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, 2002

[ ] 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.: 55

The issuer's revenues for its most recent fiscal year were ($20,250)

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 18, 2003 was $3,345,876.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
15, 2003.

TABLE OF CONTENTS

PART I PAGE

Item 1. Description of Business 3

Item 2. Description of Property 6

Item 3. Legal Proceedings 9

Item 4. Submission of Matters to a Vote of Security Holders 9

PART II

Item 5. Market for Common Equity and Related Stockholder Matters 10

Item 6. Management's Discussion and Analysis or Plan of Operation 11

Item 7. Financial Statements 19

Item 8. Changes in and Disagreements with Accountants
On Accounting and Financial Disclosure 44

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 46

Item 11. Security Ownership of Certain Beneficial Owners and Management 47

Item 12. Certain Relationships and Related Transactions 48

Item 13. Exhibits and Reports on Form 8-K 50

Item14. Controls and Procedures 51

SIGNATURES
52

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") principal 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 and Rhode Island. 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, 2002, the Company has committed to
invest approximately $11.3 million in these types of investments, of which
approximately $9.7 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.

Effective in December 2001, management reviewed its marketable securities
portfolio and determined that the classification of its entire portfolio as
trading (versus available for sale, as defined by generally accepted accounting
principles) would be more consistent with Company's overall current investment
objectives and activities. Among the factors considered in the decision was the
increase in trading activities during the latter part of 2001. The Company's
Audit Committee and Board of Directors have approved this change in
classification. As a result, beginning December 31, 2001, 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, 2002 and 2001, the market value of investments in marketable securities
amounted to approximately $3.7 million and $4.6 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.

In 2002 the Company elected not to renew its windstorm insurance coverage for
the boat slips at the Grove Isle marina. Management believes that the cost of
the insurance coverage is 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.

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 a vice president of the Company and of HMG
Advisory Corp. (the "Adviser"). The Company's 95% owned subsidiary Courtland
Investments, Inc. compensates this employee directly in his capacity as project
manager for the Company's Texas property. All other officers of the Company are
not compensated directly by the Company for their services as such in accordance
with its Advisory Agreement (the "Agreement") with the Adviser. 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 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.

The sole amendment to the Advisory Agreement was an increase in the remuneration
of the Adviser to increase the Adviser's current regular compensation monthly
fee from $55,000 to $75,000, or from $660,000 to $900,000 annually. All other
terms of the existing Advisory Agreement will remain the same. The increase in
remuneration of the Adviser was approved after taking into account the increased
costs of the Adviser in managing the affairs of the Company, the economic
factors impacting the real estate industry and competitive conditions in today's
market place.

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; Carlos Camarotti, Vice President - Finance and Assistant Secretary;
and Bernard Lerner, Vice President.

Advisory Fees. For the years ended December 31, 2002 and 2001, the Company and
its subsidiaries paid the Adviser approximately $660,000 and $924,000 in fees,
respectively, of which $660,000 represented regular compensation and
approximately $264,000 represented incentive compensation for 2001. 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 $30,000 in
2002 and 2001 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. The marina has been operated since its construction in 1986 by the
Company. The Company acquired the hotel and club portion of the facility in
September 1993 and was its operator until November 1996. The facility is
encumbered by a mortgage note payable with an outstanding balance of
approximately $3.8 million and $4.0 million as of December 31, 2002 and 2001,
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 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 2002
was $964,136, increasing to $986,986 in 2003. 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.

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, 2002, 13 of the 85 yacht slips are owned by the Company and
the other 72 are owned by unrelated individuals or their entities. During 2002,
the Company sold eleven yacht slips for a total sales price of approximately
$582,000. The net gain to the Company was approximately $332,000. 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.

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 2001 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.

Land held for development (Texas and New England):
The Company owns approximately 13 acres of vacant land held for development
located in Houston, Texas. Additionally the Company owns approximately 50 acres
of vacant land held for development located in Rhode Island. In January 2002,
the Company sold approximately 50 acres of the Massachusetts vacant land for
approximately $300,000 and recognized a gain of approximately $255,000. The land
in Texas is encumbered by a mortgage loan payable to a bank in the amount of
approximately $120,000 due on demand. Interest of 1% over the prime rate is
payable quarterly.

Retail stores (New York and Vermont):
The Company owns 2 retail store locations in Kingston, New York and Montpelier,
Vermont. The Kingston property is leased through June 2003 and the Montpelier
property is vacant and held for development or sale. In January 2002 the Company
sold a vacant retail store located in Watertown, New York for $110,000
recognizing a gain of approximately $91,000.

The retail stores described above are 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 property is a
two-story building with approximately 3,700 square feet of rentable space. 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 $378,000. This loan bears interest
at a fixed rate of 5.5% 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 September 20, 2002, the shareholders approved the amendment and renewal of
the Advisory Agreement between the Company and the Adviser for a term commencing
January 1, 2003, and expiring December 31, 2003 (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) 732,311 36,014

Directors:
Walter G. Arader 1,042,438 35,614
John B. Bailey 1,042,438 35,614
Harvey Comita 1,042,438 35,614
Lawrence Rothstein 1,042,438 35,614
Maurice Wiener 1,042,438 35,614

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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2002.

Part II.

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

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, 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
March 31, 2001 $8.25 $7.38
June 30, 2001 $7.60 $6.95
September 30, 2001 $8.45 $7.35
December 31, 2001 $7.85 $6.10

In September 2002 the Company paid a special cash dividend of $.30 per share.
There were no dividends paid or declared in 2001. 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 15, 2003, there were 509 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
approved by shareholders 86,000 $7.84 34,000
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, 2002, the Company reported a net loss of
approximately $1,564,000 (or $1.44 per share) compared with a net loss of
approximately $678,000 (or $.62 per share) for the year ended December 31, 2001.

Revenues:
Total revenues for the year ended December 31, 2002 as compared with that of
2001 decreased by approximately $673,000.

Real estate rentals and related revenue increased by approximately $142,000 (or
10%) for the year ended December 31, 2002 as compared with 2001. This was the
result of an increase in rental and related revenues from the Grove Isle hotel
of approximately $66,000 primarily due to an inflationary adjustment to base
rent in 2002, and from the addition of a new tenant at the Jacksonville shopping
center of approximately $83,000.

Marina revenues decreased by approximately $38,000 (or 8%) for the year ended
December 31, 2002 as compared with 2001. This was primarily the result of the
sale of eleven yacht slips in 2002. Related marina expense also decreased as a
result of these sales.

Net 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, 2002 and 2001, is as follows:

Description 2002 2001

Net realized (loss) gain from sales of
securities ($1,356,000) $1,329,000
Unrealized net gain (loss) in marketable
securities 383,000 (901,000)
Net change in sales of securities pending
delivery (165,000) (1,195,000)
----------------------- -----------------------
Total net loss from investments in marketable
securities ($1,138,000) ($767,000)
======================= =======================

Net realized loss from sales of marketable securities consisted of approximately
$1.96 million of losses net of $600,000 of gains for the year ended December 31,
2002. The comparable amounts in fiscal year 2001 were gains of approximately
$2.3 million of gains net of $1.0 million of losses. Approximately $240,000 and
$1.6 million of gains in fiscal years 2002 and 2001, 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 2002 to
realize gain or loss from these transactions.

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 loss from other investments, as summarized below, increased by approximately
$269,000 for the year ended December 31, 2002 as compared to 2001.

2002 2001
--------------------- -------------------

Venture capital funds - technology &
communications (a) ($760,445) ($1,402,814)
Venture capital funds - diversified
businesses (b) (347,000) 70,131
Restaurant development and operation (c) (350,000) --
Income from investment in 49% owned
affiliate (d) 43,067 106,774
Others, net (e) 143,649 224,555
--------------------- -------------------
Totals ($1,270,729) ($1,001,354)
===================== ===================

(a) The technology and communication sectors continued to deteriorate in
2002. In connection with managements regular review of these
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. Approximately $556,000 of
these 2002 write downs were related to impairments experienced in three
funds with a heavy concentration in technology-related businesses. The
2001 loss primarily consisted of an $810,000 write down of one
internet-related fund which subsequently ceased operations in 2002.
(b) 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.
(c) 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.
(d) 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 interest income
due to lower interest rates.
(e) The decrease from 2001 to 2002 is primarily due to fewer distributions
from the Company's other investments in partnerships developing real
estate.

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 decreased by approximately $136,000 (or 31%)
for the year ended December 31, 2002 as compared with 2001. This decrease was
primarily due to fewer investments in the portfolio that yielded interest and
dividends combined with lower market interest rates during 2002.

Expenses:
Total expenses for the year ended December 31, 2002 as compared to that of 2001
decreased by approximately $487,000 (or 14%).

Operating expenses of rental and other properties decreased by approximately
$163,000 (or 23%) for the year ended December 31, 2002 as compared to 2001. This
was primarily the result of a prior year non-recurring charge of $125,000 for
previously capitalized costs incurred in conjunction with potential capital
improvements at the Grove Isle property which were not undertaken, and decreased
operating expenses of the Fieber properties due to the sale of one store in
2002.

Marina expenses decreased by approximately $95,000 (or 22%) for the year ended
December 31, 2002 as compared to 2001. This decrease was primarily due to lower
insurance costs of approximately $64,000 as a result of the elimination of
windstorm coverage for the marina slips and decreased advertising and
promotional expenses of approximately $29,000 in 2002. The Company believes that
in light of the increased cost of this insurance (an approximate 100% increase
from 2001) and the large deductibles now required, it is more effective to self
insure the marina slips for this particular peril. All other insurance coverage
remains in effect on this property.

Advisor base fee remained constant from 2001 to 2002. Effective January 1, 2003
a contractual increase will commence.

Professional fees and expenses decreased by approximately $62,000 (or 25%) for
the year ended December 31, 2002 as compared to 2001. This decrease was
primarily due to decreased legal fees.

Interest expense decreased by approximately $168,000 (or 24%) for year ended
December 31, 2002 as compared to 2001 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, 2002, and 2001
consisted of the following:

Net gain after incentive fee and
minority interest
---------------------------------------
Property Sold 2002 2001
------------------ -----------------

Undeveloped land in Massachusetts $255,000 $ --
Undeveloped land in Texas -- 485,000
Retail stores in New York and Massachusetts 63,000 1,138,000
Yacht slips in Florida 315,000 391,000
------------------ -----------------
Total $633,000 $2,014,000
================== =================

Net gain on sales of properties has been reduced, where applicable, by minority
partners' interest in the gain of $58,000 and $578,000 for the years ended
December 31, 2002 and 2001, respectively, and by adviser's incentive fees of
$247,000 for the year ended December 31, 2001.

Benefit from income taxes for the years ended December 31, 2002 and 2001,
respectively was approximately $869,000 and $188,000, respectively. The increase
in the benefit for income taxes of approximately $681,000 for the year December
31, 2002 as compared with 2001 is due to the increase in net operating loss in
the current year (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, the Company has recorded a net
deferred tax asset of $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 $3.9 million in 2003 and contributions committed to other
investments of approximately $1.7 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 2003 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, 2002 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
Payable $8,622,406 $3,924,085 $962,328 $397,282 $3,338,711
Other Investment
Commitments (a) 1,661,000 1,661,000 -- -- --
------------------------- ---------------- ------------------- ------------------- ------------------- ---------------
Total $10,283,406 $5,585,085 $962,328 $397,282 $3,338,711
========================= ================ =================== =================== =================== ===============

(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 and borrowings related to both. For
the year ended December 31, 2002 the Company generated net cash from its
operating activities of approximately $386,000, had net cash used in its
investing activities of approximately $425,000 and used approximated $696,000 in
financing activities. 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, 2002, the net cash used in investing activities
of approximately $425,000 consisted primarily of capital contributions made to
other investments of approximately $1.2 million and increases in advances to
related parties of approximately $469,000. These uses of cash were partially
offset by net proceeds from disposals of properties of approximately $954,000,
payments on notes receivable of approximately $127,000 and distributions
received from other investments of approximately $159,000.

For the year ended December 31, 2002, net cash used in financing activities was
approximately $696,000 consisting of dividends paid of approximately $327,000,
repayment of mortgages and notes payable of approximately $248,000 and
distributions to minority partners of approximately $122,000.

Recent Accounting Pronouncements:
In July, 2001, the Financial Accounting Standard Board issued Statements on
Financial Accounting Standards (SFAS) No. 141 (Business Combinations) and 142
(Goodwill and Other Intangible Assets). SFAS No. 141 among other things
eliminates the use of the pooling of interest method of accounting for business
combination. Under the provision of SFAS No. 142, goodwill would no longer be
amortized, but will be subject to a periodic test for impairment based upon fair
value. SFAS No. 141 is effective for all business combinations initiated after
June 30, 2001. SFAS No. 142 must be adopted in the first quarter of fiscal years
beginning after December 15, 2001. The adoption of these statements did not have
a material impact on the Company's financial statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business (as
previously defined in that Opinion). This Statement also amends ARB No. 51,
Consolidated Financial Statements, to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
this Statement were effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The provisions of this Statement
generally are to be applied prospectively. The adoption of SFAS No. 144 did not
have a material impact on the Company's financial statements.

In June 2002, the FASB issued Statement 146, Accounting for Costs Associated
with Exit or Disposal Activities. This Statement requires the recognition of a
liability for a cost associated with an exit or disposal activity when the
liability is incurred versus the date the Company commits to an exit plan. In
addition, this Statement states the liability should be initially measured at
fair value. The Statement is effective for exit or disposal activities that are
initiated after December 31, 2002. The primary effect to the Company's financial
statements would be in the timing of accounting recognition of potential future
exit activities.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation--Transition and Disclosure. This statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, this Statement
also amends the disclosure requirements of SFAS No. 123 to require more
prominent and frequent disclosures in the financials statements about the
effects of stock-based compensation. The transitional guidance and annual
disclosure provisions of this Statement is effective for the December 31, 2002
financial statements. The interim reporting disclosures requirements will also
be effective for the Company's March 31, 2003 10-QSB. Because the Company
continues to account for employee stock-based compensation under APB opinion No.
25, the transitional guidance of SFAS No. 148 has no effect on the financial
statements at this time. However, in the December 31, 2002 financial statements
we have incorporated the enhanced disclosure requirements of SFAS No. 148.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57, and 107
and a rescission of FASB Interpretation No. 34. This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annul financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation are
applicable to guarantees issued or modified after December 31, 2002 and are not
expected to 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. It applies in the first fiscal
year or interim period beginning after June 15, 2003, to VIE's in which an
enterprise holds a variable interest that it acquired before February 1, 2003.
FIN 46 applies to public enterprises as of the beginning of the applicable
interim or annual period. We have identified no VIE's, accordingly, the adoption
of FIN 46 is not expected to have a material impact on the Company's
consolidated financial position, liquidity, or results of operations.

Item 7. Consolidated Financial Statements

Report of Independent Certified Public Accountants...................................21

Consolidated balance sheets as of December 31, 2002 and 2001.........................22

Consolidated statements of operations for the
years ended December 31, 2002 and 2001............................................23

Consolidated statements of stockholders' equity and comprehensive loss
for the years ended December 31, 2002 and 2001....................................24

Consolidated statements of cash flows for the
years ended December 31, 2002, and 2001...........................................25

Notes to consolidated financial statements...........................................26

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 sheets of HMG/Courtland
Properties, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of operations, stockholders' equity and
comprehensive loss and cash flows for the years 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 audits.

We conducted our audits 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 audits provide 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, 2002 and 2001, and the results
of its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.

Miami, Florida BDO SEIDMAN, LLP
March 21, 2003

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

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

December 31, December 31,
2002 2001
ASSETS
Investment properties, net of accumulated depreciation:
Commercial and industrial $2,737,158 $2,872,783
Hotel and club facility 4,607,964 5,008,652
Yacht slips 379,332 673,722
Land held for development 1,854,318 1,864,558
------------------------ ------------------------
Total investment properties, net 9,578,772 10,419,715

Cash and cash equivalents 1,863,534 2,598,536
Investments in marketable securities 3,730,820 4,605,085
Other investments 5,694,448 6,097,144
Investment in affiliate 2,894,196 2,851,129
Cash restricted pending delivery of securities 23,921 430,131
Loans, notes and other receivables 1,142,882 1,288,124
Notes and advances due from related parties 1,414,974 945,872
Deferred taxes 801,000 139,000
Other assets 195,612 253,891
------------------------ ------------------------
TOTAL ASSETS $27,340,159 $29,628,627
======================== ========================

LIABILITIES
Mortgages and notes payable $8,622,406 $8,869,887
Accounts payable and accrued expenses 235,947 220,019
Sales of securities pending delivery 80,117 183,340
Income taxes payable 219,174
Other liabilities 679,892 382,325
------------------------ ------------------------
TOTAL LIABILITIES 9,618,362 9,874,745

Minority interests 270,738 411,692
------------------------ ------------------------

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 38,840,780 38,534,768
Undistributed losses from operations (47,329,464) (45,132,321)
------------------------ ------------------------
19,398,923 21,290,054

Less: Treasury stock, at cost (226,500 shares) (1,659,114) (1,659,114)
Notes receivable from exercise of stock options (288,750) (288,750)
------------------------ ------------------------
TOTAL STOCKHOLDERS' EQUITY 17,451,059 19,342,190

------------------------ ------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $27,340,159 $29,628,627
======================== ========================

See notes to the consolidated financial statements

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2002 AND 2001
--------------------------------------------------------------------------

REVENUES 2002 2001

Real estate rentals and related revenue $1,628,509 $1,486,826
Marina revenues 462,524 500,667
Net loss from investments in marketable securities (1,138,034) (767,020)
Net loss from other investments (1,270,729) (1,001,354)
Interest, dividend and other income 297,480 433,949
-----------------------------------------
Total (20,250) 653,068

EXPENSES
Operating expenses:
Rental and other properties 536,894 699,550
Marina expenses 343,787 439,016
Depreciation and amortization 603,467 592,589
Advisor's base fee 660,000 660,000
General and administrative 209,172 206,632
Professional fees and expenses 182,410 244,332
Directors' fees and expenses 63,707 61,483
-----------------------------------------
Total operating expenses 2,599,437 2,903,602

Interest expense 535,596 704,052
Minority partners' interests in operating loss of
consolidated entities (89,066) (74,768)
-----------------------------------------
Total expenses 3,045,967 3,532,886
-----------------------------------------

Loss before sales of properties and income taxes (3,066,217) (2,879,818)

Gain on sales of properties, net 632,753 2,014,041
-----------------------------------------
Loss before income taxes (2,433,464) (865,777)

Benefit from income taxes 869,074 188,000

-----------------------------------------
Net loss ($1,564,390) ($677,777)
=========================================

Net Loss Per Common Share:
Basic and diluted ($1.44) ($0.62)

Weighted average common shares outstanding, basic and diluted 1,089,135 1,089,135

See notes to the consolidated financial statements

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
YEARS ENDED DECEMBER 31, 2002 AND 2001

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

Undistributed
Gains from Sales Undistributed
Common Stock Additional of Properties Losses from Comprehensive
Shares Amount Paid-In Capital Net of Losses Operations Income (loss)

Balance as of January 1, 2001 1,315,635 $1,315,635 $26,571,972 $36,520,727 ($42,440,503)

Comprehensive loss:
Net income (loss) 2,014,041 (2,691,818) ($677,777)
Other comprehensive income
Unrealized loss on marketable securities 270,754
----------------
Comprehensive loss ($407,023)
================

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

Balance as of December 31, 2001 1,315,635 1,315,635 26,571,972 38,534,768 (45,132,321)

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)
==========================================================================================

Accumulated Notes
Other Receivable Total
Comprehensive Treasury Stock from exercise of Stockholders'
Income (loss) Shares Cost Stock Options Equity

Balance as of January 1, 2001 ($270,754) 226,500 ($1,659,114) ($288,750) $19,749,213

Comprehensive loss:
Net income (loss) (677,777)
Other comprehensive income
Unrealized loss on marketable securities 270,754 270,754
Comprehensive loss

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

Balance as of December 31, 2001 226,500 (1,659,114) (288,750) 19,342,190

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

Dividends ($.30 per share) (326,741)

------------------------------------------------------------------------------------
Balance as of December 31, 2002 226,500 ($1,659,114) ($288,750) $17,451,059
====================================================================================

See notes to the consolidated financial statements

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2002 AND 2001
-------------------------------------------------------------------------------------------------------------------------------

2002 2001

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,564,390) ($677,777)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 603,467 592,589
Net loss from other investments 1,270,729 1,001,354
Gain on sales of properties, net (632,753) (2,014,041)
Net loss (gain) from marketable securities 1,138,034 767,020
Minority partners' interest in operating (losses) gains (89,066) (74,768)
Deferred income taxes (662,000) (383,000)
Changes in assets and liabilities:
Decrease in other assets and other receivables 50,954 69,035
Net proceeds from sales and redemptions of securities 2,929,507
Decrease (increase) in restricted cash 406,210 (86,459)
(Decrease) increase in sales of securities pending delivery (267,942) 256,317
Increased investments in marketable securities (3,028,556)
Increase (decrease) in accounts payable and accrued expenses 15,928 (362,276)
(Decrease) increase in current income taxes payable (219,174) 124,174
Increase in other liabilities 434,951 54,034
------------------ -----------------
Total adjustments 1,950,289 (56,021)
------------------ -----------------
Net cash provided by (used in) operating activities 385,899 (733,798)
------------------ -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisitions and improvements of properties (301,620)
Net proceeds from disposals of properties 953,684 3,675,505
Increase in notes and advances from related parties (469,102) (54,145)
Increase in mortgage loans and notes receivables (163,394)
Decrease in mortgage loans and notes receivables 126,697 171,129
Distributions from other investments 159,359 773,328
Contributions to other investments (1,195,544) (1,543,482)
Net proceeds from sales and redemptions of securities 3,626,817
Increased investments in marketable securities (3,679,196)
------------------ -----------------
Net cash (used in) provided by investing activities (424,906) 2,504,942
------------------ -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (247,481) (621,761)
Dividends paid (326,741)
Net distributions to minority partners (121,773) (474,794)
------------------ -----------------
Net cash used in financing activities (695,995) (1,096,555)
------------------ -----------------

Net (decrease) increase in cash and cash equivalents (735,002) 674,589

Cash and cash equivalents at beginning of the period 2,598,536 1,923,947
------------------ -----------------

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

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $485,000 $581,000
------------------ -----------------
Cash paid during the period for income taxes $11,000 $69,000
------------------ -----------------

See notes to the consolidated financial statements

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002 and 2001
--------------------------------------

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 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 its status as a
real estate investment trust. Masscap is a wholly-owned subsidiary of Transco
Realty Trust which is a 41% shareholder of the Company.

Grove Isle Associates, Ltd. ("GIA"). This limited partnership 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 13 as of
December 31, 2002. GIYCA and its wholly-owned subsidiary operate 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 and owns 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 13 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 41% 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, 2002, this shopping center had four
tenants each operating restaurants.

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 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, 2002 and 2001 was approximately $603,000 and $593,000,
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, 2002 and 2001, 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, 2002 and 2001 there was
approximately $510,000 and $140,000 of margin balances payable to brokers which
are 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, 2002 and
2001, 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). The components and related activity of accumulated

other comprehensive income (loss) result from the net unrealized loss on
available for sale investments as of December 31, 2000 and the subsequent
transfer of such investments to a trading portfolio in 2001. There were no
comprehensive income (loss) items in 2002.

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 and 2001, as their effect is anti-dilutive.

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 $58,000 and
$578,000 for the years ended December 31, 2002 and 2001 and adviser's incentive
fees of $247,000 for the year ended December 31, 2001. 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 a 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.

2002 2001
--------------- ---------------

Minority interest balance at beginning of year $412,000 $384,000
Minority partners' interest in operating gains (losses) of
consolidated subsidiaries (89,000) (75,000)
Minority partners' interest in net gains on sales of real estate
of consolidated subsidiaries 58,000 578,000
Net distributions to minority partners (122,000) (487,000)
Other 12,000 12,000
--------------- ---------------
Minority interest balance at end of year $271,000 $412,000
=============== ===============

Stock-Based Compensation. The Company recognizes compensation expense for its
stock option plan using the intrinsic value method of accounting. Under the
terms of the intrinsic value method, compensation cost is the excess, if any, of
the quoted market price of the stock at the grant date, over the amount an
employee must pay to acquire the stock.

Since stock based compensation is accounted for under APB 25, no compensation
cost has been recognized for stock options in the financial statements. If
compensation cost had been determined based upon the fair value of the stock
options at grant date pursuant to FAS 123 (Accounting for Stock Based
Compensation), the Company's pro forma net loss and net loss per share for the
year ended December 31, 2002 and 2001 (based on 86,000 options fully vested for
fiscal year 2001 and no options granted in fiscal year 2002) would have been as
follows:

2002 2001
---- ----

Net loss - as reported ($1,564,390) ($677,777)
Total fair value of stock-based
compensation, net of taxes -- (286,042)
-------------------------- -----------------------------
Net loss - pro forma ($1,564,390) ($963,819)
========================== =============================

Net loss per share basic and diluted - as
reported ($1.44) ($.62)
========================== =============================
Net loss per share basic and diluted - pro
forma ($1.44) ($.88)
========================== =============================

The Black-Scholes option pricing model was used with the following
weighted-average assumptions for 2001: risk-free interest rate of 5%; dividend
yield of 0%; expected Common Stock market price volatility factor of 30%; and a
weighted-average expected life of the options of 7.5 years. The aggregate fair
value of the options granted in fiscal year 2001 was $286,000. No options were
granted in 2002.

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.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation--Transition and Disclosure. This statement provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, this Statement
also amends the disclosure requirements of SFAS No. 123 to require more
prominent and frequent disclosures in the financials statements about the
effects of stock-based compensation. The transitional guidance and annual
disclosure provisions of this Statement is effective for the December 31, 2002
financial statements. The interim reporting disclosures requirements will be
effective for the Company's March 31, 2003 10-QSB. Because the Company continues
to account for employee stock-based compensation under APB opinion No. 25, the
transitional guidance of SFAS No. 148 has no effect on the financial statements

at this time. However, in the December 31, 2002 financial statements we have
incorporated the enhanced disclosure requirements of SFAS No. 148.

2. INVESTMENT PROPERTIES

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

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
=========== ========== ==========

December 31, 2001
---------------------------------------------------
Accumulated
Cost Depreciation Net
Commercial and Industrial Properties
Land $1,294,787 $1,294,787
Buildings and improvements 2,454,194 $876,198 1,577,996
----------- ---------- -----------
3,748,981 876,198 2,872,783
----------- ---------- -----------
Hotel and Club Facility
Land 1,338,517 1,338,517
Hotel/club facility and improvements 6,819,033 3,171,458 3,647,575
Furniture, fixtures & equipment 2,260,075 2,237,515 22,560
----------- ---------- -----------
10,417,625 5,408,973 5,008,652
----------- ---------- -----------

Yacht Slips 858,250 184,528 673,722
----------- ---------- -----------

Land Held for Development 1,864,558 1,864,558
----------- ---------- -----------

Total $16,889,414 $6,469,699 $10,419,715
=========== ========== ===========

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. As of
December 31, 2002 and 2001 net unrealized losses on trading securities were
approximately $518,000 and $901,000, respectively.

December 31, 2002 December 31, 2001
------------------------------------------------- -------------------------------------------

Cost Fair Unrealized Cost Fair Unrealized
Description Basis Value Gain (loss) Basis Value Gain (loss)

Real Estate
Investment Trusts $179,309 $206,166 $26,857 $511,777 $593,659 $81,882

Mutual Funds 723,389 563,898 (159,491) 900,459 659,307 (241,152)
Other Equity
Securities 1,479,254 1,222,817 (256,437) 3,215,430 2,621,091 (594,339)
------------ ---------------- -------------- ------------- -------------- --------------
Total Equity
Securities 2,381,952 1,992,881 (389,071) 4,627,666 3,874,057 (753,609)
------------ ---------------- -------------- ------------- -------------- --------------

Corporate Debt
Securities (a) 651,487 525,534 (125,953) 878,796 731,028 (147,768)
Government Debt
Securities (a) 1,215,362 1,212,405 (2,957) --- --- ---
------------ ---------------- -------------- ------------- -------------- --------------
Total Debt
Securities 1,866,849 1,737,939 (128,910) 878,796 731,028 (147,768)
------------ ---------------- -------------- ------------- -------------- --------------

Total $4,248,801 $3,730,820 ($517,981) $5,506,462 $4,605,085 ($901,377)
============ ================ ============== ============= ============== ==============

(a) As of December 31, 2002, corporate and government debt securities are
scheduled to mature as follows:

Cost Fair Value
2003 - 2007 $254,000 $214,000
2008-2012 1,154,000 1,104,000
2013 - thereafter 459,000 420,000
---------- ----------

$1,867,000 $1,738,000
========== ==========

Net (loss) gain from investments in marketable securities for the years ended
December 31, 2002 and 2001 is summarized below:

Description 2002 2001

Net realized (loss) gain from sales of
securities ($1,356,000) $1,329,000
Unrealized net gain (loss) in marketable
securities 383,000 (901,000)
Net change in sales of securities pending
delivery (165,000) (1,195,000)
-------------------- ----------------------
Total net (loss) gain ($1,138,000) ($767,000)
==================== ======================

Net realized loss from sales of marketable securities consisted of approximately
$1.96 million of losses net of approximately $600,000 of gains for the year
ended December 31, 2002. The comparable amounts in fiscal year 2001 were gains
of approximately $2.3 million of gains net of $1.0 million of losses.
Approximately $240,000 and $1.6 million of gains in fiscal years 2002 and 2001,
respectively, were recognized from the sale of stock distributions from the
Company's investments in privately held partnerships.

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 2002 2001
------------------------------------------------ ----------------------- ---------------------

Venture capital funds - technology and
communications $1,558,613 $2,309,652

Venture capital funds - diversified businesses 2,317,046 2,177,492

Restaurant development and operation 500,000 850,000

Real estate and related 640,289 580,000

High yield distressed debt funds 468,500 ---

Other 210,000 180,000
----------------------- ---------------------
Totals $5,694,448 $6,097,144
======================= =====================

As of December 31, 2002, the Company has committed to invest approximately $11.3
million in these and other similar types of entities of which approximately $9.7
million has been funded. During the years ended December 31, 2002 and 2001 the
Company contributed approximately $1.2 million and $1.5 million, respectively,
toward these commitments.

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 and
other-than-temporary decline in value. When a decline is deemed
other-than-temporary, the Company recognizes an investment loss.

Net 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 2002 and
2001 was approximately $1.5 million and $1.4 million, respectively):

Years ended December 31,
-----------------------------------------
2002 2001
--------------------- -------------------

Venture capital funds - technology & ($760,445) ($1,402,814)
communications
Venture capital funds - diversified
businesses (347,000) 70,131
Restaurant development and operation (350,000) --
Income from investment in 49%-owned affiliate 43,067 106,774
Others, net 143,649 224,555
--------------------- -------------------
Totals ($1,270,729) ($1,001,354)
===================== ===================

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 equity method of accounting. For the years ended December 31,
2002 and 2001 income from investment in affiliate amounted to approximately
$43,000 and $107,000, respectively and is included in 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 the Company and of HMG
Advisory Corp. (the "Adviser"). 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; Carlos Camarotti, Vice President - Finance and Assistant Secretary;
and Bernard Lerner, Vice President.

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 September 20, 2002, the shareholders approved the amendment and renewal of
the Advisory Agreement between the Company and the Adviser for a term commencing
January 1, 2003, and expiring December 31, 2003. The sole amendment to the
Advisory Agreement was an increase in the remuneration of the Adviser to
increase the Adviser's current regular compensation monthly fee from $55,000 to
$75,000, or from $660,000 to $900,000 annually. All other terms of the existing
Advisory Agreement will remain the same. The increase in remuneration of the
Adviser was approved after taking into account the increased costs of the
Adviser in managing the affairs of the Company, the economic factors impacting
the real estate industry and competitive conditions in today's market place.

For the years ended December 31, 2002 and 2001, the Company and its subsidiaries
paid the Adviser approximately $660,000 and $924,000 in fees, respectively, of
which $660,000 represented regular compensation and approximately $264,000
represented incentive compensation for 2001. There was no incentive compensation
for 2002. The Adviser is also the manager for certain of the Company's
affiliates and received management fees of approximately $30,000 in 2002 and
2001 for such services. Furthermore, for fiscal years 2002 and 2001 the Company
paid approximately $60,000 to one of the Company's officers in his capacity as
project manager for a specific property, as described above.

At December 31, 2002 and 2001, the Company had amounts due from the Adviser of
approximately $648,000 and $191,000, respectively. In March 2003 a cash payment
of $500,000 was received from the Adviser which brought the balance due from the
Adviser down to approximately $259,000. This amount bears interest at prime plus
1% and is due on demand. At December 31, 2002 and 2001, the Company had amounts
due from Courtland Group, Inc. (CGI) (the former adviser principally owned by
Mr. Wiener) of approximately $317,000 and $300,000, respectively. In March 2003,
a cash payment of approximately $17,000 was received from CGI which brought the
balance due from CGI down to approximately $300,000. 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 is 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 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 $147,000 and $153,000 as of December 31, 2002 and 2001,
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, 2002
and 2001, T.G.I.F. had amounts due from Mr. Wiener in the amount of
approximately $707,000 and $718,000, respectively. These amounts are due on
demand and bear interest at the prime rate. Furthermore, the Adviser receives a
management fee of $18,000 per year from T.G.I.F. CII also has notes payable to
T.G.I.F. of approximately $3.7 million as of December 31, 2002 and 2001,
respectively. These amounts bear interest at the prime rate and principal and
interest are due on demand. T.G.I.F. owns 10,000 shares of the Company's common
stock purchased at market value in 1996.

7. MORTGAGES AND NOTES PAYABLES

December 31,
------------------ ----- ------------------

2002 2001
------------------ ------------------

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. $3,813,349 $3,997,642

Note payable to individual with interest rate fixed at 7%. Loan
was repaid at maturity in July 2002. --- 25,000

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 9.25% until August 2002, then fixed at
the then prime rate plus 3/4%. Payment of principal
and interest monthly with maturity in August 2007. 378,245 391,300

Land held for development:
Mortgage loan payable, interest at 1% over prime (5.25% at
December 31, 2002) payable quarterly with interest due on demand. 120,141 120,141

Other: (unsecured)
Note payable to affiliate (T.G.I.F.), interest at prime (4.25%
at December 31, 2002) payable annually. Principal outstanding
due on demand. 3,660,671 3,685,804
------------------ ------------------

Totals $8,622,406 $8,869,887
================== ==================

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

Year ending December 31, Amount
2003 $3,924,085
2004 794,852
2005 167,476
2006 193,796
2007 203,486
2008 and thereafter 3,338,711
----------
Total $8,622,406
==========

The 2003 principal repayments are expected to be satisfied with proceeds from
sales of real estate, distributions from investments, available cash or such
debt may be refinanced.

8. INCOME TAXES
The components of loss before income taxes and the effect of adjustments to tax
computed at the federal statutory rate for the years ended December 31, 2002 and
2001 were as follows:

2002 2001

Loss before income taxes ($2,433,000) ($866,000)
-------------------------------------------------------------------------------------------------
Computed tax at federal statutory rate of 34% (827,000) (294,000)
State taxes, net of federal income tax benefit (70,000) (34,000)
REIT related exclusions 90,000 175,000
Other items, net (62,000) (35,000)
-------------------------------------------------------------------------------------------------
Benefit from income taxes ($869,000) ($188,000)
-------------------------------------------------------------------------------------------------
Effective tax rate (36%) (22%)
-------------------------------------------------------------------------------------------------

The benefit from income taxes in the consolidated statement of operations
consists of the following:

Year ended December 31, 2002 2001
------------------------------- ------------------- -----------------
Current:
Federal ($154,000) $145,000
State (53,000) 50,000
------------------------------- ------------------- -----------------
(207,000) 195,000
Deferred:
Federal (605,000) (345,000)
State (57,000) (38,000)
------------------------------- ------------------- -----------------
(662,000) (383,000)
------------------------------- ------------------- -----------------
Total ($869,000) ($188,000)
=============================== =================== =================

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 $801,000. 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, 2002 and 2001, the components of the deferred tax assets and
liabilities are as follows:

As of December 31, 2002 As of December 31, 2001
Deferred tax Deferred tax
-----------------------------------------------------------
Assets Liabilities Assets Liabilities
----------- --------------- ------------- -------------

Net operating loss carry forward $602,000 $8,000
Excess of book basis of 49% owned
corporation over tax basis 570,000 554,000
Excess of tax basis over book basis of
investment properties 191,000 177,000
Unrealized loss/gain on marketable
securities 161,000 278,000
Excess of tax basis over book basis of
other investments 462,000 45,000 292,000 62,000
----------- --------------- ------------- -------------
Totals $1,416,000 $615,000 $755,000 $616,000
=========== =============== ============= =============

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,
is $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 2002.

On August 24, 2000, certain officers and directors of the Company exercised all
of their stock options under the 1990 Stock Option Plan 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 on the first
day of January, April, July and October. The outstanding principal is due on
August 23, 2005 and the notes are collateralized by the stock.

A summary of the status of the Company's stock option plan as of December 31,
2002 and 2001, and changes during the years ending on those dates are presented
below:

As of December 31, 2002 As of December 31, 2001
----------------------------------------------------------------
Shares Weighted-Average Shares Weighted-Average
Exercise Exercise
Price Price
------------------------------------------------------------------------------------------------------

Outstanding at beginning of year 86,000 $7.84 -- --
Granted -- -- 86,000 $7.84
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 -- -- 86,000 $3.33
------------------------------------------------------------------------------------------------------

As required by SFAS 123, the Company has determined the pro-forma information as
if the company had accounted for stock options granted on June 25, 2001, under
the fair value method of SFAS 123. The Black-Scholes option pricing model was
used with the following weighted-average assumptions for 2001: risk-free
interest rate of 5%; dividend yield of 0%; expected Common Stock market price
volatility factor of 30%; and a weighted-average expected life of the options of
7.5 years. The aggregate fair value of the options granted in fiscal year 2001
was $286,000. No options were granted in 2002.

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 marina has been operated since its construction in 1986 by the
Company.

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 2002 was $964,136, increasing to
$986,986 in 2003. 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 2002
and 2001.

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, 2002, are as follows:

Year ending December 31, Amount
2003 $1,394,000
2004 1,308,000
2005 1,283,000
2006 1,244,000
2007 343,000
Subsequent years 1,430,000
----------
Total $7,002,000
==========

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

None.

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
Name and Office Age Years - Other Directorships

Maurice Wiener; Chairman of the 61 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, 50 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 42 Vice President - Finance and Assistant Secretary of the Adviser;
President-Finance and Assistant Vice President - Finance and Assistant Secretary of Courtland Group,
Secretary Inc.

Bernard Lerner; Vice President 60 Vice President of the Adviser; Vice President of Courtland Group,
Inc.

Walter Arader; Director 84 President, Arader, Herzig and Associates Inc. (financial management
consultants); Director, Pep Boys-Manny, Moe & Jack; Director, Unitel
Video; Former Secretary of Commerce, Commonwealth of Pennsylvania.

Harvey Comita; Director 73 Business Consultant; Trustee of Transco Realty Trust; President and
Director of Pan-Optics, Inc. (1971-1991); Director of Mediq,
Incorporated (1981-1991);

John B. Bailey; Director 76 Real Estate Consultant; Retired CEO, Landauer Associates, Inc. (Real
Estate Consultants) (1977-1988).

All executive officers of the Company were elected to their present positions to
serve until their successors are elected and qualified at the 2003 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 who became president and
director of the Company in 1998 and prior to that was senior vice president of
the Company.

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, directors and officers as a group, and holders of more than 5% of the
outstanding common stock.

Shares Held as of March 26, 2003

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%

John B. Bailey 12,100 (4) 12,100 *

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

All 7 Directors and 178,600 (4) 541,830 (3) 720,430 61%
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

* Less than 1 %

___________________________

(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, Mr.
Bailey, and Mr. Comita; and a total of 16,000 to two officers who are not
directors. 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, 2002 and 2001 the Adviser owed the Company approximately
$648,000 and $191,000, respectively. In March 2003 a cash payment of $500,000
was received from the Adviser which brought the balance due from the Adviser
down to approximately $259,000. Such sum bears interest at the prime rate plus
1% and is due on demand.

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.

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 $447,000 in principal and interest as of December 31, 2002
compared to a balance of $453,000 as of December 31, 2001.

The Company also holds a demand note from SBA bearing interest at the prime rate
plus 1% with an outstanding balance as of December 31, 2002 and 2001 of
approximately $1,100,000, in principal and accrued interest. No payments were
made in 2002 and 2001, and accrued and unpaid interest was not capitalized.
Because the Company consolidates SBA, the note payable and related interest
income is eliminated in consolidation.

CGI. As of December 31, 2002 and 2001, CGI owed the Company approximately
$317,000 and $300,000, respectively. In March 2003, a cash payment of
approximately $17,000 was received from CGI which brought the balance due from
CGI down to approximately $300,000. Such sums bear interest at the prime rate
plus 1% and are 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 $3,111,000 and $2,508,000 as of
December 31, 2002 and 2001, respectively. During 2002 and 2001, advances from
the Company to CII totaled $769,000 and $3,993,000, respectively. Repayments
from CII to the Company during 2002 and 2001 were $166,000 and $400,000,
respectively. Accrued and unpaid interest is capitalized and included in
advances. Because CII is a 95%-owned consolidated subsidiary of the Company, the
note payable and related interest 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. As of December
31, 200l the outstanding balance was $243,000. Accrued and unpaid interest of
approximately $11,000 was also repaid by GIYCA.

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 the Company and of HMG Advisory Corp. (the "Adviser") and is a
cousin of the Company's Chairman and CEO Mr. Maurice Wiener. CII pays Mr. Lerner
$60,000 per year.

T.G.I.F. As of December 31, 2002 and 2001, CII owed approximately $3.7 million
to T.G.I.F. All advances between CII and T.G.I.F. are due on demand and bear
interest at the prime rate plus 1%. As of December 31, 2002 and 2001, T.G.I.F.
had amounts due from Mr. Wiener of approximately $707,000 and $718,000,
respectively. These amounts are due on demand and bear interest at the prime
rate. T.G.I.F. owns 10,000 shares of the Company which were purchased in 1996 at
the market value. The Adviser receives a management fee of $18,000 per year from
T.G.I.F.

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

Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)

1. Financial Statements - See Item 7.
Index to Consolidated Financial Statements and Supplemental Data.
All other schedules are omitted because of the absence of the
conditions under which they are required or because all
information required to be reported are included in the
consolidated financial statements or notes thereto.

2. Exhibits listed in the Index to Exhibits.

(b) Reports on Form 8-K: None.

Item14. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures, as defined in
Rule 13a-14 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), that are designed to ensure that information required to
be disclosed by it in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms and that such
information is accumulated and communicated to management, including its
Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. Within the 90 days
prior to the date of this report, the Company carried out an evaluation,
under the supervision and with the participation of its management,
including its Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of its disclosure controls and
procedures. Based on the evaluation of these disclosure controls and
procedures, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were
effective.

Changes in Internal Controls

There were no significant changes in the Company's internal controls or
in other factors that could significantly affect the internal controls
subsequent to the date that it completed its evaluation.

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 26, 2003 By: /s/ Maurice Wiener
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 26, 2003
Maurice Wiener
Chairman of the Board
Chief Executive Officer

/s/ Lawrence I. Rothstein March 26, 2003
Lawrence I. Rothstein
Director, President, Treasurer & Secretary
Principal Financial Officer

/s/ Walter G. Arader March 26, 2003
Walter G. Arader, Director

/s/ John B. Bailey March 26, 2002
John B. Bailey, Director

/s/ Harvey Comita March 26, 2003
Harvey Comita, Director

/s/ Carlos Camarotti March 26, 2003
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) to
Associates, Ltd. And Grove Isle Club, Inc. the 1996 Form 10-KSB.
dated November 19, 1996.

(d) Avisory Agreement between the Company and HMG Advisory Corp. Incorporated by reference to Exhibit 10(h) to
effective January 1, 1998. the 1997 Form 10-KSB.

(e) 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.

(f) Amendment to amend 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.

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

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

(i) Amended and Restated Advisory Agreement between the Filed herewith.
Company and HMG Advisory Corp. effective January 1, 2003.

(j) Certifications pursuant to 18 USC Section 1350-Sarbanes-Oxley Filed herewith.
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

Amended and Restated Advisory Agreement between Exhibit 10(i)

the Company and HMG Advisory Corp. effective January 1, 2003.

Certifications pursuant to 18 USC Section 1350-Sarbanes-Oxley Act of 2002 Exhibit 10(j)