
Roger R. Odell
/s/ Thomas A. Wentz, Sr. Vice-President July 20, 1999
- ---------------------------
Thomas A. Wentz, Sr.
/s/ Timothy P. Mihalick Vice-President July 20, 1999
- ---------------------------
Timothy P. Mihalick
/s/ Diane K. Bryantt Secretary July 20, 1999
- ---------------------------
Diane K. Bryantt
/s/ Ralph A. Christensen Trustee and Chairman July 20, 1999
- ---------------------------
Ralph A. Christensen
/s/ Mike F. Dolan Trustee and Vice-Chairman July 21, 1999
- ---------------------------
Mike F. Dolan
/s/ Jeff L. Miller Trustee and Vice-Chairman July 23, 1999
- ---------------------------
Jeff L. Miller
Trustee July , 1999
- --------------------------- ---
C. Morris Anderson
Trustee July , 1999
- --------------------------- ---
J. Norman Ellison, Jr.
Trustee July , 1999
- --------------------------- ---
Daniel L. Feist
/s/ Patrick G. Jones Trustee July 21, 1999
- ---------------------------
Patrick G. Jones
Trustee July , 1999
- --------------------------- ---
John F. Decker
/s/ Thomas A. Wentz, Jr. Trustee July 21, 1999
- ---------------------------
Thomas A. Wentz, Jr.
</TABLE>
28
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
MINOT, NORTH DAKOTA
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
APRIL 30, 1999, 1998 AND 1997
AND
INDEPENDENT AUDITOR'S REPORT
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets 2-3
Consolidated Statements of Operations 4
Consolidated Statements of Shareholders' Equity 5
Consolidated Statements of Cash Flows 6-7
Notes to Consolidated Financial Statements 8-22
ADDITIONAL INFORMATION
Independent Auditor's Report on Additional Information 23
Marketable Securities 24
Supplemental Income Statement Information 25
Real Estate and Accumulated Depreciation 26-30
Investments in Mortgage Loans on Real Estate 31-33
Selected Financial Data 34
Gain From Property Dispositions 35
Mortgage Loans Payable 36-37
Significant Property Acquisitions 38
Schedules other than those listed above are omitted since
they are not required or are not applicable, or the required
information is shown in the financial statement or notes thereon.
Quarterly Results of Consolidated Operations (Unaudited) 39
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Trustees
Investor Real Estate Trust
and Subsidiaries
Minot, North Dakota
We have audited the accompanying consolidated balance sheets of Investors Real
Estate Trust and Subsidiaries as of April 30, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the years ended April 30, 1999, 1998 and 1997. These consolidated financial
statements are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis of our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Investors Real Estate Trust and Subsidiaries as of April 30, 1999 and 1998, and
the consolidated results of its operations and cash flows for the years ended
April 30, 1999, 1998 and 1997, in conformity with generally accepted accounting
principles.
/s/ Brady, Martz
BRADY, MARTZ & ASSOCIATES, P.C.
May 26, 1999
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<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
------------ ------------
<S> <C> <C>
REAL ESTATE INVESTMENTS
Property owned $295,825,839 $231,416,322
Less accumulated depreciation (26,112,399) (21,516,129)
------------ ------------
$269,713,440 $209,900,193
Mortgage loans receivable 10,721,214 3,438,308
Less discounts and allowances (123,212) (127,132)
------------ ------------
Total real estate investments $280,311,442 $213,211,369
------------ ------------
OTHER ASSETS
Cash $ 3,713,053 2,132,220
Marketable securities - held-to-maturity 2,964,434 3,536,538
Marketable securities - available-for-sale 734,749 720,688
Accounts receivable 77,438 55,326
Real estate deposits 300,900 2,493,713
Investment in partnership 0 6,705
Prepaid insurance 216,348 219,871
Tax and insurance escrow 1,761,195 1,254,068
Deferred charges 1,413,752 1,088,016
------------ ------------
TOTAL ASSETS $291,493,311 $224,718,514
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</TABLE>
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<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
LIABILITIES
Accounts payable and accrued expenses $ 4,388,270 $ 2,847,080
Notes payable 0 1,000,000
Mortgages payable 175,071,069 134,059,974
Investment certificates issued 11,770,136 10,369,561
-------------- -------------
Total liabilities $ 191,229,475 $ 148,276,615
-------------- -------------
MINORITY INTEREST OF UNITHOLDERS IN
OPERATING PARTNERSHIP $ 14,480,542 $ 8,289,273
-------------- -------------
SHAREHOLDERS' EQUITY
Shares of beneficial interest
(unlimited authorization, no
par value, 19,066,954 shares outstanding in 1999
and 16,391,412 shares outstanding in 1998) $ 93,095,819 $ 74,708,559
Accumulated distributions in excess of net income (7,255,958) (6,666,555)
Accumulated other comprehensive income (loss) (56,567) 110,622
-------------- -------------
Total shareholders' equity $ 85,783,294 $ 68,152,626
-------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 291,493,311 $ 224,718,514
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-3-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
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<S> <C> <C> <C>
REVENUE
Real estate rentals $ 38,785,287 $ 31,694,586 $ 22,972,368
Interest, discounts and fees 1,141,975 712,959 861,613
-------------- -------------- --------------
Total revenue $ 39,927,262 $ 32,407,545 $ 23,833,981
-------------- -------------- --------------
EXPENSES
Interest $ 12,101,981 $ 10,479,104 $ 7,638,776
Depreciation 5,966,874 4,791,907 3,584,591
Utilities and maintenance 6,356,483 5,142,459 3,741,877
Taxes and insurance 4,409,762 3,536,147 2,720,495
Property management expenses 3,288,267 2,642,977 1,870,435
Advisory and trustee services 927,063 745,907 559,149
Operating expenses 320,479 271,738 158,627
Amortization 154,677 106,108 60,588
-------------- -------------- --------------
Total expenses $ 33,525,586 $ 27,716,347 $ 20,334,538
-------------- -------------- --------------
OPERATING INCOME $ 6,401,676 $ 4,691,198 $ 3,499,443
GAIN ON SALE OF PROPERTIES 1,947,184 465,499 398,424
MINORITY INTEREST PORTION OF
OPERATING PARTNERSHIP INCOME (744,725) (141,788) (18)
-------------- -------------- --------------
NET INCOME $ 7,604,135 $ 5,014,909 $ 3,897,849
-------------- -------------- --------------
-------------- -------------- --------------
Net income per share (basic and diluted)
Operating income $ 0.33 $ 0.29 $ 0.25
Gain on sale of properties 0.11 0.03 0.03
-------------- -------------- --------------
Net income $ 0.44 $ 0.32 $ 0.28
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-4-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Accumulated
Shares of Distributions Other Total
Number of Beneficial in excess of Comprehensive Shareholder's
Shares Interest Net Income Income (Loss) Equity
------------- ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE MAY 1, 1996 13,258,908 $ 54,263,917 $ (3,551,997) $ 0 $ 50,711,920
Comprehensive income
Net income 0 0 3,897,849 0 3,897,849
Unrealized gain on
securities available for sale 0 0 0 86,505 86,505
--------------
Total comprehensive income $ 3,984,354
Dividends distributed 0 0 (5,508,689) 0 (5,508,689)
Dividends reinvested 554,681 3,579,744 0 0 3,579,744
Sale of shares 1,403,776 9,025,706 0 0 9,025,706
Shares repurchased (276,852) (1,795,416) 0 0 (1,795,416)
------------- ------------ ------------- ------------- --------------
BALANCE APRIL 30, 1997 14,940,513 $ 65,073,951 $ (5,162,837) $ 86,505 $ 59,997,619
Comprehensive income
Net income 0 0 5,014,909 0 5,014,909
Unrealized gain on
securities available-for-sale 0 0 0 24,117 24,117
--------------
Total comprehensive income $ 5,039,026
Dividends distributed 0 0 (6,518,627) 0 (6,518,627)
Dividends reinvested 639,799 4,290,541 0 0 4,290,541
Sale of shares 1,196,562 8,421,858 0 0 8,421,858
Shares repurchased (382,462) (3,077,791) 0 0 (3,077,791)
------------- ------------ ------------- ------------- --------------
BALANCE APRIL 30, 1998 16,391,412 $ 74,708,559 $ (6,666,555) $ 110,622 $ 68,152,626
Comprehensive income
Net income 0 0 7,604,135 0 7,604,135
Unrealized loss on
securities available-for-sale 0 0 0 (167,189) (167,189)
--------------
Total comprehensive income $ 7,436,946
Dividends distributed 0 0 (8,193,538) 0 (8,193,538)
Dividends reinvested 762,051 5,389,464 0 0 5,389,464
Sales of shares 2,368,504 16,284,684 0 0 16,284,684
Shares repurchased (455,013) (3,286,888) 0 0 (3,286,888)
------------- ------------ ------------- ------------- --------------
BALANCE APRIL 30, 1999 19,066,954 $ 93,095,819 $ (7,255,958) $ (56,567) $ 85,783,294
------------- ------------ ------------- ------------- --------------
------------- ------------ ------------- ------------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-5-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,604,135 $ 5,014,909 $ 3,897,849
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 6,121,551 4,898,015 3,645,179
Minority interest portion of operating
partnership income 744,725 141,788 18
Accretion of discount on contracts (2,920) (5,706) (7,698)
Gain on sale of properties (1,947,184) (465,499) (398,424)
Interest reinvested in investment certificates 408,097 349,791 288,517
Changes in other assets and liabilities:
(Increase) decrease in real estate deposits 2,192,813 (350,000) (100,000)
(Increase) decrease in other assets (11,884) 377,758 (415,274)
Increase in tax and insurance escrow (507,127) (3,599) (98,942)
Increase in deferred charges (480,413) (558,660) (180,779)
Increase (decrease) in accounts payable
and accrued expenses 1,541,190 (225,991) (69,119)
-------------- ------------- -------------
Net cash provided from operating activities $ 15,662,983 $ 9,172,806 $ 6,561,327
-------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of marketable
securities held-to-maturity $ 572,104 $ 518,921 $ 356,398
Principal payments on mortgage loans receivable 372,155 565,359 1,706,202
Proceeds from sale of property 435,787 1,482,046 0
Payments for acquisition and
improvement of properties (45,325,061) (22,894,602) (38,046,177)
Purchase of marketable securities available-for-sale (181,250) 0 (596,961)
Investment in mortgage loans receivable (7,655,061) (2,061,179) (2,835,212)
-------------- ------------- -------------
Net cash used for investing activities $(51,781,326) $(22,389,455) $(39,415,750)
-------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares, net of issue costs $ 16,284,684 $ 8,421,858 $ 9,025,706
Proceeds from investment certificates issued 4,591,528 3,283,248 4,225,004
Proceeds from mortgages payable 32,326,973 10,612,652 27,094,270
Proceeds from short-term lines of credit 0 12,900,000 8,450,000
Proceeds from sale of minority interest 0 0 1,000
Repurchase of shares and minority interest units (3,534,813) (3,077,791) (1,795,416)
Dividends paid (2,804,074) (2,228,086) (1,930,439)
Distributions paid to minority interest unitholders (791,458) (179,185) (16)
Redemption of investment certificates (3,599,050) (1,450,783) (2,128,686)
Principal payments on mortgage loans (3,774,614) (2,751,301) (2,634,017)
Payments on short-term lines of credit (1,000,000) (11,900,000) (8,450,000)
-------------- ------------- -------------
Net cash provided from financing activities $ 37,699,176 $ 13,630,612 $ 31,857,406
-------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH $ 1,580,833 $ 413,963 $ (977,017)
CASH AT BEGINNING OF YEAR 2,132,220 1,718,257 2,715,274
-------------- ------------- -------------
CASH AT END OF YEAR $ 3,713,053 $ 2,132,220 $ 1,718,257
-------------- ------------- -------------
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</TABLE>
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<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
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<S> <C> <C> <C>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Dividends reinvested $ 5,389,464 $ 4,290,541 $ 3,579,744
Real estate investment and mortgage
loans receivable acquired through
assumption of mortgage loans payable
and accrual of costs 12,458,735 10,463,677 19,575,635
Mortgage loan receivable transferred to
property owned 0 1,161,878 2,810,000
Proceeds from sale of properties
deposited directly with escrow agent 6,863,691 2,870,387 455,329
Properties acquired through the issuance of minority
interest units in the operating partnership 6,485,927 8,325,652 0
Interest reinvested directly in
investment certificates 408,097 349,791 288,517
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest paid on mortgages $ 10,998,722 $ 9,613,154 $ 6,773,978
Interest paid on investment certificates 895,214 657,966 508,686
-------------- -------------- --------------
$ 11,893,936 $ 10,271,120 $ 7,282,664
-------------- -------------- --------------
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
-7-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, 1998 AND 1997
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Investors Real Estate Trust qualifies under
Section 856 of the Internal Revenue Code as a real estate investment
trust. The Trust has properties located primarily throughout the
Upper Midwest, with principal offices located in Minot, North Dakota.
The Company invests in commercial and residential real estate, real
estate contracts, real estate related governmental backed securities
(GNMA), and equity securities in other real estate investment trusts.
Rental revenue from residential properties represents the major source
of revenues for the Trust.
Effective February 1, 1997, the Trust reorganized its structure in
order to convert to Umbrella Partnership Real Estate Investment Trust
(UPREIT) status. The Trust established an operating partnership (IRET
Properties, a North Dakota Limited Partnership) with a wholly owned
corporate subsidiary acting as its sole general partner (IRET, Inc., a
North Dakota Corporation). At that date, the Trust transferred
substantially all of its assets and liabilities to the operating
partnership in exchange for general partnership units.
The general partner has full and exclusive management responsibility
for the real estate investment portfolio owned by the operating
partnership. The partnership is operated in a manner that allows IRET
to continue its qualification as a real estate investment trust under
the Internal Revenue Code.
All limited partners of the operating partnership have "exchange
rights" allowing them, at their option, to exchange their limited
partnership units for shares of the Trust on a one for one basis. The
exchange rights are subject to certain restrictions including no
exchanges for at least one year following the acquisition of the
limited partnership units. The operating partnership distributes cash
on a quarterly basis in the amounts determined by the Trust which
results in each limited partner receiving a distribution equivalent to
the dividend received by a Trust shareholder.
BASIS OF PRESENTATION - The consolidated financial statements include
the accounts of Investors Real Estate Trust and all of its
subsidiaries in which it maintains a controlling interest. The Trust
is the sole shareholder of IRET, Inc. which is the general partner of
the operating partnership, IRET Properties. The trust is also the
sole shareholder of Miramont - IRET Inc. and Pine Cone - IRET Inc.,
both of which are invested in real estate. All material intercompany
transactions and balances have been eliminated in the consolidated
financial statements.
Prior to May 1, 1998, IRET Properties was also a general partner in
six limited partnerships, and due to the immaterial involvement of the
limited partners, had substantial influence over their operations.
These limited partnership were as follows:
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<PAGE>
NOTE 1 - (CONTINUED)
Eastgate Properties, Ltd.
Bison Properties, Ltd.
First Avenue Building, Ltd.
Sweetwater Properties, Ltd.
Hill Park Properties, Ltd.
Colton Heights, Ltd.
The above partnerships were consolidated in prior year financial
statements. Effective May 1, 1998, the related partnerships were
acquired by IRET Properties through the issuance of operating
partnership units as part of UPREIT transactions.
ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
PROPERTY OWNED - Real estate is stated at cost. Expenditures for
renewals and improvements that significantly add to the productive
capacity or extend the useful life of an asset are capitalized.
Interest, real estate taxes, and other development costs relating to
the acquisition and development of certain qualifying properties are
also capitalized. Expenditures for maintenance and repairs which do
not add to the value or extend useful lives are charged to expense as
incurred.
DEPRECIATION is provided to amortize the cost of individual assets
over their estimated useful lives using principally the straight-line
method. Useful lives range from 12 years for furniture and fixtures
to 20 - 40 years for buildings and improvements.
MORTGAGE LOANS RECEIVABLE are shown at cost less unearned discount.
Discounts on contracts are accreted using the straight-line method
over the term of the contract which approximates the effective
interest method. Deferred gain is recognized as income on the
installment method when principal payments are received. Interest
income is accrued and reflected in the related balance.
ALLOWANCE FOR LOAN LOSSES - The Trust evaluates the need for an
allowance for loan losses periodically. In performing its evaluation,
management assesses the recoverability of individual real estate loans
by a comparison of their carrying amount with their estimated net
realizable value.
MARKETABLE SECURITIES - The Trust's investments in securities are
classified as securities "held-to-maturity" and securities
"available-for-sale". The securities classified as
"available-for-sale" consist of equity shares in other real estate
investment trusts and are stated at fair value. Unrealized gains and
losses
-9-
<PAGE>
NOTE 1 - (CONTINUED)
on securities available-for-sale are recognized as direct increases or
decreases in shareholders' equity. Cost of securities sold are
recognized on the basis of specific identification. The securities
classified as "held-to-maturity" consist of Government National
Mortgage Association securities for which the Trust has positive
intent and ability to hold to maturity. They are reported at cost,
adjusted by amortization of premiums and accretion of discounts which
are recognized in interest income using the straight line method over
the period to maturity which approximates the effective interest
method.
REAL ESTATE DEPOSITS consist of funds held by an escrow agent to be
applied toward the purchase of real estate qualifying for gain
deferral as a like-kind exchange of property under section 1031 of the
Internal Revenue Code. It also consists of earnest money, or "good
faith deposits", to be used by the Trust toward the purchase of
property or the payment of loan costs associated with loan
refinancing.
INVESTMENT IN PARTNERSHIP - The Trust was accounting for its
investment in Chateau Properties, Ltd. under the equity method of
accounting, wherein the appropriate portion of the earnings or loss
was recognized annually. The Operating Partnership had a general
partnership interest in the limited partnership. Chateau Properties,
Ltd. had invested in real estate properties. During 1998, the real
estate in Chateau Properties, Ltd. was acquired through the issuance
of operating partnership units.
MINORITY INTEREST - Interests in the operating partnerships held by
limited partners are represented by operating partnership units. The
operating partnerships' income is allocated to holders of units based
upon the ratio of their holdings to the total units outstanding during
the period. Capital contributions, distributions, and profits and
losses are allocated to minority interests in accordance with the
terms of the operating partnership agreement.
NET INCOME PER SHARE - Effective May 1, 1998, the Trust adopted
Statement of Financial Accounting Standard No. 128, Earnings Per
Share. Basic net income per share is computed using the weighted
average number of shares outstanding. There is potential for dilution
of net income per share due to the conversion option of operating
partnership units. However, basic and diluted net income per share
are the same. The computation of basic and diluted net income per
share can be found in Note 13.
INCOME TAXES - The Trust intends to continue to qualify as a real
estate investment trust as defined by the Internal Revenue Code and,
as such, will not be taxed on the portion of the income that is
distributed to the shareholders, provided at least 95% of its real
estate investment trust taxable income is distributed and other
requirements are met. The Trust intends to distribute all of its
taxable income and realized capital gains from property dispositions
within the prescribed time limits and, accordingly, there is no
provision or liability for income taxes shown on the financial
statements.
-10-
<PAGE>
NOTE 1 - (CONTINUED)
UPREIT status allows non-recognition of gain by an owner of
appreciated real estate if that owner contributes the real estate to a
partnership in exchange for a partnership interest. The UPREIT
concept was born when the non-recognition provisions of Section 721 of
the Internal Revenue Code were combined with "Exchange Rights" which
allow the contributing partner to exchange the limited partnership
interest received in exchange for the appreciated real estate for the
Trust stock. Upon conversion of the partnership units to Trust
shares, a taxable event occurs for that limited partner. Income or
loss of the operating partnership shall be allocated among its
partners in compliance with the provisions of the Internal Revenue
Code Section 701(b) and 704(c).
REVENUE RECOGNITION - Residential rental properties are leased under
operating leases with terms generally of one year or less. Commercial
properties are leased to tenants for various terms exceeding one year.
Lease terms often include renewal options. In addition, a number of
the commercial leases provide for a base rent plus a percentage rent
based on gross sales in excess of a stipulated amount. Rental income
is recognized as it is earned, which is not materially different than
on a straight-line basis.
Profit on sales of real estate shall be recognized in full when real
estate is sold, provided:
a. The profit is determinable, that is, the collectibility of
the sales price is reasonably assured or the amount that
will be collectible can be estimated.
b. The earnings process is virtually complete, that is, the
seller is not obliged to perform significant activities
after the sale to earn the profit.
Based on the economic climate and the terms of many contracts, the
collectibility of the sales price was not reasonably assured as
required by generally accepted accounting principles. Consequently,
the Trust uses the installment method of accounting for profits on
several property sales as it more fairly reflects earned revenue.
Interest on mortgage loans receivable is recognized in income as it
accrues during the period the loan is outstanding. In the case of
non-performing loans, income is recognized as discussed in Note 4.
RECLASSIFICATIONS - Certain previously reported amounts have been
reclassified to conform with the current financial statement
presentation.
ACCOUNTING CHANGES - During the year ended April 30, 1999, the Trust
adopted SFAS No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting and disclosing
comprehensive income and its components. Besides net income, SFAS No.
130 requires the reporting of other comprehensive income, defined as
revenues, expenses, gains, and losses that under generally
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<PAGE>
NOTE 1 - (CONTINUED)
accepted accounting principles are not included in net income.
Unrealized gains/losses on securities available-for-sale represent the
only items presented as other comprehensive income. Comprehensive
income is presented in the Consolidated Statements of Shareholders'
Equity.
During the year ended April 30, 1999, the Trust adopted SFAS No 131,
"Disclosure About Segments of an Enterprise and Related Information."
This statement establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. Operating segments are defined as components of an
enterprise about which separate financial information is available
that is evaluated by the chief decision makers in deciding how to
allocate resources and in assessing performance. Operating segments
of the Trust would include commercial and residential rental
operations. Generally, segmental information follows the same
accounting policies utilized for consolidated reporting, except,
certain expenses, such as depreciation, are not allocated to segments
for management purposes. See Note 12 for the Trust's disclosure of
segment information in compliance with SFAS No. 131.
THE DIVIDEND REINVESTMENT PLAN is available to all shareholders of the
Trust. Under the Dividend Reinvestment Plan, shareholders may elect
for their dividends to be used by the plan administrator to acquire
additional shares on the NASDAQ Small Cap Market or, if not
available, directly from the Trust for approximately 95% of the market
price on the date of purchase.
NOTE 2 - OFF-BALANCE-SHEET RISK
The Trust had deposits at First Western Bank and Bremer Bank which
exceeded Federal Deposit Insurance Corporation limits by $3,128,203
and $665,255, respectively, at April 30, 1999
NOTE 3 - PROPERTY OWNED UNDER LEASE
Property consisting principally of real estate owned under lease is
stated at cost less accumulated depreciation and is summarized as
follows:
<TABLE>
<CAPTION>
April 30, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
Residential $228,574,976 $180,986,906
Less accumulated depreciation (19,002,784) (15,449,736)
------------ ------------
$209,572,192 $165,537,170
------------ ------------
Commercial $ 67,250 863 $ 50,429,416
Less accumulated depreciation (7,109,615) (6,066,393)
------------ ------------
$ 60,141,248 $ 44,363,023
------------ ------------
Remaining cost $269,713,440 $209,900,193
------------ ------------
------------ ------------
</TABLE>
There were no repossessions during the years ended April 30, 1999
and 1998.
-12-
<PAGE>
NOTE 3 - (CONTINUED)
The above cost of residential real estate owned included construction
in progress of $7,492,062 and $753,680 as of April 30, 1999 and 1998,
respectively. As of April 30, 1999 the trust expects to fund
approximately $5,000,000 during the upcoming year to complete these
construction projects and has a commitment to purchase the Great
Plains Software building for approximately $15,000,000. The Trust
also has outstanding offers to purchase selected properties as part of
their normal operations.
Construction period interest of $211,882, $220,573 and $269,513 has
been capitalized for the years ended April 30, 1999, 1998 and 1997,
respectively.
Residential apartment units are rented to individual tenants with
lease terms up to one year. Gross revenues from residential rentals
totaled $33,010,126, $27,231,714 and $18,935,111 for the years ended
April 20, 1999, 1998 and 1997, respectively.
Gross revenues from commercial property rentals totaled $5,775,161,
$4,462,872 and $4,037,258 for the years ended April 30, 1999, 1998 and
1997, respectively. Commercial properties are leased to tenants under
terms of leases expiring at various dates through 2013. Lease terms
often include renewal options. In addition, a number of the
commercial leases provide for a base rent plus a percentage rent based
on gross sales in excess of a stipulated amount. Rents based on a
percentage of sales totaled $101,032, $28,316 and $16,517 for the
years ended April 30, 1999, 1998 and 1997, respectively.
The future minimum lease payments to be received under these operating
leases for the commercial properties as of April 30, 1999, are as
follows:
<TABLE>
<CAPTION>
Year ending April 30,
<S> <C>
2000 $ 8,069,271
2001 8,061,284
2002 7,289,618
2003 6,992,587
2004 6,987,797
Thereafter 67,613,980
--------------
$ 105,014,537
--------------
--------------
</TABLE>
NOTE 4 - MORTGAGE LOANS RECEIVABLE
Mortgage loans receivable consists of nine contracts which are
collateralized by real estate. Contract terms call for monthly
payments of principals and interest. Interest rates range from 7 to
10.25%. Mortgage loans receivable have been evaluated for possible
losses considering repayment history, market value of underlying
collateral, deferred gains and economic conditions.
-13-
<PAGE>
NOTE 4 - (CONTINUED)
Future principal payments due under the mortgage loans contracts as of
April 30, 1999 are as follows:
<TABLE>
<CAPTION>
Year ending April 30,
<C> <C>
2000 $ 9,323,959
2001 85,035
2002 92,144
2003 202,017
2004 113,307
Later years 904,752
--------------
$ 10,721,214
--------------
--------------
</TABLE>
Details concerning mortgage loans receivable from related parties can
be found in Note 10.
There were no significant non-performing mortgage loans receivable as
of April 30, 1999 and 1998. Non-performing loans are recognized as
impaired in conformity with FASB Statement No. 114, ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN. The average balance of impaired
loans for the year ended April 30, 1999 and 1998 was not significant.
For impairment recognized in conformity with FASB Statement No. 114,
the entire change in present value of expected cash flows is reported
as bad debt expense in the same manner in which impairment initially
was recognized or as a reduction in the amount of bad debt expense
that otherwise would be reported. Additional interest income that
would have been earned on loans if they had not been non-performing
was not significant in 1999, 1998 or 1997. There was no interest
income on non-performing loans recognized on a cash basis for 1999,
1998 and 1997.
NOTE 5 - MARKETABLE SECURITIES
The amortized cost and estimated market values of marketable
securities held-to-maturity at April 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 Gross Gross
---- Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
Issuer
------
GNMA $ 2,964,434 $ 34,773 $ 21,723 $ 2,977,484
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
1998
----
Issuer
------
GNMA $ 3,536,538 $ 22,757 $ 0 $ 3,559,295
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
</TABLE>
The amortized cost and estimated market values of marketable
securities available-for-sale at April 30, 1999 and 1998 are as
follows:
-14-
<PAGE>
NOTE 5 - (CONTINUED)
<TABLE>
<CAPTION>
1999 Gross Gross
---- Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
<C> <C> <C> <C> <C>
Equity shares in
other REIT's $ 791,316 $ 82,524 $ 139,091 $ 734,749
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
1998
----
Equity shares in
other REIT's $ 610,666 $ 110,6227 $ 0 $ 720,688
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
</TABLE>
There were no realized gains or losses on sales of securities for the
years ended April 30, 1999, 1998 and 1997.
Marketable securities held-to-maturity consists of Governmental
National Mortgage Association (GNMA) securities bearing interest from
6.5% to 9.5% with maturity dates ranging from May 15, 2016 to
September 15, 2023. The following is a summary of the maturities of
securities held-to-maturity at April 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
--------------------------- -----------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Due after 10 years $ 791,316 $ 734,749 $ 3,536,538 $ 3,559,295
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
NOTE 6 - NOTES PAYABLE
As of April 30, 1999, the trust had lines of credit available from
three financial institutions. An unsecured line of credit was issued
by First Western Bank & Trust in the amount of $4,000,000 carrying an
interest rate equal to prime and maturing February 1, 2000. A second
unsecured line of credit from First International Bank & Trust was
issued in the amount of $2,500,000 carrying an interest rate equal to
prime and maturing September 15, 1999. A third unsecured line of
credit from Bremer Bank was issued in the amount of $5,000,000
carrying an interest rate equal to Bremer Financial Corp.'s reference
rate and maturing September 1, 1999. Interest payments are due monthly
on all three notes. As of April 30, 1999, the Trust had no unpaid
balances on any of their three lines of credit. As of April 30, 1998,
the Trust had an unpaid balance of $1,000,000 on the First Western
Bank & Trust line of credit and no unpaid balance on the First
International Bank & Trust line of credit. The Trust did not have a
line of credit available from Bremer Bank as of April 30, 1998.
-15-
<PAGE>
NOTE 7 - MORTGAGES PAYABLE
Mortgages payable as of April 30, 1999 included mortgages on
properties owned totaling $175,064,346 and mortgages of $6,723 on
property sold on contract. The carrying value of the related real
estate owned was $198,076,573 and the carrying value of the related
mortgage loans receivable was $159,965 as of April 30, 1999.
Mortgages payable as of April 30, 1998 included mortgages on
properties owned totaling $134,012,050 and mortgages of $47,924 on
property sold on contract. The carrying value of the related real
estate owned was $190,827,346 and the carrying value of the related
mortgage loans receivable was $209,260 as of April 30, 1998.
Monthly installments are due on the mortgages with interest rates
ranging from 6.47% to 9.75% and with varying maturity dates through
November 30, 2034.
Of the mortgages payable, the balances of fixed rate mortgages totaled
$138,616,556 and $85,899,604, and the balances of variable rate
mortgages totaled $36,454,513 and $48,160,370 as of April 30, 1999 and
1998, respectively.
The aggregate amount of required future principal payments on
mortgages payable is as follows:
<TABLE>
<CAPTION>
Years ending April 30,
<S> <C>
2000 $ 4,257,321
2001 4,560,488
2002 4,897,046
2003 8,353,234
2004 5,197,797
Later years 147,805,183
--------------
Total payments $ 175,071,069
--------------
--------------
</TABLE>
NOTE 8 - INVESTMENT CERTIFICATES ISSUED
The Trust has placed investment certificates with the public. The
interest rates vary from 6% to 11% per annum, depending on the term of
the security. Total securities maturing within fiscal years ending
April 30, are shown below. Interest is paid annually, semiannually,
or quarterly on the anniversary date of the security.
<TABLE>
<CAPTION>
Due in years ending April 30
----------------------------
<S> <C>
2000 $ 7,908,954
2001 896,483
2002 902,368
2003 562,451
2004 1,466,151
Thereafter 33,729
--------------
$ 11,770,136
--------------
--------------
</TABLE>
-16-
<PAGE>
NOTE 9 - DEFERRED GAIN FROM PROPERTY DISPOSITIONS
Deferred gain represents gain from property dispositions that have
been reported on the installment method. With the installment method
of reporting, the proportionate share of the gain is recognized at the
point cash is received. Deferred gain recognized on the installment
basis was $1,000, $16,713 and $146,361 for the years ended April 30,
1999, 1998 and 1997, respectively.
NOTE 10 - TRANSACTIONS WITH RELATED PARTIES
Mr. Roger R. Odell and Mr. Thomas A. Wentz, Sr., officers and
shareholders of the Trust are partners in Odell-Wentz & Associates,
the advisor to the Trust. Under the advisory Contract between the
Trust and Odell-Wentz & Associates, the Trust pays an advisor's fee
based on the net assets of the Trust and a percentage fee for
investigating and negotiating the acquisition of new investments. For
the year ended April 30, 1999, Odell-Wentz & Associates received total
fees under said agreement of $951,234. The fees for April 30, 1998
were $740,393 and for April 30, 1997 were $667,367.
For the years ended April 30, 1999, 1998 and 1997, the Trust has
capitalized $195,019, $141,468 and $177,834, respectively, of these
fees, with the remainder of $756,215, $598,925 and $489,533,
respectively, expensed as advisory and trustee fees on the statement
of operations. The advisor is obligated to provide office space,
staff, office equipment, computer services and other services
necessary to conduct the business affairs of the Trust.
Investors Management and Marketing (IMM) provides property management
services to the Trust. Roger R. Odell is a shareholder in IMM. IMM
received $609,783, $530,678 and $408,904 for services rendered for
years ended April 30, 1999, 1998 and 1997, respectively.
Inland National Securities is a corporation that provides underwriting
services in the sale of additional shares for the Trust. Roger R.
Odell is also a shareholder in Inland National Securities. Fees for
services totaled $157,392, $171,755 and $291,143 for the years ended
April 30, 1999, 1998 and 1997, respectively.
The Trust paid fees and expense reimbursements to the law firm in
which Thomas A. Wentz, Jr. is a partner totaling $33,022, $62,293 and
$36,045 for the years ended April 30, 1999, 1998 and 1997,
respectively. Thomas A. Wentz, Jr. is a trustee of the Trust.
Investment certificates issued by the Trust to officers and trustees
totaled $2,138,758, $1,219,457 and $519,528, at April 30, 1999, 1998
and 1997, respectively.
The Trust issued 334,172 limited partnership units at $7.20/unit to
Roger R. Odell and C. Morris Anderson upon the completion of the
UPREIT transaction with Magic City Realty during the year ended April
30, 1998. Mr. Odell and Mr. Anderson owned all of Magic City Realty.
Mr. Anderson is also a trustee of the Trust.
-17-
<PAGE>
NOTE 11 - MARKET PRICE RANGE OF SHARES
Since October 17, 1997, Investors Real Estate Trust traded shares on
the NASDAQ Small Capital Market. For the year ended April 30, 1998 a
total of 812,498 shares were traded in 445 separate trades. The high
trade price during the period was 7.41, low was 6.56, and the closing
price on April 30, 1998 was 7.12. For the year ended April 30, 1999,
a total of 1,862,187 shares were traded in 1,017 separate trades. The
high trade price during the period was 14.00, low was 6.50, and the
closing price on April 30, 1999 was 7.50.
Prior to October 17, 1997, Investors Real Estate Trust shares were
traded on Over-the-Counter-Market. The price range is as follows:
<TABLE>
<CAPTION>
Bid Ask
----------------- -----------------
Low High Low High
------- ------ -------- -------
<S> <C> <C> <C> <C>
May 1, 1996 to April 30, 1997 $ 6.44 6.62 7.00 7.20
May 1, 1997 to October 17, 1997 6.62 6.85 7.20 7.45
</TABLE>
NOTE 12 - SEGMENT DATA
The following information summarizes the Trust's segment reporting for
Residential and Commercial properties along with reconciliations to
the consolidated financial statements:
<TABLE>
<CAPTION>
Year Ending April 30, 1999
--------------------------
Segment revenue Commercial Residential Total
------------ ------------- -------------
<S> <C> <C> <C>
Rental revenue $ 5,775,161 $ 33,010,126 $ 38,785,287
------------ ------------- -------------
Segment expenses
Mortgage interest $ 2,417,316 $ 8,782,600 $ 11,199,916
Utilities and maintenance 113,374 6,243,109 6,356,483
Taxes and insurance 91,003 4,318,759 4,409,762
Property management 60,612 3,227,655 3,288,267
------------ ------------- -------------
$ 2,682,206 $ 22,572,123 $ 25,254,428
------------ ------------- -------------
Segment gross profit $ 3,092,856 $ 10,438,003 $ 13,530,859
------------ -------------
------------ -------------
Reconciliation to consolidated operations:
Interest discounts and fee revenue 1,141,975
Other interest expense (902,065)
Depreciation (5,966,874)
Advisory and trust fees (927,063)
Operating expenses (320,479)
Amortization (154,677)
-------------
Consolidated operating income $ 6,401,676
-------------
-------------
</TABLE>
-18-
<PAGE>
NOTE 12 - (CONTINUED)
<TABLE>
<CAPTION>
April 30, 1999
--------------
Segment Assets Commercial Residential Total
------------- -------------- --------------
<S> <C> <C> <C>
Property owned $ 67,250,863 $ 228,574,976 $ 295,825,839
Less accumulated depreciation (7,109,615) (19,002,784) (26,112,399)
------------- -------------- --------------
Total consolidated property owned $ 60,141,248 $ 209,572,192 $ 269,713,440
------------- -------------- --------------
------------- -------------- --------------
Year Ending April 30, 1998
--------------------------
Segment revenue Commercial Residential Total
------------- -------------- --------------
Rental revenue $ 5,775,161 $ 25,919,425 $ 31,694,586
------------- -------------- --------------
Segment expenses
Mortgage interest $ 2,048,990 $ 7,665,969 $ 9,714,959
Utilities and maintenance 113,374 5,029,085 5,142,459
Taxes and insurance 229,696 3,306,451 3,536,147
Property management 50,700 2,592,277 2,642,977
------------- -------------- --------------
$ 2,442,760 $ 18,593,782 $ 21,036,542
------------- -------------- --------------
Segment gross profit $ 3,332,401 $ 7,325,643 $ 10,658,044
------------- --------------
------------- --------------
Reconciliation to consolidated operations:
Interest discounts and fee revenue $ 712,959
Other interest expense (764,145)
Depreciation (4,791,907)
Advisory and trust fees (745,907)
Operating expenses (271,738)
Amortization (106,108)
--------------
Consolidate operating income $ 4,691,198
--------------
--------------
April 30, 1998
--------------
Segment Assets Commercial Residential Total
------------- -------------- --------------
Property owned $ 50,429,416 $ 180,986,906 $ 231,416,322
Less accumulated depreciation (6,066,393) (15,449,736) (21,516,129)
------------- -------------- --------------
Total consolidated property owned $ 44,363,023 $ 165,537,170 $ 209,900,193
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
-19-
<PAGE>
NOTE 12 - (CONTINUED)
<TABLE>
<CAPTION>
Year Ending April 30,1997
-------------------------
Segment revenue Commercial Residential Total
------------- -------------- --------------
<S> <C> <C> <C>
Rental revenue $ 4,063,284 $ 18,909,084 $ 22,972,368
------------- -------------- --------------
Segment expenses
Mortgage interest 1,670,216 5,406,681 7,076,897
Utilities and maintenance 254,248 3,487,629 3,741,877
Taxes and insurance 225,810 2,494,685 2,720,495
Property management 45,249 1,825,186 1,870,435
------------- -------------- --------------
$ 2,195,523 $ 13,214,181 $ 15,409,704
------------- -------------- --------------
Segment gross profit $ 1,867,761 $ 5,694,903 $ 7,562,664
------------- --------------
------------- --------------
Reconciliation to consolidated operations:
Interest discounts and fee revenue 861,613
Other interest expense (561,879)
Depreciation (3,584,591)
Advisory and trust fees (559,149)
Operating expenses (158,627)
Amortization (60,588)
--------------
Consolidated operating income $ 3,499,443
--------------
--------------
April 30, 1997
- --------------
Segment Assets Commercial Residential Total
------------- -------------- --------------
Property owned $ 42,241,096 $ 149,643,413 $ 191,884,509
Less accumulated depreciation (5,102,464) (11,845,692) (16,948,156)
------------- -------------- --------------
Total consolidated property owned $ 37,138,632 $ 137,797,721 $ 174,936,353
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
-20-
<PAGE>
NOTE 13 - EARNINGS PER SHARE
Basic earnings per share are computed by dividing the earnings
available to stockholders by the weighted average number of shares
outstanding during the period. Diluted earnings per share reflect per
share amounts that would have resulted if potential dilutive
securities had been converted to shares. Operating partnership units
can be exchanged for shares on a one for one basis. The following
tables reconciles amounts reported in the consolidated financial
statements for the years ended April 30, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Numerator
Net income applicable to shares $ 7,604,135 $ 5,014,909 $ 3,897,849
----------- ----------- -----------
Numerator for basic earnings per share 7,604,135 5,014,909 3,897,849
Minority interest portion of operating
partnership income 744,725 141,788 18
----------- ----------- -----------
Numerator for diluted earnings per share $ 8,348,860 $ 5,156,697 3,897,867
----------- ----------- -----------
Denominator
Denominator for basic earnings per share
Weighted average shares 17,441,976 15,636,214 14,044,467
Effect of dilutive securities
Convertible operating partnership units 1,662,489 417,445 13
----------- ----------- -----------
Denominator for diluted earnings per share 19,104,465 16,053,659 14,044,480
----------- ----------- -----------
Basic earnings per share $ 0.44 $ 0.32 $ 0.28
----------- ----------- -----------
----------- ----------- -----------
Diluted earnings per share $ 0.44 $ 0.32 $ 0.28
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
-21-
<PAGE>
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value:
Mortgage loans receivable - Fair values are based on the
discounted value of future cash flows expected to be received for
a loan using current rates at which similar loans would be made
to borrowers with similar credit risk and the same remaining
maturities.
Cash - The carrying amount approximates fair value because of the
short maturity of those instruments.
Marketable securities - The fair values of these instruments are
estimated based on quoted market prices for these instruments.
Notes payable - The carrying amount approximates fair value
because of the short maturity of those notes.
Mortgages payable - For variable rate loans that re-price
frequently, fair values are based on carrying values. The fair
value of fixed-rate loans is estimated based on the discounted
cash flows of the loans using current market rates.
Investment certificates issued - The fair value is estimated
using a discounted cash flow calculation that applies interest
rates currently being offered on deposits with similar remaining
maturities.
Accrued interest payable - The carrying amount approximates fair
value because of the short-term nature of which interest will be
paid.
The estimated fair values of the Company's financial instruments are
as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- --------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Mortgage loan receivable $ 10,721,214 $ 10,721,214 $ 3,438,308 $ 3,438,308
Cash 3,713,053 3,713,053 2,132,220 2,132,220
Marketable securities
held-to-maturity 2,964,434 2,977,484 3,536,538 3,559,295
Marketable securities
available-for-sale 734,749 734,749 720,688 720,688
FINANCIAL LIABILITIES
Notes payable $ 0 $ 0 $ 1,000,000 $ 1,000,000
Mortgages payable 175,071,069 175,561,542 135,059,974 129,354,699
Investment certificates issued 11,770,136 11,619,938 10,369,561 10,202,603
Accrued interest payable 1,428,222 1,428,222 1,220,177 1,220,177
</TABLE>
-22-
<PAGE>
ADDITIONAL INFORMATION
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION
Board of Trustees
Investor Real Estate Trust
and Subsidiaries
Minot, North Dakota
Our report on our audit of the basic consolidated financial statements of
Investors Real Estate Trust and Subsidiaries for the years ended April 30, 1999,
1998 and 1997, appears on page 1. Those audits were made for the purpose of
forming an opinion on such consolidated financial statements taken as a whole.
The information on pages 24 through 38 related to the 1999, 1998 and 1997
consolidated financial statements is presented for purposes of additional
analysis and is not a required part of the basic consolidated financial
statements. Such information, except for information on page 39 that is marked
"unaudited" on which we express no opinion, has been subjected to the auditing
procedures applied in the audits of the basic consolidated financial statements,
and, in our opinion, the information is fairly stated in all material respects
in relation to the basic consolidated financial statements for the years ended
April 30, 1999, 1998 and 1997, taken as a whole.
We also have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Investors Real Estate Trust and
Subsidiaries as of April 30, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
two years ended April 30, 1996 and 1995, none of which is presented herein, and
we expressed unqualified opinions on those consolidated financial statements.
In our opinion, the information on page 34 relating to the 1996 and 1995
consolidated financial statements is fairly stated in all material respects in
relation to the basic consolidated financial statements from which is has been
derived.
/s/ Brady, Martz
BRADY, MARTZ & ASSOCIATES, P.C.
May 26, 1999
-23-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1999 AND 1998
<TABLE>
<CAPTION>
Schedule I
MARKETABLE SECURITIES
April 30, 1999 April 30, 1998
------------------------- -----------------------------
Principal Principal
Amount Market Amount Market
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
GNMA Pools $ 2,964,434 $ 2,977,484 $ 3,536,538 $ 3,559,295
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Cost Market Cost Market
----------- ----------- ------------ ------------
Equity shares in
other REIT's $ 791,316 $ 734,749 $ 610,066 $ 720,688
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
-24-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
FOR THE YEARS ENDED APRIL 30, 1999, 1998 AND 1997
Schedule X
SUPPLEMENTAL INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
Charged to Costs and Expenses
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Item
Maintenance and repairs $3,470,202 $2,832,772 $1,812,496
Taxes, other than payroll and
income taxes
Property taxes 4,025,560 3,162,656 2,515,631
Royalties * * *
Advertising costs * * *
</TABLE>
*Less than 1 percent of total revenues
-25-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1999
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
COST CAPITALIZATION
INITIAL COST TO TRUST SUBSEQUENT TO ACQUISITION
------------------------------- -------------------------------
BUILDING & CARRYING
APARTMENTS ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1112 32ND AVE SW $ 354,903 $ 50,000 $ 543,147 $ 21,605 $ 0
177 10TH AVE E-DICKINSON, ND 221,575 40,000 318,109 76,470 0
405 GRANT AVE-HARVEY, ND 0 13,584 157,211 54,914 0
4301-4313 9TH AVE SW-FARGO, ND 415,847 52,870 908,727 58,694 0
BEULAH CONDOS ND 0 6,360 336,589 128,500 0
BISON PROPERTIES 0 38,581 333,394 197,808 0
CANDLELIGHT APTS-FARGO, ND 473,605 80,040 757,977 61,075 0
CASTLE ROCK-BILLINGS, MT 3,946,539 736,000 4,375,683 561,514 0
CENTURY APTS-DICKINSON, ND 1,481,672 100,000 1,564,598 459,683 0
CENTURY APTS-WILLISTON, ND 2,508,160 200,000 3,166,750 542,834 0
CHATEAU APTS-MINOT, ND 1,625,659 122,000 2,242,090 42,020 0
CLEARWATER APTS-BOISE, ID 2,652,705 585,000 3,189,463 47,736 0
COUNTRY MEADOWS-BILLINGS, MT 2,609,222 245,624 3,638,442 9,855 120,821
COUNTRY MEADOWS PHASE II 0 245,623 1,897,131 0 0
COLTON HEIGHTS-MINOT, ND 313,877 80,000 734,286 111,759 0
COTTONWOOD LAKE-BISMARCK, ND 2,792,497 1,055,862 8,027,224 763,951 114,353
CRESTVIEW APTS-BISMARCK, ND 3,360,790 235,000 4,290,031 274,576 0
EASTGATE PROPERTIES 0 23,917 1,490,181 530,188 0
FOREST PARK ESTATES-G FORKS 3,849,741 810,000 5,579,164 731,736 0
HERITAGE MANOR-ROCHESTER, MN 5,014,255 403,256 6,967,952 50,769 0
HILL PARK PROPERTIES 1,365,554 224,750 2,562,296 237,113 0
IBM LAND-ROCHESTER, MN 0 11,871 0 0 0
IVY CLUB-VANCOUVER, WA 7,079,422 1,274,000 9,973,755 448,913 0
JENNER PROPERTIES 1,298,052 220,000 2,077,500 215,668 0
KIRKWOOD APTS-BISMARCK, ND 2,205,000 449,290 2,729,745 408,247 0
LEGACY APTS-GRAND FORKS, ND 6,404,073 1,361,855 8,886,258 360,264 224,180
LEGACY UNDERGROUND-G FORKS 0 725,277 2,260,345 0 0
MAGIC CITY APTS, MINOT, ND 2,546,829 532,000 4,738,000 158,774 0
MANDAN APTS, MANDAN, ND 818 20,000 236,500 32,921 0
MEADOWS-JAMESTOWN-INS. CLAIM 0 0 1,334,976 0 0
MEADOWS-JMSTWN-NEW CONST 0 167,325 452,685 0 0
MIRAMONT APTS-FT. COLLINS, CO 11,481,696 1,470,000 12,765,460 49,715 0
NEIGHBORHOOD APTS-CO SPRINGS 7,291,069 1,033,592 9,811,600 251,991 0
NORTH POINTE, BISMARCK, ND 1,678,718 143,500 1,996,726 139,262 123,687
OAK MANOR APTS-DICKINSON, ND 0 25,000 225,000 100,484 0
OAKWOOD ESTATES-SIOUX FALLS, SD 2,090,133 342,800 2,783,950 418,581 0
OXBOW-SIOUX FALLS, SD 3,311,700 404,072 4,494,441 90,760 0
PARK EAST APTS-FARGO, ND 3,466,359 83,000 4,082,665 785,662 0
PARK MEADOWS-WAITE PARK, MN 7,753,474 1,143,450 9,099,297 898,267 0
PARKWAY APTS-BEULAH, ND 0 7,000 40,738 74,320 0
PINE CONE APTS-FT. COLLINS, CO 10,472,304 904,545 12,167,093 145,282 0
POINTE WEST APTS-MINOT, ND 2,372,322 240,000 3,537,775 179,566 0
PRAIRIE WINDS APTS-S FALLS, SD 1,307,534 144,097 1,816,011 27,567 0
ROCKY MEADOWS 96-BILLINGS, MT 2,788,609 655,985 5,484,735 428,596 103,378
ROSEWOOD/OAKWOOD-S. FALLS 1,243,428 200,000 1,738,245 9,690 0
SOUTH POINTE-MINOT, ND 6,418,627 550,000 9,151,175 191,819 402,672
SOUTHVIEW APTS-MINOT, ND 0 185,000 468,585 59,543 0
SOUTHWIND APTS-GRAND FORKS, ND 4,048,673 400,000 5,033,683 278,671 0
SWEETWATER PROPERTIES 162,315 90,767 1,208,847 539,077 0
VAN MALL WOODS, VANCOUVER, WA 4,031,894 600,000 5,421,312 13,036 0
VIRGINIA APTS-MINOT, ND 0 37,600 163,036 30,527 0
WEST STONEHILL-ST CLOUD, MN 7,799,243 939,000 10,167,355 386,329 0
WESTWOOD PARK-BISMARCK, ND 1,254,294 161,114 1,717,304 249,443 0
WOODRIDGE APTS-ROCHESTER, MN 4,177,096 370,000 6,028,096 135,915 0
------------ ------------ ------------ ------------ ------------
$135,670,283 $ 20,240,607 $195,173,588 $ 12,071,690 $ 1,089,091
------------ ------------ ------------ ------------ ------------
</TABLE>
-26-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1999
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
LIFE ON WHICH
BUILDINGS LATEST INCOME
AND ACCUMULATED DATE STATEMENT
APARTMENTS LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED
- ---------- -------------- -------------- -------------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
1112 32ND AVE SW $ 50,000 $ 564,752 $ 614,752 $ 49,252 1996 24-40 YEARS
177 10TH AVE E DICKINSON 40,278 394,301 434,579 82,205 1989 24-40 YEARS
405 GRANT AVE HARVEY 14,674 211,036 225,710 37,196 1991 24-40 YEARS
4301-4313 9TH AVE SW FARGO 68,868 951,423 1,020,291 252,252 1988 5-40 YEARS
BEULAH CONDOS ND 78,339 393,110 471,449 323,402 1983 15-40 YEARS
BISON PROPERTIES 38,581 531,202 569,783 343,202 1972 25-40 YEARS
CANDLELIGHT APTS FARGO 80,040 819,052 899,092 128,130 1993 24-40 YEARS
CASTLE ROCK BILLINGS 736,000 4,937,197 5,673,197 46,470 1999 40 YEARS
CENTURY APTS DICKINSON 126,738 1,997,543 2,124,281 607,904 1986 35-40 YEARS
CENTURY APTS WILLISTON 274,971 3,634,613 3,909,584 1,263,633 1986 35-40 YEARS
CHATEAU APTS MINOT 122,000 2,284,110 2,406,110 60,360 1997 12-40 YEARS
CLEARWATER BOISE 585,000 3,237,199 3,822,199 50,368 1999 40 YEARS
COUNTRY MEADOWS BILLINGS 245,624 3,769,118 4,014,742 135,691 1996 40 YEARS
COUNTRY MEADOWS PHASE II 245,623 1,897,131 2,142,754 0 1999 N/A-CONST IN PROGRESS
COLTON HEIGHTS PROPERTIES 80,095 845,950 926,045 364,965 1984 33-40 YEARS
COTTONWOOD LAKE BISMARCK 1,055,862 8,905,528 9,961,390 172,173 1997 40 YEARS
CRESTVIEW APTS BISMARCK 235,000 4,564,607 4,799,607 610,281 1994 24-40 YEARS
EASTGATE PROPERTIES 28,639 2,015,647 2,044,286 1,376,073 1970 33-40 YEARS
FOREST PARK ESTS G FORKS 811,954 6,308,946 7,120,900 966,124 1993 24-40 YEARS
HERITAGE MANOR ROCHESTER 403,256 7,018,721 7,421,977 124,570 1999 40 YEARS
HILL PARK PROPERTIES 245,653 2,778,506 3,024,159 1,207,552 1985 33-40 YEARS
IBM LAND ROCHESTER 11,871 0 11,871 0 1999 N/A LAN
IVY CLUB VANCOUVER 1,274,000 10,422,668 11,696,668 54,423 1999 40 YEARS
JENNER PROPERTIES 1,357,209 1,155,959 2,513,168 98,005 1996 40 YEARS
KIRKWOOD APTS BISMARCK 449,290 3,137,992 3,587,282 130,417 1997 12-40 YEARS
LEGACY APTS GRAND FORKS 1,361,855 9,470,702 10,832,557 507,423 1996 24-40 YEARS
LEGACY UNDERGROUND G FORKS 725,277 2,260,345 2,985,622 0 1997 N/A-CONST IN PROGRESS
MAGIC CITY APTS MINOT 532,000 4,896,774 5,428,774 186,966 1997 12-40 YEARS
MANDAN APTS MANDAN 20,000 269,671 289,671 58,649 1989 24-40 YEARS
MEADOWS JMSTWN-INS CLAIM 0 1,334,976 1,334,976 0 1999 N/A-CONST IN PROGRESS
MEADOWS JMSTWN-NEW CONST 167,325 452,685 620,010 0 1999 N/A-CONST IN PROGRESS
MIRAMONT APTS FT COLLINS 1,470,000 12,815,175 14,285,175 801,792 1996 40 YEARS
NEIGHBORHOOD APTS CO SPRING 1,033,592 10,063,591 11,097,183 640,191 1996 40 YEARS
NORTH POINTE 49 BISMARCK 143,500 2,259,675 2,403,175 195,742 1995 24-40 YEARS
OAK MANOR APTS DICKINSON 29,012 321,472 350,484 63,163 1989 24-40 YEARS
OAKWOOD ESTS SIOUX FALLS 342,800 3,202,531 3,545,331 496,449 1993 24-40 YEARS
OXBOW SIOUX FALLS 404,073 4,585,200 4,989,273 512,778 1994 24-40 YEARS
PARK EAST APTS FARGO 83,000 4,868,327 4,951,327 142,292 1997 12-40 YEARS
PARK MEADOWS WAITE PARK 1,143,450 9,997,564 11,141,014 645,662 1997 40 YEARS
PARKWAY APTS BEULAH 11,816 110,242 122,058 17,555 1988 5-40 YEARS
PINE CONE APTS FT COLLINS 904,545 12,312,375 13,216,920 1,226,183 1994 40 YEARS
POINTE WEST APTS MINOT 240,000 3,717,341 3,957,341 498,446 1994 24-40 YEARS
PRAIRIE WINDS APTS S FALLS 144,097 1,843,577 1,987,674 296,874 1993 24-40 YEARS
ROCKY MEADOWS 96 BILLINGS 655,985 6,016,710 6,672,695 377,901 1996 40 YEARS
ROSEWOOD/OAKWOOD S FALLS 200,000 1,747,935 1,947,935 108,851 1996 40 YEARS
SOUTH POINTE MINOT 275,000 10,020,666 10,295,666 721,002 1995 24-40 YEARS
SOUTHVIEW APTS MINOT 185,000 528,128 713,128 60,658 1994 24-40 YEARS
SOUTHWIND APTS G FORKS 409,892 5,302,462 5,712,354 456,706 1996 24-40 YEARS
SWEETWATER PROPERTIES 94,270 1,744,421 1,838,691 1,012,925 1972 5-40 YEARS
VAN MALL WOODS VANCOUVER 600,000 5,434,347 6,034,347 73,671 1999 40 YEARS
VIRGINIA APTS MINOT 37,600 193,563 231,163 68,508 1987 27 1/2-40 YEARS
WEST STONEHILL ST. CLOUD 939,000 10,553,684 11,492,684 923,809 1995 40 YEARS
WESTWOOD PARK BISMARCK 161,114 1,966,747 2,127,861 35,926 1999 40 YEARS
WOODRIDGE APTS ROCHESTER 370,000 6,164,011 6,534,011 388,014 1996 40 YEARS
-------------- -------------- --------------- ---------------
$ 21,343,768 $207,231,208 $ 228,574,976 $ 19,002,784
-------------- -------------- --------------- ---------------
-------------- -------------- --------------- ---------------
</TABLE>
-27-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1999
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
COST CAPITALIZATION
INITIAL COST TO TRUST SUBSEQUENT TO ACQUISITION
---------------------------- ----------------------------
BUILDING & CARRYING
OFFICE BUILDINGS ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
- ---------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1ST AVENUE BUILDING $ 0 $ 30,000 $ 219,496 $ 589,341 $ 0
401 SOUTH MAIN MINOT 0 70,600 334,308 204,211 0
408 1ST ST SE MINOT 0 10,000 34,836 2,072 0
CREEKSIDE OFFICE BLDG BILLINGS 1,210,759 311,310 1,088,149 285,459 0
LESTER CHIROPRACTIC CLINIC 0 25,000 243,916 0 0
WALTERS 214 S MAIN MINOT 0 27,055 76,076 8,809 0
------------ ------------ ------------ ------------ ------------
$ 1,210,759 $ 473,965 $ 1,966,781 $ 1,089,892 $ 0
------------ ------------ ------------ ------------ ------------
<CAPTION>
COMMERCIAL
- ----------
<S> <C> <C> <C> <C> <C>
AMERICA'S BEST FURNITURE $ 3,453,722 $ 765,000 $ 4,874,576 $ 152,606 $ 0
AMERITRADE OMAHA, NE 6,150,000 326,500 7,873,500 83,977 0
ARROWHEAD SHOPPING CENTER 0 100,359 1,063,925 1,666,880 0
BARNES & NOBLE FARGO 2,032,279 540,000 2,752,012 0 0
BARNES & NOBLE OMAHA 2,201,636 600,000 3,099,101 0 0
CARMIKE THEATRE GRAND FORKS 1,945,022 183,515 2,225,585 69,569 67,068
COMPUTER CITY KENTWOOD, MI 1,456,644 225,000 1,888,574 0 0
CORNER C-STORE MINOT 869,944 195,000 999,432 5,910 0
EDGEWOOD VISTA BILLINGS 705,332 130,000 837,405 12,813 0
EDGEWOOD VISTA E. GRAND FORKS 605,008 25,000 874,821 0 0
EDGEWOOD VISTA MINOT 4,248,353 260,000 1,835,335 4,180,596 0
EDGEWOOD VISTA MISSOULA 609,135 108,900 853,528 0 0
EDGEWOOD VISTA SIOUX FALLS 707,751 130,000 838,366 6,373 0
GREAT PLAINS SOFTWARE FARGO 0 125,501 283,199 0 0
HUTCHINSON TECH S FALLS 3,177,752 244,800 4,029,426 154,800 0
LINDBERG BLDG EDEN PRAIRIE 1,178,965 198,000 1,154,404 103,385 0
MINOT PLAZA MINOT 0 50,000 452,898 6,181 0
PETCO FARGO 1,058,364 324,148 873,080 54,461 27,245
PIONEER SEED MOORHEAD 278,123 56,925 548,075 48,876 0
STONE CONTAINER FARGO 2,884,434 440,251 4,319,924 149,155 89,156
SUPERPUMPER CROOKSTON 0 13,125 214,153 201,499 0
SUPERPUMPER GRAND FORKS 0 80,000 405,007 0 0
SUPERPUMPER LANGDON 0 59,674 151,500 28,038 0
SUPERPUMPER SIDNEY 0 12,000 108,600 0 0
VIRO-MED EDEN PRAIRIE 3,120,000 666,000 4,160,310 37,324 0
WEDGEWOOD SWEETWATER, GA 1,500,840 334,346 2,475,655 1,161,878 0
------------ ------------ ------------ ------------ ------------
$ 38,183,304 $ 6,194,044 $ 49,188,391 $ 8,124,321 $ 183,469
------------ ------------ ------------ ------------ ------------
TOTALS $175,064,346 $ 26,908,616 $246,358,760 $ 21,285,903 $ 1,272,560
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
-28-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1999
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
LIFE IN WHICH
BUILDINGS LATEST INCOME
and ACCUMULATED DATE STATEMENT
OFFICE BUILDINGS LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED
- ---------------- ------------ ------------ ------------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
1ST AVENUE BUILDING $ 67,710 $ 771,127 $ 838,837 $ 340,708 1981 33-40 YEARS
401 SOUTH MAIN MINOT 70,722 538,397 609,119 138,716 1987 24-40 YEARS
408 1ST STREET SE MINOT 10,016 36,892 46,908 23,918 1986 19-40 YEARS
CREEKSIDE OFFICE BLDG 311,310 1,373,608 1,684,918 233,355 1992 40 YEARS
LESTER CHIROPRACTIC 25,000 243,917 268,917 64,206 1988 40 YEARS
WALTERS 214 S MAIN 27,829 84,110 111,939 76,556 1978 20-40 YEARS
------------ ------------ ------------ ------------
$ 512,587 $ 3,048,051 $ 3,560,638 $ 877,459
------------ ------------ ------------ ------------
<CAPTION>
COMMERCIAL
- -------------
<S> <C> <C> <C> <C> <C> <C>
AMERICA'S BEST 765,000 $ 5,027,182 $ 5,792,182 $ 672,263 1994 40 YEARS
AMERITRADE OMAHA 326,500 7,957,477 8,283,977 8,289 1999 40 YEARS
ARRWHD SHOPPING CTR 100,411 2,730,753 2,831,164 2,147,694 1973 15 1/2- 40 YEARS
BARNES & NOBLE FARGO 540,000 2,752,012 3,292,012 309,601 1994 40 YEARS
BARNES & NOBLE OMAHA 600,000 3,099,101 3,699,101 271,171 1995 40 YEARS
CARMICKE THEATRE 183,516 2,362,221 2,545,737 265,687 1994 40 YEARS
COMPUTER CITY 225,000 1,888,574 2,113,574 118,036 1996 40 YEARS
CORNER C-STORE 195,000 1,001,342 1,196,342 21,904 1999 40 YEARS
EDGEWD V BILLINGS 130,000 850,218 980,218 18,504 1999 40 YEARS
EDGEWD V E G FORKS 630,608 269,213 899,821 39,175 1997 40 YEARS
EDGEWD V MINOT 260,000 6,015,931 6,275,931 227,907 1997 40 YEARS
EDGEWD V MISSOULA 108,900 853,528 962,428 53,346 1997 40 YEARS
EDGEWD V SIOUX FALLS 130,000 844,739 974,739 18,437 1999 40 YEARS
GT PLAINS SOFTWARE 125,501 283,199 408,700 0 1998 N/A-CONST IN PROGRESS
HUTCHINSON TECH 244,800 4,184,226 4,429,026 672,223 1993 40 YEARS
LINDBERG BLDG EDEN 198,000 1,257,789 1,455,789 226,447 1992 40 YEARS
MINOT PLAZA 50,000 459,079 509,079 74,132 1993 40 YEARS
PETCO FARGO 324,148 954,786 1,278,934 106,679 1994 40 YEARS
PIONEER SEED MRHD 56,925 596,951 653,876 107,107 1992 40 YEARS
STONE CONTAINER 440,251 4,558,235 4,998,486 396,231 1995 40 YEARS
SPRPUMPER CROOKSTON 13,125 415,652 428,777 90,248 1988 40 YEARS
SPRPUMPER G FORKS 80,000 405,007 485,007 86,064 1991 40 YEARS
SPRPUMPER LANGDON 59,674 179,538 239,212 62,067 1987 31 1/2- 40 YEARS
SPRPUMPER SIDNEY 12,000 108,600 120,600 17,648 1993 40 YEARS
VIRO-MED EDEN PRAIRIE 666,000 4,197,634 4,863,634 21,787 1999 40 YEARS
WEDGEWD SWEETWATER 334,346 3,637,533 3,971,879 199,509 1996 40 YEARS
------------ ------------ ------------ ------------
$ 6,799,705 $ 56,890,520 $ 63,690,225 $ 6,232,156
------------ ------------ ------------ ------------
TOTALS $ 28,656,060 $267,169,779 $295,825,839 $ 26,112,399
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
-29-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1999
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
Reconciliations of total real estate carrying value for the three years ending
April 30, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year $231,416,322 $191,884,509 $131,447,734
Additions during year
- acquisitions 62,455,508 39,014,23 59,377,674
- improvements and other 4,780,853 1,463,878 635,791
------------ ------------ ------------
$298,652,683 $232,687,071 $192,289,286
Deductions during year
- cost of real estate sold (2,826,844) (1,270,749) (404,777)
------------ ------------ ------------
Balance at close of year $295,825,839 $231,416,322 $191,884,509
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Reconciliations of accumulated depreciation for the three years ended April 30,
1999, 1998 and 1997 are as follows:
<TABLE>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year $ 21,516,129 $ 16,948,156 $ 13,551,571
Additions during year
- provisions for depreciation 5,966,874 4,791,907 3,584,591
Deduction during year
- accumulated depreciation
on real estate sold (1,370,604) (223,934) (188,006)
------------ ------------ ------------
Balance at close of year $ 26,112,399 $ 21,516,129 $ 16,948,156
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
-30-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1999
Schedule XII
INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE
<TABLE>
<CAPTION>
Interest Final Maturity Payment Prior
Rate Date Terms Liens
------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
Residential
Higley Heights, Phoenix, AZ 8% 3-31-04 Quarterly -
Great Plains Software, Fargo, ND 9.50% 1-1-99 Balloon Pmt -
Rolland Hausman 9% 2-1-16 Monthly -
Other - over $100,000 8-10.25% 11-1-02 to
6-1-07 Monthly -
- less than $100,000 7-8.75% 12-1-00 to
1-1-04 Monthly -
Total
Less - Unearned discounts
- Deferred gain from property dispositions
- Allowance for loan losses
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Face Carrying of Loans Subject to
Amounts of Amounts of Delinquent Principal
Mortgages Mortgages or Interest
- ------------- ------------- --------------------
<S> <C> <C>
$ 809,786 $ 742,811 $ 742,811
15,000,000 9,185,758 0
315,659 294,968 0
517,325 387,895 0
113,970 109,782 0
- ------------- ------------- --------------------
$ 16,756,740 $ 10,721,214 $ 742,811
- ------------- --------------------
- ------------- --------------------
(1,898)
(1,000)
(120,314)
-------------
$ 10,598,002
-------------
-------------
</TABLE>
-32-
<PAGE>
Schedule XII (CONTINUED)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
MORTGAGE LOANS RECEIVABLE,
BEGINNING OF YEAR $ 3,438,308 $ 3,108,933
New participations in and advances
on mortgage loans 7,655,061 2,061,179
------------ ------------
$ 11,093,369 $ 5,170,112
Collections (372,155) (1,727,237)
Write-off through allowance 0 (4,567)
------------ ------------
MORTGAGE LOANS RECEIVABLE,
END OF YEAR $ 10,721,214 $ 3,438,308
------------ ------------
------------ ------------
</TABLE>
-33-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data
Revenue $ 39,927,262 $ 32,407,545 $ 23,833,981 $ 18,659,665 $ 13,801,123
Operating income 6,401,676 4,691,198 3,499,443 3,617,807 3,560,318
Gain on repossession/
Sale of properties 1,947,184 465,499 398,424 994,163 407,512
Minority interest of portion of
Operating partnership income (744,725) (141,788) (18) 0 0
Net income 7,604,135 5,014,909 3,897,849 4,611,970 3,967,830
Consolidated Balance Sheet Data
Total real estate investments $ 280,311,442 $ 213,211,369 $ 177,891,168 $ 122,377,909 $ 84,005,635
Total assets 291,493,311 224,718,514 186,993,943 131,355,638 94,616,744
Shareholders' equity 85,783,294 68,152,626 59,997,619 50,711,920 37,835,654
Consolidated Per Share Data
(basic and diluted)
Operating income $ .33 $ .29 $ .25 $ .30 $ .34
Gain on sale of properties .11 .03 .03 .08 .04
Dividends .47 .42 .39 .37 .34
Tax status of dividend
Capital gain 6.3% 2.9% 21.0% 1.6% 11.0%
Ordinary income 76.0% 97.1% 79.0% 98.4% 89.0%
Return of capital 17.7% 0.0% 0.0% 0.0% 0.0%
</TABLE>
-34-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND AFFILIATED PARTNERSHIPS
APRIL 30, 1999, 1998 AND 1997
GAIN FROM PROPERTY DISPOSITIONS
<TABLE>
<CAPTION>
Total
Original Unrealized Realized Realized Realized
Gain 4/30/99 4/30/99 4/30/98 4/30/97
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Brooklyn Addition* $ 25,000 $ 1,000 $ 1,000 $ 1,000 $ 1,000
1302 South 19 1/2* 87,699 0 0 15,713 6,732
406 17th St. - Mandan* 233,522 0 0 0 138,629
Fairfeild Apts - Marshall 80,121 0 80,121 0 0
Superpumper - Emerado 158,146 0 158,146 0 0
Park Place Apts - Waseca 366,018 0 366,018 0 0
Bison Props. - Jamestown 1,341,899 0 1,341,899 0 0
Scottsbluff Estates 326,138 0 0 326,138 0
Superpumper - Bottineau 83,579 0 0 83,579 0
Superpumper - New Town 25,417 0 0 25,417 0
Other gains 13,652 0 0 13,652 0
Hutchinson, MN 252,063 0 0 0 252,063
---------- ---------- ---------- ----------
$ 1,000 $1,947,184 $ 465,499 $ 398,424
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
* The gain from the sale of these properties is being realized based on the
installment method. The amount of deferred gain realized was $1,000, $16,713
and $146,361 for the years ended April 30, 1999, 1998 and 1997, respectively.
-35-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1999
MORTGAGE LOANS PAYABLE
<TABLE>
<CAPTION>
Final Periodic Carrying Delinquent
Interest Maturity Payment Face Amount Amount of Principal or
Rate Date Terms of Mortgage Mortgage Interest
---------- ---------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1112 32nd Ave SW Minot 8.50% 07/20/10 Monthly $ 425,000 $ 354,903 $ 0
177 10th Ave E, Dickinson ND 8.50% 11/01/18 Monthly 250,963 221,575 0
4301 9th Ave Sunchase I 9.04% 09/01/02 Monthly 364,765 116,019 0
4313 9th Ave Sunchase II 9.04% 02/01/14 Monthly 370,000 299,828 0
America's Best (FKA Smiths Home) 9.75% 03/29/03 Monthly 3,750,000 3,453,722 0
Ameritrade-Omaha, NE 7.25% 05/01/19 Monthly 6,150,000 6,150,000 0
Barnes & Noble Stores 7.98% 12/01/10 Monthly 4,900,000 4,233,915 0
Candlelight Apts 8.50% 12/01/99 Monthly 578,000 473,605 0
Carmike-Grand Forks 7.75% 02/01/07 Monthly 2,000,000 1,945,022 0
Castle Rock-Billings, MT 6.66% 03/01/09 Monthly 3,950,000 3,946,539 0
Century Apts - Dickinson 8.00625% 03/01/06 Monthly 1,595,000 1,481,672 0
Century Apts - Williston 8.00625% 03/01/06 Monthly 2,700,000 2,508,160 0
Chateau - Minot 8.00625% 03/01/06 Monthly 1,674,350 1,625,659 0
Clearwater-Boise, ID 6.47000% 01/01/09 Monthly 2,660,000 2,652,705 0
Cottonwood Phase I 6.59000% 01/01/09 Monthly 2,800,000 2,792,497 0
Country Meadows - Billings 7.51000% 01/01/08 Monthly 2,660,000 2,609,222 0
Creekside - Billings 8.35% 06/01/13 Monthly 1,250,000 1,210,759 0
Crestview Apts-Bismarck 8.69% 07/01/08 Monthly 3,400,000 3,360,790 0
COMPUSA 7.75% 02/01/01 Monthly 1,565,361 1,456,644 0
Corner Express-Minot 7.52% 10/01/13 Monthly 885,000 869,944 0
Edgewod Vista - Billings 7.13% 10/01/13 Monthly 720,000 705,332 0
Edgewood Vista - E Grand Forks 8.35% 07/05/12 Monthly 650,000 605,008 0
Edgewood Vista - Minot 8.27% 09/20/12 Monthly 4,510,000 4,248,353 0
Edgewood Vista - Missoula 9.75% 04/15/12 Monthly 647,500 609,135 0
Edgewood Vista - Sioux Falls 7.52% 07/01/13 Monthly 720,000 707,751 0
Forest Park Estates IDS 7.625% 05/01/03 Monthly 4,500,000 3,849,741 0
Heritage Manor-Rochester, MN 6.800% 10/01/18 Monthly 5,075,000 5,014,255 0
Hutchinson Technology 8.75% 08/01/08 Monthly 3,250,000 3,177,752 0
Ivy Club Apts. - Vancouver, WA 7.36% 12/01/01 Monthly 7,092,443 7,079,422 0
Jenner Properties, ND 9.50% 11/01/99 Monthly 1,391,585 1,298,052 0
Kirkwood Manor - Bismarck 9.05% Various Bond - semi 2,330,000 2,205,000 0
-36-
<PAGE>
MORTGAGE LOANS PAYABLE (CONTINUED)
<CAPTION>
Interest Maturity Payment Face Amount Amount of Principal or
Rate Date Terms of Mortgage Mortgage Interest
---------- ---------- ----------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Legacy Apts - Grand Forks - Phase I 7.070% 01/01/04 Monthly $ 4,000,000 $ 3,861,356 $ 0
Legacy Apts - Grand Forks - Phase II 7.070% 05/29/28 Monthly 2,575,000 2,542,717 0
Lindberg Bldg, Eden Prairie 7.625% 12/01/08 Monthly 1,200,000 1,178,965 0
Magic City Apts, Minot 8.50% 10/10/10 Monthly 2,794,192 2,546,829 0
Mandan Apts-312 12th 8.75% 08/01/99 Monthly 134,767 818 0
Miramont Apts 8.25% 08/01/36 Monthly 11,582,472 11,481,696 0
Neighborhood Apts-Colorado Springs 7.98% 12/20/06 Monthly 7,525,000 7,291,069 0
North Pointe - Bismarck 7.12% 08/01/15 Monthly 1,700,000 1,678,718 0
Oakwood Estates-Sioux Falls 8.00625% 03/01/06 Monthly 2,250,000 2,090,133 0
Oxbow Sioux Falls 8.00625% 03/01/06 Monthly 3,565,000 3,311,700 0
Park East, Fargo 6.82000% 04/06/08 Monthly 3,500,000 3,466,359 0
Park Meadows Phase I 8.50% 01/10/07 Monthly 2,600,000 2,469,369 0
Park Meadows Phase II 7.8990% 01/10/07 Monthly 2,214,851 2,134,105 0
Park Meadows Phase III 3.84% 30 yr bond Monthly 3,235,000 3,150,000 0
PETCO Warehouse 8.50% 12/01/10 Monthly 1,100,000 1,058,364 0
Pinecone Ft Collins 7.125% 12/01/34 Monthly 10,685,215 10,472,304 0
Pioneer Building - Fargo 8.375% 12/01/06 Monthly 425,000 278,123 0
Pointe West Apts 8.97% 01/01/04 Monthly 2,400,000 2,372,322 0
Prairie Winds Apts - Sioux Falls 7.67% 05/01/18 Monthly 1,470,000 1,307,534 0
Rocky Meadows - Billings 7.75% 08/01/16 Monthly 3,000,000 2,788,609 0
Rosewood Ct - Sioux Falls 7.975% 09/01/96 Monthly 1,323,000 1,243,428 0
South Pointe, Minot ND 7.12% 06/05/16 Monthly 6,500,000 6,418,627 0
Southwind Apts 7.12% 04/28/10 Monthly 4,100,000 4,048,673 0
Stone Container 8.25% 12/01/10 Monthly 3,300,000 2,884,434 0
Van Mall Woods-Vancouver, WA 6.86% 12/01/03 Monthly 4,070,426 4,031,894 0
Viro-Med-Eden Prairie, MN 6.98% 04/01/14 Monthly 3,120,000 3,120,000 0
Wedgewood Retirement 7.975% 04/23/17 Monthly 1,566,720 1,500,840 0
West Stonehill 7.93% 02/01/98 Monthly 8,232,569 7,799,243 0
Westwood Park 9.25% 03/01/11 Monthly 1,295,866 1,254,294 0
Woodridge-Rochester 7.85% 12/01/16 Monthly 4,410,000 4,177,096 0
Colton Heights 8.75% 06/01/07 Monthly 730,000 313,877 0
Grafton 24 Plex 9.75% 03/20/03 Monthly 270,000 68,670 0
Grafton 18 Plex 9.75% 03/20/03 Monthly 198,000 93,645 0
Hill Park Properties 8.00625% 03/01/06 Monthly 1,470,000 1,365,554 0
1516 N Bismarck 8.00% 08/01/99 Monthly 246,000 6,723 0
-------------- -------------- ------------
TOTALS $ 183,604,045 $ 175,071,069 $ 0
-------------- -------------- ------------
-------------- -------------- ------------
</TABLE>
-37-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
APRIL 30, 1999
SIGNIFICANT PROPERTY ACQUISITIONS
Acquisitions for cash, assumptions of mortgages, and
issuance of units in the operating partnership
<TABLE>
<S> <C>
Commercial:
Edgewood Vista - Sioux Falls, SD $ 965,000
Edgewood Vista - Billings, MT 965,000
Corner Express - Minot, ND 1,190,432
Viro-Med - Eden Prairie, MN 4,826,310
Ameritrade - Omaha, NE 8,283,977
--------------
$ 16,230,719
--------------
Apartments:
Heritage Manor - Rochester, MN $ 7,371,208
Westwood Park Apartments - Bismarck, ND 2,025,455
Country Meadows Phase II - Billings, MT** 1,321,962
Clearwater Apts - Boise, ID 3,786,463
Legacy - Phase III - Grand Forks, ND** 2,260,345
Van Mall Woods - Vancouver, WA 6,021,312
Meadows - Jamestown, ND** 1,502,301
Castle Rock Apartments - Billings, MT 5,614,223
Cottonwood Lake - Bismarck, ND*** 4,645,444
Ivy Club Apartments - Vancouver, WA 11,676,076
--------------
$ 46,224,789
--------------
TOTAL $ 62,455,508
--------------
--------------
</TABLE>
**Property not place in service at April 30, 1999. Additional costs are still
to be incurred.
***Represents costs to complete a project started in year ending April 30,
1998.
-38-
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------
7-31-98 10-31-98 1-31-99 4-30-99
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 9,102,179 $ 9,836,370 $ 10,236,797 $ 10,751,916
Income before gains on sale
of properties 1,327,851 1,760,067 1,732,928 1,580,830
Net gain on sale of properties 366,017 1,341,899 80,122 158,146
Minority interest of unitholders
in operating partnership (133,863) (287,579) (158,820) (164,463)
Net income 1,560,005 2,814,387 1,654,228 1,575,515
Per share (basic and diluted)
Income before gains on sale
of properties .07 .09 .09 .08
Net gain on sale of properties .02 .08 .00 .01
<CAPTION>
QUARTER ENDED
------------------------------------------------------------
7-31-97 10-31-97 1-31-98 4-30-98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 7,183,761 $ 7,996,262 $ 8,440,393 $ 8,787,129
Income before gains on sale
of properties 894,045 1,233,451 1,358,752 1,204,950
Net gain on sale of properties 36,096 83,579 326138 16,713
Minority interest of unitholders
in operating partnership (9) (9,423) (64,006) (68,350)
Net income 933,105 1,307,607 1,620,884 1,153,313
Per share (basic and diluted)
Income before gains on sale
of properties .06 .08 .08 .07
Net gain on sale of properties .00 .01 .02 .00
<CAPTION>
QUARTER ENDED
------------------------------------------------------------
7-31-96 10-31-96 1-31-97 4-30-97
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 4,966,475 $ 5,474,027 $ 6,383,030 $ 7,010,450
Income before gains on sale
of properties 978,107 1,048,154 1,027,117 446,065
Net gain on sale of properties 252,062 0 138,629 7,733
Minority interest of unitholders
in operating partnership 0 0 0 (18)
Net income 1,230,169 1,048,154 1,165,746 453,780
Per share (basic and diluted)
Income before gains on sale
of properties .07 .08 .07 .03
Net gain on sale of properties .02 .00 .01 .00
</TABLE>
The above financial information is unaudited. In the opinion of management, all
adjustments (which are of a normal recurring nature) have been included for a
fair presentation.
-39-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1999
<CASH> 3,713,053
<SECURITIES> 3,699,183
<RECEIVABLES> 14,490,847
<ALLOWANCES> (123,212)
<INVENTORY> 0
<CURRENT-ASSETS> 21,779,871
<PP&E> 295,825,839
<DEPRECIATION> (26,112,399)
<TOTAL-ASSETS> 291,493,311
<CURRENT-LIABILITIES> 18,868,812
<BONDS> 186,841,205
0
0
<COMMON> 93,095,819
<OTHER-SE> (7,312,525)
<TOTAL-LIABILITY-AND-EQUITY> 291,493,311
<SALES> 0
<TOTAL-REVENUES> 39,927,262
<CGS> 0
<TOTAL-COSTS> 21,423,605
<OTHER-EXPENSES> 744,725
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,101,981
<INCOME-PRETAX> 5,656,951
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,656,951
<DISCONTINUED> 1,947,184
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,604,135
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
