UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under ss. 240.14a-12
HMG/COURTLAND PROPERTIES, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
HMG/COURTLAND PROPERTIES, INC.
1870 South Bayshore Drive
Coconut Grove, Florida 33133
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 16, 2004
TO THE SHAREHOLDERS: June 21, 2004
The annual meeting of shareholders of HMG/Courtland Properties, Inc.
(the "Company") will be held at 10:30 A.M., on Friday, July 16, 2004, at the
Grove Isle Club and Resort, 4 Grove Isle Drive, Coconut Grove, Florida for the
following purposes:
1. To elect a Board of Directors;
2. To act upon the renewal of the Advisory Agreement between the
Company and HMG Advisory Corp.;
3. To transact such other business as may properly come before the
meeting.
The record date for determining shareholders entitled to notice of and
to vote at the annual meeting is June 17, 2004.
Enclosed is a copy of the Company's Annual Report to Shareholders (Form
10-KSB) for the fiscal year ended December 31, 2003.
It is important, whether or not you plan to attend the meeting in
person, that you fill in, sign and date the accompanying proxy and return it
promptly in the postage prepaid envelope which is enclosed for your convenience.
The signing and mailing of the proxy will not affect your right to vote your
shares in person if you attend the meeting and desire to do so.
By Order of the Board of Directors
Lawrence I. Rothstein
President and Secretary
PROXY STATEMENT
OF
HMG/COURTLAND PROPERTIES, INC.
The accompanying proxy is solicited by the Board of Directors for use
at the annual meeting of shareholders and is being mailed with this Proxy
Statement to all shareholders on June 21, 2004. If a proxy card is properly
signed and is not revoked by the shareholder, the shares of common stock of the
Company (the "Shares") represented thereby will be voted at the meeting in
accordance with the instructions, if any, of the shareholder. If no instructions
are given, they will be voted for the election of Directors nominated by the
Board of Directors and for approval of the renewal of the advisory agreement
(the "Advisory Agreement") between the Company and HMG Advisory Corp. (the
"Adviser"). Any shareholder may revoke his proxy at any time before it is voted
by giving written notice of revocation to the Secretary of the Company.
Holders of Shares of record at the close of business on June 17, 2004
are entitled to notice of and to vote at the meeting. On that date, there were
1,089,135 Shares outstanding. Each Share is entitled to one vote on all business
of the meeting. The holders of a majority of the outstanding Shares, present in
person or represented by proxy, will constitute a quorum at the meeting.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions are
counted in tabulations of the votes cast on proposals presented to stockholders,
whereas broker non-votes are not counted for purposes of determining whether a
proposal has been approved. As of June 17, 2004, Transco Realty Trust
("Transco"), 1870 South Bayshore Drive, Coconut Grove, Florida 33133, was the
beneficial owner of 477,300 Shares, or 44% of the outstanding Shares, and
Emanuel Metz, CIBC Oppenheimer Corp., One World Financial Center, 200 Liberty
Street, New York, New York 10281, was the beneficial owner of 59,500 Shares, or
5% of the outstanding Shares. Beneficial ownership is based on sole voting and
investment power.
The Company has been advised by its officers and nominees for
directors, and their affiliated shareholders, Transco, Courtland Group, Inc.
("CGI") and T.G.I.F. Texas, Inc. ("T.G.I.F.") that they intend to vote for the
election of each of the nominees and for the approval of the Advisory Agreement.
Such shareholders own in the aggregate 634,430 shares, or 58% of the outstanding
Shares. As a result, each of the nominees is expected to be elected as a
Director and the Advisory Agreement is expected to be approved. As noted below,
certain Directors of the Company are affiliated with principal shareholders of
the Company and are principal shareholders, directors and officers of the
Adviser. See "Election of Directors" below for information concerning holders
who may be deemed to own beneficially more than 5% of the outstanding Shares.
1
ELECTION OF DIRECTORS
The entire Board of Directors will be elected at the annual meeting of
shareholders to serve until the next annual meeting of shareholders and until
the election and qualification of their successors. In the event any nominee
should not continue to be available for election, proxies may be voted for the
election of a substitute nominee or the Board of Directors may elect to reduce
the number of Directors. The Board of Directors has no reason to anticipate that
any nominee will not be available for election. All of the nominees, except for
Mr. Stuntebeck, have been elected previously by the shareholders.
An affirmative vote by the holders of a majority of the Shares present
in person or by proxy at the Annual Meeting of Shareholders is required for the
election of each Director.
Set forth below is certain information about each current Director,
each nominee for Director and the Shares held by all Directors and executive
officers.
Shares Held as of a June 17, 2004
---------------------------------
Additional Shares
Name, Age, Year First Principal Occupation or Shares Owned by in which the
Became a Director or Employment During the Past Five the Nominee or Nominee has, or Total Shares
Officer of the Company Years Other than with the Company Members of His Participates in, and Percent of
and Other Information Family1 the Voting or Class6
Investment Power2
------------------ ------------------------------ ------------- ---------------- -------------
Maurice Wiener 62-1974 Chairman of the Board and Chief 65,1004 541,8303 606,930
Chairman of the Board Executive Officer of the Adviser; 52%
of Directors, and Chief Executive Trustee, Transco Realty
Executive Officer Trust; Director, T.G.I.F. Texas,
Inc.; Chairman of the Board and
Chief Executive Officer of CGI
Lawrence I. Rothstein Director, President, treasurer 50,0004 541,8303 591,830
51-1983 Director, and Secretary of Adviser; Trustee 50%
President, Treasurer and Vice-President of Transco;
and Secretary Director, President, and
Secretary of CGI; Vice-President
of T.G.I.F. Texas, Inc.
Walter G. Arader President, Walter Arader and 15,4004 0 15,400
85-1977 Director Associates, inc. (financial and 1%
management consultants).
Clinton Stuntebeck Partner Emeritus, Schnader 0 0 0%
66-2004 Director Harrison Segal & Lewis, LLP
(2004); Chairman, Concordia
Holdings, Ltd. (investment and
business consulting) Senior
Partner, Schnader Harrison Segal
& Lewis, LLP;
2
Harvey Comita 74-1992 Business Consultant; Trustee, 10,0004 477,3005 487,300
Director Transco Realty Trust. 41%
All Directors and 151,0004 541,8303 692,830
Executive Officers as a 61%
Group
-------------------------------
* Less than one percent
(1) Unless otherwise indicated, beneficial ownership is based on sole voting
and investment power with respect to the Shares.
(2) Shares listed in this column represent Shares held by entities with which
the Directors or officers are associated. The Directors, officers and
members of their families have no ownership rights in the Shares listed in
this column. See note 3 below.
(3) This number includes the number of Shares held by Transco (477,300 Shares),
CGI (54,530 shares) and T.G.I.F. Texas, Inc. ("T.G.I.F.") (10,000 shares).
Several of the Directors of the Company are directors, trustees, officers
or shareholders of Transco, CGI and T.G.I.F.
(4) This number includes shares subject to options granted under the 2000 Stock
Option Plan as follows: Mr. Wiener, 30,000; Mr. Rothstein, 25,000; 5,000
each to Mr. Arader and Mr. Comita; and 8,000 to one officer who is not a
director. Reference is made to "Compensation of Directors and Executive
Officers and Other Transactions" for further information about the 2000
Stock Option Plan.
(5) This number represents the number of shares held by Transco, of which Mr.
Comita is a Trustee.
(6) This percentage assumes the exercise of all outstanding options.
Mr. Wiener is the executive trustee of Transco and holds 37% of its
stock. Mr. Wiener is also director and officer of CGI which owns 32% of
Transco's stock. Mr. Wiener is Chairman of the Board, Chief Executive Officer
and a 65% shareholder of CGI. Mr. Wiener is a director and 18% shareholder of
TGIF. Mr. Wiener is the cousin of Bernard Lerner, Vice President of the
Company's subsidiary, Courtland Investments, Inc.
For information concerning relationships of certain directors and
officers of the Company to the Adviser, see "Amendment and Approval of Advisory
Agreement."
As a result of these relationships, the persons named above may be
deemed to share investment power and voting power of Shares held by each firm
with which they are associated in conjunction with a number of other persons,
including in several cases, persons who are neither directors nor officers of
the Company.
Meetings of the Board of Directors
The Board of Directors held three meetings during 2003. During this
period all of the Directors of the Company attended at least 75% of the total
number of meetings of the Board and
3
any Committee of which they were a member. The Board encourages director
attendance at the Annual Meeting of the Shareholders.
Committees of the Board of Directors
The Board of Directors has an Audit Committee and a Stock Option
Committee. The Company does not have a Compensation Committee. Messrs. Arader
and Comita serve as members of the Audit Committee. The Audit Committee met four
times during 2003.
Messrs. Arader and Comita serve as members of the Stock
Option-Committee. The Committee is authorized to grant options to officers and
key employees of the Company. The Stock Option Committee did not meet during
2003.
Nominating Committee
---------------------
The Board of Directors does not have a standing Nominating Committee
due to the size of the Board; however, the Company's three independent directors
review and make recommendations to the Board regarding the size and composition
of the Board, consider and recruit candidates for director nominees based upon
recommendations from current outside directors, members of management, outside
consultants or search firms, and shareholders; recommend on an annual basis a
slate of director nominees for approval by the Board and the shareholders and
review our committee structure and membership. The independent directors are
Messrs. Arader, Comita and Stuntebeck.
All three independent directors are "independent" directors as defined
by the current American Stock Exchange listing standards. The Company does not
have a Nominating Committee charter.
In evaluating and determining whether to recommend a person as a
candidate for election as a director, the three independent directors' criteria
reflects the requirements of the recently adopted American Stock Exchange rules
with respect to independence and the following factors: the needs of the Company
with respect to the particular talents and experience of its directors, personal
and professional integrity of the candidate, level of education and/or business
experience, broad-based business acumen, the level of understanding of the
Company's business and the income-producing commercial properties industry,
strategic thinking and a willingness to share ideas, and diversity of
experiences, expertise and background. These directors will use these and other
criteria that they deem appropriate to evaluate potential nominees and will not
evaluate proposed nominees differently depending upon who has made the
recommendation.
The three directors will consider proposed nominees whose names are
submitted to them by shareholders. They have not adopted a formal process for
that consideration because they believe that this informal consideration process
will be adequate. The three independent directors intend to review periodically
whether a more formal policy should be adopted.
Any shareholder who desires to recommend a nominee for director must
submit a letter, addressed to Secretary, HMG/Courtland Properties, Inc., 1870
South Bayshore Drive, Coconut
4
Grove, Florida 33133, and which is clearly identified as a "Director Nominee
Recommendation." All recommendation letters must identify the author as a
shareholder and provide a brief summary of the candidate's qualifications, as
well as contact information for both the candidate and the shareholder.
Shareholders who wish to make a recommendation for a nominee to be elected at
the Company's 2005 Annual Meeting must submit their recommendation by February
22, 2005, to allow for meaningful consideration and evaluation of the nominees
by the three independent directors.
REPORT OF THE AUDIT COMMITTEE
The primary purpose of the Audit Committee is to assist the Board in
monitoring the integrity of our financial statements, our independent auditor's
qualifications and independence, the performance of our independent auditors,
and our compliance with legal and regulatory requirements. The Audit Committee
was established in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Board of Directors
has determined that each member of the Audit Committee, Messrs. Arader and
Comita, is (1) and "audit committee financial expert," as that term is defined
in Item 401(e) of Regulation S-B of the Exchange Act, and (2) "independent" as
defined by the listing standards of the American Stock Exchange and Section
10A(m)(3) of the Exchange Act. The Committee operates pursuant to a charter that
was last amended by the Board on June 16, 2003. A copy of the charter was an
appendix to last year's proxy statement.
Management is responsible for the preparation, presentation and
integrity of the Company's financial statements, accounting and financial
reporting principles and internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations. The
independent auditors for the Company's 2003 fiscal year, Berenfeld, Spritzer,
Schecter & Sheer ("BSSS") , were responsible for performing an independent audit
of the consolidated financial statements in accordance with generally accepted
auditing standards.
In performing its oversight role, the Audit Committee has, among other
things covered in its charter, reviewed and discussed the audited financial
statements with management and the independent auditors. The Committee has also
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61, Communication with Audit Committees, as
currently in effect. The Committee has received the written disclosures and the
letter from the independent auditors required by Independence Standards Board
Standard No.1, Independence Discussions with Audit Committees, as currently in
effect. The Committee has also considered whether the provision of non-audit
services by the independent auditors is compatible with maintaining the
auditors' independence and has discussed with the auditors the auditors'
independence.
Based on the reviews, reports and discussions described in this Report,
and subject to the limitations on the role and responsibilities of the Committee
referred to in this Report and in the charter, the Audit Committee recommended
to the Board that the audited financial statements be included in the Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2003.
5
The members of the Audit Committee are not professionally engaged in
the practice of auditing or accounting and are not necessarily experts in the
fields of accounting or auditing, including in respect of auditor independence.
Members of the Committee rely without independent verification on the
information provided to them and on the representations made by management and
the independent auditors. Accordingly, the Audit Committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Audit
Committee's considerations, efforts and discussions referred to above do not
assure that the audit of the Company's financial statements has been carried out
in accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that BSSS is in fact "independent."
Members of the Audit Committee:
Walter G. Arader
Harvey Comita
INDEPENDENT PUBLIC ACCOUNTANTS
BSSS serves as our independent accountant. As previously reported, on
October 8, 2003, the Company terminated the service of BDO Seidman, LLP and at
the same time selected BSSS as independent auditors for the 2003 fiscal year. In
performing its oversight role, the Audit Committee reviewed whether to retain
BSSS as our independent accounting firm for the 2004 fiscal year as part of its
regular process of recommending an independent auditor to the Board. The
Committee has recommended to the Board of Directors the selection of BSSS as the
Company's independent auditors for 2004, and the Board has concurred in its
recommendation. A representative of BSSS is not expected to be present at the
Annual Meeting. The Audit Committee pre-approved all services rendered to the
Company by its independent accountants.
The aggregate fees billed by the Company's accounting firms for the
years ended December 31, 2003 and December 31, 2002 are as follows:
Fees of Accountants
Aggregate Amount Billed Share of Total
----------------------- --------------
December 31, 2003 December 31, 2002 December 31, 2003 December 31, 2002
Audit Fees, including review of
quarterly financial statements $56,000 $87,000 70.7% 66.0%
Audit-Related Fees (costs 3,222 0 4.1% .0%
associated with new accountant
transition)
Tax Fees (consists of fees related
to tax compliance and planning) 20,000 45,000 25.2% 34.0%
------ ------ ---- ----
Total Fees $79,222 $132,000 100% 100%
6
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive officers receive no cash compensation from the Company in
their capacity as executive officers. Executive officers are eligible to receive
stock options pursuant to the Stock Option Plan.
Compensation of Directors. Each Director receives an annual fee of
$8,000, plus expenses and $500 for each meeting attended of the Board of
Directors.
Exercise and Grant of Options. The following table sets forth currently
outstanding grants of options to the executive officers. During 2000, the Stock
Option Committee granted to each director an option to purchase 5,000 shares. No
options were granted or exercised during 2003.
Outstanding Option Grants
-------------------------
Name of Executive Officer Shares Subject to
Grant of Options(l)
----------------
Maurice Wiener 30,000(2)
Chairman of the Board and
Chief Executive Officer
Lawrence I. Rothstein 25,000(2)
------
Director, President and
Chief Financial Officer
TOTAL 55,000
(1) These options were granted Mr. Wiener and Mr. Rothstein at an exercise
price of $8.33 and $7.57, respectively. The closing price for the
Company's Shares on the American Stock Exchange was $7.57 per Share on
June 25, 2001, the date of grant. All options expire on June 24, 2011.
(2) Represents 35% and 29%, respectively, of all options granted.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires the Company's
directors and executive officers to file with the Securities and Exchange
Commission initial reports of beneficial ownership and reports of change in
beneficial ownership of the Company's Shares. Such officers and directors are
required by SEC regulations to furnish to the Company copies of all Section
16(a) reports that they file. Based solely on a review of the copies of such
forms furnished to the Company, or written representations that no other reports
were required, the Company believes that during 2003, its officers and directors
of the Company complied with all applicable Section 16(a) filing requirements.
7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion describes the organizational structure of the
Company's subsidiaries and affiliates.
Transco Realty Trust ("Transco")
--------------------------------
Transco is a publicly-held 44% shareholder of the Company. Mr. Wiener
is the executive trustee and an officer of Transco and holds approximately 34%
of Transco's stock. Mr. Rothstein serves as a trustee and an officer of Transco.
Mr. Comita serves as a trustee of Transco.
Courtland Group, Inc. ("CII")
-----------------------------
CGI owns approximately 32% of Transco's stock and approximately 5% of
the Company's common stock. Mr. Weiner is Chairman of the Board and a 65%
shareholder of CGI. Mr. Rothstein serves as Director and president of CGI. CGI
served as the Company's investment adviser until December 31, 1997.
HMG Advisory Corp. (the "Adviser")
----------------------------------
The day-to-day operations of the Company are handled by the Adviser.
Reference is made to "Approval of Advisory Agreement" below for further
information about the duties and remuneration of the Adviser. The Adviser is
majority-owned by Maurice Wiener, its Chairman and CEO.
Courtland Investments, Inc. ("CII")
-----------------------------------
The Company owns a 95% non-voting interest in CII. The other 5% (which
represents 100% of the voting stock) is owned by a wholly-owned subsidiary of
Transco. In May 1998, the Company and the Transco subsidiary entered into a
written agreement in order to confirm and clarify the terms of their previous
continuing arrangement with regard to the ongoing operations of CII, all of
which provide the Company with complete authority over all decision making
relating to the business, operation, and financing of CII consistent with its
status as a real estate investment trust.
CII and its wholly-owned subsidiary own 100% of Grove Isle Club, Inc.,
Grove Isle Yacht Club Associates and Grove Isle Marina, Inc. CII also owns 15%
of Grove Isle Associates, Ltd., and the other 85% is owned by the Company.
HMG-Fieber Associates ("Fieber")
The Company owns a 70% interest in Fieber and the other 30% is owned by
NAF Associates ("NAF").
The following discussion describes all material transactions,
receivables and payables involving related parties. The Company believes that
all of the transactions described below were on terms as favorable to the
Company as comparable transactions with unaffiliated third parties.
8
The Adviser
-----------
As of December 31, 2003 and 2002 the Adviser owed the Company
approximately $259,000 and $648,000, respectively. In March, 2004 and 2003, the
Advisor made cash payments of $25,000 and $500,000, respectively, toward amounts
due to the Company. Amounts due from the Advisor bear interest at the prime rate
plus 1% and are due on demand.
Effective December 1, 1999, the Adviser began leasing its executive
offices from CII pursuant to a lease agreement. This lease agreement is at the
going market rate for similar property and calls for base rent of $48,000 per
year payable in equal monthly installments. Additionally, the Adviser is
responsible for all property insurance, utilities, maintenance and security
expenses relating to the leased premises. The lease term is five years.
CGI
---
As of December 31, 2003 and 2002, CGI owed the Company $303,000 and
$317,000, respectively. Amounts due from CGI bear interest at the prime rate
plus 1% and are due on demand.
CII - T.G.I.F. Texas, Inc.
--------------------------
CII owns approximately 49% of the outstanding shares of T.G.I.F. Texas,
Inc. ("T.G.I.F."). Mr. Wiener is a director and officer of T.G.I.F. and owns,
directly and indirectly, approximately 18% of the outstanding shares of T.G.I.F.
As of December 31, 2003 and 2002, T.G.I.F. had amounts due from Mr. Wiener in
the amount of approximately $707,000. These amounts are due on demand and bear
interest at the prime rate. The Advisor received management fees of $4,000 and
$18,000 from T.G.I.F for the years ended December 31, 2003 and 2003,
respectively. Mr. Wiener received consulting and director's fees from T.G.I.F.
of $29,000 and $45,000 for 2003 and 2003, respectively.
As of December 31, 2003 and 2002 CII owed approximately $3,661,000 to
T.G.I.F. All advances between CII and T.G.I.F. are due on demand and bear
interest at the prime rate plus 1%.
CII - Grove Isle
----------------
In 1986, CII acquired from the Company the rights to develop the marina
at Grove Isle for a promissory note of $620,000 with interest payable at an
annual rate equal to the prime rate. The principal matures on January 2, 2006.
Interest payments are due each January 2. Because the Company consolidates CII,
the note payable and related interest income are eliminated in consolidation.
The Company holds a demand note due from CII bearing interest at the
prime rate plus 1% with an outstanding balance of $3,401,000 and $3,111,000 as
of December 31, 2003 and 2002, respectively. During 2003 and 2002, advances from
the Company to CII totaled $743,000 and $769,000, respectively. Repayments from
CII to the Company during 2003 and 2002 were $483,000 and $166,000,
respectively. Accrued and unpaid interest is capitalized and included in
9
advances. Because CII is a 95 %-owned consolidated subsidiary of the Company,
the note payable and related interest are eliminated in consolidation.
The Company's demand note from Grove Isle Yacht Club Associates (GIYCA,
a wholly-owned subsidiary of CII) was repaid during 2002.
Transco - South Bayshore Associates ("SBA")
-------------------------------------------
SBA is a joint venture in which Transco and the Company hold interests
of 25% and 75%, respectively. The major asset of SBA is a demand note from
Transco, bearing interest at the prime rate, with an outstanding balance of
approximately $439,000 in principal and interest as of December 31, 2003
compared to a balance of $447,000 as of December 31, 2002.
The Company holds a demand note from SBA bearing interest at the prime
rate plus 1% with an outstanding balance as of December 31, 2003 and 2002 of
approximately $1,100,000, in principal and accrued interest. No payments were
made in 2003 and 2002, and accrued and unpaid interest was not capitalized.
Because the Company consolidates SBA, the note payable and related interest
income is eliminated in consolidation.
Exercised Stock Options and Related Promissory Notes
----------------------------------------------------
On August 24, 2000, certain officers and directors of the Company
exercised all of their stock options and purchased a total of 70,000 shares of
the Company's common stock for $358,750. The company received $70,000 in cash
and $288,750 in promissory notes for the balance. These promissory notes bear
interest at 6.18% per annum payable quarterly in arrears on the first day of
January, April, July and October. The balance of the notes as of December 31,
2003 is $258,750. A payment of $30,000 was received in 2003. The outstanding
principal is due on August 23, 2005 and the notes are collateralized by the
stock.
APPROVAL OF RENEWAL
OF THE ADVISORY AGREEMENT
The Advisory Agreement. At the 2003 Annual Meeting of Shareholders, the
advisory agreement (the "Advisory Agreement") between the Company and HMG
Advisory Corp. (the "Adviser") was amended and renewed for a one-year term
expiring on December 31, 2004. On March 19, 2004, the Board of Directors
approved, subject to shareholder approval, the renewal of the Advisory Agreement
between the Company and the Adviser for a term commencing January 1, 2005, and
expiring December 31, 2005.
Under the terms of the Advisory Agreement, the renewal must be approved
by the holders of a majority of the Shares. If the shareholders approve the
Advisory Agreement, it will be amended and renewed for a one-year term.
The Adviser is majority owned by Mr. Wiener with the remaining shares
owned by certain officers, including Mr. Rothstein. The officers and directors
of the Adviser are as follows: Maurice Wiener, Chairman of the Board and Chief
Executive officer; Lawrence 1.
10
Rothstein, President, Treasurer, Secretary and Director; and Carlos Camarotti,
Vice President Finance and Assistant Secretary.
The following description of the Advisory Agreement contains a summary
of its material terms.
General Provisions. The Advisory Agreement is not assignable without
the consent of the unaffiliated Directors of the Company and the Adviser. The
Advisory Agreement provides that officers, directors, employees and agents of
the Adviser or of its affiliates may serve as Directors, officers or agents of
the Company.
Duties of Adviser. The Adviser in performing its duties under the
Advisory Agreement is at all times subject to the supervision of the Directors
of the Company and has only such authority as the Directors delegate to it as
their agent. The Adviser counsels and presents to the Company investments
consistent with the objectives of the Company and performs such research and
investigation as the Directors may request in connection with the policy
decisions as to the type and nature of investments to be made by the Company.
Such functions include evaluation of the desirability of acquisition, retention
and disposition of specific Company assets. The Adviser also is responsible for
the day-to-day investment operations of the Company and conducts relations with
mortgage loan brokers, originators and servicers, and determines whether
investments offered to the Company meet the requirements of the Company. The
Adviser provides executive and administrative personnel, office space and
services required in rendering such services to the Company. To the extent
required to perform its duties under the Advisory Agreement, the Adviser may
deposit into and disburse from bank accounts opened in its own name any money on
behalf of the Company under such terms and conditions as the Company may
approve.
Allocation of Expenses. Under the Advisory Agreement, the Adviser pays:
all salary and employment expenses of its own personnel and of the officers and
employees of the Company who are affiliates of the Adviser; all of the
administrative, rent and other office expenses (except those relating to a
separate office, if any, maintained by the Company) relating to its services as
Adviser; and travel (to the extent not paid by any party other than the Company
or the Adviser) and advertising expenses incurred in seeking investments for the
Company.
The Company is required to pay all expenses of the Company not assumed
by the Adviser, including, without limitation, the following: (a) the cost of
borrowed money; (b) taxes on income, real property and all other taxes
applicable to the Company; (c) legal, accounting, underwriting, brokerage,
transfer agent's, registrar's, indenture trustee's, listing, registration and
other fees, printing, 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 and expenses of advisors
and independent contractors, consultants, managers and other agents employed
directly by the Company; (e) expenses connected with the acquisition,
disposition or ownership of mortgages or real property or other investment
assets, including, to the extent not paid by any party other than the Company or
the Adviser, but not limited to, costs of foreclosure, costs of appraisal, legal
fees and other expenses for professional .services, maintenance, repairs and
improvement of property, and brokerage and sales commissions, and expenses of
11
maintaining and managing real property equity interests; (f) the expenses of
organizing or terminating the Company; (g) all insurance costs (including the
cost of Directors' liability insurance) incurred in connection with the
protection of the Company's property as required by the Directors; (h) expenses
connected with payment 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, including a dividend reinvestment plan, if any; (i) 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 checks,
certificates for securities and proxy solicitation materials and reports to
holders of the Company's securities; (j) to the extent not paid by borrowers
from the Company, the expenses of administering, processing and servicing
mortgage, development, construction and other loans; (k) the cost of any
accounting, statistical, or bookkeeping equipment necessary for the maintenance
of the books and records of the Company; (1) general legal, accounting and
auditing fees and expenses; (m) salaries and other employment expenses of the
personnel employed by the Company who are not affiliates of the Adviser, fees
and expenses incurred by the Directors, officers and employees in attending
Directors' meetings, and fees and travel and other expenses incurred by the
Directors and officers and employees of the Company who are not affiliates of
the Adviser.
Expenses relating to the grant of options to all officers and employees
of the Company under a plan approved by the shareholders of the Company are
borne by the Company.
Remuneration of the Adviser. For services rendered under the Advisory
Agreement that was in effect during 2003, the Adviser was entitled to receive as
compensation a monthly fee equal to the sum of (a) $75,000 (equivalent to
$900,000 per year) and (b) 20% of the amount of any unrefunded commitment fees
received by the Company with respect to mortgage loans and other commitments
which the Company was not required to fund and which expired within the next
preceding calendar month. In 2003 and 2002, the Adviser's annual regular
compensation amounted to approximately $977,000 and $660,000 in fees,
respectively, of which $900,000 represented regular compensation and
approximately $77,000 represented incentive compensation for 2003. There was no
incentive fee for 2002. The Adviser continues to receive the incentive
compensation outlined below.
The Advisory Agreement also provides that the Adviser shall receive
incentive compensation for each fiscal year of the Company equal to the sum of
(a) 10% of the realized capital gains (net of accumulated net realized capital
losses) and extraordinary nonrecurring items of income of the Company for such
year, and (b) 10% of the amount, if any, by which Net Profits of the Company
exceed 8% per annum of the Average Net Worth of the Company. "Net Profits" is
defined as the gross earned income of the Company for such period (exclusive of
gains and losses from the disposition of assets), minus all expenses other than
non-cash charges for depreciation, depletion and amortization and the incentive
compensation payable to the Adviser, and minus all amounts expended for mortgage
amortization on long-term mortgage indebtedness, excluding extraordinary and
balloon payments. "Average Net Worth" is defined as the average of the amount in
the shareholders' equity accounts on the books of the Company, plus the
accumulated non-cash reserves for depreciation, depletion and amortization shown
on the books of the Company, determined at the close of the last day of each
month for the computation period.
12
If and to the extent that the Company requests the Adviser, or any of
its directors, officers, or employees, to render services for the Company, other
than those required to be rendered by the Adviser under the Advisory Agreement,
such additional services are to be compensated separately on terms to be agreed
upon between such party and the Company from time to time, which terms must be
fair and reasonable and at least as favorable to the Company as similar
arrangements for comparable transactions of which the Company is aware with
organizations unaffiliated with the Adviser. The Adviser received $17,000 in
2002 and $30,000 in 2003, respectively, for managing certain of the Company's
affiliates.
Set forth below is the aggregate compensation paid to the Adviser
during the two fiscal years ended December 31, 2003 and 2002.
Form of Compensation Amount
-------------------- ------
2003 2002
---- ----
Regular Compensation $900,000 $660,000
20% of Unrefunded Commitment Fees -0- -0-
Incentive 77,000 -0-
Management Fees 17,000 30,000
------ ----------
Total $994,000 $690,000
Brokerage Fees Paid the Adviser. Under the Advisory Agreement, the
Adviser and its affiliates are prohibited from receiving from the Company any
brokerage or similar fees for the placement of mortgages or other investments
with the Company. However, the Adviser and its affiliates can receive normal
brokerage commissions from borrowers in connection with transactions involving
the Company, provided that such commissions are fully disclosed to all Directors
of the Company and the Directors approve of the transaction and that such
commissions (which to the extent paid by the borrower and retained by the
Adviser or its affiliates may reduce the yield to the Company) are fair and
reasonable and in accord with the prevailing rates in the locality in which the
transaction is consummated for the type of transaction involved. The Adviser and
its affiliates may, subject to the same terms and conditions, receive normal
brokerage commissions from sellers, buyers, lessees and other parties with whom
the Company engages in transactions.
Management of the Adviser. Set forth below are the names, offices with
the Adviser and principal occupations of the current executive officers and
directors of the Adviser.
Name and Offices
with the Adviser Principal Occupation
----------------- ---------------------
Maurice Wiener See "Election of Directors."
Chairman of the Board of
13
Directors and Chief Executive Officer
Lawrence Rothstein See "Election of Directors."
President, Treasurer, Secretary
and Director
Carlos Camarotti Vice President and Assistant
Secretary of the Adviser
Vice President-Finance and
Assistant Secretary
The Directors recommend that the shareholders approve the renewal of
the Advisory Agreement. An affirmative vote by the holders of a majority of the
Shares present in person or by proxy at the Annual Meeting of Shareholders is
required for approval of the Advisory Agreement.
14
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by Directors,
officers and employees of the Company personally, by telephone or by telegraph.
OTHER BUSINESS
The Board of Directors is not aware of any business other than those
items referred to above to be presented for action at the meeting. However,
should any other matters requiring a vote of the shareholders arise, the agents
named in the accompanying proxy will vote in accordance with their own best
judgment.
PROPOSALS FOR NEXT YEAR'S MEETING
Shareholder proposals intended to be presented in the Company's proxy
materials for the next Annual Meeting of Shareholders must be received by
February 22, 2005, and must satisfy the requirements of the proxy rules
promulgated by the Securities and Exchange Commission. A shareholder who wishes
to make a proposal at the next Annual Meeting of Shareholders without including
the proposal in the Company's proxy statement must notify the Company by May 7,
2005. If a shareholder fails to give notice by this date, then the persons named
as proxies in the proxies the Company solicits for the next Annual Meeting of
Shareholders will have discretionary authority to vote on the proposal.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders may communicate with the Board of Directors by sending
correspondence, in care of the Company's Secretary, HMG/Courtland Properties,
Inc., 1870 South Bayshore Drive, Coconut Grove, Florida 33131, with an
instruction to forward the communication to the particular director. The
Company's Secretary will promptly forward all such shareholder communications to
that director.
----------------------------------------
A copy of the Annual Report on Form 10-KSB for the year ended December
31, 2003 including financial statements and schedules thereto, filed with the
Securities and Exchange Commission, may be obtained by shareholders without
charge upon written request to: Secretary, HMG/Courtland Properties, Inc., 1870
South Bayshore Drive, Coconut Grove, Florida 33133
YOU CAN SAVE YOUR COMPANY ADDITIONAL EXPENSE BY SIGNING AND
RETURNING YOUR PROXY AS PROMPTLY AS POSSIBLE
---------------------------------------
15
FORM OF PROXY
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
HMG/COURTLAND PROPERTIES, INC.
July 16, 2004
Please Detach and Mail in the Envelope Provided
[X] Please mark your
votes as in this sample
For Withheld Nominees: M. Wiener 2. Approval of renewal of For Against Abstain
1. Election of L. Rothstein the Advisory Agreement
Directors [ ] [ ] W. Arader between Company [ ] [ ] [ ]
C. Stuntebeck and HMG Advisory Corp.
H. Comita
FOR except vote withheld from
the following nominees:
---------------------------
3. In their discretion, upon such other matters as may properly come before
the meeting or any adjournment thereof, all in accordance with the
Company's Proxy Statement, receipt of which is hereby acknowledged.
This proxy when properly executed will be voted in accordance with the above
instructions. In the absence of such specifications this proxy will be voted FOR
Proposals 1 and 2.
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
Signature(s) __________________________ Date ________________________
Note: (Please sign exactly as your name appears. Persons signing as executors,
trustees, guardians, etc. please so indicate when signing.)