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Originator-Name: webmaster@www.sec.gov
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<SEC-DOCUMENT>0000950134-05-019527.txt : 20051021
<SEC-HEADER>0000950134-05-019527.hdr.sgml : 20051021
<ACCEPTANCE-DATETIME>20051021170519
ACCESSION NUMBER:		0000950134-05-019527
CONFORMED SUBMISSION TYPE:	PRE 14A
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20051215
FILED AS OF DATE:		20051021
DATE AS OF CHANGE:		20051021

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INCOME OPPORTUNITY REALTY INVESTORS INC /TX/
		CENTRAL INDEX KEY:			0000949961
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE INVESTMENT TRUSTS [6798]
		IRS NUMBER:				752615944
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		PRE 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14784
		FILM NUMBER:		051150355

	BUSINESS ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		4685224200

	MAIL ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>PRE 14A
<SEQUENCE>1
<FILENAME>d29535ppre14a.htm
<DESCRIPTION>PRELIMINARY PROXY STATEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>pre14a</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>SCHEDULE 14A</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Proxy Statement Pursuant to Section&nbsp;14(a) of the<BR>
Securities Exchange of 1934 (Amendment No. ___)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Filed by the Registrant <FONT face="Wingdings">&#254;</FONT><br>
Filed by a Party other than the Registrant <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check the appropriate box:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Preliminary Proxy Statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Definitive Proxy Statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Definitive Additional Materials.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Soliciting Material Pursuant to Section&nbsp;140.14A-11(c) or Section&nbsp;240.14a-12.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.</B>
</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">(Name of Registrant as Specified In Its Charter)</DIV>


<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">(Name of Person(s) Filing Proxy Statement if other than the Registrant)</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Payment of Filing Fee (Check the appropriate box):
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No fee required.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title of each class of securities to which transaction applies:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Aggregate number of securities to which transaction applies:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule&nbsp;0-11 (Set forth the amount on which the filing fee is calculated and state
how it was determined):</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>

</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="right" valign="top">4)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">Proposed maximum aggregate value of transaction:</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top">5)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">Total fee paid:</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD colspan="2" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
</table>
</div>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" valign="top" align="left">Fee paid previously with preliminary materials.</TD>
</tr>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT></DIV></TD>
    <TD>&nbsp;</TD>
   <TD  colspan="2" valign="top" align="left">Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.</TD>
</tr>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="95%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Amount Previously Paid:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Form, Schedule or Registration Statement No.:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Filing Party:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Date Filed:</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">-2-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.<BR>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS<BR>
TO BE HELD ON DECEMBER 15, 2005</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Opportunity Realty Investors, Inc. will hold its Annual Meeting of Stockholders on
Thursday, December&nbsp;15, 2005 at 1:30 p.m., local Dallas, Texas time, at 1800 Valley View Lane, Suite
300, Dallas, Texas 75234. The purpose of the meeting is to consider and act upon:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149; Election of a Board of five directors to serve until the next Annual Meeting
of Stockholders and until their successors are duly-elected and qualified.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149; Approval of a proposed amendment to the Articles of Incorporation to increase
the authorized number of shares of Common Stock from 10,000,000 shares to
100,000,000 shares and Preferred Stock from 1,000,000 shares to 10,000,000 shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149; Ratification of the selection of Swalm &#038; Associates, P.C. as the independent
registered public accounting firm.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#149; Such other matters as may properly be presented at the Annual Meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only Stockholders of record at the close of business on November&nbsp;4, 2005, will be entitled to
vote at the meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your vote is important. Whether or not you plan to attend the meeting, please complete, sign,
date and return the enclosed proxy card in the accompanying envelope provided. Your completed
proxy will not prevent you from attending the meeting and voting in person should you choose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated: November&nbsp;4, 2005
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">By order of the Board of Directors,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">/s/ Louis J. Corna
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD nowrap colspan="3" align="left">Louis J. Corna<br>
Executive Vice President, General Counsel,<br>
Tax Counsel and Secretary&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROXY STATEMENT</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FOR THE ANNUAL MEETING OF STOCKHOLDERS</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TO BE HELD DECEMBER 15, 2005</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors of Income Opportunity Realty Investors, Inc. (the &#147;Company&#148;or &#147;we&#148; or
&#147;us&#148;) is soliciting proxies to be used at the 2005 Annual Meeting of Stockholders (the &#147;Annual
Meeting&#148;). Distribution of this Proxy Statement and a Proxy Form is scheduled to begin on November
7, 2005. The mailing address of the Company&#146;s principal executive offices is 1755 Wittington
Place, Suite&nbsp;340, Dallas, Texas 75234.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>About the Meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Who Can Vote</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Record holders of Common Stock of the Company at the close of business on November&nbsp;4, 2005
(the &#147;Record Date&#148;) may vote at the Annual Meeting. On that date, 4,168,035 shares of Common Stock
were outstanding after giving effect to a 3-for-1 forward stock split on June&nbsp;10, 2005. Each share
is entitled to cast one vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>How Can You Vote</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you return your signed proxy before the Annual
Meeting, we will vote your shares as you direct. You can specify whether your shares should be
voted for all, some or none of the nominees for director. You can also specify whether you
approve, disapprove or abstain from the other proposal to ratify the selection of auditors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a proxy is executed and returned but no instructions are given, the shares will be voted
according to the recommendations of the Board of Directors. The Board of Directors recommends a
vote <B>FOR </B>Proposals 1, 2 and 3.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revocation of Proxies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may revoke your proxy at any time before it is exercised by (a)&nbsp;delivering a written
notice of revocation to the Corporate Secretary, (b)&nbsp;delivering another proxy that is dated later
than the original proxy, or (c)&nbsp;casting your vote in person at the Annual Meeting. Your last vote
will be the vote that is counted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Vote Required</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of a majority of the shares entitled to vote who are either present in
person or represented by a proxy at the Annual Meeting will constitute a quorum for the transaction
of business at the Annual Meeting. As of November&nbsp;4, 2005, there were 4,168,035 shares of Common
Stock issued and outstanding. The presence, in person or by proxy, of stockholders entitled to
cast at least 2,084,018
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">votes constitutes a quorum for adopting the proposals at the Annual
Meeting. If you have properly signed and returned your proxy card by mail, you will be considered part of the quorum, and the persons
named on the proxy card will vote your shares as you have instructed. If broker holding your
shares in &#147;street&#148; name indicates to us on a proxy card that the broker lacks discretionary
authority to vote your shares, we will not consider your shares as present or entitled to vote for
any purpose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A plurality of the votes cast is required for the election of directors. This means that the
director nominee with the most votes for a particular slot is elected to that slot. A proxy that
has properly withheld authority with respect to the election of one or more directors will not be
voted with respect to the director or directors indicated, although it will be counted for purposes
of determining whether there is a quorum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The proposed amendment to the Articles of Incorporation requires the affirmative vote of a
majority of the shares of Common Stock outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the other proposal, the affirmative vote of the holders of a majority of the shares
representing in person or by proxy entitled to vote on the proposal will be required for approval.
An abstention with respect to such proposal will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect
of a negative vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the Record Date, two affiliates held 3,419,853 shares representing approximately 82.05%
of the shares outstanding. These two affiliates have advised the Company that they currently
intend to vote all of their shares in favor of the approval of all proposals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you received multiple proxy cards, this indicates that your shares are held in more than
one account, such as two brokerage accounts, and are registered in different names. You should
vote each of the proxy cards to ensure that all your shares are voted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Matters to be Acted Upon at the Annual Meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not know of any other matters to be validly presented or acted upon at the Annual
Meeting. Under our Bylaws, no business besides that stated in the Annual Meeting Notice may be
transacted at any meeting of stockholders. If any other matter is presented at the Annual Meeting
on which a vote may be properly taken, the shares represented by proxies will be voted in
accordance with the judgment of the person or persons voting those shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Expenses of Solicitation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is making this solicitation and will pay the entire cost of preparing, assembling,
printing, mailing and distributing these proxy materials and soliciting votes. Some of our
directors, officers and employees may solicit proxies personally, without any additional
compensation, by telephone or mail. Proxy materials will also be furnished without cost to brokers
and other nominees to forward to the beneficial owners of shares held in their names.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Available Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our internet website address is <u>www.incomeopp-realty.com</u>. We make available free of
charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Reports on Form 8-K, reports filed pursuant to Section&nbsp;16 and amendments to those reports as soon
as reasonably practicable after we electronically file or furnish such materials to the Securities
and Exchange Commission. In addition, we have posted the Charters of our Audit Committee, Compensation
Committee, and our Governance and Nominating Committee, as well as our Code of Business Conduct and
Ethics, Corporate Governance Guidelines and Director Independence Standards, all under separate
headings. These charters and principles are not incorporated in this instrument by reference. We
will also provide a copy of these documents free of charge to stockholders upon written request.
The Company issues Annual Reports containing audited financial statements to its common
stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Questions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may call our Investor Relations Department at 800-400-6407 if you have any questions.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLEASE VOTE &#151; YOUR VOTE IS IMPORTANT</B>
</DIV>


<P align="center" style="font-size: 10pt">-3-
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Corporate Governance and Board Matters</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The affairs of the Company are managed by the Board of Directors. The Directors are elected
at the annual meeting of stockholders each year or appointed by the incumbent Board of Directors
and serve until the next annual meeting of stockholders or until a successor has been elected or
approved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After December&nbsp;31, 2003, a number of changes occurred in the composition of the Board of
Directors of the Company, the creation of certain Board Committees, the adoption of Committee
charters, the adoption of a Code of Ethics for Senior Financial Officers and the adoption of
Guidelines for Director Independence. Also, the composition of the members of the Board of
Directors changed with the resignations of Henry A. Butler (July&nbsp;1, 2003), Earl D. Cecil (February
29, 2004) and Martin L. White (March&nbsp;15, 2004), as well as the election of Ken L. Joines as a
Director in July&nbsp;2003, and independent Directors, David E. Allard and Peter L. Larsen on February
20, 2004, and Robert A. Jakuszewski on March&nbsp;16, 2004. Additionally, on June&nbsp;2, 2003, Basic
Capital Management, Inc. (&#147;BCM&#148;) sold a total of 781,773 shares of Common Stock of the Company
(approximately 54.3% of the outstanding) as a &#147;block&#148; to Syntek West, Inc. (&#147;SWI&#148;). SWI also
purchased 12,600 shares of Common Stock of the Company in open market purchase transactions which
increased SWI&#146;s ownership to 794,223 shares (approximately 57.17% of the outstanding shares). On
June&nbsp;30, 2003, SWI replaced BCM as the contractual advisor to the Company. On June&nbsp;10, 2005, the
Company&#146;s Common Stock was the subject of a 3-for-1 forward split of the stock which increased
SWI&#146;s ownership to 2,382,669 shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Current members of the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The members of the Board of Directors (all of whom were elected by the stockholders and the
last Annual Meeting held on September&nbsp;16, 2004) on the date of this proxy statement, and the
committees of the Board on which they serve, are identified below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Governance</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Audit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Nominating</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Director</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Committee</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ted P. Stokley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David E. Allard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Chair</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Jakuszewski</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ken L. Joines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Peter L. Larsen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Chair</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Chair</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">-4-
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Role of the Board&#146;s Committees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has standing Audit, Compensation and Governance and Nominating
Committees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Audit Committee</I></B>. The functions of the Audit Committee are described below under the heading
&#147;<I>Report of the Audit Committee.</I>&#148; The charter of the Audit Committee was adopted on March&nbsp;22, 2004,
and is available on the Company&#146;s Investor Relations website <u>(www.incomeopp-realty.com)</u><I>. </I>The Audit
Committee was formed on February&nbsp;20, 2004, and the Board selected the current members of the Audit
Committee for 2004. The Board reappointed the members of the Audit Committee on September&nbsp;16,
2004. All of the members of the Audit Committee are independent within the meaning of SEC
regulations, the listing standards of the American Stock Exchange and the Company&#146;s <I>Corporate
Governance Guidelines</I>. Mr.&nbsp;Allard, a member of the Committee, is qualified as an audit committee
financial expert within the meaning of SEC regulations and the Board has determined that he has
accounting and related financial management expertise within the meaning of the listing standards
of the American Stock Exchange. All of the members of the Audit Committee meet the independence
and experience requirements of the listing standards of the American Stock Exchange. The Audit
Committee met nine times in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Governance and Nominating Committee</I></B>. The Governance and Nominating Committee is responsible
for developing and implementing policies and practices relating to corporate governance, including
reviewing and monitoring implementation of the Company&#146;s <I>Corporate Governance Guidelines</I>. In
addition, the Committee develops and reviews background information on candidates for the Board and
makes recommendations to the Board regarding such candidates. The Committee also prepares and
supervises the Board&#146;s annual review of director independence and the Board&#146;s performance
self-evaluation. The charter of the Governance and Nominating Committee was adopted on March&nbsp;22,
2004, and is available on the Company&#146;s Investor Relations website (<I>www.incomeopp-realty.com</I>). On
March&nbsp;22, 2004, the Board selected the members of the Governance and Nominating Committee for 2004.
The Board reappointed the members of the Governance and Nominating Committee on September&nbsp;16,
2004. All of the members of the Committee are independent within the meaning of the listing
standards of the American Stock Exchange and the Company&#146;s <I>Corporate Governance Guidelines. </I>The
Governance and Nominating Committee met two times in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Compensation Committee</I></B>. The Compensation Committee is responsible for overseeing the
policies of the Company relating to compensation to be paid by the Company to the Company&#146;s
principal executive officer and any other officers designated by the Board and make recommendations
to the Board with respect to such policies, produce necessary reports on executive compensation for
inclusion in the Company&#146;s proxy statement in accordance with applicable rules and regulations and
to monitor the development and implementation of succession plans for the principal executive
officer and other key executives and make recommendations to the Board with respect to such plans.
The charter of the Compensation Committee was adopted on March&nbsp;22, 2004, and is available on the
Company&#146;s Investor Relations website <u>(www.incomeopp-realty.com)</u>. On March&nbsp;22, 2004, the Board
selected the members of the Compensation Committee for the coming year. The Board reappointed the
members of the Compensation Committee on September&nbsp;16, 2004. All of the members of the Committee
are independent within the meaning of the listing standards
</DIV>

<P align="center" style="font-size: 10pt">-5-
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of the American Stock Exchange and the Company&#146;s <I>Corporate Governance Guidelines</I>. The
Compensation Committee is to be comprised of at least two directors who are independent of
management and the Company. The Compensation Committee met one time in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Presiding Director</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2004, the Board created a new position of presiding director, whose primary
responsibility is to preside over periodic executive sessions of the Board in which management
directors and other members of management do not participate. The presiding director also advises
the Chairman of the Board and, as appropriate, Committee chairs with respect to agendas and
information needs relating to Board and Committee meetings, provides advice with respect to the
selection of Committee chairs and performs other duties that the Board may from time to time
delegate to assist the Board in the fulfillment of its responsibilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Director Peter L. Larsen has served in such position since March&nbsp;2004. In September&nbsp;2004, the
non-management members of the Board designated him to serve in this position until the Company&#146;s
2005 annual meeting of stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Selection of nominees for the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Governance and Nominating Committee will consider candidates for Board membership
suggested by its members and other Board members, as well as management and stockholders. The
Committee may also retain a third-party executive search firm to identify candidates upon request
of the Committee from time to time. A stockholder who wishes to recommend a prospective nominee for
the Board should notify the Company&#146;s Corporate Secretary or any member of the Governance and
Nominating Committee in writing with whatever supporting material the stockholder considers
appropriate. The Governance and Nominating Committee will also consider whether to nominate any
person nominated by a stockholder pursuant to the provisions of the Company&#146;s bylaws relating to
stockholder nominations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once the Governance and Nominating Committee has identified a prospective nominee, the
Committee will make an initial determination as to whether to conduct a full evaluation of the
candidate. This initial determination will be based on whatever information is provided to the
Committee with the recommendation of the prospective candidate, as well as the Committee&#146;s own
knowledge of the prospective candidate, which may be supplemented by inquiries to the person making
the recommendation or others. The preliminary determination will be based primarily on the need for
additional Board members to fill vacancies or expand the size of the Board and the likelihood that
the prospective nominee can satisfy the evaluation factors described below. If the Committee
determines, in consultation with the Chairman of the Board and other Board members as appropriate,
that additional consideration is warranted, it may request the third-party search firm to gather
additional information about the prospective nominee&#146;s background and experience and to report its
findings to the Committee. The Committee will then evaluate the prospective nominee against the
standards and qualifications set out in the Company&#146;s <I>Corporate Governance Guidelines, </I>including:
</DIV>

<P align="center" style="font-size: 10pt">-6-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of the prospective nominee to represent the interests of the
stockholders of the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the prospective nominee&#146;s standards of integrity, commitment and
independence of thought and judgment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the prospective nominee&#146;s ability to dedicate sufficient time, energy
and, attention to the diligent performance of his or her duties, including the
prospective nominee&#146;s service on other public company boards, as specifically
set out in the Company&#146;s <I>Corporate Governance Guidelines</I>;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent to which the prospective nominee contributes to the range of
talent, skill and expertise appropriate for the Board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent to which the prospective nominee helps the Board reflect the
diversity of the Company&#146;s stockholders, employees, customers, guests and
communities; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the willingness of the prospective nominee to meet any minimum equity
interest holding guideline.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Committee also considers such other relevant factors as it deems appropriate, including the
current composition of the Board, the balance of management and independent directors, the need for
Audit Committee expertise and the evaluations of other prospective nominees. In connection with
this evaluation, the Committee determines whether to interview the prospective nominee, and if
warranted, one or more members of the Committee, and others as appropriate, interview prospective
nominees in person or by telephone. After completing this evaluation and interview, the Committee
makes a recommendation to the full Board as to the persons who should be nominated by the Board,
and the Board determines the nominees after considering the recommendation and report of the
Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bylaws of the Company provide that any stockholder entitled to vote in the election
of directors generally may nominate one or more persons for election as directors at a meeting only
if written notice of such stockholders&#146; intention to make such nomination has been delivered
personally to, or has been mailed to and received by the Secretary at the principal office of the
Company not later than 35 nor more than 60&nbsp;days prior to the date of the meeting. If a stockholder
has a suggestion for candidates for election, the stockholder should follow this procedure. Each
notice from a stockholder must set forth (i)&nbsp;the name and address of the stockholder who intends to
make the nomination and the name of the person to be nominated, (ii)&nbsp;the class and number of shares
of stock held of record, owned beneficially and represented by proxy by such stockholder as of the
record date for the meeting and as of the date of such notice, (iii)&nbsp;a representation that the
stockholder intends to appear in person or by proxy at the meeting to nominate the person specified
in the notice, (iv)&nbsp;a description of all arrangements or understandings between such stockholder
and each nominee and any other person (naming those persons) pursuant to which the nomination is to
be made by such stockholder, (v)&nbsp;such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed pursuant to the proxy
rules, and (vi)&nbsp;the
</DIV>

<P align="center" style="font-size: 10pt">-7-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">consent of each nominee to serve as a director of the Company if so elected. The chairman of
the Annual Meeting may refuse to acknowledge the nomination of any person not made in compliance
with this procedure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Determinations of directors independence</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2004, the Board enhanced its <I>Corporate Governance Guidelines. </I>The <I>Guidelines</I>
adopted by the Board meet or exceed the new listing standards adopted during the year by the
American Stock Exchange. The full text of the <I>Guidelines </I>can be found in the Investor Relations
section of the Company&#146;s website <u>(www.incomeopp-realty.com)</u>. A copy may also be obtained upon
request from the Company&#146;s Corporate Secretary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the <I>Guidelines, </I>the Board undertook its annual review of director independence in
March&nbsp;2005. During this review, the Board considered transactions and relationships between each
director or any member of his or her immediate family and the Company and its subsidiaries and
affiliates, including those reported under <I>&#147;Certain Relationships and Related Transactions&#148; </I>below.
The Board also examined transactions and relationships between directors or their affiliates and
members of the Company&#146;s senior management or their affiliates. As provided in the <I>Guidelines</I>, the
purpose of this review was to determine whether any such relationships or transactions were
inconsistent with a determination that the director is independent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of this review, the Board affirmatively determined of the then directors, Messrs.
Allard, Jakuszewski and Larsen are each independent of the Company and its management under the
standards set forth in the <I>Corporate Governance Guidelines</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Board meetings during fiscal 2004</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board met 12 times during fiscal 2004. Each director attended all of the meetings of the
Board and Committees on which he served. Under the Company&#146;s <I>Corporate Governance Guidelines</I>, each
Director is expected to dedicate sufficient time, energy and attention to ensure the diligent
performance of his or her duties, including by attending meetings of the stockholders of the
Company, the Board and Committees of which he is a member.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Directors&#146; compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each non-employee director receives an annual retainer of $15,000 plus reimbursement for
expenses. The Chairman of the Board receives an additional fee of $1,500 per year. The members of
the Audit Committee receive a fee of $250 for each Committee meeting attended. In addition, each
independent director receives an additional fee of $1,000 per day for any special services rendered
by him to the Company outside of his or ordinary duties as a director plus reimbursement of
expenses. The Company also reimburses directors for travel expenses incurred in connection with
attending Board, committee and stockholder meetings and for other Company-business related
expenses. Directors who are also employees of the Company or its Advisor receive no additional
compensation for service as a director.
</DIV>

<P align="center" style="font-size: 10pt">-8-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, $75,005 was paid to the non-employee directors in total directors&#146; fees for all
services, including the annual fee for service during the period from January&nbsp;1, 2004 through
December&nbsp;31, 2004. Those fees received by directors were Earl D. Cecil, who resigned on February
29, 2004 ($7,500), Martin L. White who resigned March&nbsp;15, 2004 ($7,500), Ted P. Stokely ($16,500),
David E. Allard ($14,940), Robert A. Jakuszewski ($13,875) and Peter L. Larsen ($13,875).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stockholders communication with the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders and other parties interested in communicating directly with the presiding
director or with the non-Management directors as a group may do so by writing to David E. Allard,
Director, 1525 N. Stemmons Freeway, Dallas, Texas 75207-3410. Effective March
22, 2004, the Governance and Nominating Committee of the Board also approved a process for handling
letters received by the Company and addressed to members of the Board but received at the Company.
Under that process, the Corporate Secretary of the Company reviews all such correspondence and
regularly forwards to the Board a summary of all such correspondence and copies of all
correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the
Board or committees thereof or that he otherwise determines requires their attention. Directors may
at any time review a log of all correspondence received by the Company that is addressed to members
of the Board and received by the Company and request copies of any such correspondence. Concerns
relating to accounting, internal controls or auditing matters are immediately brought to the
attention of the Chairman of the Audit Committee and handled in accordance with procedures
established by the Audit Committee with respect to such matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Code of Ethics</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has adopted a Code of Business Conduct and Ethics, which applies to all directors,
officers and employees (including those of the Contractual Advisor). In addition, the Company has
adopted a code of ethics entitled &#147;Code of Ethics for Senior Financial Officers&#148; that applies to
the principal executive officer, president, principal financial officer, chief financial officer,
the principal accounting officer and Controller. The text of both documents is available on the
Company&#146;s Investor Relations website <u>(www.incomeopp-realty.com)</u>. The Company intends to post
amendments to or waivers from its Code of Ethics for Senior Financial Officers (to the extent
applicable to the Company&#146;s chief executive officer, principal financial officer or principal
accounting officer) at this location on its website.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compliance With Section&nbsp;16(a) of Reporting Requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16(a) under the Securities Exchange Act of 1934 requires the Company&#146;s
directors, executive officers and any persons holding 10% or more of the Company&#146;s shares of Common
Stock are required to report their ownership of the Company&#146;s shares of Common Stock and any
changes in that ownership to the Securities and Exchange Commission (the &#147;Commission&#148;) on specified
report forms. Specific due dates for these reports have been established, and the Company is
required to report any failure to file by these dates during each fiscal year. All of these filing
requirements were satisfied by the Company&#146;s directors and executive officers and holders of more
than 10% of the Company&#146;s Common Stock during the fiscal year ended December&nbsp;31, 2004. In
</DIV>

<P align="center" style="font-size: 10pt">-9-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">making these statements, the Company has relied upon the written representations of its directors and
executive officers and the holders of 10% or more of the Company&#146;s Common Stock and copies of the
reports that each has filed with the Commission.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Security Ownership of Certain Beneficial Owners and Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Security Ownership of Certain Beneficial Owners</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the ownership of the Company&#146;s Common Stock, both beneficially
and of record, both individually and in the aggregate, for those persons or entities known by the
Company to be the beneficial owners of more than 5% of its outstanding Common Stock as of the close
of business on November&nbsp;4, 2005.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Approximate</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percent of Class**</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Syntek West, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,382,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">57.17</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1755 Wittington Place, Suite&nbsp;340</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transcontinental Realty Investors, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.88</TD>
    <TD nowrap>%</TD>
</TR>



<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1800 Valley View Lane, Suite&nbsp;300</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Security Ownership of Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the ownership of the Company&#146;s Common Stock, both beneficially
and of record, both individually and in the aggregate for the directors and executive officers of
the Company as of the close of business on November&nbsp;4, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Approximate</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percent of Class*</B>*</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Steven A. Abney</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.88</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David E. Allard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark W. Branigan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.88</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Henry A. Butler</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.88</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Louis J. Corna</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.88</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert Neil Crouch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sharon Hunt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.88</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Jakuszewski</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">-10-
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Approximate</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percent of Class*</B>*</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ken L. Joines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,382,669</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">57.17</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Peter L. Larsen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ted R. Munselle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.88</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gene E. Phillips</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,382,669</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">57.17</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ted P. Stokely</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.88</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Martin L. White</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24.88</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All directors and executive officers as
a group (13 people)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3,419,853</TD>
    <TD nowrap>(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">82.05</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#042;</B>&nbsp;&#147;Beneficial Ownership&#148; means the sole or shared power to vote, or
to direct the voting of, a security or investment power with respect
to a security, or any combination thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#042;&#042;</B>&nbsp;Percentages are based upon 4,168,035 shares of Common Stock
outstanding at November&nbsp;4, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;Includes 1,037,184 shares owned by Transcontinental Realty
Investors, Inc. (&#147;TCI&#148;), of which the directors and executive
officers of TCI may be deemed to be the beneficial owners by virtue
of their positions as directors and executive officers. Each of the
current directors (Messrs.&nbsp;Butler, Munselle, Stokely and White and
Ms.&nbsp;Hunt) and executive officers (Messrs.&nbsp;Abney, Branigan and Corna)
of TCI disclaim beneficial ownership of such shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;Includes 2,382,669 shares owned by SWI, of which the directors
and executive officers of SWI (Messrs.&nbsp;Joines and Phillips) may be
deemed to be the beneficial owners by virtue of their positions as
directors and executive officers of SWI.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL 1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ELECTION OF DIRECTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Five directors are to be elected at the Annual Meeting. Each director elected will
hold office until the 2006 Annual Meeting. All of the nominees for director are now serving as
directors. Each of the nominees has consented to being named in this proxy statement as a nominee
and has agreed to serve as a director if elected. The persons named on the proxy card will vote
for all of the nominees for director listed unless you withhold authority to vote for one or more
of the nominees. The nominees receiving a plurality of votes cast at the Annual Meeting will be
elected as directors. Abstentions and broker non-votes will not be treated as a vote for or
against any particular nominee and will not affect the outcome of the election of directors.
Cumulative voting for the election of directors is not permitted. If any director is unable to
stand for re-election, the Board will designate a
</DIV>

<P align="center" style="font-size: 10pt">-11-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">substitute. If a substitute nominee is named, the persons named on the proxy card will vote
for the election of the substitute director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The nominees for directors are listed below, together with their ages, terms of service, all
positions and offices with the Company or the Company&#146;s advisor, SWI, other principal occupations,
business experience and directorships with other companies during the last five years or more. The
designation &#147;affiliated&#148; when used below with respect to a director means that the director is an
officer, director or employee of the Company or the advisor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>David E. Allard, 46</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Financial Officer (since February&nbsp;2005) of Digital Witness Surveillance, a Dallas,
Texas-based development stage software provider; Executive Vice President and Secretary (April&nbsp;2003
to February&nbsp;2, 2005) of Internet America, Inc. Mr.&nbsp;Allard was Chief Operating Officer (2000-2002)
of Primedia Workplace Learning, a workplace training business; Executive Vice President and Chief
Financial Officer (1999-2000) of E-Train, Inc., a provider of online job training and seminars;
Special Advisor (1998-1999) of Thayer Capital Partners; Chief Operating Officer (1997-1998) of
Career Track, Inc. (a TCI subsidiary); Senior Vice President and Vice President &#151; Business
Development (1992-1996) of Westcott Communications, Inc.; Partner (1985-1992) of Farmer and Allard,
P.C. (a CPA firm); Audit Manager/CPA (1983-1985) of Grant Thornton LLP (a CPA firm). Mr.&nbsp;Allard
was elected as a director of the Company on February&nbsp;20, 2004. Mr.&nbsp;Allard has been a director of
the Company since February&nbsp;20, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Robert A. Jakuszewski, 42</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice President &#151; Sales and Marketing (since September&nbsp;1998) of New Horizons Communications,
Inc. Mr.&nbsp;Jakuszewski was a Consultant (01/1998-09/1998) for New Horizon Communications, Inc.;
Regional Sales Manager (1996-1998) of Continental Funding; Territory Manager (1992-1996) of
Sigvaris, Inc.; Senior Sales Representative (1988-1992) of Mead Johnson Nutritional Division,
USPNG; Sales Representative (1986-1987) of Muro Pharmaceutical, Inc. Mr.&nbsp;Jakuszewski was elected a
director of the Company on March&nbsp;16, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ken L. Joines, 38 (Affiliated)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President and Chief Financial Officer (July&nbsp;15, 2004 to September&nbsp;16, 2004) of
the Company; Director, Vice President, Secretary and Treasurer (since March&nbsp;2001) of SWI, an
administrative services company and the advisor to the Company; Owner/Operator (since September
1998) of Joines &#038; Associates (a financial consulting company, subcontractor of Whitson Management
Group); Financial Consultant (1996-1998) of Whitson Financial/Whitson Management Group. Mr.&nbsp;Joines
has been a director of the Company since July&nbsp;2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Peter L. Larsen, 63</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Larsen has been involved in the commercial real estate industry since 1972. From
1996 through 2002, he was Senior Vice President of Acquisitions of Tarragon Corporation (formerly
Tarragon Realty Investors, Inc.), and its predecessors, a publicly-held real estate entity, the
common
</DIV>

<P align="center" style="font-size: 10pt">-12-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">stock of which is traded on the NASDAQ National Market. Since 1992, Mr.&nbsp;Larsen has also been
a director of four Texas non-profit corporations which own 545 apartment units and are overseeing
the development of a multi-million dollar retirement center in Coppell, Texas. Mr.&nbsp;Larsen has been
a director of the Company since February&nbsp;20, 2004, and the Presiding Director since March&nbsp;2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Ted P. Stokely, 71 (Affiliated)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chairman of the Board of the Company (since January&nbsp;1995). Mr.&nbsp;Stokely is General Manager
(since January&nbsp;1995) of ECF Senior Housing Corporation, a non-profit corporation; General Manager
(since January&nbsp;1993) of Housing Assistance Foundation, Inc., a non-profit corporation; part-time
unpaid Consultant (since January&nbsp;1993) of Eldercare Housing Foundation, a non-profit corporation;
General Manager (since April&nbsp;2002) of Unified Housing Foundation, Inc., a non-profit corporation;
Director and Chairman of the Board of ARI (since November&nbsp;2002); and Director (since April&nbsp;1990)
and Chairman of the Board (since January&nbsp;1995) of TCI. Mr.&nbsp;Stokely has been a director of the
Company since April&nbsp;1990.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Board of Directors unanimous recommends a vote FOR<BR>
the election of all of the Nominees named above.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL 2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>APPROVAL OF AMENDMENT TO THE ARTICLES OF INCORPORATION<BR>
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF<BR>
COMMON STOCK AND PREFERRED STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The authorized capital stock of the Company consists of 10,000,000 shares of Common Stock, par
value $0.01 per share, and 1,000,000 shares of Preferred Stock, par value $0.01 per share. The
Board of Directors has approved and recommends that the stockholders adopt an amendment to Article
FOURTH, Part&nbsp;A, to the Articles of Incorporation that would increase the authorized number of
shares of Common Stock from 10,000,000 shares to 100,000,000 shares and increase the number of
shares of Preferred Stock from 1,000,000 shares to 10,000,000 shares (the &#147;Stock Amendment&#148;). As
amended, pursuant to the proposed Stock Amendment, Article&nbsp;FOURTH, Part&nbsp;A, of the Articles of
Incorporation would read in its entirety as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;FOURTH:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The total number of shares of all classes which the
Corporation shall have authority to issue is 110,000,000, of which
100,000,000 shares, par value $0.01 per share, shall be of a class
designated &#145;Common Stock,&#146; and 10,000,000 shares, par value $0.01
per share, shall be of a class designated &#145;Preferred Stock.&#146;&#148;
</DIV>

<P align="center" style="font-size: 10pt">-13-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No shares of Preferred Stock have been designated in any series as permitted by Article
FOURTH, Part&nbsp;B of the Articles of Incorporation, and no shares of Preferred Stock have been issued
and are outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of November&nbsp;4, 2005, 4,168,035 shares of Common Stock are issued and outstanding, and no
additional shares are reserved for future issuance under any option plan or other arrangement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Background and Reasons</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors believes that the increased authorized number of shares of Common Stock
contemplated by the proposed Stock Amendment is desirable to make available shares of Common Stock
for future issuance by allowing the Company greater flexibility with respect to general corporate
purposes and in considering potential future actions involving the issuance of stock, including,
without limitation, raising capital, stock dividends or splits, potentially providing equity
incentives to employees, officers and directors. The Company currently does not have any specific
agreements or plans that would involve the issuance of additional shares of Common Stock that would
be authorized by the Stock Amendment although the Company intends to consider transactions from
time to time that could result in such issuances. The Board of Directors also believes that an
increased authorized number of shares of Common Stock would be desirable to make additional
unreserved shares of Common Stock available for issuance or reservation without further stockholder
authorization, except as may be required by law or by the rules of the American Stock Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As the Board of Directors cannot presently estimate what specific type of security might be
necessary in connection with any future acquisition, the Board of Directors believes that the
number of available shares of Preferred Stock should also be increased for the same reasons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Potential Effect</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorizing the Company to issue more shares than currently authorized by the Articles of
Incorporation will not affect materially any substantive rights, powers or privileges of the
holders of shares of Common Stock. Holders of shares of Common Stock are entitled to one vote per
share on all matters submitted to the stockholders and do not have cumulative voting rights or
pre-emptive rights for the purchase of additional shares of any class of capital stock. The
additional shares of Common Stock for which authorization is sought are identical to the shares of
Common Stock now authorized. However, the issuance of additional shares of Common Stock may, among
other things, have a dilutive effect on the earnings per share and on equity and voting power of
existing stockholders and may adversely affect the market price for the Common Stock. Although the
Board of Directors has no present intention of issuing any additional shares of Common Stock or
Preferred Stock for such purposes, the proposed increase in the number of authorized shares of
Common Stock and/or Preferred Stock could enable the Board of Directors to render more difficult or
discourage an attempt by another person or entity to obtain control of the Company. However, the
Company does not view the Stock Amendment as part of an &#147;anti-takeover&#148; strategy. The Stock
Amendment is not being advanced as a result of any known effort by any party to accumulate shares
of Common Stock or to obtain control of the Company.
</DIV>

<P align="center" style="font-size: 10pt">-14-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Conclusion and Recommendations; Vote Required</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The approval of the Stock Amendment requires the affirmative vote by the holders of a majority
of the shares of Common Stock presently outstanding and entitled to vote at the Annual Meeting.
The Board of Directors believes that the proposal is in the best interests of the Company and the
stockholders and had unanimously approved the Stock Amendment. <B>The Board of Directors recommends a
vote FOR approval of the Stock Amendment to increase the authorized number of shares of Common
Stock from 10,000,000 shares to 100,000,000 shares and to increase the authorized number of shares
of Preferred Stock from 1,000,000 shares to 10,000,000 shares.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL 3</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RATIFICATION OF APPOINTMENT OF<BR>
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has appointed Swalm &#038; Associates, P.C. as the independent registered
public accounting firm for Income Opportunity Realty Investors, Inc. for the 2005 fiscal year and
to conduct quarterly reviews through September&nbsp;30, 2005. The Company&#146;s Bylaws do not require that
stockholders ratify the appointment of Swalm &#038; Associates, P.C. as the Company&#146;s independent
registered public accounting firm. The Audit Committee will consider the outcome of this vote in
its decision to appoint an independent registered public accounting firm next year, however, it is
not bound by the stockholders&#146; decision. Even if the selection is ratified, the Audit Committee,
in its sole discretion, may change the appointment at any time during the year if it determines
that such a change would be in the best interest of the Company and its stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A representative of Swalm &#038; Associates, P.C. will attend the Annual Meeting. The
representative will have an opportunity to make a statement if he or she desires to do so and will
be available to respond to appropriate questions from the stockholders.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Board of Directors recommends a vote FOR the ratification of the<BR>
appointment of Swalm &#038; Associates, P.C. as the Company&#146;s<BR>
independent registered public accounting firm.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Changes in Registrant&#146;s Certifying Accountant</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective July&nbsp;1, 2003, the Board of Directors of the Company engaged the Plano, Texas
firm of Farmer, Fuqua &#038; Huff, P.C. as the independent accountant to audit the Company&#146;s financial
statements for the fiscal year ending December&nbsp;31, 2003. During the Company&#146;s two most recent
fiscal years ended December&nbsp;31, 2002 and any subsequent interim period, the Company did not consult
with Farmer, Fuqua &#038; Huff, P.C. or any of its members about the application of accounting
principles to any specified transaction or any other matter. The engagement effective July&nbsp;1, 2003
of Farmer, Fuqua &#038; Huff, P.C. as a new independent accountant for the Company necessarily resulted
in the termination or dismissal of the then principal accountant which audited the Company&#146;s
financial statements for the past two fiscal years ended December&nbsp;31, 2001 and 2002, BDO Seidman,
LLP. BDO Seidman, LLP made a fee proposal estimate the Company for 2003
</DIV>

<P align="center" style="font-size: 10pt">-15-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">which was greater than the fee proposal of Farmer, Fuqua &#038; Huff, P.C. for the same work. During the Company&#146;s
two most recent fiscal years and any subsequent interim period through July&nbsp;1, 2003, BDO Seidman,
LLP&#146;s report on the Company&#146;s financial statements for those two years did not contain an adverse
opinion or disclaimer of opinion, nor was such opinion qualified or modified as to uncertainty,
audit scope or accounting principles, and no disagreement existed between the Company and BDO
Seidman, LLP concerning any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure. The decision to change accountants was approved by the
then Audit Committee of the Board of Directors of the Company which then consisted of Messrs.&nbsp;Ted
P. Stokely, Earl D. Cecil (who resigned as a director on February&nbsp;29, 2004) and Martin L. White
(who resigned as a director on March&nbsp;15, 2004).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective June&nbsp;1, 2004, Farmer, Fuqua &#038; Huff, P.C. was engaged by the Audit Committees of two
affiliates of the Company to serve as those entities&#146; independent accountant for the fiscal year
ending December&nbsp;31, 2004. By virtue of the other assignments for Farmer, Fuqua &#038; Huff, P.C. with
those affiliates of IOT, Farmer, Fuqua &#038; Huff, P.C. suggested that perhaps another firm should
handle the audit of IOT&#146;s financial statements for the fiscal year ending December&nbsp;31, 2004 and in
fact recommended Swalm &#038; Associates, P.C. The approval of the engagement of Swalm &#038; Associates,
P.C. was given by the Audit Committee of the Board of Directors of IOT effective June&nbsp;1, 2004, and
a Current Report on Form 8-K for event occurring May&nbsp;31, 2004 was filed with the Securities and
Exchange Commission (the &#147;SEC&#148;). However, it was discovered that Swalm &#038; Associates, P.C. had not
completed the registration process with the Public Company Accounting Oversight Board (&#147;PCAOB&#148;).
Accordingly, on June&nbsp;17, 2004, the Audit Committee of the Board of Directors (consisting of Messrs.
Allard, Jakuszewski and Larsen) re-engaged Farmer, Fuqua &#038; Huff, P.C. as the independent
accountants for the Company. During the short period of time of engagement of Swalm &#038; Associates,
P.C. (from June&nbsp;1, 2004 through June&nbsp;17, 2004), Swalm &#038; Associates, P.C. performed no work for the
Company. In addition, during the Company&#146;s two most recent fiscal years ended December&nbsp;31, 2003,
and any subsequent interim period through May&nbsp;31, 2004, the Company did not consult with Swalm &#038;
Associates, P.C. or any of its members about the application of accounting principles to any
specified transaction or any other matter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;19, 2004, the Company received notification that Swalm &#038; Associates, P.C.&#146;s
registration with the PCAOB had become effective. Effective July&nbsp;22, 2004, the Audit Committee
(consisting of Messrs.&nbsp;Allard, Jakuszewski and Larsen) of the Board of Directors re-engaged the
Plano, Texas firm of Swalm &#038; Associates, P.C. as the independent accountant to audit the Company&#146;s
financial statements for the fiscal year ending December&nbsp;31, 2004. The engagement effective July
22, 2004 of Swalm &#038; Associates, P.C. as the independent accountant for the Company necessarily
resulted in the termination or dismissal of the principal accountant which had audited the
Company&#146;s financial statements for the fiscal year ended December&nbsp;31, 2003, Farmer, Fuqua &#038; Huff,
P.C. During the Company&#146;s most recent fiscal year and any subsequent interim period, Farmer, Fuqua
&#038; Huff, P.C.&#146;s report on the Company&#146;s financial statements for that year did not contain an
adverse opinion or disclaimer of opinion nor was such opinion qualified or modified as to
uncertainty, audit scope or accounting principles, and no disagreement existed between the Company
and Farmer, Fuqua &#038; Huff, P.C. concerning any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.
</DIV>

<P align="center" style="font-size: 10pt">-16-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Fiscal Years 2003 and 2004 Audit Firm Fee Summary</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the aggregate fees for professional services rendered to the
Company for the years 2004 and 2003 by the Company&#146;s principal accounting firms, BDO Seidman, LLP
(January&nbsp;2002 to June&nbsp;2003), Farmer Fuqua &#038; Huff, P.C. (July&nbsp;1, 2003 to December&nbsp;31, 2003 and
January&nbsp;1, 2004 to July&nbsp;22, 2004) and Swalm &#038; Associates, P.C. (July&nbsp;22, 2004 to December&nbsp;31,
2004):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Type of Fees</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2003</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">44,724</TD>
    <TD nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">53,407</TD>
    <TD nowrap>(b)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit-Related Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD nowrap>(a)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD nowrap>(b)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All Other Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total Fees:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">46,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">55,507</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>

<DIV align="left"><DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The amount of audit fees paid to Farmer, Fuqua &#038; Huff, P.C. for January&nbsp;1, 2004 to July&nbsp;2,
2004, was $48,274; the amount of audit fees paid to Swalm &#038; Associates, P.C. for July&nbsp;22, 2004
through December&nbsp;31, 2004 was $7,000. All tax fees for 2004 were paid to Farmer, Fuqua &#038; Huff,
P.C.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The amount of audit fees paid to BDO Seidman, LLP for January to June&nbsp;2003 was $10,269;
the amount of audit fees paid to Farmer, Fuqua &#038; Huff, P.C. for July through December&nbsp;2003 was
$43,238. All tax fees for 2003 were paid to Farmer, Fuqua &#038; Huff, P.C.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All services rendered by the principal auditors are permissible under applicable laws and
regulations and were pre-approved by either the Board of Directors or the Audit Committee, as
required by law. The fees paid the principal auditors for services as described in the above table
fall under the categories listed below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Fees</I>. These are fees for professional services performed by the
principal auditor for the audit of the Company&#146;s annual financial statements and
review of financial statements included in the Company&#146;s 10-Q filings and services
that are normally provided in connection with statutory and regulatory filing or
engagements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit-Related Fees</I>. These are fees for assurance and related services
performed by the principal auditor that are reasonably related to the performance of
the audit or review of the Company&#146;s financial statements. These services include
attestations by the principal auditor that are not required by statute or regulation
and consulting on financial accounting/reporting standards.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Fees</I>. These are fees for professional services performed by the
principal auditor with respect to tax compliance, tax planning, tax consultation,
returns
</DIV>

<P align="center" style="font-size: 10pt">-17-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">preparation and review of returns. The review of tax returns includes the
Company and its consolidated subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>All Other Fees</I>. These are fees for other permissible work performed by the
principal auditor that do not meet the above category descriptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These services are actively monitored (as to both spending level and work content) by the
Audit Committee to maintain the appropriate objectivity and independence in the principal auditor&#146;s
core work, which is the audit of the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Report of the Audit Committee<BR>
Of the Board of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee of the Board is composed of three directors, each of whom the Board has
determined meets the independence and experience requirements of the American Stock Exchange and
the SEC under Rule&nbsp;10A-3 under the Securities Exchange Act of 1934. The Audit Committee oversees
the Company&#146;s auditing, accounting and financial reporting processes on behalf of the Board. The
Audit Committee also recommends to the Board of Directors the selection of the Company&#146;s
independent accountants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee&#146;s job is one of oversight as set forth in its charter. It is not a duty
of the Audit Committee to prepare the Company&#146;s financial statements, to plan or conduct audits or
to determine that the Company&#146;s financial statements are complete and accurate and are in
accordance with generally accepted accounting principles. Management of the Company is responsible
for preparing the Company&#146;s financial statements and for maintaining internal controls. The
independent auditors are responsible for auditing the financial statements and for expressing an
opinion as to whether those audited financial statements fairly present the financial position,
results of operations and cash flows of the Company in conformity with generally accepted
accounting principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has reviewed and discussed the audited consolidated financial statements
of the Company for the 2004 fiscal year with management, and has discussed with the independent
accountants the matters required to be discussed by Statement on Auditing Standards No.&nbsp;61
(Codification of Statements on Auditing Standards, AU SEC. 380) which includes, among other things,
matters related to the conduct of the audit of the Company&#146;s financial statements. The Audit
Committee has received the written disclosures and the letter from the independent accountants
required by Independence Standards Board Standard No.&nbsp;1 (Independence Discussions with Audit
Committees), and the Audit Committee has discussed with representatives of the independent
accountants their independence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon the review and discussions described above, the Audit Committee recommended to the
Board of Directors, and the Board has approved, that the audited consolidated financial statements
be included in the Company&#146;s Annual Report on Form 10-K for the year ended December
</DIV>

<P align="center" style="font-size: 10pt">-18-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">31, 2004, filed with the Securities and Exchange Commission. The Audit Committee and the Board have also
recommended, subject to stockholder approval, the selection of Swalm &#038; Associates, P.C. as the
Company&#146;s independent auditors for fiscal year 2005.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">AUDIT COMMITTEE
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:15px; text-indent:-15px">David E. Allard
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Robert A. Jakuszewski
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Peter L. Larsen</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Approval Policy for Audit and Non-Audit Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Sarbanes-Oxley Act of 2002 (the &#147;SO Act&#148;), and the rules of the Securities and
Exchange Commission (the &#147;SEC&#148;), the Audit Committee of the Board of Directors is responsible for
the appointment, compensation and oversight of the work of the independent auditor. The purpose of
the provisions of the SO Act and the SEC rules for the Audit Committee role in retaining the
independent auditor is two-fold. First, the authority and responsibility for the appointment,
compensation and oversight of the auditors should be with directors who are independent of
management. Second, any non-audit work performed by the auditors should be reviewed and approved
by these same independent directors to ensure that any non-audit services performed by the auditor
do not impair the independence of the independent auditor. To implement the provisions of the SO
Act, the SEC issued rules specifying the types of services that an independent auditor may not
provide to its audit client, and governing the Audit Committee&#146;s administration of the engagement
of the independent auditor. As part of this responsibility, the Audit Committee is required to
pre-approve the audit and non-audit services performed by the independent auditor in order to
assure that they do not impair the auditor&#146;s independence. Accordingly, the Audit Committee has
adopted a written pre-approval policy of audit and non-audit services (the &#147;Policy&#148;), which sets
forth the procedures and conditions pursuant to which services to be performed by the independent
auditor are to be pre-approved. Consistent with the SEC rules establishing two different
approaches to approving non-prohibited services, the policy of the Audit Committee covers
pre-approval of audit services, audit-related services, international administration tax services,
non-U.S. income tax compliance services, pension and benefit plan consulting and compliance
services, and U.S. tax compliance and planning. At the beginning of each fiscal year, the Audit
Committee will evaluate other known potential engagements of the independent auditor, including the
scope of work proposed to be performed and the proposed fees, and approve or reject each service,
taking into account whether services are permissible under applicable law and the possible impact
of each non-audit service on the independent auditor&#146;s independence from management. Typically, in
addition to the generally pre-approved services, other services would include due diligence for an
acquisition that may or may not have been known at the beginning of the year. The Audit Committee
has also delegated to any member of the Audit Committee designated by the Board or the financial
expert member of the Audit Committee responsibilities to pre-approve services to be performed by
the independent auditor not exceeding $25,000 in value or cost per engagement of audit and
non-audit services, and such authority may only be exercised when the Audit Committee is not in
session.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Compensation Committee Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has no employees, payroll or benefit plans and pays no compensation to its
executive officers. The executive officers of the Company who are also officers or employees of
</DIV>

<P align="center" style="font-size: 10pt">-19-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prime Income Asset Management LLC (&#147;Prime&#148;) are compensated by Prime. Such executive officers
perform a variety of services for Prime, and the amount of their compensation is determined solely
by Prime. Prime does not allocate the cash compensation of its officers among the various entities
for which it may serve as advisor or sub-advisor. Prime contracts with SWI to provide certain
services to the Company through SWI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The only remuneration paid by the Company is to the directors who are not officers or
directors of SWI. These independent directors (i)&nbsp;review the business plan of the Company to
determine that it is in the best interest of the stockholders, (ii)&nbsp;review the advisory contract,
(iii)&nbsp;supervise the performance of the Company&#146;s advisor and review the reasonableness of the
compensation paid to the advisor in terms of the nature and quality of services performed, (iv)
review the reasonableness of the total fees and expenses of the Company, and (v)&nbsp;select, when
necessary, a qualified independent real estate appraiser to appraise properties acquired. See
&#147;Director Compensation&#148; for a description of the compensation paid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee is responsible for overseeing the policies of the Company relating
to compensation to be paid by the Company, if any, to certain designated officers and to make
recommendations to the Board with respect to compensation policies, produce necessary reports and
executive compensation for inclusion in the proxy statement, and to monitor the development and
implementation of succession plans. The charter of the Compensation Committee was adopted on March
22, 2004, and the members of the Compensation Committee, all of whom are independent within the
meaning of the listing standards of the American Stock Exchange and the Company&#146;s corporate
governance guidelines, are listed below. Since its formation on March&nbsp;22, 2004, the Compensation
Committee has not performed any task to report other than to review its existing charter.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">COMPENSATION COMMITTEE
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">David E. Allard
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Peter L. Larsen
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Robert A. Jakuszewski</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Committee Interlocks and Insider Participation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Compensation Committee is made up of non-employee directors who have never
served as officers of, or been employed by the Company. None of the Company&#146;s executive officers
serve on a board of directors of any entity that has a director or officer serving on this
Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive
officers of the Company are Mark W. Branigan, Executive Vice President &#150;
Multi-Family Construction, Louis J. Corna, Executive Vice President
&#150; General Counsel/Tax Counsel
and Secretary, and Robert Neil Crouch, Executive Vice President and Chief Financial Officer.
Messrs.&nbsp;Branigan, Corna and Crouch are employed by Prime. None of the executive officers receive
any direct remuneration from the Company, nor do any hold any options granted by the Company.
Their positions with the Company are not subject to a vote of stockholders. The ages, terms of
service and all positions and offices with the Company, Prime, BCM, SWI, other affiliated entities, other
</DIV>

<P align="center" style="font-size: 10pt">-20-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">principal occupations, business experience and directorships with other publicly-held companies
during the last five years or more are set forth below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mark W. Branigan, 50</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive
Vice President&#150;Multi-Family Construction (since September&nbsp;2004); Executive Vice
President&#150;Residential (June&nbsp;2001 to September&nbsp;2004), Executive Vice President and Chief Financial
Officer (August&nbsp;2000 to June&nbsp;2001), Vice President&#150;Director of Construction (August&nbsp;1999 to August
2000) of the Company, TCI, ARL and BCM; Director (September&nbsp;2000 to June&nbsp;2001) of the Company, TCI
and ARL; Executive Vice President&#150;Residential (since June&nbsp;2003) of Prime and PIAMI; and Executive
Vice President&#150;Residential Asset Management (January&nbsp;1992 to October&nbsp;1997) of American Realty
Trust, Inc. (&#147;ART&#148;); Real Estate Consultant (November&nbsp;1997 to July&nbsp;1999).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Louis J. Corna, 57</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President, General Counsel/Tax Counsel and Secretary (since February&nbsp;2004),
Executive Vice President (October&nbsp;2001 to February&nbsp;2004), Executive Vice President and Chief
Financial Officer (June&nbsp;2001 to October&nbsp;2001) and Senior
Vice President&#150;Tax (December&nbsp;2000 to June
2001) of the Company, TCI, ARL and BCM; Executive Vice President, General Counsel/Tax Counsel and
Secretary (since February&nbsp;2004), Executive Vice President&#150;Tax (July&nbsp;2003 to February&nbsp;2004) of
Prime and PIAMI; Private Attorney (January&nbsp;2000 to
December&nbsp;2000); Vice President&#150;Taxes and
Assistant Treasurer (March&nbsp;1998 to January&nbsp;2000) of IMC
Global, Inc.; Vice President&#150;Taxes (July
1991 to February&nbsp;1998) of Whitman Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Robert Neil Crouch, 52</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President and Chief Financial Officer (since September&nbsp;17, 2004) of the
Company. Mr.&nbsp;Crouch was Corporate Controller (from September&nbsp;2002 to September&nbsp;16, 2004) of
Apptricity Corporation, a small Dallas, Texas-based software development company; prior thereto
(from January&nbsp;1999 to September&nbsp;2002), he was corporate controller of Attenza, Inc., a Dallas,
Texas web-based computer self-help company. Mr.&nbsp;Crouch has been a Certified Public Accountant
since 1981.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Advisor</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the Board of Directors is directly responsible for managing the affairs of the
Company and for setting the policies which guide it, day-to-day operations are performed by a
contractual advisor under the supervision of the Board of Directors. The duties of the advisor
include, among other things, locating, investigating, evaluating and recommending real estate and
mortgage note investment and sales opportunities, as well as financing and refinancing sources.
The advisor also serves as a consultant to the Board of Directors in connection with the business
plan and investment decisions made by the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SWI has served as the Company&#146;s advisor since June&nbsp;30, 2003. Prior to June&nbsp;30, 2003, and
since 1989, BCM had served as the advisor to the Company and its predecessors. SWI is 100%
</DIV>

<P align="center" style="font-size: 10pt">-21-
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">owned by Gene E. Phillips. Mr.&nbsp;Phillips is chairman, president, chief executive officer and a director
of SWI, is involved in daily consultation with the officers of SWI and has significant influence
over the conduct of SWI&#146;s business, including the rendering of advisory services and the making of
investment decisions for itself and the Company. Mr.&nbsp;Joines, a director of the Company since July
2003, is an officer and a director of SWI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Advisory Agreement, SWI is required to annually formulate and submit for Board
approval a budget and business plan containing a twelve-month forecast of operations and cash flow,
a general plan for asset sales and purchases, borrowing activity and other investments. SWI is
required to report quarterly to the Board on the Company&#146;s performance against the business plan.
In addition, all transactions require prior Board approval, unless they are explicitly provided for
in the approved plan or are made pursuant to authority expressly delegated to SWI by the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement also requires prior approval of the Board for the retention of all
consultants and third party professionals, other than legal counsel. The Advisory Agreement
provides that SWI shall be deemed to be in a fiduciary relationship to the stockholders; contains a
broad standard governing SWI&#146;s liability for losses by the Company; and contains guidelines for
SWI&#146;s allocation of investment opportunities as among itself, the Company and other entities it
advises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement provides for SWI to be responsible for the day-to-day operations of the
Company and to receive an advisory fee comprised of a gross asset fee of 0.0625% per month (0.75%
per annum) of the average of the gross asset value (total assets less allowance for amortization,
depreciation or depletion and valuation reserves) and an annual net income fee equal to 7.5% of the
Company&#146;s net income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement also provides for SWI to receive an annual incentive sales fee equal to
10% of the amount, if any, by which the aggregate sales consideration for all real estate sold by
the Company during the fiscal year exceeds the sum of (1)&nbsp;the cost of each property as originally
recorded in the Company&#146;s books for tax purposes (without deduction for depreciation, amortization
or reserve for losses), (2)&nbsp;capital improvements made to such assets during the period owned, and
(3)&nbsp;all closing costs (including real estate commissions) incurred in the sale of such real estate.
However, no incentive fee shall be paid unless (a)&nbsp;such real estate sold in such fiscal year, in
the aggregate, has produced an 8% simple annual return on the net investment, including capital
improvements, calculated over the holding period before depreciation and inclusive of operating
income and sales consideration, and (b)&nbsp;the aggregate net operating income from all real estate
owned for each of the prior and current fiscal years shall be at least 5% higher in the current
fiscal year than in the prior fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, pursuant to the Advisory Agreement, SWI or an affiliate of SWI is to
receive an acquisition commission for supervising the acquisition, purchase or long-term lease of
real estate equal to the lesser of (i)&nbsp;up to 1% of the cost of acquisition, inclusive of
commissions, if any, paid to non-affiliated brokers, or (ii)&nbsp;the compensation customarily charged
in arm&#146;s-length transactions by others rendering similar property acquisition services as an
ongoing public activity in the same geographical location and for comparable property, provided that the aggregate purchase price of
</DIV>

<P align="center" style="font-size: 10pt">-22-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">each property (including acquisition fees and real estate brokerage commissions) may not exceed
such property&#146;s appraised value at acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement requires SWI or any affiliate of SWI to pay the Company one-half of any
compensation received from third parties with respect to the origination, placement or brokerage of
any loan made by the Company. However, the compensation retained by SWI or any affiliate of SWI
shall not exceed the lesser of (i)&nbsp;2% of the amount of the loan commitment, or (ii)&nbsp;a loan
brokerage and commitment fee which is reasonable and fair under the circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement also provides that SWI or an affiliate of SWI is to receive a mortgage
or loan acquisition fee with respect to the purchase of any existing mortgage loan equal to the
lesser of (i)&nbsp;1% of the amount of the loan purchased, or (ii)&nbsp;a brokerage or commitment fee which
is reasonable and fair under the circumstances. Such fee will not be paid in connection with the
origination or funding of any mortgage loan by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Advisory Agreement, SWI or an affiliate of SWI also is to receive a mortgage
brokerage and equity refinancing fee for obtaining loans or refinancing on properties equal to the
lesser of (i)&nbsp;1% of the amount of the loan or the amount refinanced, or (ii)&nbsp;a brokerage or
refinancing fee which is reasonable and fair under the circumstances. However, no such fee shall
be paid on loans from SWI or an affiliate of SWI without the approval of the Board of Directors.
No fee shall be paid on loan extensions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Advisory Agreement, SWI is to receive reimbursement of certain expenses incurred by
it in the performance of advisory services to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Advisory Agreement, all or a portion of the annual advisory fee must be refunded by
SWI if the Operating Expenses of the Company (as defined in the Advisory Agreement) exceed certain
limits specified in the Advisory Agreement based on the book value, net asset value and net income
of the Company during the fiscal year. SWI was required to refund $226,000 of the 2003 advisory
fee under this provision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, if management were to request that SWI render services other than those required
by the Advisory Agreement, SWI or an affiliate of SWI is separately compensated for such additional
services on terms to be agreed upon from time to time. As discussed below, under Property
Management, the Company has hired Triad Realty Services, Ltd. (&#147;Triad&#148;), an affiliate of Prime, to
provide management for the Company&#146;s properties and, as discussed below, under &#147;Real Estate
Brokerage,&#148; the Company has engaged Regis Realty I LLC (&#147;Regis I&#148;), a related party, on a
non-exclusive basis to provide brokerage services for the Company. SWI may assign the Advisory
Agreement only with the prior consent of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors and principal officers of SWI are set forth below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Office(s)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gene E. Phillips
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Chairman, President and Chief Executive Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ken L. Joines
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Vice President, Treasurer and Secretary</TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<P align="center" style="font-size: 10pt">-23-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Property Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since February&nbsp;1, 1990, affiliates of BCM have provided property management services.
Currently, Triad provides such property management services for a fee of 6% or less of the monthly
gross rents collected on residential properties and 3% or less of the monthly gross rents collected
on commercial properties under its management. Triad subcontracts with other entities for the
provision of the property-level management services to the Company at various rates. The general
partner of Triad is Prime. The limited partner of Triad is Highland Realty Services, Inc.
(&#147;Highland&#148;), a related party. Triad subcontracts the property-level management and leasing of
five of the Company&#146;s commercial properties to Regis Realty I, LLC (&#147;Regis I&#148;), a related party,
which is a company owned by Highland. Regis I also received property and construction management
fees and leasing commissions in accordance with its property-level management agreement with Triad.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Real Estate Brokerage</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since January&nbsp;1, 2003, Regis I provided real estate brokerage services to the Company (on a
non-exclusive basis). Regis I is entitled to receive a real estate commission for property
purchases and sales in accordance with a sliding scale of total fees to be paid (i)&nbsp;maximum fee of
4.5% on the first $2&nbsp;million of any purchase or sale transaction of which no more than 3.5% would
be paid to Regis I or affiliates; (ii)&nbsp;maximum fee of 3.5% on transaction amounts between $2
million and $5&nbsp;million, of which no more than 3% would be paid to Regis I or affiliates; (iii)
maximum fee of 2.5% on transaction amounts between $5&nbsp;million and $10&nbsp;million, of which no more
than 2% would be paid to Regis I; and (iv)&nbsp;maximum fee of 2% on transaction amounts in excess of
$10&nbsp;million, of which no more than 1.5% would be paid to Regis I or affiliates.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Certain Relationships and Related Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Certain Business Relationships</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;1989, the Board of Directors of the predecessor of the Company voted to retain BCM
as the predecessor&#146;s advisor. BCM is a company of which Messrs.&nbsp;Mark W. Branigan and Louis J.
Corna serve as executive officers. BCM is indirectly owned by a trust for the children of Gene E.
Phillips. Mr.&nbsp;Phillips is not an officer or director of BCM but serves as a representative of the
trust, is involved in daily consultation of the officers of BCM and has significant influence over
the conduct of BCM&#146;s business, including the rendering of advisory services and the making of
investment decisions for itself and for the Company. On June&nbsp;30, 2003, BCM ended its advisory
agreement with the Company. SWI has served as the Company&#146;s advisor since July&nbsp;1, 2003. SWI is
owned by Gene E. Phillips. Mr.&nbsp;Phillips is Chairman, President, Chief Executive Officer and a
director and is involved in daily consultation with the officers of SWI and has significant
influence over the conduct of SWI&#146;s business, including the rendering of advisory services and the
making of investment decisions for itself and for the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since February&nbsp;1, 1990, affiliates of BCM have provided property management services to
the Company and its predecessor. Currently, Triad provides such property management services. The
general partner of Triad is Prime. The limited partner is Highland. Triad subcontracts the
property-level management and leasing of five of the Company&#146;s commercial properties to Regis I,
</DIV>

<P align="center" style="font-size: 10pt">-24-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">which is a company owned by Highland. Regis I is a limited liability company, the sole member
of which is Highland.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Affiliates of BCM have also provided brokerage services, on a non-exclusive basis, for the
Company and received brokerage commissions in accordance with a brokerage agreement. Currently,
Regis I performs such brokerage services for the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Messrs.&nbsp;Mark W. Branigan, Louis J. Corna and Robert Neil Crouch II are employed by Prime
Income Asset Management LLC (&#147;Prime&#148;), the sole member of which is Prime Income Asset Management,
Inc., a Nevada corporation (&#147;PIAMI&#148;), which is owned by Realty Advisors, Inc. (80%) and SWI (20%).
Messrs.&nbsp;Branigan and Corna, executive officers of the Company, also serve as executive officers of
ARI and TCI, and accordingly owe fiduciary duties to those entities as well as the Company. Mr.
Joines is an officer and director of SWI and owes fiduciary duties to SWI. Mr.&nbsp;Joines is the
President and Mr.&nbsp;Stokely is the General Manager of Unified Housing Foundation, Inc., and they owe
duties to this entity as well as to the Company. Mr.&nbsp;Stokely, who serves as a director of ARI, and
TCI owes fiduciary duties to TCI and ARI, as well as the Company under applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the Company has engaged in and may continue to engage in business transactions,
including real estate partnerships, with related parties. Management believes that all of the
related party transactions represented the best investments available at the time and were at least
as advantageous to the Company as could have been obtained from unrelated third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;24, 2004, a Secured Promissory Note in the amount of $2,990,000 given by UHF for UHM to
Transcontinental Eldorado, Inc. was assigned from TCI to the Company as a partial payment for TCI&#146;s
repurchase of 100% of the outstanding common shares of Transcontinental Treehouse Corporation from
the Company. The sale price of Treehouse-IR was $7.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $1,222,500 given by UHF for
Unified Housing of Parkside Crossing, LLC to Regis I and the accrued interest receivable of
$112,878 were assigned from Regis I to the Company as a paydown of certain intercompany receivables
due to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $1,053,616 given by UHF for
United Housing of Temple, LLC to Regis I and the accrued interest receivable of $98,338 were
assigned from Regis I to the Company as a paydown of certain intercompany receivables due to the
Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;30, 2004, a Secured Promissory Note in the amount of $1,770,000 given by UHF for
Housing for Seniors of Lewisville, LLC, to Regis I and the accrued interest receivable of $174,640
were assigned from Regis I to the Company as a paydown of certain intercompany receivables due to
the Company.
</DIV>

<P align="center" style="font-size: 10pt">-25-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is a partner with TCI in Nakash Income Associates nd TCI Eton Square, L.P. TCI
owns 345,728 shares of Common Stock of the Company (approximately 24%).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, the Company paid SWI and its affiliates and related parties $743,000 in advisory
fees, $250,000 in net income fees, $518,000 in mortgage brokerage and equity refinancing fees, and
$120,000 in property and construction management fees and leasing commissions, net of property
management fees paid to subcontractors other than Regis. In addition, from time to time, the
Company has made advances to SWI which generally have not had specific repayment terms, did not
bear interest until July&nbsp;1, 2005, and have been reflected in the Company&#146;s financial statements as
other assets or other liabilities from affiliates. At December&nbsp;31, 2004, SWI had advanced to the
Company $1.3&nbsp;million, and the Company had advanced to TCI $260,000. Effective July&nbsp;1, 2005, such
advances bear interest at 1% above the prime rate (currently 7.75%) per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restrictions on Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;FOURTEENTH of the Company&#146;s Articles of Incorporation provides that the Company shall
not, directly or indirectly, contract or engage in any transaction with (1)&nbsp;any director, officer
or employee of the Company, (2)&nbsp;any director, officer or employee of the advisor, (3)&nbsp;the advisor,
or (4)&nbsp;any affiliate or associate (as such terms are defined in Rule&nbsp;12b-2 under the Securities
Exchange Act of 1934, as amended) of any of the aforementioned persons, unless (a)&nbsp;the material
facts as to the relationship among or financial interest of the relevant individuals or persons and
as to the contract or transaction are disclosed to or are known by the Company&#146;s Board of Directors
or the appropriate committee thereof, and (b)&nbsp;the Company&#146;s Board of Directors or appropriate
committee thereof determines that such contract or transaction is fair to the Company and
simultaneously authorizes or ratifies such contract or transaction by the affirmative vote of a
majority of independent directors of the Company entitled to vote thereon. Article&nbsp;FOURTEENTH
defines an &#147;Independent Director&#148; as one who is neither an officer or an employee of the Company,
nor a director, officer or employee of the Company&#146;s advisor.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PERFORMANCE GRAPH</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following performance graph compares the cumulative total stockholder return on shares of
Common Stock of the Company with the Dow Jones US Total Market Index (&#147;DJ Total Market Index&#148;) and
the Dow Jones Real Estate Investment Index (&#147;DJ Real Estate Index&#148;). The comparison assumes that
$100 was invested on December&nbsp;31, 1999, in shares of Common Stock of the Company, and in each of
the indices and further assumes the reinvestment of all distributions. Past performance is not
necessarily an indicator of future performance.
</DIV>

<P align="center" style="font-size: 10pt">-26-
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<IMG src="d29535pd2953501.gif" alt="(GRAPHIC)">
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="25"></TD>
</TR>

<TR>
    <TD colspan="25" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="2">12/31/99</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="2">12/31/00</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="2">12/31/01</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="2">12/31/02</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="2">12/31/03</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="2">12/31/04</FONT></B></TD>
</TR>

<TR>
    <TD colspan="25"></TD>
</TR>

<TR>
    <TD colspan="25" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">&nbsp;Income Opportunity Realty Investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">369</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">&nbsp;Dow Jones US Real Estate Index
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">265</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <FONT size="2">&nbsp;Dow Jones US Composite Index
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">

</DIV>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OTHER MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors knows of no other matters that may be properly or should be brought
before the Annual Meeting. However, if any other matters are properly brought before the Annual
Meeting, the persons named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The audited financial statements of the Company, in comparative form for the years ended
December&nbsp;31, 2004 and 2003 are contained in the 2004 Annual Report to Stockholders, which is being
delivered with this proxy statement. However, such report and the financial statements contained
therein are not to be considered part of this solicitation.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SOLICITATION OF PROXIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS PROXY STATEMENT IS FURNISHED TO STOCKHOLDERS TO SOLICIT PROXIES ON BEHALF OF THE BOARD OF
DIRECTORS OF INCOME OPPORTUNITY REALTY INVESTORS, INC. </B>The cost of soliciting proxies will be born
by the Company. Directors and officers of the Company may, without additional compensation,
solicit by mail, in person or by telecommunication.
</DIV>

<P align="center" style="font-size: 10pt">-27-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FUTURE PROPOSALS OF STOCKHOLDERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholder proposals for our Annual Meeting to be held in 2006 must be received by us by
December&nbsp;31, 2005, and must otherwise comply with the rules promulgated by the Securities and
Exchange Commission to be considered for inclusion in our proxy statement for that year. Any
stockholder proposal, whether or not to be included in our proxy materials, must be sent to our
Corporate Secretary at 1800 Valley View Lane, Suite&nbsp;300, Dallas, Texas 75234.
</DIV>
<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>COPIES OF INCOME OPPORTUNITY REALTY INVESTORS, INC.&#146;S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2004 TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (WITHOUT EXHIBITS) ARE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE
THROUGH OUR WEBSITE AT </B><u><B>WWW.INCOMEOPP-REALTY.COM</B></u> <B>OR UPON WRITTEN REQUEST TO INCOME OPPORTUNITY
REALTY INVESTORS, INC., 1800 VALLEY VIEW LANE, SUITE 300, DALLAS, TEXAS 75234, ATTN: DIRECTOR OF
INVESTOR RELATIONS.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated: November&nbsp;4, 2005.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">By order of the Board of Directors,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">/s/ Louis J. Corna
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD nowrap colspan="3" align="left">Louis J. Corna<br>
Executive Vice President, General Counsel,<br>
Tax Counsel and Secretary&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">-28-
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">
</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 100%; border-top: 1px dotted #000000">&nbsp;</DIV></DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>PROXY</B></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Proxy is solicited on behalf of the Board of Directors for the Annual Meeting of
Stockholders to be held December&nbsp;15, 2005.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned stockholder of INCOME OPPORTUNITY REALTY INVESTORS, INC. hereby appoints TED
P. STOKELY and LOUIS J. CORNA, and each of them proxies with full power of substitution in each of
them, in the name, place and stead of the undersigned, as attorneys and proxies to vote all shares
of Common Stock, par value $0.01 per share, of INCOME OPPORTUNITY REALTY INVESTORS, INC. which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held on Thursday,
December&nbsp;15, 2005, at 1:30 p.m., local Dallas, Texas time, at 1800 Valley View Lane, Suite&nbsp;300,
Dallas, Texas 75234, or any adjournment(s) thereof, with all powers the undersigned would possess
if personally present, as indicated below, for the transaction of such business as may properly
come before said meeting or any adjournment(s) thereof, all as set forth in the November&nbsp;4, 2005
Proxy Statement for said meeting.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="42%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="42%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&#091;INSERT ADDRESS LABEL&#093;<br>
<br>
<br>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Please<br>
Sign<br>
Here</B><br>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="font-size: 3pt; margin-top: 16pt; width: 100%; border-top: 1px solid #000000"><br>
<br>
<DIV style="font-size: 3pt; margin-top: 16pt; width: 100%; border-top: 1px solid #000000"></div></div>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><br>Dated:&nbsp;<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>&nbsp;, 2005.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">To change the address on
your account, please
check the box at right
and indicate your new
address in the address
space above. Please note
that changes to the
registered name(s) on the
account may not be
submitted via this
method. <FONT style="font-family: Wingdings">&#168;</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>Note: Please sign exactly as your name or
names appear hereon. When there is more than
one owner, each must sign. When signing as an
agent, attorney, administrator, executor,
guardian or trustee, please indicate your title
as such. If executed by a corporation, the
proxy should be signed by a duly-authorized
officer who should indicate his title. If a
partnership, please sign in partnership name by
an authorized person. Please date, sign and
mail this proxy card in the enclosed envelope
for which no postage is required if mailed in
the United States.</B></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued and to be Completed on the Other Side)
</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS PROXY WILL BE VOTED AS DIRECTED BUT IF NO DIRECTION IS INDICATED, IT WILL BE VOTED FOR
ALL NOMINEES AND FOR RATIFICATION OF THE APPOINTMENT OF SWALM &#038; ASSOCIATES, P.C. AS INDEPENDENT
AUDITORS. ON OTHER MATTERS THAT MAY COME BEFORE SAID MEETING, THIS PROXY WILL BE VOTED IN THE
DISCRETION OF THE ABOVE-NAMED PERSONS.</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Election of Directors</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="Wingdings">&#111;</FONT> <B>For </B>All Nominees (except or marked to the contrary)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="Wingdings">&#111;</FONT> <B>Withhold </B>Authority For All Nominees listed below</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">David E. Allard, Robert A. Jakuszewski, Ken L. Joines, Peter L. Larsen, Ted P. Stokely</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="5" valign="top" align="left"><DIV style="margin-left:0px; text-indent:-0px"><U><B>Instruction</B></U><B>: </B>To withhold authority to vote for any individual nominee, strike a line through the nominee&#146;s name listed above.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>Amendment to the Articles of Incorporation to increase the number of authorized shares of Common Stock from 10,000,00 shares to 100,000,000 shares and Preferred Stock from 1,000,000 shares to 10,000,000 shares</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="center"><FONT face="Wingdings">&#111;</FONT><B>For</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT><B>Against</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face="Wingdings">&#111;</FONT>Abstain</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>Ratification of the Appointment of Swalm &#038; Associates, P.C. as the independent registered public accounting firm</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="center"><FONT face="Wingdings">&#111;</FONT><B>For</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT><B>Against</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><FONT face="Wingdings">&#111;</FONT>Abstain</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">In their discretion on any other matters which may properly come before the meeting or any adjournment(s) thereof.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Board of Directors of Income Opportunity Realty Investors, Inc. recommends approval of all nominees for election as directors,<BR>
a vote FOR approval of the amendment to the Articles of Incorporation, and<BR>
a vote FOR ratification of the appointment of Swalm &#038; Associates, P.C. as the independent registered public accounting firm.</B></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Please sign, date and return promptly in the enclosed envelope.</B></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Continued and to be Signed on the Other Side)</DIV>

<br>


<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

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/V0UB^1>A.9JE&8B"```[
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
