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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] 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)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(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):
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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.
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HMG/COURTLAND PROPERTIES, INC.
1870 South Bayshore Drive
Coconut Grove, Florida 33133
_______________________________________
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 25, 2003
______________________________________
June 27, 2003
TO THE SHAREHOLDERS:
The annual meeting of shareholders of HMG/Courtland Properties, Inc.
(the "Company") will be held at 10:30 A.M., on Friday, July 25, 2003, 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 13, 2003.
Enclosed is a copy of the Company's Annual Report to Shareholders (Form
10-KSB) for the fiscal year ended December 31, 2002.
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 27, 2003. 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 13, 2003
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 13, 2003, 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 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 13, 2003
---------------------------------
Principal Occupation or Additional Shares in
Name, Age, Year First Employment During the Past Shares Owned by which the Nominee
Became a Director or Five Years Other than with the Nominee or has, or Participates Total Shares and
Officer of the the Company and Other Members of His in, the Voting or Percent of Class
Company Information Family (1) Investment Power(2) (6)
--------------------- -------------------------- -------------- -------------------- ----------------
Maurice Wiener Chairman of the Board 65,100(4) 541,830(3) 606,930
61-1974 and Chief Executive Officer 52%
Chairman of the Board of the Adviser; Executive
of Directors, and Trustee, Transco Realty
Chief Executive Trust; Director, T.G.I.F.
Officer Texas, Inc.; Chairman of the
Board and Chief Executive
Officer of CGI
Lawrence I. Rothstein Director, President, 50,000(4) 541,830(3) 591,830
50-1983 Treasurer and Secretary of 50%
Director, President, Adviser; Trustee and
Treasurer and Vice-President of Transco;
Secretary Director, President, and
Secretary of CGI;
Vice-President of T.G.I.F.
Texas, Inc.
Walter G. Arader President, Arader, Herzig 15,400(4) 0 15,400
84-1977 and Associates, inc. 1%
Director (financial and management
consultants); Director,
United Video, Inc.; Former
Secretary of Commerce,
Commonwealth of Pennsylvania
2
John B. Bailey Real estate consultant; 12,100(4) 0 12,100
76-1971 Retired CEO, Landauer *
Director Associates, Inc. (real
estate consultants)
(1977-1988)
Harvey Comita Business Consultant; 10,000(4) 477,300(5) 487,300
73-1992 Trustee, Transco Realty 41%
Director Trust; President and
Director of Pan-Optics, Inc.
(1971-1991); Director of
Mediq, Incorporated
(1981-1991)
All Directors and 170,600(4) 541,830(3) 712,430
Executive Officers as 61%
a 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, Mr. Bailey, 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.
3
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 2002. During this
period all of the Directors of the Company attended at least 75% of the total
number of meetings of the Board and any Committee of which they were a member.
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 or a Nominating
Committee. Messrs. Arader and Comita serve as members of the Audit Committee.
The Audit Committee met three times during 2002.
Messrs. Arader, Bailey 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 2002.
REPORT OF THE AUDIT COMMITTEE
The primary purpose of the Audit Committee is to assist the Board in
monitoring the in 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 Board,
in its business judgment, has determined that all members of the Committee are
"independent," as required by applicable listing standards of the American Stock
Exchange. The Committee operates pursuant to a charter that was last amended by
the Board on June 16, 2003. A copy of the current charter is attached to this
Proxy Statement as Annex A.
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 2002 fiscal year, BDO Seidman LLP, were
responsible for performing an independent audit of the consolidated financial
statements in accordance with generally accepted auditing standards.
4
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, 2002.
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 BDO Seidman LLP is in fact "independent."
Members of the Audit Committee
Walter G. Arader
Harvey Comita
INDEPENDENT PUBLIC ACCOUNTANTS
BDO Seidman LLP has served as our independent accounting firm since
January 1, 1995. In performing its oversight role, the Audit Committee reviewed
whether to retain BDO Seidman LLP as our independent accounting firm for the
2003 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 BDO Seidman LLP as the Company's independent auditors for 2003,
and the Board has concurred in its recommendation. A representative of BDO
Seidman LLP is not expected to be present at the Annual Meeting.
The aggregate fees billed by BDO Seidman LLP to the Company for the
year ended December 31, 2002 are as follows:
5
Fees of Accountants
Audit Fees, including review of quarterly financial statements.............$87,000
Financial Information Systems Design and Implementation Fee.....................-0-
All Other Fees
Audit Related..............................................................-0-
Other (consists of fees related to tax compliance and planning).........45,000
Total All Other Fees...........................................45,000
Total Fees............................................................$132,000
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 2001, the Stock
Option Committee granted to each director an option to purchase 5,000 shares. No
options were granted or exercised during 2002.
Outstanding Option Grants
-------------------------
Shares Subject to
Name of Executive Officer Grant of Options(1)
------------------------ -------------------
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
6
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 2002, its officers and
directors of the Company complied with all applicable Section 16(a) filing
requirements.
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. ("CGI")
--------------------------------
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.
7
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.
The Adviser
-----------
As of December 31, 2002 and 2001 the Adviser owed the Company
approximately $648,000 and $191,000, respectively. In March 2003 a cash payment
of $500,000 was received from the Adviser which brought the balance due from the
Adviser down to approximately $259,000. Such sum bears interest at the prime
rate plus 1% and is 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, 2002 and 2001, CGI owed the Company $317,000 and
$300,000, respectively. In March 2003 a cash payment of approximately $17,000
was received from CGI which brought the balance due from CGI down to $300,000.
Such sums 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, 2002 and 2001, T.G.I.F. had amounts due from Mr.
Wiener in the amount of approximately $707,000 and $718,000, respectively. These
amounts are due on demand and bear interest at the prime rate. Also, T.G.I.F.
owns 10,000 shares of the Company. The Adviser received a management fee of
$18,000 per year from T.G.I.F for the years ended December 31, 2002 and 2001.
As of December 31, 2002 and 2001 CII owed approximately $3.7 million
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%.
8
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 $3,111,000 and $2,508,000 as
of December 31, 2002 and 2001, respectively. During 2002 and 2001, advances from
the Company to CII totaled $769,000 and $1,553,000, respectively. Repayments
from CII to the Company during 2002 and 2001 were $166,000 and $400,000,
respectively. Accrued and unpaid interest is capitalized and included in
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. As of December 31,
2001 the outstanding balance was $243,000. Accrued and unpaid interest of
approximately $11,000 was also repaid by GIYCA. During 2001 advances from the
Company to GIYCA totaled $2,000. Repayments from GIYCA to the Company during
2002 and 2001 were $243,000 and $897,000, respectively.
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 $447,000 in principal and interest as of December 31, 2002
compared to a balance of $453,000 as of December 31, 2001.
The Company holds a demand note from SBA bearing interest at the prime
rate plus 1% with an outstanding balance as of December 31, 2002 and 2001 of
approximately $1,100,000, in principal and accrued interest. No payments were
made in 2002 and 2001, 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 outstanding principal is due on August 23,
2005 and the notes are collateralized by the stock.
9
APPROVAL OF RENEWAL
OF THE ADVISORY AGREEMENT
The Advisory Agreement. At the 2002 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, 2003. On April 11, 2003, 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, 2004, and
expiring December 31, 2004.
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 I. 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 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
10
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
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 2002, the Adviser was entitled to receive as
regular compensation a monthly fee equal to the sum of (a) $55,000 (equivalent
to $660,000 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 2002 and 2001, the Adviser's annual
regular compensation amounted to $660,000.
On September 20, 2002, shareholders approved (effective January 1,
2003) the amendment and renewal of the Advisory Agreement, and increased the
Adviser's regular compensation to $75,000 per month, or $900,000 per year, and
continued the additional fee of 20% of the amount of any unrefunded commitment
fees received by the Company as outlined
11
above. 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.
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 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 $30,000 in 2000 and 2001 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, 2001 and 2002.
Form of Compensation Amount
-------------------- ------
2002 2001
---- ----
Regular Compensation $660,000 $ 660,000
20% of Unrefunded Commitment Fees -0- -0-
Incentive -0- 264,000
Management Fees 30,000 30,000
-------- --------
Total $690,000 $954,000
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
12
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 Directors
and Chief Executive Officer
Lawrence Rothstein See "Election of Directors."
President, Treasurer, Secretary and
Director
Carlos Camarotti Vice President and Assistant
Vice President-Finance and Secretary of the Adviser
Assistant Secretary
The Directors recommend that the shareholders approve the renewal of
the 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 Agreement.
13
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.
In order for proposals of shareholders to be considered for inclusion
in the proxy materials for presentation at the 2004 annual meeting of
shareholders, such proposals must be received by the Company no later than March
1, 2004.
______________________________
A copy of the Annual Report on Form 10-KSB for the year ended December
31, 2002, 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
14
Annex A
HMG/COURTLAND PROPERTIES, INC.
AUDIT COMMITTEE CHARTER
(Amended and Restated June 16, 2003)
The Board of Directors ("Board") of HMG/Courtland Properties, Inc.
("Corporation") has established an Audit Committee with the purposes, authority,
responsibilities and specific duties described below.
I. Purpose
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Corporation, (2)
the independent auditor's qualifications and independence, (3) the performance
of the Corporation's independent auditors, and (4) the compliance by the
Corporation with legal and regulatory requirements.
The Audit Committee shall prepare the report required by the rules of
the Securities and Exchange
Commission ("Commission") to be included in the Corporation's annual proxy
statement.
II. Committee Membership
The Audit Committee shall consist of no fewer than two members. The
members of the Audit Committee shall meet the independence and experience
requirements of the American Stock Exchange, Section 10A(m)(3) of the Securities
Exchange Act of 1934 ("Exchange Act") and the rules and regulations of the
Commission. At least one member of the Audit Committee shall be a financial
expert as defined by the Commission. Audit Committee members shall not
simultaneously serve on the audit committees of more than two other public
companies unless the Board has determined that such service would not impair the
ability of such member to effectively serve on the Audit Committee.
The members of the Audit Committee shall be appointed, and may be
removed, by the Board.
III. Meetings
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall periodically meet with
management and the independent auditor in separate executive sessions. The Audit
Committee may request any officer or employee of the Corporation or the
Corporation's outside counsel or independent auditor to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee.
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IV. Committee Authority and Responsibilities
The Audit Committee shall have the sole authority to appoint or replace
the independent auditor. The Audit Committee shall be directly responsible for
the compensation and oversight of the work of the independent auditor (including
resolution of disagreements between management and the independent auditor
regarding financial reporting) for the purpose of preparing or issuing an audit
report or related work. The independent auditor shall report directly to the
Audit Committee.
The Audit Committee shall preapprove all auditing services and
permitted non-audit services (including the fees and terms thereof) to be
performed for the Corporation by its independent auditor, subject to the de
minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of
the Exchange Act which are approved by the Audit Committee prior to the
completion of the audit. The Audit Committee may form and delegate authority to
subcommittees consisting of one or more members when appropriate, including the
authority to grant preapprovals of audit and permitted non-audit services,
provided that decisions of such subcommittee to grant preapprovals shall be
presented to the full Audit Committee at its next scheduled meeting.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain independent legal, accounting or other
advisors. The Corporation shall provide for appropriate funding, as determined
by the Audit committee, for payment of compensation to the independent auditor
for the purpose of rendering or issuing an audit report and to any advisors
employed by the Audit Committee.
The Audit Committee shall make regular reports to the Board, review and
reassess the adequacy of this Charter annually and recommend any proposed
changes to the Board for approval and annually review the Audit Committee's own
performance.
The Audit Committee shall also:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor the
annual audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Corporation's Form 10-KSB.
2. Review and discuss with management and the independent auditor the
Corporation's quarterly financial statements prior to the filing of its Form
10-QSB, including the results of the independent auditor's review of the
quarterly financial statements and disclosures made in management's discussion
and analysis.
3. Discuss with management and the independent auditor any
significant financial reporting issues and judgments made in connection
with the preparation of the Corporation's financial statements, including any
significant changes in the Corporation's
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selection or application of accounting principles, any major issues as to the
adequacy of the Corporation's internal controls and any special steps adopted in
light of material control deficiencies.
4. Review and discuss reports from the independent auditors on:
(a) All critical accounting policies and practices to be used.
(b) All alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the independent
auditor.
(c) Other material written communications between the independent
auditor and management, such as any management letter or schedule of
past adjustments.
5. Discuss with management the Corporation's earnings press
releases, including the use of "pro forma" or "adjusted" non-GAAP
information, as well as financial information and earnings guidance
provided to analysts and rating agencies. Such discussion may be done
generally (consisting of discussing the types of information to be
disclosed and the types of presentations to be made).
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Corporation's financial statements.
7. Discuss with management the Corporation's major financial risk
exposures and the steps management has taken to monitor and control such
exposures, including the Corporation's risk assessment and risk management
policies.
8. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit, including any difficulties encountered in the course
of the audit work, any restrictions on the scope of activities or access
to requested information, and any significant disagreements with
management.
9. Discuss with management and the independent auditor whether there
were any accounting adjustments that were proposed by the independent
auditor but were determined by management as being immaterial or otherwise
not necessary.
10. Review any disclosures made to the Audit Committee by the
Corporation's CEO and CFO during their certification process for the Form
10-KSB and Form 10-QSB about any significant deficiencies in the design or
operation of internal controls or material weaknesses therein and any
fraud involving management or other employees who have a significant role
in the Corporation's internal controls.
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Oversight of the Corporation's Relationship with the Independent Auditor
11. Review and evaluate the lead partner of the independent auditor
team.
12. Obtain and review a report from the independent auditor at least
annually regarding (a) the independent auditor's internal quality-control
review procedures, (b) any material issues raised by the most recent
internal quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional authorities
within the preceding five years respecting one or more independent audits
carried out by the firm, (c) any steps taken to deal with any such issues,
and (d) all relationships between the independent auditor and the
Corporation. Evaluate the qualifications, performance and independence of
the independent auditor, including considering whether the auditor's
quality controls are adequate and the provision of permitted non-audit
services is compatible with maintaining the auditor's independence, and
taking into account the opinions of management. The Audit Committee shall
present its conclusions with respect to the independent auditor to the
Board.
13. Ensure the rotation of the lead (or coordinating) audit partner
having primary responsibility for the audit and the audit partner
responsible for reviewing the audit as required by law. Consider whether,
in order to assure continuing auditor independence, it is appropriate to
adopt a policy of rotating the independent auditing firm on a regular
basis.
14. Establish policies for the Corporation's hiring of employees or
former employees of the independent auditor who participated in any
capacity in the audit of the Corporation.
15. Discuss with the independent auditor any issues on which the
auditor's national office was consulted by the Corporation's audit team.
16. Meet with the independent auditor prior to the audit to discuss
the planning and staffing of the audit.
Compliance Oversight Responsibilities
17. Obtain from the independent auditor assurance that the audit:
(a) contains procedures designed to provide reasonable assurances
of detecting illegal acts that would have a direct and
material effect on the financial statements;
(b) contains procedures designed to identify related party
transactions that are material to the financial statements or
otherwise require financial statement disclosure; and
(c) includes an evaluation of the Corporation's ability to
continue as a going concern during the ensuing fiscal year.
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18. Obtain reports from management and the independent auditor
relating to the conformity by the Corporation and its subsidiary/foreign
affiliated entities with applicable legal requirements and the
Corporation's Code of Business Conduct and Ethics. Review reports and
disclosures of affiliated party transactions. Advise the Board with
respect to the Corporation's policies and procedures regarding compliance
with applicable laws and regulations and with the Corporation's Code of
Business Conduct and Ethics.
19. Establish procedures for the receipt, retention and treatment of
complaints received by the Corporation regarding accounting, internal
accounting controls or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
20. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies, any employee
complaints and any published reports which raise material issues regarding
the Corporation's financial statements or accounting policies.
21. Discuss with the Corporation's General Counsel or outside
counsel legal matters that may have a material impact on the financial
statements or the Corporation's compliance policies.
V. Limitations of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements and
disclosures are complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and regulations. Nor is it
the duty of the Audit Committee to conduct investigations or to assure
compliance with laws and regulations and the Corporation's internal policies.
These are the responsibilities of management and the independent auditor.
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