THE HYPERION TOTAL RETURN FUND, INC.
One Liberty Plaza o New York, New York 10006-1404
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
January 27, 1999 To the Stockholders:
The Annual Meeting of Stockholders of The Hyperion Total Return Fund,
Inc. (the "Fund") will be held at The Millenium Hilton, 55 Church Street (next
to the World Trade Center), New York, New York 10007, on Tuesday, April 20,
1999, at 9:45 a.m., for the following purposes:
1. To elect directors (Proposal 1).
2. To ratify or reject the selection of PricewaterhouseCoopers
LLP as the independent accountants of the Fund for the fiscal year
ending November 30, 1999 (Proposal 2).
3. To transact any other business that may properly come
before the meeting.
The close of business on January 22, 1999, has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the meeting.
By Order of the Board of Directors,
Patricia A. Sloan
Secretary
WE NEED YOUR PROXY VOTE IMMEDIATELY.
YOU MAY THINK YOUR VOTE IS NOT IMPORTANT, BUT IT IS VITAL. THE MEETING OF
STOCKHOLDERS OF THE FUND WILL BE UNABLE TO CONDUCT ANY BUSINESS IF LESS THAN A
MAJORITY OF THE SHARES ELIGIBLE TO VOTE IS REPRESENTED. IN THAT EVENT, THE FUND,
AT STOCKHOLDERS' EXPENSE, WOULD CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO
ACHIEVE A QUORUM. CLEARLY, YOUR VOTE COULD BE CRITICAL TO ENABLE THE FUND TO
HOLD THE MEETING AS SCHEDULED, SO PLEASE RETURN YOUR PROXY CARD IMMEDIATELY. YOU
AND ALL OTHER STOCKHOLDERS WILL BENEFIT FROM YOUR COOPERATION.
Instructions for Signing Proxy Cards
The following general rules for signing proxy cards may be of
assistance to you and eliminate the time and expense to the Fund involved in
validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts. Sign your name
exactly as it appears in the registration on the
proxy card.
2. Joint Accounts. Either party may
sign, but the name of the party signing should
conform exactly to the name shown in the
registration.
3. All Other Accounts. The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
Registration Valid Signature
Corporate Accounts
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
Trust Accounts
(1) ABC Trust John B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr.
UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
THE HYPERION TOTAL RETURN FUND, INC.
One Liberty Plaza o New York, New York 10006-1404
PROXY STATEMENT
This proxy statement is furnished in connection with a solicitation by
the Board of Directors of The Hyperion Total Return Fund, Inc. (the "Fund") of
proxies to be used at the Annual Meeting of Stockholders of the Fund to be held
at The Millenium Hilton, 55 Church Street (next to the World Trade Center), New
York, New York 10007, at 9:45 a.m. on Tuesday, April 20, 1999, and at any
adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders. This proxy statement and
the accompanying form of proxy are first being mailed to stockholders on or
about January 27, 1999. Stockholders who execute proxies retain the right to
revoke them by written notice received by the Secretary of the Fund at any time
before they are voted. Unrevoked proxies will be voted in accordance with the
specifications thereon and, unless specified to the contrary, will be voted FOR
the re-election of the three nominees for Class III director and for the
election of Mr. Andrew M. Carter and Mr. Robert F. Birch as Class I directors,
and FOR the ratification of the selection of PricewaterhouseCoopers LLP as the
independent accountants of the Fund for the fiscal year ending November 30,
1999. The close of business on January 22, 1999, has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the meeting. Each stockholder is entitled to one vote for each share held.
Abstentions will be treated as shares that are present and entitled to vote for
purposes of determining the presence of a quorum but as unvoted for purposes of
determining the approval of any matters submitted to stockholders for a vote.
Broker non-votes will not be counted for purposes of determining the presence of
a quorum or determining whether a proposal has been approved. On the record date
there were 23,322,815 shares outstanding.
PROPOSAL 1: ELECTION OF DIRECTORS
The Fund's Articles of Incorporation provide that the Fund's Board of
Directors shall be divided into three classes: Class I, Class II and Class III.
The terms of office of the present directors in each class expire at the Annual
Meeting in the year indicated or thereafter in each case when their respective
successors are elected and qualified: Class I, 2000; Class II, 2001; and Class
III, 1999. At each subsequent annual election, directors chosen to succeed those
directors whose terms are expiring will be identified as being of that same
class and will be elected for a three-year term. The effect of these staggered
terms is to limit the ability of other entities or persons to acquire control of
the Fund by delaying the replacement of a majority of the Board of Directors.
The terms of Lewis S. Ranieri, Leo M. Walsh, Jr. and Patricia A. Sloan,
the members of Class III currently serving on the Board of Directors, expire at
this year's Annual Meeting. The persons named in the accompanying form of proxy
intend to vote at the Annual Meeting (unless directed not to so vote) for the
re-election of Messrs. Ranieri and Walsh and Ms. Sloan. The persons named in the
accompanying form of proxy also intend to vote (unless directed not to so vote)
for the election of Mr. Andrew M. Carter and Mr. Robert F. Birch to serve as
Class I directors until the 2000 Annual Meeting of Stockholders. On July 21,
1998, the Board of Directors elected Mr. Carter to fill the vacancy created by
the resignation of Garth Marston, who resigned on June 10, 1998. On December 8,
1998, the Board elected Mr. Robert F. Birch as a Class I Director to fill a
newly created director position. The elections of Messrs. Carter and Birch are
subject to shareholder approval. Each nominee has indicated that he or she will
serve if elected, but if any nominee should be unable to serve, the proxy or
proxies will be voted for any other person or persons, as the case may be,
determined by the persons named in the proxy in accordance with their judgment.
As described above, there are three nominees for re-election and two
nominees for election to the Board of Directors at this time. Proxies cannot be
voted for a greater number of persons than the nominees currently proposed to
serve on the Board of Directors.
The following table provides information concerning each of the eight
members and nominees of the Board of Directors of the Fund:
<TABLE>
<S> <C> <C> <C>
Shares of Common
Stock
Beneficially
Owned Directly or
Indirectly, on
Name and Office Principal Occupation During Past Five Years, Director November 30,
with the Fund Other Directorships and Age Since 1998(**)
Class III Nominees to serve until 2002 Annual Meeting of Stockholders:
Lewis S. Ranieri*
Director Chairman and Chief Executive Officer of Ranieri & Co., Inc. (since
1988); in addition, President of LSR Hyperion Corp., a general partner
of the limited partnership that is the general partner of Hyperion
Partners L.P. ("Hyperion Partners") (since 1988). Director and Vice
Chairman of the Board of Hyperion Capital Management, Inc. (since
December 1998); Director and Chairman of the Board of Hyperion Capital
Management, Inc. (1989-November 1998); Chairman of the Board
(1989-December 1998) and/or Director (since 1989) of several investment
companies advised by Hyperion Capital Management, Inc. or by its
affiliates; Director of Lend Lease Hyperion Mortgage Opportunity Fund,
Inc. (formerly Equitable Real Estate Hyperion Mortgage Opportunity
Fund, Inc.) and Lend Lease Hyperion High Yield Commercial Mortgage
Fund, Inc. (formerly Equitable Real Estate Hyperion High Yield
Commercial Mortgage Fund, Inc.) (since 1995); Director and Chairman of
Bank United Corp., and Director of Bank United; Director and President
of Hyperion Funding 1993 Corp., the general partner of the limited
partnership that is the general partnership that is the general partner
of Hyperion 1993 Fund L.P.; and also Chairman and President of various
other direct and indirect subsidiaries of Hyperion Partners (since
1989). Formerly Vice Chairman of Salomon Brothers Inc (until 1987).
Age 52 June 1989 -
Leo M. Walsh, Jr.
Director, Chairman of Director and/or Trustee of several investment companies advised by
the Audit Committee Hyperion Capital Management, Inc. or by its affiliates (1989-Present).
Financial Consultant for Merck-Medco Managed Care L.L.C. (formerly Medco
Containment Services Inc.) (1994-Present); Director of Equitable Real
Estate Hyperion Mortgage Opportunity Fund, Inc. and Equitable Real
Estate Hyperion High Yield Commercial Mortgage Fund, Inc. (1995-1997);
Financial Consultant for Synetic Inc., a manufacturer of porous plastic
materials for health care uses (1989-1994). Formerly President, WW
Acquisition Corp. (1989-1990); Senior Executive Vice President and
Chief Operating Officer of The Equitable Life Assurance Society of the
United States ("The Equitable") (1986-1988); Director of The Equitable
and Chairman of Equitable Investment Corporation, a holding company for
The Equitable's investment oriented subsidiaries (1983-1988); Chairman
and Chief Executive Officer of EQUICOR-Equitable HCA Corporation
(1987-1988).
Age 66 June 1989 1,500
</TABLE>
<TABLE>
<S> <C> <C> <C>
Shares of Common
Stock
Beneficially
Owned Directly or
Indirectly, on
Name and Office Principal Occupation During Past Five Years, Director November 30,
with the Fund Other Directorships and Age Since 1998(**)
Patricia A. Sloan*
Director, Secretary Managing Director of Ranieri & Co., Inc. (1988-Present). Secretary,
Director and/or Trustee of several investment companies advised by
Hyperion Capital Management, Inc. or by its affiliates (1989-Present).
Director of Bank United Corp., the parent of Bank United (formerly Bank
United of Texas FSB) (1988-Present). Formerly Director of the
Financial Institutions Group of Salomon Brothers Inc (1972-1988).
Age 55 April 1994 300
Class I Nominees to serve until 2000 Annual Meeting of Stockholders:
Andrew M. Carter*
Director, Chairman of Chairman and Chief Executive Officer of Hyperion Capital Management,
the Board Inc. (November 1998-Present). Vice Chairman of The China Business Group
(1996-Present), and presently officer of four charitable boards: The New
England Conservatory, The Loomis Chaffee School, The William E. Simon
Graduate School of Business Administration at the University of
Rochester, and The Big Brother Association of Boston. Director of
several investment companies advised by Hyperion Capital Management,
Inc. (July 1998-Present). Formerly President and Founding Principal,
Andrew M. Carter & Company (1994-1998); Director and Senior Vice
President, Jennison Associates Capital Corp. (1975-1993); Founder,
Standard & Poor's/Carter, Doyle (1972-1975); Vice President, Head of
Fixed Income Group, Wellington Management Co. (1968-1972); and Manager
of the Harvard Endowment bond portfolio, Harvard Treasurer's Office
(1964-1968).
Age 58 July 1998 # -
Robert F. Birch
Director, Member of the Chairman and President, New America High Income Fund (1992-Present).
Audit Committee Director and Strategic Planning Consultant, Dewe Rogerson, Inc. Ltd.
(1994-1998). Chairman of the Board and Co-Founder, The China Business
Group, Inc. (1996-Present). Formerly, Chairman and Chief Executive
Officer, Memtek Corporation (1990-1991); Associated with Finn Wishengrad
Warnke & Gayton, a consulting firm specializing in work-outs of
financially distressed companies (1988-1989); President and Chief
Executive Officer, Gardner and Preston Moss, Inc. (1969-1987).
Age 62 December 1998 -
</TABLE>
<TABLE>
<S> <C> <C> <C>
Shares of Common
Stock
Beneficially
Owned Directly or
Indirectly, on
Name and Office Principal Occupation During Past Five Years, Director November 30,
with the Fund Other Directorships and Age Since 1998(**)
Class I Director to serve until 2000 Annual Meeting of Stockholders:
Kenneth C. Weiss*
Director Director and/or Trustee of several investment companies advised by
Hyperion Capital Management, Inc. or by its affiliate (1992-Present) and
former President and Chief Executive Officer of Hyperion Capital
Management, Inc. (February 1992-December 1998). Former Chairman of the
Board, and/or officer of several investment companies advised by
Hyperion Capital Management, Inc. or by its affiliates (February
1992-December 1998). Director and President of Lend Lease Hyperion
Mortgage Opportunity Fund, Inc. and Lend Lease Hyperion High Yield
Commercial Mortgage Fund, Inc. and their Investment Advisor
(1995-December 1998).Formerly Director of First Boston Asset Management
(1988-February 1992). Director of The First Boston Corporation (until
1988).
Age 46 April 1994 4,786
Class II Directors to serve until 2001 Annual Meeting of Stockholders:
Rodman L. Drake
Director, Member of the Chief Operating Officer, Continuation Investments N.V. (1997-Present).
Audit Committee Director and/or Trustee of several investment companies advised by
Hyperion Capital Management, Inc. (1989-Present). Formerly, Co-Chairman
of KMR Power Corporation (1993-1997); President, Mandrake Group (1993-1997); Managing Director and
Chief Executive Officer of Cresap (1980-1990). Trustee of Excelsior Funds (1994-Present). Director,
Parsons Brinckerhoff, Inc. (1995-Present) and Parsons Brinckerhoff Energy
Systems, Inc. (1995-Present), and Latin American Growth Fund Inc.
(1994-Present).
Age 56 July 1989 205
Harry E. Petersen, Jr.
Director, Member of the Director and/or Trustee of several investment companies advised by
Audit Committee Hyperion Capital Management, Inc. or by its affiliates (1992-Present).
Senior Advisor to Cornerstone Equity Advisors, Inc. (1998-Present).
Formerly, Senior Advisor to Potomac Babson Inc. (1995-1998). Formerly,
Director of Equitable Real Estate Hyperion Mortgage Opportunity Fund, Inc. and Equitable Real Estate
Hyperion High Yield Commercial Mortgage Fund, Inc. (1995-1997); Director
of Lexington Corporate Properties, Inc. (1993-1997); Consultant to
Advisers Capital Management, Inc. (1992-1995); Consultant on public and
private pension funds (1991-1993); President of Lepercq Realty Advisors
(1988-1990). Member of Advisory Council of Polytechnic University.
Age 74 Oct. 1993 200
</TABLE>
* Interested persons as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), because of affiliations with Hyperion Capital
Management, Inc., the Fund's Investment Advisor. ** The holdings of no director
or nominee represented more than 1% of the outstanding shares of the Trust. # On
July 21, 1998, the Board of Directors elected Mr. Carter to fill the vacancy
created by the resignation of Garth Marston, who resigned on June 10, 1998.
Officers of the Fund. The officers of the Fund are chosen each year at
the first meeting of the Board of Directors of the Fund following the Annual
Meeting of Stockholders, to hold office at the discretion of the Board of
Directors until the meeting of the Board following the next Annual Meeting of
Stockholders and until their successors are chosen and qualified. The Board of
Directors has elected six officers of the Fund. Except where dates of service
are noted, all officers listed below served as such throughout the 1998 fiscal
year. The following sets forth information concerning each officer of the Fund
who served during all or part of the last fiscal year of the Fund:
<TABLE>
<S> <C> <C> <C>
Name and
Principal Occupation Office Age Officer Since
Andrew M. Carter Chairman 58 December 1998
See information under "ELECTION OF DIRECTORS."
Senior Vice February 1992- December
Kenneth C. Weiss President 46 1998
See information under "ELECTION OF DIRECTORS."
Clifford E. Lai President 44 April 1993
President (Since November 1998) and Chief Investment Officer, Hyperion Capital
Management, Inc. (March 1993-Present). President of several investment
companies advised by Hyperion Capital Management, Inc. or by its affiliates
(1993-Present). Formerly Managing Director and Chief Investment Strategist for
Fixed Income, First Boston Asset Management (1989-1993); Vice President, Morgan
Stanley & Co. (1987-1989).
Patricia A. Botta Vice President 41 March 1997
Director of Hyperion Capital Management, Inc. (1989-Present). Formerly with the
Davco Group (1988-1989) and with Salomon Brothers Inc (1986-1988).
John H. Dolan Vice President 45 March 1998
Chief Investment Strategist of Hyperion Capital Management (1998-Present).
Formerly, Managing Director at Bankers Trust (1995-1997); Managing Director of
Salomon Brothers (1987-1995); Manager of mortgage-backed securities desk at
Citibank (1979-1987).
Patricia A. Sloan Secretary 55 July 1989
Managing Director of Ranieri & Co., Inc. (1988-Present); See information under
"ELECTION OF DIRECTORS."
Thomas F. Doodian Treasurer 40 February 1998
Chief Operating Officer, Hyperion Capital Management, Inc. (July 1995-Present).
Treasurer of several investment companies advised by Hyperion Capital
Management, Inc. (February 1998-Present). Formerly, Vice President in Mortgage
Backed Trading at Mabon Securities Corporation (1994-1995); fixed income
analyst, trader, and Vice President and Controller at Credit Suisse First Boston
(1984-1994).
</TABLE>
Security Ownership of Certain Beneficial Owners at November 30, 1998
<TABLE>
<S> <C> <C> <C> <C>
- ------------------ --------------------------------------------------- -------------------------- ------------------ -------------
Name and Amount and
Address of Nature of Percent
Title of Beneficial Beneficial of
Class Owner Ownership Class Source
- ------------------ --------------------------------------------------- -------------------------- ------------------ --------------
Common NONE
Stock
- ------------------ --------------------------------------------------- -------------------------- ------------------ --------------
</TABLE>
At November 30, 1998, directors and officers of the Fund as a group
owned beneficially less than 1% of the outstanding shares of the Fund. No
person, to the knowledge of management, owned beneficially more than 5% of the
Fund's outstanding shares at that date. The business address of the Fund and its
officers and directors is One Liberty Plaza, New York, New York 10006-1404.
Interested Persons. Mr. Ranieri serves as a Director and Vice Chairman
of the Board of the Advisor. Mr. Carter serves as the Chairman and Chief
Executive Officer of the Advisor. Mr. Weiss formerly served as a Director,
President and Chief Executive Officer of the Advisor. Ms. Sloan is a special
limited partner of Hyperion Ventures, the sole general partner of Hyperion
Partners L.P., of which the Advisor is a wholly-owned subsidiary. As a result of
their service with the Advisor and certain affiliations with the Advisor as
described below, the Fund considers Messrs. Ranieri, Carter, Weiss and Ms. Sloan
to be "interested persons" of the Fund within the meaning of Section 2(a)(19) of
the 1940 Act.
Committees and Board of Directors' Meetings. The Fund has a standing
Audit Committee presently consisting of Messrs. Walsh, Drake, Birch, and
Petersen, all of whom are members of the Board of Directors and are currently
non-interested persons of the Fund. Mr. Carter resigned from the Audit Committee
on November 20, 1998. The principal functions of the Fund's Audit Committee are
to recommend to the Board the appointment of the Fund's accountants, to review
with the accountants the scope and anticipated costs of their audit and to
receive and consider a report from the accountants concerning their conduct of
the audit, including any comments or recommendations they might want to make in
that connection. During the last fiscal year of the Fund, the full Board of
Directors met five times, and the Audit Committee met one time. All of the
members of the Audit Committee attended the Audit Committee meeting, and all of
the Directors attended at least 75% of the Board meetings. The Fund has no
nominating, compensation or similar committees.
Compensation of Directors and Executive Officers. No remuneration was
paid by the Fund to persons who, at the time, were directors, officers or
employees of Hyperion Capital Management, Inc. or any affiliate thereof for
their services as directors or officers of the Fund. Each director of the Fund,
other than those who are officers or employees of Hyperion Capital Management,
Inc. or any affiliate thereof, is entitled to receive a fee of $7,500 per year
plus $1,000 for each Board of Directors' meeting attended. Members of the Audit
Committee receive $750 for each Audit Committee meeting attended, other than
meetings held on days when there is also a directors' meeting.
Directors' Compensation Table
For The Twelve Month Period Ended 11/30/98
<TABLE>
<S> <C> <C>
Directors' Total Directors' Compensation
Compensation from the Fund and the Fund Complex
from the Fund
Andrew M. Carter**................................................... $2,875 $11,500
Rodman L. Drake...................................................... $11,500 $46,000
Garth Marston*....................................................... $8,625 $34,500
Harry E. Petersen, Jr................................................ $11,500 $46,000
Leo M. Walsh, Jr. ................................................... $11,500 $46,000
$46,000 $184,000
</TABLE>
*Mr. Marston resigned as Director of the Fund on June 10, 1998, and currently
serves as a Director Emeritus. Pursuant to the Director Emeritus Plan adopted by
the Board of Directors, a Director Emeritus receives compensation from the Fund
at a rate equal to one-half of the compensation paid to directors. **
Compensation represents that paid to Mr. Carter as a disinterested director
prior to his change in status as an interested director on November 20, 1998. No
compensation was paid by the Fund or Fund complex subsequent to the change in
status.
Required Vote
Election of the listed nominees for director requires the affirmative
vote of the holders of a majority of the shares of Common Stock of the Fund
present or represented by proxy at the Annual Meeting.
PROPOSAL 2: RATIFICATION OR REJECTION OF
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Fund will consider, and it is expected
that they will recommend, the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund for the fiscal year ending November 30,
1999, at a meeting scheduled to be held on March 9, 1999. The appointment of
accountants is approved annually by the Audit Committee of the Board of
Directors and is subsequently submitted to the stockholders for ratification or
rejection. The Fund has been advised by PricewaterhouseCoopers LLP that at
November 30, 1998, neither that firm nor any of its partners had any direct or
material indirect financial interest in the Fund. A representative of
PricewaterhouseCoopers LLP will be at the meeting to answer questions concerning
the Fund's financial statements and will have an opportunity to make a statement
if he or she chooses to do so.
The Board of Directors of the Fund has determined that it would be in
the best interests of the Fund and its shareholders to appoint
PricewaterhouseCoopers LLP to replace Deloitte & Touche as the accountants of
the Fund. The Board's decision was based upon the breadth and scope of the
accounting and auditing services that PricewaterhouseCoopers LLP would provide
to the Fund.
Required Vote
Ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund requires the affirmative vote of the holders
of a majority of the outstanding shares of Common Stock of the Fund present or
represented by proxy at the Annual Meeting.
ADDITIONAL INFORMATION
Investment Advisor
The Fund has engaged Hyperion Capital Management, Inc., the Advisor, to
provide professional investment management for the Fund pursuant to an Advisory
Agreement dated August 4, 1989. The Advisor is a Delaware corporation which was
organized in February 1989. The Advisor is a registered investment advisor under
the Investment Advisers Act of 1940, as amended. The business address of the
Advisor and its officers and directors is One Liberty Plaza, New York, New York
10006-1404.
The Advisor is a subsidiary of Hyperion Partners L.P., a Delaware
limited partnership ("Hyperion Partners"). The sole general partner of Hyperion
Partners is Hyperion Ventures L.P., a Delaware limited partnership ("Hyperion
Ventures"). Corporations owned principally by Lewis S. Ranieri, Salvatore A.
Ranieri and Scott A. Shay are the general partners of Hyperion Ventures. Lewis
S. Ranieri, a former Vice Chairman of Salomon Brothers Inc ("Salomon Brothers"),
is a Vice Chairman of the Board of the Advisor and director of the Fund. Messrs.
Salvatore Ranieri and Shay are directors of the Advisor, but have no other
positions with either the Advisor or the Fund. Messrs. Salvatore Ranieri and
Shay are principally engaged in the management of the affairs of Hyperion
Ventures and its affiliated entities. Mr. Carter is the Chairman and Chief
Executive Officer of the Advisor and Chairman of the Fund. Since January 1,
1990, Patricia A. Sloan, Secretary of the Fund, has been a special limited
partner of Hyperion Ventures and, since July 1993, she has been a limited
partner of Hyperion Partners. Mr. Lai, the President of the Fund and the
Advisor, may be entitled, in addition to receiving a salary from the Advisor, to
receive a bonus based upon a portion of the Advisor's profits, including any
profit from a sale of the Advisor. Ms. Botta and Mr. Dolan, Vice Presidents of
the Fund, and Mr. Doodian, Treasurer of the Fund, are also employees of the
Advisor. The business address of Hyperion Partners and Hyperion Ventures is 50
Charles Lindbergh Boulevard, Suite 500, Uniondale, New York 11553.
The Advisor provides advisory services to several other registered
investment companies and one offshore fund, all of which invest primarily in
mortgage-backed securities. Its management includes several individuals with
extensive experience in creating, evaluating and investing in Mortgage-Backed
Securities, Derivative Mortgage-Backed Securities and Asset-Backed Securities,
and in using hedging techniques. Lewis S. Ranieri, Vice Chairman of the Advisor
and Director of the Fund, was instrumental in the development of the secondary
mortgage-backed securities market and the creation and development of secondary
markets for conventional mortgage loans, CMOs and other mortgage-related
securities. While at Salomon Brothers, Mr. Ranieri directed that firm's
activities in the mortgage, real estate and government guaranteed areas.
Clifford E. Lai, President and Chief Investment Officer of the Advisor and
President of the Fund, was formerly Managing Director and Chief Investment
Strategist for Fixed Income for First Boston Asset Management Corporation.
Investment Advisory Agreement
On March 10, 1998 the Board of Directors of the Fund, including those
persons identified as interested persons and a majority of the directors who are
not parties to the Advisory Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party (the "Disinterested Directors"),
approved extension of the Advisory Agreement through March 31, 1999. At the time
of the Board's approval of the latest extension of the Advisory Agreement,
Messrs. Lewis Ranieri, Weiss and Ms. Sloan were interested persons of the Fund.
The Advisory Agreement was last submitted to a vote of the Stockholders of the
Fund at the first Annual Meeting of the Stockholders of the Fund held on June 5,
1990. At that meeting, the Stockholders approved the continuance of the Advisory
Agreement. The Advisory Agreement provides that it will continue from year to
year, but only so long as such continuation is specifically approved at least
annually by both (1) the vote of a majority of the Board of Directors or the
vote of a majority of the outstanding voting securities of the Fund (as provided
in the 1940 Act); and, (2) the vote of a majority of the Disinterested Directors
cast in person at a meeting called for the purpose of voting on such approval.
The Advisory Agreement may be terminated at any time without the payment of any
penalty, upon the vote of a majority of the Board of Directors or a majority of
the outstanding voting securities of the Fund or by the Advisor, on 60 days'
written notice by either party to the other. The Agreement will terminate
automatically in the event of its assignment (as such term is defined in the
1940 Act and the rules thereunder). The Board of Directors will consider
continuance of the Advisory Agreement until March 31, 2000, at a meeting
scheduled for March 9, 1999.
Pursuant to the Advisory Agreement, the Fund has retained the Advisor
to manage the investment of the Fund's assets and to provide, with the
assistance of Pacholder Associates, Inc. (the "Sub-Advisor"), such investment
research, advice and supervision, in conformity with the Fund's investment
objective and policies, as may be necessary for the operations of the Fund.
The Advisory Agreement provides, among other things, that the Advisor
will bear all expenses of its employees and overhead incurred in connection with
its duties under the Advisory Agreement, and will pay all salaries of the Fund's
directors and officers who are affiliated persons (as such term is defined in
the 1940 Act) of the Advisor. The Advisory Agreement provides that the Fund
shall pay to the Advisor a monthly fee for its services which is equal to .65%
per annum of the Fund's average weekly net assets, which, for purposes of
determining the Advisor's fee, shall be the average weekly value of the total
assets of the Fund, minus the sum of accrued liabilities (including accrued
expenses) of the Fund and any declared but unpaid dividends on the Common
Shares. Investment advisory fees paid by the Fund to the Advisor during the last
fiscal year of the Fund amounted to $1,642,589, of which $81,952 was paid by the
Advisor to the Sub-Advisor.
Sub-Advisor
Hyperion Capital Management, Inc., the Advisor, has engaged the
Sub-Advisor to provide sub-investment advisory services for investments in
higher yielding, lower rated, or unrated fixed income securities of U.S.
corporations ("High Yield Securities"). The Sub-Advisor, a registered investment
adviser, is an Ohio corporation, organized in December, 1983, and currently
manages in excess of $400 million in corporate high yield and $300 million of
other rated and non-rated debt and equity securities. The business address of
the Sub-Advisor and its officers and directors is 8044 Montgomery Road, Suite
382, Cincinnati, Ohio 45236.
The overall portfolio management strategy
undertaken by the Sub-Advisor on behalf of the Fund
is mutually determined by the Advisor and the
Sub-Advisor. The execution of the management
strategy is conducted under the general supervision
and direction of William J. Morgan. Mr. Morgan, a
founder of the Sub-Advisor, is President of the
Sub-Advisor. Prior to that time, he was an
Investment Analyst of Union Central Life Insurance
Company. Anthony L. Longi, Jr. has been
responsible for the day-to-day management of the
Fund's High Yield Securities portfolio since
November 1994. Mr. Longi is an Executive Vice
President and Fixed-Income Portfolio Manager of the
Sub-Advisor, where he has been employed since
1987. He has had numerous positions within the
firm, including high yield and investment grade
fixed-income analyst, special situations analyst,
trader and research coordinator. Dr. Asher O.
Pacholder, Chairman of the Sub-Advisor, owns more
than 50% of the shares of the Sub-Advisor and Mr.
Morgan owns more than 20% of the shares. Both Dr.
Pacholder and Mr. Morgan are directors of the
Sub-Advisor. No officer, director or employee of
the Sub-Advisor is an officer, director or nominee
for election as a director of the Fund.
Although the Sub-Advisor will make all decisions with respect to the
Fund's investments in High Yield Securities on behalf of the Advisor, the amount
of the Fund's assets allocated to these investments will be determined by the
Advisor.
Sub-Advisory Agreement
On March 10, 1998 the Board of Directors of the Fund, including a
majority of the Disinterested Directors, approved extension of the Sub-Advisory
Agreement through March 31, 1999. No director of the Fund owned any securities
of, or had any other material direct or indirect interest, in the Sub-Advisor or
any person controlling, controlled by or under common control with the
Sub-Advisor on the date of the Disinterested Directors' approval of the
extension of the Sub-Advisory Agreement. The Sub-Advisory Agreement was last
submitted to a vote of the Stockholders of the Fund at the first Annual Meeting
of the Stockholders of the Fund held on June 5, 1990. At that meeting the
Stockholders approved the Sub-Advisory Agreement, which contains the same
provisions with respect to continuation and termination as does the Advisory
Agreement, except that the Sub-Advisory Agreement may not be assigned without
the consent of the other party thereto. The Board of Directors will consider
continuance of the Sub-Advisory Agreement until March 31, 2000 at a meeting
scheduled for March 9, 1999.
The Sub-Advisory Agreement provides, among other things, that the
Sub-Advisor will bear all expenses of its employees and overhead incurred in
connection with its duties under the Sub-Advisory Agreement. The Sub-Advisory
Agreement provides that the Advisor shall pay to the Sub-Advisor a monthly fee
for the Sub-Advisor's services which is equal to .35% per annum of the portion
of the Fund's average weekly net assets that is invested in High Yield
Securities (which shall be equal to the average weekly value of the total assets
invested in High Yield Securities, minus the sum of accrued liabilities
(including accrued expenses) directly related thereto and a pro rata percentage
of any declared but unpaid dividends on the Common Shares and a pro rata
percentage of accrued liabilities related to the Fund in general). The Advisor
has paid and intends to continue to pay the Sub-Advisor's fee out of the fee
that the Advisor will receive from the Fund. Investment advisory fees paid by
the Advisor to the Sub-Advisor during the last fiscal year of the Fund amounted
to $81,952.
Administration Agreement
The Fund has entered into an Administration Agreement with Hyperion
Capital Management, Inc. (the "Administrator"). The Administrator performs
administrative services necessary for the operation of the Fund, including
maintaining certain books and records of the Fund, and preparing reports and
other documents required by federal, state, and other applicable laws and
regulations, and provides the Fund with administrative office facilities. For
these services, the Fund pays a fee monthly at an annual rate of 0.20% of its
average weekly assets. For the twelve month period ended November 30, 1998, the
Administrator earned $505,568 in administration fees. In addition, the
Administrator has entered into Administration Agreements with the other
investment companies listed below, with the following fee structure: a monthly
fee at an annual rate of 0.17% of the first $100 million of the Fund's average
weekly net assets, 0.145% of the next $150 million and 0.12% of any amounts
above $250 million.
Investment Companies Managed by Hyperion Capital
Management, Inc.
In addition to acting as advisor to the Fund, Hyperion Capital
Management, Inc. acts as investment advisor to the following other investment
companies at the indicated annual compensation.
<TABLE>
<S> <C> <C>
Investment Advisory Fee Approximate Net Assets at
November 30, 1998
(in Millions)
Hyperion 2002 Term Trust, Inc. 0.50% of the Trust's average weekly $279,886
net assets
Hyperion 1999 Term Trust, Inc. 0.50% of the Trust's average weekly $453,234
net assets
Hyperion 2005 Investment Grade Opportunity Term 0.65% of the Trust's average weekly $167,340
Trust, Inc. net assets
</TABLE>
Brokerage Commissions
Because it buys its portfolio securities in dealer markets, the Fund
did not pay any brokerage commissions on its securities purchases during its
last fiscal year. The Fund paid an aggregate of $3,825 in futures commissions
during the last fiscal year, all of which were paid to entities that are not
affiliated with the Fund or the Advisor.
The Advisor and the Sub-Advisor have discretion to select brokers and
dealers to execute portfolio transactions initiated by the Advisor and the
Sub-Advisor and to select the markets in which such transactions are to be
executed. The Advisory Agreement and the Sub-Advisory Agreement provide, in
substance, that in executing portfolio transactions and selecting brokers or
dealers, the primary responsibility of the Advisor and the Sub-Advisor is to
seek the best combination of net price and execution for the Fund. It is
expected that securities will ordinarily be purchased in primary markets, and
that in assessing the best net price and execution available to the Fund, the
Advisor and the Sub-Advisor will consider all factors they deem relevant,
including the price, dealer spread, the size, type and difficulty of the
transaction involved, the firm's general execution and operation facilities and
the firm's risk in positioning the securities involved. Transactions in foreign
securities markets may involve the payment of fixed brokerage commissions,
which are generally higher than those in the United States.
In selecting brokers or dealers to execute particular transactions and
in evaluating the best net price and execution available, the Advisor and the
Sub-Advisor are authorized to consider "brokerage and research services" (as
those terms are defined in Section 28(e) of the Securities Exchange Act of
1934). The Advisor and the Sub-Advisor are also authorized to cause the Fund to
pay to a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction. The Advisor and the Sub-Advisor must determine in good faith,
however, that such commission was reasonable in relation to the value of the
brokerage and research services provided, viewed in terms of that particular
transaction or in terms of all the accounts over which the Advisor or the
Sub-Advisor exercise investment discretion. Research services furnished by
brokers through whom the Fund effects securities transactions may be used by the
Advisor and the Sub-Advisor in servicing all of the accounts for which
investment discretion is exercised by the Advisor or the Sub-Advisor, and not
all such services may be used by the Advisor or the Sub-Advisor in connection
with the Fund.
Compliance With Section 16 Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934 requires the
Fund's officers and directors and persons who own more than ten percent of a
registered class of the Fund's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Officers, directors and greater than ten-percent
shareholders are required by SEC regulations to furnish the Fund with copies of
all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by the
Fund and written representations from certain reporting persons that all
applicable filing requirements for such persons had been complied with, the Fund
believes that during the fiscal year ended November 30, 1998, all filing
requirements applicable to the Fund's officers, directors, and greater than
ten-percent beneficial owners were complied with.
OTHER BUSINESS
The Board of Directors of the Fund does not know of any other matter
which may come before the meeting. If any other matter properly comes before the
meeting, it is the intention of the persons named in the proxy to vote the
proxies in accordance with their judgment on that matter.
PROPOSALS TO BE SUBMITTED BY STOCKHOLDERS
All proposals by stockholders of the Fund that are intended to be
presented at the Fund's next Annual Meeting of Stockholders to be held in 2000
must be received by the Fund for inclusion in the Fund's proxy statement and
proxy relating to that meeting no later than September 27, 1999.
EXPENSES OF PROXY SOLICITATION
The cost of preparing, assembling and mailing material in connection
with this solicitation of proxies will be borne by the Fund. In addition to the
use of the mails, proxies may be solicited personally by regular employees of
the Fund, Hyperion Capital Management, Inc., or Corporate Investors
Communications, Inc., paid solicitors for the Fund, or by telephone or
telegraph. The anticipated cost of solicitation by the paid solicitors will be
nominal. The Fund's agreement with Corporate Investor Communications, Inc.
provides that such paid solicitors will perform a broker search and deliver
proxies in return for the payment of their fee plus the expenses associated with
this proxy solicitation. Brokerage houses, banks and other fiduciaries will be
requested to forward proxy solicitation material to their principals to obtain
authorization for the execution of proxies, and they will be reimbursed by the
Fund for out-of-pocket expenses incurred in this connection.
January 27, 1999
THE HYPERION TOTAL RETURN FUND, INC.
PROXY SOLICITED ON BEHALF OF THE DIRECTORS
The undersigned hereby appoints Lewis
S.Ranieri, Clifford E. Lai, and Patricia A.Sloan,
and each of them, attorneys and proxies for the
undersigned, with full power of substitution and
revocation to represent the undersigned and to
vote on behalf of the undersigned all shares of
The Hyperion Total Return Fund, Inc. (the "Fund")
which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Fund to be
held at The Millenium Hilton, 55 Church Street
(next to the World Trade Center), New York, New
York 10007, on Tuesday, April 20, 1999 at
9:45a.m., and at any adjournments thereof. The
undersigned hereby acknowledges receipt of the
Notice of Meeting and accompanying Proxy Statement
and hereby instructs said attorneys and proxies to
vote said shares as indicated hereon. In their
discretion, the proxies are authorized to vote
upon such other business as may properly come
before the Meeting. A majority of the proxies
present and acting at the Meeting in person or by
substitute (or, if only one shall be so present,
then that one) shall have and may exercise all of
the power of authority of said proxies hereunder.
The undersigned hereby revokes any proxy
previously given.
NOTE: Please sign exactly as your name appears on the
Proxy. If joint owners, EITHER may sign this Proxy. When
signing as attorney, executor, administrator, trustee,
guardian or corporate officer, please give full title.
Date , 1999
Signature(s), (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
I PLAN DO NOT PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS ON
April 20, 1999
Please indicate your vote by an "X" in the
appropriate box below. This Proxy, if properly
executed, will be voted in the manner directed by
the stockholder. If no direction is made, this
Proxy will be voted FOR election of the nominees as
Directors in Proposal 1 and FOR Proposal 2. Please
refer to the Proxy Statement for a discussion of
the Proposals.
1. ELECTION OF DIRECTORS: FOR all nominees listed (except
as marked to the contrary below)
WITHHOLD authority to vote for all nominees
Class III:
Lewis S. Ranieri
Leo M. Walsh, Jr.
Patricia A. Sloan
Class I:
Andrew M. Carter
Robert F. Birch
(Instruction: To withhold authority to vote for
any individual nominee(s), write the name(s) of the
nominee(s) on the line below.)
2. Ratification or rejection of the
selection of independent accountants
(a vote "FOR" is a vote for ratification) FOR AGAINST ABSTAIN
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
