<PAGE> 1
[HYPERION CAPITAL MANAGEMENT, INC. LOGO]
This report is not to be used in connection with the
offering of shares of the Fund unless accompanied or
preceded by an effective prospectus.
(C) 1995 Hyperion Capital Management, Inc.
- ---------------------------------
[HYPERION LOGO]
SHORT DURATION
U.S. GOVERNMENT FUNDS
- ---------------------------------
SEMI-ANNUAL REPORT
APRIL 30, 1995
<PAGE> 2
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUNDS
REPORT OF THE INVESTMENT ADVISER
- --------------------------------------------------------------------------------
Dear Shareholder: June 12, 1995
We are pleased to present this Semi-Annual Report for the Hyperion Short
Duration U.S. Government Funds (the "Funds") for the six months ended April 30,
1995 and to share our outlook for the balance of the Funds' fiscal year. As you
know, the Fund's investment objectives are to provide a high level of current
income relative to other high-quality short-term investments, while maintaining
a relatively stable net asset value. In pursuing these objectives, the Funds
invest primarily in short duration mortgage-backed securities issued or
guaranteed by the U.S. Government or one of its agencies.
MARKET ENVIRONMENT
The fixed income market staged a remarkable recovery during the first quarter of
1995 after turning in a disappointing performance in 1994. Interest rates
sharply reversed direction, declining across the yield curve, as the yield on 2-
and 10-Year Treasuries fell by 91 and 64 basis points, respectively.
After raising the Federal Funds rate by 300 basis points since February 1994,
Federal Reserve Chairman Alan Greenspan hinted that the tightening phase of
monetary policy may be nearing an end. Recent economic data suggest that perhaps
a non-inflationary, moderate growth scenario (commonly referred to as the "soft
landing" scenario) may come to pass as a result of the Federal Reserve Board's
monetary policy.
After recording strong GDP growth of 5.1% during the fourth quarter of 1994, the
economy slowed to 2.7% in the first quarter of 1995. A slowdown in retail sales,
housing completions, durable goods orders and unemployment figures all suggested
GDP growth of about 1.0% for the second quarter, which is slightly below the
growth target of the Federal Reserve.
Yields across the yield curve fell in reaction to the soft landing consensus.
The yield on the 2-Year Treasury, which had traded as wide as +2.25% over the
Federal Funds rate in 1994, currently yields approximately 50 basis points below
the Federal Funds rate.
PORTFOLIO STRATEGY AND PERFORMANCE
Your Funds performed relatively well during this period, as the combination of
higher share price and reinvested income provided positive total returns. These
results strengthened the Funds' fiscal year-to-date performance. For the six
month period ended April 30, 1995, the Funds' results substantially exceeded the
Lipper Analytical Services average of 0.59%* for adjustable rate mortgage funds,
returning 2.94%* for Fund I and 2.77%* for Fund II.
The Funds' investments remained conservative with respect to interest rates
during much of this period. Our aim was to keep the Funds' duration at
approximately 1 year. Towards the end of March, as the prospect of further rate
increases by the Federal Reserve seemed to diminish, we increased the target
duration from 1 to 1.25 years.
The major change in our strategy during this six month period was to shift a
portion of the Funds' collateralized mortgage obligation ("CMOs") holdings to
adjustable rate mortgages ("ARMs") and Agency debentures. Year to date 1995,
these sectors represent the best value for short duration investment strategies
as many competing sectors, such as CMOs, five and seven year balloon mortgage
backed securities, and asset-backed securities
- ---------------
* Figures assume cumulative reinvestment of all dividends and capital gains
distributions at net asset value on the payable date.
1
<PAGE> 3
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUNDS
REPORT OF THE INVESTMENT ADVISER (Continued)
- --------------------------------------------------------------------------------
have been trading at historically rich levels relative to other securities of
similar risk profiles. Furthermore, since a less active Federal Reserve Board
should result in less volatility for short term interest rates, ARMs represent
an attractive short duration investment sector at this time.
Currently, sector diversification in the portfolio is broad, with holdings in
Treasuries, well structured CMOs, ARMs and asset backed securities in the
portfolio. Looking ahead, we plan to continue to conservatively over- and
under-weight different fixed income sectors of the market as relative value
opportunities become available.
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS AS OF APRIL 30, 1995*
<TABLE>
<CAPTION>
CATEGORIES PERCENTAGES
<S> <C>
U.S. GOVERNMENT AGENCY
ADJUSTABLE RATE MORTGAGES 34.4
U.S. GOVERNMENT AGENCY
COLLATERALIZED MORTGAGE
OBLIGATIONS 16.5
U.S. TREASURY AND AGENCY
OBLIGATIONS 27.0
ASSET-BACKED OBLIGATIONS 15.2
COLLATERALIZED MORTGAGE
OBLIGATIONS 5.1
REPURCHASE AGREEMENTS 1.8
<FN>
* As a percentage of total investments.
</TABLE>
INVESTMENT OUTLOOK
The fixed income markets have experienced significant volatility over the past
several years, as evidenced by a strong bull market in 1993, sharply rising
interest rates in 1994, and a significant decline in yields in 1995. This market
volatility has been a product of changing domestic and worldwide conditions.
Though many of these trends have come full circle, we believe that interest
rates will continue to be volatile. In such an environment, we continue to favor
the most stable mortgage backed securities for the portfolio, such as CMO
planned amortization class ("PAC") bonds and slower prepaying conventional
agency backed ARMs and GNMA ARMs.
2
<PAGE> 4
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUNDS
REPORT OF THE INVESTMENT ADVISER (Concluded)
- --------------------------------------------------------------------------------
In the asset-backed sector, we have invested in high quality securities backed
by retail auto loans and home equity loans.
These securities offer investment diversification and positive return attributes
in the flatter yield curve environment we are currently experiencing. The
Treasury securities in the portfolio provide positive yield spreads over money
market instruments and a high degree of liquidity. As a result, the portfolio
should not be significantly exposed to the anticipated increase in mortgage
prepayments and should perform accordingly as interest rates change.
CONCLUSION
As always, we remain committed to serving the needs of our shareholders by
meeting the Funds' objectives. If you have any questions, please call us at
800-HYPERION. We look forward to hearing from you.
Sincerely,
/s/ KENNETH C. WEISS
- ---------------------
KENNETH C. WEISS
Trustee and Senior Vice President,
Hyperion Short Duration U.S. Government Funds
President and Chief Executive Officer,
Hyperion Capital Management, Inc.
/s/ CLIFFORD E. LAI
- ---------------------
CLIFFORD E. LAI
President and Chief Executive Officer,
Hyperion Short Duration U.S. Government Funds
Managing Director and Chief Investment Officer,
Hyperion Capital Management, Inc.
/s/ L. DAVID RICCI
- ---------------------
L. DAVID RICCI
Vice President,
Hyperion Short Duration U.S. Government Funds
Vice President and Portfolio Manager,
Hyperion Capital Management, Inc.
3
<PAGE> 5
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUNDS
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (unaudited)
<TABLE>
<CAPTION>
FUND FUND II
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
ASSETS:
Investment in Short Duration U.S. Government Portfolio
("Portfolio"), at value (Note 1)*.................... $ 10,379,716 $ 28,569,571
Receivable for shares sold................................ 3,070 --
Deferred organization expenses (Note 1)................... 29,359 29,715
Prepaid expenses.......................................... 10,145 10,075
------------ ------------
Total assets......................................... 10,422,290 28,609,361
------------ ------------
LIABILITIES:
Dividends payable to shareholders......................... 53,170 139,124
Payable for shares repurchased............................ 68,062 530,546
Accrued expenses.......................................... 10,799 59,848
------------ ------------
Total liabilities.................................... 132,031 729,518
------------ ------------
NET ASSETS................................................ $ 10,290,259 $ 27,879,843
============ ============
COMPOSITION OF NET ASSETS:
Paid-in capital........................................... $ 28,267,441 $ 41,767,586
Undistributed net investment income....................... 278,287 370,931
Accumulated net realized loss from Portfolio.............. (18,229,964) (14,232,463)
Net unrealized depreciation from Portfolio................ (25,505) (26,211)
------------ ------------
NET ASSETS................................................ $ 10,290,259 $ 27,879,843
============ ============
SHARES OUTSTANDING........................................ 1,172,657 3,065,253
------------ ------------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE............ $8.78 $9.10
----- -----
MAXIMUM OFFERING PRICE PER SHARE.......................... $9.05** $9.10
----- -----
- ---------------
<FN>
* Each Fund invests all of its investable assets in the Portfolio, which has
the same investment objective as the Funds. The financial statements of the
Portfolio, including the Portfolio of Investments, are included in the back
of the report, immediately following the financial statements of the Funds.
(Note 1)
** Net asset value plus sales charge of 3.00% of offering price.
See notes to financial statements
</TABLE>
4
<PAGE> 6
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUNDS
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1995 (unaudited)
<TABLE>
<CAPTION>
FUND FUND II
<S> <C> <C>
- -----------------------------------------------------------------------------------------------
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO (Note 1)
Allocated interest income...................................... $ 512,663 $1,201,959
Allocated portfolio expenses................................... (45,259) (103,521)
--------- ----------
Net investment income allocated from portfolio................. 467,404 1,098,438
--------- ----------
EXPENSES (Note 1):
Distribution fees (Note 2)................................... 19,219 174,897
Transfer agent fees.......................................... 15,250 34,773
Trustees' fees and expenses (Note 2)......................... 8,768 18,995
Printing and postage......................................... 9,404 14,314
Audit fees................................................... 4,025 9,075
Registration fees............................................ 7,145 10,077
Accounting fees.............................................. 5,050 7,050
Insurance.................................................... 1,034 2,938
Amortization of organization expense (Note 1)................ 14,763 14,940
Miscellaneous expenses....................................... -- 48
--------- ----------
Total expenses............................................ 84,658 287,107
--------- ----------
Net investment income.......................................... 382,746 811,331
--------- ----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM PORTFOLIO:
Net realized losses.......................................... (107,787) (580,156)
Net change in unrealized appreciation........................ 89,887 639,441
--------- ----------
Net realized and unrealized gains (losses)................... (17,900) 59,285
--------- ----------
Net increase in net assets resulting from operations......... $ 364,846 $ 870,616
========= ==========
- ---------------
<FN>
See notes to financial statements
</TABLE>
5
<PAGE> 7
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR
APRIL 30, ENDED
1995 OCTOBER 31,
(UNAUDITED) 1994
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income................................ $ 382,746 $ 1,431,079
Net realized losses from Portfolio................... (107,787) (37,206)
Net change in unrealized appreciation (depreciation)
from Portfolio.................................... 89,887 (895,174)
------------ ------------
Net increase in net assets resulting from
operations........................................ 364,846 498,699
------------ ------------
DIVIDENDS TO SHAREHOLDERS:
Net investment income................................ (422,107) (1,611,577)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares........................ 41,499 200,098
Reinvestment of dividends from net investment
income............................................ 241,160 729,980
Cost of shares redeemed.............................. (13,793,390) (41,134,560)
------------ ------------
Net decrease in net assets resulting from capital
share transactions................................ (13,510,731) (40,204,482)
------------ ------------
Total decrease in net assets.................... (13,567,992) (41,317,360)
NET ASSETS:
Beginning of period.................................... 23,858,251 65,175,611
------------ ------------
End of period (including undistributed net investment
income of $278,287 and $317,648, respectively)....... $ 10,290,259 $ 23,858,251
============ ============
OTHER INFORMATION:
Share transactions (par value $0.00001 per share):
Sold................................................. 4,744 21,896
Issued to shareholders in connection with
reinvestment of dividends from net investment
income............................................ 27,573 81,827
Redeemed............................................. (1,581,166) (4,581,294)
------------ ------------
Net decrease in shares outstanding................... (1,548,849) (4,477,571)
============ ============
- ---------------
<FN>
See notes to financial statements
</TABLE>
6
<PAGE> 8
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUND II
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR
APRIL 30, ENDED
1995 OCTOBER 31,
(UNAUDITED) 1994
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income................................ $ 811,331 $ 2,148,791
Net realized losses from Portfolio................... (580,156) (468,240)
Net change in unrealized appreciation (depreciation)
from Portfolio.................................... 639,441 (1,075,539)
------------ ------------
Net increase in net assets resulting from
operations........................................ 870,616 605,012
------------ ------------
DIVIDENDS TO SHAREHOLDERS:
Net Investment Income................................ (843,271) (2,384,318)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares........................ 11,785 101,654
Reinvestment of dividends from net investment
income............................................ 483,093 1,347,423
Cost of shares redeemed.............................. (17,303,624) (50,423,272)
------------ ------------
Net decrease in net assets resulting from capital
share transactions................................ (16,808,746) (48,974,195)
------------ ------------
Total decrease in net assets.................... (16,781,401) (50,753,501)
NET ASSETS:
Beginning of period.................................... 44,661,244 95,414,745
------------ ------------
End of period (including undistributed net investment
income of $370,931 and $402,871, respectively)....... $ 27,879,843 $ 44,661,244
============ ============
OTHER INFORMATION:
Share transactions (par value $0.00001 per share):
Sold................................................. 1,296 10,912
Issued to shareholders in connection with
reinvestment of dividends from net investment
income............................................ 53,363 146,283
Redeemed............................................. (1,911,877) (5,447,968)
------------ ------------
Net decrease in shares outstanding................... (1,857,218) (5,290,773)
============ ============
- ---------------
<FN>
See notes to financial statements
</TABLE>
7
<PAGE> 9
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD
SIX APRIL
MONTHS FOR THE FOR THE FOR THE 12,
ENDED YEAR YEAR YEAR 1991*
APRIL ENDED ENDED ENDED THROUGH
30, OCTOBER OCTOBER OCTOBER OCTOBER
1995 31, 31, 31, 31,
(UNAUDITED) 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 8.77 $ 9.05 $ 9.41 $ 9.78 $ 9.70
------- ------- ------- -------- --------
Income from investment
operations:
Net investment income.......... 0.22+ 0.35 0.55 0.66 0.43
Net realized and unrealized
gain (loss) on investment... 0.03++ (0.23) (0.44) (0.36) 0.08
------- ------- ------- -------- --------
Total from Investment
operations............. 0.25 0.12 0.11 0.30 0.51
------- ------- ------- -------- --------
Less distributions:
Dividends to shareholders from
net investment income....... (0.24) (0.40) (0.47) (0.67) (0.43)
------- ------- ------- -------- --------
Net asset value, end of period... $ 8.78 $ 8.77 $ 9.05 $ 9.41 $ 9.78
======= ======= ======= ======== ========
TOTAL INVESTMENT RETURN**........ 2.94% 1.39% 1.12% 3.11% 10.25%
Ratios to Average Net
Assets/Supplemental Data:
Net assets, end of period
(000's)........................ $10,290 $23,858 $65,176 $254,558 $149,987
Total operating expenses(b)...... 1.69%(a) 1.60% 0.99% 0.49% 1.00%(a)
Net investment income............ 4.98%(a) 4.03% 5.67% 6.71% 8.62%(a)
- ---------------
<FN>
* Commencement of operations. Investment activity began on April 25, 1991.
** Does not include sales charge. Please refer to the Fund's Prospectus for a
full description of its sales charges and expenses.
(a) Annualized.
(b) Includes the Fund's share of Short Duration U.S. Government Portfolio's
expenses. In addition, during the year ended October 31, 1992, the Adviser
reimbursed the Portfolio and the Fund for certain expenses under an expense
reimbursement agreement. If this agreement had not been in place, the ratio
of expenses to average net assets for the year ended October 31, 1992, would
have been $0.80%.
+ Net investment income per share has been calculated based on average monthly
shares outstanding.
++ The amount shown for a share outstanding throughout the period does not
agree with the aggregate net gains on investments for the period because of
timing of sales and repurchases of the Fund's shares in relation to
fluctuating market values of the investments of the Fund.
See notes to financial statements
</TABLE>
8
<PAGE> 10
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUND II
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD
SIX APRIL
MONTHS FOR THE FOR THE FOR THE 12,
ENDED YEAR YEAR YEAR 1991*
APRIL ENDED ENDED ENDED THROUGH
30, OCTOBER OCTOBER OCTOBER OCTOBER
1995 31, 31, 31, 31,
(UNAUDITED) 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.......................... $ 9.07 $ 9.34 $ 9.70 $ 10.08 $ 10.00
------- ------- ------- -------- -------
Income from investment operations:
Net investment income........... 0.21+ 0.30 0.44 0.59 0.39
Net realized and unrealized gain
(loss) on investment......... 0.04++ (0.23) (0.41) (0.38) 0.08
------- ------- ------- -------- -------
Total from investment
operations.............. 0.25 0.07 0.03 0.21 0.47
------- ------- ------- -------- -------
Less distributions:
Dividends to shareholders from
net investment income........ (0.22) (0.34) (0.39) (0.59) (0.39)
------- ------- ------- -------- -------
Net Asset Value, end of period.... $ 9.10 $ 9.07 $ 9.34 $ 9.70 $ 10.08
======= ======= ======= ======== =======
TOTAL INVESTMENT RETURN**......... 2.77% 0.75% 0.25% 2.10% 9.14%(a)
Ratios to Average Net
Assets/Supplemental Data:
Net assets, end of period
(000's)......................... $27,880 $44,661 $95,415 $200,193 $84,365
Total operating expenses(b)....... 2.23%(a) 2.16% 1.94% 1.59% 2.11%(a)
Net investment income............. 4.64%(a) 3.29% 4.56% 5.65% 7.37%(a)
- ---------------
<FN>
* Commencement of operations. Investment activity began on April 25, 1991.
** Does not include sales charge. Please refer to the Fund's Prospectus for a
full description of its sales charges and expenses.
(a) Annualized.
(b) Includes the Fund's share of Short Duration U.S. Government Portfolio's
expenses. In addition, during the year ended October 31, 1992, the Adviser
reimbursed the Portfolio and the Fund for certain expenses under an expense
reimbursement agreement. If this agreement had not been in place, the ratio
of expenses to average net assets for the year ended October 31, 1992, would
have been $1.89%.
+ Net investment income per share has been calculated based on average monthly
shares outstanding.
++ The amount shown for a share outstanding throughout the period does not
agree with the aggregate net gains on investments for the period because of
timing of sales and repurchases of the Fund's shares in relation to
fluctuating market values of the investments of the Fund.
See notes to financial statements
</TABLE>
9
<PAGE> 11
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUND AND
HYPERION SHORT DURATION U.S. GOVERNMENT FUND II
NOTES TO FINANCIAL STATEMENTS
April 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES.
Hyperion Short Duration U.S. Government Fund (the "Fund") and Hyperion Short
Duration U.S. Government Fund II ("Fund II") (collectively, "Funds") are
separate series of Hyperion Government Mortgage Trust and Hyperion Government
Mortgage Trust II ("Trusts"), respectively, each of which is a Massachusetts
business trust. The Trusts are registered under the Investment Company Act of
1940, as amended, as open-end, diversified management investment companies. The
Declarations of Trust permit the respective Trustees to create an unlimited
number of series within each Trust, each of which is a separate class of shares.
At April 30, 1995, there was one series in each Trust.
Each Fund invests all of its investable assets in the Short Duration U.S.
Government Portfolio (the "Portfolio"), an open-end, diversified management
investment company having the same investment objective as each Fund. The value
of each Fund's investment in the Portfolio reflects that Fund's proportionate
interest in the net assets of the Portfolio (26.7% and 73.3%, at April 30, 1995,
for the Fund and Fund II, respectively). The performance of the Funds is
directly affected by the performance of the Portfolio. The financial statements
of the Portfolio, including the portfolio of investments, are included elsewhere
in this report and should be read in conjunction with the Funds' financial
statements.
The following is a summary of the significant accounting policies of the
Funds:
A. Investment Valuation. Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. Investment Income and Dividends to Shareholders. Each Fund earns income,
net of Portfolio expenses, daily on its investment in the Portfolio. Dividends
to shareholders are declared daily and paid monthly from net investment income.
Distributions to shareholders of net realized capital gains, if any, will be
made annually.
C. Federal Taxes. Each series of each Trust is treated as a separate
entity for federal income tax purposes. Each Fund's policy is to comply with the
provisions of the Internal Revenue Code of 1986, as amended, applicable to
regulated investment companies and to distribute substantially all of its
taxable income, including net realized gains, if any, within the prescribed time
periods. Accordingly, no provisions for federal income or excise tax are
necessary. As of October 31, 1994, the Hyperion Short Duration U.S. Government
Fund had available for federal income tax purposes unused capital loss
carryovers of approximately $139,000, $12,134,000 and $5,697,000 which will
expire in 1999, 2000 and 2001, respectively. As of October 31, 1994, the
Hyperion Short Duration U.S. Government Fund II had available for federal income
tax purposes unused capital loss carryovers of approximately $60,000,
$6,733,000, $6,344,000 and $171,000 which will expire in 1999, 2000, 2001, and
2002, respectively.
D. Deferred Organization Expenses. Organizational costs are being
amortized on a straight-line basis over a five-year period. The amount paid by a
Fund on any redemption of that Fund's shares representing initial seed capital
investments ("initial shares") will be reduced by the pro rata portion of any
unamortized organization expenses which the number of the initial shares
redeemed bears to the total number of initial shares outstanding immediately
prior to such redemption.
E. Other. All net investment income of the Portfolio is allocated pro rata
among the Funds and any other investors in the Portfolio.
2. ADMINISTRATION, DISTRIBUTION AND TRUSTEES' FEES.
A. Administration. The Trusts retain Signature Broker-Dealer Services,
Inc. ("Signature") to serve as
10
<PAGE> 12
- --------------------------------------------------------------------------------
HYPERION SHORT DURATION U.S. GOVERNMENT FUND AND
HYPERION SHORT DURATION U.S. GOVERNMENT FUND II
NOTES TO FINANCIAL STATEMENTS (Concluded)
April 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
Administrator and Distributor. Signature provides administrative services
necessary for the operations of the Funds, furnishes office space and facilities
required for conducting the business of the Funds and pays the compensation of
the Funds' officers affiliated with Signature. The Portfolio has entered into a
similar agreement with Signature. For its services under an Administrative
Services Agreement, Signature receives no fees from the Funds.
B. Distribution. Signature acts as agent of the Trusts and principal
underwriter of shares of each Fund pursuant to a Distribution Agreement with
each Trust. For its services under the Distribution Agreements, Signature
receives from each Fund a fee, accrued daily and paid monthly, at an annual rate
equal to 0.25% and 1.00% of the Fund and Fund II's average daily net assets,
respectively. For the six months ended April 30, 1995, the Funds accrued fees of
$19,219 and $174,897 for the Fund and Fund II, respectively.
C. Trustees' Fees. The fees and expenses of the Trustees for the six
months ended April 30, 1995 amounted to $8,768 and $18,995 for the Fund and Fund
II, respectively. Trustees affiliated with Hyperion Capital Management, Inc.
("Hyperion"), the Portfolio's adviser, receive no fees for their services.
3. INVESTMENT TRANSACTIONS.
Additions and reductions in each Fund's investment in the Portfolio amounted
to $643,949 and $1,853,185 and $14,545,279 and $18,060,851 for the Fund and Fund
II, respectively.
11
<PAGE> 13
- --------------------------------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS
April 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
CURRENT AMOUNT
COUPON MATURITY (000'S) VALUE
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--116.0%
U.S. GOVERNMENT AGENCY ADJUSTABLE RATE MORTGAGES--51.2%
Federal Home Loan Mortgage Corporation TBA..... 6.500% 05/22/95 $5,000 $ 5,126,500
------------
Federal National Mortgage Association--
Pool#57732................................... 5.839 12/01/17 2,802 2,814,000
TBA.......................................... 6.500 06/22/95 5,000 5,131,500
Pool#132675.................................. 7.585 12/01/20 1,174 1,221,222
Pool#70156................................... 7.640 09/01/27 520 541,930
------------
9,708,652
------------
Government National Mortgage Association TBA... 7.500 06/22/95 5,000 5,111,000
------------
TOTAL U.S. GOVERNMENT AGENCY ADJUSTABLE RATE MORTGAGES
(Cost--$19,960,296)............................................................ 19,946,152
------------
U.S. GOVERNMENT AGENCY COLLATERALIZED MORTGAGE OBLIGATION (REMICS)--24.6%
Federal Home Loan Mortgage Corporation
Series 1684, Class C
(Cost--$9,515,625)........................... 5.150 11/15/12 10,000 9,564,100
------------
U.S. TREASURY & AGENCY OBLIGATIONS--40.2%
Federal Home Loan Mortgage
Corporation Debenture........................ 8.420 01/12/98 5,000 5,056,500
------------
U.S. Treasury Notes............................ 6.875 02/28/97 1,500 1,507,200
U.S. Treasury Notes............................ 7.125 02/29/00 4,000 4,037,600
U.S. Treasury Notes............................ 7.500 01/31/97 5,000 5,075,000
------------
10,619,800
------------
TOTAL U.S. TREASURY & AGENCY OBLIGATIONS
(Cost--$15,614,670)............................................................ 15,676,300
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost--$45,090,591)............................................................ 45,186,552
------------
- -------------------------------------------------------------------------------------------------
ASSET-BACKED OBLIGATIONS--22.6%
Premier Auto Trust
Series 1993-3, Class A3...................... 4.900 12/15/98 4,000 3,916,215
Ryan Mortgage Acceptance Corporation IV
Series 3, Class F............................ 11.200 09/01/15 1,958 2,039,036
UCFC Home Equity Loan
Series 1993-D1, Class A1..................... 5.450 07/10/13 2,997 2,835,678
------------
TOTAL ASSET-BACKED OBLIGATIONS
(Cost--$9,017,937)............................................................. 8,790,929
------------
- -------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--7.6%
The Money Store Home Equity Trust
Series 1994-B, Class A1
(Cost--$2,873,623)........................ 6.375 03/15/07 3,012 2,985,766
------------
- -------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 14
- --------------------------------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
PORTFOLIO OF INVESTMENTS (Concluded)
April 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000'S) VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--2.7%
Dated April 28, 1995, State Street Bank and Trust Co., 5.75%,
due 5/1/95, proceeds: $1,047,502, collateralized by $1,050,000
U.S. Treasury Notes, 5.875%, due 5/31/96 value: $1,069,672
(Cost--$1,047,000)............................................... $1,047 $ 1,047,000
------ --------------
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS--148.9%
(Cost--$58,029,151)......................................................... 58,010,247
RECEIVABLE FOR VARIATION MARGIN ON FUTURES (a)................................ 13,425
LIABILITIES IN EXCESS OF OTHER ASSETS--(48.9%)................................ (19,074,385)
--------------
NET ASSETS--100%.............................................................. $ 38,949,287
============
- --------------------------------------------------------------------------------
<FN>
TBA To Be Announced. TBA securities are purchased on a forward commitment
basis with an approximate principal amount and no maturity date. The
actual principal amount, interest rate and maturity date will be
determined upon settlement.
REMIC Real Estate Mortgage Investment Conduit
(a) Open future contracts as of April 30, 1995 are as follows (Note 1):
</TABLE>
<TABLE>
<CAPTION>
VALUE AT UNREALIZED
PAR VALUE OR EXPIRATION VALUE AT APRIL 30, APPRECIATION
NOTIONAL AMOUNT TYPE DATE TRADE DATE 1995 (DEPRECIATION)
---------------- ------------------------- -------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Long:
$ 20,000,000 2-Yr. U.S. Treasury Note June 1995 $ 20,328,125 $ 20,450,000 $ 121,875
83,000,000 Eurodollar Future June 1995 19,371,700 19,444,825 73,125
100,000,000 Eurodollar Future September 1995 23,281,500 23,387,500 106,000
100,000,000 Eurodollar Future December 1995 23,211,350 23,330,000 118,650
82,000,000 Eurodollar Future March 1996 19,022,900 19,130,600 107,700
------------ ------------ ---------
$105,215,575 $105,742,925 $ 527,350
============= ============= ==========
Short:
$ 20,000,000 2-Yr. U.S. Treasury Note June 1995 $ 20,198,438 $ 20,450,000 $(251,562)
800,000 10-Yr. U.S. Treasury Note June 1995 828,500 842,500 (14,000)
130,000,000 Eurodollar Future June 1995 30,420,825 30,455,750 (34,925)
124,000,000 Eurodollar Future September 1995 28,940,425 29,000,500 (60,075)
124,000,000 Eurodollar Future December 1995 28,862,275 28,929,200 (66,925)
105,000,000 Eurodollar Future March 1996 24,417,300 24,496,500 (79,200)
23,000,000 Eurodollar Future June 1996 5,335,850 5,358,425 (22,575)
23,000,000 Eurodollar Future September 1996 5,335,425 5,352,675 (17,250)
26,000,000 Eurodollar Future December 1996 6,029,400 6,043,050 (13,650)
------------ ------------ ---------
$150,368,438 $150,928,600 $(560,162)
============= ============= ==========
- ---------------
<FN>
See notes to financial statements
</TABLE>
13
<PAGE> 15
- -------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (unaudited)
- -------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investment, at value (cost
$58,029,151)(Note 1)............... $58,010,247
Cash................................. 965
Interest receivable.................. 471,776
Deferred organization expenses (Note
1)................................. 5,418
Prepaid expenses..................... 8,762
Receivable for variation margin on
futures (Note 1)................... 13,425
-----------
Total assets..................... 58,510,593
-----------
LIABILITIES:
Payable for investments purchased.... 15,367,604
Reverse repurchase agreements,
including accrued interest of
$3,417 (Note 1).................... 4,138,417
Fees payable to Adviser (Note 2)..... 11,457
Fees payable to Administrator (Note
2)................................. 1,309
Fees payable to Trustees (Note 2).... 9,375
Accrued expenses..................... 33,144
-----------
Total liabilities................ 19,561,306
-----------
NET ASSETS APPLICABLE TO INVESTORS'
BENEFICIAL INTERESTS............... $38,949,287
============
COMPOSITION OF NET ASSETS:
Paid-in capital...................... $39,001,003
Net unrealized depreciation on
investments........................ (18,904)
Net unrealized depreciation on
futures............................ (32,812)
-----------
Net assets....................... $38,949,287
============
</TABLE>
- -------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months ended April 30, 1995 (unaudited)
- -------------------------------------------------------
<TABLE>
<S> <C>
INTEREST INCOME (Note 1)................ $2,442,000
----------
EXPENSES:
Investment advisory fees (Note 2)....... $ 89,781
Administration fees (Note 2)............ 10,261
Custody fees and expenses............... 24,436
Audit fees.............................. 10,375
Trustees' fees and expenses (Note 2).... 9,157
Insurance............................... 2,046
Amortization of organization expenses
(Note 1).............................. 2,724
----------
Total operating expenses............ 148,780
Interest expense (Note 1)......... 727,378
----------
Total Expenses.................... 876,158
----------
NET INVESTMENT INCOME................... 1,565,842
----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS AND FUTURES TRANSACTIONS
Net realized losses on:
Investment transactions............... (362,699)
Futures transactions.................. (325,244)
----------
(687,943)
----------
Net change in unrealized appreciation
(depreciation) on:
Investments........................... 1,264,663
Futures transactions.................. (535,335)
----------
729,328
----------
Net Realized and Unrealized Gain on
Investments and Futures
Transactions.......................... 41,385
----------
Net Increase in Net Assets Resulting
from Operations....................... $1,607,227
===========
</TABLE>
- ---------------
See notes to financial statements
14
<PAGE> 16
- -------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED FOR THE YEAR
APRIL 30, ENDED
1995 OCTOBER 31,
(UNAUDITED) 1994
------------ -------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS:
<S> <C> <C>
Net investment
income............. $ 1,565,842 $ 4,946,706
Net realized loss on
investments and
futures
transactions....... (687,943) (505,446)
Net change in
unrealized
appreciation
(depreciation) on
investments and
futures
transactions....... 729,328 (1,970,711)
------------ -------------
Net increase in net
assets
from operations.... 1,607,227 2,470,549
------------ -------------
<CAPTION>
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
<S> <C> <C>
Additions............ 53,184 298,821
Reductions........... (32,349,409) (100,257,824)
------------ -------------
Net decrease in net
assets resulting from
transactions in
investors' beneficial
interest............. (32,296,225) (99,959,003)
------------ -------------
Total decrease in
net assets....... (30,688,998) (97,488,454)
NET ASSETS:
Beginning of
period............. 69,638,285 167,126,739
------------ -------------
End of period........ $ 38,949,287 $ 69,638,285
============ ==============
</TABLE>
- -------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
STATEMENT OF CASH FLOWS
For the Six Months ended April 30, 1995 (unaudited)
- -------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
Cash flows provided from operating
activities:
Interest............................ $ 2,609,180
Operating expenses paid............. (176,539)
Interest paid....................... (743,316)
Increase in short-term
investments....................... (258,000)
Decrease from futures
transactions...................... (872,442)
Purchase of portfolio investments... (120,618,073)
Proceeds from disposition of
portfolio investments............. 179,591,182
-------------
Net cash provided from operating
activities........................ 59,531,992
-------------
Cash Flows used for Financing
Activities:
Net cash provided from additions to
investors' interests.............. 53,184
Net cash used for reductions in
investors' interests.............. (32,349,409)
Net cash used for reverse repurchase
agreements........................ (27,235,000)
-------------
Net cash used for financing
activities........................ (59,531,225)
-------------
Net increase in cash.................. 767
Cash at beginning of period........... 198
-------------
Cash at end of period................. $ 965
==============
RECONCILIATION OF NET INCREASE IN NET
ASSETS TO NET CASH PROVIDED FROM
OPERATING ACTIVITIES:
Net increase in net assets resulting
from operations..................... $ 1,607,227
-------------
Amortization of organization
expenses.......................... 2,724
Decrease in investments............. 43,642,268
Increase in payable for investments
purchased......................... 15,367,604
Change in unrealized
appreciation--net................. (1,264,663)
Increase variation margin
receivable........................ (11,863)
Increase in other assets............ (8,762)
Decrease in interest receivable..... 235,116
Decrease in fees payable............ (1,516)
Decrease in other expenses
payable........................... (20,205)
Decrease in interest payable........ (15,938)
-------------
Total Adjustments................... 57,924,765
-------------
Net cash provided from operating
activities.......................... $ 59,531,992
==============
- ---------------
<FN>
See notes to financial statements
</TABLE>
15
<PAGE> 17
- --------------------------------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
April 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES.
Short Duration U.S. Government Portfolio (the "Portfolio") is registered
under the Investment Company Act of 1940, as amended, (the "Act") as a no-load,
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York on February 4, 1991. The
Declaration of Trust permits the Trustees to issue an unlimited number of
beneficial interests in the Portfolio. The following is a summary of the
significant accounting policies of the Portfolio:
A. Valuation of Investments. Where market quotations are readily
available, portfolio securities are valued based upon the current bid price. The
Portfolio values Mortgage-Backed Securities 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 Trustees of the
Portfolio, 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.
B. Interest Income. Interest income is determined on the basis of interest
accrued and original issue discount earned, adjusted for amortization of premium
or accretion of discount, and amortization of market premium when required or
elected for federal income tax purposes.
C. Repurchase Agreements. The Portfolio may invest in repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Portfolio from a third party with the commitment that they will be
repurchased by the seller at a fixed price on an agreed upon date. The Portfolio
may enter into repurchase agreements with banks or lenders meeting the
creditworthiness standards established by the Portfolio's Board of Trustees. The
resale price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or date of maturity of the
purchased security.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, the Portfolio will seek to dispose of such
securities, which action could involve costs or delays. To minimize this risk,
the securities collateralizing the repurchase agreement will be held by the
custodian at all times in an amount at least equal to the repurchase price,
including accrued interest. The collateral is marked to market daily.
D. Borrowings: Reverse Repurchase Agreements and Dollar Roll
Agreements. The Portfolio may enter into reverse repurchase agreements and
dollar roll agreements with the same parties with whom it may enter into
repurchase agreements. Under a reverse repurchase agreement or a dollar roll
agreement, the Portfolio sells securities and agrees to repurchase them, or
substantially similar securities in the case of a dollar roll agreement, at a
mutually agreed upon date and price. Under the Act, reverse repurchase
agreements and dollar roll agreements will be regarded as a form of borrowing by
the Portfolio unless, at the time it enters into a reverse repurchase agreement
or a dollar roll agreement, it establishes and maintains a segregated account
with its custodian containing securities from its portfolio having a value not
less than the repurchase price (including accrued interest). The Portfolio has
established and maintained such an
16
<PAGE> 18
- --------------------------------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
account for each of its reverse repurchase agreements and dollar roll
agreements. Reverse repurchase agreements and dollar roll agreements involve the
risk that the market value of the securities retained in lieu of sale by the
Portfolio may decline below the price of the securities the Portfolio has sold
but is obligated to repurchase. In the event the buyer of securities under a
reverse repurchase agreement or a dollar roll agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce the Portfolio's obligation to
repurchase the securities, and the Portfolio's use of the proceeds of the
reverse repurchase agreement or the dollar roll agreement may effectively be
restricted pending such decision.
At April 30, 1995, the Portfolio had the following reverse repurchase
agreement outstanding:
<TABLE>
<CAPTION>
MATURITY
IN
ZERO TO 30
DAYS
----------
<S> <C>
Maturity Amount..................... $4,139,784
----------
Market Value of Assets Sold Under
Agreement......................... $4,060,000
----------
Interest Rate....................... 5.95%
</TABLE>
The average daily balance of reverse repurchase agreements outstanding
during the six months ended April 30, 1995, was approximately $25,957,000 at a
weighted average interest rate of 5.55%. The maximum amount of reverse
repurchase agreements outstanding at any time during the six months ended April
30, 1995, was $58,191,117 on February 8, 1995, which was 54.5% of total assets.
E. Futures. A futures contract is an agreement between two parties to buy
and sell a security at a set price on a future date. Upon entering into such a
contract the Portfolio is required to pledge to the broker an amount of cash
and/or securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contract, the Portfolio agrees to receive from or pay
to the broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the Portfolio as unrealized gains or losses. When the contract is
closed, the Portfolio records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed.
F. Purchased Options. The premium paid by the Portfolio for the purchase
of a call option or put option is included in the Portfolio's "Statement of
Assets and Liabilities" as an investment and subsequently "marked-to-market" to
reflect the current market value of the option purchased. The current market
value of a purchased option is the last reported sale price or, if no sales are
reported, the last bid price. If an option which the Portfolio has purchased
expires on the stipulated expiration date, the Portfolio realizes a loss in the
amount of the cost of the option. If the Portfolio enters into a closing sale
transaction, it realizes a gain or loss, depending on whether the proceeds from
the sale are greater or less than the cost of the option. If the Portfolio
exercises a purchased put option, it realizes a gain or loss from the sale of
the underlying security and the proceeds from such sale will be decreased by the
premium originally paid. If the Portfolio exercises a purchased call option, the
cost of the security which the Portfolio purchases upon exercise will be
increased by the premium originally paid.
G. Federal Taxes. The Portfolio's policy is to comply with the applicable
provisions of the Internal Revenue Code of 1986, as amended. Accordingly, no
provision for federal income or excise tax is necessary.
H. Deferred Organization Expenses. Expenses incurred by the Portfolio in
connection with its organization are being amortized by the Portfolio on a
straight-line basis over a five-year period.
17
<PAGE> 19
- --------------------------------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
April 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
I. Other. Investment transactions are accounted for on the trade date (the
date on which the security is purchased or sold). Gains and losses are
determined on the basis of identified cost.
2. ADVISORY, ADMINISTRATION AND TRUSTEES' FEES.
A. Investment Advisory Fees. The Portfolio has retained Hyperion Capital
Management Inc. ("Hyperion") to make investment decisions for the Portfolio. For
its services under the Investment Advisory Agreement, Hyperion receives from the
Portfolio a fee accrued daily and paid monthly at an annual rate equal to 0.35%
of the Portfolio's average daily net assets. For the six months ended April 30,
1995, the Portfolio accrued fees aggregating $89,781.
B. Administration Fees. The Portfolio has retained Signature Broker-Dealer
Services, Inc. ("Signature") to serve as Administrator. Certain officers of
Signature serve as officers to the Portfolio. Under the Administrative Services
Agreement, Signature provides management and administrative services necessary
for the operations of the Portfolio, furnishes office space and facilities
required for conducting the business of the Portfolio and pays the compensation
of the Portfolio's officers affiliated with Signature.
For these services, Signature receives from the Portfolio a fee accrued
daily and paid monthly at an annual rate equal to 0.04% of the Portfolio's
average daily net assets. For the six months ended April 30, 1995, the Portfolio
accrued fees aggregating $10,261 for those services. Under an agreement dated
November 30, 1994, Hyperion has agreed to pay Signature an amount by which
Signature would be guaranteed a minimum revenue amount of $7,500 monthly. Any
amounts paid under the agreement are the sole responsibility of Hyperion. The
Portfolio has no responsibility to Signature under the terms of the agreement.
C. Trustees' Fees. The fees and expenses of the Trustees amounted to
$9,157 for the six months ended April 30, 1995. Trustees affiliated with
Hyperion receive no fees for their services.
3. INVESTMENTS IN SECURITIES.
Purchases and sales of investment securities, other than short-term
obligations, aggregated $135,925,886 and $177,024,316, respectively.
18
<PAGE> 20
- --------------------------------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Concluded)
April 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
Treasury and Eurodollar futures transactions during the six months ended April
30, 1995 are summarized as follows:
<TABLE>
<CAPTION>
PURCHASES OF FUTURES SALES OF FUTURES
CONTRACTS CONTRACTS
------------------------ -------------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL
OF AMOUNT OF AMOUNT
CONTRACTS OF CONTRACTS CONTRACTS OF CONTRACTS
------ ------------- ------- -------------
<S> <C> <C> <C> <C>
U.S. TREASURY BONDS AND NOTES
Contracts open at beginning of
year............................... 50 $ 10,000,000 400 $ 75,000,000
Contracts opened..................... 550 85,000,000 1,082 176,100,000
Contracts closed..................... (500) (75,000,000) (1,374) (230,300,000)
------ ------------- ------- -------------
OPEN AT END OF YEAR.................. 100 $ 20,000,000 108 $ 20,800,000
====== ============== ======== ==============
EURODOLLAR BONDS AND NOTES
Contracts open at beginning of
year............................... 769 $ 192,250,000 769 $ 192,250,000
Contracts opened..................... 148 37,000,000 202 50,500,000
Contracts closed..................... (552) (138,000,000) (416) (104,000,000)
------ ------------- ------- -------------
OPEN AT END OF YEAR.................. 365 $ 91,250,000 555 $ 138,750,000
====== ============== ======== ==============
</TABLE>
- --------------------------------------------------------------------------------
For federal income tax purposes, the cost of securities owned at April 30,
1995 was substantially the same as the cost of securities for financial
statement purposes.
At April 30, 1995 the components of net unrealized depreciation of investments
were as follows:
<TABLE>
<S> <C>
Gross appreciation............................................................... $ 216,368
Gross depreciation............................................................... (235,272)
-------------
$ (18,904)
==============
</TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX PERIOD
MONTHS FOR THE APRIL
ENDED YEAR FOR THE FOR THE 12,
APRIL ENDED YEAR YEAR 1991*
30, OCTOBER ENDED ENDED THROUGH
1995 31, OCTOBER OCTOBER OCTOBER
(UNAUDITED) 1994 31, 1993 31, 1992 31, 1991
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Ratios to Average Net Assets/
Supplemental Data:
Net Assets, end of period
(in 000's).................. $38,949 $69,638 $167,127 $461,817 $220,775
Net investment income......... 6.10%(a) 4.81% 5.99% 6.87%(b) 9.43%(a)
Total operating expenses...... 0.58%(a) 0.60% 0.48% 0.38%(b) 0.55%(a)
Interest expense.............. 2.84%(a) 0.95% 1.33% 1.07% 2.05%(a)
Portfolio turnover............ 373%(a) 316% 308% 355% 24%
- ---------------
<FN>
* Commencement of operations. Investment activity commenced on April 25, 1991.
(a) Annualized.
(b) Reflects a voluntary reimbursement of expenses by the Portfolio's Adviser.
If the adviser had not reimbursed any expenses for the year ended October
31, 1992, then the ratios of net investment income and expenses to average
net assets would have been 6.81% and 0.44%, respectively.
See notes to financial statements
</TABLE>
19
<PAGE> 21
- ------------------------------------------------------
TRUSTEES
HYPERION GOVERNMENT MORTGAGE TRUST
Lewis S. Ranieri, Chairman
Malcolm MacKay
Howard N. Wallick
Kenneth C. Weiss
Gene L. Wexler
- ------------------------------------------------------
HYPERION GOVERNMENT MORTGAGE TRUST II
Lewis S. Ranieri, Chairman
Rodman L. Drake
Leslie S. Jacobson
Robert S. Lieberman
Garth Marston
Alan E. Master
Patricia A. Sloan
Kenneth C. Weiss
- ------------------------------------------------------
SHORT DURATION U.S. GOVERNMENT PORTFOLIO
Lewis S. Ranieri, Chairman
Lawrence Chimerine
Harry E. Petersen, Jr.
Louis A. Schapiro
Leo M. Walsh, Jr.
Kenneth C. Weiss
- ------------------------------------------------------
OFFICERS
Clifford E. Lai, President and Chief Executive Officer
Kenneth C. Weiss, Senior Vice President
Louis C. Lucido, Senior Vice President
Patricia A. Botta, Vice President and Secretary
Paul V. Ippolito, Vice President
L. David Ricci, Vice President
Paul Zavattoni, Treasurer
Thomas M. Lenz, Assistant Secretary
PORTFOLIO INVESTMENT ADVISER
Hyperion Capital Management, Inc.
520 Madison Avenue
New York, New York 10022
For General Information about the Funds:
(800) HYPERION
ADMINISTRATOR AND DISTRIBUTOR
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, Massachusetts 02116
(617) 423-0800
TRANSFER AGENT
Fundamental Shareholder Services, Inc.
90 Washington Street
New York, New York 10006
For Shareholder Services:
(800) 296-6960
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02116
LEGAL COUNSEL
Gibson Dunn & Crutcher
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
