THE
H Y P E R I O N
TOTAL RETURN FUND, INC.
Semi-Annual Report
May 31, 1999
________________________________________________________________________________
THE HYPERION TOTAL RETURN FUND, INC.
Report of the Investment Advisor
________________________________________________________________________________
July 20, 1999
Dear Shareholder:
We welcome this opportunity to provide you with information about The
Hyperion Total Return Fund, Inc. (the "Fund") for its semi-annual period
ended May 31, 1999, and to share our outlook for the remainder of the
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 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 securities
("MBS"), asset-backed securities ("ABS") and high-yield corporate
securities.
Market Environment
Fueled by the continued strength of the domestic economy, a slowly
recovering global economy, and an alarmingly high consumer price index
("CPI") report in April, fixed income markets were very volatile during
the last 12 months. For example, interest rates, driven down over 1.0%
by global economic problems in 1998, increased by over 1.5% thus far in
1999. Over the last six months, the yield on the 2-year U.S. Treasury
Note increased from 4.53% to 5.40%, while the yield on the 10-year U.S.
Treasury Note increased from 4.64% to 5.62%. All of this foretells the
tightening in monetary policy by the Federal Reserve this summer. The
Federal Reserve's decision to raise interest rates marks the first
increase since February 1997. We believe increases will be limited to 50
basis points this year, however, with uncertainties surrounding the Year
2000 preventing any further move.
The next twelve months should be as volatile as the last year. Problems
associated with Year 2000 issues-whether real or perceived-could set off
a chain reaction of events affecting the markets. Given these
uncertainties, we expect certain sectors of the market to underperform in
the Third and Fourth Quarters of 1999. Therefore, until a clear trend
emerges, our strategy will be to maintain a conservative positioning of
the Fund with respect to duration, maturity, and liquidity.
Portfolio Strategy and Performance
The disruptions that occurred in the markets over the last year have led
to certain changes to the portfolio. We have shifted the credit exposure
of the portfolio away from consumer related assets towards real estate
collateral and have moved from asset-backed securities ("ABS") into
residential and commercial mortgage-backed securities ("CMBS"). The
residential and commercial MBS markets have performed well since 1998.
Given the strength of the economy, we believe that these sectors will
exhibit strong performance.
We will continue to pursue strategies to improve the convexity of the
portfolio by investing in securities either with lower coupon collateral
or those that offer improved prepayment protection because of their
structure. Convexity is a measurement of a security's sensitivity to
changes in interest rates. During the next six months, we expect
investment opportunities in residential MBS, ABS, and CMBS to become more
attractive, especially in the A and BBB rated classes. Therefore, we
will try to maintain a high level of liquidity in the portfolio with the
goal of opportunistically reallocating a percentage of the assets to
these sectors in the Fourth Quarter of 1999.
The Fund's total return, based on Net Asset Value ("NAV") for the six
month period ending May 31, 1999, was 1.20%. Total investment return is
based upon the change in NAV of the Fund's shares and includes
reinvestment of dividends. Based on the NYSE closing price of $8.375 on
May 31, 1999, the Fund was yielding 8.96%. This yield was 3.38% above
the yield of the 5-Year U.S. Treasury Note, and was competitive with the
yields of other multi-sector bond funds in its category.
________________________________________________________________________________
THE HYPERION TOTAL RETURN FUND, INC.
Report of the Investment Advisor
________________________________________________________________________________
On July 9, 1999, the Board of Directors of the Fund declared a new
monthly dividend of $0.05000 per share. This dividend represents an
annualized rate of 6.00% based on the Fund's initial offering price of
$12.00 per share.
As of the end of June, the Fund, inclusive of leverage, was managed with
an average duration (duration measures a bond portfolio's price
sensitivity to interest rate changes) of 5.7 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 shares at a discount to the NAV and retiring them, the
spread (between share purchase price and the NAV) is captured by the Fund
and benefits all of the Fund's remaining shareholders. From December 1,
1998, through and including May 31, 1999, the Fund has repurchased and
retired 688,900 shares, and captured $0.0390 in additional NAV per share,
for a total of $896,690 for all shareholders.
The chart that follows shows the allocation of the Fund's holdings by
asset category on May 31, 1999.
The Hyperion Total Return Fund, Inc.
Portfolio of Investments as of MAY 31, 1999 *
U.S. Government Agency Pass-Through Certificates 7.2%
U.S. Government Agency Collateralized Mortgage Obligations 28.4%
U.S. Treasury Obligations 3.4%
Asset-Backed Securities 14.9%
Commercial Mortgage-Backed Securities 11.5%
Subordinated Collateralized Mortgage Obligations 26.5%
Collateralized Mortgage Obligations 0.6%
High-Yield Corporate Securities 5.6%
U.S. Government Stripped Mortgage-Backed Security 0.2%
Preferred Stocks 1.1%
Repurchase Agreement 0.6%
*As a percentage of total investments
_______________________________________________________________________________
THE HYPERION TOTAL RETURN FUND, INC.
Report of the Investment Advisor
________________________________________________________________________________
Conclusion
The Fund's commitment to its shareholders remains to actively seek out
the significant investment opportunities in the market, 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 in an effort to
achieve its objectives. We appreciate the opportunity to serve your
investment needs.
Sincerely,
ANDREW M. CARTER
Director and Chairman of the Board,
The Hyperion Total Return Fund, Inc.
Chairman and Chief Executive Officer,
Hyperion Capital Management, Inc.
CLIFFORD E. LAI
President,
The Hyperion Total Return Fund, Inc.
President and Chief Investment Officer,
Hyperion Capital Management, Inc.
JOHN H. DOLAN
Vice President,
The Hyperion Total Return Fund, Inc.
Director,
Hyperion Capital Management, Inc.
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THE HYPERION TOTAL RETURN FUND, INC.
Portfolio of Investments Principal
May 31, 1999 (unaudited) Interest Amount Value
Rate Maturity (000s) (Note 2)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 56.8%
U.S. Government Agency Pass-Through Certificates - 10.5%
Federal National Mortgage Association
(Cost - $23,534,063) 6.50 % 06/01/29 $ 24,000 $ 23,460,000
------------
U.S. Government Agency Collateralized Mortgage Obligations - 41.1%
Federal Home Loan Mortgage Corporation
Series 1643, Class PH 5.75 07/15/23 12,000 @ 11,583,600
Series 1701, Class PH 6.50 03/15/09 10,000 @ 10,083,490
Series 1675, Class KC 6.50 10/15/10 5,750 @ 5,678,815
Series 1659, Class SD 8.50 + 01/15/09 2,234 2,311,674
Series 1565, Class L 9.00 + 08/15/08 2,066 2,130,401
Series 1587, Class SK 9.00 + 10/15/08 1,857 1,993,490
Series 1604, Class MC 9.00 + 11/15/08 5,557 5,935,581
Series 1604, Class SB 9.00 + 11/15/08 1,084 1,155,389
Series 1587, Class SF 9.29 + 05/15/08 928 970,520
Series 1469, Class I 9.83 + 03/15/00 2,184 2,206,473
------------
44,049,433
------------
Federal National Mortgage Association
Series 1994-42, Class PG 6.00 03/25/23 10,000 @ 9,726,700
Series 1997-1, Class B 6.50 02/18/04 19,945 @ 19,826,874
Series 1994-27, Class PM 6.50 11/25/10 7,760 @ 7,662,146
Series 1998-W6, Class B3 7.09 10/25/28 2,259 1,603,041
Series 1993-170, Class SC 9.00 + 09/25/08 4,612 4,744,236
Series 1993-48, Class C 9.50 04/25/08 4,575 @ 4,769,148
------------
48,332,145
------------
Total U.S. Government Agency Collateralized Mortgage Obligations
(Cost - $90,288,211) 92,381,578
------------
U.S. Government Stripped Mortgage-Backed Security - 0.3%
Interest-Only Security:
Vendee Mortgage Trust
Series 1997-2, IO
(Cost - $1,219,747) 0.07 + 06/15/27 295,267 728,718
------------
U.S. Treasury Obligations - 4.9%
U.S. Treasury Bills 4.41 06/17/99 190 189,604
------------
U.S. Treasury Notes 3.63 07/15/02 5,151 5,152,362
4.25 11/15/03 2,000 1,889,062
4.75 02/15/04 4,000 3,855,624
------------
10,897,048
------------
Total U.S. Treasury Obligations
(Cost - $11,238,565) 11,086,652
------------
Total U.S. Government & Agency Obligations
(Cost - $126,280,586) 127,656,948
------------
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ASSET-BACKED SECURITIES - 25.6%
Access Financial Manufactured Housing Contract Trust
Series 1995-1, Class B1 7.65 % + 05/15/21 $ 10,060 $ 9,528,711
------------
Autobond Receivables Trust
Series 1996-A, Class B (b) 15.00 + 01/15/02 1,206 (a) 60,287
Series 1996-B, Class B (b) 15.00 + 04/15/02 1,468 (a) 73,407
------------
133,694
------------
Bosque Asset Corporation
Asset-Backed Notes* 7.66 + 06/05/02 613 (a) 613,215
------------
Ditech Home Loan Owner Trust
Series 1998-1, Class M2 7.64 06/15/29 5,000 4,434,375
------------
Franchise Loan Receivable Trust
Series 1995-B, Class A 9.63 01/15/11 3,687 (a) 3,765,236
------------
GE Capital Mortgage Services, Inc.
Series 1996-HE3, Class B4 (b) (d)* 8.25 09/25/26 558 61,415
Series 1996-HE3, Class B5 (b) (d)* 8.25 09/25/26 457 13,699
------------
75,114
------------
Global Rated Eligible Assets Trust
Series 1998-A, Class A1 (b)* 7.33 03/15/06 1,689 422,173
------------
Green Tree Financial Corporation
Series 1999-2, Class M1 6.80 + 12/01/30 12,750 @ 12,457,566
Series 1998-8, Class M1 6.84 09/01/30 10,000 @ 9,834,600
Series 1996 CTF, Class M 7.30 11/15/27 1,500 1,497,270
------------
23,789,436
------------
125 Home Loan Owner Trust
Series 1998-1, Class M2 7.75 + 02/15/29 5,000 4,470,315
------------
Standard Credit Card Master Trust
Series 1995-1, Class B 8.45 01/07/07 5,600 6,054,233
------------
Structured Mortgage Asset Residential Trust
Series 1997-2, Class A (b) 8.24 03/15/06 2,446 489,271
------------
Westgate Resorts LLC
Series 1998-A, Class A2* 8.26 07/15/13 3,826 3,711,233
------------
Total Asset-Backed Securities
(Cost - $65,894,072) 57,487,006
------------
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COLLATERALIZED MORTGAGE OBLIGATIONS - 52.0%
Collateralized Mortgage Obligations - 0.9%
Prudential Home Mortgage Securities Co., Inc.
Series 1993-5, Class A8
(Cost - $2,091,841) 10.20 + 03/25/00 2,051 2,054,670
------------
</TABLE>
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Commercial Mortgage Backed Securities - 12.7%
Asset Securitization Corporation
Series 1997-D5, Class A1B 6.66 % + 02/14/41 $ 10,000 $ 9,968,300
------------
Bankers Trust Company Mortgage Investors Trust
Series 1996-S1, Class E 10.25 12/01/06 907 (a) 935,380
------------
FFCA Secured Lending Corporation
Series 1998-1, Class A1B* 6.73 07/18/13 4,500 4,334,063
------------
First Chicago/Lennar Trust I
Series 1997-CHLI, Class D* 8.05 + 05/29/08 3,000 (a) 2,518,125
------------
GS Mortgage Securities Corp. II
Series 1998-GLII, Class F (d)* 7.19 + 04/13/31 4,000 2,951,664
------------
Mortgage Capital Funding, Inc.
Series 1996-MC1, Class G (d)* 7.15 06/15/06 1,559 1,271,365
------------
Nationslink Funding Corporation
Series 1998-1, Class F (d)* 7.05 02/20/08 2,000 1,522,800
------------
Paine Webber Mortgage Acceptance Corporation
Series 1995-M2, Class C* 6.90 12/01/03 5,000 (a) 5,015,625
------------
Total Commercial Mortgage Backed Securities
(Cost - $30,391,816) 28,517,322
------------
Subordinated Collateralized Mortgage Obligations - 38.4%
Cendant Mortgage Corp.
Series 1998-9, Class A4 (d) 6.50 08/18/28 15,351 14,568,216
------------
Chase Mortgage Finance Corporation
Series 1998-S4, Class B3 6.75 08/25/28 1,911 1,431,134
Series 1994-D, Class B3 6.75 + 02/25/25 677 564,287
------------
1,995,421
------------
Citicorp Mortgage Securities, Incorporated
Series 1997-2, Class B2 7.25 05/25/27 1,992 1,894,388
Series 1997-5, Class B2 7.25 11/25/27 2,034 1,929,248
------------
3,823,636
------------
Countrywide Alternative Loan Trust
Series 1998-2, Class B3* 7.00 05/25/28 1,090 820,698
------------
Countrywide Funding Corporation
Series 1996-2, Class B4* 7.75 09/25/26 950 910,141
------------
DLJ Mortgage Acceptance Corporation
Series 1995-T10, Class C (b)* 28.20 + 09/02/23 1,692 (a) 870,463
------------
</TABLE>
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Subordinated Collateralized Mortgage Obligations (continued)
G3 Mortgage Reinsurance Ltd.
Mortgage Default Recourse Class A (d)* 5.92 %+ 05/25/08 $ 2,000 $ 1,917,500
Mortgage Default Recourse Class B (d)* 6.22 + 05/25/08 6,000 5,677,500
Mortgage Default Recourse Class C (d)* 7.77 + 05/25/08 6,500 5,807,347
Mortgage Default Recourse Class E (d)* 24.92 + 05/25/08 6,965 5,225,786
------------
18,628,133
------------
GE Capital Mortgage Services, Inc.
Series 1994-2, Class B5* (c) 6.00 + 01/25/09 703 (a) 154,689
Series 1994-10, Class M 6.50 03/25/24 5,546 @ 5,376,113
Series 1998-17, Class B3 6.75 10/25/28 3,377 2,422,286
Series 1995-10, Class B3* 7.00 + 10/25/10 608 (a) 559,922
Series 1994-17, Class B3* 7.00 + 05/25/24 1,910 (a) 1,789,681
Series 1996-3, Class B3* 7.00 + 03/25/26 1,809 (a) 1,642,223
Series 1996-9, Class B5* (c) 7.50 06/25/26 1,209 (a) 314,324
------------
12,259,238
------------
Headlands Mortgage Securities, Inc.
Series 1997-4, Class B4 7.25 11/25/27 1,522 1,151,273
------------
Independent National Mortgage Corporation
Series 1994-2, Class B2 (c) 6.50 02/25/09 551 121,158
Series 1995-Q, Class B1 7.50 11/25/25 2,778 2,796,005
------------
2,917,163
------------
Paine Webber Mortgage Acceptance Corporation
Series 1993-9, Class B1 7.00 10/25/23 2,952 1,953,849
------------
PHH Mortgage Services Corp.
Series 1997-6, Class B3 7.35 + 11/18/27 994 922,044
------------
Prudential Home Mortgage Securities Co., Inc.
Series 1996-5, Class B4* 7.25 04/25/26 1,347 (a) 937,412
Series 1996-5, Class B5* (c) 7.25 04/25/26 1,205 (a) 313,260
Series 1996-5, Class B1 7.25 04/25/26 3,364 3,344,605
------------
4,595,277
------------
Residential Accredit Loans, Inc.
Series 1998-QS5, Class B1* 6.75 04/25/28 1,738 1,281,408
Series 1998-QS11, Class B1* 6.75 08/25/28 2,621 1,864,556
------------
3,145,964
------------
Residential Asset Securitization Trust
Series 1997-A2, Class B1 7.75 04/25/27 2,388 2,420,280
------------
Residential Funding Mortgage Securities I, Inc.
Serie 1993-S49, Class B2 6.00 12/25/08 228 177,187
Series 1999-S12. Class M3 6.50 05/25/29 3,521 3,160,277
Series 1999-13, Class M3 6.50 05/25/29 1,462 1,300,081
Series 1996-S5, Class B1 6.75 02/25/11 514 445,845
Series 1996-S8, Class B1 6.75 03/25/11 495 428,360
Series 1996-S13, Class B3 (c) 7.00 05/25/11 341 68,292
</TABLE>
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Subordinated Collateralized Mortgage Obligations (continued)
Residential Funding Mortgage Securities I, Inc. (continued)
Series 1996-S13, Class B2 7.00 % 05/25/11 $ 342 $ 264,896
Series 1995-S12, Class B2 7.25 08/25/10 304 234,228
Series 1996-S17, Class B2 (c) 7.25 07/25/11 268 205,898
Series 1996-S17, Class B3 7.25 07/25/11 268 54,932
Series 1995-S17, Class B3 7.50 12/26/25 1,839 809,235
Series 1997-S2, Class M2 7.50 01/25/27 1,758 1,772,458
Series 1997-S2, Class B2 7.50 01/25/27 830 607,352
Series 1997-S3, Class B2 7.50 02/25/27 502 351,168
Series 1997-S7, Class B1 7.50 05/25/27 1,166 996,027
Series 1996-S23, Class B2 7.75 11/25/26 506 393,238
Series 1996-S23, Class B1 7.75 11/25/26 680 615,269
Series 1996-S22, Class B1 8.00 10/25/26 1,024 942,637
------------
12,827,380
------------
Salomon Brothers Mortgage Securities VII
Series 1997-HUD2, Class B5 7.00 07/25/24 4,404 2,459,122
------------
Total Subordinated Collateralized Mortgage Obligations
(Cost - $88,687,594) 86,268,298
------------
Total Collateralized Mortgage Obligations
(Cost - $121,171,251) 116,840,290
------------
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CORPORATE OBLIGATIONS - 8.1%
Aerospace and Defense - 0.2%
BE Aerospace, Inc. 8.00 03/01/08 500 482,500
------------
Air Transport - 0.2%
Atlantic Coast Airlines* 8.75 01/01/07 453 (a) 462,923
------------
Automotive - 0.6%
Navistar International Corporation 8.00 02/01/08 500 505,000
United Rentals Incorporated* 9.00 04/01/09 250 247,500
Western Star Trucks Holdings* 8.75 05/01/07 500 (a) 502,500
------------
1,255,000
------------
Beverage and Tobacco - 0.2%
Cott Corporation 9.38 07/01/05 500 480,000
------------
Building & Development - 0.3%
American Standard Inc. 7.38 02/01/08 250 238,125
U S Home Corporation 8.25 08/15/04 500 496,250
------------
734,375
------------
Cable Television - 0.7%
Century Communications Corporation 9.50 03/01/05 500 523,750
CSC Holdings Inc 8.13 08/15/09 500 522,500
Rogers Cablesystems, Ltd. 9.63 08/01/02 500 526,250
------------
1,572,500
------------
</TABLE>
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CORPORATE OBLIGATIONS (continued)
Chemicals/Plastics - 0.4%
Buckeye Cellulose Corporation 8.50 % 12/15/05 $ 500 $ 502,500
ISP Holdings, Inc. 9.00 10/15/03 250 252,187
------------
754,687
------------
Clothing/Textiles - 0.3%
Pillowtex Corporation 9.00 12/15/07 250 243,125
Westpoint Stevens Inc. 7.88 06/15/08 500 497,500
------------
740,625
------------
Containers-Metal/Glass - 0.1%
Ball Corporation 8.25 08/01/08 250 250,000
------------
Ecological Services & Equipment - 0.2%
American Eco Corp. 9.63 05/15/08 250 147,500
Safety Kleen Services, Inc. 9.25 06/01/08 250 260,625
------------
408,125
------------
Electronics/Electric - 0.4%
Elgar Holdings, Inc. 9.88 02/01/08 125 100,312
Mark IV Industries, Inc. 7.75 04/01/06 750 713,443
------------
813,755
------------
Equipment Leasing - 0.4%
Coinmach Corporation 11.75 11/15/05 250 272,188
Rental Services Corp. 9.00 05/15/08 500 500,000
------------
772,188
------------
Food Service - 0.2%
Apple South Inc. 9.75 06/01/06 500 490,000
------------
Healthcare - 0.2%
Rural/Metro Corporation 7.88 03/15/08 500 460,000
------------
Home Furnishings - 0.3%
Ekco Group, Inc. 9.25 04/01/06 500 501,875
Home Products International Inc. 9.63 05/15/08 250 232,500
------------
734,375
------------
Hotels/Motels/Inns and Casinos - 0.3%
HMH Properties Inc. 7.88 08/01/08 500 460,625
Prime Hospitality Corporation 9.25 01/15/06 250 263,438
------------
724,063
------------
Industrial Equipment - 0.3%
Columbus McKinnon Corporation 8.50 04/01/08 500 487,500
Figgie International Incorporated 9.88 10/01/99 250 252,500
------------
740,000
------------
Insurance - 0.2%
Americo Life, Inc. 9.25 06/01/05 500 504,375
------------
</TABLE>
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CORPORATE OBLIGATIONS (continued)
Leisure - 0.5%
Premier Parks Incorporated 9.25 % 04/01/06 $ 500 $ 507,500
Speedway MotorSports, Inc. 8.50 08/15/07 350 357,000
Speedway MotorSports, Inc.* 8.50 08/15/07 150 153,000
------------
1,017,500
------------
Medical Equipment - 0.2%
Prime Medical Services, Inc. 8.75 04/01/08 500 487,500
------------
Nonferrous Metals/Minerals - 0.4%
Easco Corporation 10.00 03/15/01 250 252,813
P & L Coal Holdings Corp.* 8.88 05/15/08 500 502,500
------------
755,313
------------
Steel - 0.7%
Inland Steel Company 7.90 01/15/07 500 484,375
NS Group Incorporated 13.50 07/15/03 500 518,750
Ryerson Tull, Inc. 9.13 07/15/06 500 520,175
------------
1,523,300
------------
Surface Transport - 0.3%
Allied Holdings Inc. 8.63 10/01/07 250 (a) 237,500
Moran Transportation Company 11.75 07/15/04 250 270,000
Newport News Shipbuilding, Inc. 8.63 12/01/06 250 265,000
------------
772,500
------------
Telecommunications/Mobile, Cellular - 0.3%
Price Communications Wireless* 9.13 12/15/06 500 508,750
Rogers Cantel 9.38 06/01/08 250 262,500
------------
771,250
------------
Utilities - 0.2%
El Paso Electric Company 8.90 02/01/06 500 538,355
------------
Total Corporate Obligations
(Cost - $18,337,039) 18,245,209
------------
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Shares
(000s)
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 1.6%
Camden Property Trust, Series A 61 1,545,642
Duke Realty Investment, Series D 1 19,268
Equity Residential Properties, Series J 80 1,869,533
Equity Residential Properties, Series G 8 225,059
------------
Total Preferred Stocks
(Cost - $3,623,796) 3,659,502
------------
</TABLE>
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REPURCHASE AGREEMENT - 0.8%
Dated 5/28/99, with State Street Bank and Trust Company;
proceeds: $1,744,833; collateralized by $1,755,000
Federal Home Loan Bank, 5.560%, due 8/24/00,
value: $1,755,382 (Note 2)
(Cost - $1,744,000) 4.30 % 06/01/99 $ 1,744 $ 1,744,000
-------------
Total Investments - 144.9%
(Cost - $337,050,744) 325,632,955
Liabilities in Excess of Other Assets - (44.9%) (100,970,753)
-------------
NET ASSETS - 100.0% $ 224,662,202
=============
</TABLE>
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@ - Portion of or entire principal amount delivered as collateral for
reverse repurchase agreements. (Note 5)
+ - Variable Rate Security: Coupon rate is rate in effect at
May 31, 1999
* - 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)- Non-Income Producing security
(b)- Security valued in good faith by or at the direction of the Board
of Directors
(c)- Represents a class of subordinated mortgage backed securities
(First Loss Bonds) that are the first to receive the credit
losses on the underlying mortgage pools and will continue to
receive the credit losses until the subordinated class is paid
off.
(d)- Private Placement
IO - Interest Only Security--Interest rate is based on the notional
amount of the underlying mortgage pools.
** - Open futures contracts as of May 31, 1999 are as follows:
OPEN FUTURES
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Notional Value at Value at Unrealized
Amount Type Expiration Date Trade Date May 31, 1999 Appreciation
Short:
$ 9,000,000 10 Yr. U.S. Treasury Note June 1999 $10,355,625 $10,096,875 $258,750
</TABLE>
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See notes to financial statements.
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THE HYPERION TOTAL RETURN FUND, INC
Statement of Assets and Liabilities
May 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
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Assets:
Investments, at value (cost $337,050,744) (Note 2) $ 32,563,295,456
Cash 91,812
Receivable for investments sold 15,475,556
Interest receivable 3,905,082
Principal paydowns receivable 115,190
Receivable for variation margin 2,813
Prepaid expenses 234,972
---------------------------
Total assets 34,545,837,956
---------------------------
Liabilities:
Reverse repurchase agreements (Note 5) 90,833,000
Payable for investments purchased 29,500,000
Interest payable (Note 5) 248,931
Accrued expenses and other liabilities 214,247
---------------------------
Total liabilities 120,796,178
---------------------------
Net Assets (equivalent to $9.77 per share based on
22,994,215 shares issued and outstanding) $ 224,662,202
===========================
Composition of Net Assets:
Capital stock, at par value ($.01) (Note 6) $ 229,942
Additional paid-in capital (Note 6) 260,297,076
Undistributed net investment income 348,705
Accumulated net realized loss (25,054,482)
Net unrealized depreciation (11,159,039)
---------------------------
Net assets applicable to capital stock outstanding $ 224,662,202
===========================
- -------------------
See notes to financial statements
</TABLE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
Statement of Operations
For the Six Months Ended May 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income (Note 2):
Interest $ 12,652,998
----------------------------
Expenses:
Investment advisory fee (Note 3) 751,245
Administration fee (Note 3) 231,152
Insurance 72,851
Custodian 37,634
Transfer agency 29,095
Directors' fees 25,810
Reports to shareholders 23,681
Accounting and tax services 21,641
Registration fees 16,136
Legal 6,182
Miscellaneous 5,811
----------------------------
Total operating expenses 1,221,238
Interest expense (Note 5) 2,701,529
----------------------------
Total expenses 3,922,767
----------------------------
Net investment income 8,730,231
----------------------------
Realized and Unrealized Gains (Losses) on Investment
and Futures Transactions (Notes 2 and 4):
Net realized gains (losses) on:
Investment transactions (958,026)
Futures transactions 50,762
----------------------------
(907,264)
----------------------------
Net change in unrealized depreciation on investments and futures transactions (7,237,649)
----------------------------
Net realized and unrealized loss on investments and futures transactions (8,144,913)
----------------------------
Net increase in net assets resulting from operations $ 585,318
============================
See notes to financial statements
</TABLE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC For the For the Year
Statements of Changes in Net Assets Six Months Ended Ended
May 31, 1999 November 30,
(unaudited) 1998
- --------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations:
Net investment income $ 8,730,231 $ 18,386,968
Net realized loss on investments and futures transactions (907,264) (3,852,786)
Net change in unrealized depreciation on investments and futures transactions (7,237,649) (10,890,009)
----------------------- -----------------------
Net increase in net assets resulting from operations 585,318 3,644,173
----------------------- -----------------------
Dividends to Shareholders (Note 2):
Net investment income (8,708,611) (18,093,595)
----------------------- -----------------------
Capital Stock Transactions (Note 6):
Cost of Fund shares repurchased and retired (6,017,848) (7,075,100)
----------------------- -----------------------
Total decrease in net assets (14,141,141) (21,524,522)
Net Assets:
Beginning of period 238,803,343 260,327,865
----------------------- -----------------------
End of period (including undistributed net investment income of
$348,705 and $327,085, respectively) $ 224,662,202 $ 238,803,343
======================= =======================
See notes to financial statements
</TABLE>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC.
Statement of Cash Flows
For the Six Months Ended May 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Increase (Decrease) in Cash:
Cash flows provided by operating activities:
Interest received (including net amortization of $812,724) $ 13,386,740
Interest expense paid (2,622,524)
Operating expenses paid (480,139)
Purchases and sales of short-term portfolio investments, net 1,193,000
Purchase of long-term portfolio investments (94,070,173)
Proceeds from disposition of long-term portfolio investments and
principal paydowns 115,442,403
Net cash used for futures transactions 309,513
---------------------------
Net cash provided by operating activities 33,158,820
---------------------------
Cash flows used for financing activities:
Cash used to repurchase and retire Fund shares (6,017,848)
Net cash used for reverse repurchase agreements (18,204,001)
Cash dividends paid (8,705,612)
---------------------------
Net cash used for financing activities (32,927,461)
---------------------------
Net increase in cash 231,359
Temporary bank overdraft at beginning of period (139,547)
---------------------------
Cash at end of period $ 91,812
===========================
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 $ 585,318
---------------------------
Decrease in investments 10,637,142
Increase in net unrealized depreciation on investments 7,237,649
Increase in interest receivable (168,143)
Increase in other assets (4,791,323)
Increase in other liabilities 19,658,177
---------------------------
Total adjustments 32,573,502
---------------------------
Net cash provided by operating activities $ 33,158,820
===========================
See notes to financial statements
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
THE HYPERION TOTAL RETURN FUND, INC For the Six For the Year For the Year For the Year For the Year For the Year
Financial Highlights Months Ended Ended Ended Ended Ended Ended
May 31, 1999 November 30, November 30, November 30, November 30, November 30,
(unaudited) 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of period $ 10.08 $ 10.64 $ 10.55 $ 10.61 $ 9.56 $ 10.59
------------ ------------ ------------ ------------ ------------ ------------
Net investment income 0.38 0.76 0.77 0.95 0.92 1.07
Net realized and unrealized
gains (losses) on investment
and futures transactions (0.35) (0.61) 0.16 (0.11) 1.13 (1.10)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net
asset value resulting from
operations 0.03 0.15 0.93 0.84 2.05 (0.03)
------------ ------------ ------------ ------------ ------------ ------------
Net effect of shares repurchased 0.04 0.04 0.02 ---- ---- 0.01
Dividends from net investment income (0.38) (0.75) (0.86) (0.90) (1.00) (1.01)
------------ ------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 9.77 $ 10.08 $ 10.64 $ 10.55 $ 10.61 $ 9.56
============ ============ ============ ============ ============ ============
Market price, end of period $ 8.375 $ 8.69 $ 9.3125 $ 9.375 $ 9.00 $ 8.50
============ ============ ============ ============ ============ ============
Total Investment Return + 0.68% (1) 1.23% 8.64% 14.97% 17.45% (7.93)%
Ratios to Average Net Assets/Supplemental Data:
Net assets, end of period (000's) $ 224,662 $ 238,803 $ 260,328 $ 261,113 $ 263,022 $ 237,208
Operating expenses 1.06% (2) 1.05% 1.05% 1.08% 1.07% 1.09%
Interest expense 2.34% (2) 2.39% 2.46% 2.34% 2.24% 1.75%
Total expenses 3.40% (2) 3.44% 3.51% 3.42% 3.31% 2.84%
Net investment income 7.55% (2) 7.27% 7.45% 9.26% 9.18% 10.63%
Portfolio turnover rate 33% 90% 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 brokerage
commissions. Dividends and distributions are assumed to be reinvested at
the prices obtained under the Fund's dividend reinvestment plan.
(1) Not Annualized
(2) Annualized
- ------------------------------
See notes to financial statements.
________________________________________________________________________________
THE HYPERION TOTAL RETURN FUND, INC.
Notes to Financial Statements
May 31, 1999 (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, securities held by the Fund 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 or in the
financial condition of an issuer or market.
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 realized 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
2. Significant Accounting Policies (continued)
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 hedge against
fluctuations in the value of portfolio securities 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 continue 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. 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 Agreements and Affiliated Transactions
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.
During the six months ended May 31, 1999, the Advisor received
$751,245 in investment advisory fees.
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 pays, 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 providing 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. During the six months ended May
31, 1999, the Administrator received $231,152 in administration
fees. The Administrator is responsible for any fees due the
Sub-Administrator.
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, 1999, were $46,012,248
and $49,817,930, respectively. Purchases and sales of U.S.
Government securities, for the six months ended May 31, 1999 were
$66,720,578 and $61,045,269, 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
Federal National Mortgage Association, 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.
5. Borrowings (continued)
At May 31, 1999, the Fund had the following reverse repurchase
agreements outstanding:
Maturity in
Zero to 30 Days
Maturity Amount, Including Interest Payable $ 91,237,191
Market Value of Assets Sold
Under Agreements $ 113,100,364
Weighted Average Interest Rate 4.90%
- --------------------------------------------------- --------------------
The average daily balance of reverse repurchase agreements
outstanding during the six months ended May 31, 1999, was
approximately $114,124,632 at a weighted average interest rate of
4.75%. The maximum amount of reverse repurchase agreements
outstanding at any time during the year was $113,915,757, as of
January 27, 1999, which was 31.00% of total assets.
6. Capital Stock
There are 50 million shares of $0.01 par value common stock
authorized. Of the 22,994,215 shares outstanding at May 31, 1999,
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 of the Trust's shares, are authorized for
repurchase. The purchase price may not exceed the then-current net
asset value.
As of May 31, 1999, 1,984,100 shares have been repurchased
pursuant to this program at a cost of $23,590,919 and at an average
discount of 13.00% from its net asset value. For the six months
ended May 31, 1999, 688,900 shares have been repurchased at a cost
of $6,017,848 and at an average discount of 13.26% from its net
asset value. For the year ended November 30, 1998, 772,300 shares
have been repurchased at a cost of $7,075,100 and at an average
discount of 12.90% from its net asset value. All shares
repurchased have been 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. During the
period, the Fund had segregated sufficient cash and/or securities
to cover any commitments under these contracts.
Open futures contract at May 31, 1999 are included in the portfolio
of investments.
There was no written option activity for the six months ended May
31, 1999.
- -------------------------------------------------------------------
PROXY RESULTS (unaudited)
- -------------------------------------------------------------------
The Hyperion Total Return Fund, Inc. shareholders voted on the following
proposals at a shareholders meeting on April 20, 1999. 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 Directors: Lewis S. Ranieri 19,266,910 635,901
Leo M. Walsh, Jr. 19,281,414 621,398
Patricia A. Sloan 19,278,943 623,868
Andrew M. Carter 19,271,098 631,713
Robert F. Birch 19,271,298 631,513
- ----------------------------------------------------- ---------------------------------- -------------------- --------------------
- --------------------------------------------------------------- ------------------------ -------------------- --------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------- ------------------------ -------------------- --------------------
2. To select PricewaterhouseCoopers LLP as the Fund's
independent accountants: 19,188,055 475,164 239,593
</TABLE>
- -------------------------------------------------------------------
YEAR 2000 CHALLENGE (unaudited)
- -------------------------------------------------------------------
The Fund continues to review the current status of its exposure
to the Year 2000 computer issue. The Fund does not own or
directly use any computers in conducting its business. Instead,
it relies on various service providers to conduct its business
and its service providers may use or depend on computers to
provide services to the Fund. As is the case with other
investment companies and financial and business organizations,
the Fund could be adversely affected if the computer systems used
by the Fund's service providers do not properly address this
problem prior to January 1, 2000.
The Fund's investment adviser has collected and assessed
information regarding the Year 2000 preparations of each of the
Fund's service providers. The Fund's investment adviser has been
advised by each of the Fund's service providers that it has
adopted a Year 2000 plan, completed an internal assessment of its
computer systems, and begun implementation of procedures to bring
its mission-critical systems into Year 2000 compliance. The Fund
has been informed that substantially all of its service providers
will be compliant by the end of the Third Quarter of the calendar
year of 1999. Based on this information, management of the Fund
does not anticipate that the transition into the Year 2000 will
have any material impact on the Fund's operations; however,
management of the Fund will continue to monitor the situation.
However, no assurance can be given that the Fund's service
providers have anticipated every step necessary to avoid any
adverse effect on the Fund attributable to the Year 2000.
- -------------------------------------------------------------------
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.
<TABLE>
<S> <C>
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
</TABLE>
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that periodically the Fund may purchase its shares of
beneficial interest in the open market at prevailing market prices.
________________________________________________________________________________
Officers & Directors
________________________________________________________________________________
Andrew M. Carter
Chairman
Lewis S. Ranieri
Director
Robert F. Birch
Director
Rodman L. Drake*
Director
Garth Marston
Director Emeritus
Leo M. Walsh, Jr.*
Director
Harry E. Petersen, Jr.*
Director
Kenneth C. Weiss
Director
Patricia A. Sloan
Director & Secretary
Clifford E. Lai
President
John H. Dolan
Vice President
Patricia A. Botta
Vice President
Thomas F. Doodian
Treasurer
* Audit Committee Members
The accompanying financial statements as of May 31, 1999
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
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000851169
<NAME> HYPERION TOTAL RETURN FUND, INC.
<SERIES>
<NUMBER> 0
<NAME> HYPERION TOTAL RETURN FUND, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> MAY-31-1999
<INVESTMENTS-AT-COST> 337051
<INVESTMENTS-AT-VALUE> 325633
<RECEIVABLES> 19498
<ASSETS-OTHER> 327
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 345458
<PAYABLE-FOR-SECURITIES> 29500
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 91296
<TOTAL-LIABILITIES> 120796
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 260527
<SHARES-COMMON-STOCK> 22994
<SHARES-COMMON-PRIOR> 23683
<ACCUMULATED-NII-CURRENT> 349
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (25055)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (11159)
<NET-ASSETS> 224662
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 12653
<OTHER-INCOME> 0
<EXPENSES-NET> 3923
<NET-INVESTMENT-INCOME> 8730
<REALIZED-GAINS-CURRENT> (907)
<APPREC-INCREASE-CURRENT> (7238)
<NET-CHANGE-FROM-OPS> 585
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8709
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 689
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (14141)
<ACCUMULATED-NII-PRIOR> 327
<ACCUMULATED-GAINS-PRIOR> (24147)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 751
<INTEREST-EXPENSE> 2702
<GROSS-EXPENSE> 3923
<AVERAGE-NET-ASSETS> 231787
<PER-SHARE-NAV-BEGIN> 10.08
<PER-SHARE-NII> 0.38
<PER-SHARE-GAIN-APPREC> (0.31)
<PER-SHARE-DIVIDEND> (0.38)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.77
<EXPENSE-RATIO> 1.06
[AVG-DEBT-OUTSTANDING] 114125
[AVG-DEBT-PER-SHARE] 4.92
</TABLE>
