Edgar Filing: HMG COURTLAND PROPERTIES INC

U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB

[X] Annual Report under Section 13 or 15(d) of the
Securities and Exchange Act of 1934

For the fiscal year ended December 31, 2003
-----------------

[ ] Transition Report under Section 13 or 15(d) of the
Securities and Exchange Act of 1934

Commission file number: 1-7865

HMG/COURTLAND PROPERTIES, INC.
------------------------------
(Name of Small Business issuer in its Charter)

Delaware 59-1914299
-------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

1870 S. Bayshore Drive, Coconut Grove, Florida 33133
-------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code: (305) 854-6803

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of class on which registered:
-------------- --------------------
Common Stock - Par value $1.00 per share American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this form 10-KSB. [X]

DOCUMENTS INCORPORATED BY REFERENCE: See Item 13, for items incorporated by
reference into this Annual Report on Form 10KSB. Exhibit Index: Page No.: 54

The issuer's revenues for its most recent fiscal year were $3,285,965

The aggregate market value of the voting stock held by non-affiliates of the
Registrant (excludes shares of voting stock held by directors, executive
officers and beneficial owners of more than 10% of the Registrant's voting
stock; however, this does not constitute an admission that any such holder is an

"affiliate" for any purpose) based on the closing price of the stock as traded
on the American Stock Exchange on March 4, 2004 was $4,530,874.The number of
shares outstanding of the issuer's common stock, $1 par value as of the latest
practicable date: 1,089,135 shares of common stock, $1 par value, as of March 4,
2004.

TABLE OF CONTENTS

PART I PAGE

Item 1. Description of Business 3

Item 2. Description of Property 6

Item 3. Legal Proceedings 8

Item 4. Submission of Matters to a Vote of Security Holders 8

PART II

Item 5. Market Price for Common Equity and Related Stockholder Matters
and Purchases of Equity Securities 9

Item 6. Management's Discussion and Analysis or Plan of Operation 10

Item 7. Financial Statements 17

Item 8. Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure 43

Item 8A. Controls and Procedures 43

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 1b (a) of the Exchange Act 44

Item 10. Executive Compensation 44

Item 11. Security Ownership of Certain Beneficial Owners and Management 46

Item 12. Certain Relationships and Related Transactions 47

Item 13. Exhibits and Reports on Form 8-K 49

Item14. Principal Accountants Fees and Services 49

SIGNATURES 51

Part I.

Cautionary Statement. This Annual Report contains certain statements relating to
future results of the Company that are considered "forward-looking statements"
within the meaning of the Private Litigation Reform Act of 1995. Actual results
may differ materially from those expressed or implied as a result of certain
risks and uncertainties, including, but not limited to, changes in political and
economic conditions; interest rate fluctuation; competitive pricing pressures
within the Company's market; equity and fixed income market fluctuation;
technological change; changes in law; changes in fiscal, monetary, regulatory
and tax policies; monetary fluctuations as well as other risks and uncertainties
detailed elsewhere in this Annual Report or from time-to-time in the filings of
the Company with the Securities and Exchange Commission. Such forward-looking
statements speak only as of the date on which such statements are made, and the
Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such statement is made
or to reflect the occurrence of unanticipated events.

Item 1. Description of Business.
-------------------------------
HMG/Courtland Properties, Inc. ("HMG"), organized in 1972, is a Delaware
corporation and qualifies for taxation as a real estate investment trust
("REIT") under the Internal Revenue Code. HMG and its subsidiaries (the
"Company") business is the ownership and management of income-producing
commercial properties and its management considers other investments if such
investments offer growth or profit potential. Properties owned by the Company
include a hotel, private club and marina located in Coconut Grove, Florida; a
shopping center in Jacksonville, Florida; and undeveloped land in Houston,
Texas, Rhode Island and Vermont. The Company acquires its real estate and other
investments utilizing available cash, trading securities or borrowing funds. The
Company has invested its available cash in income-producing debt and equity
instruments, including but not limited to those in real estate related
activities. The Company's primary source of recurring operating revenue is from
rental and related properties.

Reference is made to Item 12. Certain Relationships and Related Transactions for
discussion of the Company's organizational structure and related party
transactions.

Other investments.
-----------------
The Company's other investments consist of equity interests in various privately
held entities, primarily limited partnerships whose purpose is to invest venture
capital funds in growth-oriented enterprises which may include investments in
commercial real estate. As of December 31, 2003, the Company has committed to
invest approximately $11.1 million in these types of investments, of which
approximately $9.5 million has been funded. Of the total amount committed,
approximately $1.6 million is in real estate related investments and the
remaining investments are in other private entities which invest in diversified
growth-oriented enterprises.

Other investments give rise to exposure resulting from the volatility in capital
markets. The Company mitigates its risks by diversifying its investment
portfolio. Information with respect to the amounts and types of other
investments including the nature of the declines in value is set forth in Note 4
of the Notes to Consolidated Financial Statements.

Investments in marketable securities:

The Company invests idle cash in income producing instruments, including equity
and debt securities issued primarily by large capital companies or government
agencies with readily determinable fair values in varying industries including
real estate investment trusts and mutual funds focusing in commercial real
estate activities. All of the Company's marketable securities investments are in
companies listed on major national stock markets, however the overall investment
portfolio and some of the Company's investment strategies could be viewed as
risky and the market values of the portfolio may be subject to fluctuations.

The Company may realize gains and losses in its overall investment portfolio
from time to time to take advantage of market conditions and/or manage the
portfolio's resources and the Company's tax liability. The Company may utilize
margin for its marketable securities purchases through the use of standard
margin agreements with national brokerage firms. The use of available leverage
is guided by the business judgment of management. The Company may also use
options and futures to hedge concentrated stock positions and index futures to
hedge against market risk and enhance the performance of the Company's portfolio
while reducing the overall portfolio's risk and volatility.

Consistent with the Company's overall investment objectives and activities
management classifies all marketable securities as being held in a trading
portfolio. Accordingly, all unrealized gains and losses on the Company's
investments in marketable securities were recorded in the statement of
operations.

Marketable securities are stated at market value as determined by the most
recently traded price of each security at the balance sheet date. As of December
31, 2003 and 2002, the market value of investments in marketable securities
amounted to approximately $4.9 million and $3.7 million, respectively.

Information with respect to the amounts and types of investments in marketable
securities is set forth in Note 3 of the Notes to Consolidated Financial
Statements.

Investment in affiliate:
------------------------
Information with respect to the investment in affiliate is set forth in Note 5
of the Notes to Consolidated Financial Statements.

Insurance, Environmental Matters and Other.
-------------------------------------------
In the opinion of management, all significant assets of the Company are
adequately covered by insurance and the cost and effects of complying with
environmental laws do not have a material impact on the Company's operations.

For the years ended December 31, 2003 and 2002 the Company elected not to renew
its windstorm insurance coverage for the boat slips at the Grove Isle marina. At
the time Management believed that the cost of the insurance coverage was
overvalued in comparison with any benefit obtained from reduced risk.
Furthermore, the structural stability and location of the slips (concrete
pilings located in an inland bay) may mitigate the damage from windstorm. As a
result of a more favorable insurance market, effective January 1, 2004 the
Company was able to obtain windstorm coverage for the marina at a cost more
favorable than previously available, and has renewed its windstorm coverage.

Competition.
-------------
The Company competes for suitable opportunities for real estate investments with
other real estate investment trusts, foreign investors, pension funds, insurance
companies and other investors. The Company also competes with other real estate
investors and borrowers for available sources of financing.

In addition, to the extent the Company leases properties it must compete for
tenants with other lessors offering similar facilities. Tenants are sought by
providing modern, well-maintained facilities at competitive rentals. The Company
has attempted to facilitate successful leasing of its properties by investing in
facilities that have been developed according to the specifications of tenants
and special local needs.

Employees.
----------
The Company has one employee who is an officer of Courtland Investments (a
95%-owned consolidated subsidiary). This employee assumed the responsibilities
of the prior project manager of one of the Company's properties. The Company has
no employees other than officers who are not compensated for their services as
such in accordance with its Advisory Agreement (the "Agreement") with the
Advisor. Reference is made to Item 12. Certain Relationships and Related
Transactions

Terms of the Agreement. Under the terms of the Agreement, the Adviser serves as
the Company's investment adviser and, under the supervision of the directors of
the Company, administers the day-to-day operations of the Company. All officers
of the Company, other than the project manager described above (who is not
employed by the Adviser), who are officers of the Adviser are compensated solely
by the Adviser for their services. The Agreement is renewable annually upon the
approval of a majority of the directors of the Company who are not affiliated
with the Adviser and a majority of the Company's shareholders. The contract may
be terminated at any time on 120 days written notice by the Adviser or upon 60
days written notice by a majority of the unaffiliated directors of the Company
or the holders of a majority of the Company's outstanding shares.

On July 25, 2003, the shareholders approved the renewal of the Advisory
Agreement between the Company and the Adviser for a term commencing January 1,
2004, and expiring December 31, 2004.

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.

Advisory Fees. For the years ended December 31, 2003 and 2002, the Company and
its subsidiaries paid the Adviser approximately $977,000 and $660,000 in fees,
respectively, of which $900,000 represented regular compensation and
approximately $77,000 represented incentive compensation for 2003. There was no
incentive fee for 2002. The Adviser is also the manager for certain of the
Company's affiliates and received management fees of approximately $17,000 and
$30,000 in 2003 and 2002, respectively, for such services.

Item 2. Description of Property.
-------------------------------

Grove Isle Hotel, Club and Marina (Coconut Grove, Florida). A 50 room hotel and
private club facility ("the facility") located on 7 acres of a private island in
Coconut Grove, Florida, known as "Grove Isle". In addition to the 50 hotel
rooms, the facility includes public space, tennis courts, and an 85-yacht slip
marina.

In November 1996, the Company entered into a long-term lease and a Master
Agreement with Westgroup Grove Isle Associates, Ltd. ("Westgroup"), an affiliate
of Noble House Resorts, Inc. which is a national operator of hotels and resorts.
The Master Agreement, among other things, transferred the operations of the
Grove Isle hotel and club to Westgroup.

The initial term of the lease with Westgroup is ten years and calls for annual
net base rent, as amended in 1999, of $918,400, plus real estate taxes and
property insurance, payable in monthly installments. In addition to the base
rent, Westgroup also pays the Company participation rent consisting of a portion
of Westgroup's operating surplus. Participation rent is due at end of each lease
year. There has been no participation rent since the inception of the lease. The
1999 lease amendment also increased base rent commencing January 1, 2002 in
accordance with changes in the Consumer Price Index ("CPI"). Base rent for 2003
was $986,986, increasing to $1,003,157 in 2004. Concurrently, participation rent
will be reduced by the amount by which base rent increases solely as a result of
CPI increases for the lease year.

The facility is encumbered by a mortgage note payable with an outstanding
balance of approximately $3.4 million and $3.8 million as of December 31, 2003
and 2002, respectively. This loan bears interest at 6.86% until September 2004,
then adjusted every three years thereafter to 2.9% plus the current index value
of the weekly average yield on U.S. Treasury securities. This loan matures in
September 2010.

In 1997 and in conjunction with the aforementioned agreements, the Company
advanced $500,000 to the principal owner of Noble House Resorts, Inc. and
received a promissory note bearing interest at 8% per annum with interest
payments due quarterly beginning on July 1, 1997 with all principal due at
maturity in 2006. All interest payments due have been received.

As of December 31, 2003, 8 of the 85 yacht slips are owned by the Company and
the other 77 are owned by unrelated individuals or their entities. During 2003,
the Company sold four yacht slips for a total sales price of approximately
$588,000. The net gain to the Company was approximately $356,000. The Company
operates and maintains all aspects of the marina at Grove Isle in exchange for
an annual maintenance fee from the slip owners to cover operational expenses. In
addition the Company rents the unsold slips to boat owners on short term basis.

Fashion Square Shopping Center (Jacksonville, Florida). A shopping center
located on approximately 11 acres in Jacksonville, Florida, presently consisting
of five nationally franchised operating restaurants and a retail site. Four of
the five restaurant operators are leasing the property from the Company and the
fifth restaurant operator purchased its site from the Company in 1995. The
retail site is owned and operated by an unrelated party. This property is
encumbered by two mortgage loans due to a bank totaling $650,000 which bear
interest at a fixed rate of 7.5% and calls for monthly interest-only payments
with all principal due in November 2004.

The tenants of the four leased restaurants are described below:

Restaurant #1:
--------------
The tenant is an operator of a 7,000 square foot restaurant on a one
acre parcel covered by a ground lease which commenced in March 1994.
The initial term of the lease is ten years and provides for base rent
of $60,000 per year with 1% increases each subsequent year. In February
2004 the tenant-operator of this restaurant filed a voluntary petition
for reorganization relief under the Chapter 11 U.S. Bankruptcy Code and
is current with all terms of the lease agreement.

Restaurant #2:
--------------
The tenant is an operator of a 5,300 square foot restaurant on a 3/4
acre parcel covered by a ground lease which commenced in November 1995.
The initial term of the lease is twenty years and provides for base
rent of $60,000 per year with a 12.5% increase every five years.

Restaurant #3:
--------------
The tenant is an operator of a 6,242 square foot restaurant which was
constructed in 1996. The initial term of the lease is ten years which
commenced in December 1996 and provides for annual base rent of $80,000
for years one through five and $88,000 for years six through ten. The
lease also calls for percentage rent based on sales. In 2003 the
partnership received approximately $2,000 in percentage rent. No
percentage rent was due in 2002. The lease also provides three five
year renewal options for years eleven through twenty-five with
escalating base rent.

Restaurant #4:
--------------
The tenant is an operator of a 4,000 square foot restaurant which was
constructed in 2001. The Company contributed $200,000 in improvements
towards the construction of the restaurant building. The initial term
of the lease is ten years which commenced in September 2001 and
provides for base rent of $98,000 per year with increases of

approximately 4% each subsequent year. In September 2003 the tenant
operating this restaurant ceased operations. As of March 2004 all
payments required by the lease agreement are current.

Land held for development (Texas and Rhode Island):
---------------------------------------------------
As of December 31, 2003, the Company owns approximately 7 acres of vacant land
held for development located in Houston, Texas. In September 2003, the Company
sold approximately 5 acres of this land for $1.2 million recognizing a net gain
of approximately $281,000.

Additionally the Company owns approximately 50 acres of vacant land held for
development located in Rhode Island.

Retail stores (New York and Vermont):
-------------------------------------
The Company owns 2 retail store locations, one in Kingston, New York and the
other in Montpelier, Vermont. The Kingston property is leased through July 2006
and calls for annual base rent of approximately $52,000 with a renewal option
after three years with adjustments for inflation. The Montpelier property is
vacant and held for development or sale.

The Kingston, NY retail store described above is owned by a joint venture of
which the Company is an approximate 70% owner. The 30% minority partner is NAF
Associates. Reference is made to Item 12. Certain Relationships and Related
Transactions, HMG Fieber Associates.

Executive offices (Coconut Grove, Florida):
-------------------------------------------
The principal executive offices of the Company and the Adviser are located at
1870 South Bayshore Drive, Coconut Grove, Florida, 33133, in premises owned by
the Company and leased to the Adviser pursuant to a lease agreement dated
December 1, 1999. The lease provides for base rent of $48,000 per year payable
in equal monthly installments during the initial five year term of the lease.
Additionally, the tenant pays the property taxes, insurance, utility, and
maintenance and security expenses relating to the leased premises. This property
is encumbered by mortgage loan due to a bank of approximately $361,000. This
loan bears interest at a fixed rate of 4.75% through maturity and calls for
monthly principal and interest payments with all principal due in August 2007.

The Company regularly evaluates potential real estate acquisitions for future
investment or development and would utilize funds currently available or from
other resources to implement its strategy.

Item 3. Legal Proceedings
-------------------------

None.

Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------
On July 25, 2003, the shareholders approved the renewal of the Advisory
Agreement between the Company and the Adviser for a term commencing January 1,
2004, and expiring December 31, 2004 (Reference is made to Item 1. Business),
and reelected the Company's then existing Board of Directors by the following
votes:

Number of votes
--------------------------------
For Against/Withheld
--------------------------------

Amendment and renewal of Advisory Agreement (a) 1,003,314 5,465

Directors:
Walter G. Arader 1,004,315 5,465
Harvey Comita 1,004,315 5,465
Lawrence Rothstein 1,004,315 5,465
Maurice Wiener 1,004,315 5,465

(a) The number of votes for the Amendment and renewal of the Advisory Agreement
represents majority of the outstanding votes.

John Bailey, a long-time director, passed away in July 2003.

On March 19, 2004, the Company's Board of Directors elected Clinton Stuntebeck
as a director of the Company, to hold office until the next Annual Meeting of
Shareholders. Mr. Stuntebeck is a retired partner in the law firm of Schnader
Harrison Segal & Lewis, LLP, the Company's corporate counsel.

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2003.

Part II.

Item 5. Market Price for Common Equity and Related Stockholder Matters and
Purchases of Equity Securities.

The high and low per share sales prices of the Company's stock on the American
Stock Exchange (ticker symbol: HMG) for each quarter during the past two years
were as follows:

High Low
---- ----

March 31, 2003 $7.60 $6.20
June 30, 2003 $9.35 $7.70
September 30, 2003 $9.00 $8.25
December 31, 2003 $8.80 $7.90

March 31, 2002 $7.80 $6.62
June 30, 2002 $9.95 $7.85
September 30, 2002 $7.99 $6.22
December 31, 2002 $6.80 $6.00

There were no dividends paid or declared in 2003. In September 2002 the Company
paid a special cash dividend of $.30 per share. The Company's policy has been to
pay such dividends as are necessary for it to qualify for taxation as a REIT
under the Internal Revenue Code.

As of March 4, 2004, there were 436 holders of record of the Company's common
stock.

The following table illustrates securities authorized for issuance under the
Company's equity compensation plan:

Number of securities
Number of securities to Weighted-average remaining available for
be issued upon exercise exercise price of future issuance under
of outstanding options outstanding options equity compensation plans
--------------------------- -------------------------- ----------------------------

Equity compensation plan 86,000 $7.84 34,000
approved by shareholders
Equity compensation plan not
approved by shareholders -- -- --
--------------------------- -------------------------- ----------------------------
Total 86,000 $7.84 34,000
=========================== ========================== ============================

Item 6. Management's Discussion and Analysis or Plan of Operation.
-----------------------------------------------------------------

Critical Accounting Policies and Estimates:
-------------------------------------------
Securities and Exchange Commission Financial Reporting Release No. 60 requires
all companies to include a discussion of critical accounting policies and
methods used in the preparation of the financial statements. Note 1 of the
consolidated financial statements, included elsewhere on this annual report of
Form 10KSB, includes a summary of the significant accounting policies and
methods used in the preparation of the Company's consolidated financial
statements. The Company believes the following critical accounting policies
affect the significant judgments and estimates used in the preparation of the
Company's financial statements:

Marketable Securities. Consistent with the Company's overall investment
objectives and activities, management has classified its entire marketable
securities portfolio as trading. As a result, all unrealized gains and losses on
the Company's investment portfolio are included in the statement of operations.
Our investments in trading equity and debt marketable securities are valued
based on quoted market prices. Marketable securities are subject to fluctuations
in value in accordance with market conditions.

Other Investments. The Company's other investments consist primarily of nominal
equity interests in various privately-held entities, including limited
partnerships whose purpose is to invest venture capital funds in growth-oriented
enterprises. The Company does not have significant influence over any investee
and no single investment exceeds 5% of the Company's total assets. None of these
investments meet the criteria of accounting under the equity method and are
carried at cost; less distributions deemed return of capital and other than
temporary unrealized losses. These investments do not have available quoted
market prices, so we must rely on valuations and related reports and information
provided to us by those entities. These

valuations are by their nature subject to estimates which could change
significantly from period to period. The Company regularly reviews the
underlying assets in its other investment portfolio for events, including but
not limited to bankruptcies, closures and declines in estimated fair value, that
may indicate the investment has suffered an other-than-temporary decline in
value. When a decline is deemed other-than-temporary, we permanently reduce the
cost basis component of the investments. As such, any recoveries in the value of
the investments will not be recognized until the investments are sold.

Our estimates of each of these items historically have been adequate. However,
due to uncertainties inherent in the estimation process, it is reasonably
possible that the actual resolution of any of these items could vary
significantly from the estimate and, accordingly, there can be no assurance that
the estimates may not materially change in the near term.

Real Estate. Land, buildings and improvements, furniture, fixtures and equipment
are recorded at cost. Tenant improvements, which are included in buildings and
improvements, are also stated at cost. Expenditures for ordinary maintenance and
repairs are expensed to operations as they are incurred. Renovations and/or
replacements, which improve or extend the life of the asset are capitalized and
depreciated over their estimated useful lives.

Depreciation is computed utilizing the straight-line method over the estimated
useful lives of ten to forty years for buildings and improvements and five to
ten years for furniture, fixtures and equipment. Tenant improvements are
amortized on a straight-line basis over the term of the related leases.

The Company is required to make subjective assessments as to the useful lives of
its properties for purposes of determining the amount of depreciation to reflect
on an annual basis with respect to those properties. These assessments have a
direct impact on the Company's net income. Should the Company lengthen the
expected useful life of a particular asset, it would be depreciated over more
years, and result in less depreciation expense and higher annual net income.

Assessment by the Company of certain other lease related costs must be made when
the Company has a reason to believe that the tenant will not be able to execute
under the term of the lease as originally expected.

The Company periodically reviews the carrying value of certain of its properties
and long-lived assets in relation to historical results, current business
conditions and trends to identify potential situations in which the carrying
value of assets may not be recoverable. If such reviews indicate that the
carrying value of such assets may not be recoverable, the Company would estimate
the undiscounted sum of the expected future cash flows of such assets or analyze
the fair value of the asset, to determine if such sum or fair value is less than
the carrying value of such assets to ascertain if a permanent impairment exists.
If a permanent impairment exists, the Company would determine the fair value by
using quoted market prices, if available, for such assets, or if quoted market
prices are not available, the Company would discount the expected future cash

flows of such assets and would adjust the carrying value of the asset to fair
value. Judgments as to impairments and assumptions used in projecting future
cash flow are inherently imprecise.

Results of Operations:
----------------------
For the year ended December 31, 2003, the Company reported net income of
approximately $181,000 (or $.17 per share) compared with a net loss of
approximately $1,564,000 (or $1.44 per share) for the year ended December 31,
2002.

Revenues:
---------
Total revenues for the year ended December 31, 2003 as compared with that of
2002 increased by approximately $3,306,000, as discussed below.

Real estate rentals and related revenue increased by approximately $56,000 (or
3%) for the year ended December 31, 2003 as compared with 2002. This was the
result of an increase in rental and related revenues from the Grove Isle hotel
of approximately $25,000 primarily due to an inflationary adjustment to base
rent in 2003, approximately $18,000 from the lease renewal of Kingston, NY
retail store addition and approximately $11,000 from a new tenant at the
Jacksonville shopping center.

Marina revenues increased by approximately $15,000 (or 3%) for the year ended
December 31, 2003 as compared with 2002. Related marina expense increased by
$31,000 (or 9%). Increased marina expenses were primarily due to increase
payroll and related expenses. There were four yacht slips sold during 2003.

Net gain (loss) from investments in marketable securities, including marketable
securities distributed by partnerships in which the Company owns minority
positions, for the years ended December 31, 2003 and 2002, is as follows:

Description 2003 2002
----------- ---- ----
Net realized gain (loss) from sales of

securities $ 37,000 ($1,356,000)
Unrealized net gain (loss) in marketable
securities 754,000 383,000
Net change in sales of securities pending
delivery (24,000) (165,000)
------------------ -------------------
Total net gain (loss) from investments in
marketable securities $767,000 ($1,138,000)
================== ===================

Net realized gain from sales of marketable securities consisted of approximately
$362,000 of gains net of $325,000 of losses for the year ended December 31,
2003. The comparable amounts in fiscal year 2002 were losses of approximately
$1.96 million of losses net of $600,000 of gains. Approximately $197,000 and
$240,000 of gains in fiscal years 2003 and 2002, respectively, were recognized
from the sale of stock distributions from the Company's investments in privately
held partnerships.

Consistent with the Company's overall current investment objectives and
activities the entire marketable securities portfolio is classified as trading
(versus available for sale, as defined by generally accepted accounting
principles). Unrealized gains or losses from marketable securities are recorded
as revenues in the statement of operations.

Investment gains and losses on marketable securities may fluctuate significantly
from period to period in the future and could have a significant impact on the
Company's net earnings. However, the amount of investment gains or losses on
marketable securities for any given period has no predictive value and
variations in amount from period to period have no practical analytical value.

Investments in marketable securities give rise to exposure resulting from the
volatility of capital markets. The Company believes its risk to be mitigated by
the diversity of its marketable securities portfolio.

Net gain (loss) from other investments is summarized below:

2003 2002
----------- -----------
Venture capital funds - technology & ($ 108,507) ($ 760,445)
communications (a)
Real estate and related (b) 139,852 18,565
Venture capital funds - diversified
businesses (c) -- (347,000)
Restaurant development and operation (d) -- (350,000)
Income from investment in 49% owned
affiliate (e) 32,130 43,067
Others, net (12,300) 125,084
----------- -----------
Totals $ 51,175 ($1,270,729)
=========== ===========

(a) In connection with management's regular review of other investments
including analyzing such factors as bankruptcies and realized losses of
underlying investees the Company recorded adjustments to write down
investments in these sectors for declines in value deemed to be
other-than-temporary. In 2003 management recorded a total of $114,000
in write-downs in two funds which were invested primarily in
communications industry. The 2002 loss included approximately $556,000
of write downs related to impairments experienced in three funds with a
heavy concentration in technology-related businesses.
(b) This gain consists primarily of the final substantial distribution from
an investment in a real estate development project located in Miami,
Florida.
(c) Included in the loss for 2002 is $252,000 representing a partial write
down of an investment in a limited partnership which owns various
diversified businesses, primarily in the manufacturing and production
related sectors. One of these businesses in the metal forming industry
experienced a permanent impairment in value as a result of a business

restructuring in November 2002. The Company's ownership percentage in
this limited partnership is approximately .51%. The remaining loss in
2002 of $95,000 related to an other-than-temporary decline in value of
a partnership which invested in large capital growth-oriented companies
in diversified businesses.
(d) The Company invested $350,000 in May 2000 for a 10% interest in the
operations of a restaurant located in Atlanta, Georgia. The restaurant
opened in February 2001 but was never able to sustain the required
level of revenues required for profitability. In February 2003 the
restaurant ceased operations. The Company's investment was written off
as of December 31, 2002.
(e) Income from the Company's 49% owned affiliate (T.G.I.F. Texas, Inc.,
reference is made to Note 5 of the Notes to Consolidated Financial
Statements) decreased primarily as a result of reduced rental revenue.

Net gain or loss from other investments may fluctuate significantly from period
to period in the future and could have a significant impact on the Company's net
earnings. However, the amount of investment gain or loss from other investments
for any given period has no predictive value and variations in amount from
period to period have no practical analytical value.

Interest, dividend and other income for the year ended December 31, 2003
remained consistent as compared with that of 2002.

Expenses:
---------
Total expenses for the year ended December 31, 2003 as compared to that of 2002
increased by approximately $374,000 (or 12%).

Operating expenses of rental and other properties for the year ended December
31, 2003 remained consistent as compared with that of 2002.

Marina expenses increased by approximately $31,000 (or 9%) for the year ended
December 31, 2003 as compared to 2002. This increase was primarily due to
increase personnel costs at the marina of approximately $16,000 and increased
utility costs.

Effective January 1, 2003 a contractual increase in the Advisory Agreement
commenced resulting in an increase in base Adviser fee from $660,000 to $900,000
per annum.

Professional fees and expenses for the year ended December 31, 2003 remained
consistent as compared with that of 2002.

Interest expense decreased by approximately $47,000 (or 9%) for year ended
December 31, 2003 as compared to 2002 primarily due to decreased loan amounts
outstanding as a result of principal repayments, and an overall decline in
interest rates on the Company's variable rate mortgages and notes payable.

Net gain on sales of real estate for the years ended December 31, 2003, and 2002
consisted of the following:

Net gain after incentive fee
and minority interest
------------------------------

Property Sold 2003 2002
------------- ---- ----
Yacht slips in Florida $356,000 $315,000
Undeveloped land in Texas 282,000 --
Undeveloped land in Massachusetts -- 255,000
Retail stores in New York and Massachusetts -- 63,000
-------------- -------------
Total $638,000 $633,000
============== =============

Net gain on sales of properties has been reduced, where applicable, by minority
partners' interest in the gain of $19,000 and $58,000 for the years ended
December 31, 2003 and 2002, respectively, and by adviser's incentive fees of
$69,000 for the year ended December 31, 2003.

Provision for income taxes for the year ended December 31, 2003 was
approximately $323,000 which consisted entirely of deferred income tax expense.
There is no current income tax provision or liability and the deferred income
tax expense primarily consists of the utilization of prior year net operating
loss carry forward (see Note 8 of the Notes to Consolidated Financial
Statements). The Company follows the liability method of accounting for income
taxes. Under this method, deferred tax liabilities and assets are recognized for
the expected future tax consequences of temporary differences between the
carrying amount and the tax basis of assets and liabilities at each year-end
based on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income. As a result of
timing differences associated with the carrying value of other investments and
depreciable assets and the future benefit of a net operating loss, as of
December 31, 2003 and 2002, respectively, the Company has recorded a net
deferred tax asset of $478,000 and $801,000. A valuation allowance against
deferred tax asset has not been established as management believes it is more
likely than not, based on the Company's previous history and expectation of
future taxable income before expiration, that these assets will be realized.

Effect of Inflation:
--------------------
Inflation affects the costs of operating and maintaining the Company's
investments. In addition, rentals under certain leases are based in part on the
lessee's sales and tend to increase with inflation, and certain leases provide
for periodic adjustments according to changes in predetermined price indices.

Liquidity, Capital Expenditure Requirements and Capital Resources: The Company's
material commitments primarily consist of maturities of debt obligations of
approximately $3.8 million in 2004 and contributions committed to other
investments of approximately $1.6 million due upon demand. The funds necessary
to meet these obligations are expected from the proceeds from the sales of
properties or investments, refinancing, distributions from investments and
available cash. Included in the maturing debt obligations for 2004 is a note
payable to the Company's 49% owned affiliate, T.G.I.F. Texas, Inc. ("TGIF")
(Reference is made to Item 12 Certain Relationships and Related Transactions) of
approximately $3.7 million. This amount is due on

demand. The obligation due to TGIF will be paid with funds available from
distributions from its investment in TGIF and from available cash.

A summary of the Company's contractual cash obligations at December 31, 2003 is
as follows:

Payments Due by Period
--------------------------------------------------------------------------------------------
Contractual Obligations Total Less than 1 year 1 - 3 years 4 - 5 years After 5 years
------------------------- ---------------- ------------------- ------------------- ------------------- ---------------

Mortgages and Notes $8,086,227 $3,840,386 $1,039,663 $434,873 $2,771,305
Payable
Other Investment
Commitments (a) 1,643,000 1,643,000 -- -- --
------------------------- ---------------- ------------------- ------------------- ------------------- ---------------
Total $9,729,227 $5,483,386 $1,039,663 $434,873 $2,771,305
========================= ================ =================== =================== =================== ===============

(a) The timing of amounts due under commitments for other investments is
determined by the managing partners of the individual investments. These amounts
are reflected as due in less than one year although the actual funding may not
be required until some time in the future.

Material Changes in Operating, Investing and Financing Cash Flows:
-----------------------------------------------------------------
The Company's cash flows are generated primarily from its real estate
activities, sales of investment securities, distributions from other investments
and borrowings. For the year ended December 31, 2003 the Company used net cash
in operating activities of approximately $1.4 million. This primarily consisted
of the repayment of margin loan balances of approximately $680,000 and
investments in marketable securities in excess of proceeds from sales of
securities of approximately $371,000. The Company believes that there will be
sufficient cash flows in the next year to meet its operating requirements.

For the year ended December 31, 2003, the net cash provided by investing
activities of approximately $2.7 million consisted primarily of net proceeds
from the sales of properties of $1.6 million, distributions from investments of
approximately $1.5 million and repayment of notes and advances due from related
parties of $426,000. These sources of cash were partially offset by net
contributions to investments of approximately $843,000.

For the year ended December 31, 2003, net cash used in financing activities was
approximately $536,000 consisting of the repayment of mortgages and notes
payable.

Item 7. Consolidated Financial Statements
---------------------------------

Reports of Independent Certified Public Accountants..................18.

Consolidated balance sheets as of December 31, 2003 and 2002.........20.

Consolidated statements of operations for the
years ended December 31, 2003 and 2002............................21.

Consolidated statements of stockholders' equity
for the years ended December 31, 2003 and 2002....................22.

Consolidated statements of cash flows for the
years ended December 31, 2003, and 2002...........................23.

Notes to consolidated financial statements...........................24.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of HMG/Courtland Properties, Inc.:

We have audited the accompanying consolidated balance sheet of HMG/Courtland
Properties, Inc. and subsidiaries as of December 31, 2003, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of HMG/Courtland
Properties, Inc. and subsidiaries at December 31, 2003, and the results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.

Weston, Florida
March 12, 2004

Berenfeld, Spritzer, Shechter & Sheer

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of HMG/Courtland Properties, Inc.:

We have audited the accompanying consolidated balance sheet of HMG/Courtland
Properties, Inc. and subsidiaries as of December 31, 2002, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of HMG/Courtland
Properties, Inc. and subsidiaries at December 31, 2002, and the results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.

Miami, Florida
March 21, 2003

BDO Seidman, LLP

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------------------------------

December 31, December 31,
2003 2002
ASSETS
Investment properties, net of accumulated depreciation:

Commercial and industrial $ 2,611,777 $ 2,737,158
Hotel and club facility 4,212,734 4,607,964
Yacht slips 169,073 379,332
Land held for development 1,083,855 1,854,318
------------ ------------
Total investment properties, net 8,077,439 9,578,772

Cash and cash equivalents 2,624,643 1,863,534
Investments in marketable securities 4,892,908 3,730,820
Other investments 5,048,016 5,694,448
Investment in affiliate 2,926,326 2,894,196
Cash restricted pending delivery of securities 23,921
Loans, notes and other receivables 1,015,118 1,142,882
Notes and advances due from related parties 1,003,243 1,414,974
Deferred taxes 478,000 801,000
Other assets 234,036 195,612
------------ ------------
TOTAL ASSETS $ 26,299,729 $ 27,340,159
------------ ------------

LIABILITIES
Mortgages and notes payable $ 8,086,227 $ 8,622,406
Accounts payable and accrued expenses 229,461 235,948
Sales of securities pending delivery 80,117
Other liabilities 679,891
------------ ------------
TOTAL LIABILITIES 8,315,688 9,618,362

Minority interests 322,193 270,738
------------ ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock, $1 par value; 2,000,000 shares
authorized; none issued
Excess common stock, $1 par value; 500,000 shares authorized;
none issued
Common stock, $1 par value; 1,500,000 shares authorized;
1,315,635 shares issued and outstanding 1,315,635 1,315,635
Additional paid-in capital 26,571,972 26,571,972
Undistributed gains from sales of properties, net of losses 39,478,523 38,840,780
Undistributed losses from operations (47,786,418) (47,329,464)
------------ ------------
19,579,712 19,398,923

Less: Treasury stock, at cost (226,500 shares) (1,659,114) (1,659,114)
Notes receivable from exercise of stock options (258,750) (288,750)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 17,661,848 17,451,059

------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,299,729 $ 27,340,159
------------ ------------

See notes to the consolidated financial statements

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2003 AND 2002
---------------------------------------------------------------------------

REVENUES 2003 2002
----------- -----------

Real estate rentals and related revenue $ 1,684,201 $ 1,628,509
Marina revenues 477,123 462,524
Net gain (loss) from investments in marketable securities 766,712 (1,138,034)
Net gain (loss) from other investments 51,175 (1,270,729)
Interest, dividend and other income 306,754 297,480
----------- -----------
Total 3,285,965 (20,250)

EXPENSES
Operating expenses:
Rental and other properties 540,098 536,894
Marina expenses 374,908 343,787
Depreciation and amortization 585,432 603,467
Adviser's base fee 900,000 660,000
General and administrative 271,422 209,172
Professional fees and expenses 177,619 182,410
Directors' fees and expenses 61,664 63,707
----------- -----------
Total operating expenses 2,911,143 2,599,437

Interest expense 488,370 535,596
Minority partners' interests in operating gain (loss) of
consolidated entities 20,406 (89,066)
----------- -----------
Total expenses 3,419,919 3,045,967
----------- -----------

Loss before sales of properties and income taxes (133,954) (3,066,217)

Gain on sales of properties, net 637,743 632,753
----------- -----------
Income (loss) before income taxes 503,789 (2,433,464)

Provision for (benefit from) income taxes 323,000 (869,074)

----------- -----------
Net income (loss) $ 180,789 ($1,564,390)
=========== ===========

Net Income (Loss) Per Common Share:
Basic and diluted $ 0.17 ($ 1.44)

Weighted average common shares outstanding:
Basic 1,089,135 1,089,135
Diluted 1,094,993 1,089,135

See notes to the consolidated financial statements

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2003 AND 2002

Undistributed
Gains from Sales Undistributed
Common Stock Additional of Properties Losses from Treasury Stock
Shares Amount Paid-In Capital Net of Losses Operations Shares Cost
-------------------------------------------------------------------------------------------------

Balance as of January 1, 2002 1,315,635 $1,315,635 $26,571,972 $38,534,768 ($45,132,321) 226,500 ($1,659,114)

Net income (loss) 632,753 (2,197,143)

Dividends ($.30 per share) (326,741)
-------------------------------------------------------------------------------------------------
Balance as of December 31, 2002 1,315,635 1,315,635 26,571,972 38,840,780 (47,329,464) 226,500 (1,659,114)

Net income (loss) 637,743 (456,954)

Repayment of Note receivable
from exercise
of Stock Options
-------------------------------------------------------------------------------------------------

Balance as of December 31, 2003 1,315,635 $1,315,635 $26,571,972 $39,478,523 ($47,786,418) 226,500 ($1,659,114)
=================================================================================================

Notes
Receivable Total
from exercise of Stockholders'
Stock Options Equity
---------------------------------------------

Balance as of January 1, 2002 ($288,750) $19,342,190

Net income (loss) (1,564,390)

Dividends ($.30 per share) (326,741)
---------------------------------------------
Balance as of December 31, 2002 (288,750) $17,451,059

Net income (loss) 180,789

Repayment of Note receivable
from exercise
of Stock Options 30,000 30,000

---------------------------------------------

Balance as of December 31, 2003 ($258,750) $17,661,848
=============================================

See notes to the consolidated financial statements

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003 AND 2002
-------------------------------------------------------------------------------------------------------------

2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 180,789 ($1,564,390)
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:
Depreciation and amortization 585,432 603,467
Net (gain) loss from other investments (51,175) 1,270,729
Gain on sales of properties, net (637,743) (632,753)
Net (gain) loss from investments in marketable securities (766,712) 1,138,034
Minority partners' interest in operating gains (losses) 20,406 (89,066)
Deferred income tax expense (benefit) 323,000 (662,000)
Changes in assets and liabilities:
Decrease in other assets and other receivables 36,540 50,954
Net proceeds from sales and redemptions of securities 2,208,322 2,929,507
(Decrease) increase in sales of securities pending delivery (80,099) 138,268
Increased investments in marketable securities (2,579,794) (3,028,556)
(Decrease) increase in accounts payable and accrued expenses (8,796) 15,928
Decrease in current income taxes payable (219,174)
(Decrease) increase in other liabilities (679,891) 434,951
----------- -----------
Total adjustments (1,630,510) 1,950,289
----------- -----------
Net cash (used in) provided by operating activities (1,449,721) 385,899
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from disposals of properties 1,599,997 953,684
Decrease (increase) in notes and advances from related parties 411,731 (469,102)
Net decrease in mortgage loans and notes receivables 25,195 126,697
Distributions from other investments 1,523,226 159,359
Contributions to other investments (843,140) (1,195,544)
----------- -----------
Net cash provided by (used in) investing activities 2,717,009 (424,906)
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (536,179) (247,481)
Dividends paid (326,741)
Repayment of note receivable from stock options exercised 30,000
Net distributions to minority partners (121,773)
----------- -----------
Net cash used in financing activities (506,179) (695,995)
----------- -----------

Net increase (decrease) in cash and cash equivalents 761,109 (735,002)

Cash and cash equivalents at beginning of the period 1,863,534 2,598,536
----------- -----------

Cash and cash equivalents at end of the period $ 2,624,643 $ 1,863,534
----------- -----------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 488,000 $ 485,000
----------- -----------
Cash paid during the year for income taxes $ 1,000 $ 11,000
----------- -----------

See notes to consolidated financial statements

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003 and 2002

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Consolidation. The consolidated financial statements include the
accounts of HMG/Courtland Properties, Inc. (the "Company") and entities in which
the Company owns a majority voting interest or controlling financial interest.
The Company was organized in 1972 and qualifies for taxation as a real estate
investment trust ("REIT") under the Internal Revenue Code. All material
transactions and balances with consolidated and unconsolidated entities have
been eliminated in consolidation or as required under the equity method.

The Company's consolidated subsidiaries are described below:

Courtland Investments, Inc. ("CII"). A 95% owned corporation, which owns 100% of
Grove Isle Yacht Club Associates and a 15% general partnership interest in Grove
Isle Associates, Ltd. CII also invests in marketable securities and various
investments in partnerships whose primary purpose is to make equity investments
in growth-oriented enterprises and real estate.

The Company holds a 95% non-voting interest and Masscap Investments Company,
Inc. ("Masscap") holds a 5% voting interest in CII. The Company and Masscap have
had a continuing arrangement with regard to the ongoing operations of CII, which
provides the Company with complete authority over all decision making relating
to the business, operations and financing of CII consistent with the Company's
status as a real estate investment trust. Masscap is a wholly-owned subsidiary
of Transco Realty Trust which is a 44% shareholder of the Company.

Grove Isle Associates, Ltd. ("GIA"). This limited partnership (owned 85% by the
Company and 15% by CII) owns a 50-room, hotel and private club facility located
on approximately 7 acres of a private island in Coconut Grove, Florida known as
Grove Isle. (See Note 10).

Grove Isle Yacht Club Associates ("GIYCA"). This partnership was the developer
of the 85 boat slips located at Grove Isle of which the Company owns 8 as of
December 31, 2003. All other slips are privately owned. Grove Isle Marina, Inc.
a wholly-owned subsidiary of GIYCA operates all aspects of the Grove Isle
marina.

Courtland/Key West, Inc. ("CKWI"). This Corporation was formed in December 1999
and is wholly-owned by CII. CKWI owns a 10% interests in two limited liability
companies that were formed for the purpose of owning and operating restaurants.

The Grove Towne Center - Texas, Ltd ("TGTC"). This limited partnership is a
wholly-owned by the Company. The sole asset of the partnership is 8 acres of
undeveloped land located in suburban Houston, Texas.

South Bayshore Associates ("SBA"). This is a 75% owned joint venture where the
major asset is a receivable from the Company's 44% shareholder, Transco Realty
Trust.

HMG - Fieber Associates ("Fieber"). This is a 70% owned joint venture where the
major asset is a retail store located in the state of New York.

260 River Corp ("260"). This is a wholly-owned corporation which owns a 70%
interest in a retail store location in Montpelier, Vermont.

HMG Fashion Square, Inc. ("HMGFSQ"). This is a wholly-owned corporation where
the major asset is a shopping center on an approximate 11-acre site in
Jacksonville, Florida. As of December 31, 2003, this shopping center had three
tenants operating restaurants and one former restaurant operator.

Preparation of Financial Statements. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Income Taxes. The Company accounts for income taxes
in accordance with the Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes". SFAS No. 109 requires a Company to use the
asset and liability method of accounting for income taxes. Under the asset and
liability method, deferred income taxes are recognized for the tax consequences
of "temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. Under SFAS No. 109, the effect
on deferred income taxes of a change in tax rates is recognized in income in the
period that includes the enactment date. The Company qualifies as a real estate
investment trust and distributes its taxable ordinary income to stockholders in
conformity with requirements of the Internal Revenue Code. In addition, net
operating losses can be carried forward to reduce future taxable income but
cannot be carried back.

Distributed capital gains on sales of real estate as they relate to REIT
activities are not subject to taxes; however, undistributed capital gains are
taxed as capital gains. State income taxes are not significant. Any benefit from
or provisions for income taxes relates to the Company's undistributed capital
gains and taxable losses or income of CII which is not consolidated with the
Company for income tax purposes and accordingly files a separate tax return.
Refer to Note 8 for further disclosure on income taxes.

Depreciation and Amortization. Depreciation of properties held for investment is
computed using the straight-line method over the estimated useful lives of the
properties, which range up to 39.5 years. Deferred mortgage and leasing costs
are amortized over the shorter of the respective

term of the related indebtedness or life of the asset. Depreciation and
amortization expense for the years ended December 31, 2003 and 2002 was
approximately $585,000 and $603,000, respectively. The yacht slips are being
depreciated on a straight-line basis over their estimated useful life of 20
years.

Fair Value of Financial Instruments. The carrying value of financial instruments
including other receivables, notes and advances due from related parties,
accounts payable and accrued expenses and mortgages and notes payable
approximate their fair values at December 31, 2003 and 2002, due to their
relatively short terms or variable interest rates.

Marketable Securities. The entire marketable securities portfolio is classified
as trading consistent with the Company's overall investment objectives and
activities. Accordingly, all unrealized gains and losses on the Company's
marketable securities investment portfolio are included in the statement of
operations.

Gross gains and losses on the sale of marketable securities are based on the
first-in first-out method of determining cost.

Marketable securities from time to time are pledged as collateral pursuant to
broker margin requirements. As of December 31, 2003 there were no such amounts
outstanding. As of December 31, 2002 there was approximately $510,000 of margin
balances payable to brokers which were included in other liabilities.

Notes and other receivables. Management periodically performs a review of
amounts due on its notes and other receivable balances to determine if they are
impaired based on factors affecting the collectibility of those balances.
Management's estimates of collectibility of these receivables requires
management to exercise significant judgment about the timing, frequency and
severity of collection losses, if any, and the underlying value of collateral,
which may affect recoverability of such receivables. As of December 31, 2003 and
2002, there were no receivables that required an allowance.

Sales of Securities Pending Delivery. Sales of securities pending delivery
represent the fair market value of shares sold with the promise to deliver that
security at some future date. The obligation may be satisfied with current
holdings of the same security or by subsequent purchases or acquisitions of that
security. Unrealized gains and losses from changes in the obligation are
included in earnings.

Equity investments. Investments in which the Company does not have a majority
voting or financial controlling interest but has the ability to exercise
influence are accounted for under the equity method of accounting, even though
the Company may have a majority interest in profits and losses.

The Company's generally has no voting or financial controlling interests in its
other investments which include entities that invest venture capital funds in
growth oriented enterprises. These other investments are carried at cost less
adjustments for other than temporary declines in value.

Comprehensive Income (Loss). The Company reports comprehensive income (loss) in
the consolidated statement of stockholders' equity. Comprehensive income (loss)
is the change in equity from transactions and other events from nonowner
sources. Comprehensive income (loss) includes net income (loss) and other
comprehensive income (loss). There were no comprehensive income (loss) items in
2002 or 2003.

Earnings Per Common Share. Net income per common share (basic and diluted) is
based on the net income divided by the weighted average number of common shares
outstanding during each year. Diluted net income per share includes the dilutive
effect of options to acquire common stock. Common shares outstanding include
issued shares less shares held in treasury. Options to acquire 86,000 shares of
the Company's common stock were excluded from the calculation of diluted
earnings per share in 2002, as their effect is anti-dilutive.

For the year ended
December 31,
2003 2002
---- ----
Basic:
------
Net Income (loss) $ 180,789 ($1,564,390)

Weighted average shares outstanding 1,089,135 1,089,135
---------- ----------

Basic earnings (loss) per share $ .17 ($ 1.44)
========== ==========

Diluted:
--------
Net Income (loss) $ 180,789 ($1,564,390)

Weighted average shares outstanding 1,089,135 1,089,135

Options to acquire common stock 5,858 --
---------- ----------

Diluted weighted average common shares 1,094,993 1,089,135

Diluted earnings (loss) per share $ .17 ($ 1.44)
========== ==========

Gain on Sales of Properties. Gain on sales of properties is recognized when the
minimum investment requirements have been met by the purchaser and title passes
to the purchaser.

Furthermore, gain on sales of properties has been reduced, where applicable, by
minority partners' interest in the gain of $19,000 and $58,000 for the years
ended December 31, 2003 and 2002 and adviser's incentive fees of $69,000 for the
year ended December 31, 2003. There were no incentive fees for the year ended
December 31, 2002.

Cash and Cash Equivalents. For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid investments with an original
maturity of three months or less to be cash and cash equivalent.

Reclassifications. Certain amounts in prior year's consolidated financial
statements have been reclassified to conform to the current year's presentation.

Minority Interest. Minority interest represents the minority partners'
proportionate share of the equity of the Company's majority owned subsidiaries.

2003 2002
--------------- ---------------

Minority interest balance at beginning of year $271,000 $412,000
Minority partners' interest in operating gains (losses) of
consolidated subsidiaries 20,000 (89,000)
Minority partners' interest in net gains on sales of real estate
of consolidated subsidiaries 19,000 58,000
Net distributions to minority partners --- (122,000)
Other 12,000 12,000
--------------- ---------------
Minority interest balance at end of year $322,000 $271,000
=============== ===============

Stock-Based Compensation. The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations, in accounting for its employee stock options rather
than the alternative fair value accounting followed by SFAS No. 123, "Accounting
for Stock-Based Compensation." APB No. 25 provides that the compensation expense
relative to the Company's employee stock options is measured based on the
intrinsic value of the stock option. SFAS No. 123 requires companies that
continue to follow APB No. 25 to provide a pro-forma disclosure of the impact of
applying the fair value method of SFAS No. 123. No options were granted in 2003
and 2002 and there is no pro-forma effect.

Revenue Recognition. The Company is the lessor of various real estate
properties. All of the lease agreements are classified as operating leases and
accordingly all rental revenue is recognized as earned based upon total fixed
cash flow over the initial term of the lease, using the straight line method.
Percentage rents are based upon tenant sales levels for a specified period and
are recognized on the accrual basis, based on the lessee's monthly sales.
Reimbursed expenses for real estate taxes, common area maintenance, utilities
and insurance are recognized in the period in which the expenses are incurred,
based upon the provisions of the tenant's lease.

In addition to base rent, the Company may receive participation rent consisting
of a portion of the tenant's operating surplus, as defined in the lease
agreement. Participation rent is due at end of each lease year and recognized
when earned.

Asset Impairments. The Company periodically reviews the carrying value of its
properties and long-lived assets in relation to historical results, current
business conditions and trends to identify potential situations in which the
carrying value of assets may not be recoverable. If such reviews indicate that
the carrying value of such assets may not be recoverable, the Company would
estimate the undiscounted sum of the expected future cash flows of such assets
or analyze the fair value of the asset, to determine if such sum or fair value
is less than the carrying value of such assets to ascertain if a permanent
impairment exists. If a permanent impairment exists, the Company would determine
the fair value by using quoted market prices, if available, for such assets, or
if quoted market prices are not available, the Company would discount the
expected future cash flows of such assets and would adjust the carrying value of
the asset to fair value.

Recent Accounting Pronouncements:
---------------------------------
During April 2003, the FASB issued SFAS 149 - "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities", effective for contracts entered
into or modified after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. In addition, except as stated
below, all provisions of this Statement should be applied prospectively. The
provisions of this Statement that relate to Statement 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases
or sales of then-issued securities or other securities that do not yet exist,
should be applied to both existing contracts and new contracts entered into
after June 30, 2003. The Company does not participate in such transactions, and
accordingly, adoption of this statement did not have a material effect on the
Company's financial statements.

During May 2003, the FASB issued SFAS 150 - "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003. This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a freestanding financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as equity.
Some of the provisions of this Statement are consistent with the current
definition of liabilities in FASB Concepts Statement No. 6, "Elements of
Financial Statements". The Company does not participate in such transactions,
and accordingly, adoption of this statement did not have a material effect on
the Company's financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46 (" FIN 46"),
"Consolidation of Variable Interest Entities." FIN 46 clarifies the application
of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other

parties. FIN 46 applies immediately to variable interest entities ("VIE's")
created after January 31, 2003, and to VIE's in which an enterprise obtains an
interest after that date. On October 9, 2003 the FASB issued FASB Staff Position
No. FIN 46-6 "Effective Date of FASB Interpretation No.46 Consolidation of
Variable Interest Entities," which defers the implementation date for public
entities that hold an interest in a variable interest entity or potential
variable interest entity from the first fiscal year or interim period beginning
after June 15, 2003 to the end of the first interim or annual period ending
after December 15, 2003. This deferral applies only if 1) the variable interest
entity was created before February 1, 2003 and 2) the public entity has not
issued financial statements reporting that variable interest entity in
accordance with FIN 46, other than disclosures required by paragraph 26 of FIN
46. The adoption of FIN 46 did not have a material impact on the Company's
financial position, liquidity or results of operations.

2. INVESTMENT PROPERTIES
The components of the Company's investment properties and the related
accumulated depreciation information follow:

December 31, 2003
---------------------------------------------------
Accumulated
Cost Depreciation Net
Commercial and Industrial Properties
Land $1,289,786 $1,289,786
Buildings and improvements 2,280,394 $ 958,403 1,321,991
--------- --------- ---------
3,570,180 958,403 2,611,777
--------- --------- ---------
Hotel and Club Facility
Land 1,338,518 1,338,518
Hotel/club facility and improvements 6,819,032 3,949,069 2,869,963
Furniture, fixtures & equipment 144,164 139,911 4,253
--------- --------- ---------
8,301,714 4,088,980 4,212,734
--------- --------- ---------

Yacht Slips 300,136 131,063 169,073
--------- --------- ---------

Land Held for Development 1,083,855 1,083,855
--------- --------- ---------

Total $13,255,885 $5,178,446 $8,077,439
=========== ========== ==========

December 31, 2002
---------------------------------------------------
Accumulated
Cost Depreciation Net
Commercial and Industrial Properties
Land $1,289,786 $1,289,786
Buildings and improvements 2,280,394 $833,022 1,447,372
--------- --------- ---------
3,570,180 833,022 2,737,158
--------- --------- ---------
Hotel and Club Facility
Land 1,338,518 1,338,518
Hotel/club facility and improvements 6,819,033 3,558,206 3,260,827
Furniture, fixtures & equipment 144,164 135,545 8,619
------- ------- -------
8,301,715 3,693,751 4,607,964
--------- --------- ---------

Yacht Slips 540,361 161,029 379,332
----------- --------- --------- ---------

Land Held for Development 1,854,318 1,854,318
------------------------- ----------- --------- ---------

Total $14,266,574 $4,687,802 $9,578,772
=========== ========== ==========

3. INVESTMENTS IN MARKETABLE SECURITIES
Investments in marketable securities consist primarily of large capital
corporate equity and debt securities in varying industries or issued by
government agencies with readily determinable fair values (see table below).
These securities are stated at market value, as determined by the most recently
traded price of each security at the balance sheet date. The value of any single
security does not exceed 5% of the total value of the portfolio. Consistent with
the Company's overall current investment objectives and activities its entire
marketable securities portfolio is classified as trading. All unrealized gains
and losses on this portfolio are recorded in the statement of operations. For
the years ended December 31, 2003 and 2002 net unrealized gains on trading
securities were approximately $754,000 and $383,000, respectively.

December 31, 2003 December 31, 2002
------------------------------------------------- -------------------------------------------

Cost Fair Unrealized Cost Fair Unrealized
Description Basis Value Gain (loss) Basis Value Gain (loss)
----------- ----- ----- ----------- ----- ----- -----------
Real Estate
Investment Trusts $ 177,256 $ 277,501 $ 100,245 $ 179,309 $ 206,166 $ 26,857

Mutual Funds 625,389 683,584 58,195 723,389 563,898 (159,491)
Other Equity
Securities 1,287,395 1,444,935 157,540 1,479,254 1,222,817 (256,437)
---------- ---------- ---------- ---------- ---------- ----------
Total Equity 2,090,040 2,406,020 315,980 2,381,952 1,992,881 (389,071)
---------- ---------- ---------- ---------- ---------- ----------

Securities

Corporate Debt
Securities (a) 631,340 626,326 (5,014) 651,487 525,534 (125,953)
Government Debt
Securities (a) 1,921,289 1,860,562 (60,727) 1,215,362 1,212,405 (2,957)
---------- ---------- ---------- ---------- ---------- ----------
Total Debt
Securities 2,552,629 2,486,888 (65,741) 1,866,849 1,737,939 (128,910)
---------- ---------- ---------- ---------- ---------- ----------

Total $4,642,669 $4,892,908 $ 250,239 $4,248,801 $3,730,820 ($ 517,981)
========== ========== ========== ========== ========== ==========

(a) As of December 31, 2003, corporate and government debt securities are
scheduled to mature as follows:

Cost Fair Value

2004 - 2008 $ 369,000 $ 353,000
2009-2013 325,000 338,000
2014 - thereafter 1,859,000 1,796,000
------------ ------------
$2,553,000 $2,487,000
============ ============

Net gain (loss) from investments in marketable securities for the years ended
December 31, 2003 and 2002 is summarized below:

Description 2003 2002
----------- ---- ----

Net realized gain (loss) from sales of
securities $ 37,000 ($1,356,000)
Unrealized net gain in marketable securities 754,000 383,000
Net change in sales of securities pending
delivery (24,000) (165,000)
----------- -----------
Total net gain (loss) $ 767,000 ($1,138,000)
=========== ===========

Net realized gain from sales of marketable securities consisted of approximately
$362,000 of gains net of $325,000 of losses for the year ended December 31,
2003. The comparable amounts in fiscal year 2002 were losses of approximately
$1.96 million net of $600,000 of gains. Approximately $197,000 and $240,000 of
gains in fiscal years 2003 and 2002, respectively, were recognized from the sale
of stock distributions from the Company's investments in privately held
partnerships.

Consistent with the Company's overall current investment objectives and
activities the entire marketable securities portfolio is classified as trading
(versus available for sale, as defined by generally accepted accounting
principles). Unrealized gains or loss of marketable securities on hand are
recorded in the statement of operations.

Net change in sales of securities pending delivery represents the changes in the
market value of those securities and the delivery of securities during 2003 and
2002to realize gain or loss from these transactions.

Investments in marketable securities give rise to exposure resulting from the
volatility of capital markets. The Company attempts to mitigate its risk by
diversifying its marketable securities portfolio.

4. OTHER INVESTMENTS

The Company's other investments consist primarily of nominal equity interests in
various privately-held entities, including limited partnerships whose purpose is
to invest venture capital funds in growth-oriented enterprises. The Company does
not have significant influence over any investee and no single investment
exceeds 5% of the Company's total assets. None of these

investments meet the criteria of accounting under the equity method and are
carried at cost less distributions and other than temporary unrealized losses.

The Company's other investments consist of:

Carrying Values as of December 31,
----------------------------------
Investment Focus 2003 2002
---------- ----------
Venture capital funds - technology and
communications $ 882,748 $1,558,613

Venture capital funds - diversified businesses 1,914,575 2,317,046

Restaurant development and operation 500,000 500,000

Real estate and related 745,686 640,289

High yield distressed debt funds 645,007 468,500

Other 360,000 210,000
---------- ----------
Totals $5,048,016 $5,694,448
========== ==========

As of December 31, 2003, the Company has committed to invest approximately $11.1
million in these and other similar types of entities of which approximately $9.5
million has been funded. During the years ended December 31, 2003 and 2002 the
Company contributed approximately $843,000 and $1.2 million, respectively,
toward these commitments and received distributions from these investments
(primarily cash distributions) of $1.5 million and $159,000, respectively.

The Company regularly reviews the underlying assets in its investment portfolio
for events, including but not limited to bankruptcies, closures and declines in
estimated fair value, that may indicate the investment has suffered an
other-than-temporary decline in value. When a decline is deemed
other-than-temporary, the Company recognizes an investment loss.

Net gain (loss) from other investments, which includes adjustments to write down
the carrying value of such investments as a result of an other-than-temporary
declines in value, is as follows (the total amount written down during 2003 and
2002 was approximately $114,000 and $1.5 million, respectively):

Years ended December 31,
---------------------------
2003 2002
------------ --------------
Venture capital funds - technology & ($108,507) ($760,445)
communications
Real estate and related 139,852 18,565
Venture capital funds - diversified
businesses --- (347,000)
Restaurant development and operation --- (350,000)
Income from investment in 49% owned affiliate 32,130 43,067
Others, net (12.300) 125,084
------------ --------------
Totals $51,175 ($1,270,729)
============ ==============

Other investments give rise to exposure resulting from credit risks and the
volatility in capital markets. The Company attempts to mitigate its risks by
diversifying its investment portfolio. Net gain or loss from other investments
may fluctuate significantly from period to period in the future and could have a
significant impact on the Company's net earnings.

5. INVESTMENT IN AFFILIATE

Investment in affiliate consists of CII's 49% equity interest in T.G. I.F.
Texas, Inc. (T.G.I.F.). T.G.I.F. is a closely held Texas Corporation, which owns
one net leased property in Louisiana and holds promissory notes receivable from
its shareholders, including CII and Maurice Wiener, the Chairman of the Company.
Reference is made to Notes 6 and 7 for discussion on notes payable by CII to
T.G. I.F. and notes payable by Mr. Wiener to T.G.I.F. This investment is
recorded under the equity method of accounting. For the years ended December 31,
2003 and 2002 income from investment in affiliate amounted to approximately
$32,000 and $43,000, respectively and is included in gain (loss) from other
investments in the consolidated statement of operations.

6. NOTES AND ADVANCES DUE FROM AND TRANSACTIONS WITH RELATED PARTIES

The Company has one employee who is a vice president of CII. This employee
assumed the responsibilities of the prior project manager of one of the
Company's properties.

The Company has an agreement (the "Agreement") with HMG Advisory Corp. (the
"Adviser") for its services as investment adviser and administrator of the
Company's affairs. All officers of the Company (except the project manager
described above) who are officers of the Adviser are compensated solely by the
Adviser for their services.

The Adviser is majority owned by Mr. Wiener, the Company's Chairman, with the
remaining shares owned by certain officers. 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.

Under the terms of the Agreement, the Adviser serves as the Company's investment
adviser and, under the supervision of the directors of the Company, administers
the day-to-day operations of the Company. All officers of the Company, other
than the project manager described above, who are officers of the Adviser are
compensated solely by the Adviser for their services. The Agreement is renewable
annually upon the approval of a majority of the directors of the Company who are
not affiliated with the Adviser and a majority of the Company's shareholders.
The contract may be terminated at any time on 120 days written notice by the
Adviser or upon 60 days written notice by a majority of the unaffiliated
directors of the Company or the holders of a majority of the Company's
outstanding shares.

On July 25, 2003, the shareholders approved renewal of the Advisory Agreement
between the Company and the Adviser for a term commencing January 1, 2004, and
expiring December 31, 2004. All terms of the existing Advisory Agreement will
remain the same.

For the years ended December 31, 2003 and 2002, the Company and its subsidiaries
paid the Adviser approximately $977,000 and $660,000 in fees, respectively, of
which $900,000 represented regular compensation and approximately $77,000
represented incentive compensation for 2003. There was no incentive fee for
2002. The Adviser is also the manager for certain of the Company's affiliates
and received management fees of approximately $17,000 and $30,000 in 2003 and
2002, respectively, for such services. Furthermore, for fiscal years 2003 and
2002 the Company paid approximately $85,000 and $60,000, respectively to one of
the Company's officers in his capacity as project manager of a specific
property, as described above.

At December 31, 2003 and 2002, the Company had amounts due from the Adviser of
approximately $259,000 and $648,000, respectively. In March 2004 and 2003,
respectively, the Adviser made cash payments of $25,000 and $500,000 on amounts
due to the Company. The amounts due from the Adviser bears interest at prime
plus 1% and is due on demand. At December 31, 2003 and 2002, the Company had
amounts due from Courtland Group, Inc. (CGI) (the former adviser principally
owned by Mr. Wiener) of approximately $303,000 and $317,000, respectively. In
March 2003 a cash payment of approximately $17,000 was received from CGI. This
amount bears interest at Prime +1% and is due on demand.

The Adviser leases 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 expiring in November 2004.

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
stock for $358,750. The Company received $70,000 in cash and promissory notes
for the balance of $288,750. These promissory notes bear interest at 6.18% per
annum payable quarterly in arrears on the first day of January, April, July and
October. The balance of the notes as of December 31, 2003 is $258,750. A payment
of $30,000 was received in 2003. The outstanding principal is due on August 23,
2005 and the notes are collateralized by the stock.

The Company, via its 75% owned joint venture (SBA), has a note receivable from
Transco (a 43% shareholder of the Company) of $300,000 plus accrued interest of
approximately $139,000 and $147,000 as of December 31, 2003 and 2002,
respectively. This note bears interest at the prime rate and is due on demand.

Mr. Wiener is an 18% shareholder and the chairman and director of T.G.I.F.
Texas, Inc., a 49% owned affiliate of CII (See Note 3). As of December 31, 2003
and 2002, T.G.I.F. had amounts due from CII in the amount of approximately
$3,661,000. These amounts are due on demand and bear interest at the prime rate.
All interest due has been paid. T.G.I.F. also owns 10,000 shares of the
Company's common stock it purchased at market value in 1996.

As of December 31, 2003 and 2002, T.G.I.F. had amounts due from Mr. Wiener in
the amount of approximately $707,000. These amounts bear interest at the prime
rate and principal and interest are due on demand. All interest due has been
paid.

HMGA (the Adviser of the Company) received management fees from T.G.I.F. of
$4,000 and $18,000 for the years ended December 31, 2003 and 2002. Mr. Wiener
received consulting and director's fees from T.G.I.F totaling $29,000 and
$45,000 for the years ended December 31, 2003 and 2002, respectively.

7. MORTGAGES AND NOTES PAYABLES

December 31,
------------------ ----- ------------------
2003 2002
------------------ ------------------
Collateralized by Investment Properties (Note 2)
------------------------------------------------

Hotel, private club and yacht slips:
Mortgage loan payable with interest fixed at 6.86% through September 29,
2004. Monthly payments of principal and interest based on 25-year
amortization. All outstanding principal due at
maturity on September 29, 2010. $3,414,302 $3,813,349

Shopping center:
Mortgage loan payable with interest fixed at 7.5% payable
monthly with principal due at maturity in November 2004. 300,000 300,000

Mortgage loan payable with interest fixed at 7.5% payable
monthly with principal due at maturity in November 2004. 350,000 350,000

Office building:
Mortgage loan payable, interest at prime plus 3/4% (4.75% as of
December 31, 2003). Payment of principal and interest monthly
with maturity in August 2007. 361,254 378,245

Land held for development:
Mortgage loan payable, interest at 1% over prime (5.00% at December 31,
2003) payable quarterly with interest due on
demand. Note paid off in September 2003. --- 120,141

Other (unsecured) (Note 6):
---------------------------
Note payable to affiliate:
Note payable is to affiliate T.G.I.F., interest at prime (4.00%
at December 31, 2003) payable annually. Principal outstanding
due on demand. 3,660,671 3,660,671
------------------ ------------------

Totals $8,086,227 $8,622,406
================== ==================

A summary of scheduled principal repayments or reductions for all types of notes
and mortgages payable is as follows:

Year ending December 31, Amount
----------------------- ------
2004 $3,840,386
2005 839,149
2006 200,514
2007 212,011
2008 222,862
2009 and thereafter 2,771,305
----------
Total $8,086,227

8. INCOME TAXES

The components of income (loss) before income taxes and the effect of
adjustments to tax computed at the federal statutory rate for the years ended
December 31, 2003 and 2002 were as follows:

2003 2002
---- ----

Income (loss) before income taxes $504,000 ($2,433,000)
-------------------------------------------------------------------------------
Computed tax at federal statutory rate of 34% 171,000 (827,000)
State taxes, net of federal income tax benefit 25,000 (70,000)
REIT related exclusions 136,000 90,000
Other items, net (9,000) (62,000)
-------------------------------------------------------------------------------
Provision for (benefit from) income taxes $323,000 ($869,000)
===============================================================================
Effective tax rate 57% (36%)
-------------------------------------------------------------------------------

The provision for (benefit from) income taxes in the consolidated statement of
operations consists of the following:

Year ended December 31, 2003 2002
----------------------------------------- -------------
Current:
Federal $ -- ($154,000)
State -- (53,000)
------------------------------- --------- ---------
-- (207,000)
Deferred:
Federal 296,000 (605,000)
State 27,000 (57,000)
------------------------------- --------- ---------
323,000 (662,000)
------------------------------- --------- ---------
Total $ 323,000 ($869,000)
=============================== ========= =========

The Company follows the liability method of accounting for income taxes. Under
this method, deferred tax liabilities and assets are recognized for the expected
future tax consequences of

temporary differences between the carrying amount and the tax basis of assets
and liabilities at each year-end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. As a result of timing differences associated with the carrying
value of other investments and depreciable assets and the future benefit of a
net operating loss, the Company has recorded a net deferred tax asset of
$478,000. A valuation allowance against deferred tax asset has not been
established as it is more likely than not, based on the Company's previous
history, that these assets will be realized.

As of December 31, 2003 and 2002, the components of the deferred tax assets and
liabilities are as follows:

As of December 31, As of December 31,
2003 2002
Deferred tax Deferred tax
-----------------------------------------------------------
Assets Liabilities Assets Liabilities
----------- --------------- ------------- -------------

Net operating loss carry forward $705,000 $602,000
Excess of book basis of 49% owned
corporation over tax basis
583,000 570,000
Excess of tax basis over book basis of
investment property 205,000 191,000
Unrealized gain/loss on marketable
securities 44,000 161,000
Excess of tax basis over book basis of
other investments 292,000 97,000 462,000 45,000
----------- --------------- ------------- -------------
Totals $1,202,000 $724,000 $1,416,000 $615,000
=========== =============== ============= =============

9. STOCK-BASED COMPENSATION

The Company applies APB Opinion 25, Accounting for Stock Issued to Employees,
and related Interpretations in accounting for its stock option plan. Under APB
Opinion 25, if the exercise price of the Company's employee stock options equals
or exceeds the market price of the underlying stock on the date of grant, no
compensation is recognized. In November 2000, the Company's Board of Directors
authorized the 2000 Stock Option Plan, which was approved by the shareholders in
June 2001. The Plan provides for the grant of options to purchase up to 120,000
shares of the Company's common stock to the officers and directors of the
Company. Under the 2000 Plan, options are vested immediately upon grant and may
be exercised at any time within ten years from the date of grant. Options are
not transferable and expire upon termination of employment, except to a limited
extent in the event of retirement, disability or death of the grantee. On June
25, 2001, options were granted to all officers and directors to purchase an
aggregate of 86,000 common shares at no less than 100% of the fair market value
at the date of grant. The average exercise price of the options granted in 2001
was $7.84 per share. The Company's stock price on the date of grant was $7.57
per share. There were no options granted in 2003 or 2002.

A summary of the status of the Company's stock option plan as of December 31,
2003 and 2002, and changes during the years ending on those dates are presented
below:

As of December 31, 2003 As of December 31, 2002
----------------------------------------------------------------
Shares Weighted-Average Shares Weighted-Average
Exercise Exercise
Price Price
------------------------------------------------------------------------------------------------------

Outstanding at beginning of year 86,000 $7.84 86,000 $7.84
Granted -- -- -- --
Exercised -- -- -- --
Forfeited -- -- -- --

------------------------------------------------------------------------------------------------------

Outstanding at end of year 86,000 $7.84 86,000 $7.84

------------------------------------------------------------------------------------------------------

Options exercisable at year-end 86,000 $7.84 86,000 $7.84
Weighted average fair value of
options granted during the year -- -- -- --
======================================================================================================

10. OPERATING LEASES AS LESSOR

Lease of Grove Isle hotel property. In November 1996, the Company entered into a
long-term lease and a Master Agreement with Westgroup Grove Isle Associates,
Ltd. ("Westgroup"), an affiliate of Noble House Resorts, Inc. which is a
national operator of hotels and resorts. The Master Agreement, among other
things, transferred the operations of the Grove Isle hotel and club to
Westgroup.

The initial term of the lease with Westgroup is ten years and calls for annual
net base rent, as amended in 1999, of $918,400, plus real estate taxes and
property insurance, payable in monthly installments. In addition to the base
rent Westgroup pays GIA participation rent consisting of a portion of
Westgroup's operating surplus, as defined in the lease agreement. Participation
rent is due at end of each lease year. There has been no participation rent
since the inception of the lease. The 1999 lease amendment also calls for an
increase in base rent commencing January 1, 2002 in accordance with changes in
the Consumer Price Index ("CPI"). Base rent for 2003 was $986,986, increasing to
$1,003,157 in 2004. Concurrently, participation rent will be reduced by the
amount by which base rent increases solely as a result of CPI increases for the
lease year.

During 1997 and in conjunction with the aforementioned agreements, GIA advanced
$500,000 to the principal owner of the tenant of the Grove Isle property. GIA
received a promissory note bearing interest at 8% per annum with interest
payments due quarterly beginning on July 1, 1997 and all principal due at
maturity in 2006. All interest payments due have been received.

Minimum lease payments receivable. The Company leases its commercial and
industrial properties under agreements for which substantially all of the leases
specify a base rent and a

rent based on tenant sales (or other benchmark) exceeding a specified
percentage. Such percentage rent was not material in 2003 and 2002.

These leases are classified as operating leases and generally require the tenant
to pay all costs associated with the property. Minimum annual rentals on
non-cancelable leases in effect at December 31, 2003, are as follows:

Year ending December 31, Amount
----------------------- ------
2004 $1,348,000
2005 1,247,000
2006 1,083,000
2007 294,000
2008 294,000
Subsequent years 1,072,000
-----------
Total $5,339,000
===========

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

On October 8, 2003 the Company reported it terminated the services of BDO
Seidman, LLP and at the same time selected the accounting firm of Berenfeld,
Spritzer, Shechter & Sheer as independent auditors for the 2003 fiscal year.
There were no disagreements with accountants on accounting and financial
disclosure matters. Reference is made to the separate Form 8-K report filed by
the Company on October 8, 2003.

Item 8A. Controls and Procedures.
----------------------------------
Our Chief Executive Officer and Chief Financial Officer, after evaluating the
effectiveness of our disclosure controls and procedures (as defined in the
Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered
by the Annual Report on Form 10-KSB have concluded that, based on such
evaluation, our disclosure controls and procedures were adequate and designed to
ensure that material information relating to us and our consolidated
subsidiaries, which we are required to disclose in the reports we file or submit
under the Exchange Act of 1934, was made known to them by others within those
entities and reported within the time periods specified in the SEC's rules and
forms.

There were no changes in our internal controls over financial reporting
identified in connection with the evaluation of such internal control over
financial reporting that occurred during our last fiscal year which have
materially affected or are reasonably materially likely to affect, our internal
control over financial reporting.

Part III.

Item 9. Directors, Executive Officers and Control Persons.
-----------------------------------------------------------
Listed below is certain information relating to the executive officers and
directors of the Company:

Principal Occupation and Employment other than With the Company
During the Past Five
Years - Other
Name and Office Age Directorships
---------------------------------------------------------------------------------------------------------------------

Maurice Wiener; Chairman of the 62 Chairman of the Board and Chief Executive Officer of the Adviser;
Board of Directors and Chief Executive Trustee, Transco; Director, T.G.I.F. Texas, Inc.; Chairman
Executive Officer of the Board and Chief Executive Officer of Courtland Group, Inc.

Lawrence I. Rothstein; Director, 51 Director, President and Secretary of the Adviser; Trustee and Vice
President, Treasurer and Secretary President of Transco; Director, President and Secretary of Courtland
Group, Inc. Vice President and Secretary, T.G.I.F. Texas, Inc.

Carlos Camarotti; Vice 43 Vice President - Finance and Assistant Secretary of the Adviser;
President-Finance and Assistant Vice President - Finance and Assistant Secretary of Courtland Group,
Secretary Inc.

Walter Arader; Director 85 President, Walter G. Arader and Associates (financial and management
consultants); Director, Review Publications, Inc., La France Corp.;
Former Secretary of Commerce, Commonwealth of Pennsylvania.

Harvey Comita; Director 74 Business Consultant; Trustee of Transco Realty Trust; President and
Director of Pan-Optics, Inc. (1971-1991); Director of Mediq,
Incorporated (1981-1991);

Clinton Stuntebeck; Director 65 Retired Partner, Schnader, Harrison, Segal, Lewis, LLP (2004);
Senior Partner, Schnader, Harrison, Segal, Lewis, LLP

All executive officers of the Company were elected to their present positions to
serve until their successors are elected and qualified at the 2004 annual
organizational meeting of directors immediately following the annual meeting of
shareholders. All directors of the Company were elected to serve until the next
annual meeting of shareholders and until the election and qualification of their
successors. All directors and executive officers have been in their present
position since before 1996, except for Mr. Rothstein and Mr. Stuntebeck. Mr.
Rothstein became president and director of the Company in 1998 and prior to that
was senior vice president of the Company.

Code of Ethics
We have adopted a Code of Ethics that applies to all our directors, officers
(including our principal executive officer, principal financial officer,
principal accounting officer and controller

and HMG Advisory Corp. (HMGA) and its employees in all instances in which HMGA
is acting on behalf of the Company. The Company will provide to any person
without charge, upon written request, a copy of the Code of Ethics including any
amendments as well as any waivers that are required to be disclosed by the rules
of the SEC or the American Stock Exchange.

Audit Committee and Audit Committee Financial Expert

The Company has a separately designated standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange act of 1934, as
amended (the "Exchange Act"). The members of the Audit Committee are Messrs.
Arader and Comita. The Board of Directors has determined that each of Messrs.
Arader and Comita is (1) an " 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.

Item 10. Executive Compensation.
--------------------------------
Executive officers received no cash compensation from the Company in their
capacity as executive officers. Reference is made to Item 1. Business and Item
6. Management's Discussion and Analysis or Plan of Operation for information
concerning fees paid to the Adviser.

Compensation of Directors. Each Director receives an annual fee of $8,000, plus
expenses and $500 per each Board of Directors meeting attended.

Stock Options. In November 2000, the Company's Board of Directors authorized the
2000 Stock Option Plan (the "Plan"), which was approved by the shareholders in
June 2001. The Plan, which permits the grant of qualified and non-qualified
options expires in 2010, and is intended to provide incentives to the directors
and employees (the "employees") of the Company, as well as to enable the Company
to obtain and retain the services of such employees. The Plan is administered by
a Stock Option Committee (the "Committee") appointed by the Board of Directors.
The Committee selects those key officers and employees of the Company to whom
options for shares of common stock of the Company shall be granted. The
Committee determines the purchase price of shares deliverable upon exercise of
an option; such price may not, however, be less than 100% of the fair market
value of a share on the date the option is granted. Payment of the purchase
price may be made in cash, Company stock, or by delivery of a promissory note,
except that the par value of the stock must be paid in cash or Company stock.
Shares purchased by delivery of a note must be pledged to the Company. Shares
subject to an option may be purchased by the optionee within ten years from the
date of the grant of the option. However, options automatically terminate if the
optionee's employment with the Company terminates other than by reason of death,
disability or retirement. Further, if, within one year following exercise of any
option, an optionee terminates his employment other than by reason of death,
disability or retirement, the shares acquired upon exercise of such option must
be sold to the Company at a price equal to the lesser of the purchase price of
the shares or their fair market value.

On June 25, 2001, options were granted to all officers and directors to purchase
an aggregate of 86,000 common shares at no less than 100% of the fair market
value at the date of grant. The average exercise price of the options granted in
2001 is $7.84 per share. The Company's stock price on the date of grant was
$7.57 per share.

Item 11. Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------
Set forth below is certain information concerning common stock ownership by
directors, executive officers, directors and officers as a group, and holders of
more than 5% of the outstanding common stock.

Shares Held as of March 4, 2004
-------------------------------

Shares Owned by Named Additional Shares in Which the named
Persons & Members of His Person Has, or Participates in, the Total Shares & Percent
Name (6) Family (1) Voting or Investment Power (2) of Class
------------------------------------------------------------------------------------------------------------------------

Maurice Wiener 65,100 (4) 541,830 (3), (5) 606,930 52%

Lawrence Rothstein 50,000 (4) 541,830 (3) 591,830 50%

Walter G. Arader 15,400 (4) 15,400 1%

Harvey Comita 10,000 (4) 477,300 (6) 487,300 41%

All 6 Directors and 151,000 (4) 541,830 (3) 692,830 59%
Officers as a Group

Emanuel Metz 59,500 59,500 5%
CIBC Oppenheimer Corp.
One World Financial Center
200 Liberty Street
New York, NY 10281

Transco Realty Trust 477,300 (5) 477,300 41%
1870 S. Bayshore Drive
Coconut Grove, FL 33133

-------------------------------
(1) Unless otherwise indicated, beneficial ownership is based on sole
voting and investment power.

(2) Shares listed in this column represent shares held by entities with
which directors or officers are associated. Directors, officers and
members of their families have no ownership interest in these shares.

(3) This number includes the number of shares held by Transco Realty Trust
(477,300 shares), Courtland Group, Inc. (54,530 shares) and T.G.I.F.
Texas, Inc. (10,000 shares). Several of the directors of the Company
are directors, trustees, officers or shareholders of certain of those
firms.

(4) This number includes options granted under the 2000 Stock Option Plan,
none of which have been exercised. These options have been granted to
Mr. Wiener, 30,000; Mr. Rothstein, 25,000; 5,000 each to Mr. Arader and
Mr. Comita; and 16,000 to two officers. Reference is made to Item 10.
Executive Compensation for further information about the 2000 Stock
Option Plan.

(5) Mr. Wiener holds approximately 34% and 65% of the stock of Transco and
Courtland Group Inc., respectively, and may therefore be deemed to be
the beneficial owner of the shares of the Company held by Transco and
Courtland Group, Inc.

(6) This number represents the number of shares held by Transco Realty
Trust, of which, Mr. Comita is a Trustee.

(7) Except as otherwise set forth, the address for theses individuals is
1870 South Bayshore Drive, Coconut Grove, Florida 33133.

Item 12. 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 44% shareholder of the Company of which Mr. Wiener is its executive
trustee of and holds 37% of its stock.

HMG Advisory Corp. (the "Adviser").
---------------------------------
The day-to-day operations of the Company are handled by the Adviser, as
described above under Item 1. Business "Advisory Agreement." The Adviser is
majority owned by Mr. Wiener, its Chairman and CEO.

Reference is made to Item 1. Business and Item 6. Management's Discussion and
Analysis or Plan of Operation for further information about the remuneration of
the Adviser.

Courtland Group, Inc. ("CGI").
---------------------------------
CGI served as the Company's investment Adviser until January 1, 1998 and owns
approximately 32% of Transco's stock and owns approximately 5% of the Company's
common stock. CGI is 65% owned by Mr. Wiener, its Chairman and CEO

Courtland Investments, Inc. ("CII").
---------------------------------
The Company holds a 95% non-voting interest and Masscap Investment Company
("Masscap") holds a 5% voting interest in CII. In May 1998, the Company and
Masscap 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 ("GIYCA") and Grove Isle Marina, Inc. CII also owns
15% of Grove Isle Associates, Ltd., and the other 85% is owned by the Company.

T.G.I.F. Texas, Inc. ("T.G.I.F.").
---------------------------------
CII owns approximately 49% of the outstanding shares of T.G.I.F. Mr. Wiener is a
director and chairman of T.G.I.F. and owns, directly and indirectly,
approximately 18% of the outstanding shares of T.G.I.F. T.G.I.F also owns 10,000
shares of the Company's stock.

HMG-Fieber Associates ("Fieber").
---------------------------------
The Company owns approximately 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. 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, 2003 and 2002 the Adviser owed the Company approximately
$259,000 and $648,000, respectively. In March 2004 and 2003, the Advisor made
cash payments of $25,000 and $500,000, respectively, toward amounts due to the
Company. Amounts due from the Adviser bear interest at the prime rate plus 1%
payable monthly, with principal due on demand.

South Bayshore Associates ("SBA")
---------------------------------
SBA is a joint venture in which Transco and the Company hold interests of 25%
and 75%, respectively. The sole major asset of SBA is a demand note from
Transco, bearing interest at the prime rate, with an outstanding balance of
approximately $439,000 in principal and interest as of December 31, 2003
compared to a balance of $447,000 as of December 31, 2002.

The Company also holds a demand note from SBA bearing interest at the prime rate
plus 1% with an outstanding balance as of December 31, 2003 and 2002 of
approximately $1,100,000, in principal and accrued interest. Interest payments
of $20,000 were made in 2003 and 2002. Accrued and unpaid interest is not added
to the principal. Because the Company consolidates SBA, the note payable and
related interest income is eliminated in consolidation.

CGI. As of December 31, 2003 and 2002, CGI owed the Company approximately
$303,000 and $317,000, respectively. In March 2003 a cash payment of
approximately $17,000 was received from CGI. Amounts due from CGI bear interest
at the prime rate plus 1% payable monthly, with principal due on demand.

CII. The Company holds a demand note due from CII bearing interest at the prime
rate plus 1% with an outstanding balance of $3,401,000 and $3,111,000 as of
December 31, 2003 and 2002, respectively. During 2003 and 2002, advances from
the Company to CII totaled $743,000 and $769,000, respectively. Repayments from
CII to the Company during 2003 and 2002 were $483,000 and $166,000,
respectively. Accrued and unpaid interest is capitalized and included in
advances. Because CII is a 95%-owned consolidated subsidiary of the Company, the
note payable and related interest is eliminated in consolidation.

In 1986, CII acquired from the Company the rights to develop the marina at Grove
Isle for a promissory note of $620,000 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 is eliminated in consolidation.

The Company's demand note due from GIYCA was repaid during 2002.

CII compensates one employee directly in his capacity as project manager for the
Company's Texas property. This employee is Mr. Bernard Lerner who is a vice
president of Courtland Investments, Inc. and is also a cousin of the Company's
Chairman and CEO Mr. Maurice Wiener. For the years ended December 31, 2003 and
2002 CII paid Mr. Lerner $85,000 and $60,000, respectively.

T.G.I.F. As of December 31, 2003 and 2002, CII owed approximately $3,661,000 to
T.G.I.F. All advances between CII and T.G.I.F. are due on demand and bear
interest at the prime rate plus 1%. All interest due has been paid. As of
December 31, 2003 and 2002, T.G.I.F. had amounts due from Mr. Wiener of
approximately $707,000. These amounts are due on demand and bear interest at the
prime rate. All interest due has been paid. The Adviser received management fees
of $4,000 and $18,000 for the years ended December 31, 2003 and 2002,
respectively. Mr. Wiener received consulting and director's fees from T.G.I.F of
$29,000 and $45,000 for the years ended December 31, 2003 and 2002,
respectively. Also, T.G.I.F. owns 10,000 shares of the Company which were
purchased in 1996 at the market value.

Exercised stock options and related promissory notes.
-----------------------------------------------------
On August 24, 2000, certain officers and directors of the Company exercised all
of their stock options and purchased a total of 70,000 shares of the Company's
common stock for $358,750. The Company received $70,000 in cash and $288,750 in
promissory notes for the balance. These promissory notes bear interest at 6.18%
per annum payable quarterly in arrears on the first day of January, April, July
and October. The balance of the notes as of December 31, 2003 is $258,750. A
payment of $30,000 was received in 2003. The outstanding principal is due on
August 23, 2005 and the notes are collateralized by the stock.

Item 13. Exhibits and Reports on Form 8-K.
-----------------------------------------

(a) Exhibits listed in the Index to Exhibits.

(b) Reports on Form 8-K: On October 8, 2003 the Company filed a Form
8-K which reported the change in the Company's certifying
accountant.

Item 14. Principal Accountants Fees and Services.
------------------------------------------------
The following table sets forth fees billed to the Company by the Company's
independent auditors for the year ended December 31, 2003 and December 31, 2002
for (i) services rendered for the audit of the Company's annual financial
statements and the review of the Company's quarterly financial statements, (ii)
services rendered that are reasonably related to the performance of the audit or
review of the Company's financial statements that are not reported as Audit
Fees, and (iii) services rendered in connection with tax preparation,
compliance, advice and assistance. The Audit Committee pre-approved all services
rendered by the Company's independent auditors.

Principal Accountant Fees and Services
For the fiscal year ended December 31, 2003 December 31, 2002
--------------------------------------------- ------------------------------- -----------------------------

Audit Fees $56,000 $87,000
Audit - Related Fees 3,222 --
Tax Fees 20,000 45,000
------------------------------- -----------------------------
Total Fees $79,222 $132,000
=============================== =============================

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

HMG/Courtland Properties, Inc.

March 19, 2004 By:
-----------------------
Maurice Wiener
Chairman and Chief
Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.

_/s/ Maurice Wiener March 19, 2004
------------------------
Maurice Wiener
Chairman of the Board
Chief Executive Officer

_ /s/ Lawrence I. Rothstein March 19, 2004
------------------------
Lawrence I. Rothstein
Director, President,
Treasurer & Secretary
Principal Financial Officer

_/s/ Walter G. Arader March 19, 2004
------------------------
Walter G. Arader, Director

_/s/ Harvey Comita March 19, 2004
------------------------
Harvey Comita, Director

_/s/ Clinton Stuntebeck March 19, 2004
------------------------
Clinton Stuntebeck, Director

_/s/ Carlos Camarotti March 19, 2004
---------------------
Carlos Camarotti
Vice President - Finance and Controller
Principal Accounting Officer

EXHIBIT INDEX
Description

(3) (a) Amended and Restated Certificate of Incorporation Incorporated by reference to Annex A of the
May 29, 2001 Proxy Statement.

(b)
By-laws Incorporated by reference to Exhibit 6.1
to the Registration Statement of Hospital
Mortgage Group, Inc. on Form S-14, No. 2-64,
789, filed July 2, 1979.

(10) (a) Amended and restated lease agreement between Grove Incorporated by reference to Exhibit 10(d) to
Isle Associates, Ltd. and Westgroup Grove Isle the 1996 Form 10-KSB.
Associates, Ltd. dated November 19, 1996.

(b) Master agreement between Grove Isle Associates, Ltd. Incorporated by reference to Exhibit 10(e) to
Grove Isle Clubs. Inc., Grove Isle Investments, Inc. the 1996 Form 10-KSB
and Westbrook Grove Isle Associates, Ltd. dated
November 19, 1996.

(c) Agreement Re: Lease Termination between Grove Isle Incorporated by reference to Exhibit 10(f)
Associates, Ltd. to And Grove Isle Club, Inc. to the 1996 Form 10-KSB.
dated November 19, 1996.

(d) Amended and restated agreement between NAF Incorporated by reference to Exhibit 10(f) to
Associates and the Company, dated August 31, 1999. the 1999 Form 10-KSB.

(e) Amendment to Amended and restated lease agreement between Incorporated by reference to Exhibit 10(g) to
Grove Isle Associates, Ltd. and Westgroup Grove Isle the 1999 Form 10-KSB.
Associates, Ltd. dated December 10, 1999.

(f) Lease agreement between Courtland Investments,
Inc. and HMG Advisory Corp. dated December 1, 1999. Incorporated by reference to Exhibit 10(h) to
the 1999 Form 10-KSB.

(g) 2000 Incentive Stock Option Plan of HMG/Courtland Incorporated by reference to Exhibit 10(h) to
Properties, Inc. the 2001 Form 10-KSB.

(h) Amended and Restated Advisory Agreement between Incorporated by reference to Exhibit 10(i) and
the Company and HMG Advisory Corp. effective January 10(j) to the 2002 Form 10-KSB.
1, 2003.

(31) Code of Ethics for Chief Executive Officer and Senior Financial
Officers dated May 2003 Included herein

(32) (a) Certification of Chief Executive Officer as Included herein.
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002

(b) Certification of Chief Financial Officer as adopted Included herein.
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(33) (a) Certification of Chief Executive Officer pursuant to 18 Included herein.
U.S.C. ss. 1350 as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002

(b) Certification of Chief Financial Officer pursuant to Included herein.
18 U.S.C. ss. 1350 as Included herein. adopted pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002

Subsidiaries of the Company:

HMG-FIEBER ASSOCIATES, a Connecticut Joint Venture
SOUTH BAYSHORE ASSOCIATES, a Florida Joint Venture
HMG FASHION SQUARE, INC., a Florida Corporation
FASHION SQUARE PARTNERSHIP, a Florida Limited Liability Partnership
COURTLAND INVESTMENTS, INC., a Delaware Corporation
GROVE ISLE INVESTMENTS, INC., a Florida Corporation
GROVE ISLE MARINA, INC., a Florida Corporation
GROVE ISLE YACHT CLUB ASSOCIATES, a Florida Joint Venture
GROVE ISLE ASSOCIATES, LTD., a Florida Limited Partnership
GROVE ISLE CLUB, INC., a Florida Corporation
HMG HOUSTON GROVE, INC., a Texas Corporation
THE GROVE TOWNE CENTER-TEXAS, LTD. , a Texas Limited Partnership
260 RIVER CORP., a Vermont Corporation
FASHION SQUARE OWNER'S ASSOCIATION, a Florida Corporation
COURTLAND KEY WEST, INC., a Florida Corporation

Exhibit Index
-------------

Description/Reference
Exhibit 1
--------------------------------------------------------------------------------

HMG/Courtland Properties, Inc. Code of Ethics for Chief Executive Officer and
Senior Financial Officers dated May 1, 2003

Exhibit 2a
--------------------------------------------------------------------------------

Certification of Chief Executive Officer as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

Exhibit 2b
--------------------------------------------------------------------------------

Certification of Chief Financial Officer as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

Exhibit 3
--------------------------------------------------------------------------------

Certification of Chief Executive Officer pursuant to18 U.S.C.ss.1350 as adopted
pursuant toss.906 of the Sarbanes-Oxley Act of 2002

EXHIBIT 1: HMG/COURTLAND PROPERTIES, INC. CODE OF ETHICS FOR CHIEF

EXECUTIVE OFFICER AND SENIOR FINANCIAL OFFICERS (May 2003)

1. Purpose.
--------

The Board of Directors ("Board") of HMG/Courtland Properties, Inc.
("Company") has adopted the following Code of Ethics ("Code") to apply to the
Company's Chief Executive Officer, Chief Financial Officer and Chief Accounting
Officer (collectively defined as the "Senior Financial Officers"). This Code is
intended to focus Senior Financial Officers on areas of ethical risk, provide
guidance to help them recognize and deal with ethical issues, provide mechanisms
to report unethical conduct, foster a culture of honesty and accountability,
deter wrongdoing and promote fair and accurate disclosure and financial
reporting.

No code or policy can anticipate every situation that may arise.
Accordingly, this Code is intended to serve as a source of guiding principles.
Senior Financial Officers are encouraged to bring questions about particular
circumstances that may involve one or more of the provisions of this Code to the
attention of the Chair of the Audit Committee, who may consult with inside or
outside legal counsel as appropriate.

2. Ethical Conduct.
----------------

Each Senior Financial Officer is expected to adhere to a high standard
of ethical conduct. The good name of the Company depends on the way Senior
Financial Officers conduct business and the way the public perceives that
conduct. Unethical actions, or the appearance of unethical actions, are not
acceptable. Senior Financial Officers will be expected to be guided by the
following principles in carrying out their responsibilities:

|X| Loyalty. Senior Financial Officers should not be, or appear to
be, subject to influences, interests or relationships that
conflict with the best interests of the Company.

|X| Compliance with Applicable Laws. Senior Financial Officers are
expected to comply with all laws, rules and regulations
applicable to the Company's activities.

|X| Observance of Ethical Standards. Senior Financial Officers must
adhere to high ethical standards in the conduct of their duties.
These include honesty and fairness.

3. Integrity of Records and Financial Reporting.
---------------------------------------------

Senior Financial Officers are responsible for the accurate and reliable
preparation and maintenance of the Company's financial records. Accurate and
reliable preparation of financial records is of critical importance to proper
management decisions and the fulfillment of the Company's financial, legal and
reporting obligations. Diligence in accurately preparing and maintaining the
Company's records allows the Company to fulfill its reporting obligations and to
provide shareholders, governmental authorities and the general public with full,
fair, accurate, timely and understandable disclosure. Senior Financial Officers
are responsible for establishing and maintaining adequate disclosure controls
and procedures and internal controls and procedures, including procedures which
are designed to enable the Company to: (a) accurately document and account for
transactions on the books and records of the Company; and (b) maintain reports,
vouchers, bills, invoices, payroll and service records, business measurement and
performance records and other essential data with care and honesty.

4. Conflicts of Interest.
----------------------

Senior Financial Officers must avoid any conflicts of interest between
themselves and the Company. Any situation that involves, or may involve, a
conflict of interest with the Company should be disclosed promptly to the Chair
of the Audit Committee, who may consult with inside or outside legal counsel as
appropriate.

A "conflict of interest" can occur when an individual's personal
interest is adverse to, or may appear to be adverse to, the interests of the
Company as a whole. Conflicts of interest also arise when an individual, or a
member of his or her immediate family, receives improper personal benefits as a
result of his or her position with the Company. "Immediate family" includes that
person's spouse, parents, children, siblings, mothers- and fathers-in-law, sons-
and daughters-in-law and brothers and sisters-in-law.

This Code does not attempt to describe all possible conflicts of
interest which could develop. Some of the more common conflicts from which
Senior Financial Officers must refrain, however, are set forth below.

o Improper conduct and activities. Senior Financial Officers may not
engage in any conduct or activities that are inconsistent with the
Company's best interests or that disrupt or impair the Company's
relationship with any person or entity with which the Company has or
proposes to enter into a business or contractual relationship.

o Compensation from non-Company sources. Senior Financial Officers may
not accept compensation (in any form) for services performed for the
Company from any source other than the Company.

o Gifts. Senior Financial Officers and members of their immediate
families may not accept gifts from persons or entities where any such
gifts are being made in order to influence their actions in their
position with the Company, or where acceptance of the gifts could
create the appearance of a conflict of interest.

o Personal use of Company assets. Senior Financial Officers may not use
Company assets, labor or information for personal use, other than
incidental personal use, unless approved by the Chair of the Audit
Committee or as part of a compensation or expense reimbursement
program.

5. Corporate Opportunities.
------------------------

Senior Financial Officers are prohibited from: (a) taking for
themselves personally opportunities related to the Company's business; (b) using
the Company's property, information, or position for personal gain, or (c)
competing with the Company for business opportunities.

6. Confidentiality.
----------------

Senior Financial Officers should maintain the confidentiality of
information entrusted to them by the Company and any other confidential
information about the Company, its business, customers or suppliers, that comes
to them, from whatever source, except when disclosure is authorized or legally
mandated. For purposes of this Code, "confidential information" includes all
non-public information relating to the Company, its business, customers or
suppliers.

7. Compliance with Laws, Rules and Regulations.
--------------------------------------------

Senior Financial Officers shall comply with laws, rules and regulations
applicable to the Company, including insider trading laws. Transactions in
Company securities are governed by the Company's Insider Trading Policy.

8. Encouraging the Reporting of any Illegal or Unethical Behavior.
---------------------------------------------------------------

Senior Financial Officers should promote ethical behavior and create a
culture of ethical compliance. Senior Financial Officers should foster an
environment in which the Company: (a) encourages employees to talk to
supervisors, managers and other appropriate personnel when in doubt about the
best course of action in a particular situation; (b) encourages employees to
report violations of laws, rules and regulations to appropriate personnel; and
(c) informs employees that the Company will not allow retaliation for reports
made in good faith.

9. Conclusion.
-----------

Senior Financial Officers should communicate any suspected violations
of this Code promptly to the Chair of the Audit Committee. Violations will be
investigated by the Board or by a person or persons designated by the Board and
appropriate disciplinary action will be taken in the event of any violations of
the Code, up to and including termination.