HMG COURTLAND PROPERTIES INC, 10KSB40, 1999-03-30

HMG COURTLAND PROPERTIES INC
10KSB40, 1999-03-30
REAL ESTATE INVESTMENT TRUSTS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998
-----------------

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES 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)

2701 S. Bayshore Drive, 33133
Coconut Grove, Florida (Zip Code)
(Address of principal executive offices)

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

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

Title of each class Name of each exchange
Share of Common Stock: on which registered:
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: NONE
Total Number of Pages: _____ Exhibit Index: Page No.: N/A
(continued)
<PAGE>

State the issuer's revenues for the most recent fiscal year: $3,003,019

State the aggregate market value of the voting stock held by non-affiliates of
the Registrant: $2,377,397 based on the closing price of the stock as traded on
the American Stock Exchange on March 19, 1999. (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.)

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date: 1,100,235 shares of common
stock, $1 par value, as of March 19, 1999.

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.

(2)

<PAGE>
Part I.

Item 1. Business.
- ------------------

HMG/Courtland Properties, Inc. (the "Company") invests in a portfolio of equity
interests in commercial real estate. The Company was organized in 1972 and
qualifies for taxation as a real estate investment trust ("REIT") under the
Internal Revenue Code. The Company's present investment policy is to invest
primarily in income-producing commercial properties.

To implement its investment policy, the Company directly and through its
subsidiaries has invested in improved properties and in the commercial
development of unimproved properties held in its portfolio or acquired for that
purpose.

The following table summarizes the Company's portfolio of real estate
investments as of December 31, 1998:

Percent of
Geographic Distribution Investments (1)
----------------------- ---------------
Florida 74%
Texas 21%
Northeastern United States (2) 5%
-----
100%
====

Type of Property(3)
Undeveloped land 21%
Hotel and club facility 45%
Individual retail stores 4%
Yacht slips 11%
Shopping center and other 19%
-----
100%
====
-----------------
(1) For each category, the aggregate of cost less accumulated
depreciation divided by the aggregate of such investments in all
real estate owned directly by the Company or by joint ventures in
which the Company has a majority interest. The Company's minority
interests in joint ventures are not included in the above.

(2) New York, Massachusetts, Maine and Vermont.

(3) Based on predominant present or intended use.

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

Consolidated Entities
- ---------------------
Courtland Investments, Inc. ("CII"). The Company owns a 95% equity interest in
CII (all non-voting). The other 5% equity interest (which is 100% of the voting
interest) is held by Masscap Investment Company, Inc. ("MICI"), a wholly-owned
subsidiary of Transco Realty Trust ("Transco") which is a 43% shareholder of the
Company. The Company and MICI have had a continuing arrangement with regard to
the ongoing operations of CII, all of 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.

(3)
<PAGE>

CII owns equity interests in certain corporations and partnerships that are
passive (non-operating) in nature. CII also owns an interest in a partnership
which owns a 50 room hotel and private club (see discussion on Grove Isle
Associates, Ltd. "GIA"), a corporation (Grove Isle Club Inc."GICI") which
formerly operated the hotel and club and a joint venture owning the marina
adjacent to the hotel and club (Grove Isle Yacht Club Associates "GIYCA"). The
properties are located in Coconut Grove, Florida, and a more detailed
description of each follows:

Grove Isle Associates, Ltd. ("GIA"). This limited partnership (owned 15% by CII
and 85% by the Company) owns 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 a pool. The facility is encumbered by a
mortgage note payable with an outstanding balance of approximately $4.5 million
and $4.0 million as of December 31, 1998 and 1997, respectively. In September
1998, the Company refinanced this mortgage note payable. The outstanding balance
of the note was increased from approximately $4.0 million to $4.5 million. The
terms of the new mortgage note include payments based on a twenty-five (25) year
amortization with all outstanding principal and interest due in September 2010.
The interest rate is fixed at 7.75% for the first three years of the loan. The
rate will then be re-adjusted and become fixed at 290 basis points above the
then five (5) year Treasury Note rate for the next three years, and re-adjusted
every three years thereafter at the then five (5) year Treasury Note rate.

In November 1996, GIA entered into a long-term lease with an unrelated tenant,
Westgroup Grove Isle Associates, Ltd. ("Westgroup") and a Master Agreement with
Westgroup whereby among other things Westgroup assumed the operations of the
Grove Isle hotel and club.

The leased premises includes all real property and all furniture, furnishings,
fixtures, appliances and other equipment used in connection with the operation
of the Grove Isle hotel, resort and membership club. The initial term of the
lease is ten years and calls for annual net base rent of $880,000 plus real
estate taxes and property insurance, payable in monthly installments. In
addition to the base net rent Westgroup shall also pay 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. No
participation rent was due in 1998 or 1997. Furthermore, as previously reported,
in consideration for GICI relinquishment of its rights in and to the original
lease with GIA, GIA agreed to pay to GICI the sum of $200,000 for each year that
the Westgroup lease is in good standing and has also assigned to GICI the
aforementioned participation rent due from Westgroup. This sum is payable
annually commencing in November 1997. This amount is eliminated in
consolidation.

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.

Grove Isle Club, Inc. ("GICI"). This corporation operated the aforementioned
hotel and club through November 18, 1996. It's primary sources of revenues are
presently from the aforementioned $200,000 annual payment from GIA. As of
December 31, 1998 and 1997 GICI has amounts due to GIA which are eliminated in
consolidation of approximately $1,758,000 and $1,759,000, respectively. This
promissory note bears interest at a fixed rate of 8% per annum and is due on
demand.

Grove Isle Yacht Club Associates ("GIYCA"). This partnership was the developer
of the 85 boat slips located at Grove Isle. As of December 31, 1998, forty-two
slips remain unsold and are encumbered by the aforementioned $4.5 million
mortgage note payable by GIA. GIYCA (through a 100% owned

(4)
<PAGE>

subsidiary) 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.

HMG-Fieber Associates ("Fieber"). HMG-Fieber Associates, a joint venture owned
65% by the Company and 35% by NAF Associates (NAF), a Connecticut general
partnership, owns 10 retail stores. Eight of the stores are leased to
Grossman's, Inc., a chain of home improvements stores, under net leases. Two
stores are not leased at the present time. During 1998, there were no Fieber
properties sold. During 1997 Fieber sold 4 of its locations as described below.
All except one of the remaining leases contain renewal options of at least five
years.

In October 1997, Fieber sold its property located in Pittsfield, Maine for
$75,000 and recognized a gain to the venture of approximately $33,000. The net
gain to the Company was approximately $19,000.

In August 1997, Fieber sold its property located on Presque Isle, Maine for
$150,000 and recognized a gain to the venture of approximately $102,000. The net
gain to the Company was approximately $60,000.

In March 1997, Fieber sold its store located in Vestal, New York for $350,000
and recognized a gain to the venture of approximately $226,000. The net gain to
the Company was approximately $132,000.

In January 1997, Fieber sold its store located in Springfield, Massachusetts for
approximately $937,000 and recognized a gain to the venture of approximately
$774,000. The net gain to the Company was approximately $452,000.

Reference is made to Item 12. Certain Relationships and Related Transactions for
further information regarding the failure of former directors Lee Gray and
Norman Fieber to disclose Mr. Gray's interest in NAF, the inquiry into that
failure by a Special Committee appointed by the Board of Directors and the
actions taken by the Board of Directors as a result of that inquiry.

260 River Corp. ("260"). On January 1, 1997, each partner in HMG-Fieber received
its pro rata interest in the ventures' property located in Vermont. The property
was transferred at book value and resulted in no gain or loss to the Company.
The Company's 65% interest in this property is owned by 260 River Corp., a
wholly-owned subsidiary.

The Grove Towne Center - Texas, Ltd. ("TGTC"). The Grove Towne Center-Texas,
Ltd. is a limited partnership owned 75% by the Company (including a 1% general
partnership interest by a wholly-owned subsidiary of the Company). The remaining
25% partnership interest is held by an unrelated entity.

In March 1999, TGTC sold approximately 2.3 acres for approximately $557,000 and
the Company recognized a net gain of approximately $203,000.

On January 1, 1998 a 10% limited partner of TGTC assigned its partnership
interest to the Company in exchange for the cancellation of a $677,000
promissory note due to the Company. This assignment has no impact on the
Company's consolidated financial statements.

In January 1998, TGTC sold approximately 13.5 acres for $2.6 million. The net
gain on this sale to the Company was approximately $725,000.

(5)
<PAGE>

In December 1997, TGTC was awarded approximately $380,000 from the State of
Texas in consideration for the condemnation of 28,000 square feet of its
property to be used to widen the adjacent freeway. The net gain to the Company
was approximately $181,000.

In February 1997, TGTC sold .7 acres for $244,000. The net gain to the Company
was approximately $68,000.

In January 1997, TGTC sold 3.15 acres for $823,000. The net gain to the Company
was approximately $146,000.

South Bayshore Associates ("SBA"). SBA is a joint venture, formed in 1986 in
which Transco Realty Trust (Transco) and the Company hold interests of 25% and
75%, respectively. The major asset of SBA is a demand note bearing interest at
the prime rate from Transco with an outstanding balance as of December 31, 1998
and 1997 of approximately $475,000 and $450,000, respectively, in principal and
accrued interest.

The Company holds a demand note (which is eliminated in consolidation) from SBA
bearing interest at the prime rate plus 1% with an outstanding balance including
accrued interest as of December 31, 1998 and 1997 of approximately $994,000 and
$935,000, respectively, in principal and accrued interest.

HMG Fashion Square, Inc. This wholly-owned subsidiary has a 90% partnership
interest in Fashion Square Partnership (the "partnership") formed in 1992 for
the purpose of developing a shopping center located on approximately 11.5 acres
near Jacksonville, Florida. The shopping center presently consists of four
operating restaurants and a Sears Homelife Center. Three of the four restaurant
operators are leasing the property from the partnership and the fourth operator
purchased the third and final out parcel from the partnership in November 1997,
the partnership sold its last out parcel, approximately one acre, for $400,000.
The net gain to the Company was approximately $175,000. The purchaser is an
operator of a chain of restaurants.

In December of 1996, the partnership entered into a lease with a tenant which is
an operator of a restaurant. The leased premises, a 6,242 square foot
restaurant, was constructed in 1996 and the partnership contributed $200,000
towards the cost of the restaurant building. The initial term of the lease is
ten years and calls 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. No percentage rent was due in 1998 or 1997. The lease also
provides three five year renewal options for years eleven through twenty-five
with escalating base rent. This property is encumbered by a mortgage loan of
$350,000 which bears interest at a fixed rate of 9.75% and calls for monthly
interest-only payments with all principal due in November 1999.

In November, 1994, the partnership entered into a ground lease with a tenant
which is an operator of a restaurant. In 1995, this tenant completed
construction of a restaurant on the 3/4 acres of land covered by the ground
lease. The initial term of the lease is twenty years and calls for base rent of
$60,000 per year with 12.5% increase every five years.

In March 1994, the partnership entered into a ground lease with a tenant which
is an operator of a 7,000 square foot restaurant on the one acre parcel covered
by the ground lease. The partnership agreed to contribute approximately $100,000
in improvements to the leased site. The initial term of the lease is ten years
and calls for base rent of $60,000 per year with 1% increases each subsequent
year. This property is encumbered by a mortgage loan of $300,000 which bears
interest at a fixed rate of 9.75% and calls for monthly interest-only payments
with all principal due in February 2001.

(6)
<PAGE>

HMG Sugargrove, Inc. This wholly-owned subsidiary sold its sole asset (eight
acres of land located in Houston, Texas) in June 1998 for approximately
$1,064,000. The net gain to the Company was approximately $621,000. In July
1997, a prospective buyer of the 8 acres forfeited a $225,000 non-refundable
deposit and did not close on the sale. This amount was recognized as other
income in 1997.

Insurance, Environmental Matters and Other.
- -------------------------------------------
In the opinion of management, all 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.

Other Transactions and Investments.
- -----------------------------------
(a) Sales of Property.
------------------
In March 1998, the Company, in conjunction with the previously disclosed
1997 condemnation of land by the state of Texas, received an additional
condemnation award of approximately $144,000 and recognized a net gain of
approximately $86,000.

Reference is made to the above sections of Item 1. Business and Item 6.
Management's Discussion and Analysis or Plan of Operation for information
concerning sales of properties.

(b) Other Investments.
------------------
In September 1998, the Company invested $250,000 in an unrelated
privately-held mortgage fund which invests in high-yield mortgage-backed
securities. As of December 31, 1998, the carrying value of this investment
approximates its net realizable value.

Other Unconsolidated Investments of CII.
T.G.I.F. Texas, Inc. (T.G.I.F.). CII owns 2,798,232 shares of common stock
of T.G.I.F. Texas, Inc., a Texas publicly-held corporation (T.G.I.F.),
(representing approximately 49% of T.G.I.F. equity) with a carrying value
of approximately $2.4 million. Mr. Wiener (T.G.I.F.'s Chairman and sole
director) is an 18% stockholder of T.G.I.F. As of December 31, 1998 and
1997, CII had outstanding loans due to T.G.I.F. of approximately $3.2
million and $3.1 million, respectively. These loans are payable on demand
and bear interest at the prime rate (7.75% as of December 31, 1998).
Interest is payable annually, CII expects to repay these loans with
proceeds from distributions of its investments. The carrying value of CII's
investment in T.G.I.F. approximates its net realizable value.

CII also owns investments primarily in the form of limited partnership
interests in companies whose purpose is to make equity investments in
growth oriented enterprises. The Company's ownership interest in these
partnerships represents less than 3% of each partnership's total ownership.

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 directly and through its subsidiaries
leases properties, it must compete for tenants with other lessors offering
similar facilities. Tenants sought by providing modern, well-maintained
facilities at competitive rentals. The Company has attempted to facilitate
successful

(7)
<PAGE>
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 no employees other than officers who are not compensated for
their services as such.

Advisory Agreement (the "Agreement").
- -------------------------------------
Terms of the Agreement. Under the terms of the Agreement, HMG Advisory Corp.
(the "Advisor") serves as the Company's investment advisor and, under the
supervision of the directors of the Company, administers the day-to-day
operations of the Company. All officers of the Company who are officers of the
Advisor are compensated solely by the Advisor 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 Advisor and a majority of the Company's
shareholders. The contract may be terminated at any time on 120 days' written
notice by the Advisor 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.

Under the Agreement, the Advisor is entitled to receive a monthly fee of
$55,000. The Advisor is entitled to an annual incentive compensation equal to
the sum of 10% of net realized capital gains and extraordinary items of income
for that year and 10% of the amount, if any, by which net profits of the Company
for such fiscal year exceeded 8% per annum of the Average Net Worth of the
Company, as defined. The Advisor also is entitled to a monthly fee of 20% of the
amount of any unrefunded commitment fees received by the Company with respect to
mortgage loans and other commitments which the Company was not required to fund
and which expired within the next preceding calendar month.

As previously reported, on April 4, 1997, the Board of Directors approved the
aforementioned advisory agreement between the Company and HMG Advisory Corp.
effective for a term commencing January 1, 1998 through December 31, 1998. This
advisory agreement was approved by a majority of the shareholders of the Company
at the 1997 Annual Meeting of Shareholders on June 27, 1997. The advisory
agreement is substantially the same as the former advisory agreement with
Courtland Group, Inc., but with a 25% reduction in the regular compensation paid
to the Advisory.

The Advisor is majority owned by Mr. Wiener with a portion of the remaining
shares owned by certain officers. The officers and directors of the Advisor 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 year ended December 31, 1998, the Company and its
subsidiaries paid the Advisor approximately $792,000 in fees, of which $660,000
represented regular compensation and approximately $132,000 represented
incentive compensation, including approximately $39,000 paid by CII to the
Advisor relating to capital gains realized by CII. Also, in January 1998, the
Company paid Courtland Group, Inc. (the former advisor) approximately $80,000 in
incentive fee compensation relating to the sale of property substantially
completed in 1997, but did not close until January 1998. In 1997, Courtland
Group Inc. was paid regular compensation of $875,000, and incentive compensation
of approximately $385,000, including approximately $130,000 paid by CII to the
Advisor relating to capital gains realized by CII. The Advisor is also the
manager for certain of the Company's affiliates and received fees of
approximately $30,000 in 1998 for such services.

(8)
<PAGE>
Item 2. Description of Property.
- --------------------------------
The principal executive offices of the Company and the Advisor are located at
2701 South Bayshore Drive, Coconut Grove, Florida, 33133, in premises furnished
by the Advisor pursuant to the terms of the Agreement. Reference is made to Item
1. Business for a description of the Company's properties.

Item 3. Legal Proceedings.
- --------------------------
As previously reported, the Company has made certain claims and took certain
other actions against Lee Gray, a former officer and Director of the Company,
Norman A. Fieber, a former Director of the Company, and certain related parties.
The Company's claims and actions arose from the failure of Messrs. Gray and
Fieber to disclose Mr. Gray's and Mr. Gray's sister's interest in the Company's
HMG- Fieber Wallingford Associates and HMG-Fieber Associates joint ventures (the
"Joint Ventures") and the inquiry into Messrs. Gray's and Fieber's failure to
disclose Mr. Gray's and Mr. Gray's sister's interest in HMG-Fieber Associates by
a Special Committee appointed by the Board of Directors (the "Inquiry"). The
Company is currently party, as both plaintiff and defendant, to litigation in
two jurisdictions stemming from the Inquiry and the actions taken by the Company
and Courtland Group, Inc., a Delaware corporation ("CGI"), subsequent to the
Inquiry.

HMG Courtland Properties, Inc. v. Lee Gray et al (the "Delaware Litigation").
- -----------------------------------------------------------------------------
On July 2, 1997, the Company filed suit in the Court of Chancery of the State of
Delaware in and for New Castle County against Lee Gray (individually and as a
partner in Martine Avenue Associates), Norman A. Fieber (individually and as a
partner in NAF Associates), Betsy Gray Saffell (Lee Gray's sister) (individually
and as a partner in Martine Avenue Associates), Martine Avenue Associates, (a
New York general partnership in which Mr. Gray and Mrs. Saffell are the general
partners) ("Martine"), NAF Associates (a Connecticut general partnership in
which Mr. Fieber and Martine are general partners, and the Company's joint
venture partner in HMG-Fieber Associates ("NAF"), and The Jim Fieber Trust ( a
trust for beneficiaries including Mr. Fieber and Martine, and the Company's
joint venture partner in HMG-Fieber Wallingford Associates, which has James A
Fieber, son of Norman A. Fieber, as trustee) (the "Trust"). NAF and the Trust
have been dismissed from the case because the Delaware court determined that it
did not have personal jurisdiction over those two entities.

The Company's lawsuit is based on the facts underlying the Board of Directors'
conclusion , based upon the report of the Special Committee following the
Inquiry and in consultation with counsel, that Mr. Gray breached his fiduciary
duties to the Company and CGI by failing to disclose his and his sister's
interest in the Joint Ventures, and that Mr. Fieber breached his fiduciary duty
to the Company and assisted Mr. Gray by failing to disclose Mr. Gray's and Mr.
Gray's sister's interest in the Joint Ventures. The Company's suit makes the
following claims: (i) breach of fiduciary duty against Mr. Gray; (ii) breach of
fiduciary duty against Mr. Fieber; (iii) aiding and abetting against Mr. Fieber,
Mrs. Saffell, Martine, NAF and the Trust; (iv) usurpation of a corporate
opportunity against all defendants; (v) common law fraud against Messrs. Gray
and Fieber; and (vi) conspiracy against all defendants. Relief being sought by
the Company includes: (i) damages; (ii) imposition of constructive trust for the
benefit of the Company over, and an accounting of, the defendants' interests in
the Joint Ventures; (iii) a recision of the transactions which created the Joint
Ventures; and (iv) a disgorgement of all interests and profits derived by all
the defendants from the Joint Ventures. Trial of the lawsuit is scheduled to
begin May 10, 1999 and is expected to last one week. The Company believes
strongly that its claims are meritorious and intends to vigorously pursue all
legal remedies against all defendants.

(9)
<PAGE>

Judicial Circuit in and for Dade County, Florida against the following
defendants: (i) the Company; (ii) all of the directors and certain of the
officers of the Company and of CGI; (iii) CGI; and (iv) HMG Advisory Corp., a
Delaware corporation that has served as the Company's advisor since January 1,
1998.

In his lawsuit, Mr. Gray, individually and derivatively as a shareholder of CGI,
alleges, among other things, that his removal as an officer of the Company, his
failure to be nominated for reelection as Director of the Company, his
subsequent removal as an officer and director of CGI and the Board of Directors'
decision not to renew the Company's former advisory agreement with CGI, were the
product of a conspiracy involving certain officers and Directors of the Company
and of CGI who wanted to force Mr. Gray out of the Company and CGI, and to
terminate the Company's advisory agreement with CGI, for their own financial
gain. Mr. Gray has also alleged that he was libeled in the discussion of the
Inquiry and the results thereof in certain documents, including documents filed
with the Securities and Exchange Commission. Mr. Gray is seeking money damages
in excess of $15,000, punitive damages, and temporary and permanent injunctive
relief on the following grounds: (i) breach of fiduciary duty against the
directors and certain of the officers of the Company; (ii) libel against the
Company and the directors and certain of the officers of the Company; (iii)
breach of fiduciary duty against the officers and directors of CGI; and (iv)
tortious interference with an advantageous business relationship against
defendants HMG Advisory Corp. and the officers and directors of CGI.

On July 10, 1997, the Company filed a motion to dismiss the portion of the
lawsuit directed against it and its directors. The motion to dismiss was granted
November 18, 1997. On December 1, 1997, Mr. Gray filed an amended complaint that
seeks to reinstate the libel claim against the Company. The Company moved to
dismiss the amended complaint and the motion was denied. The parties have agreed
to stay this suit pending the outcome of the Delaware litigation described
above. The Company and its officers and directors believe strongly that they
have meritorious defenses to, and intend to vigorously defend against, the libel
claim made by Mr. Gray.

CGI also filed a motion to dismiss the tortious interference claims described in
(iv) above which was granted. HMGA filed a motion to dismiss which was granted.
HMGA is no longer a defendant.

Norman A. Fieber v. HMG/Courtland Properties, Inc. et al.
- ---------------------------------------------------------
On July 8, 1997, Norman A. Fieber, NAF Associates and James A. Fieber, Trustee
(collectively, the "Fieber Plaintiffs") filed a separate lawsuit against the
Company in the Superior Court of the State of Connecticut, Fairfield/Bridgeport
Judicial District. In their lawsuit, the Fieber Plaintiffs sought a declaratory
judgement absolving them of any liability to the Company on essentially all of
the issues and claims being considered in the Company's lawsuit in Delaware
discussed above.

On August 27, 1997, the Company moved to dismiss, or in the alternative, stay
this action on the grounds that the declaratory judgement action was
inappropriate given the pendency of the Company's prior pending lawsuit in
Delaware. This motion was never decided. On June 16, 1998, the Fieber Plaintiffs
filed a notice of withdrawal of their claims and the matter is now terminated.

Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1998.

(10)
<PAGE>
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 for each quarter during the past two years were as follows:

High Low
------- --------
March 31, 1997 5 1/4 4 5/8
June 30, 1997 5 4 7/16
September 30, 1997 4 3/4 4 1/8
December 31, 1997 6 1/8 4 1/2

March 31, 1998 4 5/8 4 1/4
June 30, 1998 5 1/2 4 1/4
September 30, 1998 5 7/8 4 1/2
December 31, 1998 5 3 5/8

The Company stopped paying dividends, beginning in the fourth quarter of 1990,
in order to preserve its cash in light of the overall economic conditions and
for future development opportunities. 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. The Company continues to meet all qualifications for
taxation as a REIT.

As of March 19, 1999, there were 220 holders of record of the Company's common
stock.

Item 6. Management's Discussion and Analysis or Plan of Operation.
- ------------------------------------------------------------------
Discussion of Balance Sheet Items:
- ----------------------------------
At December 31, 1998, the balance sheet reflected assets consisting primarily of
equity interests in real estate investment properties and investments in
unconsolidated entities. Liabilities at December 31, 1998 consisted principally
of mortgages on individual properties.

Significant changes and/or activity in specific balance sheet items between
December 31, 1998 and 1997 are described below:

Assets:
- -------
Commercial and industrial properties increased from approximately $3 million to
$3.3 million, an increase of approximately $300,000 or (10%). This increase was
primarily the result of improvements made during 1998 to CII's office building
which was purchased in 1997.

The carrying value of the hotel and club facility decreased from approximately
$7.3 million to approximately $6.5 million, a decrease of approximately $800,000
(or 11%). This was primarily the result of depreciation expense.

(11)
<PAGE>

Land held for development decreased from approximately $5.1 million to
approximately $3.0 million, a decrease of approximately $2.1 million (or 41%).
This was primarily as the result of sales of land located in Houston, Texas.

Investments in and receivables from unconsolidated entities increased from
approximately $4.1 million to approximately $4.6 million, an increase of
approximately $500,000 (or 12%). This was primarily as a result of additional
investments (net of distributions) in privately-held limited partnerships whose
primary purpose is to make equity investments in growth-oriented enterprises and
an investment in a privately-held mortgage fund.

The Company's consolidated balance in cash and cash equivalents decreased from
approximately $2.5 million to approximately $1.8 million, a decrease of
approximately $700,000 (or 28%). This decrease is primarily the result of
increased investments in marketable securities and in unconsolidated
investments, partially offset by net proceeds from sales of real estate.

Investments in marketable securities increased from approximately $100,000 to
$1.6 million, as a result of increased cash available for investment primarily
from the sales of properties.

Other assets decreased from approximately $792,000 to approximately $403,000, a
decrease of approximately $389,000 (or 49%). This was primarily the result of
decreased funds in escrow relating to the condemnation of certain property
located in Houston, Texas on December 31, 1997 and decreased deferred loan
costs.

Liabilities:
- ------------
Accounts payable and accrued expenses increased from approximately $888,000 to
approximately $1,059,000, an increase of approximately $171,000 (or 19%). This
was primarily as a result of increased accrued expenses of HMG-Fieber
Associates.

Mortgages and notes payable decreased from approximately $10.2 million to
approximately $9.6 million, a decrease of approximately $600,000 (or 6%). The
activity during the year consisted of repayments of debt by The Grove Towne
Center-Texas, Ltd. of approximately $1.1 million partially offset by increased
borrowings of approximately $511,000 relating to the refinancing of the debt
encumbering the Grove Isle property.

Results of Operations:
- ----------------------
For the year ended December 31, 1998, the Company reported a net loss of
approximately $930,000 or ($.82 per share) compared with net income of
approximately $548,000 (or $.47 per share) for the year ended December 31, 1997.
Changes in specific revenues and expenses are discussed below.

Revenues:
- ---------
1998 versus 1997:
- -----------------
Total revenues for the year ended December 31, 1998 as compared with that of
1997 decreased by approximately $872,000 (or 23%). This decrease was primarily
due to decreased gains from unconsolidated investments of approximately $708,000
or (78%) and decreased other income due to non-recurring gain from the
forfeiture of a land sale deposit of approximately $202,000 and gain on the sale
of a yacht slip of approximately $107,000 in 1997. These decreases were
partially offset by an increase in the gain on sale of marketable securities of
approximately $276,000.

(12)
<PAGE>
Expenses:
- ---------
1998 versus 1997:
- -----------------
Total expenses for the year ended December 31, 1998 as compared to that of 1997
increased by approximately $99,000 (or 2%).

Operating expenses of rental properties and other decreased by approximately
$135,000 or (17%) for the year ended December 31, 1998 as compared to 1997. This
decrease was primarily due to lower operating expenses of The Grove Towne
Center-Texas, Ltd. property as a result of sales during the year.

Advisor's fee decreased by $215,000 (or 25%) for the year ended 12/31/98 as
compared to 1997. This was the result of the change in the advisory agreement
effective January 1, 1998, as previously reported.

General and administrative expenses decreased by approximately $95,000 or (20%)
for the year ended December 31, 1998 as compared to 1997. This decrease was
primarily due to approximately $190,000 of decreased costs relating to the
termination of the Grove Isle property operations in the first quarter of 1997.
This decrease was partially offset by increased operating costs of CII of
approximately $96,000.

Professional fees increased by approximately $455,000 (or 69%) for year ended
December 31, 1998 as compared to 1997. This was primarily the result of
increased costs relating to the on-going litigation, as previously reported.

Interest expense decreased by approximately $84,000 (or 9%) primarily as the
result of paydowns and refinancing of long-term debt.

Minority partner's interest in operating gains (losses) of consolidated entities
increased by approximately $280,000 primarily due to decreased losses from The
Grove Towne Center -Texas, Ltd. as a result of no further losses being allocated
to the minority partner due to a deficit in it's minority balance.

Net gain on sale of real estate for the years ended December 31, 1998 and 1997
consisted of the following:

<TABLE>
<CAPTION>
Net gain after incentive fee and
minority interest
--------------------------------
<S> <C> <C>
Property Sold 1998 1997
---------- ----------
Undeveloped land in Texas $1,433,000 $1,190,000
Undeveloped land in Rhode Island 86,000 --
Land in Florida shopping center -- 174,000
HMG-Fieber retail stores in various states -- 664,000
---------- ----------
$1,519,000 $2,028,000
========== ==========
</TABLE>

Projected Operating Results:
- ----------------------------
The Company's rental and related revenues and expenses in 1999 are expected to
remain consistent with those of 1998.

Effect of Inflation:
- --------------------
Inflation affects the costs of operating and maintaining the Company's
investments and the availability and terms of financing. 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.

(13)
<PAGE>
Liquidity and Capital Resources:
- --------------------------------
The Company's material commitments primarily consist of maturities of debt
obligations of approximately $3.9 million in 1999. The funds necessary to meet
these obligations are expected from the proceeds of sales of properties,
refinancing, distributions from investments and available cash. Included in the
maturing debt obligations is a note payable by CII to T.G.I.F. of approximately
$3.2 million due on demand. CII intends to repay this obligation, when due, with
funds available from distributions from investments. In addition, the Company
intends to continue to seek opportunities for investment in income producing
properties.

The Company used cash from operating activities of approximately $1.4 million
for the year ended December 31, 1998 versus approximately $2.2 million in 1997.
The Company believes that there will be sufficient cash flows in the next year
to meet its operating requirements.

Capital Expenditure Requirements
- --------------------------------
The Company does not presently anticipate any significant capital expenditures,
other than in the ordinary course of business.

Material Changes in Operating, Investing and Financing Cash Flows:
- ------------------------------------------------------------------
Discussion of 1998 Changes.
- ---------------------------
For the year ended December 31, 1998, net cash provided by investing activities
was approximately $1.7 million. This consisted primarily of net proceeds from
disposals of properties of approximately $3.4 million, net proceeds from the
sales of and redemptions of securities of approximately $1.5 million, less
increased investments in marketable securities of approximately $2.5 million,
less acquisitions and improvements of properties of approximately $407,000 and
less additional investments of approximately $263,000.

For the year ended December 31, 1998, net cash used in financing activities was
approximately $967,000. This consisted of repayment of mortgages and notes
payable of approximately $5.2 million and purchase of treasury stock of
approximately $325,000, partially offset by additional borrowings of $4.6
million.

Year 2000.
- ----------
Background.
- -----------
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, date-sensitive
computer software may recognize a date using "00" as the year 1900 rather than
the Year 2000. This is generally referred to as the Year 2000 issue. If this
situation occurs, the potential exists for computer system failure or
miscalculations by computer programs, which could disrupt operations.

State of Readiness.
- -------------------
Costs and Risks.
- ----------------
In February 1999, the Company completed the conversion of its computer system to
use 4-digit year fields and therefore believes to be "Year 2000" compliant. The
cost of such conversion was not material to the Company's financial condition or
results of operation, nor did the Company experience any material disruption in
its operations with respect thereto. The Company's computer system is small,
consisting of only six personal computers connected via one local area network
server located in one facility. The Company utilizes its computer system to
perform accounting and word processing functions only. The Company has no other
operations which rely on computers or other equipment that would be affected by
the Year 2000 issue.

(14)
<PAGE>
The Company is exposed to the risk that one or more of its tenants could
experience Year 2000 problems that impact their ability to meet lease
obligations to the Company. To date, the Company is not aware of any tenant Year
2000 issue that would have a material adverse impact on the Company's
operations. The Company has received an interim status report from its primary
tenant at its Grove Isle property in Florida that this tenant is addressing its
Year 2000 readiness. The Company has no means of ensuring that this or any other
tenant will be Year 2000 ready. The inability of tenants to complete their Year
2000 resolution process in a timely fashion could have an adverse impact on the
Company. The effect of non-compliance by tenants is not determinable at this
time.

The Company's Year 2000 risks are considered minimal and no contingency plans
are believed to be necessary.

Widespread disruptions in the national or international economy, including
disruptions affecting the financial markets, resulting from Year 2000 issues, or
in certain industries, such as commercial or investment banks, could also have
an adverse impact on the Company. The likelihood and effect of such disruptions
is not determinable at this time.

Future Accounting Pronouncements.
- ---------------------------------
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information, " which among other things, changes the way public companies report
information about operating segments, is effective for the Company in 1998. The
Company currently operates solely as a real estate investment trust and
therefore SFAS No. 131 has no effect on the Company's reporting.

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Statement applies to all entities and is
effective for all fiscal quarters of the fiscal years beginning after June 15,
1999. The Company did not materially engage in derivative instruments or hedging
activities in any periods presented in the consolidated financial statements.

(15)
<PAGE>

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

Report of Independent Certified Public Accountants..................17.

Consolidated balance sheets as of December 31, 1998 and 1997........18.

Consolidated statements of operations for the
years ended December 31, 1998 and 1997............................19.

Consolidated statements of stockholders' equity for
the years ended December 31, 1998 and 1997........................20.

Consolidated statements of cash flows for the
years ended December 31, 1998, and 1997...........................21.

Notes to consolidated financial statements..........................22.

(16)
<PAGE>

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 its subsidiaries (the "Company") as of December 31, 1998,
and 1997 and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. 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 the Company as of
December 31, 1998, and 1997 and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.

BDO SEIDMAN, LLP

Miami, Florida
March 19, 1999

(17)

<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
---- ----
<S> <C> <C> <C>
ASSETS NOTES
Investment Properties, net of accumulated depreciation: 2
Commercial and Industrial $3,267,582 $3,046,597
Hotel and Club Facility 6,521,428 7,254,692
Yacht Slips 1,508,291 1,557,675
Land Held for Development 3,013,272 5,073,976
----------------- --------------------
Total investment properties, net 14,310,573 16,932,940

Investments In and Receivables From Unconsolidated Entities 3 4,603,047 4,138,935
Notes and Advances Due From Related Parties 4 719,937 655,912
Loans, Notes and Other Receivables 875,614 894,935
Cash and Cash Equivalents 1,834,365 2,492,059
Investments in marketable securities 5 1,621,488 102,378
Other Assets 402,674 792,464
================= ====================
TOTAL ASSETS $24,367,698 $26,009,623
================= ====================

LIABILITIES & STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses 1,058,959 888,346
Mortgages and Notes payable 6 9,555,129 10,216,407
Other Liabilities 349,767 390,864
----------------- --------------------
TOTAL LIABILITIES 10,963,855 11,495,617

Commitment and contingincies 4

Minority interests 424,925 396,694
----------------- --------------------

STOCKHOLDERS' EQUITY 8
Preferred Stock, no par value; 2,000,000 shares
authorized; none issued
Common Stock, $1 par value; 1,500,000 shares authorized;
1,245,635 shares issued and outstanding 1,245,635 1,245,635
Additional Paid-in Capital 26,283,222 26,283,222
Undistributed Gains From Sales of Real Estate, net of losses 36,670,311 35,151,554
Undistributed Losses From Operations (50,015,668) (47,566,637)
Accumulated other comprehensive income 116,555
----------------- --------------------
14,300,055 15,113,774
Less: Treasury Stock, at cost (145,400 and 78,800 shares as of
December 31, 1998 and 1997, respectively) (1,321,137) (996,462)

----------------- --------------------
TOTAL STOCKHOLDERS' EQUITY 12,978,918 14,117,312

----------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24,367,698 $26,009,623
================= ====================
</TABLE>

See notes to consolidated financial statements

(18)

<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Rentals and related revenue $ 1,715,704 $ 1,707,430
Marina revenues 518,522 537,226
Gain from sale of marketable securities 347,834 71,894
Gain from unconsolidated investments 201,534 909,450
Interest from invested cash, dividends and other 219,425 648,978
-------------------------------
Total revenues 3,003,019 3,874,978
-------------------------------

EXPENSES
Operating expenses:
Rental Properties and other 655,167 790,033
Marina 507,255 556,895
Advisor's fee 660,000 875,000
General and administrative 382,314 477,771
Professional fees and expenses 1,110,142 655,486
Directors' fees and expenses 41,315 63,227
Depreciation and amortization 1,043,702 1,080,347
-------------------------------
Total operating expenses 4,399,895 4,498,759

Interest expense 851,559 936,027
Minority partners' interests in operating
gains (losses) of consolidated entities 200,596 (79,606)
-------------------------------
Total expenses 5,452,050 5,355,180
-------------------------------

Loss before sales of real estate (2,449,031) (1,480,202)

Gain on sales of real estate, net 1,518,757 2,028,215
-------------------------------

Net (Loss) income ($ 930,274) $ 548,013
===============================

Net (Loss) Income Per Common Share, Basic and Diluted
(Based on weighted average shares outstanding of
1,130,707 and 1,166,835 for the years ended December 31,
1998 and 1997 respectively) ($ 0.82) $ 0.47
=========== ===========
</TABLE>

See notes to consolidated financial statements

(19)

<PAGE>

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Undistributed
Gains from Undistri- Accumulated
Sales of buted Other Total
Additional Real Estate, Losses Compre- Compre- Stock
Common Stock Paid-In Net of from hensive hensive Treasury Stock holders'
Shares Amount Capital Losses Operations Income Income Shares Cost Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1997 1,245,635 $1,245,635 $26,283,222 $33,123,339 ($46,086,435) 78,800 ($996,462) $13,569,299

Net ncome (loss) 2,028,215 (1,480,202) 548,013
---------------------------------------------------------------------------------------------------------------

Balance as of
December 31, 1997 1,245,635 1,245,635 26,283,222 35,151,554 (47,566,637) 78,800 (996,462) 14,117,312

Comprehensive
income (loss)
Net income (loss) 1,518,757 (2,449,031) ($930,274) (930,274)
Other comprehensive
income
Unrealized gain
on marketable
securities 116,555 $116,555 116,555
---------
Comprehensive
income (loss) ($813,719)

Purchased 66,600
shares of
treasury stock 66,600 (324,675) (324,675)

---------------------------------------------------------------------------------------------------------------
Balance as of
December 31, 1998 1,245,635 $1,245,635 $26,283,222 $36,670,311 ($50,015,668) $116,555 145,400 ($1,321,137) $12,978,918
===============================================================================================================
</TABLE>

See notes to consolidated financial statements

(20)
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 930,274) $ 548,013
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,043,702 1,080,347
Gain from unconsolidated investments (201,534) (909,450)
Gain on sales of real estate, net (1,518,757) (2,028,215)
Gain from sales of marketable securities, net (347,834) (71,894)
Minority partners' interest in operating gains (losses) 200,596 (79,606)
Changes in assets and liabilities:
Decrease (increase) in other assets 314,565 (276,591)
(Increase) decrease in due from affiliates (64,025) 185,886
Increase (decrease) in accounts payable and accrued expenses 170,613 (733,580)
(Decrease) increase in other liabilities (41,097) 107,055
----------- -----------
Total adjustments (443,771) (2,726,048)
----------- -----------
Net cash used in operating activities (1,374,045) (2,178,035)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisitions and improvements of properties (406,816) (669,806)
Net proceeds from disposals of properties 3,388,497 4,714,429
Increase in mortgage loans, notes and other loans receivable (50,953) (1,419,622)
Decrease in mortgage loans, notes and other loans receivable 70,274 969,579
Net contributions to unconsolidated entities (262,577) (160,560)
Net proceeds from sales and redemptions of securities 1,453,268 89,599
Increase in investments in securities (2,507,989) (73,344)
----------- -----------
Net cash provided by investing activities 1,683,704 3,450,275
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages and notes payables (5,245,830) (1,313,931)
Additions to mortgages and notes payables 4,584,552 1,445,943
Purchase of treasury stock (324,675)
Net contributions from (distributions to) minority partners 18,600 (301,739)
----------- -----------
Net cash used in financing activities (967,353) (169,727)
----------- -----------

Net decrease in cash and cash equivalents (657,694) 1,102,513

Cash and cash equivalents at beginning of the period 2,492,059 1,389,546
----------- -----------

Cash and cash equivalents at end of the period $ 1,834,365 $ 2,492,059
=========== ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 790,000 $ 1,112,000
=========== ===========
</TABLE>

See notes to consolidated financial statements

(21)
<PAGE>

HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 and 1997
--------------------------------------

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.
Investments in which the Company does not have a majority voting or financial
controlling interest are accounted for under the equity method of accounting ,
even though the Company may have a majority interest in profits and losses. The
Company invests in a portfolio of equity interests in commercial real estate.
The Company was organized in 1972 and qualifies for taxation as a real estate
investment trust ("REIT") under the Internal Revenue Code. The Company operates
in one business segment and its present investment policy is to invest primarily
in income-producing commercial properties. 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, a 15% general partnership interest in Grove
Isle Associates, Ltd., and various investments in partnerships whose primary
purpose is to make equity investments in growth-oriented enterprises and real
estate.

As previously reported, 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, all of 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.

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 9).

Grove Isle Club, Inc. ("GICI"). This corporation was the former operator of the
hotel and club of GIA. GICI's present revenues consists solely of the amounts
received from GIA in consideration for the relinquishment of its lease of the
Grove Isle property (See Note 9).

Grove Isle Yacht Club Associates ("GIYCA"). This partnership was the developer
of the 85 boat slips located at Grove Isle of which 42 remain unsold. GIYCA and
its wholly-owned subsidiary operate all aspects of the Grove Isle marina.

The Grove Towne Center - Texas, Ltd. A 75% owned limited partnership having a
wholly-owned subsidiary of the Company as its sole general partner. This
partnership was formed in 1994 with its principal asset being a 41 acre site
located in suburban Houston, Texas, held for investment and development. During
the year ended December 31, 1997 this partnership sold approximately 4.5 acres
of its property and in January 1998, the partnership sold another 13.5 acres. In
March 1999, this partnership sold another 2.3 acres.

(22)
<PAGE>

South Bayshore Associates. A 75% owned venture of which the major asset is a
receivable from the Company's venture partner.

HMG - Fieber Associates. A 65% owned venture of which the major assets are
commercial properties located in the northeastern United States. (See Note 4).

260 River Corp. A 100% subsidiary of the company which owns a 65% interest in
one property located in Montpelier, Vermont.

HMG Sugargrove, Inc. A wholly-owned Texas corporation which sold its sole asset
(an 8 acre parcel of land in Houston, Texas) in June 1998.

HMG Fashion Square, Inc. A wholly-owned Florida corporation of which the major
asset is a 90% partnership interest in Fashion Square Partnership which owns a
shopping center on an approximate 10 acre site in Jacksonville, Florida. As of
December 31, 1998, this shopping center has three tenants each operating
restaurants.

Unconsolidated entities are discussed in Note 3.

The following table summarizes the Company's portfolio of real estate
investments as of December 31, 1998:

Percent of
Geographic Distribution Investments (1)
----------------------- ---------------
Florida 74%
Texas 21%
Northeastern United States (2) 5%
-----
100%

Type of Property (3)
Undeveloped land 21%
Hotel and club facility 45%
Individual retail stores 4%
Yacht slips 11%
Shopping center and other 19%
-----
100%
====
-----------------
(1) For each category, the aggregate of cost less accumulated
depreciation divided by the aggregate of such investments in all
real estate owned directly by the Company or by joint ventures in
which the Company has a majority interest. The Company's minority
interests in joint ventures are not included in the above.

(2) New York, Massachusetts, Maine and Vermont.

(3) Based on predominant present or intended use.

Preparation of Financial Statements.
- ------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles 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.

(23)
<PAGE>

Income Taxes. The Company qualifies as a real estate investment trust and
distributes its taxable operating 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.
The Company intends to distribute any of its future taxable operating income and
is not taxed on the amounts distributed. 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 solely to 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 7 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, 1998, and 1997 was approximately $1 million and $1.1
million, respectively. The GIYCA's yacht slips are being depreciated on a
straight-line basis over their remaining useful life of 20 years.

Fair Value of Financial Instruments. The carrying value of financial instruments
including investments in and receivables from unconsolidated entities, notes and
advances due from related parties, accounts payable and accrued expenses and
mortgages and notes payable approximate their fair values at December 31, 1998.

Marketable Securities. Investments in marketable securities have been designated
as available for sale. Those securities are reported at market value, with net
unrealized gains and losses included in equity. Unrealized losses that are other
than temporary are recognized in earnings. Realized gains and loses on
investments are determined using the average cost method.

Comprehensive Income. During the third quarter of 1998, the Company implemented
Statement of Financial Accounting Standards ("SFAS") No. 130. "Reporting
Comprehensive Income" and has elected to report comprehensive income in the
consolidated statement of stockholders' equity. Comprehensive income is the
change in equity from transactions and other events from nonowner sources.
Comprehensive income includes net income and comprehensive income. The
components and related activity of accumulated other comprehensive income,
resulting from net unrealized gain on available-for- sale investments are as
follows:

Accumulated Other Comprehensive Income:
Balance as of December 31, 1997.....................................$-0-
Changes during the year..........................................116,555
--------
Balance as of December 31, 1998.................................$116,555
========

Earnings (Loss) Per Common Share. Net income (loss) per common share (basic and
diluted) is based on the net income (loss) divided by the weighted average
number of common shares outstanding during each year. Common shares outstanding
includes issued shares less shares held in treasury.

The Company's potential issuable shares of common stock pursuant to outstanding
stock purchase options are excluded from the Company's diluted computation as
their effect would be antidilutive to the Company's net income (loss).

Treasury Stock. In June 1998, the Company purchased 66,600 shares of treasury
stock at a cost of approximately $325,000 or $4.88 per share which was the
market value at the date of purchase.

(24)
<PAGE>

Gain on Sales of Real Estate. Gain on sales of real estate has been reduced,
where applicable, by minority partners' interest in the (loss) gain of $191,000
and $422,000 and advisor's incentive fees of $168,000 and $225,000 for the years
ended December 31, 1998 and 1997, respectively.

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.

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Minority interest balance at beginning of year $ 397,000 $ 356,000
Minority partners' interest in operating gains (losses) of consolidated
subsidiaries 201,000 (80,000)
Minority partners' interest in net gain (losses) on sales of real estate of
consolidated subsidiaries (191,000) 422,000
Net contributions from (distributions to) minority partners 6,000 (314,000)
Other 12,000 13,000
--------- ---------
Minority interest balance at end of year $ 425,000 $ 397,000
========= =========
</TABLE>

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, or other measurement
date, over the amount an employee must pay to acquire the stock.

Revenue Recognition. The Company is the lessor of various real estate. 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. 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.

Future Accounting Pronouncements. SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which among other things, changes the
way public companies report information about operating segments, is effective
for the Company in 1998. The Company currently operates solely as a real estate
investment trust and therefore SFAS No. 131 has no effect on the Company's
reporting.

Asset Impairments. The Company periodically reviews the carrying value of
certain of its 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

(25)
<PAGE>

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.

(26)

<PAGE>

2. INVESTMENT PROPERTIES

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

<TABLE>
<CAPTION>
December 31, 1998
-------------------------------------------
Accumulated
Cost Depreciation Net
---- ------------ ---
<S> <C> <C> <C>
Commercial and Industrial Properties
Land $ 1,445,948 $ 1,445,948
Buildings and improvements 3,295,078 $ 1,473,444 1,821,634
----------- ----------- -----------
4,741,026 1,473,444 3,267,582
----------- ----------- -----------
Hotel and Club Facility
Land 1,338,518 1,338,518
Hotel/ club facility and improvements 6,918,914 1,984,754 4,934,160
Furniture, fixtures & equipment 2,234,643 1,985,893 248,750
----------- ----------- -----------
10,492,075 3,970,647 6,521,428
----------- ----------- -----------

Yacht Slips 1,587,675 79,384 1,508,291
----------- ----------- -----------

Land Held for Development 3,013,272 3,013,272
----------- ----------- -----------

Total $19,834,048 $ 5,523,475 $14,310,573
=========== =========== ===========
</TABLE>

December 31, 1997
--------------------------------------------
Accumulated
Cost Depreciation Net
---- ------------ ---
<S> <C> <C> <C>
Commercial and Industrial Properties
Land $ 1,444,890 $ 1,444,890
Buildings and improvements 2,930,635 $ 1,328,928 1,601,707
----------- ----------- -----------
4,375,525 1,328,928 3,046,597
----------- ----------- -----------
Hotel and Club Facility
Land 1,338,518 1,338,518
Hotel/ club facility and improvements 6,910,614 1,583,641 5,326,973
Furniture, fixtures & equipment 2,231,630 1,642,429 589,201
----------- ----------- -----------
10,480,762 3,226,070 7,254,692
----------- ----------- -----------

Yacht Slips 1,557,675 1,557,675
----------- ----------- -----------

Land Held for Development 5,073,976 5,073,976
----------- ----------- -----------

Total $21,487,938 $ 4,554,998 $16,932,940
=========== =========== ===========
</TABLE>

(27)
<PAGE>

3. INVESTMENTS IN AND RECEIVABLES FROM UNCONSOLIDATED ENTITIES

As of December 31, 1998 the Company's investments in and receivables from
unconsolidated entities primarily consisted of CII's 49% equity interest in
T.G.I.F. Texas, Inc. (T.G.I.F.) and CII's other investments. CII owns
approximately 49% of the outstanding common stock of T.G.I.F., a publicly-held
Texas corporation which primarily owns notes receivable from its shareholders
and a net leased property in Louisiana. This investment is accounted for under
the equity method. The operations of T.G.I.F. are not material to the Company's
consolidated financial statements. During 1997, T.G.I.F. sold its four net
leased properties in Texas for $4 million. This sale was in conjunction with a
1987 settlement agreement between T.G.I.F. and its former franchisor T.G.I.
Fridays, Inc. CII recognized a gain of approximately $510,000 from T.G.I.F.
primarily as a result of this sale. T.G.I.F. continues to own one property
located in Baton Rouge, Louisiana which is leased to a restaurant operator.
Also, see Note 6 for notes payable to T.G.I.F.

CII's other investments primarily consist of investments in various partnerships
whose purpose is to make equity investments primarily in growth oriented
enterprises. CII's ownership interest in each of these partnerships is less than
3% of the total partnership ownership . The carrying values of all investments
in and receivables from unconsolidated entities are carried at the lower of cost
or fair value.

In connection with such investments, the Company has committed to contribute
approximately $1.5 million to these partnerships as required by agreement.
Subsequent to year end, the Company invested and/or committed to invest an
additional $1.5 million in similar partnerships.

Carrying Values as of December 31,
----------------------------------
Description 1998 1997
----------- ---------- ----------
T.G.I.F. Texas, Inc. $2,392,963 $2,264,931
Various Others 2,210,084 1,874,004
---------- ----------
$4,603,047 $4,138,935
========== ==========

4. NOTES AND ADVANCES DUE FROM AND TRANSACTIONS WITH RELATED PARTIES
AND LITIGATION

The Company has an agreement (the "Agreement") with HMG Advisory Corp. (the
"Advisor") for its services as investment advisor and administrator of the
Company's affairs. All officers of the Company who are officers of the Advisor
are compensated solely by the Advisor 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 Advisor and a majority of the Company's
shareholders. The contract may be terminated at any time on 120 days written
notice by the Advisor 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 Advisor is majority owned by Mr. Wiener with the remaining shares owned by
certain officers. The officers and directors of the Advisor 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 Agreement, the Advisor is also entitled to receive a monthly fee of
$55,000. The Advisor is entitled to a monthly fee of 20% of the amount of any
unrefunded commitment fees received by the Company with respect to mortgage
loans and other commitments which the Company was not required to

(28)
<PAGE>

fund and which expired within the next preceding calendar month. The Advisor is
also entitled to an annual incentive compensation equal to the sum of 10% of net
realized capital gains and extraordinary items of income for that year and 10%
of the amount, if any, by which net profits of the Company for such fiscal year
exceeded 8% per annum of the Average Net Worth of the Company, as defined.

During 1998, $792,000 was earned by the Advisor as advisory fees of which
approximately $132,000 was for incentive compensation. The Advisor also received
management fees from certain affiliates of the Company in the amount of
approximately $30,000 in 1998.

As previously reported, the Company's advisory agreement prior to January 1,
1998, was with Courtland Group, Inc. In January 1998, Courtland Group Inc.
received approximately $80,000 in incentive fees relating to the sale of
property which was substantially completed in December 1997, but did not close
until January 1998.

During 1997, Courtland Group, Inc. earned approximately $1,260,000 in advisory
fees of which $385,000 was for incentive compensation.

At December 31, 1998, the Company had amounts due from the Advisor of
approximately $11,000. This amount bears interest at prime plus 1%. At December
31, 1998 and 1997, the Company had amounts due from Courtland Group, Inc. of
approximately $233,000 and $205,000, respectively. This amount bears interest at
Prime +1% and is due on demand.

The Company, via its 75% owned joint venture (SBA), has a note receivable from
Transco of $300,000 plus accrued interest of approximately $175,000 and $150,000
as of December 1998 and 1997, respectively. This note bears interest at the
prime rate and is due on demand.

Mr. Wiener, Chairman of the Company, is an 18% shareholder and an officer and
director of T.G.I.F. Texas, Inc., a 49% owned affiliate of CII (See Note 3). As
of December 31, 1998 and 1997, T.G.I.F. had amounts due from Mr. Wiener in the
amount of approximately $388,000 and $185,000, respectively. These amounts are
due on demand and bear interest at the prime rate. Furthermore, the Advisor
receives a management fee of $18,000 per year from T.G.I.F. CII has amounts due
to T.G.I.F. of approximately $3.2 million and $3.1 million as of December 31,
1998 and 1997, 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 purchased at market value in 1996.

In October 1996, it was brought to the Company's attention that Mr. Lee Gray
(then President, Treasurer and Director of the Company, "Gray") failed to
disclose his interest, through a partnership of his and his sister's, in a 35%
joint venture partner in HMG-Fieber Associates. Additionally, another director
(Mr. Norman Fieber, "Fieber"), who had an interest in the joint venture partner,
failed to disclose Gray's or Gray's sister's interest in such partnership. In
November 1996, the Company appointed a Special Committee of the Board to review
Gray's and Fieber's failure to disclose the interests in the joint venture
partner. During the course of the inquiry it was discovered that Gray also
failed to disclose his and his sister's interest in the Company's 66 2/3% joint
venture partner in another joint venture which operated through 1992. Based on
the report of the Special Committee in March 1997, the Board concluded that Gray
and Fieber breached their fiduciary duties to the Company by failing to disclose
Gray's and Gray's sister's interest in the joint ventures. The Board removed
Gray as President and Treasurer of the Company. Both Gray and Fieber refused to
resign as directors of the Company. Mr. Gray and Mr. Fieber were not re-elected
as directors at the 1997 Annual Meeting of Shareholders. The Company is
currently a party, as both plaintiff and defendant, to litigation in two
jurisdictions, as follows:

(29)
<PAGE>
HMG Courtland Properties, Inc. v. Lee Gray et al (the "Delaware Litigation").
- -----------------------------------------------------------------------------
On July 2, 1997, the Company filed suit in the Court of Chancery of the State of
Delaware in and for New Castle County against Lee Gray (individually and as a
partner in Martine Avenue Associates), Norman A. Fieber (individually and as a
partner in NAF Associates), Betsy Gray Saffell (Lee Gray's sister) (individually
and as a partner in Martine Avenue Associates), Martine Avenue Associates, (a
New York general partnership in which Mr. Gray and Mrs. Saffell are the general
partners) ("Martine"), NAF Associates (a Connecticut general partnership in
which Mr. Fieber and Martine are general partners, and the Company's joint
venture partner in HMG-Fieber Associates ("NAF"), and The Jim Fieber Trust ( a
trust for beneficiaries including Mr. Fieber and Martine, and the Company's
joint venture partner in HMG-Fieber Wallingford Associates, which has James A
Fieber, son of Norman A. Fieber, as trustee) (the "Trust"). NAF and the Trust
have been dismissed from the case because the Delaware court determined that it
did not have personal jurisdiction over those two entities.

Lee Gray v. HMG/Courtland Properties, Inc et al (the "Florida Litigation").
- ---------------------------------------------------------------------------
On May 22, 1997, Lee Gray, a former director and officer and a shareholder of
the Company and a former officer and director and a shareholder of CGI, which
served as the Company's advisor pursuant to an advisory agreement which expired
December 31, 1997, filed suit in the Circuit Court of the 11th Judicial Circuit
in and for Dade County, Florida against the following defendants: (i) the
Company; (ii) all of the directors and certain of the officers of the Company
and of CGI; (iii) CGI; and (iv) HMG Advisory Corp., a Delaware corporation that
has served as the Company's advisor since January 1, 1998.

(30)
<PAGE>
On July 10, 1997, the Company filed a motion to dismiss the portion of the
lawsuit directed against it and its directors. The motion to dismiss was granted
November 18, 1997. On December 1, 1997, Mr. Gray filed an amended complaint that
seeks to reinstate the libel claim against the Company. The Company moved to
dismiss the amended complaint and the motion was denied. The parties have agreed
to stay this suit pending the outcome of the Delaware litigation described
above. The Company and its officers and directors believe strongly that they
have meritorious defenses to, and intend to vigorously defend against, the libel
claim made by Mr. Gray.

CGI also filed a motion to dismiss the tortious interference claims described in
(iv) above which was granted. HMGA filed a motion to dismiss which was granted.
HMGA is no longer a defendant.

5. INVESTMENTS IN MARKETABLE SECURITIES

Investments in marketable securities are composed primarily of corporate equity
securities. These securities are classified as available-for-sale and carried at
fair value, based on quoted market price. The net unrealized gains or losses on
these investments are reported as a separate component of stockholders' equity.
Gross unrealized gains on available-for-sale securities as of December 31, 1998
were approximately $161,000. Gross unrealized losses as of December 31, 1998
were approximately $45,000.

Gross gains on sales of marketable securities of approximately $423,000 were
realized during the year ended December 31, 1998. Gross losses of approximately
$75,000 were realized during the year ended December 31, 1998. Gross gains and
losses are based on the average cost method of determining cost.

(31)
<PAGE>

6. MORTGAGES AND NOTES PAYABLES

<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1997
----------- -------
<S> <C> <C>
Collateralized by Investment Properties (Note 2)
- ------------------------------------------------
Land Held for Development:
Mortgage loan payable, interest at 9% payable quarterly with quarterly
principal payments of $12,776. Principal and accrued interest were
paid off in January 1998 -- $ 867,524

Mortgage loan payable, interest at 1% over prime (8.75% at December
31, 1998) payable monthly. Principal payment of $153,600 due in
June 1999 with remaining balance due at maturity in June 2000 $ 568,000 768,000

Mortgage loan payable, interest at prime plus 1.75% (9.5% at
December 31, 1998) payable monthly with all principal due June 1999 221,340 221,340

Mortgage loan payable, interest fixed at 9.75% payable quarterly with
principal payments of $15,867 due each February 1st and a balloon
payment due February 2000. Note was paid in 1998 -- 149,167

Joint Venture owning retail centers:
Mortgage loan payable requiring monthly payments of principal and
interest of $2,895 at 10% interest rate
Note was paid in 1998 -- 33,095

Partnerships owning hotel and club facility and yacht slips:
Mortgage loan payable with interest at prime plus 2% (10.5% at
December 31, 1997). Payments of interest based on 20-year
amortization. Loan balance was paid off through a refinancing. See
new mortgage below -- 3,972,055

Mortgage loan payable with interest at prime plus 1.75%; fixed at
7.75% through September 30, 2003 (7.75% as of December 31, 1998)
Monthly payments of principal and interest based on 25-year
amortization. All outstanding principal due at maturity on September
30, 2008 4,490,411 --

Note payable to individual with interest rate fixed at 8%. Payment of
principal and interest quarterly, with maturity in May 1998. Note was
paid in 1998 -- 6,426

Partnership owning shopping center:
Mortgage loan payable with interest fixed at 9.75% payable monthly
with principal due at maturity in November 1999 300,000 300,000

Mortgage loan payable with interest fixed at 9.75% payable monthly
with principal done at maturity in February 2001 350,000 350,000

Office building:
Mortgage loan payable, interest at 9.25% for the first five years, then
fixed at the then prime rate plus 3/4%. Payment of principal and
interest monthly with maturity in August 2007 420,071 428,045

Other:
Note payable to affiliate (T.G.I.F.), interest at prime (7.75% at
December 31, 1998) payable annually in January. Principal outstanding
due on demand 3,205,307 3,120,755
----------- -----------

$ 9,555,129 $10,216,407
=========== ===========
</TABLE>

(32)
<PAGE>
Partnership owning shopping center:

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

Year ending December 31, Amount
------------------------------- ----------
1999 $3,952,180
2000 492,256
2001 434,267
2002 91,209
2003 98,725
2004 and thereafter 4,486,492
----------
Total $9,555,129
==========

The 1999 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.

7. INCOME TAXES

The Company's income tax benefit or provision is solely attributable to CII
which files a separate tax return. Deferred tax assets and liabilities reflect
the impact of temporary differences between amounts of assets and liabilities
for financial reporting purposes and the bases of such assets and liabilities as
measured by income tax law. A valuation allowance is recognized to reduce
deferred tax assets to the amounts more likely than not to be realized. The
Company has net operating loss carryforwards of approximately $2.1 million which
expire through 2018. As of December 31, 1998 and 1997, the components of the
deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
As of December 31, 1998 As of December 31, 1997
Deferred tax Deferred tax
--------------------------------------------------------------
Assets Liabilities Assets Liabilities
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net operating loss carryforward $ 2,100,000 $ 1,911,000

Excess of book basis of 49%-owned
corporation over tax basis 382,000 334,000

Other 410,000 16,000 447,000 22,000

Valuation allowance (2,112,000) (2,002,000)
----------- ----------- ----------- -----------

Totals $ 398,000 $ 398,000 $ 356,000 $ 356,000
=========== =========== =========== ===========
</TABLE>

The change in the valuation allowance between December 31, 1998 and 1997 was an
increase of $110,000.

There is no provision or benefit necessary for income taxes for the years ended
December 31, 1998 and 1997.

8. STOCK-BASED COMPENSATION

At December 31, 1998, the Company has a fixed stock option plan which is
described below. The Company applies APB Opinion 25, Accounting for Stock Issued
to Employees, and related Interpretations in accounting for the 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.

(33)
<PAGE>

In July 1991, the shareholders approved the 1990 Stock Option Plan (which
expires in 2001) for the issuance of options to the officers and directors of
the Company. Under the 1990 Plan, options were authorized to be granted to
purchase 120,000 common shares at no less than 100% of the fair market value at
the date of grant. Options may be exercised at any time within ten years from
the date of grant and are not transferable. Options expire upon termination of
employment, except to a limited extent in the event of retirement, disability or
death of the optionee.

FASB Statement 123, Accounting for Stock-Based Compensation, requires the
Company to provide proforma information regarding net income and net income per
share as if compensation cost for the Company's stock option plan had been
determined in accordance with the fair value based method prescribed in FASB
Statement 123. There were no options granted during the years ended December 31,
1998 and 1997, and therefore, under the accounting provisions of FASB Statement
123, the Company's proforma net income (loss) and net income (loss) per share
would not differ.

A summary of the status of the Company's fixed stock option plan as of December
31, 1998 and 1997, and changes during the years ending on those dates are
presented below:

<TABLE>
<CAPTION>
As of December 31, 1998 As of December 31, 1997
-------------------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 75,000 $ 5.12 105,000 $ 5.20
Granted -- -- -- --
Exercised -- -- -- --
Forfeited 5,000 $ 5.00 30,000 $ 5.41
- --------------------------------------------------------------------------------

Outstanding at end of year 70,000 $ 5.13 75,000 $ 5.12
- --------------------------------------------------------------------------------

Options exercisable at year-end 70,000 $ 5.13 75,000 $ 5.12
Weighted average fair value of -- -- -- --
options granted during the year
================================================================================
</TABLE>

The following table summarizes information about fixed stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------------------------------- ---------------------------
Weighted-
Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise outstanding at Contractual Exercise Exercisable Exercise
Prices 12/31/98 Life Price at 12/31/98 Price
=========================================================================================================
<S> <C> <C> <C> <C> <C>
$3.75 - $5.50 70,000 2.9 $5.13 70,000 $5.13
</TABLE>

(34)

<PAGE>

9. OPERATING LEASES AS LESSOR

Grove Isle Lease. In November 1996, GIA terminated its lease with GICI and
entered into a long-term lease with an unrelated tenant, Westgroup Grove Isle
Associates, Ltd. ("Westgroup"). GIA and GICI also entered into a Master
Agreement with Westgroup whereby among other things Westgroup assumed the
operations of the Grove Isle hotel and club.

The leased premises include all real property and all furniture, furnishings,
fixtures, appliances and other equipment used in connection with the operation
of the Grove Isle hotel, resort and membership club. The initial term of the
lease is ten years and calls for annual net base rent of $880,000 plus real
estate taxes and property insurance, payable in monthly installments. In
addition to the base net rent, Westgroup shall also pay 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. No
participation rent was due in 1998 and 1997. Furthermore, also as previously
reported, in consideration for GICI relinquishment of its rights in and to the
original lease with GIA, GIA agreed to pay to GICI the sum of $200,000 for each
year that the Westgroup lease is in good standing and has also assigned to GICI
the aforementioned participation rent due from Westgroup. In November 1998 and
1997, GIA paid GICI $200,000 as per agreement. This amount is eliminated in
consolidation.

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 approximated $37,000 and
$81,000 in 1998 and 1997, respectively.

These leases are classified as operating leases and generally require the tenant
to pay all costs associated with the property. Minimum annual rentals on
noncancelable leases in effect at December 31, 1998, are as follows:

Year ending December 31, Amount
----------------------- ------
1999 $1,297,000
2000 1,307,000
2001 1,290,000
2002 1,204,000
2003 1,110,000
Subsequent years 3,943,000
-----------
Total $10,151,000
===========

(35)
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure.
---------------------
Not applicable.

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:

<TABLE>
<CAPTION>
Principal Occupation and Employment other than With
the Company During the Past Five
Name and Office Age Years - Other Directorships
- --------------- --- --------------------------------------------------------
<S> <C> <C>
Maurice Wiener; Chairman of 57 Chairman of the Board and Chief Executive Officer of the
the Board of Directors and Advisor; Executive Trustee, Transco; Director, T.G.I.F.
Chief Executive Officer Texas, Inc.; Chairman of the Board and Chief Executive
Officer of Courtland Group, Inc.
Lawrence I. Rothstein; 46 Director, President and Secretary of the Advisor ; Trustee
Director, President, Treasurer and Vice President of Transco; Director, President and
and Secretary Secretary of Courtland Group, Inc. Vice President and
Secretary, T.G.I.F. Texas, Inc.
Carlos Camarotti; Vice 38 Vice President - Finance and Assistant Secretary of the
President-Finance and Advisor; Vice President - Finance and Assistant Secretary
Assistant Secretary of Courtland Group, Inc.

Bernard Lerner; Vice 56 Vice President of the Advisor; Vice President of Courtland
President Group, Inc.

Walter Arader; Director 77 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 69 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 72 Real Estate Consultant; Retired CEO, Landauer Associates,
Inc. (Real Estate Consultants) (1977-1988).
</TABLE>

Except as previously discussed, all executive officers of the Company were
elected to their present positions to serve until their successors are elected
and qualified at the 1998 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.

(36)
<PAGE>
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 Advisor.

Compensation of Directors. Each Director receives an annual fee of $5,000, plus
expenses and $500 per each Board of Directors meeting attended.

Stock Options. In July 1991, the shareholders approved the 1990 Stock Option
Plan (the "Plan"). The Plan, which is non-qualified and expires in 2001, 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.

As of December 31, 1998, 70,000 options have been granted, of which none have
been exercised, and 15,000 options are reserved for issuance under the Plan, of
which none have been granted.

(37)
<PAGE>
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.

<TABLE>
<CAPTION>
Shares Held as of March 19, 1999
--------------------------------
Additional Shares in
Which the named
Shares Owned by Person Has, or
Named Persons & Participates in, the
Members of His Voting or Total Shares &
Name Family(1) Investment Power(2) Percent of Class
- ---- ------ ---------------- ----------------
<S> <C> <C> <C> <C>
Maurice Wiener 35,100(4) 541,830(3) 576,930 46%

Lawrence Rothstein 25,000(4) 541,830(3) 566,830 46%

Walter G. Arader 12,800(4) 0 12,800 1%

John B. Bailey 7,100(4) 0 7,100 *

Harvey Comita 5,000(4) 477,300(6) 482,300 39% *

All 7 Directors and 95,000(4) 541,830(3) 636,830 51%
Officers as a Group

Emanuel Metz 59,500 0 59,500 5%
CIBC Oppenheimer Corp.
One World Financial Center
200 Liberty Street
New York, NY 10281

Transco Realty Trust 477,300(5) 0 477,300 38%
2701 S. Bayshore Drive
Coconut Grove, FL 33133
<FN>
* 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). Of those shares owned by Transco Realty Trust, 24,350
shares have been pledged to a brokerage firm pursuant to a margin
agreement. 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 1990 Stock Option Plan, none
of which have been exercised. These options have been granted to Mr.
Wiener, 30,000; Mr. Rothstein ,15,000; 5,000 each to Mr. Arader, Mr.
Bailey, and Mr. Comita; and a total of 10,000 to two officers who are not
directors. Reference is made to Item 10. Executive Compensation for further
information about the 1990 Stock Option Plan.

(5) Mr. Wiener holds approximately 25% and 40% 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.
</FN>
</TABLE>

(38)
<PAGE>

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 publicly-held 43% shareholder of the Company.

HMG Advisory Corp. (the "Advisor").
- -----------------------------------
The Advisor is majority owned by Maurice Wiener, its Chairman and CEO. As of
December 31, 1998, the Advisor owed the Company approximately $11,000. Such sum
bearing interest at the prime rate plus 1% and is due on demand.

Courtland Group, Inc. ("CGI").
- ------------------------------
CGI served as the Company's investment Advisor until January 1, 1998 and owns
approximately 21% of Transco's stock and owns approximately 5% of the Company's
common stock. As of December 31, 1998 and 1997, CGI owed the Company
approximately $233,000 and $205,000, respectively. Such sums bear interest at
the prime rate plus 1% and are due on demand.

Courtland Investments, Inc. ("CII").
- ------------------------------------
As previously reported, 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 and Grove Isle Marina, Inc. CII also owns 15% of
Grove Isle Associates, Ltd., and the other 85% is owned by the Company.

On May 31, 1997, CII sold a 45% partnership interest in GIA, Ltd. to the Company
for approximately $4.6 million. This transaction was between consolidated
subsidiaries and accordingly had no impact on the consolidated financial
statements of the Company.

HMG-Fieber Associates ("Fieber").
- ---------------------------------
The Company owns a 65% interest in Fieber and the other 35% is owned by NAF
Associates ("NAF"). The partners in NAF include the following related parties:
Norman A. Fieber, a former director of the Company (33.62%), Norman A. Fieber's
son, James A. Fieber, (1.08%), Norman A. Fieber's brother, Stanley S. Fieber,
M.D. (7.59%), and Martine Avenue Associates (Martine), a New York general
partnership in which Mr. Gray, a former officer and director of the Company, and
Mr. Gray's sister are the partners (13.02%).

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 Advisor.
- ------------
The day-to-day operations of the Company are handled by the Advisor, as
described above under Item 1. Business "Advisory Agreement." 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 Advisor.

(39)
<PAGE>
Transco.
- --------
As of December 31, 1998, the Company has a note and accrued interest receivable
from Transco of $475,000 compared to $450,000 as of December 31, 1997. This note
bears interest at the prime rate and is due on demand.(See Item 1. Business-
South Bayshore Associates).

CII - T.G.I.F. Texas, Inc.
- --------------------------
CII owns approximately 49% of the outstanding shares of T.G.I.F. Texas, Inc.
("T.G.I.F.") Mr. Wiener is a director and officer of T.G.I.F. and owns, directly
and indirectly, approximately 18% of the outstanding shares of T.G.I.F. As of
December 31, 1998 and 1997, T.G.I.F. had amounts due from Mr. Wiener of
approximately $388,000 and $185,000, respectively. These amounts are due on
demand and bear interest at the prime rate. Also, T.G.I.F. owns 10,000 shares of
the Company at $5 per share which was the market value at the time of purchase.
The Advisor receives a management fee of $18,000 per year from T.G.I.F.

As of December 31, 1998 and 1997, CII owed approximately of $3.2 million and
$3.1 million, respectively to T.G.I.F. All advances between CII and T.G.I.F. are
due on demand and bear interest at the prime rate plus 1%.

CII- Grove Isle.
- ----------------
In 1986, CII acquired from the Company the rights to develop the marina at Grove
Isle for a promissory note of $620,000 payable in 10 years at an annual interest
rate equal to the prime rate. The principal matures on January 2, 2001. Interest
payments are due each January 2. Because the Company consolidates CII, the note
payable and related interest income are eliminated in consolidation.

HMG-Fieber Wallingford Associates.
- ----------------------------------
In April of 1986, James A. Fieber, Trustee, acting for The Fieber Group
purchased from the Company a two-thirds interest in a store located in
Wallingford, Connecticut leased to Grossman's, Inc. for $233,000 based on the
appraised value of the store, less existing indebtedness. Subsequently, on July
1, 1986, the Company purchased from Transco its 8 1/3% interest in the
Wallingford store and concurrently entered into an agreement with The Fieber
Group creating the joint venture titled HMG-Fieber Wallingford Associates, owned
two-thirds by James A. Fieber, Trustee, acting for The Fieber Group, and
one-third by the Company. Partners in The Fieber Group included the following
related parties: Norman A. Fieber, a former director of the Company, James
Fieber (Norman A. Fiebers' son) and Martine Avenue Associates, a New York
general partnership in which Mr. Gray, a former officer and director of the
Company, and Mr. Gray's sister are the partners.

HMG-Fieber Associates ("Fieber").
- ---------------------------------
On June 30, 1986, the Company purchased from Transco its 25% interest in certain
retail stores located in Connecticut, Maine, Massachusetts, New Hampshire, New
York, Pennsylvania, Rhode Island and Vermont and owned by South Bayshore
Associates, a joint venture owned 75% by the Company and 25% by Transco. These
stores were leased to Grossman's, Inc, a chain of home improvement stores, under
net leases, most of which provided for minimum and percentage rent payments. The
purchase price paid the Company was $1,500,000 plus the assumption of
liabilities of $660,355. Concurrently, the Company sold to NAF a 35% interest in
the Grossman's stores for a price of approximately $2,100,000 plus the
assumption of liabilities of $924,497, and entered into an agreement with NAF
creating the joint venture titled HMG-Fieber Associates. The purchase price of
Transco's 25% interest and of NAF's 35% interest were based on the appraised
value of the Grossman's stores, less existing indebtedness. NAF is a Connecticut
general partnership, the partners of which include the following related
parties: Norman A. Fieber, a former director of the Company (33.62%), James A.
Fieber, Norman A. Fieber's son (1.08%), Stanley S. Fieber, M.D., Norman A.
Fieber's brother (7.59%), and Martine Avenue Associates, a New

(40)
<PAGE>

York general partnership in which Mr. Gray, a former officer and director the
Company, and Mr. Gray's sister are the partners (13.02%).

Inquiry Relating to HMG-Fieber Wallingford Associates and HMG-Fieber Associates.
- --------------------------------------------------------------------------------
On November 15, 1996, the Board of Directors appointed a Special Committee of
the Board to review Mr. Lee Gray's failure to disclose his and his sister's
interest, through Martine Avenue Associates ("Martine"), a partnership of Mr.
Gray and his sister, in NAF Associates ("NAF"), the Company's 35% joint venture
partner in HMG-Fieber Associates ("Fieber"), as well as Mr. Norman A. Fieber's
failure to disclose Mr. Gray's and Mr Gray's sister's interest in NAF. Mr.
Gray's interest in NAF first came to the attention of the Company in October of
1996. During the course of the inquiry, it was discovered that Mr. Gray and his
sister also had an interest in The Fieber Group, the Company's 66 2/3% joint
venture partner in HMG-Fieber Wallingford Associates (Wallingford), which
venture operated from 1986 to 1992. James A. Fieber, Norman A. Fieber's son, and
Stanley Fieber, Norman A. Fieber's brother, were also partners in NAF.

As a result of the inquiry, it was determined that in 1986, Mr. Gray and his
sister, through Martine, acquired a 13.02% interest in NAF and a 20% interest in
The Fieber Group, but did not then or at any time since disclose those interests
to the Board of Directors of the Company. Norman A. Fieber, a partner in both
NAF and The Fieber Group, also failed to disclose Mr. Gray's and Mr. Gray's
sister's interests in NAF and The Fieber Group.

A special meeting of the Board of Directors was held on March 21, 1997, at which
the Board considered the report of the Special Committee. Based on the Special
Committee's report and in consultation with counsel, the Board concluded that
Mr. Gray breached his fiduciary duty to the Company and to the Advisor by
failing to disclose his and his sister's interest in NAF and Wallingford, and
that Mr. Norman A. Fieber breached his fiduciary duty to the Company and
assisted Gray by failing to disclose Mr. Gray's and Mr. Gray's sister's interest
in NAF and Wallingford.

The Board requested the resignation of Mr. Gray as President, Treasurer,
Director and as a member of the Audit Committee; requested the resignation of
Mr. Norman A. Fieber as a Director and member of the Audit Committee; and
requested that the Board of Directors of the Advisor consider requesting the
resignation of Mr. Gray as President, Treasurer and Director of the Advisor.

Lee Gray has been removed as President and Treasurer of the Company and as a
member of the Audit Committee and as President and a Director of the Advisor.
Mr. Gray refused to resign as a director of the Company. Norman A. Fieber has
been removed as a member of the Audit Committee of the Company and refused to
resign as a director of the Company. Mr. Gray and Mr. Norman A. Fieber were not
re- elected as directors of the Company at the 1997 Annual Meeting of
Shareholders.

(41)
<PAGE>
Part IV.
--------

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 omitted because of the absence of the conditions under which
they are required or because all information required to be reported is included
in the consolidated financial statements or notes thereto.

2. Exhibits listed in the Index to Exhibits.

(b)

Reports on Form 8-K: None.

(42)

<PAGE>

SIGNATURES

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

HMG/Courtland Properties, Inc.

March 19, 1999 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 19, 1999
- --------------------------------
Maurice Wiener
Chairman of the Board
Chief Executive Officer

/s/ Lawrence I. Rothstein March 19, 1999
- --------------------------------
Lawrence I. Rothstein
Director, President, Treasurer
& Secretary

/s/ Walter G. Arader March 19, 1999
- --------------------------------
Walter G. Arader, Director

/s/ John B. Bailey March 19, 1999
- --------------------------------
John B. Bailey, Director

/s/ Harvey Comita March 19, 1999
- --------------------------------
Harvey Comita, Director

/s/ Carlos Camarotti March 19, 1999
- --------------------------------
Carlos Camarotti
Vice President - Finance and Controller

(43)

<PAGE>
EXHIBIT INDEX
-------------
Description
-----------
<TABLE>
<S> <C> <C>
(3) (a) Restated Certificate of Incorporation Incorporated by reference to Exhibit 3(a) to the
Company's 1987 Report on Form 10-KSB (the "1987 Form
10-KSB").

(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) Agreement between NAF Associates and the Incorporated by reference to Exhibit 10(f)
Company, dated June 30, 1986. to the 1987 Form 10-K.

(b) 1990 Incentive Stock Option Plan of Incorporated by reference to Exhibit 10(j)
HMG/Courtland Properties, Inc. to the 1991 Form 10-KSB.

(c) Amended and restated lease agreement between
Grove Isle Associates, Ltd. and Westgroup Grove Incorporated by reference to Exhibit10(d) to the
Isle Associates, Ltd. dated November 19, 1996. 1996 Form 10-KSB.

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

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

(f) Martine Avenue Associates Partnership Incorporated by reference to Exhibit
Agreement dated May 24, 1968 and 10(g) to the 1996 Form 10-KSB.
amendment dated January 29, 1987.

(g) Advisory Agreement between the Company and Incorporated by reference to Exhibit
HMG Advisory Corp. effective January 1, 1998. 10(h) to the 1997 From 10-KSB.
</TABLE>

(44)

<PAGE>

(22) 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 Partnership
HMG SUGARGROVE, INC., a Texas Corporation
COURTLAND INVESTMENTS, INC., a Delaware Corporation
GROVE ISLE INVESTMENTS, 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

(45)

<ARTICLE> 5
<CIK> 0000311817
<NAME> HMG/Courtland Properties, Inc.

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Dec-31-1998
<CASH> 1,834,365
<SECURITIES> 1,621,488
<RECEIVABLES> 1,595,551
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,834,048
<DEPRECIATION> 5,523,475
<TOTAL-ASSETS> 24,367,698
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,245,635
0
0
<OTHER-SE> 11,733,283
<TOTAL-LIABILITY-AND-EQUITY> 24,367,698
<SALES> 3,003,019
<TOTAL-REVENUES> 3,003,019
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,600,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 851,559
<INCOME-PRETAX> (930,274)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (930,274)
<EPS-PRIMARY> (0.82)
<EPS-DILUTED> 0

</TABLE>