<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
REPORT OF THE INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER: July 18, 1996
We welcome this opportunity to present you with the semi-annual report for The
Hyperion Total Return Fund, Inc. (the 'Fund') for the six month period ended May
31, 1996. The Fund's shares are traded on the New York Stock Exchange under the
symbol 'HTR'.
DESCRIPTION OF THE FUND
The Fund is a closed-end investment company whose investment objective is to
provide shareholders with both a high total return, including short and
long-term capital gains and a high level of current income. The Fund pursues
these objectives by investing in a portfolio consisting primarily of mortgage-
backed securities ('MBS'), U.S. Treasury obligations, collateralized mortgage
obligations ('CMOs') and corporate securities.
MARKET ENVIRONMENT
Since our last report, interest rates have moved in a volatile fashion. Year-end
expectations of further Federal Reserve easing were realized with a 25 basis
point reduction in the Federal Funds rate to 5.25% in January. However, a
dramatic shift in market psychology occurred. Led by strong auto and housing
markets, economic growth for 1996 is stronger than anticipated. With stronger
economic growth, interest rates increased on fears of surging inflation and a
projected shift in the future course of monetary policy towards higher interest
rates. Although economic growth has been higher than anticipated by the Federal
Reserve, inflationary pressures have yet to surface in the economy. Nonetheless,
interest rate volatility has been high.
The dramatic change in yields between November 30, 1995, February 13, 1996 and
May 31, 1996 is outlined below.
<TABLE>
<CAPTION>
11/30/95 2/13/96 5/31/96
-------- -------- --------
<S> <C> <C> <C>
Fed Funds................ 5.75% 5.25% 5.25%
2-Year Treasury Note..... 5.35% 4.79% 6.24%
5-Year Treasury Note..... 5.52% 5.13% 6.63%
10-Year Treasury Note.... 5.75% 5.58% 6.85%
</TABLE>
PORTFOLIO STRATEGY
On July 12, 1996, the Fund announced an increase in its monthly dividend rate
from $.07 per share to $.075 per share. The Funds' dividend rate is now yielding
one of the highest rates of all its comparative total return bond funds, both on
a market price and an initial public offering price basis.
As in the past, we have continued to invest in some of the emerging sectors of
the fixed income market, and most recently, we have increased our allocation
within some of the newer sectors within asset-backed securities. Additionally,
we are continuing to take advantage of what we believe are ongoing
inefficiencies in the subordinated (CMO) market.
Conversely, we have decreased our weighting in sectors of the market which
appear to us fully priced on a relative value basis. These sectors include
investment grade corporate bonds and commercial CMOs. Further, we believe that
most sectors of the agency CMO market have become more expensive relative to
alternative investments in recent months, and therefore we have reduced some of
the Fund's exposure to this sector as well.
Going forward, the Fund will continue to focus on sector allocation and security
selection rather than trying to anticipate the direction of interest rates.
Consequently, the fund will continue to maintain interest rate exposure between
that of the 5-Year and 10-Year Treasury Obligations.
<PAGE>
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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, 1996*
[CHART]
U.S. Treasury Obligations 25.2%
Commercial Collateralized Mortgage Obligations 19.8%
Subordinated Collateralized Mortgage Obligations 18.7%
Asset Backed Securities 17.2%
U.S. Government Agency Collateralized Mortgage Obligations 8.4%
U.S. Government Agency Pass-Through Certificates 5.3%
Corporate Obligations 4.3%
Repurchase Agreement 1.1%
* As a percentage of total investments.
CONCLUSION
Hyperion Capital Management, as the Fund's Advisor commits to its shareholders
to continue to actively seek out the significant investment opportunities, and
act on them in a timely fashion. We have endeavored to be accessible to our
shareholders during these challenging times in the fixed income markets. As
always, we welcome your questions and comments and encourage you to contact our
Shareholder Services Representatives at 1-800-HYPERION.
We will continue to do our best to manage the Fund so that it achieves its
objectives. We appreciate the opportunity to serve your investment needs and we
thank you for your continued support.
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
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.
2
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
May 31, 1996 (unaudited)
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT &
AGENCY OBLIGATIONS--57.0%
U.S. GOVERNMENT AGENCY
PASS-THROUGH
CERTIFICATES--7.8%
Federal National Mortgage
Association 8.00% 01/01/26 $ 9,842@ $ 9,878,419
------------
Government National
Mortgage Association 7.00 09/15/25 9,882@ 9,421,638
------------
TOTAL U.S. GOVERNMENT AGENCY
PASS-THROUGH CERTIFICATES
(Cost - $20,031,359) 19,300,057
------------
U.S. GOVERNMENT AGENCY
COLLATERALIZED MORTGAGE
OBLIGATIONS
(REMICS)--12.4%
Federal Home Loan Mortgage
Corporation
Series 1643, Class PH 5.75 07/15/23 12,000 10,822,500
Series 1832, Class F 6.50 03/15/11 5,000 4,657,813
Series 1469, Class I 8.65+ 03/15/00 2,184 2,132,440
Series 1565, Class L 9.00+ 08/15/08 2,066 1,862,023
------------
19,474,776
------------
Federal National Mortgage
Association
Series 1995-M3, Class
CN, PAC, IO 0.91 07/25/19 23,729 1,475,647
Series 1993-154, Class
EA, PAC, IO 6.00 10/25/06 6,493 1,534,986
Series 1993-179, Class
SM 9.42+ 10/25/21 9,656 8,013,337
------------
11,023,970
------------
TOTAL U.S. GOVERNMENT AGENCY
COLLATERALIZED MORTGAGE
OBLIGATIONS
(REMICS)
(Cost - $31,813,742) 30,498,746
------------
U.S. TREASURY OBLIGATIONS--36.8%
U.S. Treasury Notes
5.63 02/15/06 16,000@ 14,642,500
6.13 03/31/98 10,000@ 9,976,562
6.25 04/30/01 10,000@ 9,815,625
7.50 11/15/01 24,000@ 24,840,000
7.75 01/31/00 15,000@ 15,546,094
7.88 11/15/04 15,000@ 15,946,875
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost - $90,908,471) 90,767,656
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost - $142,753,572) 140,566,459
------------
- -------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
May 31, 1996 (unaudited)
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET-BACKED SECURITIES--25.1%
Aegis Auto Receivables Trust
Series 1996-1, Class C 12.14% 10/20/01 $ 1,840 $ 1,840,000
------------
Autobond Receivables
Trust
Series 1996-A, Class B 15.00 01/15/02 2,059 2,059,214
Series 1996-B, Class B 15.00 06/15/26 2,100 2,092,125
------------
4,151,339
------------
Bankers Trust Company
Mortgage Investors
Series 1996-S1,
Class E 10.25 12/01/06 3,000 2,885,625
------------
Fasco Inc.
Series 1996-A, Class C 11.91 09/10/01 1,445 1,445,000
Series 1995-A, Class C 11.92 12/01/05 2,158(a) 2,135,261
Series 1995-A, Class D 30.00 12/10/00 2,472 2,123,640
------------
5,703,901
------------
Franchise Loan
Receivables Trust
Series 1995-B, Class A 9.63 01/25/11 5,470 5,778,136
Series 1995-B, Class C 9.63 01/25/11 4,207 3,633,139
------------
9,411,275
------------
Health & Tennis Master
Trust
Series 1995-1 9.73 01/15/01 5,000(a) 4,977,344
------------
Green Tree Financial
Corporation
Series 1995-10, Class
M1 7.00 02/15/27 5,500 5,102,969
------------
Oslo Seismic Services,
Inc.
First Preferred
Mortgage Notes 8.28 06/01/11 5,000 4,962,500
------------
Sterling Jewelers
Series 1995-1, Class B 8.02 11/02/04 7,880 7,606,662
------------
The Money Store Home
Equity Trust
Series 1994-A, Class
A4 6.28 12/15/22 5,000 4,564,844
Series 1996-A, Class
A7 7.36 03/15/24 6,000 5,840,625
------------
10,405,469
------------
World Financial Network
Credit Card Master
Trust
Series 1996-B, Class A 6.95 04/15/06 5,000 4,925,000
------------
TOTAL ASSET-BACKED SECURITIES
(Cost - $63,512,571) 61,972,084
------------
- -------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
May 31, 1996 (unaudited)
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS (REMICS)--56.2%
COMMERCIAL COLLATERALIZED
MORTGAGE OBLIGATIONS--28.9%
America Southwest
Financial Securities
Co. Series 1995-C1,
Class S2, IO 2.03% 05/05/25 $ 49,800 $ 5,431,313
------------
Bellaire Finance, Inc.
Series 1995-1, Class E 12.74 02/01/05 4,665(a) 4,681,968
------------
Chevy Chase Home Loan
Trust Series 1996-1 7.15 06/01/11 5,000 4,960,156
------------
DLJ Mortgage Acceptance
Corp.
Series 1995-CF, Class
S2, PAC, IO 1.65 12/17/05 48,300 4,701,703
Series 1996-CF1,
Class A1B 7.58 05/12/06 3,000 2,973,281
------------
7,674,984
------------
Imexsa Export Trust-Senior
Structured Export Cert.
Series 1996-1 10.13 05/31/03 4,000 4,069,375
------------
Lennar US Partners
Series 1995-1, Class E 9.75 02/15/05 3,500(a) 3,495,625
Series 1994-1, Class D 9.89 09/15/04 4,000 4,021,875
------------
7,517,500
------------
Merrill Lynch Mortgage
Investors, Inc.
Series 1995-C1,
Class A 7.07 05/25/15 4,715 4,641,059
------------
Nomura Asset Securities
Corporation
Series 1994-MD1, Class
A3X, IO 0.40 03/15/18 41,049 814,566
Series 1994-MD1, Class
A2X, IO 0.75 03/25/18 38,996 1,230,811
------------
2,045,377
------------
PaineWebber Mortgage
Acceptance Corporation
Series 1995-M2, Class C 6.90 12/01/03 5,000(a) 4,842,188
Series 1995-M1, Class B 6.95 01/15/07 4,000(a) 3,882,500
------------
8,724,688
------------
Resolution Trust Company
Series 1992-C8,
Class B 8.84 12/25/23 5,000 5,156,250
Series 1994-N2,
Class N4 10.00 12/15/04 5,000(a) 5,092,188
Series 1994-N2,
Class 5A 10.63 12/15/04 2,000(a) 1,988,125
------------
12,236,563
------------
Salomon Brothers
Mortgage Securities
VII, Inc.
Series 1996-C1,
Class A2 6.78 11/20/04 3,000 2,881,875
------------
SKW Real Estate Limited
Partnership
Class II E 11.00 04/15/05 6,500(a) 6,517,266
------------
TOTAL COMMERCIAL
COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost - $72,457,772) 71,382,124
------------
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
May 31, 1996 (unaudited)
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS
(REMICS)--56.2% (CONTINUED)
SUBORDINATED COLLATERALIZED
MORTGAGE OBLIGATIONS--27.3%
Citibank, N.A.
Series 1987-A, Class 1 9.00% 01/25/17 $ 11,438 $ 10,869,163
------------
Citicorp Mortgage
Securities, Inc.
Series 1993-6,
Class B4 7.00 03/25/08 766(a) 298,867
------------
Countrywide Funding
Corp.
Series 1993-4,
Class B3 6.50 11/25/08 1,164 372,573
Series 1994-2,
Class B2 6.50 02/25/09 675 256,625
Series 1993-6,
Class B2 6.63 12/25/08 532(a) 202,255
Series 1995-2,
Class B4 8.50 06/25/25 871(a) 696,777
------------
1,528,230
------------
DLJ Mortgage Acceptance
Corp.
Series 1996-Q1,
Class B2 6.35 03/25/26 1,465 1,200,100
Series 1995-T10,
Class C 17.96 12/25/23 3,525(a)(b) 2,645,127
------------
3,845,227
------------
Fleet Finance Home
Equity Trust
Series 1991-1, Class
G, PAC, I/O-ette 654.44+ 07/25/21 10(a)(b) 50,000
------------
GE Capital Mortgage
Services, Inc.
Series 1994-2,
Class B2 6.00 01/25/09 934 280,276
Series 1994-10,
Class M 6.50 03/25/24 5,863 5,146,713
Series 1994-17,
Class B3 7.00 05/25/24 2,000 1,418,057
Series 1994-18,
Class B5 7.00 05/25/24 1,355(a) 284,510
Series 1996-2,
Class B3 7.00 02/25/26 1,001 710,616
Series 1996-3,
Class B3 7.00 03/25/26 1,875 1,299,156
Series 1995-7,
Class B3 7.50 09/25/25 2,984 2,179,343
------------
11,318,671
------------
Independent National
Mortgage Corporation
Series 1995-Q,
Class B1 7.50 11/25/25 2,989 2,805,281
------------
Prudential Home Mortgage
Securities Co., Inc.
Series 1995-7,
Class B4 7.00 11/25/25 1,038(a) 587,679
Series 1995-5,
Class B4 7.25 09/25/25 946(a) 548,569
Series 1996-5,
Class B4 7.25 02/25/26 1,387 744,244
Series 1996-5,
Class B1 7.25 03/25/26 3,472 3,144,330
Series 1996-5,
Class B5 7.25 04/25/26 1,388 333,112
Series 1995-4,
Class B3 7.50 07/25/10 799 651,824
Series 1992-A,
Class 4B 7.90 04/28/22 8,100(a)(c) 971,991
Series 1996-A,
Class B1 7.96 04/25/26 6,000 4,044,375
------------
11,026,124
------------
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
May 31, 1996 (unaudited)
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS (REMICS)
(CONCLUDED)
SUBORDINATED COLLATERALIZED
MORTGAGE OBLIGATIONS
(CONCLUDED)
Residential Funding
Mortgage Securities,
Inc.
Series 1993-S49,
Class B2 6.00% 12/25/08 $ 277 $ 192,235
Series 1993-S23,
Class B2 6.50 06/25/08 478 349,329
Series 1993-S25,
Class B2 6.50 07/25/08 342 249,690
Series 1996-S5,
Class B1 6.75 02/25/11 591 471,204
Series 1996-S8,
Class B1 6.75 03/25/11 567 450,682
Series 1993-S20,
Class B2 7.00 06/25/08 687 517,718
Series 1993-S29,
Class B2 7.00 08/25/08 345 258,842
Series 1996-S13,
Class B2 7.00 05/25/11 395 269,061
Series 1996-S13,
Class B3 7.00 05/25/11 394 134,034
Series 1994-S13,
Class M1 7.00 05/25/24 3,916 3,606,683
Series 1993-J3,
Class B5 7.19+ 02/28/08 1,316 460,430
Series 1996-S4,
Class M2 7.25 02/25/26 2,119 1,913,400
Series 1996-S9,
Class A10 7.25 04/25/26 9,990 9,447,060
Series 1995-J1,
Class 3 7.57 06/28/23 6,062(a) 3,861,355
Series 1992-S16,
Class A9 18.27+ 05/25/22 3,314 3,436,613
------------
25,618,336
------------
TOTAL SUBORDINATED
COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost - $71,792,746) 67,359,899
------------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS (REMICS)
(Cost - $144,250,518) 138,742,023
------------
- ----------------------------------------------------------------------------------
CORPORATE OBLIGATIONS--6.3%
AEROSPACE/SUBSYSTEMS/COMPONENTS--0.2%
Coltec Industries, Inc. 9.75 04/01/00 500 510,000
------------
ALUMINUM--0.2%
Easco Corp. 10.00 03/15/01 500 505,000
------------
BEVERAGES--0.2%
Cott Corp. 9.38 07/01/05 500 483,125
------------
BROADCASTING/CABLE TV--0.8%
Century Communications
Corp. 9.50 03/01/05 1,000 985,000
Lenfest Communications 8.38 11/01/05 500 460,000
Rogers Cablesystem, Ltd. 9.63 08/01/02 500 498,750
------------
1,943,750
------------
BROADCASTING/RADIO--0.2%
Infinity Broadcasting
Co. 10.38 03/15/02 500 535,000
------------
CHEMICALS--0.2%
Buckeye Cellulose 8.50 12/15/05 500 485,000
------------
CONTAINERS/GLASS--0.2%
Owens-Illinois, Inc. 11.00 12/01/03 500 545,000
------------
CONTAINERS/PAPER--0.4%
Stone Container Corp. 10.75 10/01/02 1,000 1,007,500
------------
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
May 31, 1996 (unaudited)
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE
OBLIGATIONS (CONTINUED)
FILMED ENTERTAINMENT--0.1%
United Artists 11.50% 05/01/02 $ 250 $ 261,875
------------
FINANCE--0.1%
VIS Capital Corp. 12.38 07/01/98 168 168,000
------------
FOOD--0.1%
Beatrice Foods Corp. 12.00 12/01/01 1,000(c) 280,000
------------
FOOD/DISTRIBUTORS--0.2%
Fleming Companies 10.63 12/15/01 350 311,500
------------
FOOD SERVING/
RESTAURANTS--0.2%
Apple South Inc. 9.75 06/01/06 500 495,000
------------
HEALTH CARE CENTERS--0.2%
Manor Care, Inc. 9.50 11/15/02 500 533,020
------------
HOTELS/MOTELS/INNS--0.2%
Host Marriott Travel
Plaza 9.50 05/15/05 500 483,750
------------
HOUSEWARES--0.2%
Ekco Group Inc. 9.25 04/01/06 500 486,250
------------
INSURANCE--0.2%
Americo Life, Inc. 9.25 06/01/05 500 470,000
------------
MANUFACTURING/
SPECIALTIES--0.3%
Mark IV Industries 7.75 04/01/06 750 697,500
------------
METAL/OTHER
FABRICATING--0.2%
Wolverine Tube, Inc. 10.13 09/01/02 500 522,500
------------
PUBLISHING--0.2%
K-III Communications
Corporation 8.50 02/01/06 500 460,000
------------
SERVICES--0.1%
Coinmach Corp. 11.75 11/15/05 250 258,750
------------
STEEL/IRON/STEEL
MINI-MILL--0.2%
Northwestern Steel &
Wire Co. 9.50 06/15/01 500 485,000
------------
TELECOMMUNICATIONS--0.1%
Paging Network, Inc. 11.75 05/15/02 250 270,625
------------
TELECOMMUNICATIONS/MOBILE,
CELLULAR--0.1%
Rogers Cantel Inc. 9.38 06/01/08 250 248,437
------------
TEXTILES/APPAREL
MANUFACTURER--0.2%
Tultex Corp. 10.63 03/15/05 500 516,250
------------
TRANSPORTATION--0.6%
Moran Transportation
Company 11.75 07/15/04 500 500,000
Teekay Shipping, Inc. 9.63 07/15/03 1,000 1,010,000
------------
1,510,000
------------
UTILITIES/ELECTRIC--0.2%
California Energy Corp. 9.88 06/30/03 500 505,000
------------
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
PORTFOLIO OF INVESTMENTS (CONCLUDED)
<TABLE>
<CAPTION>
May 31, 1996 (unaudited)
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS (CONCLUDED)
UTILITIES/ELECTRIC/OPERATING--0.2%
El Paso Electric Company 8.90% 02/01/06 $ 500 $ 492,500
------------
TOTAL CORPORATE OBLIGATIONS
(Cost - $16,345,569) 15,470,332
------------
- ----------------------------------------------------------------------------------
REPURCHASE AGREEMENT--1.6%
Dated 5/31/96, with State Street Bank and Trust Company, 4.90%,
due 6/3/96; proceeds: $4,001,633; collateralized by $4,060,000
U.S. Treasury Note 6.25%, due 8/31/00, value: $4,123,784
(Cost - $4,000,000) 4,000 4,000,000
------------
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS--146.2%
(Cost - $370,862,230) $360,750,898
------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(46.2%) (113,956,487)
------------
NET ASSETS--100.0% $246,794,411
------------
------------
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
@ Portion of or entire principal amount delivered as collateral for
reverse repurchase agreements. (Note 5)
REMIC Real Estate Mortgage Investment Conduit
+ Variable Rate Security: Coupon rate is rate in effect at May 31, 1996
PAC Planned Amortization Class--Security principal payments are within a
predetermined range.
IO Interest-only--Security pays coupon proceeds based on a notional
principal amount.
I/O-ette Interest-only security with nominal principal amount
(a) Private Placement
(b) Not readily marketable
(c) Non-accrual investment status
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $370,862,230) (Note 1).............. $360,750,898
Interest receivable............................................. 4,764,913
Prepaid expenses................................................ 114,670
------------
Total assets.......................................... 365,630,481
------------
LIABILITIES:
Reverse repurchase agreements (Note 5).......................... 107,718,000
Payable for investments purchased............................... 10,583,998
Dividends payable............................................... 142,626
Investment advisory fee payable (Note 2)........................ 134,561
Payable for shares repurchased.................................. 42,650
Administration fee payable (Note 2)............................. 41,403
Interest payable (Note 5)....................................... 30,324
Accrued expenses and other liabilities.......................... 142,508
------------
Total liabilities..................................... 118,836,070
------------
NET ASSETS (equivalent to $9.96 per share based on 24,766,615
shares outstanding)........................................... $246,794,411
------------
------------
COMPOSITION OF NET ASSETS:
Capital stock, at par (Note 4).................................. $ 247,666
Additional paid-in capital...................................... 276,266,547
Undistributed net investment income............................. 2,098,129
Accumulated net realized losses................................. (21,706,599)
Net unrealized depreciation..................................... (10,111,332)
------------
Net assets applicable to capital stock outstanding.............. $246,794,411
------------
------------
</TABLE>
- ------------------
See notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME (Note 1):
Interest.......................................................... $16,832,590
-----------
EXPENSES:
Investment advisory fees (Note 2)................................. 837,756
Administration fees (Note 2)...................................... 257,770
Insurance......................................................... 82,191
Transfer agency................................................... 75,165
Custodian......................................................... 38,687
Audit and tax services............................................ 29,950
Legal............................................................. 22,843
Directors' fees and expenses...................................... 23,130
Reports to shareholders........................................... 21,829
Registration fees................................................. 16,295
Miscellaneous..................................................... 11,536
-----------
Total operating expenses....................................... 1,417,152
Interest expense (Note 5)................................. 2,953,037
-----------
Total expenses............................................ 4,370,189
-----------
Net investment income............................................. 12,462,401
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND FUTURES (Notes 1 and 3):
Net realized gains (losses) on:
Investment transactions........................................... 2,188,535
Futures transactions.............................................. (435,754)
-----------
1,752,781
Net change in unrealized depreciation on investments and futures.... (19,038,995)
-----------
Net realized and unrealized losses on investments and futures....... (17,286,214)
-----------
Net decrease in net assets resulting from operations................ $(4,823,813)
-----------
-----------
</TABLE>
- ---------------
See notes to financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the For the
Six Months Year
Ended Ended
May 31, 1996 November 30,
(unaudited) 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS:
Net investment income........................ $ 12,462,401 $ 22,765,962
Net realized gains on investments and
futures................................... 1,752,781 9,876,509
Net change in unrealized appreciaton
(depreciation) on investments and futures
transactions.............................. (19,038,995) 18,096,156
------------ ------------
Net increase (decrease) in net assets
resulting from operations................. (4,823,813) 50,738,627
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
(Note 1):
Net investment income........................ (11,273,353) (24,681,139)
------------ ------------
CAPITAL STOCK TRANSACTIONS (Note 4):
Cost of shares repurchased and retired....... (130,450) (243,325)
------------ ------------
Total increase (decrease) in net
assets............................. (16,227,616) 25,814,163
NET ASSETS:
Beginning of period............................ 263,022,027 237,207,864
------------ ------------
End of period (including undistributed net
investment income of $2,098,129 and $909,081,
respectively)................................ $246,794,411 $263,022,027
------------ ------------
------------ ------------
</TABLE>
- ---------------
See notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended May 31, 1996 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
Cash flows used for operating activities:
Interest received (excluding accretion of $1,269,284)..... $ 15,195,544
Interest expense paid..................................... (2,987,935)
Operating expenses paid................................... (1,517,114)
Purchase of short-term portfolio investments, net......... (3,031,000)
Purchase of long-term portfolio investments............... (487,360,697)
Proceeds from disposition of long-term portfolio
investments and principal paydowns..................... 479,496,858
Net cash used for futures transactions.................... (350,442)
---------------
Net cash used for operating activities.................... (554,786)
---------------
Cash flows provided from financing activities:
Cash used to repurchase shares............................ (87,800)
Cash provided from reverse repurchase agreements.......... 2,770,469,625
Cash used to liquidate reverse repurchase agreements...... (2,758,543,625)
Cash dividends paid....................................... (11,284,113)
---------------
Net cash provided from financing activities............... 554,087
---------------
Net decrease in cash........................................ (699)
Cash at beginning of period................................. 699
---------------
Cash at end of period....................................... $ 0
---------------
---------------
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH USED FOR OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations........ $ (4,823,813)
---------------
Decrease in investments................................... 17,448,856
Increase in prepaid assets................................ (108,144)
Decrease in receivable for investments sold............... 2,723,809
Increase in interest receivable........................... (367,761)
Decrease in payable for investments purchased............. (15,236,954)
Decrease in fees payable.................................. (8,576)
Decrease in variation margin payable...................... (164,063)
Decrease in interest payable.............................. (34,898)
Increase in accrued expenses and other liabilities........ 16,758
---------------
Total adjustments................................. 4,269,027
---------------
Net cash used for operating activities...................... $ (554,786)
---------------
---------------
</TABLE>
- ------------------
See notes to financial statements.
13
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
<TABLE>
<CAPTION>
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, 1996 November 30, November 30, November 30, November 30,
(uanudited) 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period..... $ 10.61 $ 9.56 $ 10.59 $ 10.87 $ 11.50
------------- ------------ ------------ ------------ ------------
Net investment income.................... 0.50 0.92 1.07 1.07 1.19
Net realized and unrealized gains
(losses) on investments and futures
transactions........................... (0.70) 1.13 (1.09) (0.21) (0.59)
------------- ------------ ------------ ------------ ------------
Net increase (decrease) in net asset
value from operations.................. (0.20) 2.05 (0.02) 0.86 0.60
------------- ------------ ------------ ------------ ------------
Dividends to shareholders from net
investment income...................... (0.45) (1.00) (1.01) (1.14) (1.23)
------------- ------------ ------------ ------------ ------------
Net asset value, end of period........... $ 9.96 $ 10.61 $ 9.56 $ 10.59 $ 10.87
------------- ------------ ------------ ------------ ------------
------------- ------------ ------------ ------------ ------------
Market price, end of period.............. $ 8.50 $ 9.00 $ 8.50 $ 10.375 $ 11.625
------------- ------------ ------------ ------------ ------------
------------- ------------ ------------ ------------ ------------
TOTAL INVESTMENT RETURN+................. (0.70)% 17.45% (7.93)% (0.89)% 10.31%
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTARY DATA:
Net assets, end of period (000s)........... $ 246,794 $263,022 $237,208 $263,801 $268,961
Total operating expenses................... 1.10%* 1.07% 1.09% 1.08% 1.04%
Interest expense........................... 2.29%* 2.24% 1.75% 1.50% 1.24%
Net investment income...................... 9.67%* 9.18% 10.63% 9.95% 10.79%
Portfolio turnover rate.................... 129% 320% 234% 395% 390%
</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.
* Annualized
See notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1996 (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.
The Fund purchases or writes options to hedge against adverse market movements
or fluctuations in value caused by changes in interest rates. The Fund bears the
risk in purchasing an option that it will expire without being exercised. If
this occurs, the option expires worthless and the premium paid for the option is
a loss. The risk associated with writing call options is that the Fund may
forego the opportunity for a profit if the market value of the underlying
position increases and the option is exercised. The Fund will only write options
on positions held in its portfolio. The risk in writing a put option is that the
Fund may incur a loss if the market value of the underlying position decreases
and the option is exercised. In addition, the Fund bears the risk of not being
able to enter into a closing transaction for written options as a result of an
illiquid market.
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 by marking to market the option contracts at the end of each day's
trading. 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.
The Fund invests in financial futures contracts to adjust the portfolio for
fluctuations in value caused by changes in prevailing market interest rates.
Should interest rates move unexpectedly, the Fund may not achieve the
anticipated benefits of the financial futures contracts and may realized a loss.
The use of futures transactions involves the risk of imperfect correlation in
movements in the price of future contracts, interest rates and the underlying
hedged assets. The Fund is at risk that it may not be able to close out a
transaction because of an illiquid secondary market.
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.
15
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1996 (unaudited)
- --------------------------------------------------------------------------------
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.
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 'Advisor'), 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 Advisor. The
Advisor 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 Advisor 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 Advisor 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 Advisor.
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, 1996 were $382,688,976 and $414,604,823, respectively.
As of May 31, 1996, unrealized depreciation for federal income tax purposes
aggregated $10,111,332, of which $1,767,518 related to appreciated securities
and $11,878,850 related to depreciated securities. The aggregate cost of
investments at May 31, 1996 for federal income tax purposes was $370,862,230. At
November 30, 1995, the Fund had a capital loss carryforward of $22,415,204, of
which $4,577,302 and $17,837,902 expire in 2000 and 2002, respectively. These
will be available to offset like amounts of any future taxable gains.
4. CAPITAL STOCK:
There are 50 million shares of $0.01 par value common stock authorized. Of the
24,766,615 shares outstanding at May 31, 1996, the Advisor owned 8,334 shares.
16
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
May 31, 1996 (unaudited)
- --------------------------------------------------------------------------------
The Fund is continuing its stock repurchase program, whereby an amount of up to
15% of the total outstanding common stock, or approximately 3.7 million shares,
are authorized for repurchase. The purchase price may not exceed the
then-current net asset value. As of May 31, 1996, 211,700 shares have been
repurchased pursuant to this program at a cost of $1,796,314 and at an average
discount of 14.41% from it net asset value. For the six months ended May 31,
1996, 15,000 shares were repurchased at a cost of $130,450 and at an average
discount of 15.64% from its net asset value.
5. 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, 1996, the Fund had the following reverse repurchase agreements
outstanding:
<TABLE>
<CAPTION>
MATURITY IN
ZERO TO 30 DAYS
---------------
<S> <C>
Maturity Amount..................... $ 107,819,683
---------------
Market Value of Assets Sold Under
Agreements........................ $ 107,804,163
---------------
Weighted Average Interest Rate...... 4.99%
</TABLE>
The average daily balance of reverse repurchase agreements outstanding during
the six-month period ended May 31, 1996, was $109,555,103 at a weighted average
interest rate of 5.30%. The maximum amount of reverse repurchase agreements
outstanding at any time during the period was $131,783,900 as of April 8, 1996,
which was 30.96% of total assets.
6. FINANCIAL INSTRUMENTS:
The Fund regularly trades in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing exposure
to various market risks. These financial instruments include written options and
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Fund has in particular classes of financial instruments and does
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
There were no open futures contracts at May 31, 1996.
During the period, the Fund had segregated sufficient cash and/or securities to
cover any commitments under these contracts.
7. SUBSEQUENT EVENTS:
The Fund's Board of Directors declared the following regular monthly dividends:
<TABLE>
<CAPTION>
DIVIDEND RECORD PAYABLE
PER SHARE DATE DATE
- --------- ------- -------
<S> <C> <C>
$0.070 6/17/96 6/27/96
$0.075 7/22/96 7/31/96
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
PROXY RESULTS
- --------------------------------------------------------------------------------
During the six months ended May 31, 1996, The Hyperion Total Return Fund, Inc.
shareholders voted on the following proposals at a shareholders meeting on April
16, 1996. The description of each proposal and number of shares voted are as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED
FOR WITHOUT AUTHORITY
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. To elect members to the Fund's Board of Directors: Lewis S. Ranieri 19,533,831 326,154
Leo M. Walsh, Jr. 19,537,166 322,819
Patricia A. Sloan 19,544,122 315,863
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
SHARES VOTED SHARES VOTED SHARES VOTED
FOR AGAINST ABSTAIN
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's
independent accountants: 19,425,820 115,059 319,106
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
SELECTED QUARTERLY FINANCIAL DATA
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PER SHARE
-------------------------------------------------
NET REALIZED UNREALIZED
INVESTMENT GAIN GAIN DIVIDEND/
QUARTERLY PERIOD INCOME (LOSS) (LOSS) DISTRIBUTION
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
February 28, 1991 $ 0.29 $ 0.01 $ 0.12 $(0.30)
May 31, 1991 0.32 0.02 0.16 (0.30)
August 31, 1991 0.30 (0.06) 0.26 (0.30)
November 30, 1991 0.33 (0.18) 0.28 (0.20)
February 29, 1992 0.30 0.34 0.59 (0.34)
May 31, 1992 0.30 (0.35) 0.15 (0.30)
August 31, 1992 0.30 (0.19) 0.29 (0.30)
November 30, 1992 0.29 (0.27) 0.03 (0.29)
February 28, 1993 0.28 (0.11) 0.03 (0.29)
May 31, 1993 0.28 0.08 (0.19) (0.38)
August 31, 1993 0.25 0.07 0.16 (0.28)
November 30, 1993 0.26 (0.08) (0.17) (0.19)
February 28, 1994 0.26 (0.23) 0.14 (0.35)
May 31, 1994 0.29 (0.22) (0.35) (0.26)
August 31, 1994 0.29 (0.23) 0.14 (0.24)
November 30, 1994 0.23 (0.22) (0.28) (0.16)
February 28, 1995 0.23 (0.16) 0.42 (0.35)
May 31, 1995 0.23 0.18 0.37 (0.22)
August 31, 1995 0.23 0.18 (0.22) (0.22)
November 30, 1995 0.23 0.21 0.15 (0.21)
February 28, 1996 0.25 0.17 (0.38) (0.24)
May 31, 1996 0.25 (0.09) (0.40) (0.21)
<CAPTION>
MARKET PRICE NAV
--------------- --------------- VOLUME
QUARTERLY PERIOD HIGH LOW HIGH LOW (000'S)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
February 28, 1991 $ 11 $ 9 5/8 $10.91 $10.70 3,040
May 31, 1991 11 1/4 10 1/8 11.12 10.86 4,287
August 31, 1991 11 5/8 10 3/4 11.32 11.06 2,469
November 30, 1991 12 11 3/8 11.50 11.29 2,674
February 29, 1992 12 11 11.46 10.94 4,012
May 31, 1992 12 1/4 11 1/8 11.07 10.86 2,843
August 31, 1992 12 1/8 11 1/8 11.12 10.91 3,539
November 30, 1992 11 7/8 11 3/8 11.15 10.76 2,120
February 28, 1993 12 11 10.89 10.77 2,104
May 31, 1993 12 10 3/4 10.69 10.56 2,349
August 31, 1993 11 7/8 10 1/2 10.86 10.62 4,997
November 30, 1993 11 9 7/8 10.81 10.60 3,673
February 28, 1994 10 7/8 10 10.66 10.48 2,591
May 31, 1994 10 5/8 9 10.36 9.85 1,898
August 31, 1994 9 1/4 8 1/2 9.98 9.87 2,249
November 30, 1994 8 7/8 7 5/8 9.81 9.53 2,879
February 28, 1995 8 7/8 8 9.70 9.40 2,405
May 31, 1995 9 8 1/2 10.18 9.69 1,565
August 31, 1995 9 3/8 8 3/8 10.37 10.04 2,129
November 30, 1995 9 1/8 8 5/8 10.61 10.23 1,698
February 28, 1996 9 5/8 9 10.78 10.41 2,217
May 31, 1996 9 1/4 8 3/8 10.45 9.99 2,068
</TABLE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR
HYPERION CAPITAL MANAGEMENT, INC.
520 Madison Avenue
New York, New York 10022
FOR GENERAL INFORMATION ABOUT THE FUND:
(800) HYPERION
SUB-ADVISOR
PACHOLDER ASSOCIATES, INC.
Towers of Kenwood
8044 Montgomery Road
Suite 382
Cincinnati, Ohio 45236
ADMINISTRATOR
PRINCETON ADMINISTRATORS, L.P.
P.O. Box 9011
Princeton, New Jersey 08543
(800) 543-6217
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02116
TRANSFER AGENT
BOSTON EQUISERVE L.P.
Investor Relations Department
P.O. Box 8200
Boston, Massachusetts 02266-8200
FOR SHAREHOLDER SERVICES:
(800) 426-5523
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two World Financial Center
New York, New York 10281
LEGAL COUNSEL
GIBSON DUNN & CRUTCHER LLP
1050 Connecticut Avenue, N.W.
Washington D.C. 20036
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.
19
<PAGE>
- --------------------------------------------------------------------------------
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.
20
<PAGE>
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
- --------------------------------------------------------------------------------
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>
- ------------------------------------------------------
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
Joseph W. Sullivan
Treasurer
* Audit Committee Members
- ------------------------------------------------------
HYPERION
Capital Management, Inc.
- ------------------------------------------------------
The accompanying financial statements as of May 31, 1996 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 Trust shares.
THE HYPERION TOTAL RETURN FUND, INC.
520 Madison Avenue
New York, NY 10022
THE
H Y P E R I O N
TOTAL RETURN FUND, INC.
SEMI-ANNUAL REPORT
MAY 31, 1996
