<PAGE> 1
--------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
REPORT OF THE INVESTMENT ADVISOR
--------------------------------------------------------------------------------
DEAR SHAREHOLDER: July 24, 1995
We welcome this opportunity to provide you with information about The Hyperion
Total Return Fund, Inc. (the "Fund") for the six month period ended May 31,
1995. As you know, the Fund's investment objectives are to provide shareholders
a high total return, including short- and long-term capital gains and a high
level of current income. The Fund pursues these investment objectives by
investing in a portfolio primarily of mortgage-backed securities ("MBS"), U.S.
Treasury obligations, collateralized mortgage obligations ("CMOs") and corporate
securities.
MARKET ENVIRONMENT
The fixed income market has continued its remarkable recovery which was in the
beginning stages when we reported to you last November. Interest rates have
broadly declined since the end of 1994. The yields on the 2-Year and 10-Year
Treasuries were down 190 and 162 basis points, respectively, on June 30, 1995.
The Federal Reserve Board reduced short-term interest rates by 25 basis points
on July 6, 1995. While judged modest, this reduction in interest rates confirmed
the market's anticipatory move to lower rates.
After recording strong Gross Domestic Product ("GDP") growth of 5.1% during the
fourth quarter of 1994, the economy slowed to 2.7% in the first quarter of 1995.
A slowdown in retail sales, housing completions, durable goods orders and
employment growth all suggests GDP growth of about 1.0% for the second quarter,
which is slightly below the growth target of the Federal Reserve.
This recent economic data suggests that there is likely to be a "soft landing"
within the economy. This means that the level of economic activity has slowed
GDP growth to non-inflationary levels (under 2.5%). These circumstances have led
to a leveling of interest rates across varying maturities (commonly referred to
as a "flattening of the yield curve").
PORTFOLIO STRATEGY AND PERFORMANCE
The Fund participated in the recent bond market rally, posting a positive total
return of 14.64% based on the net asset value for the six month period ended May
31, 1995. The net asset value increased over this period by $0.70, from $9.56 on
November 30, 1994 to $10.26 on May 31, 1995. During this period, the Fund's
investment activities have been tailored to the changing market conditions.
The Fund's performance was enhanced due to several factors. The most important
factor was the dramatic increase in interest rate volatility and a sharp
reduction in long-term interest rates. Hyperion Capital Management has pursued
several strategies within this interest rate environment. First, in order to
combat the recent spikes in interest rate volatility, we increased the Fund's
portfolio allocation of highly predictable cash flow products such as U.S.
Treasuries, asset-backed securities and U.S. agency debentures. Second, we have
emphasized products which would offer us excellent call protection and a buffer
against mortgage refinancings and their associated prepayment risk. Third,
during the past quarter we increased our allocation to commercial
mortgage-backed securities ("CMBS") and planned amortization class ("PACs")
agency CMOs while decreasing the Fund's exposure to products
<PAGE> 2
--------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
REPORT OF THE INVESTMENT ADVISOR (CONTINUED)
--------------------------------------------------------------------------------
with cash flows which can vary widely based on their associated mortgage
prepayment rates (i.e., agency pass-through certificates and interest-only
strips). Finally, our remaining mortgage exposure is comprised entirely of pools
of bonds backed by seasoned mortgages. These seasoned pools have been through
past refinancing cycles and as a result, they are more predictable because they
are less likely to experience extreme prepayment activity.
We continue to pursue strategies which will offer us attractive total return
opportunities within the current market environment. However, our underlying
philosophy is to pursue these total return opportunities through "sector
rotation" rather than interest rate anticipation. We will continue to seek
investments with a high degree of stability, in order to insulate the Fund from
average life variability in both rising and declining interest rate
environments.
INVESTMENT OUTLOOK
We believe the involuntary increase in inventories of durable goods (i.e.,
automobiles, home appliances, etc.) and nondurable goods (i.e., retail clothing,
etc.) due to a decrease in final sales has created the economic environment
which has prompted the Federal Reserve to ease interest rates. Hyperion Capital
Management believes that at least two themes will direct the course of interest
rates for the remainder of the calendar year: 1) consumer spending patterns and
their resultant impact on increase/decrease of production and 2) Congress'
attempt to structurally change the deficit of the U.S. Government.
The fixed income markets have experienced significant volatility over the past
several years, as evidenced by a market dominated by declining interest rates in
1993, sharply rising interest rates in 1994, and again a significant decline in
interest rates in 1995. This market volatility has largely been a product of
changing domestic and worldwide conditions. Though many of these trends have
come full circle, we believe that interest rates will continue to be volatile.
In this uncertain economic environment, we will continue to favor the most
stable MBS for the portfolio.
The chart which follows shows the allocation of the Fund's holdings by asset
category on May 31, 1995.
2
<PAGE> 3
--------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
REPORT OF THE INVESTMENT ADVISOR (CONCLUDED)
--------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
PORTFOLIO OF INVESTMENTS AS OF MAY 31, 1995*
<TABLE>
<S> <C>
U.S. GOVERNMENT AGENCY
PASS-THROUGH CERTIFICATES 6.3%
U.S. GOVERNMENT AGENCY
COLLATERALIZED MORTGAGE
OBLIGATIONS 10.4%
U.S. GOVERNMENT AGENCY
STRIPPED MORTGAGE-BACKED
SECURITIES 1.5%
U.S. TREASURY AND AGENCY
OBLIGATIONS 18.2%
INTEREST-ONLY STRIPPED
MORTGAGE-BACKED SECURITIES 2.2%
ASSET-BACKED SECURITIES 13.3%
COLLATERALIZED MORTGAGE
OBLIGATIONS 26.9%
CORPORATE OBLIGATIONS 20.8%
REPURCHASE AGREEMENT 0.4%
</TABLE>
*As a percentage of total investments.
CONCLUSION
As always, we remain committed to serving the needs of our shareholders by
meeting the Fund's objectives. If you have any questions, please call us at
800-HYPERION. We look forward to hearing from you.
Sincerely,
/s/ CLIFFORD E. LAI
-----------------------
CLIFFORD E. LAI
President,
The Hyperion Total Return Fund, Inc.
Managing Director and Chief Investment Officer,
Hyperion Capital Management, Inc.
/s/ KENNETH C. WEISS
-----------------------
KENNETH C. WEISS
Director and Senior Vice President,
The Hyperion Total Return Fund, Inc.
President and Chief Executive Officer,
Hyperion Capital Management, Inc.
/s/ JOHN N. DUNLEVY
-----------------------
JOHN N. DUNLEVY
Vice President,
The Hyperion Total Return Fund, Inc.
Director, Hyperion Capital Management, Inc.
Hyperion Capital Management, Inc.
3
<PAGE> 4
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC. Principal
PORTFOLIO OF INVESTMENTS Current Amount Value
May 31, 1995 (unaudited) Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 51.5%
U.S. GOVERNMENT AGENCY PASS-THROUGH CERTIFICATES -- 8.9%
Federal National Mortgage Association 9.00% 05/01/16-07/01/22 $ 7,678 $ 8,016,577
------------
Government National Mortgage Association 7.00 11/15/22-12/15/22 14,946# 14,736,096
------------
TOTAL U.S. GOVERNMENT AGENCY PASS-THROUGH CERTIFICATES
(Cost - $21,610,773) 22,752,673
------------
U.S. GOVERNMENT AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS) -- 14.7%
Federal Home Loan Mortgage Corporation
Series 1101, Class M 6.95 07/15/21 16,000# 15,560,000
Series 1714, Class O 7.00 11/15/23 12,915# 12,105,566
------------
27,665,566
------------
Federal National Mortgage Association
Series 1991-56, Class M 6.75 06/25/21 10,000# 9,612,500
------------
TOTAL U.S. GOVERNMENT AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS)
(Cost - $34,865,717) 37,278,066
------------
U.S. GOVERNMENT AGENCY STRIPPED MORTGAGE-BACKED SECURITIES (REMICS) -- 2.2%
Interest-Only Security:
Federal Home Loan Mortgage Corporation
Series 1362, Class CA, PAC 1071.23 07/15/21 25 1,344,320
------------
Principal-Only Securities:
Federal National Mortgage Association
Series 1990-130, Class C, PAC 0.00 09/25/14 2,021 1,922,713
Series 1989-43, Class B, PAC 0.00 10/25/17 2,334 2,230,729
------------
4,153,442
------------
TOTAL U.S. GOVERNMENT AGENCY STRIPPED MORTGAGE-BACKED SECURITIES (REMICS)
(Cost - $5,559,949) 5,497,762
------------
U.S. TREASURY & AGENCY OBLIGATIONS -- 25.7%
Federal National Mortgage Association
Debenture 7.55 06/10/04 5,000# 5,121,094
------------
U.S. Treasury Notes 6.88 03/31/00 10,000# 10,320,313
7.50 02/15/05 10,000# 10,826,562
7.75 01/31/00 15,000# 15,998,438
7.88 11/15/04 21,000# 23,244,375
------------
60,389,688
------------
TOTAL U.S. TREASURY & AGENCY OBLIGATIONS
(Cost - $61,227,656) 65,510,782
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost - $123,264,095) 131,039,283
------------
--------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC. Principal
PORTFOLIO OF INVESTMENTS (CONTINUED) Current Amount Value
May 31, 1995 (unaudited) Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
INTEREST-ONLY STRIPPED MORTGAGE-BACKED SECURITIES (REMICS) -- 3.0%
Fleet Finance Home Equity Trust
Series 1991-1, Class G, I/O-ette(a) 922.81% 07/25/21 $ 10 $ 50,000
------------
Greenwich Capital Acceptance Corp.
Series 1991, Class S(b) 0.66 05/01/20 145,840@ 3,896,665
------------
Kidder Peabody Acceptance Corp.
Series 1993-C1, Class A3XP, PAC 0.93 09/01/06 25,000 1,300,781
------------
Nomura Asset Securities Corporation
Series 1994-MD1, Class A3X 0.40 03/15/18 41,049 968,500
Series 1994-MD1, Class A2X 0.75 03/25/18 38,996 1,505,002
------------
2,473,502
------------
TOTAL INTEREST-ONLY STRIPPED MORTGAGE-BACKED SECURITIES (REMICS)
(Cost - $10,520,610) 7,720,948
------------
--------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 18.8%
Bellaire Finance, Inc.
Series 1995-1, Class E 12.74 02/20/08 4,937@ 5,249,679
------------
Broadway Receivables, Inc.
Series 1994, Class B 11.00 10/15/99 6,000 6,051,563
------------
CARCO Dealers Wholesale Trust
Series 1990-A 9.25 08/16/96 10,000 10,050,000
------------
Ford Credit Grantor Trust
Series 1994-B, Class A 7.30 10/15/99 4,473 4,543,640
------------
Mortgage Obligation Structured Trust
Series 1993-1, Class B2 10.71 10/25/18 5,847 5,768,748
------------
Neiman Marcus Group Credit Card Master Trust
Series 1995-1, Class A 7.60 06/15/03 5,000 5,245,313
------------
Standard Credit Card Master Trust
Series 1994-4, Class A 8.25 11/07/03 10,000 10,860,938
------------
TOTAL ASSET-BACKED SECURITIES
(Cost - $46,557,816) 47,769,881
------------
--------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS) -- 38.0%
COMMERCIAL COLLATERALIZED MORTGAGE OBLIGATIONS -- 15.5%
Factory Stores of America
Class A 7.42 06/01/07 4,000 4,058,125
------------
Greenwich Capital Acceptance Corp.
Series 1994-A, Class B 8.70 05/15/01 779 755,227
------------
Lennar US Partners
Series 1995-1, Class E 9.75 02/15/05 3,500 3,515,312
------------
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC. Principal
PORTFOLIO OF INVESTMENTS (CONTINUED) Current Amount Value
May 31, 1995 (unaudited) Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS) (CONTINUED)
COMMERCIAL COLLATERALIZED MORTGAGE OBLIGATIONS (CONCLUDED)
Nomura Asset Securities Corporation
Series 1993-1, Class B3 6.68% 12/15/03 $ 6,300 $ 4,652,156
Series 1995-MD-111, Class A2 8.33 03/04/20 7,000 7,508,594
------------
12,160,750
------------
Resolution Trust Company
Series 1994-N2, Class N4 10.00 12/15/04 5,000 5,064,062
Series 1993-N3, Class 4 10.50 10/15/03 2,000 1,964,688
Series 1994-N2, Class 5A 10.63 12/15/04 2,000@ 1,975,937
------------
9,004,687
------------
SKW Real Estate Limited Partnership
Class E 10.75 04/15/04 6,000 6,018,750
Class II E 11.00 04/15/05 4,000 4,011,250
------------
10,030,000
------------
TOTAL COMMERCIAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost - $39,126,251) 39,524,101
------------
CREDIT COLLATERALIZED MORTGAGE OBLIGATIONS -- 18.4%
Capstead Mortgage Securities Corp.
Series 1993-E, Class J2 6.50 11/25/08 1,284 722,990
------------
Chase Mortgage Finance Corp.
Series 1993-D2, Class 2M 8.00 03/25/25 2,266 2,282,497
------------
Countrywide Funding Corp.
Series 1994-2, Class B2 6.50 02/25/09 710 288,703
Series 1993-6, Class B2 6.63 12/25/08 560 234,500
------------
523,203
------------
GE Capital Mortgage Services, Inc.
Series 1994-10, Class B4 6.50 03/25/24 1,577 927,921
Series 1994-18, Class B5 7.00 05/25/24 1,370 317,168
Series 1994-19, Class M 7.50 08/25/24 9,286 9,156,407
------------
10,401,496
------------
Prudential Home Mortgage Securities Co.,
Inc.
Series 1993-H, Class 5B 6.76 09/28/08 6,689 2,846,834
Series 1994-E, Class 1B1 7.34 09/28/24 12,257 11,878,200
Series 1992-33, Class B3 7.50 11/25/22 7,422 6,196,210
Series 1992-37, Class B3 7.50 11/25/22 5,237 4,309,832
------------
25,231,076
------------
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC. Principal
PORTFOLIO OF INVESTMENTS (CONTINUED) Current Amount Value
May 31, 1995 (unaudited) Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS) (CONCLUDED)
CREDIT COLLATERALIZED MORTGAGE OBLIGATIONS (CONCLUDED)
Residential Funding Mortgage Securities,
Inc.
Series 1995-J1, Class B3 7.57% 06/25/23 $ 6,090 $ 3,900,137
Series 1994-S13, Class M1 7.00 12/15/04 3,958 3,767,167
------------
7,667,304
------------
TOTAL CREDIT COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost - $46,035,546) 46,828,566
------------
MULTI-FAMILY COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.1%
DLJ Mortgage Acceptance Corp.
Series 1992-M10, Class A2
(Cost - $9,762,210) 9.00 12/22/02 9,660 10,424,797
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS)
(Cost - $94,924,007) 96,777,464
------------
--------------------------------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 29.5%
AEROSPACE/SUBSYSTEMS/COMPONENTS -- 0.4%
Coltec Industries, Inc. 9.75 04/01/00 1,000 1,030,000
------------
AIRCRAFT MANUFACTURING/COMPONENTS -- 0.4%
UNC, Inc. 9.13 07/15/03 1,000 950,000
------------
ALUMINIUM -- 0.4%
Easco Corp. 10.00 03/15/01 1,000 1,005,000
------------
AUTO/TRUCK MANUFACTURING -- 0.2%
Hyster Yale Materials Handling, Inc. 12.38 08/01/99 444 457,875
------------
BROADCASTING/CABLE TV -- 0.8%
Century Communications Corp. 11.88 10/15/03 1,000 1,065,000
Rogers Cablesystem, Ltd. 9.63 08/01/02 1,000 1,005,000
------------
2,070,000
------------
BROADCASTING/RADIO -- 0.4%
Infinity Broadcasting Co. 10.38 03/15/02 1,000 1,050,000
------------
BUILDING -- 0.6%
Blount, Inc. 9.00 06/15/03 500 520,000
Triangle Pacific Corp. 10.50 08/01/03 1,000 1,015,000
------------
1,535,000
------------
CONGLOMERATES/DIVERSIFIED -- 0.7%
Interlake Corp. 12.13 03/01/02 500 507,500
Reeves Industries, Inc. 11.00 07/15/02 1,300 1,361,750
------------
1,869,250
------------
CONTAINERS/GLASS -- 0.6%
Owens-Illinois, Inc. 11.00 12/01/03 1,500 1,661,250
------------
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC. Principal
PORTFOLIO OF INVESTMENTS (CONTINUED) Current Amount Value
May 31, 1995 (unaudited) Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
CONTAINERS/PAPER -- 0.4%
Stone Container Corp. 10.75% 10/01/02 $ 1,000 $ 1,060,000
------------
FINANCE -- 5.2%
Commercial Credit Corp. 7.38 04/15/05 7,500 7,740,234
Norwest Financial Corp. 7.50 04/15/05 5,000 5,240,625
VIS Capital Corp. 12.38 07/01/98 168 168,000
------------
13,148,859
------------
FOOD -- 0.4%
Beatrice Foods Corp. 12.00 12/01/01 1,000 930,000
------------
FOOD/BAKERY, MILK & SUGAR -- 0.2%
Spreckles Industries 11.50 09/01/00 500 492,500
------------
FOOD SERVING -- 0.2%
Flagstar Corp. 10.88 12/01/02 500 462,500
------------
GAS & OIL RETAILER -- 0.1%
Petroleum Heat & Power Co. 12.25 02/01/05 250 266,250
------------
GOVERNMENT BONDS -- 8.2%
Government of Italy 6.00 09/27/03 5,000 4,694,531
Hydro Quebec 8.05 07/07/24 7,000 7,587,344
Province of Ontario 7.63 06/24/04 5,000 5,267,969
Republic of Finland 7.88 07/28/04 3,000 3,235,781
------------
20,785,625
------------
HEALTH CARE CENTERS -- 0.9%
Health Trust, Inc. - The Hospital Co. 10.75 05/01/02 1,000 1,115,000
Manor Care, Inc. 9.50 11/15/02 1,000 1,065,000
------------
2,180,000
------------
INSURANCE -- 0.8%
American Financial Ohio Corp. 10.00 10/20/99 1,000 1,000,000
Americo Life, Inc. 9.25 06/01/05 1,000 922,500
------------
1,922,500
------------
LEISURE/AMUSEMENT/MUSICAL INSTRUMENTS -- 0.2%
Selmer Company, Inc. 11.00 05/15/05 500 497,500
------------
MANUFACTURING/DISTRIBUTION/CONSUMER -- 0.4%
Florsheim Shoe Company 12.75 09/01/02 1,000 970,000
------------
MEDICAL EQUIPMENT/SUPPLY -- 0.4%
Mcgaw, Inc. 10.38 04/01/99 1,000 1,050,000
------------
METAL/OTHER FABRICATING -- 0.2%
Wolverine Tube, Inc. 10.13 09/01/02 500 510,000
------------
MINING -- 0.5%
Magma Copper Co. 12.00 12/15/01 1,250 1,365,625
------------
MOTION PICTURES -- 0.2%
AMC Entertainment, Inc. 11.88 08/01/00 500 543,750
------------
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC. Principal
PORTFOLIO OF INVESTMENTS (CONTINUED) Current Amount Value
May 31, 1995 (unaudited) Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS (CONCLUDED)
OIL & GAS/REFINER -- 0.3%
Tesoro Petroleum Corp. 13.00% 12/01/00 $ 650 $ 654,875
------------
PAPER PRODUCTS -- 0.4%
Buckeye Cellulose, Inc. 10.25 05/15/01 1,000 997,500
------------
PLASTICS/PRODUCTS -- 1.1%
Applied Extrusion Technologies, Inc. 11.50 04/01/02 1,000 1,050,000
Inter-City Products, Inc. 9.75 03/01/00 1,000 910,000
Plastic Specialties, Inc. 11.25 12/01/03 1,000 920,000
------------
2,880,000
------------
RETAIL/DRUGS -- 0.5%
Hook-Super X, Inc. 10.13 06/01/02 1,250 1,325,000
------------
RETAIL/FOOD SUPERMARKETS -- 1.0%
Ralph's Grocery, Inc. 10.45 06/15/04 500 500,000
Safeway, Inc. 10.00 12/01/01 1,000 1,105,000
Stop and Shop Companies, Inc. 9.75 02/01/02 1,000 1,070,000
------------
2,675,000
------------
SERVICES -- 0.4%
Solon Automated Services, Inc. 12.75 07/15/01 1,000 980,000
------------
STEEL/IRON/STEEL MINI-MILL -- 0.4%
Northwestern Steel and Wire Co. 9.50 06/15/01 1,000 930,000
------------
TELECOMMUNICATIONS -- 0.6%
Paging Network, Inc. 11.75 05/15/02 1,500 1,612,500
------------
TEXTILES/APPAREL MANUFACTURER -- 0.3%
Tultex Corporation 10.63 03/15/05 750 767,812
------------
TEXTILES/PRODUCER -- 0.4%
Fieldcrest Cannon, Inc. 11.25 06/15/04 1,000 1,045,000
------------
TEXTILE/SYNTHETIC FILTER
MANUFACTURER -- 0.2%
Synthetic Industries, Inc. 12.75 12/01/02 500 492,500
------------
TRANSPORTATION -- 0.8%
Moran Transportation Company 11.75 07/15/04 1,000 940,000
Viking Star Shipping, Inc. 9.63 07/15/03 1,000 975,000
------------
1,915,000
------------
UTILITIES/GAS -- 0.3%
Texas Gas Transmission Corp. 9.63 07/15/97 750 789,450
------------
TOTAL CORPORATE OBLIGATIONS
(Cost - $73,043,122) 74,878,121
------------
--------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC. Principal
PORTFOLIO OF INVESTMENTS (CONCLUDED) Amount Value
May 31, 1995 (unaudited) (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 0.5%
Dated 5/31/95 with State Street Bank and Trust
Company, 5.90%, due 6/1/95; proceeds: $1,379,226;
collateralized by $1,410,000 U.S. Treasury Note,
3.875%, due 9/30/95, value: $1,409,782
(Cost - $1,379,000) $ 1,379 $ 1,379,000
------------
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 141.3%
(Cost - $349,688,650) $359,564,697
UNREALIZED APPRECIATION ON OPEN FUTURES CONTRACTS -- 0.3%* 713,075
LIABILITIES IN EXCESS OF OTHER ASSETS -- (41.6%) (105,822,841)
------------
NET ASSETS -- 100.0% $254,454,931
===========
--------------------------------------------------------------------------------------------------------
</TABLE>
# Portion of or entire principal amount pledged as collateral for
reverse repurchase agreements. (Note 6)
REMIC Real Estate Mortgage Investment Conduit
PAC Planned Amortization Class
I/O-ette Interest-only security with nominal principal amount
(a) Not readily marketable
(b) Private Placement
@ Portion of or entire principal amount pledged as initial margin on
financial futures transactions.
* Open Futures Contracts as of May 31, 1995 are as follows (Note 1):
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION VALUE AT VALUE AT APPRECIATION
NOTIONAL AMOUNT TYPE DATE TRADE DATE MAY 31, 1995 (DEPRECIATION)
----------------- --------------------- --------------- ----------- ------------ --------------
<C> <C> <S> <C> <C> <C>
Long:
-----------------
$ 123,000,000 Eurodollar Futures June 1995 $28,854,600 $28,889,625 $ 35,025
122,000,000 Eurodollar Futures September 1995 28,526,650 28,727,950 201,300
78,000,000 Eurodollar Futures December 1995 18,175,950 18,369,000 193,050
----------- ------------ --------------
$75,557,200 $75,986,575 $429,375
=========== ============= ===============
Short:
-----------------
$ 123,000,000 Eurodollar Futures June 1995 $29,107,925 $28,889,625 $218,300
122,000,000 Eurodollar Futures September 1995 28,806,125 28,727,950 78,175
78,000,000 Eurodollar Futures December 1995 18,356,225 18,369,000 (12,775)
----------- ------------ --------------
$76,270,275 $75,986,575 $283,700
=========== ============= ===============
</TABLE>
---------------
See notes to financial statements.
10
<PAGE> 11
<TABLE>
<S> <C>
-------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995 (unaudited)
-------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost - $349,688,650) (Note 1)...................... $ 359,564,697
Receivable for investments sold........................................... 31,438,674
Interest receivable....................................................... 5,427,988
Prepaid expenses.......................................................... 47,433
-------------
Total assets.................................................... 396,478,792
-------------
LIABILITIES:
Reverse repurchase agreements (Note 6).................................... 107,868,250
Payable for investments purchased......................................... 33,587,257
Dividend payable.......................................................... 171,310
Investment advisory fee payable (Note 2).................................. 134,682
Administration fee payable (Note 2)....................................... 41,441
Interest payable (Note 6)................................................. 26,640
Accrued expenses and other liabilities.................................... 194,281
-------------
Total liabilities............................................... 142,023,861
-------------
NET ASSETS
(equivalent to $10.26 per share based on 24,809,115 shares outstanding)... $ 254,454,931
=============
COMPOSITION OF NET ASSETS:
Capital stock, at par (Note 4)............................................ $ 248,091
Additional paid-in capital................................................ 276,639,897
Distributions in excess of net investment income.......................... (56,595)
Accumulated net realized losses........................................... (32,965,584)
Net unrealized appreciation............................................... 10,589,122
-------------
Net assets applicable to capital stock outstanding........................ $ 254,454,931
=============
</TABLE>
---------------
See notes to financial statements.
11
<PAGE> 12
<TABLE>
<S> <C>
----------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1995 (unaudited)
----------------------------------------------------------------------------------------------
INVESTMENT INCOME (Note 1):
Interest.................................................................... $ 15,032,622
EXPENSES:
Investment advisory fee (Note 2)............................................ 780,303
Administration fee (Note 2)................................................. 240,093
Transfer agent.............................................................. 75,476
Custodian................................................................... 58,336
Legal....................................................................... 30,025
Directors' fees and expenses................................................ 25,236
Insurance................................................................... 22,244
Audit and tax services...................................................... 22,189
Reports to shareholders..................................................... 21,671
Miscellaneous............................................................... 26,410
------------
Total operating expenses................................................. 1,301,983
Interest expense (Note 6)......................................... 2,470,788
------------
Total expenses.................................................... 3,772,771
------------
Net investment income....................................................... 11,259,851
------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS,
FUTURES AND OPTION TRANSACTIONS (Notes 1 & 3):
Net realized gains (losses) on:
Investment transactions..................................................... 1,305,626
Futures transactions........................................................ (646,975)
Option transactions......................................................... (288,345)
------------
370,306
------------
Net change in unrealized appreciation on investments and futures
transactions................................................................ 19,757,614
------------
Net realized and unrealized gains on investments, futures and option
transactions................................................................ 20,127,920
------------
Net increase in net assets resulting from operations.......................... $ 31,387,771
============
</TABLE>
---------------
See notes to financial statements.
12
<PAGE> 13
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------------------------------------
For the Six
Months Ended For the Year
May 31, 1995 Ended
(unaudited) November 30, 1994
THE HYPERION TOTAL RETURN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income....................................... $ 11,259,851 $ 26,670,353
Net realized gains (losses) on investments, futures and
option transactions....................................... 370,306 (15,636,182)
Net change in unrealized appreciation (depreciation) on
investments and futures transactions...................... 19,757,614 (11,839,629)
------------- -----------------
Net increase (decrease) in net assets resulting from
operations................................................ 31,387,771 (805,458)
------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (Note 1):
Net investment income....................................... (14,140,704) (25,056,641)
------------- -----------------
CAPITAL STOCK TRANSACTIONS (Note 4):
Net proceeds from issuance of shares........................ -- 691,936
Cost of shares repurchased.................................. -- (1,422,539)
------------- -----------------
Net decrease in net assets resulting from capital stock
transactions.............................................. -- (730,603)
------------- -----------------
Total increase (decrease) in net assets.............. 17,247,067 (26,592,702)
NET ASSETS:
Beginning of period........................................... 237,207,864 263,800,566
------------- -----------------
End of period (Including distributions in excess of net
investment income of $(56,595) and undistributed net
investment income of $2,824,258, respectively).............. $ 254,454,931 $ 237,207,864
============ =================
</TABLE>
---------------
See notes to financial statements.
13
<PAGE> 14
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended May 31, 1995 (unaudited)
--------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH:
Cash Flows used for operating activities:
Interest received (excluding amortization of $890,544).............. $ 14,039,828
Operating expenses paid............................................. (1,300,759)
Interest expenses paid.............................................. (2,582,020)
Purchase of short-term portfolio investments, net................... (132,345)
Purchase of long-term portfolio investments......................... (556,101,562)
Proceeds from disposition of long-term portfolio investments and
principal paydowns................................................. 541,929,090
Net cash used for futures transactions.............................. (1,181,301)
----------------
Net cash used for operating activities.............................. (5,329,069)
----------------
Cash Flows provided from financing activities:
Cash provided from reverse repurchase agreements.................... 3,273,960,505
Cash used to liquidate reverse repurchase agreements................ (3,254,675,005)
Cash dividends paid................................................. (13,969,394)
----------------
Net cash provided from financing activities......................... 5,316,106
----------------
Net decrease in cash..................................................... (12,963)
Cash at beginning of period.............................................. 12,963
----------------
Cash at end of period.................................................... $ 0
===============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO
NET CASH USED FOR OPERATING ACTIVITIES:
Net increase in net assets resulting from operations..................... $ 31,387,771
----------------
Increase in investments............................................. (12,220,540)
Net realized gains on investments, futures and option
transactions....................................................... (370,306)
Change in net unrealized appreciation............................... (19,757,614)
Net cash used for futures transactions.............................. (1,181,301)
Increase in prepaid assets.......................................... (44,738)
Increase in receivable for investments sold......................... (21,216,586)
Increase in interest receivable..................................... (102,250)
Increase in payable for investments purchased....................... 18,241,765
Increase in fees payable............................................ 7,956
Decrease in interest payable........................................ (111,232)
Increase in accrued expenses and other liabilities.................. 38,006
----------------
Total adjustments.............................................. (36,716,840)
----------------
Net cash used for operating activities................................... $ (5,329,069)
===============
</TABLE>
---------------
See notes to financial statements.
14
<PAGE> 15
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
FINANCIAL HIGHLIGHTS For the Six For the Year For the Year For the Year For the Year
Months Ended Ended Ended Ended Ended
May 31, 1995 November 30, November 30, November 30, November 30,
(unaudited) 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period..................... $ 9.56 $ 10.59 $ 10.87 $ 11.50 $ 10.75
------------ ------------ ------------ ------------ ------------
Net investment income........ 0.46 1.07 1.07 1.19 1.24
Net realized and unrealized
gains (losses) on
investments, futures and
option transactions........ 0.81 (1.09) (0.21) (0.59) 0.61
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
net asset value from
operations................. 1.27 (0.02) 0.86 0.60 1.85
------------ ------------ ------------ ------------ ------------
Dividends from net investment
income..................... (0.57) (1.01) (1.14) (1.23) (1.10)
------------ ------------ ------------ ------------ ------------
Net asset value, end of
period..................... $ 10.26 $ 9.56 $ 10.59 $ 10.87 $ 11.50
============ =========== =========== =========== ===========
Market price, end of
period..................... $ 9.00 $ 8.50 $ 10.375 $ 11.625 $ 11.75
============ =========== =========== =========== ===========
TOTAL INVESTMENT RETURN+..... 12.01% (7.93%) (0.89%) 10.31% 33.11%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTARY DATA:
Net assets, end of period
(000s)....................... $254,455 $237,208 $263,801 $268,961 $281,898
Total operating expenses....... 1.09%(1) 1.09% 1.08% 1.04% 1.10%
Interest expense............... 2.07%(1) 1.75% 1.50% 1.24% 2.68%
Net investment income.......... 9.41%(1) 10.63% 9.95% 10.79% 11.14%
Portfolio turnover rate........ 165% 234% 395% 390% 65%
</TABLE>
---------------
+ Total investment return is computed based upon the New York Stock Exchange
market price of the Fund's shares and excludes the effects of sales loads or
brokerage commissions.
(1) Annualized.
See notes to financial statements.
15
<PAGE> 16
--------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1995 (unaudited)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES:
The Hyperion Total Return Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, closed-end
management investment company. The investment objective of the Fund is to
provide a high total return, including short and long-term capital gains and a
high level of current income, through the management of a portfolio of
securities. No assurance can be given that the Fund's investment objective will
be achieved.
Valuation of Investments -- Where market quotations are readily available,
portfolio securities are valued based upon the current bid price. The Fund
values mortgage-backed securities ("MBS") and other debt securities for which
market quotations are not readily available at their fair value as determined in
good faith, utilizing procedures approved by the Board of Directors of the Fund,
on the basis of information provided by dealers in such securities. Some of the
general factors which may be considered in determining fair value include the
fundamental analytic data relating to the investment and an evaluation of the
forces which influence the market in which these securities are purchased and
sold. Determination of fair value involves subjective judgment, as the actual
market value of a particular security can be established only by negotiations
between the parties in a sales transaction. Debt securities having a remaining
maturity of sixty days or less when purchased and debt securities originally
purchased with maturities in excess of sixty days but which currently have
maturities of sixty days or less are valued at amortized cost.
The ability of issuers of debt securities held by the Fund to meet their
obligations may be affected by economic developments in a specific industry or
region. The values of MBS can be significantly affected by changes in interest
rates.
Options Written or Purchased -- When the Fund writes or purchases an option, the
amount equal to the premium received or paid by the Fund is recorded as a
liability or an asset and is subsequently adjusted to the current market value
of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Fund on the
expiration date as realized gains or losses. The difference between the premium
and the amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commissions, is also treated as a realized gain
or loss. If an option is exercised, the premium paid or received is added to the
proceeds from the sale or cost of the purchase in determining the realized gain
or loss or the basis of the security.
Financial Futures Contracts -- The Fund may buy or sell interest rate and
Eurodollar futures contracts for the purpose of hedging its portfolio against
anticipated interest rate changes. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in the value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
Taxes -- It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders. Therefore, no
federal income or excise tax provision is required.
Security Transactions and Investment Income -- Security transactions are
recorded on the dates the transactions are executed (the trade dates). Interest
income is recorded as earned. Discounts on securities purchased are accrued on a
scientific basis over the estimated life of the respective securities. Realized
gains and losses are determined on the identified cost basis.
Cash Flow Information -- The Fund invests in securities and distributes
dividends and distributions which are paid in cash or are reinvested at the
discretion of shareholders. These activities are reported in the Statement of
Changes in Net Assets and additional information on cash receipts and cash
payments is presented in the Statement of Cash Flows.
Accounting practices that do not affect reporting activities on a cash basis
include carrying investments at value and accreting discounts on debt
obligations. Cash, as used in the Statement of Cash Flows, is the amount
reported as "Cash" in the Statement of Assets and Liabilities.
16
<PAGE> 17
--------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1995 (unaudited)
--------------------------------------------------------------------------------
Dividends and Distributions -- The Fund declares and pays dividends monthly from
net investment income. Distributions of realized capital gains in excess of
capital loss carryforwards are distributed at least annually. Dividends and
distributions are recorded on the ex-dividend date.
Repurchase Agreements -- The Fund, through its custodian, receives delivery of
the underlying collateral, the market value of which, at the time of purchase,
is required to be in an amount at least equal to the resale price, including
accrued interest. Hyperion Capital Management, Inc. (the "Adviser"), is
responsible for determining that the value of these underlying securities is
sufficient at all times. If the seller defaults and the value of the collateral
declines or if bankruptcy proceedings commence with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or limited.
2. INVESTMENT ADVISORY AND ADMINISTRATION
AGREEMENTS AND TRANSACTIONS WITH
AFFILIATES:
The Fund has entered into an Investment Advisory Agreement with the Adviser. The
Adviser is responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such services, the Fund pays a
monthly fee at an annual rate of 0.65% of the Fund's average weekly net assets.
The Adviser has entered into a Sub-Advisory Agreement with Pacholder Associates,
Inc. ("Pacholder"). Under the terms of the agreement, Pacholder is to assist in
managing the Fund's investments in High Yield Securities and to provide such
investment research and advice regarding High Yield Securities as may be
necessary for the operation of the Fund. For such services, the Adviser will
pay, out of its advisory fee, a monthly fee at an annual rate of 0.35% of the
portion of the Fund's average weekly net assets that is invested in High Yield
Securities.
The Fund has entered into an Administration Agreement with Princeton
Administrators, L.P. (the "Administrator"), an affiliate of Merrill Lynch,
Pierce, Fenner & Smith Incorporated. The Administrator performs administrative
services necessary for the operation of the Fund, including maintaining certain
books and records of the Fund and preparing reports and other documents required
by federal, state, and other applicable laws and regulations, and provides the
Fund with administrative office facilities. For these services, the Fund pays a
monthly fee at an annual rate of 0.20% of the Fund's average weekly net assets.
Certain officers and/or directors of the Fund are officers and/or directors of
the Adviser.
3. PURCHASES AND SALES OF INVESTMENTS:
Purchase and sales of investments, excluding short-term securities, U.S.
Government Securities and reverse repurchase agreements, for the six-month
period ended May 31, 1995 were $455,468,927 and $460,420,404, respectively.
As of May 31, 1995, unrealized appreciation for federal income tax purposes
aggregated $9,876,047, of which $14,148,322 related to appreciated securities
and $4,272,275 related to depreciated securities. The aggregate cost of
investments at May 31, 1995 for federal income tax purposes was $349,688,650. At
November 30, 1994, the Fund had a capital loss carryforward of $31,772,384, of
which $2,657,195, $11,277,287, and $17,837,902 expire in 1999, 2000, and 2002,
respectively. These will be available to offset like amounts of any future
taxable gains.
Option activity for the period ended May 31, 1995 was as follows:
<TABLE>
<CAPTION>
NUMBER
OF
CONTRACTS PREMIUM
----- ----------
<S> <C> <C>
Options outstanding at
November 30, 1994....... -- $ --
Options purchased......... 750 288,345
Options expired........... (750) (288,345)
----- ----------
Options outstanding at May
31, 1995................ -- $ --
==== =========
</TABLE>
4. CAPITAL STOCK:
The Fund has authorized 50,000,000 shares of common stock, $0.01 par value. At
May 31, 1995, there were 24,809,115 shares issued and outstanding.
17
<PAGE> 18
--------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
May 31, 1995 (unaudited)
--------------------------------------------------------------------------------
5. SUBSEQUENT EVENTS:
The Fund's Board of Directors declared the following regular monthly dividends:
<TABLE>
<CAPTION>
DIVIDEND
PER RECORD PAYABLE
SHARE DATE DATE
------- -------- --------
<S> <C> <C>
$ 0.075 6/19/95 6/29/95
$ 0.070 7/17/95 7/27/95
</TABLE>
6. BORROWINGS: REVERSE REPURCHASE
AGREEMENTS AND DOLLAR ROLL AGREEMENTS:
The Fund may enter into reverse repurchase agreements and dollar roll agreements
with the same parties with whom it may enter into repurchase agreements. A
dollar roll agreement is identical to a reverse repurchase agreement except for
the fact that substantially identical securities may be repurchased. Under a
reverse repurchase agreement or dollar roll agreement, the Fund sells securities
and agrees to repurchase them, or substantially similar securities in the case
of a dollar roll agreement, at a mutually agreed upon date and price. Under the
1940 Act, reverse repurchase agreements and dollar roll agreements will be
regarded as a form of borrowing by the Fund unless, at the time it enters into a
reverse repurchase agreement or dollar roll agreement, it establishes and
maintains a segregated account with its custodian containing securities from its
portfolio having a value not less than the repurchase price (including accrued
interest). The Fund has established and maintained such an account for each of
its reverse repurchase agreements. The Fund did not enter into any dollar roll
agreements during the period. Reverse repurchase agreements and dollar roll
agreements involve the risk that the market value of the securities retained in
lieu of sale by the Fund may decline below the price of the securities the Fund
has sold but is obligated to repurchase. In the event the buyer of securities
under a reverse repurchase agreement or a dollar roll agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Fund's use of
the proceeds of the reverse repurchase agreement or the dollar roll agreement
may effectively be restricted pending such decision.
At May 31, 1995, the Fund had the following reverse repurchase agreements
outstanding:
<TABLE>
<CAPTION>
MATURITY IN
ZERO TO 30
DAYS
-------------
<S> <C>
Maturity Amount................. $ 107,983,165
-------------
Market Value of Assets Sold
Under Agreements.............. $ 109,818,515
-------------
Weighted Average Interest
Rate.......................... 5.96%
</TABLE>
The average daily balance of reverse repurchase agreements outstanding during
the six-month period ended May 31, 1995, was $90,846,170 at a weighted average
interest rate of 5.38%. The maximum amount of reverse repurchase agreements
outstanding at any time during the period was $119,796,670 as of April 19, 1995,
which was 25.11% of total assets.
18
<PAGE> 19
--------------------------------------------------------------------------------
PROXY RESULTS
--------------------------------------------------------------------------------
During the period ended May 31, 1995, The Hyperion Total Return Fund, Inc.
shareholders voted on the following proposals at a shareholders' meeting on May
23, 1995. The description of each proposal and number of shares voted are as
follows:
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
SHARES VOTED
VOTED WITHOUT
FOR AUTHORITY
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors:
Rodman L. Drake
Harry E. Petersen, Jr. 14,160,766 397,878
14,131,958 426,686
---------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's
independent auditors. 13,960,984 162,382 435,278
---------------------------------------------------------------------------------------------------------
3. To approve certain changes to the Fund's fundamental
investment restrictions (concerning short sales of
securities). 12,953,140 837,740 767,764
---------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
--------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
SELECTED QUARTERLY FINANCIAL DATA
(unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PER SHARE
----------------------------------------------------
NET REALIZED UNREALIZED MARKET PRICE NAV
INVESTMENT GAIN GAIN DIVIDEND/ ------------- ------------
QUARTERLY PERIOD INCOME (LOSS) (LOSS) DISTRIBUTION HIGH LOW HIGH
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
February 28, 1993 $ 0.28 $ (0.11) $ 0.03 $ (0.29) $12 $11 $ 10.89
May 31, 1993 0.28 0.08 (0.19) (0.38) 12 10 3/4 10.69
August 31, 1993 0.25 0.07 0.16 (0.28) 11 7/8 10 1/2 10.86
November 30, 1993 0.26 (0.08) (0.17) (0.19) 11 9 7/8 10.81
February 28, 1994 0.26 (0.23) 0.14 (0.35) 10 7/8 10 10.66
May 31, 1994 0.29 (0.22) (0.35) (0.26) 10 5/8 9 10.36
August 31, 1994 0.29 (0.09) 0.03 (0.24) 9 1/4 8 1/2 9.98
November 30, 1994 0.23 (0.09) (0.28) (0.16) 8 7/8 7 5/8 9.81
February 28, 1995 0.23 (0.16) 0.42 (0.35) 8 7/8 8 9.70
May 31, 1995 0.23 0.18 0.37 (0.22) 9 8 1/2 10.18
<CAPTION>
NAV
----------- VOLUME
QUARTERLY PERIOD LOW (000'S)
<S> <C> <C>
------------------------------------------------------
February 28, 1993 $ 10.77 2,104
May 31, 1993 10.56 2,349
August 31, 1993 10.62 4,997
November 30, 1993 10.60 3,673
February 28, 1994 10.48 2,591
May 31, 1994 9.85 1,898
August 31, 1994 9.87 2,249
November 30, 1994 9.53 2,879
February 28, 1995 9.40 2,405
May 31, 1995 9.69 1,565
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT ADVISER TRANSFER AGENT
HYPERION CAPITAL MANAGEMENT, INC. BOSTON FINANCIAL DATA SERVICES, INC.
520 Madison Avenue 2 Heritage Drive
New York, New York 10022 North Quincy, Massachusetts 02171
FOR GENERAL INFORMATION ABOUT THE FUND: FOR SHAREHOLDER SERVICES:
(800) HYPERION (800) 426-5523
SUB-ADVISER INDEPENDENT AUDITORS
PACHOLDER ASSOCIATES, INC.
Towers of Kenwood DELOITTE & TOUCHE LLP
8044 Montgomery Road 2 World Financial Center
Suite 382 New York, New York 10281
Cincinnati, Ohio 45236
ADMINISTRATOR
LEGAL COUNSEL
PRINCETON ADMINISTRATORS, L.P.
P.O. Box 9011 GIBSON DUNN & CRUTCHER
Princeton, New Jersey 08543 1050 Connecticut Avenue, N.W.
(800) 543-6217 Washington, D.C. 20036
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02116
</TABLE>
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that periodically the Fund may purchase its shares of
beneficial interest in the open market at prevailing market prices.
20
<PAGE> 21
--------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------
A Dividend Reinvestment Plan (the "Plan") is available to shareholders of the
Fund pursuant to which they may elect to have all distributions of dividends and
capital gains automatically reinvested by State Street Bank and Trust Company
(the "Plan Agent") in additional Fund shares. Shareholders who do not
participate in the Plan will receive all distributions in cash paid by check
mailed directly to the shareholder of record (or if the shares are held in
street or other nominee name, then to the nominee) by the Fund's Custodian, as
Dividend Disbursing Agent.
The Plan Agent serves as agent for shareholders in administering the Plan. After
the Fund declares a dividend or determines to make a capital gain distribution,
payable in cash, if (1) the market price is lower than net asset value, the
participants in the Plan will receive the equivalent in Fund shares valued at
the market price determined as of the time of purchase (generally, the payment
date of the dividend or distribution); or if (2) the market price of the shares
on the payment date of the dividend or distribution is equal to or exceeds their
net asset value, participants will be issued Fund shares at the higher of net
asset value or 95% of the market price. This discount reflects savings in
underwriting and other costs that the Fund otherwise will be required to incur
to raise additional capital. If net asset value exceeds the market price of the
Fund shares on the payment date or the Fund declares a dividend or other
distribution payable only in cash (i.e., if the Board of Directors precludes
reinvestment in Fund shares for that purpose), the Plan Agent will, as agent for
the participants, receive the cash payment and use it to buy Fund shares in the
open market, on the New York Stock Exchange or elsewhere, for the participants'
accounts if, before the Plan Agent has completed its purchases, the market price
exceeds the net asset value of the Fund's shares, the average per share purchase
price paid by the Plan Agent may exceed the net asset value of the Fund's
shares, resulting in the acquisition of fewer shares than if the dividend or
distribution had been paid in shares issued by the Fund. The Fund will not issue
shares under the Plan below net asset value.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent. When a participant withdraws from the Plan or upon termination of
the Plan by the Fund, certificates for whole shares credited to his or her
account under the Plan will be issued and a cash payment will be made for any
fraction of a share credited to such account.
There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for the handling of the reinvestment of dividends and
distributions are paid by the Fund. There are no brokerage commissions charged
with respect to shares issued directly by the Fund. However, each participant
will pay a pro rata share of brokerage commissions incurred with respect to the
Plan Agent's open market purchases in connection with the reinvestment of
dividends and distributions.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal income tax that may be payable on such dividends or
distributions.
A brochure describing the Plan is available from the Plan Agent, State Street
Bank and Trust Company, by calling 1-800-426-5523.
If you wish to participate in the Plan and your shares are held in your name,
you may simply complete and mail the enrollment form in the brochure. If your
shares are held in the name of your brokerage firm, bank or other nominee, you
should ask them whether or how you can participate in the Plan. Shareholders
whose shares are held in the name of a brokerage firm, bank or other nominee and
are participating in the plan may not be able to continue participating in the
Plan if they transfer their shares to a different brokerage firm, bank or other
nominee, since such shareholders may participate only if permitted by the
brokerage firm, bank or other nominee to which their shares are transferred.
21
<PAGE> 22
------------------------------------------------------
OFFICERS & DIRECTORS
------------------------------------------------------
Lewis S. Ranieri
Chairman
Rodman L. Drake*
Director
Garth Marston*
Director
Leo M. Walsh, Jr.*
Director
Harry E. Petersen, Jr.*
Director
Kenneth C. Weiss
Director & Senior Vice President
Patricia A. Sloan
Director & Secretary
Clifford E. Lai
President
Louis C. Lucido
Senior Vice President
John N. Dunlevy
Vice President
Paul Zavattoni
Treasurer
* Audit Committee Members
----------------------------------------------------
[HYPERION CAPITAL MANAGEMANT, INC. LOGO]
----------------------------------------------------
The accompanying financial statements as of May 31, 1995 were not audited and
accordingly no opinion is expressed on them.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
THE HYPERION TOTAL RETURN FUND, INC.
520 Madison Avenue
New York, NY 10022
T H E
H Y P E R I O N
TOTAL RETURN FUND, INC.
SEMI-ANNUAL REPORT
MAY 31, 1995
[LOGO]
