SECTION 6.3 Transfer Agents and Registrars. The Board of Directors may in its discretion appoint one or more banks or trust companies in such city or cities as the Board of Directors may deem advisable, from time to time, to act as transfer agents or registrars of the Corporation's shares, and upon such appointments being made, no certificate representing shares shall be valid until countersigned by one of such transfer agents (if any) and registered by one of such registrars (if any).

SECTION 6.4 Transfer of Stock. Subject to the restrictions contained in the Articles, upon surrender to the Corporation or its transfer agent of a stock certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

SECTION 6.5 Fixing of Record Dates; Closing of Transfer Books. The Board of Directors may fix in advance a date as the record date for the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or in order to make a determination of stockholders for any other proper purpose. Such date, in any case, shall not be more than sixty (60) days, and in case of meeting of stockholders not less than ten (10) days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. In lieu of fixing a record date, the Board of Directors may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, twenty (20) days. If the stock transfer books are closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten (10) days immediately preceding such meeting.

SECTION 6.6 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, and to hold liable for calls and assessments, if any, a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

SECTION 6.7 Regulations. The Board of Directors may make such additional rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for the Corporation's shares.

ARTICLE VII

GENERAL PROVISIONS

SECTION 7.1 Dividends. Dividends, if any, upon the capital stock of the Corporation, subject to the provisions of the Articles, may be declared by the Board of Directors at any regular or special meeting, pursuant to applicable law. Dividends may be paid in cash, property or the Corporation's shares, subject to the provisions of applicable law and of the Articles. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, for equalizing dividends or for repairing or maintain any property of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

SECTION 7.2 Annual Report. The Chairman of the Board, the President, a Vice President or the Treasurer shall prepare or cause to be prepared annually a full and correct statement of the affairs of the Corporation, including a balance sheet and a financial statement of operations for the preceding fiscal year. Such balance sheet and financial statement may be, but are not required by these Bylaws to be, certified by independent certified public accountants. Such report shall also be submitted at the annual meeting and shall be filed within twenty (20) days thereafter at the principal office of the Corporation.

SECTION 7.3 Checks. All checks, drafts and orders for the payment of money, notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by the President or the Treasurer or by such officer or officers as the Board of Directors may from time to time designate.

SECTION 7.4 Depositories and Custodians. The funds of the Corporation shall be deposited with such banks or other depositories as the Treasurer may from time to time designate. All securities and other investments shall be deposited in the safekeeping of such banks or other companies as the Board of Directors may from time to time designate.

SECTION 7.5 Books of Account and Records. The Corporation shall maintain at its principal office correct and complete books and records of account of all the business and transactions of the Corporation. Upon request of any stockholder, there shall be made available in accordance with the provisions of Nevada law a record containing the number of shares of stock issued during a specified period not to exceed twelve months and the consideration received by the Corporation for each such share.

SECTION 7.6 Information for Inspection. Any stockholder of the Corporation, or any agent thereof, may inspect and copy during usual business hours these Bylaws, minutes of the proceedings of meetings of stockholders, annual statements of its affairs and voting trust agreements on file at its principal office.

SECTION 7.7 Fiscal Year. The fiscal year of the Corporation shall be the calendar year.

SECTION 7.8 Corporate Seal. The Corporate Seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Nevada." The Corporate Seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE VIII

AMENDMENTS

SECTION 8.1 Directors. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, adopt, alter, amend, change or repeal the Bylaws of the Corporation.

SECTION 8.2 Stockholders. The stockholders of the Corporation may not make, adopt, alter, amend, change or repeal the Bylaws of the Corporation except upon the affirmative vote of not less than seventy five percent (75%) of the outstanding stock of the Corporation entitled to vote thereon; provided, however, that the power of the stockholders to make, adopt, alter, amend, change or repeal the Bylaws of the Corporation is further subject to the provisions of the Articles of Incorporation.

APPENDIX E

SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
OF
INCOME OPPORTUNITY REALTY TRUST
(FORMERLY CONSOLIDATED CAPITAL INCOME OPPORTUNITY TRUST/2)

This second amended Declaration of Trust is made and entered into as of April 1, 1987 and will be recorded in Alameda County, California, as soon as reasonably possible after execution. The original Declaration of Trust was entered into on December 14, 1984 and was first amended on April 24, 1985. This Declaration of Trust supercedes and overrides all prior Declaration of Trust of Income Opportunity Realty Trust (the "Trust") formerly known as Consolidated Capital Income Opportunity Trust/2.

Robert J. Blake, Fred H. Field, Albert H. Schaaf, and Douglas M. Temple, Thomas J. Fitzmyers, David V. John, Betty Hood-Gibson and Robert J. Thiebaut do hereby agree to hold in trust, as Trustees, any and all property, real, personal, or otherwise, tangible or intangible, of every type and description, which is transferred, conveyed, or paid to them as such Trustees, and all rents, income, profits, and gains therefrom for the benefit of the Shareholders hereunder, subject to the terms and conditions and for the uses and purposes hereinafter set forth.

ARTICLE I

THE TRUST: DEFINITIONS

1.1. Name. The name of the Trust shall be "Income Opportunity Realty Trust." As far as practicable and except as otherwise provided in this Declaration, the Trustees shall conduct the Trust's activities, execute all documents, and sue or be sued in the name of Income Opportunity Realty Trust, or in their names as Trustees of Income Opportunity Realty Trust. If the Trustees determine that the use of such name is not practicable, legal or convenient, they may use such other designation or may adopt another name under which the Trust may hold property or conduct its activities.

If Consolidated Capital Equities Corporation, a Colorado corporation, or any subsidiary, affiliate, or successor of such corporation shall cease, for any reason, to render to the Trust the services of Advisor (as defined in Section 1.4 hereof) pursuant to the contract referred to in Article IV hereof and any renewal or extension of such contract, then the Trustees shall, upon request of Consolidated Capital Equities Corporation or its successors, and without any vote or consent of the Shareholders of this Trust being required, promptly amend this Declaration of Trust to change the name of the Trust to one which does not include any reference to "Consolidated Capital," "Johnstown/Consolidated" or any approximation thereof.

1.2. Place of Business. The principal office of the Trust shall be 2000 Powell Street, Emeryville, California 94608. However, the Trustees may, from time to time, change such location and maintain other offices or places of business.

1.3. Nature of Trust. The Trust is a real estate investment trust (also known as a business trust for real estate purposes) organized under the laws of the state of California. It is intended that the Trust shall carry on business as a "real estate investment trust" ("REIT") as described in the REIT Provisions of the Code. The Trust is not a general partnership, limited partnership, joint venture, corporation, or joint stock company or association (but nothing herein shall preclude the Trust from being taxed as an association under the REIT Provisions of the Code), nor shall the Trustees or Shareholders or any of them for any purpose be, nor be deemed to be, nor treated in any way whatsoever to be, liable or responsible hereunder as partners or joint venturers. The relationship of the Shareholders to the Trustees shall be solely that of beneficiaries of the Trust, and their rights shall be limited to those conferred upon them by this Declaration.

1.4. Definitions. The terms defined in this Section 1.4, whenever used in this Declaration, shall, unless the context otherwise requires, have the respective meanings hereinafter specified in this Section 1.4. In this

Declaration, words in the singular number include the plural, and words in the plural number include the singular.

(a) Advisor. "Advisor" shall mean any Person appointed, employed, or contracted with by the Trustees under the provisions of Article IV hereof.

(b) Affiliate. "Affiliate" shall mean, as to any person, any other person who owns beneficially, directly, or indirectly, 1% or more of the outstanding capital stock, shares, or equity interests of such person or of any other person which controls, is controlled by, or is under common control with, such person or is an officer, retired officer, director, employee, partner, or trustee (excluding non-interested trustees not otherwise affiliated with the entity) of such person or of any other person which controls, is controlled by, or is under common control with, such person.

(c) Annual Meeting of Shareholders. "Annual Meeting of Shareholders" shall mean the meeting of Shareholders held once a year, at the time and place designated by the Trustees, for the purpose of electing Trustees, conducting a vote on other issues appropriate for Shareholder vote, and discussing appropriate issues concerning the business of the Trust.

(d) Annual Report. "Annual Report" shall mean the report to Shareholders distributed annually concerning the business and financial operations of the Trust for such year, containing the report of the Trust's auditors and audited financial statements.

(e) Appraisal. "Appraisal" shall mean the value, as of the date of the appraisal, of real property (in its existing state or in a state to be created) as determined by (i) the Trustees, (ii) the Advisor, or (iii) a disinterested person having no economic interest in the real property and who is a member in good standing of the American Institute of Real Estate Appraisers (MAI), or who in the sole judgment of the Trustees is properly qualified to make such determination. The Trustees may in good faith rely on a previous Appraisal made on behalf of other persons, provided (i) it meets the aforesaid standard, and was made in connection with an investment in which the Trust acquires an interest or (ii) it was prepared not earlier than two years prior to the acquisition by the Trust of its interest in the real property. In appraising such properties, appraisers may take into consideration each of the specific terms and conditions of a purchase, including any leaseback or other guarantee arrangement contained therein. An appraisal may not necessarily represent the cash value of the property but may consider the value of the income stream from such property plus the discounted value of the fee interest and other terms of the purchase.

(f) Appraised Value. "Appraised Value" shall mean the value stated in the most recent appraisal of the real property owned by the Trust.

(g) Average Net Invested Capital. "Average Net Invested Capital" for a period shall mean the average of the Net Invested Capital at the end of each calendar month during the period in respect to which such computation is being made.

(h) Book Value. "Book Value" shall mean the value of an asset or assets of the Trust on the books of the Trust, before provision for amortization, depreciation, or depletion, and before deducting any indebtedness or other liability in respect thereto, except that no asset shall be valued at more than its fair value as determined by the Trustees.

(i) Book Value of Invested Assets. "Book Value of Invested Assets" shall mean the Book Value of the Trust's total assets (without deduction of any liabilities) but excluding (i) goodwill and other intangible assets;
(ii) cash; and (iii) cash-equivalent investments with terms which mature in one year or less.

(j) Code. "Code" shall mean the Internal Revenue Code of 1954, as amended through the date hereof.

(k) Declaration. "Declaration" shall mean this Declaration of Trust and all amendments, restatements or modifications thereof. References in this Declaration to "herein," "hereof," and "hereunder"

shall be deemed to refer to this Declaration and shall not be limited to the particular text, article, or section in which such words appear.

(l) Mortgage Loans. "Mortgage Loans" shall mean notes, debentures, bonds, and other evidences of indebtedness or obligations which are negotiable or non-negotiable and which are secured or collateralized by mortgages, including first, wraparound, development and construction, and junior mortgages.

(m) Mortgages. "Mortgages" shall mean mortgages, deeds of trust, or other security deeds on real property or rights or interests in real property.

(n) Net Asset Value. "Net Asset Value" shall mean the Book Value of all the assets of the Trust minus all the liabilities of the Trust.

(o) Net Contributed Capital. "Net Contributed Capital" shall mean the total initial investments and contributions to the capital of the Trust by all investors after deduction of the expenses of organization and registration.

(p) Net Income. "Net Income" for any period shall mean the Net Income of the Trust for such period computed on the basis of its results of operations for such period, after deduction of all expenses other than the Advisory Fee payable to the Advisor, extraordinary items, gains, and losses from the disposition of assets of the Trust and amortization, and depreciation or depletion of the assets of the Trust.

(q) Non-Interested Trustee. "Non-Interested Trustee" shall mean a Trustee who is not affiliated, directly or indirectly, with the Advisor, whether by ownership of, ownership interest in, employment by, any business or professional relationship with, or serves as an officer or director of, the Advisor or an affiliated business entity of the Advisor. A Non-Interested Trustee shall also mean one who performs no other services for the Trust, except as Trustee. An indirect relationship shall include circumstances in which a member of the immediate family of a Trustee has one of the foregoing relationships with the Advisor or the Trust for which he serves as Trustee. A Non-Interested Trustee may also serve as a Non- Interested Trustee of other independent REITs sponsored by Consolidated Capital.

(r) Operating Expenses. "Operating Expenses" shall mean the aggregate annual expenses regarded as operating expenses in accordance with generally accepted accounting principles, as determined by the independent auditors selected by the Trustees and including the Advisory Fee payable to the Advisor and the fees and expenses paid to the Trustees who are not employees or affiliates of the Advisor. The operating expenses shall exclude, however, the following:

(i) the cost of money borrowed by the Trust;

(ii) income taxes, taxes and assessments on real property and all other taxes applicable to the Trust;

(iii) expenses and taxes incurred in connection with the issuance, distribution, transfer, registration, and stock exchange listing of the Trust's securities (including legal, auditing, accounting, underwriting, brokerage, printing, engraving, and other fees);

(iv) fees and expenses paid to independent mortgage servicers, contractors, consultants, managers, and other agents retained by or on behalf of the Trust;

(v) expenses directly connected with the purchase origination, ownership, and disposition of real properties or mortgage loans (including the costs of foreclosure, insurance, legal, protective, brokerage, maintenance, repair, and property improvement services) other than expenses with respect thereto of employees of the Advisor, except legal, internal auditing, mortgage servicing, foreclosure and computer costs and transfer agent services performed by employees of the Advisor;

(vi) expenses of maintaining and managing real estate equity interests and processing and servicing mortgage and other loans;

(vii) expenses connected with payments of dividends, interest or distributions by the Trust to Shareholders;

(viii) expenses connected with communications to Shareholders and bookkeeping and clerical expenses for maintaining Shareholder relations, including the cost of printing and mailing share certificates, proxy solicitation materials and reports;

(ix) transfer agent's, registrar's and indenture trustee's fees and charges;

(x) the cost of any accounting, statistical, bookkeeping, or computer equipment necessary for the maintenance of books and records of the Trust.

(xi) reserves for depletion, depreciation and amortization and losses and provisions for losses.

The following direct expenses of the Advisor shall be excluded from the Trust's operating expenses and shall be borne by the Advisor:

(i) employment expenses of the Advisor's personnel (including Trustees, officers, and employees of the Trust who are directors, officers, or employees of the Advisor or its affiliates), other than the expenses of those employee services listed at (v) above;

(ii) rent, telephone, utilities, and office furnishings and other office expenses of the Advisor (except those relating to a separate office, if any, maintained solely for the Trust); and

(iii) the Advisor's overhead directly related to performance of its functions under the Advisory Agreement.

(s) Person. "Person" shall mean and include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other entities and governments and agencies and political subdivisions thereof.

(t) Real Property. "Real Property" shall mean and include land, rights in land, leasehold interests (including, but not limited to, interests of a lessor or lessee therein), and any buildings, structures, improvements, fixtures, and equipment located on or used in connection with land, leasehold interests, and rights in land or interests therein, but shall not include mortgages, mortgage loans, or interests therein.

(u) REIT. "REIT" shall mean Real Estate Investment Trust.

(v) REIT Provisions of the Code. "REIT Provisions of the Internal Revenue Code" shall mean Part II, Subchapter M of Chapter 1, of the Internal Revenue Code of 1954, as now enacted or hereafter amended, or successor statutes, and regulations and rulings promulgated thereunder.

(w) Securities. "Securities" shall mean any stock, shares, voting trust certificates, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities," or any certificates of interest, shares, or participations in temporary or interim certificates for, receipts for, guarantees of, or warrants, options (except non-tradeable options relating to the purchase of a particular parcel of real estate), or rights to subscribe to, purchase, or acquire any of the foregoing.

(x) Shares. "Shares" shall mean the shares of beneficial interest of the Trust as described in Section 6.1.

(y) Shareholders. "Shareholders" shall mean, as of any particular time, all holders of record of outstanding Shares at such time.

(z) Sponsor. "Sponsor" shall mean Consolidated Capital Equities Corporation, a Colorado corporation, or any successor entity.

(aa) Taxable Income. "Taxable Income" shall have the same meaning as "Taxable Income" has in the REIT Provisions of the Code.

(bb) Total Assets of the Trust Estate. "Total Assets of the Trust Estate" shall mean the value of all the assets of the Trust Estate as shown on the books of the Trust.

(cc) Trust Estate. "Trust Estate" shall mean, as of any particular time, any and all property, real, personal, or otherwise, tangible or intangible, which is owned or held by the Trust or the Trustees, including, but not limited to, property which is transferred, conveyed, or paid to the Trust or Trustees, and all rents, income, profits, and gains therefrom.

(dd) Trustees. "Trustees" shall mean, as of any particular time, Trustees holding office under this Declaration at such time, whether they be the Trustees named herein or additional or successor Trustees, and shall not include the officers, representatives or agents of the Trust, or the Shareholders, but nothing herein shall be deemed to preclude the Trustees from also serving as officers, representatives, or agents of the Trust, or from owning Shares.

(ee) Trustees' Regulations. "Trustees' Regulations" shall mean the regulations adopted pursuant to Section 3.3.

ARTICLE II

TRUSTEES

2.1. Number, Term of Office, and Qualifications of Trustees. There shall be no less than five nor more than 15 Trustees. Within the limits set forth in this
Section 2.1, the number of Trustees may be increased or decreased from time to time by the Trustees or by the Shareholders. Subject to the provisions of
Section 2.3, each Trustee shall hold office until the expiration of his term and until the election and qualification of his successor. The terms of the Trustees executing this Declaration, or of any successor or successors to them, duly appointed hereunder prior to the first Annual Meeting of the Shareholders, to be held in the next calendar year following the year in which the close of the Trust's initial public offering of its shares occurs or by June of 1988, whichever later occurs, shall expire at such first Annual Meeting of the Shareholders. Thereafter, the term of each Trustee shall expire at the Annual Meeting of the Shareholders following the election and qualification of Trustees. Trustees may be re-elected.

A Trustee shall be an individual at least 21 years of age who is not under legal disability. A Trustee shall qualify as such when he has either signed this Declaration or agreed in writing to be bound by it. Unless otherwise required by law or by action of the Trustees, no Trustee shall be required to give bond, surety or security in any jurisdiction for the performance of any duties or obligations hereunder. A Trustee, in the capacity as Trustee, shall not be required to devote his entire time to the business and affairs of the Trust. A majority of the Trustees shall at all times be persons who are not affiliates of the Sponsor or any of its affiliates or successor entities; provided, however, that upon a failure to comply with this requirement because of the death, resignation, or removal of a Non-Interested Trustee who is not such an affiliate, such requirement shall not be applicable for a period of 60 days.

2.2. Compensation and Other Remuneration. The Trustees shall be entitled to receive such reasonable compensation for their services as Trustees as they may determine from time to time; provided, however, that Trustees and officers of the Trust who are affiliated with the Advisor or any of its affiliates shall not receive compensation from the Trust for their services as Trustees or officers of the Trust. The Trustees, either directly or indirectly, shall also be entitled to receive remuneration for services rendered to the Trust in any other capacity. Such services may include, without limitation, services as an officer of the Trust, legal, accounting, or other professional services, or services as a broker, transfer agent, or underwriter, whether performed by a Trustee or by any person affiliated with a Trustee.

2.3. Resignation, Removal and Death of Trustees. The term of office of a Trustee shall terminate and vacancy shall occur in the event of the death, resignation, bankruptcy, adjudicated incompetence or other incapacity to exercise the duties of the office, or removal of a Trustee. A Trustee may resign at any time by

giving written notice in recordable form to the remaining Trustees at the principal office of the Trust. Such resignation shall take effect on the date such notice is given, or at any later time specified in the notice, without need for prior or subsequent accounting. A Trustee may be removed at any time, with or without cause by vote or consent of holders of a majority of the outstanding Shares entitled to vote thereon, or by a majority of the remaining Trustees. A Trustee judged incompetent or bankrupt, or for whom a guardian or conservator has been appointed, shall be deemed to have signed as of the date of such adjudication or appointment. Upon the resignation or removal of any Trustee, or upon his otherwise ceasing to be a Trustee, he shall execute and deliver such documents as the remaining Trustees shall require for the conveyance of any Trust property held in his name and shall account to the remaining Trustee or Trustees, as they require, for all property which he holds as Trustee and shall thereupon be discharged as Trustee. Upon the incapacity or death of any Trustee, his legal representative shall perform the acts set forth in the preceding sentence, and the discharge mentioned therein shall run to such legal representative and to the incapacitated Trustee or the estate of the deceased Trustee, as the case may be.

2.4. Vacancies. If any or all of the Trustees cease to be Trustees hereunder, whether by reason of resignation, removal, incapacity, death, or otherwise, such event shall not terminate the Trust or affect its continuity. Until vacancies are filled, the remaining Trustees (even though less than five) may exercise the powers of the Trustees hereunder. Vacancies (including vacancies created by increases in number) may be filled by the remaining Trustees, or by the vote or consent of holders of a majority of the outstanding Shares entitled to vote thereon. The Non-Interested Trustees shall nominate replacements for vacancies among the independent Trustees on the Board. If at any time there shall be no Trustees in office, successor Trustees shall be elected by the Shareholders as provided in Section 6.7.

2.5. Successor and Additional Trustees. The right, title, and interest of the Trustees in and to the Trust Estate shall also vest for the benefit of the Shareholders in successor and additional Trustees upon their qualification, and they shall thereupon have all the rights and obligations of Trustees hereunder. Such right, title, and interest shall vest in the Trustees, whether or not conveyance documents have been executed and delivered pursuant to Section 2.3; or otherwise.

2.6. Actions by Trustees. A quorum for all meetings of the Trustees shall be a majority of the Trustees. Interested or affiliated Trustees may be counted in determining the presence of a quorum at a meeting of the Trustees. Unless specifically provided otherwise in this Declaration, the Trustees may act (i) by a vote or resolution at a meeting at which a quorum is present, or (ii) without a meeting by a written vote, resolution, or other writing consenting to said action, signed by a majority of the Trustees. Every act or decision done or made by a majority of the Trustees present at a meeting duly held at which a quorum is present is the act of the Trustees and is binding on the Trust. Any agreement, deed, mortgage, lease, or other instrument or writing executed by one or more of the Trustees, or by any person specifically authorized by resolution or in the Trustees' Regulations, shall be valid and binding upon the Trustees and upon the Trust when (i) authorized by a majority of the Trustees at a meeting by resolution, without a meeting, by consent of all of the Trustees, or in the Trustees' Regulations, or (ii) ratified by action of the Trustees at a later meeting or by written consent. No commitment to invest or sell the Trust's funds or assets can be made by anyone other than the Trustees acting by a majority vote at a meeting or by unanimous written consent, except that (i) the Trustees may delegate authority to the Advisor to commit the Trust to certain investments or sales within guidelines established by the Trustees and entered into the minute book of the Trust; and (ii) actions by officers of the Trust related to the management and investment of reserves and initial capital raised during a public offering of shares. Authority to sign documents on behalf of the Trust shall be set forth in the Trustees' Regulations or in the minute book of the Trust. Notwithstanding anything to the contrary contained herein, a majority of the independent Trustees shall:

(i) frequently and at least annually review the investment policies of the Trust to determine that the investment policies are in the best interest of the shareholders;

(ii) take all reasonable steps to insure that annual reports are delivered to shareholders and that annual meetings are held;

(iii) require that any Advisory Contract entered into by the Trust be terminable by the majority of the independent Trustees or the Advisor upon 60 days' written notice without cause;

(iv) determine at least annually that the compensation which the Trust pays to the Advisor under an Advisory Contract is reasonable in relation to the nature and quality of services performed; and supervise the performance of the Advisor and the compensation paid to it by the Trust;

(v) determine at least annually that the total fees and expenses of the Trust are reasonable in light of the investment experience of the Trust, its net assets, net income and the fees and expenses of other comparable Advisors in real estate; and

(vi) select, when necessary in their opinion, a qualified independent real estate appraiser to appraise properties purchased by the Trust.

2.7. Executive Committee. The Trustees may appoint from among their own number an Executive Committee of three or more persons to whom they may delegate from time to time such of the powers herein given to the Trustees as they may deem advisable. A majority of the Executive Committee shall at all times be Non-Interested Trustees; provided, however, that upon a failure to comply with this requirement because of the death, resignation, or removal of a Trustee who is not such an Affiliate, such requirement shall not be applicable for a period of 60 days.

2.8. Audit Committee. The Trustees may appoint from among their number an Audit Committee of three or more persons to review the Trust's operating and accounting procedures. A majority of the Audit Committee shall at all times be Non-Interested Trustees; provided, however, that upon a failure to comply with this requirement because of the death, resignation, or removal of a Trustee who is not such an Affiliate, such requirement shall not be applicable for a period of 60 days.

ARTICLE III

TRUSTEES' POWERS

3.1. Power and Authority of Trustees. The Trustees, subject only to the specific limitations contained in this Declaration, shall have, without further or other authorization and free from any power or control on the part of the Shareholders, full, absolute, and exclusive power, control, and authority over the Trust Estate and over the business and affairs of the Trust to the same extent as if the Trustees were the sole owners thereof in their own right, and may do all such acts and things as in their sole judgment and discretion are necessary for or incidental to or desirable for the carrying out of any of the purposes of the Trust or the conducting of the business of the Trust. Any determination made in good faith by the Trustees of the purposes of the Trust or the existence of any power or authority hereunder shall be conclusive. In construing the provisions of this Declaration, a presumption shall favor of the grant of powers and authority to the Trustees. The enumeration of any specific power or authority herein shall not be construed as limiting the general powers or authority or any other specified power or authority conferred herein upon the Trustees.

3.2. Specific Powers and Authorities. Subject only to the express limitations contained in this Declaration and in addition to any powers and authorities conferred by this Declaration or which the Trustees may have by virtue of any present or future statute or rule or law, the Trustees, without any action or consent by the Shareholders, shall have and may exercise at any time and from time to time the following powers and authorities which may or may not be exercised by them in their sole judgment and discretion and in such manner and upon such terms and conditions as they may from time to time deem proper:

(a) To retain, invest, and reinvest the capital or other funds of the Trust in equity, leasehold and/or mortgage interests in real or personal property of any kind, all without regard to whether any such property is authorized by law for the investment of Trust funds or whether any investments may mature before the possible termination of the Trust, and to possess and exercise all the rights, powers, and privileges pertaining to the ownership of the Trust Estate and to increase the capital of the Trust at any time by the issuance of additional Shares for such consideration as they deem appropriate.

(b) For such consideration as they deem proper, to invest in, develop, and purchase or otherwise acquire for cash or other property or through the issuance of Shares through a public and/or private offering or through the issuance of notes, debentures, bonds, or other obligations of the Trust and hold for investment real, personal or mixed, tangible or intangible, property of any kind wherever located in the world, including without limitation, (i) the entire or any participating interest in rents, lease payments, or other income from, or the entire or any participating interest in the profits from, or the entire or any participating interest in the equity or ownership of, real property; (ii) the entire or any participating interest in notes, bonds, or other obligations which are secured by mortgages; (iii) in connection with any such investment, purchase, or acquisition, a share of rents, lease payments, or other gross income from or a share of the profits from or a share in the equity or ownership of real property, either directly or through joint venture, general or limited partnership, or other lawful combinations or associations; (iv) loans secured by the pledge or transfer of mortgages; and (v) securities of every nature, whether or not secured by mortgage loans. The Trustees shall have the power to pay fees and commissions in connection with such investments, including fees and commissions payable to the Sponsor or its affiliates.

(c) To sell, rent, lease, hire, exchange, release, partition, assign, mortgage, pledge, hypothecate, grant security interests in, encumber, negotiate, convey, transfer, or otherwise dispose of any and all of the Trust Estate or interests, including security interests, in the Trust Estate, by deeds, trust deeds, assignments, bills of sale, transfers, leases, mortgages, financing statements, security agreements, and other instruments for any of such purposes.

(d) To issue Shares, bonds, debentures, notes, or other evidences of indebtedness which may be secured or unsecured and may be subordinated to any indebtedness of the Trust and may be convertible into Shares and which include options, warrants, and rights to subscribe to, purchase, or acquire any of the foregoing, all without vote of or other action by the Shareholders to such persons for such cash, property, or other consideration (including securities issued or created by, or interests in any person) at such time or times and on such terms as the Trustees in their sole discretion and in good faith may deem advisable and to list any of the foregoing securities issued by the Trust on any securities exchange and to purchase, repurchase at fair market value, or otherwise acquire, hold, cancel, reissue, sell, and transfer any of such securities.

(e) To enter into leases, contracts, obligations, and other agreements for a term extending beyond the term of office of the Trustees and beyond the possible termination of the Trust or for a lesser term.

(f) To borrow money from independent third parties or affiliates of the Sponsor and give negotiable or non-negotiable instruments therefor; to guarantee, indemnify, or act as surety with respect to payment or performance of obligations of third parties; to enter into other obligations on behalf of the Trust; and to assign, convey, transfer, mortgage, subordinate, pledge, grant security interests in, encumber or hypothecate the Trust Estate or interests, including security interests, in the Trust Estate to secure any of the foregoing; provided that upon and after giving effect to any proposed borrowing the amount of outstanding, secured and unsecured indebtedness of the Trust for money borrowed from or guaranteed to others, including mortgages on acquired real property, would not exceed 300% of the Net Asset Value of the Trust.

(g) To lend money, whether secured or unsecured.

(h) To create reserve funds for any purpose.

(i) To incur and pay out of the Trust Estate any charges or expenses, and disburse any funds of the Trust, which charges, expenses, or disbursements are, in the opinion of the Trustees, necessary for or incidental to or desirable for the carrying out of any of the purposes of the Trust or the conducting of the business of the Trust, including, without limitation, taxes and other governmental levies, charges, and assessments of whatever kind or nature, imposed upon or against the Trustees in connection with the Trust or the Trust Estate or upon or against the Trust Estate or any part thereof, and for any of the purposes herein.

(j) To deposit funds or securities held by the Trust in banks, trust companies, savings and loan associations and other depositories, whether or not such deposits will draw interest, the same to be subject to withdrawal on such terms and in such manner and by such person or persons (including any one or more Trustees, officers, agents, or representatives) as the Trustees may determine and set forth by resolution from time to time.

(k) To possess and exercise all the rights, powers, and privileges appertaining to the ownership of all or any interests in, mortgages or securities issued or created by, any person, forming part of the Trust estate, to the same extent that an individual might, and, without limiting the generality of the foregoing, to vote or give any consent, request or notice, or waive any notice, either in person or by proxy or power of attorney, with or without power of substitution, to one or more Persons, which proxies and powers of attorney may be for meetings or actions generally, or for any particular meeting or action, and may include the exercise of discretionary powers.

(l) To enter, with affiliates or non-affiliates, into joint ventures, general or limited partnerships, leaseback agreements, and any other lawful combinations or associations for any purpose, including but not limited to the development of raw land.

(m) To elect, appoint, engage, or employ such officers for the Trust as the Trustees may determine, who may be removed or discharged at the discretion of the Trustees, such officers to have such powers and duties, and to serve such terms and at such compensation as may be prescribed by the Trustees or by the Trustees' Regulations; to engage or employ any persons (including, subject to the provisions of Sections 7.5 and 7.6, any Trustee or officer and any person with which any Trustee or officer is directly or indirectly connected) as agents, representatives, employees, or independent contractors (including, without limitation, real estate advisors, investment advisors, transfer agents, registrars, underwriters, accountants, attorneys at law, real estate agents, managers, appraisers, brokers, architects, engineers, construction managers, general contractors or otherwise) in one or more capacities, and to pay compensation from the Trust for services in as many capabilities as such person may be so engaged or employed; and, except as prohibited by law, to delegate any of the powers and duties of the Trustees to any one or more Trustees, agents, representatives, officers, employees, independent contractors, or other persons.

(n) To determine whether monies, Securities or other assets received by the Trust shall be charged or credited to income or capital or allocated between income and capital, such determination including the power to amortize or fail to amortize any part or all of any premium or discount, to treat any part or all of the profit resulting from the maturity or sale of any asset, whether purchased at a premium or at a discount, as income or capital or to apportion the same between income and capital; to apportion the sale price of any asset between income and capital, and to determine in what manner any expenses or disbursements are to be borne as between income and capital, whether or not in the absence of the power and authority conferred by this subsection such monies, Securities, or other assets would be regarded as income or as capital or such expense or disbursement would be charged to income or to capital; to treat any dividend or other distribution on any investment as income or capital or apportion the same between income and capital; to provide or fail to provide reserves for depreciation, amortization, or obsolescence in respect of all or any part of the Trust Estate subject to depreciation, amortization, or obsolescence in such amounts and by such methods as they shall determine; to allocate to the share of beneficial interest account less than all of the consideration received for Shares and to allocate the balance thereof to paid-in capital; and to determine the method or form in which the accounts and records of the Trust shall be kept and to change from time to time such method or form.

(o) To determine from time to time the value of all or any part of the Trust Estate and of any services, securities, assets, or other consideration to be furnished to or acquired by the Trust, and from time to time to revalue all or any part of the Trust Estate in accordance with such appraisals or other information as are, in the Trustees' sole judgment, necessary and/or satisfactory.

(p) To collect, sue for, and receive all sums of money or other assets coming due to the Trust, and to engage in, intervene in, prosecute, join, defend, compound, compromise, abandon, or adjust, by

arbitration or otherwise, any actions, suits, proceedings, disputes, claims, controversies, demands, or other litigation relating to the Trust, the Trust Estate or the Trust's affairs; to enter into agreements therefor, whether or not any suit is commenced or claim accrued or asserted and, in advance of any controversy, to enter into agreements regarding arbitration, adjudication, or settlement thereof.

(q) To renew, modify, release, compromise, extend, consolidate, or cancel, in whole or in part, any obligation to or of the Trust.

(r) To purchase and pay for out of the Trust Estate insurance contracts and policies insuring the Trust Estate against any and all risks and insuring the Trust and/or any or all of the Trustees, the Shareholders, officers, employees, agents, investment advisors, or independent contractors of the Trust against any and all claims and liabilities of every nature asserted by any person arising by reason of any action alleged to have been taken or omitted by the Trust or by any such Person as Trustee, Shareholder, officer, employee, agent, investment advisor or independent contractor, whether or not the Trust would have the power to indemnify such person against such liability.

(s) To cause legal title to any of the Trust Estate to be held by and/or in the name of the Trustees, or except as prohibited by law, by and/or in the name of the Trust or one or more of the Trustees or any other person, on such terms, in such manner, with such powers in such person as the Trustees may determine, and with or without disclosure that the Trust or Trustees are interested therein.

(t) To adopt a fiscal year for the Trust, and from time to time to change such fiscal year without the approval of the Shareholders.

(u) To adopt and use a seal (but the use of a seal shall not be required for the execution of instruments or obligations of the Trust).

(v) To make, perform, and carry out, or cancel and rescind, contracts of every kind for any lawful purpose without limit as to amount, with any person, firm, trust, association, corporation, municipality, county, parish, state, territory, government, or other municipal or governmental subdivision. These contracts shall be for such duration and upon such terms as the Trustees in their sole discretion shall determine.

(w) To do all other such acts and things as are incidental to the foregoing, and to exercise all powers which are necessary or useful to carry on the business of the Trust; to promote any of the purposes for which the Trust is formed, and to carry out the provisions of this Declaration.

3.3. Trustees' Regulations. The Trustees may make, adopt, amend, or repeal regulations containing provisions relating to the business of the Trust, the conduct of its affairs, its rights or powers and the rights or powers of its Shareholders, Trustees, or officers not inconsistent with law or with this Declaration.

3.4. Additional Powers. The Trustees shall additionally have and exercise all the powers conferred by the laws of California upon business trusts or real estate investment trusts formed under such laws, insofar as such laws are not in conflict with the provisions of this Declaration.

3.5. Incorporation. Upon a vote of two-thirds of the Trustees, and with the approval of the holders of a majority of the Shares voting at a meeting called for such a purpose, the Trustees shall have the power to cause to be organized or to assist in organizing a corporation or corporations under the laws of any jurisdiction or any other trust, partnership, association, or other organization to take over the Trust Estate or any part or parts thereof or to carry on any business in which the Trust shall directly or indirectly have any interest, and to sell, convey, and transfer the Trust Estate or any part or parts thereof to any such corporation, trust, partnership, association, or organization in exchange for the Shares or Securities thereof or otherwise, and to lend money to, subscribe for the Shares or Securities of, and enter into any contracts with any such corporation, trust, partnership, association, or organization, or any corporation, trust, partnership, association, or organization in which the Trust holds or is about to acquire Shares or any other interest. The Trustees may also cause a merger or consolidation between the Trust or any successor thereto and any such corporation if and to the extent permitted by law, provided that under the law then in effect, the federal income tax benefits

available to qualified real estate investment trusts and their shareholders, or substantially similar benefits, are also available to such corporation, trust, partnership, association, or organization and its stockholders or members, and provided that the resulting investment would be substantially equal in quality and substantially the same in type as an investment in the Shares.

ARTICLE IV

ADVISOR: LIMITATION ON OPERATING EXPENSE

4.1. Employment of Advisor. The Trustees are responsible for the general policies of the Trust and for such general supervision of the business of the Trust conducted by all officers, agents, employees, advisors, managers, or independent contractors of the Trust as may be necessary to ensure that such business conforms to the provisions of this Declaration. However, the Trustees shall not be required personally to conduct all the business of the Trust, and consistent with their ultimate responsibility as stated above, the Trustees shall have the power to appoint, employ, or contract with any person (including one or more of themselves or any corporation, partnership, or trust in which one or more of them may be directors, officers, stockholders, partners, or trustees) as the Trustees may deem necessary or proper for the transaction of the business of the Trust. The Trustees may therefor employ or contract with such person (herein referred to as the "Advisor"), and the Trustees may grant or delegate such authority to the Advisor as the Trustees may in their sole discretion deem necessary or desirable without regard to whether such authority is normally granted or delegated by Trustees. Any such delegated authority shall be entered into the minute book of the Trust.

The Trustees (subject to the provisions of Sections 4.2 and 4.4) shall have the power to determine the terms and compensation of the Advisor or any other person whom they may employ or with whom they may contract; provided, however, that any determination to employ or contract with any Trustee or any Person of which a Trustee is an affiliate, shall be valid only if made, approved, or ratified by a majority of the Trustees who are not affiliates of such person. The Trustees may exercise broad discretion in allowing the Advisor to administer and regulate the operations of the Trust, to act as agent for the Trust, to execute documents on behalf of the Trustees, and to make executive decisions which conform to general policies and general principles previously established by the Trustees.

4.2. Term. The Trustees shall not enter into any contract with the Advisor unless such contract has an initial term of no more than two years and provides for annual renewal or extension thereafter, subject to approval by the Shareholders of the Trust. However, the first such term shall extend from the date of its execution to the date of the first annual meeting of the Shareholders. The Trustees shall not enter into such a contract with any person of which a Trustee is an affiliate unless such contract provides for renewal or extension thereof by the affirmative vote of a majority of the Non-Interested Trustees. The contract with the Advisor may be terminated without penalty by the Advisor upon 120 days' written notice, or by action of holders of a majority of the outstanding Shares of the Trust without penalty, or by the Trust without penalty by action of a majority of the Trustees, including a majority of the Non-Interested Trustees upon 60 days' written notice, in a manner to be set forth in the contract with the Advisor.

4.3. Other Activities of Advisor. The Advisor shall not be required to administer the investment activities of the Trust as its sole and exclusive function and may have other business interests and may engage in other activities similar or in addition to those relating to the Trust, including the rendering of services and advice to other persons (including other real estate investment trusts) and the management of other investments (including investments of the Advisor and its affiliates). The Trustees pay request the Advisor to engage in other activities which complement the Trust's investments and to provide services requested by the borrowers or prospective borrowers from the Trust, and the Advisor may receive compensation or commissions therefor from the Trust or other persons.

The Advisor shall be required to use its best efforts to present to the Trust a continuing and suitable investment program which is consistent with the investment policies and objectives of the Trust, but neither the Advisor nor any of its affiliates (subject to any applicable provisions of Section 7.6) shall be obligated to present any particular investment opportunity to the Trust even if such opportunity is of a character which, if

presented to the Trust, could be taken by the Trust, and, subject to the foregoing, shall be protected in taking for its own account or recommending to others any such particular investment opportunity.

Upon request of any Trustee, the Advisor and any person who controls, is controlled by, or is under common control with the Advisor, shall from time to time promptly furnish the Trustees with information on a confidential basis as to any investments within the Trust's investment policies made by the Advisor or such other person for its own account.

4.4. Limitation on Operating Expenses. The Operating Expenses of the Trust for any fiscal year shall not exceed the lesser of (a) 1.5% of the average of the Book Values of Invested Assets of the Trust at the end of each calendar month of such fiscal year, or (b) the greater of 1.5% of the average of the Net Asset Value of the Trust at the end of each calendar month of such fiscal year or 25% of the Trust's Taxable Income, and each contract made with the Advisor shall specifically provide for a refund to the Trust of the amount, if any, by which the Operating Expenses so exceed the applicable amount; provided, however, that the Advisor shall not be required to refund to the Trust, with respect to any fiscal year, any amount which exceeds the aggregate of the Advisory Fee paid to the Advisor under such contract with respect to such fiscal year.

ARTICLE V

INVESTMENT POLICY

5.1. General Statement of Policy. The Trustees intend initially, and to the extent funds are not fully invested in real property and mortgages as described below, to invest the Trust Estate in investments such as: (a) short-term government securities, (b) securities of government agencies, (c) bankers' acceptances, (d) certificates of deposit, (e) deposits in commercial banks, (f) participations in pools of mortgages or bonds and notes (including but not limited to Federal Home Loan Mortgage Corporation participation sale certificates ("FHLMCs"), Government National Mortgage Association modified pass-through certificates ("GNMAs") and Federal National Mortgage Association bonds and notes ("FNMAs")), and/or (g) obligations of municipal, state and federal governments and government agencies.

The Trustees intend to invest the major portion of the Trust Estate to acquire and/or develop real property, and to acquire and/or fund all types of mortgage loans, to participate in joint venture or leasehold interests in real property with affiliated or unaffiliated persons, and to pay expenses reasonably related to the development of real property. The Trustees may also invest in ownership or other interests in real property and mortgages or in persons involved in owning, operating, leasing, developing, financing, or dealing in real property or mortgages (which investments shall ordinarily be made in connection with properties having income-producing capabilities). The Trustees may make commitments to make investments consistent with the foregoing policies. The Trustees may also participate in investments with other investors, including investors affiliated with the Advisor and investors having investment policies similar to those of the Trust, on the same or different terms. The Advisor may act as advisor to such other investors, including investors who have the same investment policies.

The Trustees may retain, as permanent reserves, amounts, if any, which they deem reasonable in cash and in the types of investments described above at items
(a)-(g) and at Section 5.2 (a)-(c). The amount of the reserves shall be set from time to time by resolution and entered into the minute book. The amount of the reserve may be changed by Trustee action at any time the Trustees deem such a change appropriate.

Subject to the investment restrictions in Section 5.2 below, the Trustees may alter any or all of the above-described investment policies if they should determine such change to be in the best interest of the Trust. Subject to the preceding terms, the Trustees shall endeavor to invest the Trust's assets in accordance with the investment policies set forth in this Article V, but the failure so to invest its assets shall not affect the validity of any investment made or action taken by the Trustees.

The general purpose of the Trust is to seek income which qualifies under the REIT Provisions of the Code. The Trustees intend to make investments in such a manner as to comply with the requirements of the REIT Provisions of the Code with respect to the composition of the Trust's investments and the derivation of

its income; provided, however, that no Trustee, officer, employee, agent, investment advisor, or independent contractor of the Trust shall be liable for any act or omission resulting in the loss of tax benefits under the Code, except for that arising from his own bad faith, willful misconduct, gross negligence or reckless disregard of his duties; and provided further that for a period of time as the portfolio of investments is developed, the Trust's assets may be invested in investments producing income which does not qualify under the REIT Provisions of the Code.

5.2. Restrictions. The Trustees shall not:

(a) invest in any foreign currency, bullion or commodities; for the purposes hereof, the reserve investments described in Section 5.1 or hedges or futures related to those investments shall be deemed not to be commodities;

(b) invest in contracts of sale for real estate, except temporarily to facilitate acquisition or sale of a particular parcel of real property in which the Trust otherwise intends to invest or when held as security for mortgages made or acquired by the Trust;

(c) Engage in any short sale, or borrow, on an unsecured basis, if such borrowing will result in an asset coverage of less than 300%, except that such borrowing limitation shall not apply to a first mortgage trust. "Asset coverage," for the purpose of this section, means the ratio which the value of the total assets of an issuer, less all liabilities and indebtedness except indebtedness for unsecured borrowings, bears to the aggregate amount of all unsecured borrowings of such issuer.

(d) Issue warrants, options, or rights to buy Shares, except as part of a ratable issue to Shareholders or as part of a public offering or as part of a financing arrangement with parties other than the Advisor or directors, Trustees, officers, or employees of the Trust or the Advisor or as part of a ratable distribution to Shareholders;

(e) Invest in excess of 10% of the assets of the Trust Estate in equity ownership of unimproved, non-income-producing real property, or in participations in the ownership of unimproved, non-income-producing real property, or in mortgage loans on unimproved non-income-producing real property, except pursuant to an agreement for the development of the land within a reasonable time.

(f) issue equity securities of more than one class (other than convertible obligations, warrants, rights, and options);

(g) invest in any equity security including the shares of other REITs;

(h) make any loan to the Sponsor of the Trust, or its affiliates except as to loans, which have been approved by a majority of the independent trustees and reviewed and determined to be commercially reasonable by an independent expert;

(i) engage in trading as compared with investment activities, or engage in the business of underwriting or agency distribution of securities issued by others but this prohibition shall not prevent the Trust from selling participations or interests in real property or mortgage loans or from selling or pledging a pool of notes receivable from property sales;

(j) hold property primarily for sale to customers in the ordinary course of the trade or business of the Trust, but this prohibition shall not be construed to deprive the Trust of the power to sell any property at any time;

(k) invest more than 10% of total Trust assets in junior mortgage loans, excluding wraparound loans;

(l) acquire securities in any company holding investments or engaging in activities prohibited by this section;

(m) issue "redeemable securities " as defined in Section 2(a)(32) of the Investment Company Act of 1940, face-amount certificates of the installment type," as defined in Section 2(a)15 thereof, and "periodic payment plan certificates," as defined in Section 2(a)(27) thereof;

(n) purchase, sell, or lease any real properties to or from the Sponsor or its affiliates, including any investor program in or of which the Sponsor may also be a general partner or sponsor; notwithstanding the foregoing, the Trust may form joint ventures or partnerships with affiliates for the acquisition, development, or lease of real property or the funding of mortgage loans;

(o) issue convertible or non-convertible debt securities to the public unless the historical cash flow of the Trust or the substantiated future cash flow of the Trust, excluding extraordinary items, is sufficient to cover the interest on the debt securities; or

(p) invest any of the assets of the Trust Estate in single-family homes.

ARTICLE VI

THE SHARES AND SHAREHOLDERS

6.1. Shares. The units into which the beneficial interest in the Trust will be divided shall be designated as Shares, which Shares shall be all of one class. All Shares shall have equal non-cumulative voting, distribution, liquidation and other rights. All Shares shall be without par value. The certificates evidencing the Shares shall be in such form and signed (manually or by facsimile) on behalf of the Trust in such manner as the Trustees may from time to time prescribe or as may be prescribed in the Trustees' Regulations. The certificates shall be negotiable, and title thereto and to the Shares presented thereby shall be transferred by assignment and delivery thereof to the same extent and in all respects as a Share certificate of a California corporation. There shall be no limit upon the number of Shares to be issued. The Shares may be issued for such consideration as the Trustees in their sole discretion and in good faith shall determine or by way of Share dividend or Share split in the discretion of the Trustees. Shares reacquired by the Trust shall no longer be deemed outstanding and shall have no voting or other rights unless and until re-issued. Shares reacquired by the Trust may be cancelled and restored to the status of authorized and unissued Shares by action of the Trustees. All Shares shall be fully paid and non-assessable by or on behalf of the Trust upon receipt of full consideration for which they have been issued or without additional consideration if issued by way of Share dividend or Share split. The Shares shall not entitle the holder to preference, preemptive, appraisal, conversion, or exchange rights of any kind.

6.2. Legal Ownership of Trust Estate. The legal ownership of the Trust Estate and the right to conduct the business of the Trust are vested exclusively in the Trustees, and the Shareholders shall have no interest therein other than beneficial interest in the Trust conferred by their Shares issued hereunder, and they shall have no right to compel any partition, division, dividend or distribution of the Trust or any of the Trust Estate.

6.3. Shares Deemed Personal Property. The Shares shall be deemed personal property and shall confer upon the holders thereof only the interest and rights specifically set forth in this Declaration. The death, insolvency or incapacity of a Shareholder shall not dissolve or terminate the Trust or affect its continuity nor give his legal representative any rights whatsoever, whether against or in respect of other Shareholders, the Trustees or the Trust Estate or otherwise except the sole right to demand and, subject to the provisions of this Declaration, the Trustees' Regulations and any requirements of law, to receive a new certificate for Shares registered in the name of such legal representative, in exchange for the certificate held by such Shareholder.

6.4. Share Record; Issuance and Transferability of Shares. Records shall be kept by or on behalf of and under the direction of the Trustees, which records shall contain the names and addresses of the Shareholders the number of Shares held by them respectively, and the numbers of the certificates representing the Shares, and in which there shall be recorded all transfers of Shares. Certificates shall be issued, listed and transferred in accordance with the Trustees' Regulations. The persons in whose names certificates are registered on the records of the Trust shall be deemed the absolute owners of the Shares represented thereby for all purposes of this Trust; but nothing herein shall be deemed to preclude the Trustees or officers, or their agents or representatives, from inquiring as to the actual ownership of Shares. Until a transfer is duly effected on the records of the Trust, the Trustees shall not be affected by any notice of such transfer, either actual or constructive. The receipt by the person in whose name any Shares are registered on the records of the Trust or by the duly authorized agent of such person, or if such Shares are so registered in the names of more than one

person, the receipt by any one of such persons, or by the duly authorized agent of such persons, shall be a sufficient discharge for all dividends or distributions payable or deliverable in respect of such Shares and from all liability to see the application thereof.

Shares shall be transferable on the records of the Trust only by the record holder thereof or by his agent, thereunto duly authorized in writing upon delivery to the Trustees or a transfer agent of the certificate or certificates therefor, properly endorsed or accompanied by duly executed instruments of transfer and accompanied by all necessary documentary stamps together with such evidence of the genuineness of each such endorsement, execution, or authorization and of other matters as may reasonably be required by the Trustees or such transfer agent. Upon such delivery, the transfer shall be recorded in the records of the Trust and a new certificate for the Shares so transferred shall be issued to the transferee, and in case of a transfer of only a part of the Shares represented by any certificate, a new certificate for the balance shall be issued to the transferor. Any person becoming entitled to any Shares in consequence of the death of a Shareholder or otherwise by operation of law shall be recorded as the holder of such Shares and shall receive a new certificate therefor but only upon delivery to the Trustees or a transfer agent of instruments and other evidence required by the Trustees or the transfer agent to demonstrate such entitlement, the existing certificate for such Shares and such necessary releases from applicable government authorities.

In case of loss, mutilation, or destruction of any certificates for Shares, the Trustees may issue or cause to be issued a replacement certificate on such terms and subject to such rules and regulations as the Trustees may from time to time prescribe. Nothing in this Declaration shall impose upon the Trustee or a transfer agent a duty or limit his or its rights to inquire into adverse claims.

6.5. Dividends or Distributions to Shareholders. The Trustees may from time to time declare and pay to Shareholders such dividends or distributions in cash or other form, out of current or accumulated income, capital, capital gains, principal, surplus, proceeds from the increase or financing of Trust obligations, or from the sale of portions of the Trust Estate or from any other source as the Trustees in their discretion shall determine. Shareholders shall have no right to any dividend or distribution unless and until such dividend or distribution is declared by the Trustees. The Trustees shall furnish the Shareholders with a statement in writing advising as to the source of the funds so distributed or, if the source thereof has not then been determined, the communication shall so state and in such event the statement as to such source shall be sent to the Shareholders not later than 60 days after the close of the fiscal year in which the distribution was made.

The Trust intends to begin liquidating its assets in the normal course of business. The Trust may reinvest the net proceeds from liquidated assets; however, net cash proceeds from the sale or refinancing of equity investments received by the Trust five years or more from the termination of the initial public offering, or from the satisfaction of mortgage loan investments received 10 years or more from the termination of this offering are intended to be distributed to Shareholders. The Trustees may elect, however, to begin such self-liquidating distributions earlier.

6.6. Transfer Agent, Dividend Disbursing Agent and Registrar. The Trustees shall have power to employ one or more transfer agents, dividend disbursing agents, warrant agents and registrars and to authorize them on behalf of the Trust to keep records, to hold and disburse any dividends and distributions, and to have and perform, in respect to all original issues and transfers of Shares, warrants, dividends and distributions and reports and communications to Shareholders, the powers and duties usually had and performed by transfer agents, dividend disbursing agents, warrant agents and registrars of a California corporation.

6.7. Restrictions on Acquisitions of Shares. Notwithstanding any other provision of this Declaration of Trust, to protect its status as an REIT, no Shareholder shall be permitted, absent the consent of a majority of the Trustees of the Trust, to acquire Shares in an amount such that immediately following the acquisition such Shareholder would directly or indirectly own more than 5% of the Shares outstanding. These limitations shall apply to all Shares issued, including Shares issued upon the exercise of warrants.

6.8. Shareholders' Meetings. There shall be an annual meeting of the Shareholders at such time and place as the Trustees' Regulations shall prescribe, at which the Trustees shall be elected and any other proper business may be conducted. The Annual Meeting of Shareholders shall be held after delivery to the

Shareholders of the Annual Report and within six months after the end of each fiscal year, except that the first annual meeting shall be held in 1988 or in the fiscal year following the close of the initial public offering of Shares, whichever occurs later. Special meetings of Shareholders may be called upon the written request of Shareholders holding not less than 10% of the outstanding Shares of the Trust entitled to vote in the manner provided in the Trustees' Regulations. If there shall be no Trustees, the officers of the Trust shall promptly call a special meeting of the Shareholders for the election of successor Trustees. Upon receipt of a written request, either in person or by registered mail, stating the purpose(s) of the meeting requested by Shareholders, the Trust shall provide all Shareholders, within ten business days after receipt of said request, written notice (either in person or by mail) of a meeting and the purpose of such meeting to be held on a date not less than 20 nor more than 60 days after receipt of said request, at a time and place convenient to Shareholders. A majority of the outstanding Shares entitled to vote at any meeting represented in person or by proxy shall constitute a quorum at any such meeting. Whenever any action is to be taken by the Shareholders, it shall, except as otherwise required by this Declaration or by law, be authorized by a majority of the votes cast at a meeting of Shareholders by holders of Shares entitled to vote thereon, which Shares are not entitled to cumulative voting. The affirmative vote at a meeting of Shareholders of the holders of a majority of all outstanding Shares shall be required to approve the principal terms of the transaction and the nature and amount of the consideration involving any sale, lease, exchange, or other disposition of 50% or more of the Trust Estate in a single sale. Whenever Shareholders are required or permitted to take any action, such action may be taken without a meeting on written consent setting forth the action so taken, signed by the holders of a majority of all outstanding Shares entitled to vote thereon, or such larger proportion thereof as would be required for a vote of Shareholders if acting at a meeting on the particular issue. The vote or consent of Shareholders shall not be required for the pledging, hypothecating, granting security interests in, mortgaging, or encumbering of all or any of the Trust Estate, or for the sale, lease exchange, or other disposition of less than 50% of the Trust Estate in a single sale.

6.9. Proxies. Whenever the vote or consent of Shareholders is required or permitted under this Declaration, such vote or consent may be given either directly by the Shareholders or to proxies in the form prescribed in the Trustees' Regulations. The Trustees may solicit such proxies from the Shareholders or any of them in any matter requiring or permitting the Shareholders' vote or consent.

6.10. Reports to Shareholders.

(a) Not later than 120 days after the close of each fiscal year of the Trust, except that the first annual report shall be mailed in 1987 or in the fiscal year following the close of the initial two-year public offering of Shares, the Trustees shall mail a report of the business and operation of the Trust during such fiscal year to the Shareholders, which report shall constitute the accounting of the Trustees for such fiscal year. The report (hereinafter "Annual Report") shall be in such form and have such content as the Trustees deem proper. The Annual Report shall include a statement of assets and liabilities and a statement of income and expenses of the Trust, prepared in accordance with generally accepted accounting principles. Such financial statements shall be accompanied by the report of an independent certified public accountant thereon. A manually signed copy of the accountant's report shall be filed with the Trustees.

(b) At least quarterly the Trustees shall send to the Shareholders interim reports having such form and content as the Trustees deem proper.

6.11. Fixing Record Date. The Trustees' Regulations may provide for fixing, or, in the absence of such provision, the Trustees may fix, in advance, a date as the record date for determining the Shareholders entitled to notice of or to vote at any meeting of Shareholders or to express consent to any proposal without a meeting, or for the purpose of determining Shareholders entitled to receive payment of any dividend or distribution (whether before or after termination of the Trust) or any Annual Report or other communication from the Trustees, or for any other purpose. The record date so fixed shall be not less than five days nor more than 50 days prior to the date of the meeting or event for purposes for which it is fixed.

6.12. Notice to Shareholders. Any notice of meeting or other notice, communication or report to any Shareholder shall be deemed duly delivered to such Shareholder when such notice, communication, or report

is deposited, with postage thereon prepaid, in the United States mail, addressed to such Shareholder at his address as it appears on the records of the Trust or is delivered in person to such Shareholder.

6.13. Shareholders' Disclosures: Redemption of Shares. The Shareholders shall, upon demand, disclose to the Trustees in writing such information with respect to direct and indirect ownership of the Shares as the Trustees deem necessary to comply with the REIT Provisions of the Code and the regulations thereunder, as the same shall be from time to time amended, or to comply with the requirements of any other taxing authority. If the Trustees shall at any time and in good faith be of the opinion that direct or indirect ownership of Shares of the Trust has or may become concentrated to an extent which would prevent the Trust from qualifying as a REIT under the REIT Provisions of the Code, the Trustees shall have the power by lot or other means deemed equitable by them to prevent the transfer of and/or call for redemption a number of such Shares sufficient in the opinion of the Trustees to maintain or bring the direct or indirect ownership of Shares of the Trust into conformity with the requirements for such a REIT. The redemption price shall be (i) the last reported sale price of the Shares on the last business day prior to the redemption date on the principal national securities exchange on which the Shares are listed or admitted to trading; or (ii) if the Shares are not so listed or admitted to trading, the average of the highest bid and lowest asked prices on such last business day as reported by the NASDAQ or a similar organization selected by the Trust for such purpose; or (iii) if not determined as aforesaid, as determined in good faith by the Trustees. From and after the date fixed for redemption by the Trustees, the holder of any Shares so called for redemption shall cease to be entitled to dividends, distributions, voting rights, and other benefits with respect to such Shares, excepting only to the right to payment of the redemption price fixed as aforesaid. For the purpose of this Section 6.12, the term "individual" shall be construed as provided in
Section 542 (a) (2) of the Code or any successor provision, and "ownership" of Shares shall be determined as provided in Section 544 of the Code or any successor provision.

6.14. Right to Refuse to Transfer Shares. Whenever it is deemed by them to be reasonably necessary to protect the tax status of the Trust, the Trustees may require a statement or affidavit from each Shareholder or proposed transferee of Shares setting forth the number of Shares already owned by him and any related person specified in the form prescribed by the Trustees for that purpose. If, in the opinion of the Trustees, which shall be conclusive upon any proposed transferor or proposed transferee of Shares, any proposed transfer would jeopardize the status of the Trust as a REIT under the Code, as now enacted or as hereafter amended, the Trustees may refuse to permit such transfer. Any attempted transfer for which the Trustees have refused their permission shall be void and of no effect to transfer any legal or beneficial interest in the Shares. All contracts for the sale or other transfer of Shares shall be subject to this provision.

6.15. Issuance of Shares. Notwithstanding any other provision of this Declaration, the Trust may issue an unlimited number of Shares from time to time in the Trustees sole discretion and in good faith. Any Share or security shall have the same characteristics and entitle the registered holder thereof to the same rights as any identical securities of the same class or series issued separately by the Trust.

ARTICLE VII

LIABILITIES OF TRUSTEES, SHAREHOLDERS
AND OFFICERS, AND OTHER MATTERS

7.1. Exculpation of Trustees, Officers, and Others. No Trustee, officer, employee, or agent of the Trust shall be liable for obligations or contracts of the Trust or liable in tort or otherwise in connection with the affairs of this Trust, to the Trust, or to any Shareholder, Trustee, officer, employee, or agent of the Trust or to any other person for any action or failure to act (including without limitation the failure to compel in any way any former or acting Trustee to redress any breach of trust), except only that of liability arising from his own willful misfeasance, bad faith, gross negligence, or reckless disregard of duty.

7.2. Limitation of Liability of Shareholders, Trustees, and Officers. The Trustees' officers, employees, and agents of the Trust, in incurring any debts, liabilities, or obligations or in taking or omitting any other actions for or in connection with the Trust are, and shall be deemed to be, acting as Trustees, officers,

employees or agents of the Trust and not in their own individual capabilities. Except to the extent of liability arising from his own willful misfeasance, bad faith, gross negligence, or reckless disregard of duty, no Trustee, officer, employee or agent shall, nor shall any Shareholder, be liable for any debt, claim, demand, judgment, decree, liability or obligation of any kind, against or with respect to the Trust, arising out of any action taken or omitted for or on behalf of the Trust, and the Trust shall be solely liable therefor, and resort shall be had solely to the Trust Estate for the payment or performance thereof. Each Shareholder shall be entitled to pro rata indemnity from the Trust Estate if, contrary to the provisions hereof, such Shareholder shall be held to any personal liability.

7.3. Express Exculpatory Clauses and Instruments. In all agreements, obligations, instruments, and actions in regard to the affairs of this Trust, this Trust and not the Shareholders, officers, employees, or agents shall be the principal and entitled as such to enforce the same, collect damages, and take all other action. All such agreements, obligations, instruments, and actions shall be made, executed, incurred, or taken by or in the name and on behalf of this Trust or by the trustees as Trustees hereunder, but not personally. All such agreements, obligations, and instruments shall acknowledge notice of this paragraph or shall refer to this Declaration and contain a statement to the effect that the name of this Trust refers to the Trustees as Trustees but not personally, and that no Trustee, Shareholder, officer, employee, or agent shall be held to any personal liability thereunder; and neither the Trustees nor any officer, employee, or agent shall have any power or authority to make, execute, incur, or take any agreement, obligation, instrument, or action unless the requirements of this paragraph are met; however, the omission of such provisions from any such instrument shall not render the Shareholders or any Trustee or any officer, employee, or agent liable, nor shall the Trustees or any officer, employee, or agent of the Trust be liable to anyone for such omission.

7.4. Indemnification and Reimbursement of Trustees and Officers. Any person made a party to any action, suit, or proceeding or against whom a claim or liability is asserted by reason of the fact that he, his testator, or intestate was or is a Trustee or officer, employee, or agent or active in such capacity on behalf of the Trust shall be indemnified and held harmless by the Trust against judgments, fines, amounts paid on account thereof (whether in settlement or otherwise) and reasonable expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense of such action, suit, proceeding, claim, or alleged liability or in connection with any appeal therein, whether or not the same proceeds to judgment or is settled or otherwise brought to a conclusion; provided, however, that no such person shall be so indemnified or reimbursed for any claim, obligation, or liability which arose out of such Person's willful misfeasance, bad faith, gross negligence, or reckless disregard of duty; and provided further that such person gives prompt notice thereof, executes such documents, and takes such action as will permit the Trust to conduct the defense or settlement thereof and cooperates therein. In the event of a settlement approved by the Trustees of any such claim, alleged liability, action, suit, or proceeding indemnification and reimbursement shall be provided except as to such matters covered by the settlement which the Trust is advised by its counsel arose from such person's willful misfeasance, bad faith, gross negligence, or reckless disregard of duty. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Trust in advance of the final disposition of such action, suit or proceeding as authorized by the Trust in the specification upon receipt of an undertaking by or on behalf of a person indemnified to pay over such amount unless it shall ultimately be determined he is entitled to be indemnified by the Trust as authorized herein. Such rights of indemnification and reimbursement shall be satisfied only out of the Trust Estate. The rights accruing to any person under these provisions shall not exclude any other right to which he may be lawfully entitled, nor shall anything contained herein restrict the right of the Trust to indemnify or reimburse such person in any proper case even though not specifically provided for herein, nor shall anything contained herein restrict such person's right to contribution as may be available under applicable law. The Trust shall have power to purchase and maintain insurance on behalf of any person entitled to indemnity hereunder against any liability asserted against him and incurred by him in a capacity mentioned above, or arising out of his status as such, whether or not the Trust would have the power to indemnify him against such liability under the provisions hereof.

7.5. Right of Trustees, Officers, and Others to Own Shares or Other Property and to Engage in Other Business. Any Trustee, officer, employee, or agent of the Trust may acquire, own, hold, and dispose of Shares in the Trust, for his individual account, and may exercise all rights of a Shareholder to the same extent and in

the same manner as if he were not a Trustee, officer, employee, or agent of the Trust. Any Trustee, officer, employee, or agent of the Trust may have personal business interests and may engage in personal business activities, which interests and activities may include the acquisition, syndication, holding, management, operation, or disposition, for his own account or for the account of others, of interests in mortgages, interests in real property, or interests in persons engaged in real estate business. Subject to the provisions of Article IV, any Trustee, officer, employee, or agent may be interested as trustee, officer, director, stockholder, partner, member, advisor or employee, or otherwise have a direct or indirect interest in any person who may be engaged to render advice or services to the Trust, and may receive compensation from such person as well as compensation as Trustee, officer, or otherwise hereunder. None of these activities shall be deemed to conflict with his duties and powers as Trustee or officer, provided, however, that any such relationship shall preclude that Trustee from serving as a Non-Interested Trustee.

7.6. Transactions Between the Trust and Affiliated Persons. Except as prohibited by this Declaration, and in the absence of fraud, a contract, act, or other transaction between the Trust and any other person, or in which the Trust is interested, shall be valid even though (i) one or more of the Trustees or officers are directly or indirectly interested in, or connected with, or are trustees, partners, directors, officers, or retired officers of such other person; or (ii) one or more of the Trustees or officers of the Trust, individually or jointly with others, is a party or are parties to or directly or indirectly interested in, or connected with, such contract, act, or transaction. No Trustee or officer shall be under any disability from or have any liability as a result of entering into any such contract, act, or transaction, provided that (i) such interest or connection is disclosed or known to the Trustees and thereafter the Trustees authorize such contract, act, or other transaction by vote sufficient for such purpose by an affirmative vote of the Trustees not so interested; (ii) such interest or connection is disclosed or known to the Shareholders, and thereafter such contract, act, or transaction is approved by the Shareholders; and (iii) such contract, act, or transaction is fair and reasonable to the Trust at the time it is authorized by the Trustees or by the Shareholders. Further, any such interest shall cause an otherwise noninterested Trustee to be deemed an interested Trustee solely for the purpose of this transaction.

The Trust shall not purchase or lease, directly or indirectly, any real property or purchase any mortgage from the Advisor or any affiliated person, or from any partnership in which any of the foregoing may also be a general partner or sponsor. The Trust will not sell or lease, directly or indirectly, any of its real property or sell any mortgages to any of the foregoing persons. The Sponsor or the Advisor may make mortgage loans, purchase real property, and assume loans in connection therewith in its own name and temporarily hold title thereto for the purpose of facilitating the acquisition of such real property or mortgage loans or the borrowing of money or obtaining of financing for the Trust, or for any other purpose related to the business of the Trust, provided that such real property or mortgage loan is purchased by the Trust for a price no greater than the cost of such real property or mortgage loan to the Sponsor or Advisor and provided there is no difference in interest rates of the loans related thereto at the time acquired by the Sponsor or Advisor and the time acquired by the Trust, nor any other benefit to the Sponsor or Advisor arising out of such transaction apart from compensation otherwise permitted by the prospectus describing the initial public offering of Shares.

Notwithstanding any other provisions of this Declaration, the Trust shall not, directly or indirectly, engage in any transaction with any Trustee, officer, or employee of the Trust or any director, officer, or employee of the Advisor, or of any company or other organization of which any of the foregoing is an affiliate, except for (i) the execution and performance of the agreements contemplated by Article IV hereof; (ii) transactions involving the option to purchase or the purchase of securities of the Trust on the same terms on which such securities are then being offered to all holders of any class of securities of the Trust or to the public; (iii) entering into joint ventures or partnerships with the Advisor or its affiliates including other programs sponsored by the Advisor; and (iv) transactions with the Advisor or Affiliates thereof involving loans, real estate brokerage services, mortgage brokerage services, real property management services, the servicing of mortgages, the leasing of real or personal property, or other services, provided such transactions are on terms not less favorable to the Trust than the terms on which non-affiliated parties are then making similar loans or performing similar services for comparable entities in the same area and are not entered into on an exclusive basis with such person; provided, however, that any transaction referred to in clause (iv) may be entertained into only upon approval by affirmative vote or consent of a majority of the Trustees who are not

interested in or affiliates of any person who is interested in the transaction. Real estate brokerage commissions may be paid by the seller or buyer of the property or by the Trust, and in the case of purchases the aggregate of the total purchase price of the investment property and such real estate brokerage commission shall not exceed the Appraised Value of such property. The simultaneous acquisition by the Trust and the Advisor or any affiliate of the Advisor of participations in any investment shall not be deemed to constitute the purchase or sale of property by one of them to the other. This Section 7.6 shall not prevent the payment to any person of commissions or fees for the so-called "private placement" of such securities with investors. The Trustees are not restricted by this Section 7.6 from forming a corporation, partnership trust, or other business association owned by the Trustees or by their nominees for the purpose of holding title to property of the Trust, providing the Trustees' motive for the formation of such business association is not for their own enrichment.

7.7. Restriction of Duties and Liabilities. To the extent that the nature of this Trust (that is, as business trust) will permit, the duties and liabilities of Shareholders, Trustees, and officers shall in no event be greater than the duties and liabilities of shareholders, directors, and officers of a California corporation. The Shareholders, Trustees, and officers shall in no event have any greater duties or liabilities than those imposed by applicable laws as shall be in effect from time to time.

7.8. Persons Dealing with Trustees or Officers. The Trustees may authorize any officer or officers or agent or agents to enter into any contract or execute any instrument in the name and on behalf of the Trust and/or Trustees. See
Section 2.6 hereof.

No person dealing in good faith with the Trustees or any of them or with the authorized officers, employees, agents, or representatives of the Trust shall be bound to see to the application of any funds or property passing into their hands or control. The receipt of the Trustees, or any of them, or of authorized officers, employees, agents, or representatives of the Trust for monies or other consideration, shall be binding upon the Trust.

7.9. Reliance. The Trustees and officers may consult with counsel, and the advice or opinion of such counsel shall be full and complete personal protection to all of the Trustees and officers, in respect to any action taken or suffered by them in good faith and in reliance on and in accordance with such advice or opinion. In discharging their duties, Trustees and officers, when acting in good faith, may rely upon financial statements of the Trust represented to them to be correct by the chairman or the officer of the Trust having charge of its books of account, or stated in a written report by an independent certified public accountant fairly to present the financial position of the Trust. The Trustees may rely, and shall be personally protected in acting, upon any instrument or other document believed by them to be genuine.

7.10. Income Tax Status. Anything to the contrary herein notwithstanding and without limitation of any rights of indemnification or non-liability of the Trustees herein, said Trustees by this Declaration make no commitment or representation that the Trust will qualify for the dividends paid deduction permitted by the Code and by the Rules and Regulations thereunder pertaining to REITs in any given year. The failure of the Trust to qualify as a real estate investment trust under the Internal Revenue Code shall not render the Trustees liable to the Shareholders or to any other person or in any manner operate to annul the Trust.

                                          DATE OF
                  NAME                     BIRTH       PARENTS AND PRESENT RESIDENCE
----------------------------------------  --------   ----------------------------------
Michael Paul McGinnis...................   4/20/78   Mr. & Mrs. Steven K. McGinnis
                                                     205 Carol Court
                                                     Danville, CA 94526

Dana Morgan Silverman...................  12/15/83   Mr. & Mrs. Donald Silverman
                                                     70 Bates Boulevard
                                                     Orinda, CA 94563

Scott Jay Kaplan........................   4/16/80   Mr. & Mrs. Jay Kaplan
                                                     167 Avenida Miraflores
                                                     Tiburon, CA 94920

Christopher Daniel Karlin...............   7/23/84   Mr. & Mrs. Jeffrey H. Karlin
                                                     135 Donald Drive
                                                     Moraga, CA 94536

Ryan G. W. Barnes.......................   4/22/80   Mr. & Mrs. G. W. Barnes
                                                     1322 E. Gadsden
                                                     Pensacola, FL 32501

8.2. Termination of Trust.

(a) The Trustees intend to begin to liquidate the assets of the Trust within ten years of the termination of its first public offering of Shares to the public by making liquidating distributions to Shareholders. The Trustees shall have full discretion, in their best judgment, however, to hold on to investments beyond ten years, should market conditions or other circumstances so dictate. The Trustees shall have full authority to direct such liquidation in such a manner as to protect the value of the assets of the Trust.

(b) The Trust may be terminated by the affirmative vote or written consent of the holders of a majority of all outstanding Shares entitled to vote thereon.

Upon the termination of the Trust or as part of the process of intended self-liquidation:

(i) The Trust shall carry on no business except for the purpose of winding up its affairs.

(ii) The Trustees shall proceed to wind up the affairs of the Trust, and all of the powers of the Trustees under this Declaration shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, transfer, or otherwise dispose of all or any part of the remaining Trust Estate to one or more Persons at public or private sale for consideration which may consist in whole or in part of cash, securities, or other property of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business; provided, that any sale, conveyance, assignment, exchange, transfer, or other disposition of 50% or more of the Trust Estate in a single transaction prior to seven years from the termination of the initial public offering shall require approval of the principal terms of the transaction and the nature and amount of the consideration by vote or consent of the holders of a majority of all the outstanding Shares entitled to vote thereon.

(iii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities, and refunding agreements as they deem necessary for their protection, the Trustees may distribute the remaining Trust Estate, in cash or in kind, or partly in each, among the Shareholders according to their respective rights.

(c) After termination of the Trust and distribution to the Shareholders as herein provided, the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the facts of such termination, and the Trustees shall thereupon be discharged from all further liabilities and duties hereunder, and the rights and interests of all Shareholders shall thereupon cease.

8.3. Amendment Procedure.

(a) This Declaration may be amended by Shareholders holding a majority of the outstanding Shares entitled to vote thereon. The Trustees may also amend this Declaration without the vote or consent of Shareholders to the extent they deem it necessary to cure any ambiguity or correct any inconsistency herein or to conform this Declaration to the requirements of the REIT Provisions of the Code or to other applicable federal or state laws, rulings, or regulations (including tax and securities laws, rulings or regulations), but the Trustees shall not be liable for failing to do so.

(b) No amendment may be made, under Section 8.3(a) above, which would change any rights with respect to any outstanding securities of the Trust by reducing the amount payable thereon upon liquidation of the Trust, or by diminishing or eliminating any voting rights pertaining thereto, except with the vote or consent of the holders of two-thirds of the outstanding Shares entitled to vote thereon.

(c) A certification, in recordable form, signed by a majority of the Trustees, setting forth an amendment and reciting that it was duly adopted by the Shareholders or by the Trustees as aforesaid, or a copy of the Declaration, as amended, in recordable form, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust.

(d) Nothing contained in this Declaration shall permit the amendment of this Declaration to impair the exception from personal liability of the Shareholders, Trustees, officers, employees, and agents of this Trust.

8.4. Qualification Under the REIT Provisions of the Internal Revenue Code. It is intended that the Trust shall qualify as a "REIT" under the REIT Provisions of the Code during such period as the Trustees shall deem it advisable so to qualify the Trust.

ARTICLE IX

MISCELLANEOUS

9.1. Applicable Law. This Declaration is executed and acknowledged by the Trustees in the state of California and with reference to the statutes and laws thereof and the rights of all parties and the construction and effect of every provision hereof shall be subject to and construed according to the statutes and laws of said state.

9.2. Index and Headings for Reference Only. The index and headings preceding the text, articles and sections hereof have been inserted for convenience and reference only and shall not be construed to affect the meaning, construction, or effect of this Declaration. References to the masculine are intended to include feminine in the use of pronouns.

9.3. Successors in Interest. This Declaration and the Trustees' Regulations shall be binding upon and inure to the benefit of the undersigned Trustees and their successors, assigns, heirs, distributees, and legal representatives and to the benefit of every Shareholder and his successors, assigns, heirs, distributees, and legal representatives.

9.4. Inspection of Records. Trust records shall be available for inspection and copying by Shareholders at the same time and in the same manner and to the extent that comparable records of a California corporation

would be available for inspection by shareholders under the laws of the state of California. Except as specifically provided for in this Declaration, Shareholders shall have no greater right than shareholders of a California corporation to require financial or other information from the Trust, Trustees, or officers. Any federal or state securities administration or other similar authority shall have the right, at reasonable times during business hours and for proper purposes, to inspect the books and records of the Trust.

9.5. Counterparts. This Declaration may be simultaneously executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument, which shall be sufficiently evidenced by any such original counterpart.

9.6. Provisions of the Trust in Conflict with Law or Regulations.

(a) The Provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the "Conflicting Provisions") are in conflict with the REIT Provisions of the Code or with other applicable laws or regulations, the Conflicting Provisions shall be deemed never to have constituted a part of the Declaration; provided, however, that such determination by the Trustees shall not affect or impair any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted (including, but not limited to, the election of Trustees) prior to such determination. A certification in recordable form signed by a majority of the Trustees setting forth any such determination and reciting that it was duly adopted by the Trustees, or a copy of this Declaration, with the Conflicting Provisions removed pursuant to such determination, in recordable form, signed by a majority of the Trustees, shall be conclusive evidence of such determination when lodged in the records of the Trust. The Trustees shall not be liable for failure to make any determination under this Section 9.6(a). Nothing in this Section 9.6(a) shall in any way limit or affect the right of the Trustees to amend this Declaration as provided in Section 8.3(a).

(b) If any provisions of this Declaration shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other provision of this Declaration, and this Declaration shall be carried out as if any such invalid or unenforceable provision were not contained herein.

9.7. Certifications. The following certifications shall be final and conclusive as to any persons dealing with the Trust:

(a) A certification of a vacancy among the Trustees by reason of resignation, removal, increase in the number of Trustees, incapacity, death or otherwise, when made in writing by a majority of the remaining Trustees;

(b) A certification as to the persons holding office as Trustees or officers at any particular time, when made in writing by the Secretary or Assistant Secretary of the Trust or by any Trustee;

(c) A certification that a copy of this Declaration or of the Trustees' Regulations is a true and correct copy thereof as then in force, when made in writing by the Secretary or Assistant Secretary of the Trust or by any Trustee;

(d) The certifications referred to in Sections 8.3(c) and 9.6(a) hereof; and

(e) A certification as to any actions by Trustees, other than the above when made in writing by the Secretary or Assistant Secretary of Trust, or by any Trustee.

9.8. Recording and Filing. A copy of this Declaration and any amendments shall be recorded in the office of the County Recorder of the County of Alameda, California, and in the office of the County Recorder or its equivalent in every county where the Trust is or the Trustees are the record owner(s) of real property; provided, however, that provision is made in such local jurisdiction for such recording, and further provided that this Declaration is accepted for recording. This Declaration and any amendments may also be filed or recorded in such other places as the Trustees deem appropriate.

IN WITNESS WHEREOF, the undersigned have executed this Declaration of Trust as of the date first hereinabove set forth.

          /s/  DAVID V. JOHN                       /s/  BETTY L. HOOD-GIBSON
- ----------------------------------------    --------------------------------------
        David V. John, Trustee                   Betty L. Hood-Gibson, Trustee

       /s/  THOMAS J. FITZMYERS                     /s/  ROBERT J. THIEBAUT
- ----------------------------------------    --------------------------------------
     Thomas J. Fitzmyers, Trustee                 Robert J. Thiebaut, Trustee

          /s/  FRED H. FIELD                         /s/  ROBERT J. BLAKE
- ----------------------------------------    --------------------------------------
        Fred H. Field, Trustee                     Robert J. Blake, Trustee

        /s/  DOUGLAS M. TEMPLE                       /s/  ALBERT H. SCHAAF
- ----------------------------------------    --------------------------------------
      Douglas M. Temple, Trustee                   Albert H. Schaaf, Trustee

STATE OF CALIFORNIA

SS.:

COUNTY OF ALAMEDA

On this day of April, 1987, before me, , a notary public for the state of California, duly commissioned and sworn, personally appeared Thomas J. Fitzmyers, David V. John, Betty L. Hood-Gibson, Robert J. Thiebaut, Robert J. Blaker, Fred H. Field, Albert H. Schaaf, and Douglas M. Temple, known to me to be the persons whose names are subscribed to the within instrument, and acknowledged to me that they executed the same.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal in the county of Alameda, state of California, the day and year in this certificate first above written.

(Seal)

INDEX

                                                                                       PAGE
                                                                                       ----
ARTICLE I:     The Trust: Definitions................................................  E-1
ARTICLE II:    Trustees..............................................................  E-5
ARTICLE III:   Trustees' Powers......................................................  E-7
ARTICLE IV:    Advisor: Limitation on Operating Expenses.............................  E-11
ARTICLE V:     Investment Policy.....................................................  E-12
ARTICLE VI:    The Shares and Shareholders...........................................  E-14
ARTICLE VII:   Liability of Trustees, Shareholders and Officers and Other Matters....  E-17
ARTICLE VIII:  Duration, Amendment, Termination, and Qualification of Trust..........  E-21
ARTICLE IX:    Miscellaneous.........................................................  E-22

AMENDED DECLARATION OF TRUST

AMENDMENT NUMBER 1 TO THE SECOND AMENDED AND RESTATED
DECLARATION OF TRUST OF INCOME OPPORTUNITY REALTY TRUST
(FORMERLY CONSOLIDATED CAPITAL INCOME OPPORTUNITY TRUST/2)

The Second Amended and Restated Declaration of Trust for Income Opportunity Realty Trust (the "Declaration of Trust") is hereby amended as follows:

The following language shall be added to Section 6.1 of the Declaration of Trust, Recorded on April 20, 1987, instrument No. 87-107217 in the Alameda County Records, following the seventh sentence of such Section:

The Trustees shall also have the power, in their sole discretion, to effect reverse share splits on a pro-rata basis and to redeem for cash any fractional Shares outstanding as a result thereof.

IN WITNESS WHEREOF, I have executed this Amendment this 18th day of September, 1991.

INCOME OPPORTUNITY REALTY TRUST

                                                /s/  WILLIAM S. FRIEDMAN
                                              ----------------------------
                                                    William S. Friedman
                                                   President and Trustee
STATE OF TEXAS
                       SS.:
COUNTY OF DALLAS

On this 18th day of September, 1991, before me, the undersigned a Notary Public, for the State of Texas duly commissioned and sworn, personally appeared William S. Friedman, known to me to be the person whose name is subscribed to the within instrument, and acknowledged to me that he executed the same.

IN WITNESS WHEREOF, I have hereunto set by hand and affixed my official seal in the County of Dallas, State of Texas, the day and year in this certificate first above written.

AMENDED DECLARATION OF TRUST

AMENDMENT NUMBER 2 TO THE SECOND AMENDED AND RESTATED
DECLARATION OF TRUST OF INCOME OPPORTUNITY REALTY TRUST
(FORMERLY CONSOLIDATED CAPITAL INCOME OPPORTUNITY TRUST/2)

The Second Amended and Restated Declaration of Trust for Income Opportunity Realty Trust (the "Declaration of Trust") is hereby amended as follows:

The second paragraph of the Declaration of Trust, Recorded on April 20, 1987, instrument No. 87-107217 in Alameda County Records, shall be deleted and replaced in its entirety with the following:

William S. Friedman, Willie K. Davis, Raymond V. J. Schrag, Randall K. Gonzales, Bennett B. Sims, Ted P. Stokely, Dan L. Johnston, A. Bob Jordan and Geoffrey C. Etnire do hereby agree to hold in trust, as Trustees, any and all property, real personal, or otherwise, tangible or intangible, of every type and description, which is transferred, conveyed, or paid to them as such Trustees, and all rents, income, profits, and gains therefrom for the benefit of the Shareholders hereunder, subject to the terms and conditions and for the uses and purposes set forth.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of August 6, 1993.

      /s/  WILLIAM S. FRIEDMAN                          /s/  WILLIE K. DAVIS
- -------------------------------------           ----------------------------------
        William S. Friedman                               Willie K. Davis

     /s/  RAYMOND V. J. SCHRAG                         /s/  BENNETT B. SIMS
- -------------------------------------           ----------------------------------
        Raymond V. J. Schrag                              Bennett B. Sims

      /s/  RANDALL K. GONZALEZ                          /s/  TED P. STOKELY
- -------------------------------------           ----------------------------------
        Randall K. Gonzalez                               Ted P. Stokely

        /s/  DAN L. JOHNSTON                            /s/  A. BOB JORDAN
- -------------------------------------           ----------------------------------
          Dan L. Johnston                                  A. Bob Jordan

      /s/  GEOFFREY C. ETNIRE
- -------------------------------------
         Geoffrey C. Etnire

On this 6th day of August, 1993 before me , a Notary Public, for the State of Texas duly commissioned and sworn, personally appeared William S. Friedman, Willie K. Davis, Randall K. Gonzalez, Raymond V. J. Schrag, Bennett B. Sims, Ted P. Stokely, Dan L. Johnston, A. Bob Jordan and Geoffrey C. Etnire, known to me to be the persons whose names are subscribed to the written instrument, and acknowledged to me that they executed the same.

IN WITNESS WHEREOF, I have hereunder set my hand and affixed my official seal in the County of Dallas, State of Texas, the day and year in this Amendment first above written.

STATE OF NEW YORK

SS.:

COUNTY OF NEW YORK

On this day of August, 1993, before me, the undersigned Notary Public in and for the County and State of New York, duly commissioned and sworn, personally appeared William S. Friedman, known to me to be the person whose name is subscribed to the foregoing written instrument, and acknowledged to me that he executed the same.

IN WITNESS WHEREOF, I have hereto set my hand and affixed my official seal in the County and State of New York, the day and year above written.

AMENDED DECLARATION OF TRUST

AMENDMENT NUMBER 2 TO THE SECOND AMENDED
AND RESTATED DECLARATION OF TRUST OF
INCOME OPPORTUNITY REALTY TRUST
(FORMERLY CONSOLIDATED CAPITAL INCOME OPPORTUNITY TRUST/2)

The Second Amended and Restated Declaration of Trust for Income Opportunity Realty Trust (the "Declaration of Trust") is hereby amended as follows:

The second paragraph of the Declaration of Trust, Recorded on April 20, 1987, instrument No. 87-107217 in Alameda County Records, shall be deleted and replaced in its entirety with the following:

William S. Friedman, Willie K. Davis, Raymond V. J. Schrag, Randall K. Gonzalez, Bennett B. Sims, Ted P. Stokely, Dan L. Johnson, A. Bob Jordan and Geoffrey C. Etnire do hereby agree to hold in trust, as Trustees, any and all property, real personal, or otherwise, tangible or intangible, of every type and description, which is transferred, conveyed, or paid to them as such Trustees, and all rents, income, profits, and gains therefrom for the benefit of the Shareholders hereunder, subject to the terms and conditions and for the uses and purposes hereinafter set forth.

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of August 6, 1933.

        /s/  WILLIAM S. FRIEDMAN                       /s/  WILLIE K. DAVIS
- ---------------------------------------          ---------------------------------
          William S. Friedman                             Willie K. Davis

       /s/  RAYMOND V. J. SCHRAG                       /s/  BENNETT B. SIMS
- ---------------------------------------          ---------------------------------
          Raymond V. J. Schrag                            Bennett B. Sims

        /s/  RANDALL K. GONZALEZ                        /s/  TED P. STOKELY
- ---------------------------------------          ---------------------------------
          Randall K. Gonzalez                             Ted P. Stokely

          /s/  DAN L. JOHNSTON                          /s/  A. BOB JORDAN
- ---------------------------------------          ---------------------------------
            Dan L. Johnston                                A. Bob Jordan

        /s/  GEOFFREY C. ETNIRE
- ---------------------------------------
           Geoffrey C. Etnire

On this 6th day of August, 1993 before me Sheri L. Hall, a Notary Public, for the State of Texas duly commissioned and sworn, personally appeared William S. Friedman, Willie K. Davis, Randall K. Gonzalez, Raymond V. J. Schrag, Bennett B. Sims, Ted P. Stokely, Dan L. Johnson, A. Bob Jordan and Geoffrey C. Etnire, known to me to be the persons whose names are subscribed to the written instrument, and acknowledged to me that they executed the same.

IN WITNESS WHEREOF, I have hereto set my hand and affixed my official seal in the County of Dallas, State of Texas, the day and year in this Amendment first above written.

STATE OF NEW YORK

SS.:

COUNTY OF NEW YORK

On this day of August, 1993, before me, the undersigned Notary Public in and for the County and State of New York, duly commissioned and sworn, personally appeared William S. Friedman, known to me to be the person whose name is subscribed to the foregoing written instrument, and acknowledged to me that he executed the same.

IN WITNESS WHEREOF, I have hereto set my hand and affixed my official seal in the County and State of New York, the day and year above written.

APPENDIX F

RESTATED TRUSTEES' REGULATIONS
OF INCOME OPPORTUNITY REALTY TRUST

AS OF APRIL 21, 1989

ARTICLE I

OFFICERS

SECTION 1. Enumeration. The officers of the Trust shall be a President, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers as are elected by the Trustees, including in their discretion a Chairman of the Board. Officers shall be elected by, and shall hold office at the pleasure of the Trustees. When the duties do not conflict, any two or more offices, except those of President and Secretary, or President and Assistant Secretary, may be held by the same person.

SECTION 2. Powers and Duties of the Chairman of the Board. The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Trustees and exercise and perform such other powers and duties as may be from time to time assigned to him by the Trustees.

SECTION 3. Powers and Duties of the President. Subject to such supervisory powers, if any, as may be given by the Trustees to the Chairman of the Board, if there be such an officer, the President shall be the chief executive officer of the Trust and, subject to the control of the Trustees, shall have general supervision, direction and control of the business of the Trust and shall exercise such general powers of management as are usually vested in the office of president of a corporation. The President shall preside at all meetings of the Shareholders and in the absence of the Chairman of the Board, or if there is none, at all meetings of the Trustees. The President shall be, ex officio, a member of all standing committees.

SECTION 4. Powers and Duties of the Vice President. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Trustees or, if not ranked, the Vice President designated by the Trustees, shall perform all of the duties of the President and when so acting shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall have such other powers and perform such other duties as are prescribed for them from time to time by the Trustees.

SECTION 5. Duties of the Secretary. The Secretary shall:

(a) Minutes. Keep all and complete minutes of the meetings of the Trustees and of the meetings of the Shareholders and give notice, as required, of all such meetings;

(b) Trust Seal. Keep the seal of the Trust, if any, and affix the same to all instruments executed by the Trust which require it;

(c) Books and Other Records. Maintain custody of and keep the books of account and other records of the Trust except such as are in the custody of the Treasurer;

(d) Share Register. Keep at the principal office of the Trust a share register, or duplicate share register if a transfer agent is employed to keep the original share register, showing the ownership and transfers of ownership of all Shares; and

(e) General Duties. Generally, perform all duties which pertain to his office and which are required by the Trustees.

SECTION 6. Duties of the Treasurer. The Treasurer shall:

(a) Books and Other Records. Maintain custody of and keep books of account and other records of the Trust except such as are in the custody of the Secretary;

(b) Receipt, Deposit, and Disbursement of Funds. Receive, deposit, and disburse funds belonging to the Trust; and

(c) General Duties. Generally, perform all duties which pertain to his office and which are required by the Trustees.

ARTICLE II

TRUSTEES

SECTION 1. Number. Until changed by amendment of this Section 1 adopted by the Trustees or the Shareholders, the authorized number of Trustees shall be no less than 5 nor more than 15.

SECTION 2. Qualifying Shares Not Required. Trustees need not be Shareholders of the Trust.

SECTION 3. Quorum. A majority of the Trustees shall constitute a quorum.

SECTION 4. Election. Trustees shall be elected at each Annual Meeting of Shareholders and shall continue in office until the election of their successors. If Trustees are not elected at an annual meeting or if such meeting is not held, Trustees may be elected at a special meeting of Shareholders.

SECTION 5. Vacancies. Vacancies occurring among the Trustees (except in case of the removal of one or more Trustees under provisions of section 2.3 of the Declaration) shall be filled by appointment by a majority of the remaining Trustees, though less than a quorum, or by a sole remaining Trustee, and the person so appointed shall hold office until his successor is elected at an annual, regular, or special meeting of the Shareholders.

SECTION 6. Place of Meeting. Meetings of the Trustees shall be held at the principal office of the Trust or at such place within or without the state of California as is fixed from time to time by resolution of the Trustees or by written consent of all Trustees. Whenever a place other than the principal office is fixed by resolution as the place at which future meetings are to be held, written notice thereof shall be sent not later than the following business day to all Trustees who are absent from the meeting at which the resolution was adopted.

SECTION 7. Organization Meeting. Immediately following each Annual Meeting of Shareholders, a regular meeting of the Trustees shall be hold for the purposes of organizing, electing officers, and transacting other business. Notice of such meetings need not be given.

SECTION 8. Regular Meetings. Regular meetings of the Trustees shall be hold at the principal office of the Trust or at any other place within the state of California which has been designated by the Trustees' Regulations or from time to time by resolution of the Trustees or by written consent of all of the Trustees on the first Wednesday, every month, at 8:00 a.m., or such other time as may be designated by the Trustees, and notice of such regular meetings of the Trustees is hereby dispensed with.

SECTION 9. Special Meetings. Special meetings of the Trustees may be called at any time by the President or the Secretary or Assistant Secretary, and the President shall call a special meeting at any time upon the oral request of one Trustee. Notice of the time and place of a meeting shall be given to each Trustee, either by telephone or by sending notice by mail or by telegraph, charges prepaid, to his address appearing on the books of the Trust. In case of personal service, such notice shall be so delivered at least 24 hours prior to the time fixed for the meeting. If notice is not so given by the Secretary, it may be given by the President, or the Trustees requesting the meeting may issue the call and give the notice.

SECTION 10. Adjourned Meetings. A quorum of the Trustees may adjourn any Trustees' meeting to meet again at a stated day and hour. In the absence of a quorum, a majority of the Trustees present may adjourn from time to time to meet again at a stated day and hour prior to the time fixed for the next regular meeting of the Trustees. The motion for adjournment shall be noted in the records of the Trust. Notice of the time and place of an adjourned meeting need not be given to any Trustee if the time and place is fixed at the meeting adjourned.

SECTION 11. Waiver of Notice. The transactions of any meeting of the Trustees, however called and noticed or wherever held, shall be as valid as though conducted at a meeting duly held after regular call and notice if a quorum is present, and no consent, waiver or notification is necessary to support the validity of such meetings.

SECTION 12. Action Without Meeting. Any action required or permitted to be taken by the Trustees may be taken by the Trustees without a meeting, if a majority of the Trustees shall individually or collectively consent in writing to such action. Such written consent or consents shall be lodged with the records of the Trust. Such action by written consent shall have the same force and effect as if the action had been taken at a regular meeting.

SECTION 13. Powers and Duties. The powers and duties of the Trustees, in addition to the powers and duties set forth in the Declaration, are:

(a) Selection and Removal of Officers, Agents and Employees. To select all the other officers, agents, and employees of the Trust, to remove them at pleasure, either with or without cause, to prescribe for them duties consistent with the Declaration and the Trustees' Regulations, and to fix their compensation.

(b) Authorization of Signatures. From time to time by resolution entered in the minute book of the Trust to designate the person or persons authorized to sign or endorse contracts, documents or other agreements on behalf of the Trust and checks, drafts, or other orders for the payment of money, issued in the name of or payable to the Trust. As to any action approved by resolution by the Board of Trustees or any action within the Advisor's authority to act for the Trust, as delegated by the Board of Trustees by resolution, any one Trustee can execute and deliver documents on behalf of the Trust in his capacity as Trustee and such documents shall be binding on the Trust. Further, as to any action within the Advisor's authority to act for the Trust, as delegated by the Board of Trustees by resolution, the Advisor, by a duly authorized officer or officers as reflected in the corporate minutes of the Advisor, can execute and deliver documents on behalf of the Trust and such documents shall be binding on the Trust. No other person or agent shall have authority to sign on behalf of the Trust.

(c) Fixing Principal Office and Place of Meetings. From time to time to change the location of the principal office of the Trust and from time to time to designate any place within or without the state of California as the place at which meetings of the Trustees or of the Shareholders shall be held.

(d) Committees. To appoint an executive committee, an audit committee, and other committees, and to delegate to the executive committee any of the powers and authority of the Trustees over the business and affairs of the Trustees except the power to declare dividends and to adopt, amend, or repeal Trustees' Regulations. The Trustees shall have the power to prescribe the manner in which proceedings of the executive committee, the audit committee and other committees shall be conducted. The executive committee and the audit committee shall be composed of three or more Trustees who are Non-Interested Trustees.

(e) Audit Committee. An audit committee consisting of not less than three non-interested Trustees shall meet at such times the Trustees deem appropriate, but at least twice annually, to review the operating expenses and procedures of the Trust with the Trust's internal auditors and such persons as the Trustees deem appropriate. The audit committee shall meet at least once annually with the Trust's independent auditors to review the annual results, of the Trust's operations. Interested Trustees are not eligible to be a member of the Audit Committee.

(f) General Powers. Generally to exercise such other powers as are usually vested in directors of corporations organized under the laws of the state of California.

SECTION 14. Trustees' Compensation. Non-Interested Trustees shall receive reasonable compensation for their services as determined by the Trustees from time to time. Such compensation shall be $400 for each regular meeting and for each special meeting attended. Non-Interested Trustees shall, in addition, be reimbursed for expenses incurred in attending meetings of the Trustees. Interested Trustees shall not receive any direct compensation for serving as a Trustee or attending meetings.

ARTICLE III

ADVISORY TRUSTEES

SECTION 1. Appointment. The Trustees may at their option appoint not more than 15 individuals to serve as Advisory Trustees for the Trust, whose duties will be to review the Trust operations, investments, and policies and make recommendations in connection therewith to the Trustees. The Trustees, however, shall not be bound by the recommendations of the Advisory Trustees, and the Advisory Trustees shall have no power or authority to, and no action taken by them shall, bind or restrict the Trustees of the Trust.

SECTION 2. Election and Term of Office. The Advisory Trustees shall be elected annually by the Trustees at their organization meeting. Each Advisory Trustee shall hold office until his death, resignation, removal, or until his successor shall be elected and qualified.

SECTION 3. Compensation to Advisory Trustees. The amount of compensation to be paid to Advisory Trustees shall be fixed from time to time by the Trustees provided that such compensation shall initially be the sum of $400 for each quarterly meeting attended by an Advisory Trustee, or $100 per meeting in the event the Trustees' meetings are held on a monthly basis. In addition to the foregoing, the Trustees may authorize the payment of expenses incurred by an Advisory Trustee to attend any meeting and may also authorize the payment of additional compensation to any Advisory Trustee for services actually rendered the Trust in addition to attending meetings.

SECTION 4. Limitation of Liability. No Advisory Trustee shall be liable to the Trust, the Trustees hereunder, or the Shareholders in any amount except for disclosure or use of confidential information obtained by such Advisory Trustee in connection with his duties as an Advisory Trustee.

ARTICLE IV

SHAREHOLDERS

SECTION 1. Quorum. The presence in person or by proxy of persons entitled to vote a majority of the voting shares at any meeting of Shareholders shall constitute a quorum for Shareholder action. The Shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment notwithstanding the withdrawal of enough Shareholders to leave less than a quorum.

SECTION 2. Place of Meeting. Meetings of the Shareholders shall be held at the principal office of the Trust or at such place within or without the state of California as is designated by the Trustees or by the written consent of all Shareholders entitled to vote thereat, given either before or after the meeting and filed with the Secretary of the Trust.

SECTION 3. Annual Meeting. A regular annual meeting of the Shareholders shall be held on such date and at such place to be designated in the notice of meeting sent to Shareholders. If the day so designated is a legal holiday the meeting shall be held at the same hour on the next succeeding business day. The regular time and place of the regular annual meeting may be changed by a majority of the Trustees upon reasonable notice to Shareholders.

SECTION 4. Special Meetings. Special meetings of the Shareholders may be held at any time for any purpose or purposes. Such special meetings may be called at any time by the President or by the Trustees or by any two or more Trustees, or by one or more Shareholders holding not less than 66 2/3% of the outstanding Shares of the Trust.

SECTION 5. Adjourned Meetings. Any meetings of Shareholders, whether or not a quorum is present, may be adjourned from day to day or from time to time by the vote of a majority of the Shares, the holders of which are either present at the meeting or represented by proxy. The motion for adjournment shall be lodged with the records of the Trust.

SECTION 6. Notice of Regular or Special Meetings. Written notice specifying the place, day, and hour of any regular or special meeting, the general nature of the business to be transacted, and all other matters required by law, shall be given to each Shareholder of record entitled to vote, either personally or by sending a copy thereof by mail or telegraph, charges prepaid, to his address appearing on the books of the Trust. It shall be the duty of the Secretary to give notice of each Annual Meeting of the Shareholders at least ten days and not more than 120 days before the date on which it is to be held. If notice is not so given by the Secretary, it may be given by any other officer not less than seven days before such date. Whenever an officer has been duly requested to call a special meeting of Shareholders, it shall be his duty to fix the date and the hour thereof, which date shall be not less than ten days and not more than 60 days after the receipt of such request, if the request has been delivered in person, or after the date of mailing the request, as the case may be, and to give notice of such special meeting not less than seven days before the date on which the meeting is to be held. If the date of such special meeting in not so fixed and notice thereof given within seven days after the date of mailing the request, the date and hour of such meeting may be fixed by the person or persons calling or requesting the meeting and notice thereof shall be given by such person or persons not less than seven nor more than 60 days before the date on which the meeting is to be held.

SECTION 7. Notice of Adjourned Meetings. It shall not be necessary to give any notice of the time and place of any adjourned meeting or of the business to be transacted thereat other than by announcement at the meeting at which such adjournment is taken, except that when a meeting is adjourned for 30 days or more notice of the adjourned meeting shall be given as in the case of an original meeting.

SECTION 8. Proxies. The appointment of a proxy, or proxies shall be made by an instrument in writing executed by the Shareholder or his duly authorized agent and filed with the Registrar or Secretary of the Trust. No proxy shall be valid after the expiration of 11 months from the date of its execution unless the Shareholder executing it specified therein the length of time for which it was to continue in force, which in no case shall exceed seven years from the date of its execution. At a meeting of Shareholders all questions concerning the qualification of voters, the validity of proxies, and the acceptance or rejection of votes shall be decided by the Secretary of the meeting unless inspectors of election are appointed pursuant to Section 11 of this Article IV, in which event such inspectors shall pass upon all questions and shall have all other duties specified in said section.

SECTION 9. Action Without Meeting.

(a) Action by Written Consent. Any action which is required to be or may be taken at any annual or special meeting of Shareholders of the Trust may be taken without a meeting, without prior notice and without a vote, if consents in writing, setting forth the action so taken, shall have been signed by the holders of outstanding Shares having not less than the minimum number of votes that would be necessary to authorize or to take such action at a meeting at which all Shares entitled to vote thereon were present and voted; provided, however, that prompt notice of the taking of the action without a meeting and by less than unanimous written consent shall be given to those Shareholders who have not consented in writing.

(b) Record Date. The record date for determining Shareholders entitled to express consent to action in writing without a meeting shall be fixed by the Board of Trustees of the Trust (the "Board"). Any Shareholder seeking to have the Shareholders authorize or take action by written consent without a meeting shall, by Written notice, request the Board of Trustees to fix a record date. The Board shall, upon receipt of such a request, fix the record date as the 15th day following receipt of the request or such later date as may be specified by such Shareholder. If the record date falls on a Saturday, Sunday or legal holiday, the record date shall be the day next following which is not a Saturday, Sunday or legal holiday.

(c) Date of Consent. The date for determining if an action has been consented to by the holder or holders of Shares having the requisite voting power to authorize or take the action specified therein (the "Consent Date") shall be the close of business on the 31st day after the later of (x) the record date fixed pursuant to paragraph (b) of this Section 9 and (y) the date on which materials soliciting consents are mailed to Shareholders if such materials are required to be mailed under applicable law. If the Consent Date falls on a Saturday, Sunday or legal holiday, the Consent Date shall be the day next following which is not a Saturday, Sunday or legal holiday. On or prior to the Consent Date, consents may be revoked by written notice (i) to the

Trust, (ii) to the Shareholder or Shareholders soliciting consents or soliciting revocations in opposition to action by consent proposed by the Trust (the "Soliciting Shareholders"), or (iii) to a proxy solicitor or other agent designated by the Trust or the Soliciting Shareholder(s).

(d) Procedures. In the event of the delivery to the Trust of a written consent or consents purporting to authorize or take action and/or related revocations (each such written consent and related revocation being referred to in this Section 9 as a "Consent"), the Secretary of the Trust shall provide for the safekeeping of such Consent and, as soon as practicable after the Consent Date, shall conduct such reasonable investigation as he deems necessary or appropriate for the purpose of ascertaining the validity of such Consent and all matters incident thereto, including, without limitation, whether the holders of Shares having the requisite voting power to authorize or take the action specified in the Consent have given consent; provided, however, that if the action to which the Consent relates is the removal or replacement of one or more members of the Board, the Secretary of the Trust shall designate two persons, who may not be members of the Board or otherwise affiliated with the Trust, or a firm of nationally recognized independent inspectors of election, to serve as Inspectors with respect to such Consent and such Inspectors shall discharge the functions of the Secretary of the Trust under this paragraph (d). If after such investigation the Secretary or the Inspectors (as the case may be) shall determine that the Consent is valid, that fact shall be certified on the records of the Trust kept for the purpose of recording the proceedings of meeting of Shareholders, and the Consent shall be filed in such records, at which time the Consent shall become effective as Shareholder action as of the fifth business day following such certification.

SECTION 10. Voting Rights. If no future date is fixed for the determination of the Shareholders entitled to vote at any meeting of Shareholders, only persons in whose names Shares entitled to vote stand on the share records of the Trust on the day of any meeting of Shareholders shall be entitled to vote at such meeting.

SECTION 11. Inspectors of Election. In advance of any meeting of Shareholders the Trustees may appoint inspectors of election to act at the meeting or any adjournment thereof. If inspectors of election are not so appointed, the chairman of any meeting of Shareholders may and, on the request of any Shareholder or his proxy, shall appoint inspectors of election at the meeting. The number of inspectors shall be either one or three. If appointed at the meeting on the request of one or more Shareholders or proxies, a majority of Shares present shall determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Trustees in advance of the convening of the meeting or at the meeting by the person acting as Chairman. The inspectors of election shall determine the number of Shares outstanding, the Shares represented at the meeting, the existence of a quorum, the authenticity, validity, and effect of proxies, receive votes, ballots, or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count, and tabulate all votes or consents determine the results, and do such acts as may be proper to conduct the election or vote with fairness to all Shareholders. If there are three inspectors of election, the decision, act, or certificate of a majority is effective in all respects as the decision, act, or certificate of all. On request of the Chairman of the meeting or of any Shareholder or his proxy, the inspector shall make a report in writing of any challenge or question or matter determined by them and execute a certificate of any facts found by them.

SECTION 12. Excess Shares. No person shall at any time be or become the owner of more than 9.8% of the outstanding shares of the Trust. Any shares held in excess of this limit shall be "Excess Shares" which shall not be entitled to voting rights or dividends (until they cease to become Excess Shares) and are subject to redemption by the Trustees. This provision can be waived or suspended at any time by the formal action of the Trustees acting in accordance with these Regulations.

ARTICLE V

MISCELLANEOUS

SECTION 1. Record Dates and Closing of Transfer Books. From time to time the Trustees may fix a future date, not exceeding 50 days preceding: (i) the date of any meeting of Shareholders; (ii) the date fixed for the payment of any dividend or distribution or for the allotment of rights; or (iii) the date any change or conversion or exchange of Shares is to go into effect, as the record date for the determination of the Shareholders entitled to notice of and to vote at any such meeting or to receive any such dividend or distribution or any allotment of rights or to exercise the rights with respect to any such change, conversion or exchange of Shares. If a time is so fixed, only Shareholders of record on the date so fixed shall be entitled to notice of and to vote at such meeting or to receive such dividend or distribution or allotment of rights or to exercise such rights, as the case may be, notwithstanding any transfer of Shares on the books of the Trust after the record date so fixed. The Trustees may close the books of the Trust against transfers of Shares during the whole or any part of the period between the record date and the date so fixed for the meeting, payment, distribution, allotment, change or exercise of rights.

SECTION 2. Inspection of Trust Records. The share register or duplicate share register, the books of account, and the minutes of the proceedings of the Shareholders and Trustees shall be open to inspection upon the written demand of any Shareholder at any reasonable time and for a purpose reasonably related to his interests as a Shareholder and shall be exhibited at any time when required by the demand of 10% or more of the Shares represented at any Shareholders' meeting. Such inspection may be made in person or by an agent or attorney and shall include the right to make extracts. Demand of inspection other than at a Shareholders' meeting shall be made in writing to the President, Secretary, or Assistant Secretary of the Trust.

SECTION 3. Inspection of Trustees' Regulations. The Trustees shall keep at the principal office for the transaction of business of the Trust the original or a copy of the Trustees' Regulations as amended to date, certified by the Secretary, which Regulations shall be open to inspection by the Shareholders at all reasonable times during office hours.

SECTION 4. Representation of Shares of Corporations. The President or any Vice President and the Secretary or Assistant Secretary of the Trust, acting either in person or by a proxy or proxies designated in a written instrument duly executed by said officers, are authorized to vote, represent, and exercise on behalf of the Trust all rights incident to any shares of any corporation standing in the name of the Trust.

ARTICLE VI

SEAL

The Trust may elect to have a seal containing the words: "INCOME OPPORTUNITY REALTY TRUST, a California business trust, organized December 14, 1984, California." However, no seal is necessary to effect contracts, transfers or other documents on behalf of the Trust.

ARTICLE VII

AMENDMENTS

SECTION 1. By Shareholders. Except for any change for which a larger number is specifically required, these Trustees' Regulations may be amended or repealed, or new or additional Trustees' Regulations may be adopted by the vote or written consent or Shareholders entitled to exercise a majority of the voting power of the Trust.

SECTION 2. By Trustees. These Trustees, Regulations may be amended or repealed, or new or additional Trustees, Regulations may be adopted by the vote or written consent of the Trustees, but the Trustees may not decrease the authorized number of Trustees below five or increase the authorized number of Trustees above 15 without the vote or written consent of Shareholders entitled to exercise a majority of the

voting power of the Trust. The power hereby delegated may be revoked by the vote or written consent of Shareholders entitled to exercise a majority of the voting power of the Trust.

ARTICLE VIII

DEFINITIONS

All terms defined in the Declaration of Trust dated December 14, 1984, as amended to date, shall have the same meaning when used in these Trustees' Regulations.

DRAFT

ADVISORY AGREEMENT

BETWEEN

INCOME OPPORTUNITY REALTY INVESTORS, INC.

AND

BASIC CAPITAL MANAGEMENT, INC.

THIS AGREEMENT dated as of , 1996, between Income Opportunity Realty Investors, Inc., a Nevada corporation (the "Company"), and Basic Capital Management, Inc. (the "Advisor"), a Nevada corporation.

WITNESSETH:

1. The Company owns a portfolio of real estate and mortgages.

2. The Advisor and its employees have extensive experience in the administration of real estate assets and the origination, structuring and evaluation of real estate and mortgage investments.

NOW THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties agree as follows:

1. DUTIES OF THE ADVISOR. Subject to the supervision of the Board of Directors, the Advisor will be responsible for the day-to-day operations of the Company and, subject to Section 17 hereof, shall provide such services and activities relating to the assets, operations and business plan of the Company as may be appropriate, including:

(a) preparing and submitting an annual budget and business plan for approval by the Board of the Company (the "Business Plan");

(b) using its best efforts to present to the Company a continuing and suitable investment program consistent with the investment policies and objectives of the Company as set forth in the Business Plan;

(c) using its best efforts to present to the Company investment opportunities consistent with the Business Plan and such investment program as the Directors may adopt from time to time;

(d) furnishing or obtaining and supervising the performance of the ministerial functions in connection with the administration of the day-to-day operations of the Company including the investment of reserve funds and surplus cash in short-term money market investments;

(e) serving as the Company's investment and financial advisor and providing research, economic, and statistical data in connection with the Company's investments and investment and financial policies;

(f) on behalf of the company, investigating, selecting and conducting relations with borrowers, lenders, mortgagors, brokers, investors, builders, developers and others; provided however, that the Advisor shall not retain on the Company's behalf any consultants or third party professionals, other than legal counsel, without prior Board approval;

(g) consulting with the Directors and furnishing the Directors with advice and recommendations with respect to the making, acquiring (by purchase, investment, exchange or otherwise), holding and disposition (through sale, exchange, or otherwise) of investments consistent with the Business Plan of the Company;

(h) obtaining for the Directors such services as may be required in acquiring and disposing of investments, disbursing and collecting the funds of the Company, paying the debts and fulfilling the obligations of the Company, and handling, prosecuting, and settling any claims of the Company, including foreclosing and otherwise enforcing mortgage and other liens securing investments;

(i) obtaining for and at the expense of the Company such services as may be required for property management, loan disbursements, and other activities relating to the investments of the Company, provided, however, the compensation for such services shall be agreed to by the Company and the service provider;

(j) advising the Company in connection with public or private sales of shares or other securities of the Company, or loans to the Company, but in no event in such a way that the Advisor could be deemed to be acting as a broker dealer or underwriter;

(k) quarterly and at any time requested by the Directors, making reports to the Directors regarding the Company's performance to date in relation to the Company's approved Business Plan and its various components, as well as the Advisor's performance of the foregoing services;

(l) making or providing appraisal reports, where appropriate, on investments or contemplated investments of the Company;

(m) assisting in preparation of reports and other documents necessary to satisfy the reporting and other requirements of any governmental bodies or agencies and to maintain effective communications with stockholders of the Company; and

(n) doing all things necessary to ensure its ability to render the services contemplated herein, including providing office space and office furnishings and personnel necessary for the performance of the foregoing services as Advisor, all at its own expense, except as otherwise expressly provided for herein.

2. NO PARTNERSHIP OR JOINT VENTURE. The Company and the Advisor are not partners or joint venturers with each other, and nothing herein shall be construed so as to make them such partners or joint venturers or impose any liability as such on either of them.

3. RECORDS. At all times, the Advisor shall keep proper books of account and records of the Company's affairs which shall be accessible for inspection by the Company at any time during ordinary business hours.

4. ADDITIONAL OBLIGATIONS OF THE ADVISOR. The Advisor shall refrain from any action (including, without limitation, furnishing or rendering services to tenants of property or managing or operating real property) that would (a) adversely affect the status of the Company as a real estate investment trust, as defined and limited in Sections 856-860 of the Internal Revenue Code, (b) violate any law, rule, regulation, or statement of policy of any governmental body or agency having jurisdiction over the Company or over its securities, (c) cause the Company to be required to register as an investment company under the Investment Company Act of 1940, or (d) otherwise not be permitted by the Articles of Incorporation of the Company.

5. BANK ACCOUNTS. The Advisor may establish and maintain one or more bank accounts in its own name, and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Directors may approve, provided that no funds in any such account shall be commingled with funds of the Advisor; and the Advisor shall from time to time render appropriate accounting of such collections and payments to the Directors and to the auditors of the Company.

6. BOND. The Advisor shall maintain a fidelity bond with a responsible surety company in such amount as may be required by the Directors from time to time, covering all directors, officers, employees, and agents of the Advisor handling funds of the Company and any investment documents or records pertaining to investments of the Company. Such bond shall inure to the benefit of the Company in respect to losses of any such property from acts of such directors, officers, employees, and agents through theft, embezzlement, fraud, negligence, error, or omission or otherwise, the premium for said bond to be at the expense of the Company.

7. INFORMATION FURNISHED ADVISOR. The Directors shall have the right to change the Business Plan at any time, effective upon receipt by the Advisor of notice of such change. The Company shall furnish the Advisor with a certified copy of all financial statements, a signed copy of each report prepared by independent certified public accountants, and such other information with regard to the Company's affairs as the Advisor may from time to time reasonably request.

8. CONSULTATION AND ADVICE. In addition to the services described above, the Advisor shall consult with the Directors, and shall, at the request of the Directors or the officers of the Company, furnish advice and recommendations with respect to any aspect of the business and affairs of the Company, including any factors that in the Advisor's best judgment should influence the policies of the Company.

9. ANNUAL BUSINESS PLAN AND BUDGET. No later than January 15th of each year, the Advisor shall submit to the Directors a written Business Plan for the current Fiscal Year of the Company. Such Business Plan shall include a twelve-month forecast of operations and cash flow with explicit assumptions and a general plan for asset sales or acquisitions, lending, foreclosure and borrowing activity, other investments or ventures and proposed securities offerings or repurchases or any proposed restructuring of the Company. To the extent possible, the Business Plan shall set forth the Advisor's recommendations and the basis therefor with respect to all material investments of the Company. Upon approval by the Board of Directors, the Advisor shall be authorized to conduct the business of the Company in accordance with the explicit provisions of the Business Plan, specifically including the borrowing, leasing, maintenance, capital improvements, renovations and sale of investments set forth in the Business Plan. Any transaction or investment not explicitly provided for in the approved Business Plan shall require the prior approval of the Board of Directors unless made pursuant to authority expressly delegated to the Advisor. Within sixty (60) days of the end of each calendar quarter, the Advisor shall provide the Board of Directors with a report comparing the Company's actual performance for such quarter against the Business Plan.

10. DEFINITIONS. As used herein, the following terms shall have the meanings set forth below:

(a) "Affiliate" shall mean, as to any Person, any other Person who owns beneficially, directly, or indirectly, 1% or more of the outstanding capital stock, shares or equity interests of such Person or of any other Person which controls, is controlled by, or is under common control with such Person or is an officer, retired officer, director, employee, partner, or trustee (excluding noninterested trustees not otherwise affiliated with the entity) of such Person or of any other Person which controls, is controlled by, or is under common control with, such Person.

(b) "Appraised Value" shall mean the value of a Real Property according to an appraisal made by an independent qualified appraiser who is a member in good standing of the American Institute of Real Estate Appraisers and is duly licensed to perform such services in accordance with the applicable state law, or, when pertaining to Mortgage Loans, the value of the underlying property as determined by the Advisor.

(c) "Book Value" of an asset or assets shall mean the value of such asset or assets on the books of the Company, before provision for amortization, depreciation, depletion or valuation reserves and before deducting any indebtedness or other liability in respect thereof, except that no asset shall be valued at more than its fair market value as determined by the Directors.

(d) "Book Value of Invested Assets" shall mean the Book Value of the Company's total assets (without deduction of any liabilities), but excluding (i) goodwill and other intangible assets, (ii) cash, and (iii) cash equivalent investments with terms which mature in one year or less.

(e) "Business Plan" shall mean the Company's investment policies and objectives and the capital and operating budget based thereon, approved by the Board as thereafter modified or amended.

(f) "Fiscal Year" shall mean any period for which an income tax return is submitted to the Internal Revenue Service and which is treated by the Internal Revenue Service as a reporting period.

(g) "Gross Asset Value" shall mean the total assets of the Company after deduction of allowance for amortization, depreciation or depletion and valuation reserves.

(h) "Mortgage Loans" shall mean notes, debentures, bonds, and other evidences of indebtedness or obligations, whether negotiable or non-negotiable, and which are secured or collateralized by mortgages, including first, wraparound, construction and development, and junior mortgages.

(i) "Net Asset Value" shall mean the Book Value of all the assets of the Company minus all the liabilities of the Company.

(j) "Net Income" for any period shall mean the Net Income of the Company for such period computed in accordance with generally accepted accounting principles after deduction of the Gross Asset Fee, but before deduction of the Net Income Fee, as set forth in Sections 11(a) and 11(b), respectively, herein, and inclusive of gain or loss of the sale of assets.

(k) "Net Operating Income" shall mean rental income less property operating expenses.

(l) "Operating Expenses" shall mean the aggregate annual expenses regarded as operating expenses in accordance with generally accepted accounting principles as determined by the independent auditors selected by the Directors and including the Gross Asset Fee payable to the Advisor and fees and expenses paid to the Directors who are not employees or Affiliates of the Advisor.

(m) The operating expenses shall exclude, however, the following:

(i) the cost of money borrowed by the Company;

(ii) income taxes, taxes and assessments on real property and all other taxes applicable to the Company;

(iii) expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and stock exchange listing of the Company's securities (including legal, auditing, accounting, underwriting, brokerage, printing, engraving and other fees);

(iv) fees and expenses paid to independent mortgage servicers, contractors, consultants, managers and other agents retained by or on behalf of the Company;

(v) expenses directly connected with the purchase, origination, ownership and disposition of Real Properties or Mortgage Loans (including the costs of foreclosure, insurance, legal, protective, brokerage, maintenance, repair and property improvement services) other than expenses with respect thereto of employees of the Advisor, except legal, internal auditing, foreclosure and transfer agent services performed by employees of the Advisor;

(vi) expenses of maintaining and managing real estate equity interests and processing and servicing mortgage and other loans;

(vii) expenses connected with payments of dividends, interest or distributions by the Company to shareholders;

(viii) expenses connected with communications to shareholders and bookkeeping and clerical expenses for maintaining shareholder relations, including the cost of printing and mailing share certificates, proxy solicitation materials and reports;

(ix) transfer agent's registrar's and indenture trustee's fees and charges; and

(x) the cost of any accounting, statistical, bookkeeping or computer equipment necessary for the maintenance of books and records of the Company.

Additionally, the following expenses of the Advisor shall be excluded:

(i) employment expenses of the Advisor's personnel (including Directors, officers and employees of the Company who are directors, officers or employees of the Advisor or its Affiliates), other than the expenses of those employee services listed at (v) above.

(ii) rent, telephone, utilities and office furnishings and other office expenses of the Advisor (except those relating to a separate office, if any, maintained by the Company); and

(iii) the Advisor's overhead directly related to performance of its functions under this Agreement.

(n) "Person" shall mean and include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other entities and governments and agencies and political subdivisions thereof.

(o) "Real Property" shall mean and include land, rights in land, leasehold interests (including but not limited to interests of a lessor or lessee therein), and any buildings, structures, improvements, fixtures, and equipment located on or used in connection with land, leasehold interests, and rights in land or interests therein.

All calculations made pursuant to this Agreement shall be based on statements (which may be unaudited, except as provided herein) prepared on an accrual basis consistent with generally accepted accounting principles, regardless of whether the Company may also prepare statements on a different basis. All other terms shall have the same meaning as set forth in the Company's Articles of Incorporation and Bylaws.

11. ADVISORY COMPENSATION.

(a) Gross Asset Fee. On or before the twenty-eighth day of each month during the term hereof, the Company shall pay to the Advisor, as compensation for the basic management and advisory services rendered to the Company hereunder, a fee at the rate of .0625% per month of the average of the Gross Asset Value of the Company at the beginning and at the end of the next preceding calendar month. Without negating the provisions of Sections 18, 19, 22 and 23 hereof, the annual rate of the Gross Asset Fee shall be .75% per annum.

(b) Net Income Fee. As an incentive for successful investment and management of the Company's assets, the Advisor will be entitled to receive a fee equal to 7.5% per annum of the Company's Net Income for each Fiscal Year or portion thereof for which the Advisor provides services. To the extent the Company has Net Income in a quarter, the 7.5% Net Income fee is to be paid quarterly on or after the third business day following the filing of the report on Form 10-Q with the Securities and Exchange Commission, except for the payment for the fourth quarter, ended December 31, which is to be paid on or after the third business day following the filing of the report on Form 10-K with the Securities and Exchange Commission.

The 7.5% Net Income Fee is to be cumulative within any Fiscal Year, such that if the Company has a loss in any quarter during the Fiscal Year, each subsequent quarter's payment during such Fiscal Year shall be adjusted to maintain the 7.5% per annum rate, with final settlement being made with the fourth quarter payment and in accordance with audited results for the Fiscal Year. The 7.5% Net Income Fee is not cumulative from year to year.

(c) Acquisition Commission. For supervising the acquisition, purchase or long term lease of Real Property for the Company, the Advisor is to receive an Acquisition Commission equal to the lesser of (i) up to 1% of the cost of acquisition, inclusive of commissions, if any, paid to nonaffiliated brokers; of
(ii) the compensation customarily charged in arm's-length transactions by others rendering similar property acquisition services as an ongoing public activity in the same geographical location and for comparable property. The aggregate of each purchase price of each property including the Acquisition Commissions and all real estate brokerage fees) may not exceed such property's Appraised Value at acquisition.

(d) Incentive Sales Compensation. To encourage periodic sales of appreciated Real Property at optimum value and to reward the Advisor for improved performance of the Company's Real Property, the Company shall pay to the Advisor, on or before the 45th day after the close of each Fiscal Year, an incentive fee equal to 10% of the amount, if any, by which the aggregate sales consideration for all Real Property sold by the Company during such Fiscal Year exceeds the sum of: (i) the cost of each such Real Property as originally recorded in the Company's books for tax purposes (without deduction for depreciation, amortization or reserve for losses), (ii) capital improvements made to such assets during the period owned by the Company, and (iii) all closing costs, (including real estate commissions) incurred in the sale of such Real Property; provided, however, no incentive fee shall be paid unless (a) such Real Property sold in such Fiscal Year, in the

aggregate, has produced an 8% simple annual return on the Company's net investment, including capital improvements, calculated over the Company's holding period before depreciation and inclusive of operating income and sales consideration and (b) the aggregate Net Operating Income from all Real Property owned by the Company for all of the prior Fiscal Year and the current Fiscal Year shall be at least 5% higher in the current Fiscal Year than in the prior Fiscal Year.

(e) Mortgage or Loan Acquisition Fees. For the acquisition or purchase from an unaffiliated party of any existing mortgage or loan by the Company, the Advisor or an Affiliate is to receive a Mortgage or Loan Acquisition Fee equal to the lesser of (a) 1% of the amount of the mortgage or loan purchased by the Company or (b) 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 by the Company of any mortgage loan.

(f) Mortgage Brokerage and Equity Refinancing Fees. For obtaining loans to the Company or refinancing on Company properties, the Advisor or an Affiliate is to receive a Mortgage Brokerage and Equity Refinancing Fee equal to the lesser of (a) 1% of the amount of the loan or the amount refinanced or (b) a brokerage or refinancing fee which is reasonable and fair under the circumstances; provided, however that no such fee shall be paid on loans from the Advisor or an Affiliate without the approval of the Board of Directors. No fee shall be paid on loan extensions.

12. LIMITATION ON THIRD PARTY MORTGAGE PLACEMENT FEES. The Advisor or any of its Affiliates shall pay to the Company, one-half of any compensation received by the Advisor or any such Affiliate from third parties with respect to the origination, placement or brokerage of any loan made by the Company, provided, however, the compensation retained by the Advisor or Affiliate shall not exceed the lesser of (a) 2% of the amount of the loan committed by the Company or (b) a loan brokerage and commitment fee which is reasonable and fair under the circumstances.

13. STATEMENTS. The Advisor shall furnish to the Company not later than the tenth day of each calendar month, beginning with the second calendar month of the term of this Agreement, a statement showing the computation of the fees, if any, payable in respect to the next preceding calendar month (or, in the case of incentive compensation, for the preceding Fiscal Year, as appropriate) under the Agreement. The final settlement of incentive compensation for each Fiscal Year shall be subject to adjustment in accordance with, and upon completion of, the annual audit of the Company's financial statements; any payment by the Company or repayment by the Advisor that shall be indicated to be necessary in accordance therewith shall be made promptly after the completion of such audit and shall be reflected in the audited statements to be published by the Company.

14. COMPENSATION FOR ADDITIONAL SERVICES. If and to the extent that the Company shall request the Advisor or any director, officer, partner, or employee of the Advisor to render services for the Company other than those required to be rendered by the Advisor hereunder, such additional services, if performed, will be compensated separately on terms to be agreed upon between such party and the Company from time to time. In particular, but without limitation, if the Company shall request that the Advisor perform property management, leasing, loan disbursement or similar functions, the Company and the Advisor shall enter into a separate agreement specifying the obligations of the parties and providing for reasonable additional compensation to the Advisor for performing such services.

15. EXPENSES OF THE ADVISOR. Without regard to the amount of compensation or reimbursement received hereunder by the Advisor, the Advisor shall bear the following expenses:

(a) employment expenses of the personnel employed by the Advisor (including Directors, officers, and employees of the Company who are directors, officers, or employees of the Advisor or of any company that controls, is controlled by, or is under common control with the Advisor), including, but not limited to, fees, salaries, wages, payroll taxes, travel expenses, and the cost of employee benefit plans and temporary help expenses except for those personnel expenses described in Sections 16(e) and (p);

(b) advertising and promotional expenses incurred in seeking investments for the Company;

(c) rent, telephone, utilities, office furniture and furnishings, and other office expenses of the Advisor and the Company, except as any of such expenses relates to an office maintained by the Company separate from the office of the Advisor; and

(d) miscellaneous administrative expenses relating to performance by the Advisor of its functions hereunder.

16. EXPENSES OF THE COMPANY. The Company shall pay all of its expenses not assumed by the Advisor, including without limitation, the following expenses:

(a) the cost of money borrowed by the Company;

(b) income taxes, taxes and assessments on real property, and all other taxes applicable to the Company;

(c) legal, auditing, accounting, underwriting, brokerage, listing, registration and other fees, printing, and engraving and other expenses, and taxes incurred in connection with the issuance, distribution, transfer, registration, and stock exchange listing of the Company's securities;

(d) fees, salaries, and expenses paid to officers, and employees of the Company who are not directors, officers or employees of the Advisor, or of any company that controls, is controlled by, or is under common control with the Advisor;

(e) expenses directly connected with the origination or purchase of Mortgage Loans and with the acquisition, disposition and ownership of real estate equity interests or other property (including the costs of foreclosure, insurance, legal, protective, brokerage, maintenance, repair, and property improvement services) and including all compensation, traveling expenses, and other direct costs associated with the Advisor's employees or other personnel engaged in (i) real estate transaction legal services, (ii) internal auditing, (iii) foreclosure and other mortgage finance services, (iv) sale or solicitation for sale of mortgages, (v) engineering and appraisal services, and (vi) transfer agent services;

(f) expenses of maintaining and managing real estate equity interests;

(g) insurance, as required by the Directors (including Directors' liability insurance);

(h) the expenses of organizing, revising, amending, converting, modifying, or terminating the Company;

(i) expenses connected with payments of dividends or interest or distributions in cash or any other form made or caused to be made by the Directors to holders of securities of the Company;

(j) all expenses connected with communications to holders of securities of the Company and the other bookkeeping and clerical work necessary in maintaining relations with holders of securities, including the cost of printing and mailing certificates for securities and proxy solicitation materials and reports to holders of the Company's securities;

(k) the cost of any accounting, statistical, bookkeeping or computer equipment or computer time necessary for maintaining the books and records of the Company and for preparing and filing Federal, State and Local tax returns;

(l) transfer agent's, registrar's, and indenture trustee's fees and charges;

(m) legal, accounting, investment banking, and auditing fees and expenses charged by independent parties performing these services not otherwise included in clauses (c) and (e) of this Section 16;

(n) expenses incurred by the Advisor, arising from the sales of Company properties, including those expenses related to carrying out foreclosure proceedings;

(o) commercially reasonable fees paid to the Advisor for efforts to liquidate mortgages before maturity, such as the solicitation of offers and negotiation of terms of sale;

(p) costs and expenses connected with computer services, including, but not limited to, employee or other personnel compensation, hardware and software costs, and related development and installation costs associated therewith;

(q) costs and expenses associated with risk management (i.e. insurance relating to the Company's assets);

(r) loan refinancing compensation; and

(s) expenses associated with special services requested by the Directors pursuant to Section 14 hereof.

17. OTHER ACTIVITIES OF ADVISOR. The Advisor, its officers, directors, or employees or any of its Affiliates may engage in other business activities related to real estate investments or act as advisor to any other person or entity (including another real estate investment trust), including those with investment policies similar to the Company, and the Advisor and its officers, directors, or employees and any of its Affiliates shall be free from any obligation to present to the Company any particular investment opportunity that comes to the Advisor or such persons, regardless of whether such opportunity is in accordance with the Company's Business Plan. However, to minimize any possible conflict, the Advisor shall consider the respective investment objectives of, and the appropriateness of a particular investment to each such entity in determining to which entity a particular investment opportunity should be presented. If appropriate to more than one entity, the Advisor shall present the investment opportunity to the entity that has had sufficient uninvested funds for the longest period of time.

18. LIMITATION ON OPERATING EXPENSES. To the extent that the Operating Expenses of the Company for any Fiscal Year exceed the lesser of (a) 1.5% of the average of the book Values of Invested Assets of the Company at the end of each calendar month of such fiscal year, of (b) the greater of 1.5% of the average of the Net Asset Value of the Company at the end of each calendar month of such fiscal year or 25% of the Company's Net Income, the Advisor shall refund to the Company from the fees paid to the Advisor the amount, if any, by which the Operating Expenses so exceed the applicable amount, provided, however, that the Advisor shall not be required to refund to the Company, with respect to any fiscal year, any amount which exceeds the aggregate of the Gross Asset Fees paid to the Advisor under this Agreement with respect to such fiscal year.

19. TERM; TERMINATION OF AGREEMENT. This Agreement shall continue in force until the next Annual Meeting of Stockholders of the Company, and, thereafter, it may be renewed from year to year, subject to any required approval of the Stockholders of the Company and, if any Director is an Affiliate of the Advisor, the approval of a majority of the Directors who are not so affiliated. Notice of renewal shall be given in writing by the Directors to the Advisor not less than 60 days before the expiration of this Agreement or of any extension thereof. This Agreement may be terminated for any reason without penalty upon 60 days' written notice by the Company to the Advisor or 120 days' written notice by the Advisor to the Company, in the former case by the vote of a majority of the Directors who are not Affiliates of the Advisor or by the vote of holders of a majority of the outstanding shares of the Company. Notwithstanding the foregoing, however, in the event of any material change in the ownership, control or management of the Advisor, the Company may terminate this Agreement without penalty and without advance notice to the Advisor.

20. AMENDMENTS. This Agreement shall not be changed, modified, terminated or discharged in whole or in part except by an instrument in writing signed by both parties hereto, or their respective successors or assigns, or otherwise as provided herein.

21. ASSIGNMENT. This Agreement shall not be assigned by the Advisor without the prior consent of the Company. The Company may terminate this Agreement in the event of its assignment by the Advisor without the prior consent of the Company. Such an assignment or any other assignment of this Agreement shall bind the assignee hereunder in the same manner as the Advisor is bound hereunder. This Agreement shall not be assignable by the Company without the consent of the Advisor, except in the case of assignment by the Company to a corporation, association, trust, or other organization that is a successor to the Company. Such

successor shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound hereunder.

22. DEFAULT, BANKRUPTCY, ETC. At the option solely of the Directors, this Agreement shall be and become terminated immediately upon written notice of termination from the Directors to the Advisor if any of the following events shall occur:

(a) If the Advisor shall violate any provision of this Agreement, and after notice of such violation shall not cure such default within 30 days; or

(b) If the Advisor shall be adjudged bankrupt or insolvent by a court of competent jurisdiction, or an order shall be made by a court of competent jurisdiction for the appointment of a receiver, liquidator, or trustee of the Advisor or of all or substantially all of its property by reason of the foregoing, or approving any petition filed against the Advisor for its reorganization, and such adjudication or order shall remain in force or unstayed for a period of 30 days; or

(c) If the Advisor shall institute proceedings for voluntary bankruptcy or shall file a petition seeking reorganization under the Federal bankruptcy laws, or for relief under any law for the relief of debtors, or shall consent to the appointment of a receiver of itself or of all or substantially all its property, or shall make a general assignment for the benefit of its creditors, or shall admit in writing its inability to pay its debts generally, as they become due.

The Advisor agrees that if any of the events specified in subsections
(b) and (c) of this Section 22 shall occur, it will give written notice thereof to the Directors within seven days after the occurrence of such event.

23. ACTION UPON TERMINATION. From and after the effective date of termination of this Agreement, pursuant to Sections 19, 21 or 22 hereof, the Advisor shall not be entitled to compensation for further services hereunder but shall be paid all compensation accruing to the date of termination. The Advisor shall forthwith upon such termination:

(a) pay over to the Company all monies collected and held for the account of the Company pursuant to this Agreement;

(b) deliver to the Directors a full accounting, including a statement showing all payments collected by it and a statement of any monies held by it, covering the period following the date of the last accounting furnished to the Directors; and

(c) deliver to the Directors all property and documents of the Company then in the custody of the Advisor.

24. MISCELLANEOUS. The Advisor shall be deemed to be in a fiduciary relationship to the stockholders of the Company. The Advisor assumes no responsibility under this Agreement other than to render the services called for hereunder in good faith, and shall not be responsible for any action of the Directors in following or declining to follow any advice or recommendations of the Advisor. Neither the Advisor nor any of its shareholders, directors, officers, or employees shall be liable to the Company, the Directors, the holders of securities of the Company or to any successor or assign of the Company for any losses arising from the operation of the Company if the Advisor had determined, in good faith, that the course of conduct which caused the loss or liability was in the best interests of the Company and the liability or loss was not the result of negligence or misconduct by the Advisor. However, in no event will the directors, officers or employees of the Advisor be personally liable for any act or failure to act unless it was the result of such person's willful misfeasance, bad faith, gross negligence or reckless disregard of duty.

25. NOTICES. Any notice, report, or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report, or other communication is accepted by the party to whom it is given, and shall be given by being delivered at the following addresses of the parties hereto:

The Directors and/or the Company:

Income Opportunity Realty Investors, Inc.
10670 North Central Expressway

Suite 600
Dallas, Texas 75231
Attention: President

The Advisor:
Basic Capital Management, Inc.
10670 North Central Expressway
Suite 600
Dallas, Texas 75231
Attention: Executive Vice President and Chief Financial Officer

Either party may at any time give notice in writing to the other party of a change of its address for the purpose of this Section 25.

26. HEADINGS. The section headings hereof have been inserted for convenience of reference only and shall not be construed to affect the meaning, construction, or effect of this Agreement.

27. GOVERNING LAW. This Agreement has been prepared, negotiated and executed in the State of Texas. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Texas applicable to agreements made and to be performed entirely in the State of Texas.

28. EXECUTION. This instrument is executed and made on behalf of the Company by an officer of the Company, not individually but solely as an Officer, and the obligations under this Agreement are not binding upon, nor shall resort be had to the private property of, any of the Directors, stockholders, officers, employees, or agents of the Company personally, but bind only the Company property.

IN WITNESS WHEREOF, INCOME OPPORTUNITY REALTY INVESTORS, INC. and BASIC CAPITAL MANAGEMENT, INC., by their duly authorized officers, have signed these presents all as of the day and year first above written.

INCOME OPPORTUNITY REALTY
INVESTORS, INC.

BASIC CAPITAL MANAGEMENT, INC.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY

REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS CONSTITUTES NEITHER AN OFFER TO SELL, NOR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, NOR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION.

TABLE OF CONTENTS

                                       PAGE
                                       ----
Summary...............................    5
Certain Risk Factors..................   14
General Shareholder Information.......   19
Proposed Incorporation Procedure......   21
Market Prices of the Shares;
  Dividends...........................   52
Business and Properties of IORI
  Nevada..............................   53
Business and Properties of the
  Trust...............................   54
Security Ownership of Certain
  Beneficial Owners and Management....   66
Selected Historical Consolidated
  Financial Information...............   67
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   68
Legal Matters.........................   72
Experts...............................   72
Available Information.................   73
Incorporation of Certain Documents By
  Reference...........................   73
Solicitation of Proxies...............   74

DURING THE 25-DAY PERIOD FOLLOWING THE EFFECTIVE TIME OF THE MERGER, ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK OF IORI NEVADA, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A COPY OF THIS PROXY STATEMENT/PROSPECTUS.

INCOME OPPORTUNITY
REALTY TRUST

INCOME OPPORTUNITY REALTY INVESTORS, INC.

791,444 SHARES
OF COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

FEBRUARY 14, 1996