HMG/COURTLAND
PROPERTIES, INC.
1870
South Bayshore Drive
Coconut
Grove, Florida 33133
(305)
854-6803
NOTICE
OF
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD JULY 22, 2005
|
TO
THE SHAREHOLDERS:
|
July
9, 2005
|
The
annual meeting of shareholders of HMG/Courtland Properties, Inc. (the "Company")
will be held at 10:30 A.M., on Friday, July 22, 2005, 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 23, 2005.
Enclosed
is a copy of the Company's Annual Report to Shareholders (Form 10-KSB) for
the
fiscal year ended December 31, 2004.
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 July 9, 2005. 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 23, 2005 are entitled
to
notice of and to vote at the meeting. On that date, there were 1,078,635
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 23, 2005, 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.
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 23, 2005
|
Name,
Age, Year First
Became
a Director or
Officer
of the
Company
|
|
Principal
Occupation or Employment
During
the Past Five Years Other
than
with the Company and Other
Information
|
|
Shares
Owned by
the
Nominee or
Members
of His
Family1
|
|
Additional
Shares in
which
the Nominee
has,
or Participates
in,
the Voting or
Investment
Power2
|
|
Total
Shares
and
Percent of
Class6
|
|
|
Maurice
Wiener 63-1974 Chairman of the Board of Directors, and Chief Executive
Officer
|
|
|
Chairman
of the Board and Chief Executive Officer of the Adviser; Executive
Trustee, Transco Realty Trust; Director, T.G.I.F. Texas, Inc.;
Chairman of
the Board and Chief Executive Officer of CGI
|
|
|
64,9004
|
|
|
541,8303
|
|
|
606,730
52
|
%
|
|
Lawrence
I. Rothstein 52-1983 Director, President, Treasurer and
Secretary
|
|
|
Director,
President, treasurer and Secretary of Adviser; Trustee and Vice-President
of Transco; Director, President, and Secretary of CGI; Vice-President
of
T.G.I.F. Texas, Inc.
|
|
|
50,0004
|
|
|
541,8303
|
|
|
591,830
50
|
%
|
|
Walter
G. Arader 86-1977 Director
|
|
|
President,
Walter Arader and Associates, inc. (financial and management
consultants).
|
|
|
15,4004
|
|
|
0
|
|
|
15,400
1
|
%
|
|
Clinton
Stuntebeck 67-2004 Director
|
|
|
Partner
Emeritus, Schnader Harrison Segal & Lewis, LLP (2004); Chairman,
Concordia Holdings, Ltd. (investment and business consulting) Senior
Partner, Schnader Harrison Segal & Lewis, LLP;
|
|
|
5,0004
|
|
|
0
|
|
|
5,000
*
|
|
|
Harvey
Comita 75-1992 Director
|
|
|
Business
Consultant; Trustee, Transco Realty Trust.
|
|
|
10,0004
|
|
|
477,3005
|
|
|
487,300
41
|
%
|
|
All
Directors and Executive Officers as a Group
|
|
|
|
|
|
155,8004
|
|
|
541,8303
|
|
|
717,230
61
|
%
|
_______________________________
* 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, 40,500; Mr. Rothstein, 25,000; 5,000 each to
Mr.
Arader, Mr. Comita and Mr. Stuntebeck; 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.
For
information concerning relationships of certain directors and officers of
the
Company to the Adviser, see "Approval of Renewal of the 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 3 meetings during 2004. 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. 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 6 times during
2004.
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 met once during 2004.
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 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 2006 Annual Meeting must submit their recommendation by
March 11, 2006, 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
the 2003 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
2004 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, 2004.
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 services 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 2005 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 2005, 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, 2004 and December 31, 2003 are as follows:
Fees
of Accountants
| |
|
Aggregate
Amount Billed
|
|
Share
of Total
|
|
| |
|
December
31, 2004
|
|
December
31, 2003
|
|
December
31, 2004
|
|
December
31, 2003
|
|
| |
|
|
|
|
|
|
|
|
|
|
Audit
Fees, including review of quarterly financial
statements
|
|
$ |
61,000 |
|
$ |
56,000 |
|
|
49 |
% |
|
71 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit-Related
Fees (costs associated with new accountant transition)
|
|
|
0
|
|
|
3,222
|
|
|
26
|
%
|
|
4
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Tax
Fees (consists of fees related to tax compliance and
planning) |
|
|
20,000 |
|
|
20,000 |
|
|
25 |
% |
|
25 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
Fees |
|
$ |
81,000 |
|
$ |
79,222 |
|
|
100 |
% |
|
100 |
% |
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 2004.
Outstanding
Option Grants
|
Name
of Executive Officer
|
Shares
Subject to
Grant
of Options(l)
|
|
Maurice
Wiener
Chairman
of the Board and
Chief
Executive Officer
|
40,500(1)
(2)
|
|
Lawrence
I. Rothstein
Director,
President and
Chief
Financial Officer
|
25,000(2)
|
|
TOTAL
|
65,500
|
| |
(1)
|
These
options were granted Mr. Wiener (28,500) 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. Mr.
Wiener’s options include 12,000 reload options granted at an exercise
price of $12.25 per share.
|
| |
(2)
|
Represents
42% and 26%, 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 2004, 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 the
majority 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. Mr. Weiner is the cousin of Bernard Lerner, Vice
President of the Company’s subsidiary, Courtland Investments, Inc.
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.
The
Adviser
As
of December 31, 2004 and 2003 the Adviser owed the Company approximately
$234,000 and $259,000, respectively. In March, 2005 and 2004, the Advisor
made
cash payments of $50,000 and $25,000, 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.
Pursuant
to a lease agreement dated December 1, 2004, the Adviser leases its executive
offices from CII. 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, 2004 and 2003, CGI owed the Company $303,000. In March, 2005,
CGI made a cash payment of $50,000 on amounts due the Company. 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, 2004 and 2003, 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
for
the year ended December 31, 2003 and no fees in 2004. Mr. Wiener received
consulting and director’s fees from T.G.I.F. of $40,800 and $29,000 for 2004 and
2003, respectively.
As
of December 31, 2004 and 2003 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%. All interest due has been paid.
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 $4,492,000 and $3,401,000 as of December
31,
2004 and 2003, 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.
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
$432,000 in principal and interest as of December 31, 2004 compared to a
balance
of $439,000 as of December 31, 2003.
The
Company holds a demand note from SBA bearing interest at the prime rate plus
1%
with an outstanding balance as of December 31, 2004 and 2003 of approximately
$1,100,000, in principal and accrued interest. No payments were made in 2004
and
2003, 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, 2004 was $258,750.
A
payment of $30,000 was received in 2003. In 2005, Mr. Wiener repaid his note
in
the amount of $135,000. The outstanding principal on the other notes is due
on
August 23, 2005 and the notes are collateralized by the common
stock.
APPROVAL
OF RENEWAL
OF
THE ADVISORY AGREEMENT
The
Advisory Agreement.
At the 2004 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, 2005.
On
March 30, 2005, 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, 2006, and expiring December
31,
2006.
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. 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 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
2004, the Adviser was entitled to receive as regular 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
2004 and 2003, the Adviser's annual regular compensation amounted to
approximately $1,227,000 and $977,000 in fees, respectively, of which $900,000
represented regular compensation and approximately $315,000 represented
incentive compensation for 2004. 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 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
2003 and $12,000 in 2004, respectively, for managing certain of the Company's
affiliates.
In
August, 2004, HMG Advisory Bayshore, Inc. (“HMGABS”) (a wholly-owned subsidiary
of the Advisor) was formed for the purpose of overseeing the Monty’s Restaurant
operations acquired in August, 2004. HMGABS will receive a management fee
of
$25,000 per year from Bayshore Rawbar, LLC. As of December 31, 2004, HMGABS
had
earned $8,333 in such management fees.
Set
forth below is the aggregate compensation paid to the Adviser during the
two
fiscal years ended December 31, 2004 and 2003.
|
Form
of Compensation
|
|
Amount
|
|
| |
|
2004
|
|
2003
|
|
|
Regular
Compensation
|
|
$
|
900,000
|
|
$
|
900,000
|
|
|
20%
of Unrefunded Commitment Fees
|
|
|
-0-
|
|
|
-0-
|
|
|
Incentive
|
|
|
315,000
|
|
|
77,000
|
|
|
Management
Fees
|
|
|
12,000
|
|
|
17,000
|
|
|
Total
|
|
$
|
1,227,000
|
|
$
|
994,000
|
|
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
Chairman
of the Board of
Directors
and Chief Executive Officer
|
See
"Election of Directors."
|
|
Lawrence
Rothstein
President,
Treasurer, Secretary
and
Director
|
See
"Election of Directors."
|
|
Carlos
Camarotti
Vice
President-Finance and
Assistant
Secretary
|
Vice
President and Assistant
Secretary
of the Adviser
|
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.
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 March 11, 2006, 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 24, 2006. 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.
HOUSEHOLDING
INFORMATION
The
Commission adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for proxy statements and annual
reports with respect to two or more shareholders sharing the same address
by
delivering a single proxy statement and annual report addressed to those
shareholders. This process, which is commonly referred to as “householding,”
potentially means extra convenience for shareholders and cost savings for
companies.
This
year, the Company and a number of brokers with accountholders who are
shareholders of the Company will be “householding” the Company’s proxy materials
and annual report. As indicated in the notice previously provided by the
Company
and these brokers to the Company’s shareholders, a single proxy statement and
annual report will be delivered to multiple shareholders sharing an address
unless contrary instructions have been received from an affected shareholder.
Once you have received notice from the Company or your broker that it or
they
will be “householding” communications to your address, “householding” will
continue until you are
notified
otherwise or until you revoke your consent. If, at any time, you no longer
wish
to participate in “householding” and would prefer to receive a separate proxy
statement or annual report, please contact the Company at the address or
telephone number appearing on the first page of this proxy statement, directing
your request to the attention of the Secretary, or notify your
broker.
Shareholders
who currently receive multiple copies of the proxy statement or annual report
at
their address and would like to request “householding” of their communications
should contact the Company at the address appearing on the first page of
this
proxy statement, directing the request to the attention of the Secretary,
or
should contact their broker.
________________________________________
A
copy of the Annual Report on Form 10-KSB for the year ended December 31,
2004
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
_______________________________________