The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of the integrity of the Company’s financial statements, the adequacy of the Company’s system of internal controls, the Company’s risk management, the Company’s compliance with legal and regulatory requirements, the independent auditors’ qualifications and independence, and the performance of the Company’s independent auditors.  The Committee has sole authority over the selection of the Company’s independent auditors and manages the Company’s relationship with its independent auditors.  The Committee has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the Committee deems necessary to carry out its duties and receive appropriate funding, as determined by the Committee, from the Company for such advice and assistance.

The Committee met five times during 2012.2013.  The Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its tasks.  The Committee’s meetings include private sessions with the Company’s independent auditors without the presence of the Company’s management, as well as executive sessions consisting of only Committee members.  The Committee also meets senior management from time to time.

Management has the primary responsibility for the Company’s financial reporting process, including its system of internal control over financial reporting and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.  The Company’s independent auditors are responsible for auditing those financial statements in accordance with professional standards and expressing an opinion as to their material conformity with U.S. generally accepted accounting principles and for auditing management’s assessment of, and the effective operation of, internal control over financial reporting.  The Committee’s responsibility is to monitor and review the Company’s financial reporting process and discuss management’s report on the Company’s internal control over financial reporting.  It is not the Committee’s duty or responsibility to conduct audits or accounting reviews or procedures.  The Committee has relied, without independent verification, on management’s representation that the financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States of America and on the opinion of the independent registered public accountants included in their report on the Committee’s financial statements.

In addition, the Committee reviewed key initiatives and programs aimed at strengthening the effectiveness of the Company’s internal and disclosure control structure.  As part of this process, the Committee continued to monitor the scope and adequacy of the Company’s internal controls, reviewed staffing levels and steps taken to implement recommended improvements in any internal procedures and controls.

Based on the Committee’s discussion with management and the independent accountants and the Committee’s review of the representation of management and the report of the independent accountants to the Board of Directors, the Audit Committee recommended to the Board of Directors, and the Board of Directors has approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012,2013, filed with the SEC.  The Audit Committee and the Board of Directors have also selected Swalm & Associates, P.C. as the Company’s independent registered public accountants and auditors for the fiscal year ending December 31, 2013.

Under the Sarbanes-Oxley Act of 2002 (the “SO Act”), and the rules of the SEC, the Audit Committee of the Board of Directors is responsible for the appointment, compensation and oversight of the work of the independent auditor.  The purpose of the provisions of the SO Act and the SEC rules for the Audit Committee role in retaining the independent auditor is two-fold.twofold.  First, the authority and responsibility for the appointment, compensation and oversight of the auditors should be with directors who are independent of management.  Second, any non-audit work performed by the auditors should be reviewed and approved by these same independent directors to ensure that any non-audit services performed by the auditor do not impair the independence of the independent auditor.  To implement the provisions of the SO Act, the SEC issued rules specifying the types of services that an independent auditor may not provide to its audit client, and governing the Audit Committee’s administration of the engagement of the independent auditor.  As part of this responsibility, the Audit Committee is required to pre-approve the audit and non-audit services performed by the independent auditor in order to assure that they do not impair the auditor’s independence.  Accordingly, the Audit Committee adopted on March 22, 2004 a written pre-approvalpreapproval policy of audit and non-audit services (the “Policy”), which sets forth the procedures and conditions pursuant to which services to be performed by the independent auditor are to be pre-approved.  Consistent with the SEC rules establishing two different approaches to approving non-prohibited services, the policy of the Audit Committee covers pre-approvalpreapproval of audit services, audit-relatedaudit related services, international administration tax services, non-U.S. income tax compliance services, pension and benefit plan consulting and compliance services, and U.S. tax compliance and planning.  At the beginning of each fiscal year, the Audit Committee will evaluate other known potential engagements of the independent auditor, including the scope of work proposed to be performed and the proposed fees, and approve or reject each service, taking into account whether services are permissible under applicable law and the possible impact of each non-audit service on the independent auditor’s independence from management.  Typically, in addition to the generally pre-approved services, other services would include due diligence for an acquisition that may or may not have been known at the beginning of the year.  The Audit Committee has also delegated to any member of the Audit Committee designated by the Board or the financial expert member of the Audit Committee responsibilities to pre-approve services to be performed by the independent auditor not exceeding $25,000 in value or cost per engagement of audit and non-audit services, and such authority may only be exercised when the Audit Committee is not in session.

The Company has no employees, payroll or benefit plans and pays no compensation to its executive officers.  The executive officers of the Company who are also officers or employees of Pillar are compensated by Pillar.  Such executive officers perform a variety of services for Pillar, and the amount of their compensation is determined solely by Pillar.  Pillar does not allocate the cash compensation of its officers among the various entities for which it serves as advisor.  See “The Advisor” for a discussion of the compensation payable to Pillar under the Advisory Agreement.

The Compensation Committee of the Board of Directors is comprised of at least two directors who are independent of management and the Company.  Each member of the Compensation Committee must be determined to be independent by the Board under the Corporate Governance Guidelines on Director Independence adopted by the Board and under the NYSE MKT standards for non-employeenonemployee directors and Rule 16b-3(b)(3)(i) of the rules and regulations promulgated under the Securities Exchange Act of 1934 and the requirements for “outside directors” set forth in Treasury Regulations, Section 27(e)(3).  Each member of the Committee is to be free of any relationship that in the judgment of the Board from time to time may interfere with the exercise of his or her independent judgment.  Each Committee member is appointed annually subject to removal at any time by the Board and serves until his or her Committee appointment is terminated by the Board.  The Compensation Committee is composed of three directors, each of whom meets the standards described above.

The purposes of the Compensation Committee are to oversee the policies of the Company relating to compensation to be paid by the Company to the Company’s principal executive officer (“CEO”) and any other officers designated by the Board and make recommendations to the Board with respect to such policies, produce necessary reports and executive compensation for inclusion in the Company’s proxy statement, in accordance with applicable rules and regulations, and monitor the development and implementation of succession plans for the CEO and other key executives and make recommendations to the Board with respect to such plans.

The Company has no employees, payroll, or benefit plans and pays no compensation to its executive officers.  The executive officers of the Company, who are also officers or employees of Pillar are compensated by Pillar.  Such executive officers perform a variety of services for Pillar, and the amount of their compensation is determined solely by Pillar.  Pillar does not allocate the cash compensation of its officers among the various entities for which it may serve as advisor or sub-advisor.

The only remuneration paid by the Company is to directors who are not officers or directors of Prime or the Advisor.  These independent directors (i) review the business plan of the Company to determine that it is the best interest of the stockholders, (ii) review the advisory contract and recommend any appropriate changes thereto, (iii) supervise the performance of the Company’s contractual advisor, and review the reasonableness of the compensation paid to the contractual advisor in terms of the nature and quality of services performed, (iv) review the reasonableness of the total fees and expenses of the Company, and (v) select, when necessary, a qualified, independent real estate appraiser to appraise properties acquired.  See the sub caption “Directors’ Compensation” in the Proxy Statement for a description of the compensation paid.

The charter of the Compensation Committee was adopted on March 22, 2004, and the members of the Compensation Committee, all of whom are independent within the meaning of the listing standards of the NYSE MKT and the Company’s Corporate Governance Guidelines, are listed below.  Since its formation on March 22, 2004, the Compensation Committee has annually reviewed its existing charter and regularly performed the tasks described above relating to the business plan, advisory contract, reasonableness of compensation paid to the advisor, and the reasonableness of the total fees and expenses of the Company.

The Company’s Compensation Committee is made up of non-employeenonemployee directors who have never served as officers of, or been employed by the Company.  None of the Company’s executive officers serve on a board of directors of any entity that has a director or officer serving on this Committee.

Executive officers of the Company are listed below, all of whom are employed by Pillar.  None of the executive officers receive any direct remuneration from the Company, nor do any hold any options granted by the Company.  Their positions with the Company are not subject to a vote of stockholders.  The ages, terms of service and all positions and offices with the Company, Pillar, and other affiliated entities, other principal occupations, business experience and directorships with other publicly-heldpublicly held companies during the last five years or more are set forth below.

President and Chief Operating Officer (since April 5, 2007) of the Company, ARL and TCI (since March 2007) of Prime and (since April 30, 2011) of Pillar; Senior Vice President and Business Line Manager for U.S. Bancorp (NYSE;USB) working out of their officers in Houston, Texas from 2003 to April 2007; Executive Vice President and Chief Financial Officer, Fleetcor Technologies a privately held transaction processing company that was headquartered in New Orleans, Louisiana from 1998 to 2003; Senior Vice President and Chief Financial Officer, ICSA a privately held internet security and information company headquartered in Carlisle, Pennsylvania from 1996 to 1998; and for more than ten years prior thereto was employed in various financial and operating roles for PhoneTel Technologies, Inc. which was a publicly traded telecommunication company on the then American Stock Exchange, headquartered in Cleveland, Ohio (1992-1996) and LDI Corporation which was a publicly traded computer equipment sales/service and asset leasing company listed on the NASDAQ and headquartered in Cleveland, Ohio.

Executive Vice President (since February 2008) and Chief Financial Officer (since May 2008) of the Company, ARI and TCI.  Prior thereto (from February 2008 to March 2008) he was Executive Vice President and Interim Chief Financial Officer of the Company, ARI and TCI.  Mr. Bertcher is also President, Chief Executive Officer (since December 2006), and Chief Financial Officer (since January 2003) of New Concept Energy, Inc. (formerly CabelTel International Corporation), a Nevada corporation (“GBR”) which has its common stock listed on the NYSE MKT, a position he has occupied since November 1, 2004.  From January 3, 2003 until November 1, 2004, Mr. Bertcher was also Chief Executive Officer of GBR.  He has been a certified public accountant since 1973; Mr. Bertcher has been a director since June 1999 (and was from November 1989 to September 1996) of GBR.  Until November 1989, Mr. Bertcher was a partner in Grant Thornton, LLP having served as the Chairman of its National Real Estate and Construction Committee.  Mr. Bertcher is also Executive Vice President and Chief Financial Officer of Pillar (since April 30, 2011).

Executive Vice President, General Counsel/Tax Counsel and Secretary (since February 2004), Executive Vice President (October 2001 to February 2004), Executive Vice President and Chief Financial Officer (June 2001 to October 2001) and Senior Vice President–Tax (December 2000 to June 2001) of the Company, TCI, ARL and Prime and (prior to July 2003) of BCM; Executive Vice President, General Counsel/Tax Counsel and Secretary (since February 2004), Executive Vice President–Tax (July 2003 to February 2004) of Prime and PIAMI and (since April 30,2011) of Pillar; Private Attorney (January 2000 to December 2000); Vice President–Taxes and Assistant Treasurer (March 1998 to January 2000) of IMC Global, Inc.; Vice President–Taxes (July 1991 to February 1998) of Whitman Corporation.  Executive Vice President-General Counsel/Tax Counsel and Secretary of Pillar (since April 30, 2011).

Executive Vice President-Residential Construction (since November 15, 2006) of the Company and of ARL and TCI.  Prior to his selection as an officer of the Company, Mr. Crozier was Managing Director of Development (November 2005 to November 2006) for Woodmont Investment Company GP, LLC, a Dallas, Texas based developer of commercial properties and residential units.  Prior thereto (October 2003 to November 2005) he was President of Sterling Builders, Inc., a Spring, Texas construction and consulting company.  Prior thereto (August 2001 through September 2003) he was Vice President of Westchase Construction, LTD,Ltd., a Houston, Texas based construction firm and for more than five years prior thereto, he was employed by various firms engaged in the construction industry including Trammel Crow Residential (February 1995 through February 2000) and The Finger Companies (August 1991 through February 1995).  Mr. Crozier is also an architect.  Executive Vice President-Residential Construction of Pillar (since April 30, 2011).

Although the Board of Directors is directly responsible for managing the affairs of the Company and for setting the policies which guide it, day-to-day operations are performed by a contractual advisor under the supervision of the Board of Directors.  The duties of the advisor include, among other things, locating, investigating, evaluating and recommending real estate and mortgage note investment and sales opportunities, as well as financing and refinancing sources.  The advisor also serves as a consultant to the Board of Directors in connection with the business plan and investment decisions made by the Board.

Pillar is the contractual advisor to IOT.  Pillar is a Nevada corporation, the sole shareholder of which is Realty Advisors, LLC, a Nevada limited liability company, the sole member of which is Realty Advisors, Inc., a Nevada corporation, which is 100% owned by Realty Advisors Management, Inc., a Nevada corporation, the sole stockholder of which is a Trust known as the May Trust.  Until early 2009, Syntek West, Inc., a Nevada corporation (“SWI”), which is owned 100% by Gene E. Phillips owned 20% of PIAMI which SWI exchanged to Realty Advisors, Inc. for certain securities issued by SWI.  Gene E. Phillips and SWI are each considered to be a “related party” for financial statement purposes because of the prior ownership arrangement.  Prime served as the Company’s advisor under an Advisory Agreement effective July 1, 2009 between the Company and Prime through April 30, 2011 when such agreement terminated and the Company and Pillar entered into an Advisory Agreement effective April 30, 2011 (the “Pillar Advisory Agreement”).

Under the Pillar Advisory Agreement, Pillar is required to annually formulate and submit for Board approval a budget and business plan containing a twelve-month forecast of operations and cash flow, a general plan for asset sales and purchases, borrowing activity and other investments.  Pillar is required to report quarterly to the Board on the Company’s performance against the business plan.  In addition, all transactions required prior Board approval, unless they are explicitly provided for in the approved plan or were made pursuant to authority expressly delegated to Pillar by the Board.

The Pillar Advisory Agreement also required prior approval of the Board for the retention of all consultants and third party professionals, other than legal counsel.  The Pillar Advisory Agreement provides that Pillar is deemed to be in a fiduciary relationship to the stockholders; contains a broad standard governing Pillar’s liability for losses by the Company; and contains guidelines for Pillar’s allocation of investment opportunities as among itself, the Company and other entities it advises.

The Pillar Advisory Agreement provides for Pillar to be responsible for the day-to-day operations of the Company and to receive an advisory fee comprised of a gross asset fee of 0.0625% per month (0.75% per annum) of the average of the gross asset value (total assets less allowance for amortization, depreciation or depletion and valuation reserves) and an annual net income fee equal to 7.5% of the Company’s net income.

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

Additionally, pursuant to the Pillar Advisory Agreement, Pillar or an affiliate of Pillar is to receive an acquisition commission for supervising the acquisition, purchase or long-termlong term lease of real estate equal to the lesser of (i) up to 1% of the cost of acquisition, inclusive of commissions, if any, paid to non-affiliatednonaffiliated brokers, or (ii) the compensation customarily charged in arm’s-lengtharm’s length transactions by others rendering similar property acquisition services as an ongoing public activity in the same geographical location and for comparable property, provided that the aggregate purchase price of each property (including acquisition fees and real estate brokerage commissions) could not exceed such property’s appraised value at acquisition.

The Pillar Advisory Agreement requires Pillar or any affiliate of Pillar to pay the Company one-halfone half of any compensation received from third parties with respect to the origination, placement or brokerage of any loan made by the Company.  However, the compensation retained by Pillar or any affiliate of Pillar may not exceed the lesser of (i) 2% of the amount of the loan commitment, or (ii) a loan brokerage and commitment fee reasonable and fair under the circumstances.

The Pillar Advisory Agreement also provides that Pillar or an affiliate of Pillar is to receive a mortgage or loan acquisition fee with respect to the purchase of any existing mortgage loan equal to the lesser of (i) 1% of the amount of the loan purchased, or (ii) a brokerage or commitment fee reasonable and fair under the circumstances.  Such fee will not be paid in connection with the origination or funding of any mortgage loan by the Company.

Under the Pillar Advisory Agreement, Pillar or an affiliate of Pillar also is to receive a mortgage brokerage and equity refinancing fee for obtaining loans or refinancing on properties equal to the lesser of (i) 1% of the amount of the loan or the amount refinanced, or (ii) a brokerage or refinancing fee which is reasonable and fair under the circumstances.  However, no such fee is to be paid on loans from Pillar or an affiliate of Pillar without the approval of the Board of Directors.  No fee shall be paid on loan extensions.

The Pillar Advisory Agreement also provides for all activities in connection with or related to construction for the Company and its subsidiaries, Pillar can receive a fee equal to 6% of the so-called “hard costs” only of any costs of construction on a completed basis, based upon amounts set forth as approved on any architect certificate issued in connection with such construction, which fee is payable at such time as the applicable architect certifies other costs for payment to third parties.  The phrase “hard costs” means all actual costs of construction paid to contractors, subcontractors and third parties for materials or labor performed as a part of the construction but does not include items generally regarded as “soft costs” which are consulting fees, attorneys’ fees, architectural fees, permit fees and fees of other professionals.

Under the Pillar Advisory Agreement, Pillar is to receive reimbursement of certain expenses incurred by it in the performance of advisory services to the Company; provided, however, all or a portion of the annual advisory fee must be refunded by Pillar if the Operating Expenses of the Company (as defined in the Pillar Advisory Agreement) exceed certain limits specified in the Pillar Advisory Agreement based on the book value, net asset value and net income of the Company during the fiscal year.  Pillar may assign the Pillar Advisory Agreement only with the prior consent of the Company.

Additionally, if management requests that Pillar render services other than those required by the Pillar Advisory Agreement, Pillar or an affiliate of Pillar was to be separately compensated for such additional services on terms to be agreed upon from time to time.  As discussed below, under Property Management, the Company currently utilizes the services of Regis Realty Prime, LLC for property management and real estate brokerage. Prior to December 31, 2010, the Company employed Triad Realty Services LP (“Triad”), an affiliate of Pillar, to provide management for the Company’s properties and engaged Regis Realty I LLC (“Regis I”), a related party, on a non-exclusive basis to provide brokerage services for the Company.

Pillar also serves as a contractual advisor to TCI and ARL and the principal officers of Pillar are also the principal officers of the Company.  The Prime Advisory Agreement between the Company and Prime contained substantially the same terms as the current Pillar Advisory Agreement.

Mickey N. Phillips is the brother of Gene E. Phillips, and Ryan T. Phillips is the son of Gene E. Phillips.

Effective January 1, 2011, Regis Realty Prime, LLC d/b/a Regis Property Management, LLC (“Regis”), the sole member of which is Realty Advisors, LLC, has managed the Company’s Commercial Properties for a fee of 3% or less of the monthly gross rents collected on any commercial properties Regis manages and leasing commissions of 6% or less in accordance with the terms of a property-levelproperty level management agreement.

Prior to December 31, 2010, Triad, an affiliate of Pillar, provided property management services to the Company for a fee of 6% or less of the monthly gross rents collected on residential properties and 3% or less of the monthly gross rents collected on commercial properties under its management.  Triad subcontracted with other entities for the provision of the property-levelproperty level management services to the Company at various rates.  The general partner of Triad is Prime Income Asset Management, Inc., a Nevada corporation (“PIAMI”) which is the sole member of Prime.  The limited partner of Triad is HRS Holdings LLC (“HRSHLLC”), a related party.  Triad subcontract the property-levelproperty level management and leasing of the Company’s commercial properties to Regis I, a related party, which is a company owned by HRSHLLC.  Regis I also received property and construction management fees and leasing commissions in accordance with its then property-levelproperty level management agreement with Triad.

Regis also  provides real estate brokerage services to the Company (on a non-exclusive basis).  Regis is entitled to receive a real estate commission for property purchases and sales in accordance with a sliding scale of total fees to be paid (i) maximum fee of 4.5% on the first $2 million of any purchase or sale transaction of which no more than 3.5% would be paid to Regis or affiliates; (ii) maximum fee of 3.5% on transaction amounts between $2 million and $5 million, of which no more than 3% would be paid to Regis or affiliates; (iii) maximum fee of 2.5% on transaction amounts between $5 million and $10 million, of which no more than 2% would be paid to Regis; and (iv) maximum fee of 2% on transaction amounts in excess of $10 million, of which no more than 1.5% would be paid to Regis or affiliates.

Pillar served as the Company’s advisor since April 30, 2011.

Regis provides property management services subcontracts the property-levelproperty level management and leasing of the Company’s commercial properties. Regis also provides brokerage services, on a non-exclusive basis, for the Company and receives brokerage commissions in accordance with a brokerage agreement.

Messrs. Daniel J. Moos, Gene S. Bertcher, Louis J. Corna and Alfred Crozier are employed by Pillar which is owned by Realty Advisors, LLC, a Nevada limited liability company (“RALLC”).  The sole member of RALLC is Realty Advisors, Inc., a Nevada corporation.  Messrs. Moos, Bertcher, Corna and Crozier, executive officers of the Company, also serve as executive officers of ARL and TCI, and accordingly owe fiduciary duties to those entities as well as the Company.  Mr. Bertcher is also an officer, director and employee of GBR and as such also owes fiduciary duties to GBR as well as the Company.  Messrs. Jakuszewski and Munselle and Ms. Hunt, serve as directors of ARL and TCI and owe fiduciary duties to TCI and ARL, as well as the Company under applicable law.

For tax periods ending before August 31, 2012, the Company was part of the ARL consolidated federal return. After that date, the Company and the rest of the ARL group joined the May Realty Advisors, Management, Inc. (“RAMI”) consolidated group for tax purposes. The income tax expense (benefit) for 2010 and 2011 tax periods was calculated under a tax sharing and compensating agreement among ARL, TCI, and the Company. That agreement continued until August 31, 2012, at which time a new tax sharing and compensating agreement was entered into among ARL, TCI, the Company, and RAMI for the remainder of 2012. For 2012,2013, ARL, TCI, and the Company had a combined net taxable loss. The benefit or expense under such arrangements is calculated based on the amount of losses absorbed by taxable income multiplied by the statutory rate of 35% per the tax sharing and compensating agreements.

Historically, the Company has engaged in and may continue to engage in business transactions, including real estate partnerships, with related parties.  Management believes that all of the related party transactions represented the best investments available at the time and were at least as advantageous to the Company as could have been obtained from unrelated third parties.

TCI owns 3,381,270 shares of Common Stock of the Company (approximately 81.1%).  TCI owes $48.6 million to IOT which includes the $19.2 million note assumed from SWI in 2009 and $33.3 million of obligations TCI purchased from IOT’s then Advisor, Prime at April 30, 2011.

In 2012,2013, the Company paid Pillar $800,000 and $180,000 in advisory fees, $234,000 in cost reimbursements, and $695,000 in net income fees.  In addition, from time to time, the Company has made advances to Pillar, which generally has not had specific repayment terms and has been reflected in the Company’s financial statements as receivables from or payables to affiliates.  Such advances bear interest at 1% above the prime rate.  During 2011,2013, the Company received interest of $1,600,000$1.6 million from Pillar, respectively.Pillar.

From time to time, the Company and its affiliates have made advances to each other which generally have not had specific repayment terms, did not bear interest, are unsecured and have been reflected in the Company’s financial statements as other assets or other liabilities.  At December 31, 2012,2013, the Company had a receivable of $27,000,000$39.2 million due from TCI.

Article FOURTEENTH of the Company’s Articles of Incorporation provides that the Company shall not, directly or indirectly, contract or engage in any transaction with (1) any director, officer or employee of the Company, (2) any director, officer or employee of the advisor, (3) the advisor, or (4) any affiliate or associate (as such terms are defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) of any of the aforementioned persons, unless (a) the material facts as to the relationship among or financial interest of the relevant individuals or persons and as to the contract or transaction are disclosed to or are known by the Company’s Board of Directors or the appropriate committee thereof, and (b) the Company’s Board of Directors or appropriate committee thereof determines that such contract or transaction is fair to the Company and simultaneously authorizes or ratifies such contract or transaction by the affirmative vote of a majority of independent directors of the Company entitled to vote thereon.  Article FOURTEENTH defines an “Independent Director” as one who is neither an officer or an employee of the Company, nor a director, officer or employee of the Company’s advisor.

The Board of Directors knows of no other matters that may be properly or should be brought before the Annual Meeting.  However, if any other matters are properly brought before the Annual Meeting, the persons named in the enclosed proxy or their substitutes will vote in accordance with their best judgment on such matters.

The audited financial statements of the Company, in comparative form for the years ended December 31, 20112012 and 20122013, are contained in the 20122013 Annual Report to Stockholders, which was mailed to stockholders in April 2012.2014. However, such report and the financial statements contained therein are not to be considered part of this solicitation.

Stockholder proposals for our Annual Meeting to be held in 20142015 must be received by us by December 31, 2013,2014, and must otherwise comply with the rules promulgated by the Securities and Exchange Commission to be considered for inclusion in our proxy statement for that year.  Any stockholder proposal, whether or not to be included in our proxy materials, must be sent to our Corporate Secretary at 1603 LBJ Freeway, Suite 800, Dallas, Texas 75234.

Dated: November 8, 20137, 2014