THE
H Y P E R I O N
TOTAL RETURN FUND, INC.
Semi-Annual Report
May 31, 1998
(unaudited)
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THE HYPERION TOTAL RETURN FUND, INC.
Report of the Investment Advisor
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July 20, 1998
Dear Shareholder:
We welcome this opportunity to present you with the annual report, of The
Hyperion Total Return Fund, Inc. (the "Fund") for its semi-annual period ended
May 31, 1998 and to share our outlook for the rest of the Fund's fiscal year.
The Fund's shares are traded on the New York Stock Exchange ("NYSE") under the
symbol "HTR".
Description Of The Fund
The Fund is a diversified closed-end investment company. The Fund's investment
objective is to attempt to provide shareholders with 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. The Fund pursues this
objective by investing and actively managing a portfolio consisting primarily of
U.S. Treasury, mortgage-backed, asset-backed and high-yield corporate
securities.
Market Environment
Prices for fixed income securities have increased over the last six months with
interest rates falling an average of 25 basis points. A significant factor
contributing to the strong performance of the bond market are the current low
levels of inflation in the U.S. economy. The Consumer Price Index ("CPI") in
1997 was 2.2% versus a 3.0% to 3.5% range throughout most of the 1990's.
Although the CPI has increased slightly this year, the Federal Reserve has
chosen to keep short term interest rates unchanged. Asia's economic
difficulties, and lower global inflation, continue to be key factors affecting
domestic fixed income market volatility and performance. Japan, China and Korea
are all economies that impact U.S. fixed income markets. The weakness in these
economies is having an offsetting influence on the strong domestic economy and
its increased wage pressures, giving rise to the strong performance in the U.S.
fixed income markets.
Hyperion Capital Management, Inc. ("Hyperion") continues to be optimistic on the
bond market. Positive fundamentals, such as an improving fiscal policy,
declining government deficits, and an expectation of prolonged economic problems
in Asia are some of the major factors in place supporting Hyperion's outlook for
lower bond yields.
As a result of the current low interest rate environment, prepayment risk has
increased. A combination of efficient computer technology and greater media
publicity has made mortgage refinancing a potentially common occurrence.
Recently, homeowners have been made more aware of the best time to refinance
through more thorough and timely news reports, advertising and other forms of
media. Powerful search engines on the Internet and the public's increasing
comfort with this new informative tool provide further opportunity for
homeowners to refinance quicker, cheaper and without many of yesterday's
refinancing hassles. In order to reduce exposure to prepayment risk, Hyperion's
strategy has been to increase the allocation of securities in the portfolio to
those that are structured to deflect prepayment risk and whose underlying
collateral is less prepayment sensitive.
Portfolio Strategy and Performance
Two sectors in the portfolio were adversely impacted by unfavorable market
conditions; the high yield corporate component of the Fund, and certain credit
sensitive asset-backed security ("ABS") categories. The high yield corporate
market, during the last six months, has suffered what appears to be some
relative weakness as a function of the amount of new high-yield bonds originated
in the market. Recent lower interest rates have prompted many more issuers than
usual to issue new debt. This increased supply has caused the corporate bond
market to underperform other fixed income sectors. We expect that, once the
issuance of new high yield debt normalizes, we should see more relative
performance improvement in that sector of the Fund. The other sector of the Fund
that has been under market pressure over the last six months are certain
asset-backed security classes. Despite the healthy, robust economy, consumer
delinquency levels are at historically high levels. This is confounding, given
the fact that employment levels are high and the economy is in excellent
condition. However, the increase in consumer delinquency has affected the
asset-backed securities market. On June 11, 1998 Congress passed the Bankruptcy
Reform Bill, making it more difficult for people to wipe out their debts, which
is why we remain cautious on the sector. The exposure to the ABS sector has
negatively impacted the portfolio. We have lowered the allocation to ABS and
look to reenter the market when conditions improve. This legislation should have
a positive effect on consumer loans in general and, more specifically, the
consumer receivables sector of the asset-backed security market.
Throughout the portfolio, Hyperion has avoided investments with market prices
higher than 100% of face value. This has included the sale of securities whose
prices have risen significantly above that level. Given Hyperion's positive view
on interest rates, we are taking this action to attempt to preserve shareholder
value in the event that any of the mortgage-backed securities in the portfolio
experience any increased prepayments.
The Fund's total return, based on Net Asset Value for the six month period
ending May 31, 1998 was 2.72%. Total investment return is based upon the change
in Net Asset Value of the Fund's shares and includes reinvestment of dividends.
The current monthly dividend the Fund pays its shareholder is $0.06250 per
share. The current yield of 8.33% on shares of the Fund is based on the NYSE
closing price of $9.0000 on May 29, 1998. This yield was 278 basis points above
the yield on the 5-Year Treasury Note which was competitive when compared to
other multisector-bond funds in its category.
As of the end of July, the Fund, inclusive of leverage, was managed with an
average duration (duration measures a bond portfolio's price sensitivity to
interest rate changes) of 5.9 years.
During the past six months, the Fund has continued its share repurchase program.
This repurchase program allows the Fund to purchase and retire shares of the
Fund in the open marketplace. Such transactions are made when the share price of
the Fund is significantly below the Fund's NAV. By purchasing the stock at a
discount to the NAV and retiring the stock, the benefit of that spread (between
stock purchase price and the NAV) is captured and returned to all of the Fund's
remaining shareholders. From December 1, 1997 through and including May 31,1998,
the Fund has repurchased and retired 335,600 shares, capturing $0.0162 in
additional NAV per share or $395,781 in an actual dollar amount for
shareholders.
The chart that follows shows the allocation of the Fund's holdings by asset
category on May 31, 1998.
THE HYPERION TOTAL RETURN FUND, INC.
PORTFOLIO OF INVESTMENTS AS OF MAY 31, 1998 *
PIE CHART
U.S. Government Agency Pass-Through Certificates 0.8%
U.S. Government Agency Collateralized Mortgage Obligations 32.1%
U.S. Treasury Obligations 17.3%
Asset-Backed Securities 10.6%
Commercial Mortgage Backed Securities 10.5%
Subordinated Collateralized Mortgage Obligations 17.3%
Collateralized Mortgage Obligations 3.4%
High-Yield Corporate Securities 7.7%
U.S. Government Stripped Mortgage-Backed Security 0.3%
*As a percentage of total investments
Conclusion
The Fund commits to its shareholders to continue to actively seek out the
significant investment opportunities, and act on them in a timely fashion. 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,
CLIFFORD E. LAI
President,
The Hyperion Total Return Fund, Inc.
Managing Director and Chief Investment Officer,
Hyperion Capital Management, Inc.
KENNETH C. WEISS
Director & Senior Vice President,
The Hyperion Total Return Fund, Inc.
President and Chief Executive Officer,
Hyperion Capital Management, Inc.
JOHN H. DOLAN
Vice President,
The Hyperion Total Return Fund, Inc.
Managing Director,
Hyperion Capital Management, Inc.
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THE HYPERION TOTAL RETURN FUND, INC.
Portfolio of Investments Principal
May 31, 1998 (unaudited) Interest Amount Value
Rate Maturity (000s) (Note 2)
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U.S. GOVERNMENT & AGENCY OBLIGATIONS - 72.7%
U.S. Government Agency Pass-Through Certificates - 1.1%
Government National Mortgage Association
( Cost -$ 2,807,778 ) 8.50% 07/15/27 $ 2,687 $ 2,840,848
-----------------
U.S. Government Agency Collateralized Mortgage Obligations - 46.3%
Federal Home Loan Mortgage Corporation
Series 1643, Class PH 5.75 07/15/23 12,000 @ 11,720,700
Series 1701, Class PH 6.50 03/15/09 10,000 10,228,687
Series 1675, Class KC 6.50 10/15/10 5,750 @ 5,834,711
Series 1659, Class SD 8.50+ 01/15/09 2,234 2,346,654
Series 1469, Class I 8.80+ 03/15/00 2,184 2,226,701
Series 1565, Class L 9.00+ 08/15/08 2,066 2,207,526
Series 1587, Class SK 9.00+ 10/15/08 1,857 2,009,715
Series 1604, Class MC 9.00+ 11/15/08 5,557 6,025,443
Series 1604, Class SB 9.00+ 11/15/08 1,084 1,167,078
Series 1587, Class SF 9.29+ 05/15/08 928 994,451
-----------------
44,761,666
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Federal National Mortgage Association
Series 1993-175, Class PT 6.00+ 11/25/07 13,000 12,983,685
Series 1994-42, Class PG 6.00 03/25/23 10,000 @ 9,868,850
Series 1996-21, Class PJ 6.00 12/25/10 7,428 @ 7,386,637
Series 1994-27, Class PM 6.50 11/25/10 7,760 7,828,504
Series 1997-1, Class B 6.50 02/18/04 22,000 @ 22,145,941
Series 1993-170, Class SC 9.00 09/25/08 4,612 4,902,695
Series 1993-48, Class C 9.50 04/25/08 6,833 7,223,470
-----------------
72,339,782
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Total U.S. Government Agency Collateralized Mortgage Obligations
( Cost $ 112,848,890 ) 117,101,448
-----------------
U.S. Government Stripped Mortgage-Backed Security - 0.4%
Interest-Only Security:
Vendee Mortgage Trust
Series 1997-2, Class IO
( Cost -$ 1,336,671 ) 0.07 06/15/27 23,571 1,004,364
-----------------
U.S. Treasury Obligations - 24.9%
U.S. Treasury Notes 5.38 02/15/01 46,100 @ 45,898,359
5.50 01/31/03 6,000 @ 5,979,378
6.50 08/31/01 11,000 @ 11,295,636
-----------------
Total U.S. Treasury Obligations
( Cost $ 63,002,565 ) 63,173,373
-----------------
Total U.S. Government & Agency Obligations
( Cost $ 179,995,904 ) $ 184,120,033
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ASSET-BACKED SECURITIES - 15.4%
Autobond Receivables Trust
Series 1996-A, Class B (b) 15.00 01/15/02 1,206 (a) 543,424
Series 1996-B, Class B (b) 15.00 04/15/02 1,468 (a) 476,222
-----------------
1,019,646
-----------------
BHN I Mortgage Fund
Series 1996-1, Class A2 7.36 12/25/01 265 265,117
-----------------
BHN II Mortgage Trust
Series 1997-1, Class A1 7.10+ 03/25/11 1,672 1,647,509
-----------------
Bosque Asset Corporation
Asset-Backed Notes* 7.66 06/05/02 893 (a) 896,888
-----------------
CF/SPC Structured Mortgage Asset Residential Trust
Series 1997-4, Class A 7.85 09/15/01 1,845 1,859,225
-----------------
Financial Asset Securities Corporation
Series 1996-1, Class A (b) 10.00 12/10/00 2,324 (a) 232,424
Series 1996-A, Class C (b) 11.91 09/10/01 1,287 (a) 0
-----------------
232,424
-----------------
Franchise Loan Receivables Trust
Series 1995, Class B 9.63+ 01/15/11 4,695 (a) 5,164,428
-----------------
GE Capital Mortgage Services, Inc.
Series 1997-HE2, Class A7 7.12 06/25/27 5,000 5,138,625
-----------------
Green Tree Financial Corporation
Series 1997, Class HEA 7.16 03/15/28 5,000 5,132,025
Series 1996 CTF Class M 7.30 11/15/27 1,500 1,542,008
-----------------
6,674,033
-----------------
Health & Tennis Master Trust
Series 1996, Class A1 8.43 08/15/02 2,500 (a) 2,512,709
-----------------
Imexsa Export Trust-Senior Structured Export
Certificates
Series 1996-1 10.13 05/31/03 4,000 (a) 4,100,000
-----------------
Parametric Re, Ltd.
Series 1997-A1 4.30+ 11/19/07 500 511,250
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Standard Credit Card Master Trust
Series 1995-1, Class B 8.45 01/07/07 $ 5,600 $ 6,236,300
-----------------
Structured Mortgage Asset Residential Trust
Series 1997-2, Class A 8.24 03/15/06 2,633 2,652,355
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Total Asset-Backed Securities
( Cost - 43,176,725 ) 38,910,509
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COLLATERALIZED MORTGAGE OBLIGATIONS - 45.0%
Collateralized Mortgage Obligations - 5.0%
NSCOR
Series 1997-21, Class A8 7.00 01/25/28 8,000 8,189,629
-----------------
Prudential Home Mortgage Securities Co., Inc.
Series 1993-5, Class A8 8.43%+ 03/25/00 4,382 4,463,480
-----------------
Total Collateralized Mortgage Obligations
( Cost $ 12,501,448 ) 48 12,653,109
-----------------
Commercial Mortgage Backed Securities - 15.1%
Asset Securitization Corporation
Series 1997-D5, Class PSI, IO 1.57 02/14/41 45,689 4,935,990
Series 1997-D5, Class A1B 6.66 02/14/41 10,000 10,281,650
-----------------
15,217,640
-----------------
Bankers Trust Company Mortgage Investors Trust
Series 1996-SI, Class E 10.25 12/01/06 3,000 (a) 3,052,500
-----------------
DLJ Mortgage Acceptance Corporation
Series 1995-CF2, Class S2, IO* 1.64 12/17/27 48,300 (a) 4,157,423
-----------------
FFCA Secured Lending Corporation
Series 1998-1, Class A 1B* 6.73 10/18/25 4,500 4,559,063
-----------------
First Chicago/Lennar Trust I
Series 1997-CHLI, Class D 8.11+ 05/25/08 3,000 (a) 2,988,281
-----------------
Mortgage Capital Funding, Inc.
Series 1996-MC1, Class G 7.15 06/15/06 1,559 1,484,721
-----------------
Nationslink Funding Corporation
Series 1998-1, Class G 7.05 02/20/08 2,000 1,857,500
-----------------
Paine Webber Mortgage Acceptance Corporation
Series 1995-M2, Class C 6.90 12/01/03 5,000 (a) 5,057,155
-----------------
Total Commercial Mortgage Backed Securities
( Cost $ 37,899,248 ) $ 38,374,283
-----------------
Subordinated Collateralized Mortgage Obligations - 24.9%
Chase Mortgage Finance Corporation
Series 1994-D, Class B3 6.75 02/25/25 691 640,000
-----------------
Countrywide Funding Corporation
Series 1994-2, Class B2 [c] 6.50 02/25/09 599 203,650
Series 1995-V, Class B2 7.25 02/25/26 1,405 1,418,377
Series 1995-Q, Class B1 7.50 11/25/25 2,897 2,950,420
-----------------
-----------------
4,572,447
-----------------
DLJ Mortgage Acceptance Corporation
Series 1995-T10, Class C 17.91 09/02/23 1,912 (a) 1,013,242
-----------------
G3 Mortgage Reinsurance Ltd.
Mortgage Default Recourse* 6.66+ 05/25/08 2,000 2,002,500
Mortgage Default Recourse* 6.96+ 05/25/08 6,000 6,007,500
Mortgage Default Recourse Class C* 8.51+ 05/25/08 6,500 6,500,000
Mortgage Default Recourse* 25.66+ 05/25/08 3,000 3,000,000
-----------------
-----------------
17,510,000
-----------------
GE Capital Mortgage Services, Inc.
Series 1994-2, Class B* (c) 6.00+ 01/25/09 768 (a) 268,707
Series 1994-10, Class M 6.50 03/25/24 5,703 5,620,871
Series 1994-17, Class B3* 7.00 05/25/24 1,941 (a) 1,772,540
Series 1995-10, Class B3* 7.00 10/25/10 665 (a) 632,252
Series 1996-3, Class B3 7.00 03/25/26 1,837 (a) 1,649,135
Series 1996-9, Class B5 (c) 7.50 06/25/26 1,299 (a) 441,779
Series 1996-HE3, Class B4* 8.25+ 09/25/26 571 (a) 274,095
Series 1996-HE3, Class B5* (c) 8.25+ 09/25/26 472 (a) 23,619
-----------------
10,682,998
-----------------
Headlands Mortgage Securities, Inc.
Series 1997-4, Class B4 7.25 11/25/27 1,537 1,350,829
-----------------
Paine Webber Mortgage Acceptance Corporation
Series 1993-9, Class B1 7.00 10/25/23 2,952 2,507,347
-----------------
Prudential Home Mortgage Securities Co., Inc.
Series 1996-5, Class B4* 7.25 04/25/26 1,362 (a) 1,048,494
Series 1996-5, Class B5 (c) 7.25 04/25/26 1,219 (a) 414,596
Series 1996-5, Class B1 7.25 04/25/26 3,405 3,429,216
-----------------
4,892,306
-----------------
Residential Asset Securitization Trust
Series 1997-A2, Class B1 7.75 04/25/27 2,422 2,493,807
-----------------
Residential Funding Mortgage Securities I, Inc.
Series 1993-S49, Class B2 6.00% 12/25/08 $ 246 $ 205,805
Series 1996 S8, Class B1 6.75 03/25/11 522 496,727
Series 1996 S5, Class B1 6.75 02/25/11 543 516,987
Series 1994 S13, Class M 1 7.00 05/25/24 3,814 3,856,201
Series 1996 S13, Class B3 [c] 7.00 05/25/11 361 83,958
Series 1996 S13, Class B2 7.00 05/25/11 361 309,447
Series 1996 S17, Class B2 [c] 7.25 07/25/11 282 243,268
Series 1996 S17, Class B3 7.25 07/25/11 282 65,574
Series 1995 S12, Class B 2 7.25 08/25/10 321 261,777
Series 1997 S2, Class M2 7.50 01/25/27 1,778 1,835,332
Series 1997 S3, Class B2 7.50 02/25/27 510 392,083
Series 1997 S7, Class B1 7.50 05/25/27 1,178 1,123,117
Series 1997-S2, Class B2 7.50 01/25/27 838 644,816
Series 1996-S23, Class B2 7.75 11/25/26 513 404,088
Series 1996-S23, Class B1 7.75 11/25/26 690 671,576
Series 1996-S22, Class B1 8.00 10/25/26 1,043 1,031,327
Series 1996 S4, Class M 2 7.25 02/25/26 2,079 2,131,212
-----------------
14,273,295
-----------------
Salomon Brothers Mortgage Securities VII
Series 1997-HUD2, Class B5 7.00 07/25/24 4,473 3,037,138
-----------------
Total Subordinated Collateralized Mortgage Obligations
( Cost $ 59,594,609 ) 62,973,409
-----------------
Total Collateralized Mortgage Obligations
( Cost $ 109,995,305 ) 114,000,801
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CORPORATE OBLIGATIONS - 11.1%
Aerospace and Defense - 0.2%
BE Aerospace, Inc. 8.00 03/01/08 500 497,500
-----------------
Air Transport - 0.2%
Atlantic Coast Airlines* 8.75 01/01/07 478 (a) 477,057
-----------------
Automotive - 0.4%
Navistar International Corporation 8.00 02/01/08 500 504,400
Western Star Trucks Holdings* 8.75 05/01/07 500 (a) 513,750
-----------------
1,018,150
-----------------
Beverage and Tobacco - 0.2%
Cott Corporation 9.38 07/01/05 500 497,500
-----------------
Building & Development - 0.6%
Ackerly Commincations Inc. 10.75% 10/01/03 $ 500 $ 526,250
American Standard Inc. 7.38 02/01/08 500 485,000
U S Home Corporation 8.25 08/15/04 500 505,000
-----------------
1,516,250
-----------------
Business Equipment & Services - 0.1%
Cex Holdings Inc. 9.63 06/01/08 250 252,500
-----------------
Cable Television - 0.6%
Century Communications Corportion 9.50 03/01/05 500 537,500
CSC Holdings Inc 8.13 08/15/09 500 523,125
Rogers Cablesystems, Ltd. 9.63 08/01/02 500 535,000
-----------------
1,595,625
-----------------
Chemicals/Plastics - 0.6%
Buckeye Cellulose Corporation 8.50 12/15/05 500 507,500
Envirodyne Industries Incorporated 12.00 06/15/00 250 268,750
ISP Holdings, Inc. 9.00 10/15/03 250 261,250
Sifto Canada, Inc. 8.50 07/15/00 500 520,000
-----------------
1,557,500
-----------------
Clothing/Textiles - 0.4%
Brylane Capital Corp. 10.00 09/01/03 500 526,900
Dyersburg Corporation* 9.75 09/01/07 250 (a) 254,375
Pillowtex Corporation 9.00 12/15/07 250 261,250
-----------------
1,042,525
-----------------
Ecological Services & Equipment - 0.3%
American Eco Corp. 9.63 05/15/08 500 503,750
L.E.S. Inc. 9.25 06/01/08 250 253,750
-----------------
757,500
-----------------
Electronics/Electric - 0.8%
DII Group, Inc.* 8.50 09/15/07 500 (a) 496,250
Elgar Industries Incorporated 9.88 02/01/08 250 250,000
Mark IV Industries, Inc. 7.75 04/01/06 750 764,850
Tracor, Inc. 8.50 03/01/07 500 541,250
-----------------
2,052,350
-----------------
Equipment Leasing - 0.3%
Coinmach Corporation 11.75 11/15/05 250 281,250
Rental Services Corp. 9.00 05/15/08 500 500,000
-----------------
-----------------
781,250
-----------------
Financial Services - 0.2%
United Companies Financial Corporation 7.00 07/15/98 500 500,000
-----------------
Food Service - 0.4%
Apple South Inc. 9.75% 06/01/06 $ 500 $ 535,000
Host Marriot Travel Plaza 9.50 05/15/05 500 528,125
-----------------
-----------------
1,063,125
-----------------
Forest Products - 0.1%
Doman Industries Limited* 9.25 11/15/07 250 (a) 251,563
-----------------
Healthcare - 0.3%
Paragon Corporate Holdings, Inc. 9.63 04/01/08 250 240,000
Rural/Metro Corporation 7.88 03/15/08 500 501,250
-----------------
-----------------
741,250
-----------------
Home Furnishings - 0.3%
Ekco Group, Inc. 9.25 04/01/06 500 520,000
Home Products International Inc. 9.63 05/15/08 250 251,250
-----------------
-----------------
771,250
-----------------
Hotels/Motels/Inns and Casinos - 0.2%
HMC Acquisition Properties Inc. 9.00 12/15/07 500 542,500
-----------------
Industrial Equipment - 0.2%
Columbus McKinnon Corporation 8.50 04/01/08 495 488,812
-----------------
Insurance - 0.2%
Americo Life, Inc. 9.25 06/01/05 500 515,000
-----------------
Leisure - 0.6%
Leslie's Poolmart, Inc.* 10.38 07/15/04 500 (a) 527,500
Premier Parks Incorporated 9.25 04/01/06 500 508,125
Speedway MotorSports, Inc. 8.50 08/15/07 350 361,375
-----------------
1,397,000
-----------------
Medical Equipment - 0.2%
Prime Medical Services, Inc. 8.75 04/01/08 500 490,000
-----------------
Nonferrous Metals/Minerals - 0.3%
Easco Corporation 10.00 03/15/01 250 255,937
P & L Coal Holdings Corp. 8.88 05/15/08 500 513,125
-----------------
-----------------
769,062
-----------------
Oil & Gas - 0.8%
Pogo Producing Company 8.75 05/15/07 500 511,250
Proffitt's, Inc. 8.13 05/15/04 500 530,100
Synder Oil Corporation 8.75 06/15/07 500 508,125
Trico Marine Services, Inc. 8.50 08/01/05 500 500,000
-----------------
2,049,475
-----------------
Publishing - 0.1%
Sun Media Corp. 9.50% 02/15/07 $ 250 $ 265,000
-----------------
Retailers (Other than Food/Drug) - 0.1%
Specialty Retailers 8.50 07/15/05 250 257,500
-----------------
Steel - 0.5%
Bayou Steel Corporation 10.25 03/01/01 250 258,550
Inland Steel Company 7.90 01/15/07 500 501,250
Ryerson Tull, Inc. 9.13 07/15/06 500 555,000
-----------------
1,314,800
-----------------
Surface Transport - 0.5%
Allied Holdings Inc.* 8.63 10/01/07 250 (a) 252,500
Moran Transportation Company 11.75 07/15/04 250 278,125
Newport News Shipbuilding, Inc. 8.63 12/01/06 250 262,500
Viking Star Shipping, Inc. 9.63 07/15/03 496 510,880
-----------------
1,304,005
-----------------
Telecommunications/Mobile, Cellular - 0.8%
Centennial Corporation 8.88 11/01/01 500 521,250
Level 3 Communications, Inc. 9.13 05/01/08 250 242,500
MasTec, Incorporated 7.75 02/01/08 500 477,500
Rogers Cantel 9.38 06/01/08 250 258,750
Rural Cellular 9.63 05/15/08 250 250,000
-----------------
1,750,000
-----------------
Transportation - 0.2%
Offshore Logistics Corporation 7.88 01/15/08 500 496,250
-----------------
Utilities - 0.4%
California Energy Corporation 9.88 06/30/03 500 542,500
El Paso Electric Company 8.90 02/01/06 500 555,000
-----------------
1,097,500
-----------------
Total Corporate Obligations
( Cost $ 27,445,906 ) 28,109,799
-----------------
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Total Investments - 144.2%
( Cost$-360,613,840 ) 365,141,142
Liabilities in Excess of Other Assets - (44.2%) (111,781,494)
-----------------
NET ASSETS - 100.0% $ 253,359,648
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@ - Portion of or entire principal amount delivered as collateral
for reverse repurchase agreements. (Note 6)
+ - Variable Rate Security: Coupon rate is rate in effect at May
31, 1998
* - Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities
may be resold in transactions exempt from registration,
normally to qualified institutional buyers. (a) - Private Placement
(b) - Security valued in good faith by or at the direction of the
Board of Directors (c) - First Loss Bonds
IO - Interest Only Security-Interest rate and principal amount are
based on the notional amount of the underlying mortgage pools.
- -----------------
See notes to financial statements.
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THE HYPERION TOTAL RETURN FUND, INC.
Statement of Assets and Liabilities
May 31, 1998 (unaudited)
- -------------------------------------------------------------------------------
Assets:
Investments, at value (cost $360,613,840) (Note 2)................$........365,141,142
Interest receivable..........................................................4,152,618
Principal paydowns receivable..................................................676,922
Prepaid expenses...............................................................244,231
-------------------
Total assets.....................................................370,214,913
-------------------
Liabilities:
Reverse repurchase agreements (Note 5).....................................116,183,375
Payable for fund shares repurchased............................................358,700
Interest payable (Note 5)......................................................196,160
Bank Overdraft..................................................................33,709
Accrued expenses and other liabilities..........................................83,321
-------------------
Total liabilities................................................116,855,265
-------------------
Net Assets (equivalent to $10.50 per share based on
24,119,815 shares outstanding)..........................$........253,359,648
===================
Composition of Net Assets:
Capital stock, at par (Note 6)....................................$............241,198
Additional paid-in capital (Note 6)........................................270,219,288
Undistributed net investment income............................................263,508
Accumulated net realized losses............................................(21,891,648)
Net unrealized appreciation..................................................4,527,302
-------------------
Net assets applicable to capital stock outstanding................$........253,359,648
===================
</TABLE>
See notes to financial statements.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
Statement of Operations
For the Six Months Ended May 31, 1998 (unaudited)
- -------------------------------------------------------------------------------
Investment Income (Note 2):
Interest..................................................................$........13,809,949
-----------------
Expenses:
Investment advisory fee (Note 3)......................................................832,240
Administration fee (Note 3)...........................................................256,074
Insurance..............................................................................75,116
Custodian..............................................................................34,328
Transfer agency........................................................................37,422
Reports to shareholders................................................................34,664
Accounting and tax services............................................................28,637
Directors' fees and expenses...........................................................22,991
Registration fees......................................................................16,375
Legal...................................................................................9,951
Miscellaneous...........................................................................7,549
-----------------
Total operating expenses....................................................1,355,347
Interest expense (Note 5)............................................3,116,303
-----------------
Total expenses..............................................................4,471,650
------------------
Net investment income...............................................................9,338,299
-----------------
Realized and Unrealized Losses on Investment
Transactions (Notes 2 and 4):
Net realized losses on investment transactions.............................................(1,597,216)
Net change in unrealized appreciation on investments.......................................(2,441,317)
------------------
Net realized and unrealized losses on investment transactions..............................(4,038,533)
------------------
Net increase in net assets resulting from operations..............................$.........5,299,766
==================
See notes to financial statements.
</TABLE>
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
Statements of Changes in Net Assets For the Six
Months Ended For the Year
May 31, Ended
1998 November 30,
(unaudited) 1997
- ----------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations:
Net investment income..................................................$...........9,338,299 $ 19,089,797
Net realized (losses) gains on investments and futures transactions...............(1,597,216) 2,150,264
Net change in unrealized appreciation on investments (2,441,317) 2,075,944
-------------------- ------------------
Net increase in net assets resulting from operations...............................5,299,766 23,316,005
-------------------- -------------------
Dividends to Shareholders:
Net investment income.............................................................(9,108,503) (21,249,957)
-------------------- -------------------
Capital Stock Transactions (Note 6):
Cost of Fund shares repurchased and retired......................................(3,159,480) (2,851,597)
-------------------- -------------------
Total decrease in net assets...........................................(6,968,217) (785,549)
Net Assets:
Beginning of period..................................................................260,327,865 261,113,414
-------------------- -------------------
End of period (including undistributed net investment income of
$263,508 and $33,712, respectively)...................................$.........253,359,648 $ 260,327,865
==================== ===================
</TABLE>
See notes to financial statements.
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
Statement of Cash Flows
For the Six Months Ended May 31, 1998 (unaudited)
- -------------------------------------------------------------------------------
Increase (Decrease) in Cash:
Cash flows provided by operating activities:
Interest received (excluding net amortization of $29,082)................$...........13,375,690
Interest expense paid................................................................(3,147,974)
Operating expenses paid..............................................................(1,770,541)
Proceeds from sale of short-term portfolio investments, net...........................2,590,000
Purchase of long-term portfolio investments........................................(145,344,938)
Proceeds from disposition of long-term portfolio investments and
principal paydowns ...............................................................153,656,877
---------------------
Net cash provided by operating activities............................................19,359,114
---------------------
Cash flows used for financing activities:
Cash used to repurchase and retire Fund shares.......................................(2,800,780)
Net cash used for reverse repurchase agreements......................................(5,956,125)
Cash dividends paid.................................................................(10,636,881)
---------------------
Net cash used for financing activities..............................................(19,393,786)
---------------------
Net decrease in cash........................................................................(34,672)
Cash at beginning of period.....................................................................963
---------------------
Cash at end of period........................................................$..............(33,709)
=====================
Reconciliation of Net Increase in Net Assets Resulting from
Operations to Net Cash Provided by Operating Activities:
Net increase in net assets resulting from operations.........................$............5,299,766
---------------------
Decrease in investments..............................................................11,779,566
Decrease in net unrealized appreciation on investments................................2,441,317
Increase in interest receivable........................................................(202,177)
Decrease in other assets..............................................................4,058,260
Decrease in other liabilities........................................... (4,017,618)
---------------------
Total adjustments............................................................14,059,348
---------------------
Net cash provided by operating activities....................................$...........19,359,114
=====================
</TABLE>
See notes to financial statements.
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Financial Highlights For the Six
Months Ended For the Year For the Year For the Year For the Year
May 31, Ended Ended Ended Ended
1998 November 30, November 30, November 30, November 30,
(unaudited) 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period.............$......10.64. $....10.55.$.... ..10.61.$ 9.56 $ 10.59
-------- --------- -------- ---------- --------------
Net investment income....................................0.38..........0.77.... ....0.95...... 0.92 1.07
Net realized and unrealized gains (losses) on
investment and futures transactions....................(0.16)..... ....0.16..... ...(0.11)..... 1.13 (1.10)
-------- --------- -------- ---------- --------------
Net increase (decrease) in net asset value
resulting from operations.......................... .....0.22... ......0.93..... ....0.84...........2.05.. (0.03)
- ------- --------- -------- ---------- --------------
Net effect of shares repurchased.........................0.02..........0.02...... -........... - 0.01
Dividends from net investment income....................(0.38)........(0.86).... ...(0.90).........(1.00).............(1.01)
-------- --------- -------- ---------- --------------
Net asset value, end of period...................$......10.50.$.......10.64.$. .....10.55.$.... 10.61 $ 9.56
======== ========= ======== ========== ==============
Market price, end of period......................$.......9.00.$........9.312$.......9.375$.... 9.00 $ 8.50
======== ========= ======== ========== ==============
Total Investment Return +...............................(2.03)%(1)........8.64%.......14.97% 17.45% (7.93)%
Ratios to Average Net Assets/Supplementary Data:
Net assets, end of period (000's)......... ......$.253,360....$..260,328....$..261,113 $ 263,022 $ 237,208
Operating expenses ......................................1.06%(2).... ..1.05%.........1.08% 1.07% 1.09%
Interest expense.........................................2.43%(2).......2.46%.........2.34%...... 2.24% 1.75%
Total expenses...........................................3.49%(2).......3.51%.........3.42%...... 3.31% 2.84%
Net investment income....................................7.29%(2).......7.45%.........9.26%... 9.18% 10.63%
Portfolio turnover rate................................. 40%........ ..109%..........227%......... 320% 234%
</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) Not Annualized
(2) Annualized
See notes to financial statements.
- -------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
Notes to Financial Statements
May 31, 1998 (unaudited)
- -------------------------------------------------------------------------------
1. The Fund:
The Hyperion Total Return Fund, Inc. (the "Fund"), which was incorporated under
the laws of the State of Maryland on May 26, 1989, is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, closed-end
management investment company.
The Fund's investment objective 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.
2. Significant Accounting Policies:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Valuation of Investments: Where market quotations are readily available, Fund
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: The Fund may write or purchase options as a method
of hedging potential declines in similar underlying securities. When the Fund
writes or purchases an option, an 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, also is
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 whether the Fund has realized a gain or a loss on the investment
transaction.
The Fund, as writer of an option, may have no control over whether the
underlying securities may be sold (call) or purchased (put) and as a result
bears the market risk of an unfavorable change in the price of the security
underlying the written option.
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, to the extent of the premium paid, that it will
expire without being exercised. If this occurs, the option expires worthless and
the premium paid for the option is recognized as 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 call 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: A futures contract is an agreement between two
parties to buy and sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Fund's basis in the contract.
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 realize a loss.
The use of futures transactions involves the risk of imperfect correlation in
movements in the price of futures 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.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses from securities
transactions are calculated on the identified cost basis. Interest income is
recorded on the accrual basis. Discounts and premiums on certain securities are
accreted and amortized using the effective yield to maturity method.
Taxes: It is the Fund's intention to meet 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.
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. Dividends from net
investment income and distributions from realized gains from investment
transactions have been determined in accordance with Federal income tax
regulations and may differ from net investment income and realized gains
recorded by the Fund for financial reporting purposes. These differences, which
could be temporary or permanent in nature, may result in reclassification of
distributions; however, net investment income, net realized gains and net assets
are not affected.
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. Cash, as used in the Statement of Cash
Flows, is the amount reported as "Cash" in the Statement of Assets and
Liabilities, and does not include short-term investments.
Accounting practices that do not affect reporting activities on a cash basis
include carrying investments at value and accreting discounts and amortizing
premiums on debt obligations.
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.
3. 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 Hyperion Capital
Management, Inc. (the "Administrator"). The Administrator has entered into a
sub-administration agreement with Investors Capital Services, Inc. (the
"Sub-Administrator"). The Administrator and Sub-Adminstrator perform
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 to the Administrator 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, Administrator and Sub-Administrator.
4. Purchases and Sales of Investments:
Purchases and sales of investments, excluding short-term securities, U.S.
Government securities and reverse repurchase agreements, for the six months
ended May 31, 1998 were $60,500,442 and $67,262,690, respectively. Purchases and
sales of U.S. Government securities, for the six months ended May 31, 1998 were
$81,566,273 and $77,176,956, respectively. For purposes of this footnote, U.S.
Government securities include securities issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation, the Government National Mortgage
Association and the United States Department of Veterans Affairs.
5. Borrowings:
The Fund may enter into reverse repurchase agreements with the same parties with
whom it may enter into repurchase agreements. Under a reverse repurchase
agreement , the Fund sells securities and agrees to repurchase them at a
mutually agreed upon date and price. Under the 1940 Act, reverse repurchase
agreements will be regarded as a form of borrowing by the Fund unless, at the
time it enters into a reverse repurchase 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. Reverse repurchase 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 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 obligation to repurchase the securities, and the Fund's use of the
proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision.
At May 31, 1998, the Fund had the following reverse repurchase agreements
outstanding:
Maturity in
Zero to 30 Days
Maturity Amount, Including Interest Payable $ 116,453,190
Market Value of Assets Sold
Under Agreements.............. $ 116,721,515
Weighted Average Interest Rate
5.52%
- ------------------------------------------------- --------------------
The average daily balance of reverse repurchase agreements outstanding during
the year ended May 31, 1998, was approximately $110,015,420 at a weighted
average interest rate of 5.68%. The maximum amount of reverse repurchase
agreements outstanding at any time during the year was $131,552,750, as of
January 14, 1998, which was 33.26% of total assets.
6. Capital Stock:
There are 50 million shares of $0.01 par value common stock authorized. Of the
24,119,815 shares outstanding at May 31, 1998, the Advisor owned 8,334 shares.
The Fund is continuing its stock repurchase program, whereby an amount of up to
15% of the original 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, 1998, 858,500 shares have been repurchased pursuant to this
program at a cost of $7,850,103 and at an average discount of 12.27% from its
net asset value. For the six months ended May 31, 1998, 335,600 shares have been
repurchased at a cost of $3,159,480 and at an average discount of 11.43% from
its net asset value. For the year ended November 30, 1997, 522,900 shares were
repurchased at a cost of $4,690,560 and at an average discount of 6.23% from its
net asset value. All shares repurchased have been or will be retired.
7. 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, 1998.
There was no written option activity for the year ended May 31, 1998.
g-FootNotes598htr.DOC - 16
HTR - 07/17/98 06:19 PM
- --------------------------------------------------------------------------
PROXY RESULTS (unaudited)
- --------------------------------------------------------------------------
During the six months ended May 31, 1998, The Hyperion Total Return Fund, Inc.
shareholders voted on the following proposals at a shareholders meeting on April
21, 1998. The description of each proposal and number of shares voted are as
follows:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------ --------------------- ----------------- -------------------
Shares Voted Shares Voted
For Without Authority
- ------------------------------------------ --------------------- ----------------- -------------------
1. To elect the Fund's Board of Rodman L. Drake 19,407,837 477,405
Directors:
Harry E Petersen, Jr 14,402,286 482,956
- ------------------------------------------ --------------------- ----------------- -------------------
</TABLE>
- ------------------------------------------------------------------------------
YEAR 2000 CHALLENGE (unaudited)
- -------------------------------------------------------------------------------
The Fund could be adversely affected if computers used by the Fund's service
providers do not properly process information dated January 1, 2000 and after.
The Fund's service providers are taking steps to address Year 2000 risks with
respect to computer systems on which the Fund depends. At this time, however,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Fund.
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 the 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 handling 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.
- -------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
Selected Quarterly Financial Data
(unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share
---------------------------------
Net Realized Unrealized
InvestmentGain Gain Dividend/ Market Price NAV Volume
--------------------- ---------------
Quarter Ended Income (Loss) (Loss) Distribution High Low High Low (000s)
- --------------------------------------------------------------------------------------------------
February 28, 1991 $0.29 $0.01 $0.12 $(0.30) $11 $9 5/8 $10.91 $10.70 3,040
May 31, 1991 0.32 0.02 0.16 (0.30) 11 1/4 10 1/8 11.12 10.86 4,287
August 31, 1991 0.30 (0.06) 0.26 (0.30) 11 5/8 10 3/4 11.32 11.06 2,469
November 30, 1991 0.33 (0.18) 0.28 (0.20) 12 11 3/8 11.50 11.29 2,674
February 29, 1992 0.30 0.34 0.59 (0.34) 12 11 11.46 10.94 4,012
May 31, 1992 0.30 (0.35) 0.15 (0.30) 12 1/4 11 1/8 11.07 10.86 2,843
August 31, 1992 0.30 (0.19) 0.29 (0.30) 12 1/8 11 1/8 11.12 10.91 3,539
November 30, 1992 0.29 (0.27) 0.03 (0.29) 11 7/8 11 3/8 11.15 10.76 2,120
February 28, 1993 0.28 (0.11) 0.03 (0.29) 12 11 10.89 10.77 2,104
May 31, 1993 0.28 0.08 (0.19) (0.38) 12 10 3/4 10.69 10.56 2,349
August 31, 1993 0.25 0.07 0.16 (0.28) 11 7/8 10 1/2 10.86 10.62 4,997
November 30, 1993 0.26 (0.08) (0.17) (0.19) 11 9 7/8 10.81 10.60 3,673
February 28, 1994 0.26 (0.23) 0.14 (0.35) 10 7/8 10 10.66 10.48 2,591
May 31, 1994 0.29 (0.22) (0.35) (0.26) 10 5/8 9 10.36 9.85 1,898
August 31, 1994 0.29 (0.09) 0.03 (0.24) 9 1/4 8 1/2 9.98 9.87 2,249
November 30, 1994 0.23 (0.09) (0.29) (0.16) 8 7/8 7 5/8 9.81 9.53 2,879
February 28, 1995 0.23 (0.16) 0.42 (0.35) 8 7/8 8 9.70 9.40 2,405
May 31, 1995 0.23 0.18 0.37 (0.22) 9 8 1/2 10.18 9.69 1,565
August 31, 1995 0.23 0.18 (0.22) (0.22) 9 3/8 8 3/8 10.37 10.04 2,129
November 30, 1995 0.23 0.21 0.15 (0.21) 9 1/8 8 5/8 10.61 10.23 1,698
February 28, 1996 0.25 0.17 (0.38) (0.24) 9 5/8 9 10.78 10.41 2,217
May 31, 1996 0.25 (0.09) (0.40) (0.21) 9 1/4 8 3/8 10.45 9.99 2,068
August 31,1996 0.23 (0.12) 0.10 (0.23) 9 1/4 8 1/4 10.26 9.83 2,190
November 30, 1996 0.22 0.08 0.52 (0.22) 9 1/2 8 7/8 10.55 10.01 1,334
February 28, 1997 0.18 0.09 (0.27) (0.23) 9 5/8 9 1/8 10.52 10.25 1,664
May 31, 1997 0.20 0.02 (0.11) (0.22) 9 1/4 9 5/8 10.31 10.03 1,819
August 31,1997 0.18 0.07 0.19 (0.21) 9 15/16 9 1/2 10.60 10.25 1,922
November 30, 1997 0.21 (0.10) 0.27 (0.20) 9 3/4 9 3/16 10.72 10.41 3,292
February 28, 1998 0.20 (0.08) (0.06) (0.19) 9 5/8 9 3/8 10.80 10.52 2,650
May 31, 1998 0.19 0.02 (0.04) (0.19) 9 7/16 8 13/16 10.53 10.41 1,815
-------------------------------------------------------------------------------
</TABLE>
INVESTMENT ADVISOR AND ADMINISTRATOR TRANSFER AGENT
HYPERION CAPITAL MANAGEMENT, INC. BOSTON EQUISERVE L.P.
One Liberty Plaza Investor Relations Department
165 Broadway, 36th Floor P.O. Box 8200
New York, New York 10006-1404 Boston, Massachusetts 02266-8200
For General Information about the Fund: For Shareholder Services:
(800) HYPERION (800) 426-5523
SUB-ADVISOR INDEPENDENT ACCOUNTANTS
PACHOLDER ASSOCIATES, INC. PRICEWATERHOUSECOOPERS LLP
Towers of Kenwood 1177 Avenue of the Americas
8044 Montgomery Road New York, New York 10036
Suite 382
Cincinnati, Ohio 45236 LEGAL COUNSEL
CUSTODIAN SULLIVAN & WORCESTER LLP
1025 Connecticut Avenue, N.W.
STATE STREET BANK AND TRUST COMPANY Washington, D.C. 20036
225 Franklin Street
Boston, Massachusetts 02116
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.
- ------------------------------------------------------------------------------
Officers & Directors
- ------------------------------------------------------------------------------
Lewis S. Ranieri
Chairman
Rodman L. Drake*
Director
Garth Marston
Director Emeritus
Leo M. Walsh, Jr.*
Director
Harry E. Petersen, Jr.*
Director
Kenneth C. Weiss
Director & Senior Vice President
Patricia A. Sloan
Director & Secretary
Garth Marston
Director Emeritus
Clifford E. Lai
President
John H. Dolan
Vice President
Patricia A. Botta
Vice President
* Audit Committee Members
- ------------------------------------
The accompanying financial statements as of May 31, 1998 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.
One Liberty Plaza
165 Broadway, 36th Floor
New York, NY 10006-1404
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