<PAGE> 1
--------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
REPORT OF THE INVESTMENT ADVISOR
--------------------------------------------------------------------------------
July 17, 1995
DEAR SHAREHOLDER:
We welcome this opportunity to provide you with information about the Hyperion
1999 Term Trust, Inc. (the "Trust") for the six month period ended May 31, 1995
and to share our outlook for the balance of the Trust's fiscal year. As you
know, the Trust's investment objectives are to provide a high level of current
income consistent with investing only in securities of the highest credit
quality and to return $10.00 per share (the initial public offering price per
share) to investors on or shortly before November 30, 1999. The Trust pursues
these investment objectives by investing in a portfolio primarily of
mortgage-backed securities ("MBS") issued or guaranteed by the U.S. Government
or one of its agencies or rated AAA by a nationally recognized rating agency
(e.g., Standard & Poor's Corporation, Moody's Investors Service, Inc. or Fitch
Investment Services, Inc.).
MARKET ENVIRONMENT
The fixed income market has continued its remarkable recovery that was just in
the beginning stages when we reported to you last November. Interest rates have
broadly declined since the end of 1994. The Federal Reserve Board reduced short
term interest rates by .25% on July 6, 1995. While judged modest, this reduction
in interest rates confirmed the markets anticipatory move to lower rates.
After recording strong Gross Domestic Product ("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
employment growth all suggests GDP growth of about 1.0% for the second quarter,
which is slightly below the growth target of the Federal Reserve.
This recent economic data suggests that there is likely to be a "soft landing"
within the economy. This means that the level of economic activity has slowed
GDP growth to non-inflationary levels (under 2.5%). These circumstances have led
to a leveling of interest rates across varying maturities (commonly referred to
as a "flattening of the yield curve").
PORTFOLIO STRATEGY AND PERFORMANCE
These economic events have affected the Trust's earnings from leverage. Leverage
is most beneficial when short term interest rates are lower than longer maturity
interest rates. When long term interest rates are barely higher than short term
interest rates the benefit of leverage, and therefore earnings applied to the
dividend, is reduced. History supports our view that the norm for interest rates
is for higher long term interest rates and lower short term interest rates (a
positively sloped yield curve). We are optimistically anticipating an increase
in opportunities to enhance earnings for the Trust.
The Trust participated in the recent bond market rally, posting a positive total
return of 8.54% based on the net asset value for the six month period ending May
31, 1995. The net asset value increased in this period by $0.33, from $7.72 on
November 30, 1994 to $8.05, on May 31, 1995. During this period, the Trust's
investment activities have been tailored to the changing conditions in the
Treasury and MBS markets. The Trust's performance was enhanced due to several
factors. The most
<PAGE> 2
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HYPERION 1999 TERM TRUST, INC.
REPORT OF THE INVESTMENT ADVISOR (CONTINUED)
--------------------------------------------------------------------------------
important major trend during 1995 was the recovery in Treasury prices brought on
by the slowing economy. We positioned the Trust by maintaining well structured
investments in securities which perform best as the bond market rallies, such as
Treasuries and asset-backed securities.
Another major trend in the market for the year has been that declining yields
have increased the refinancing risks of certain mortgage products. Mortgage
rates have declined by approximately 175 basis points since the end of November
1994, with 30-year mortgage rates at approximately 7.50%. Consequently, lower
mortgage rates increase the refinancing risk of higher coupon mortgages. We have
sought to decrease the Trust's exposure to this refinancing risk by favoring
lower coupon MBS and increasing our allocation to securities that may benefit
from mortgage prepayments, such as principal-only securities. Currently, a high
percentage of the Trust's assets consist of MBS with low gross coupons,
Treasuries and asset-backed securities. We continue to seek investments with a
high degree of stability, in order to insulate the Trust from average life
variability in both rising and declining interest rate environments.
INVESTMENT OUTLOOK
We believe the involuntary increase in inventories of durable goods (i.e.,
automobiles, home appliances, etc.) and nondurable goods (i.e., retail clothing,
etc.) due to a reduction of final sales has created the economic environment
which has prompted the Federal Reserve to ease interest rates. Hyperion Capital
Management believes that at least two themes will direct the course of interest
rates for the remainder of the calendar year: 1) consumer spending patterns and
their resultant impact on increase/decrease of production and 2) Congress'
attempt to structurally change the deficit of the U.S. Government.
The fixed income markets have experienced significant volatility over the past
several years, as evidenced by a market dominated by declining interest rates in
1993, sharply rising interest rates in 1994, and again a significant decline in
interest rates in 1995. This market volatility has largely 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 this uncertain economic environment, we continue to favor the most stable MBS
for the portfolio, such as collateralized mortgage obligation ("CMO"), planned
amortization class ("PAC") bonds, slower prepaying discount MBS and high quality
asset-backed securities backed by retail auto loans and home equity loans.
The chart which follows shows the allocation of the Trust's holding by asset
category on May 31, 1995.
2
<PAGE> 3
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HYPERION 1999 TERM TRUST, INC.
REPORT OF THE INVESTMENT ADVISOR (CONCLUDED)
--------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS AS OF MAY 31, 1995*
<TABLE>
<S> <C>
U.S. GOVERNMENT AGENCY
ASSET-BACKED SECURITY 1.4%
U.S. GOVERNMENT AGENCY
PASS-THROUGH CERTIFICATES 23.4%
REPURCHASE AGREEMENT 0.3%
U.S. TREASURY OBLIGATIONS 8.2%
U.S. GOVERNMENT AGENCY
COLLATERALIZED MORTGAGE
OBLIGATIONS 21.2%
ASSET BACKED SECURITIES 3.6%
U.S. GOVERNMENT AGENCY
STRIPPED MORTGAGE-BACKED
SECURITIES 23.9%
COLLATERALIZED MORTGAGE
OBLIGATIONS 4.9%
MUNICIPAL ZERO COUPON
SECURITIES 13.1%
</TABLE>
* As a percentage of total investments.
CONCLUSION
As always, we remain committed to
serving the needs of our
shareholders by meeting the Trust's
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
Chairman,
Hyperion 1999 Term Trust, Inc.
President and Chief Executive Officer,
Hyperion Capital Management, Inc.
/s/ LOUIS C. LUCIDO
-----------------------
LOUIS C. LUCIDO
President,
Hyperion 1999 Term Trust, Inc.
Managing Director, Chief Operating Officer
3
<PAGE> 4
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS
May 31, 1995 (unaudited) Principal
Current Amount Value
Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 112.1%
U.S. GOVERNMENT AGENCY ASSET-BACKED SECURITY (REMIC) -- 2.1%
Federal National Mortgage Association
Series 1995-W1, Class A6
(Cost - $10,137,500) 8.10% 04/25/25 $ 10,000 $ 10,504,700
-------------
U.S. GOVERNMENT AGENCY PASS-THROUGH CERTIFICATES -- 33.5%
Federal National Mortgage Association 6.00 11/01/00 17,500 17,199,533
7.00 01/01/99-08/01/09 44,243 44,478,800
7.50 11/01/09-01/01/10 7,859# 8,018,701
7.52 07/01/99 7,500 7,687,275
8.00 12/01/24-05/01/25 71,178# 72,846,921
TBA 9.00 01/01/99 9,500 9,900,805
-------------
160,132,035
-------------
Government National Mortgage Association
TBA 7.00 01/15/99 10,500 10,339,245
-------------
TOTAL U.S. GOVERNMENT AGENCY PASS-THROUGH CERTIFICATES
(Cost - $164,236,912) 170,471,280
-------------
U.S. GOVERNMENT AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS) -- 30.4%
Federal Home Loan Mortgage Corporation
Series 1727, Class B 6.00 02/15/09 50,000# 49,643,000
Series 1517, Class E 6.00 04/15/18 2,000 1,947,380
Series 1456, Class G 6.50 12/15/18 10,000 9,756,300
Series 55, Class D 9.00 11/15/14 2,710 2,793,430
-------------
64,140,110
-------------
Federal National Mortgage Association
Series 1994-42, Class B 5.00 06/25/09 45,000# 44,079,750
Series 1994-50, Class PD 5.85 09/25/17 48,000# 46,073,760
-------------
90,153,510
-------------
TOTAL U.S. GOVERNMENT AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS)
(Cost - $151,543,858)
154,293,620
-------------
U.S. GOVERNMENT AGENCY STRIPPED MORTGAGE-BACKED SECURITIES -- 34.3%
Interest-Only Securities:
Federal Home Loan Mortgage Corporation
Series 112, Class B 8.00 07/15/22 15,178 4,154,862
-------------
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (unaudited) Principal
Current Amount Value
Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- (CONCLUDED)
U.S. GOVERNMENT AGENCY STRIPPED MORTGAGE-BACKED SECURITIES -- (CONCLUDED)
Federal National Mortgage Association
Series 1994-M2, Class B, REMIC 1.25% 02/25/01 $ 118,974 $ 6,618,537
Series 1992 -168, Class IO, REMIC 7.50 10/25/22 14,658 4,292,107
Series 153, Class 2 7.50 07/25/22 19,179 5,615,741
Series 162, Class 2 8.00 07/25/22 18,734@ 5,128,313
Series 184, Class 2 8.00 10/25/22 13,332 3,649,629
Series 185, Class 2 8.00 10/25/22 26,197 7,171,492
Series 261, Class 2 8.50 04/25/24 50,394 12,220,489
Series 64, Class 2 8.50 05/25/18 21,086 5,113,464
-------------
49,809,772
-------------
Principal-Only Securities:
Federal National Mortgage Association
Series 1993 -217, Class C, PAC, REMIC 0.00 08/25/23 4,550 3,086,675
Series 267, Class 1 0.00 10/25/24 148,084 116,986,326
-------------
120,073,001
-------------
TOTAL U.S. GOVERNMENT AGENCY STRIPPED MORTGAGE-BACKED SECURITIES
(Cost - $169,049,844)
174,037,635
-------------
U.S. TREASURY OBLIGATIONS -- 11.8%
U.S. Treasury Bills 5.63 04/04/96 3,000 2,858,070
U.S. Treasury Notes 6.25 05/31/00 35,000# 35,240,800
6.75 04/30/00 13,000# 13,353,470
7.50 02/15/05 8,000 8,661,280
-------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost - $59,927,411) 60,113,620
-------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost - $554,895,525) 569,420,855
-------------
--------------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 5.2%
Neiman Marcus Group Credit Card Master Trust
Series 1995-1, Class A 7.60 06/15/03 15,000 15,735,900
Spiegel Master Trust
Series 1995-A, Class A 7.50 09/15/04 10,000 10,443,800
-------------
TOTAL ASSET BACKED SECURITIES
(Cost - $24,997,656) 26,179,700
-------------
--------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (unaudited) Principal
Current Amount Value
Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS) -- 7.0%
DLJ Mortgage Acceptance Corporation
Series 1993-M10, Class A2 7.20% 07/15/03 $ 9,570 $ 9,569,992
First Boston Mortgage Securities Corporation
Series 1993-M1, Class 1A 6.75 09/25/06 24,720 24,241,598
Prudential Home Mortgage Securities Co., Inc.
Series 1993-C61, Class A5 6.50 12/25/08 1,941 1,888,894
-------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS)
(Cost - $36,754,431)
35,700,484
-------------
--------------------------------------------------------------------------------------------------------
MUNICIPAL ZERO COUPON SECURITIES -- 18.8%
ARIZONA
Maricopa County Arizona,
School District #4, FGIC (a) 07/01/99 15,530 12,666,889
Maricopa County Arizona,
School District #28, FGIC (a) 07/01/00 2,500 1,939,900
Maricopa County Arizona,
School District #213, FGIC (a) 07/01/00 3,860 2,995,206
Pima County Arizona,
School District #10, FGIC (a) 07/01/00 2,000@ 1,551,920
-------------
19,153,915
-------------
KANSAS
Kansas City Kansas, Utility System
Revenue Bonds, AMBAC (a) 03/01/00 2,200 1,731,708
Revenue Bonds, AMBAC (a) 09/01/00 2,390@ 1,834,468
Revenue Bonds, AMBAC (a) 03/01/01 7,450@ 5,623,334
-------------
9,189,510
-------------
KENTUCKY
Owensboro Kentucky, Electric Light & Power
Series B, Revenue Bonds, AMBAC (a) 01/01/00 5,200 4,136,860
-------------
MASSACHUSETTS
Massachusetts State, AMBAC (a) 06/01/99 4,400 3,639,108
-------------
NEW JERSEY
New Jersey Wastewater Treatment Trust
Series A, Revenue Bonds (a) 09/01/99 9,585 7,785,416
Series A, Revenue Bonds (a) 09/01/00 10,850 8,370,883
-------------
16,156,299
-------------
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
May 31, 1995 (unaudited) Principal
Current Amount Value
Coupon Maturity (000s) (Note 1)
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUNICIPAL ZERO COUPON SECURITIES -- (CONCLUDED)
TEXAS
Austin Texas, Series B, MBIA (a) 09/01/00 $ 3,560@ $ 2,739,527
Austin Texas, Independent School District, PSFG (a) 08/01/02 7,610 5,285,221
Austin Texas, Utility System, Revenue Bonds,
FGIC (a) 05/15/01 8,000 5,926,160
Harris County Texas, MBIA (a) 10/01/00 5,000@ 3,831,700
Harris County Texas, Flood Control, MBIA (a) 10/01/99 8,500@ 6,861,540
Klein Texas, Independent School District, PSFG (a) 02/01/00 3,000 2,376,750
Richardson Texas, Independent School District,
AMBAC (a) 08/15/00 6,215 4,802,579
-------------
31,823,477
-------------
UTAH
Intermountain Power Agency Utah, Power Supply
Revenue Bonds (a) 07/01/00 14,935@ 11,644,279
-------------
TOTAL MUNICIPAL ZERO COUPON SECURITIES
(Cost - $95,853,453) 95,743,448
-------------
--------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.5%
Dated 5/31/95 with State Street Bank and Trust Company, 5.90%,
due 6/1/95; proceeds: $2,495,000; collateralized by $2,495,000
U.S. Treasury Note, 3.875%, due 9/30/95, value: $2,495,000
(Cost - $2,495,000) $ 2,495 $ 2,495,000
-------------
--------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 143.6%
(Cost - $714,996,065) $ 729,539,487
VARIATION MARGIN PAYABLE ON OPEN FUTURES TRANSACTIONS -- (0.0%)* (16,944)
LIABILITIES IN EXCESS OF OTHER ASSETS -- (43.6%) (221,359,589)
-------------
NET ASSETS -- 100.0% $ 508,162,954
============
--------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
--------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS (CONCLUDED)
May 31, 1995 (unaudited)
--------------------------------------------------------------------------------
REMIC Real Estate Mortgage Investment Conduit
# Portion of or entire principal amount pledged as collateral for
reverse repurchase agreements.
TBA To Be Announced
@ Portion of or entire principal amount pledged as initial margin on
financial futures transactions.
PAC Planned Amortization Class
FGIC Financial Guaranty Insurance Company
(a) Zero Coupon Bonds
AMBAC American Municipal Bond Assurance Corporation
MBIA Municipal Bond Insurance Association
PSFG Permenant School Fund Guaranteed
* Open Futures Contracts as of May 31, 1995 are as follows (Note 1):
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION VALUE AT VALUE AT APPRECIATION
NOTIONAL AMOUNT TYPE DATE TRADE DATE MAY 31, 1995 (DEPRECIATION)
---------------- -------------------------- --------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Long:
----------------
$320,000,000 10-Yr. U.S. Treasury Note September 1995 $ 344,970,665 $ 351,000,000 $ 6,029,335
70,000,000 10-Yr. U.S. Treasury Note June 1995 72,973,108 77,109,375 4,136,267
-------------- -------------- --------------
$ 417,943,773 $ 428,109,375 $ 10,165,602
============= ============= =============
Short:
----------------
$277,900,000 10-Yr. U.S. Treasury Note June 1995 $ 290,479,908 $ 306,124,219 $ (15,644,311)
100,000,000 10-Yr. U.S. Treasury Note September 1995 106,659,375 109,687,500 (3,028,125)
360,000,000 Eurodollar Futures June 1995 84,124,253 84,555,000 (430,747)
168,000,000 Eurodollar Futures September 1995 39,145,875 39,559,800 (413,925)
167,000,000 Eurodollar Futures December 1995 38,840,675 39,328,500 (487,825)
163,000,000 Eurodollar Futures March 1996 37,866,053 38,406,875 (540,822)
162,000,000 Eurodollar Futures June 1996 37,591,950 38,138,850 (546,900)
157,000,000 Eurodollar Futures September 1996 36,412,200 36,930,325 (518,125)
129,000,000 Eurodollar Futures December 1996 29,886,044 30,285,975 (399,931)
-------------- -------------- --------------
$ 701,006,333 $ 723,017,044 $ (22,010,711)
============= ============= =============
</TABLE>
---------------
See notes to financial statements.
8
<PAGE> 9
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
STATEMENT OF ASSETS AND LIABILITIES
May 31, 1995 (unaudited)
--------------------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost - $714,996,065) (Note 1)....................... $ 729,539,487
Receivable for investments sold............................................ 103,627,299
Interest receivable........................................................ 3,836,919
Deferred organization expenses and other assets (Note 1)................... 512,284
-------------
Total assets..................................................... 837,515,989
-------------
LIABILITIES:
Bank overdraft............................................................. 301,925
Reverse repurchase agreements (Note 4)..................................... 276,829,500
Payable for investments purchased.......................................... 51,805,697
Investment advisory fee payable (Note 2)................................... 212,789
Interest payable (Note 4).................................................. 127,679
Administration fee payable (Note 2)........................................ 58,501
Variation margin on open futures transactions (Note 1)..................... 16,944
-------------
Total liabilities................................................ 329,353,035
-------------
NET ASSETS
(equivalent to $8.05 per share based on 63,112,639 shares outstanding)... $ 508,162,954
=============
COMPOSITION OF NET ASSETS:
Capital stock, at par (Note 5)............................................. $ 631,126
Additional paid-in capital................................................. 591,913,726
Undistributed net investment income........................................ 9,033,375
Accumulated net realized losses............................................ (96,113,586)
Net unrealized appreciation................................................ 2,698,313
-------------
Net assets applicable to capital stock outstanding......................... $ 508,162,954
=============
</TABLE>
---------------
See notes to financial statements.
9
<PAGE> 10
<TABLE>
<S> <C>
---------------------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1995 (unaudited)
---------------------------------------------------------------------------------------------
INVESTMENT INCOME (Note 1):
Interest.................................................................... $ 25,138,969
------------
EXPENSES:
Investment advisory fee (Note 2)............................................ 1,227,432
Administration fee (Note 2)................................................. 338,214
Insurance................................................................... 103,000
Custodian................................................................... 55,000
Reports to shareholders..................................................... 49,000
Transfer agent.............................................................. 35,000
Audit and tax services...................................................... 34,000
Legal....................................................................... 30,000
Registration................................................................ 28,000
Directors' fees............................................................. 27,000
Amortization of organization expenses (Note 1).............................. 6,778
Miscellaneous............................................................... 13,519
------------
Total operating expenses................................................. 1,946,943
Interest expense (Note 4)......................................... 6,418,379
------------
Total expenses.................................................... 8,365,322
------------
Net investment income....................................................... 16,773,647
------------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS,
FUTURES AND OPTION TRANSACTIONS (Notes 1 & 3):
Net realized gains on:
Investment transactions..................................................... 4,203,866
Futures transactions........................................................ 937,324
------------
5,141,190
------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................................. 33,384,862
Futures transactions........................................................ (16,782,878)
------------
16,601,984
------------
Net realized and unrealized gains on investments, futures and option
transactions................................................................ 21,743,174
------------
Net increase in net assets resulting from operations.......................... $ 38,516,821
============
</TABLE>
---------------
See notes to financial statements.
10
<PAGE> 11
<TABLE>
<S> <C> <C>
----------------------------------------------------------------------------------------------
For the
Six Months For the Year
Ended Ended
May 31, 1995 November 30,
(unaudited) 1994
HYPERION 1999 TERM TRUST, INC.
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income...................................... $ 16,773,647 $ 42,953,933
Net realized gains (losses) on investments and futures
transactions............................................ 5,141,190 (1,361,786)
Net change in unrealized appreciation on investments,
futures and option transactions......................... 16,601,984 37,803,159
------------- -------------
Net increase in net assets resulting from operations....... 38,516,821 79,395,306
------------- -------------
DIVIDENDS TO SHAREHOLDERS (Note 1):
Net investment income...................................... (17,617,782) (35,150,314)
------------- -------------
CAPITAL STOCK TRANSACTIONS (Note 5):
Cost of Trust shares repurchased and retired............... -- (1,004,815)
------------- -------------
Total increase in net assets....................... 20,899,039 43,240,177
NET ASSETS:
Beginning of period.......................................... 487,263,915 444,023,738
------------- -------------
End of period (including undistributed net investment income
of $9,033,375 and $9,877,510, respectively)................ $ 508,162,954 $ 487,263,915
============= =============
</TABLE>
---------------
See notes to financial statements.
11
<PAGE> 12
<TABLE>
<S> <C>
-------------------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended May 31, 1995 (unaudited)
-------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH:
Cash Flows used for operating activities:
Interest received (excluding accretion of $2,264,364)................ $ 24,848,789
Operating expenses paid.............................................. (2,048,376)
Interest expense paid................................................ (6,379,880)
Purchase of short-term portfolio investments, net.................... (4,334,673)
Purchase of long-term portfolio investments.......................... (1,319,028,912)
Proceeds from dispositions of long-term portfolio investments and
principal paydowns.................................................. 1,206,313,034
Variation margin..................................................... (15,981,954)
----------------
Net cash used for operating activities............................... (116,611,972)
----------------
Cash Flows provided from financing activities:
Cash provided from reverse repo agreements, net...................... 137,082,625
Cash dividends paid.................................................. (20,773,414)
----------------
Net cash provided from financing activities.......................... 116,309,211
----------------
Net decrease in cash...................................................... (302,761)
Cash at beginning of period............................................... 836
----------------
Cash at end of period..................................................... $ (301,925)
===============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO
NET CASH USED FOR OPERATING ACTIVITIES:
Net increase in net assets resulting from operations...................... $ 38,516,821
----------------
Increase in investments.............................................. (33,897,796)
Increase in net unrealized appreciation.............................. (16,601,984)
Decrease in interest receivable...................................... 285,138
Increase in variation margin receivable.............................. (136,400)
Increase in other assets............................................. (92,583,031)
Decrease in accrued expenses and other liabilities................... (12,194,720)
----------------
Total adjustments............................................... (155,128,793)
----------------
Net cash used for operating activities.................................... $ (116,611,972)
===============
</TABLE>
---------------
See notes to financial statements.
12
<PAGE> 13
<TABLE>
<S> <C> <C>
-------------------------------------------------------------------------------------------
For the For the Period
Six Months For the Year For the Year June 28, 1992*
Ended Ended Ended Ended
May 31, 1995 November 30, November 30, November 30,
(unaudited) 1994 1993 1992
HYPERION 1999 TERM TRUST, INC.
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning
of period................ $ 7.72 $ 7.02 $ 8.77 $ 9.38**
------------ ------------ ------------ --------------
Net investment income....... 0.27 0.68 0.72 0.32
Net realized and unrealized
gains (losses) on
investments, futures and
option transactions...... 0.34 0.58 (1.73) (0.66)
------------ ------------ ------------ --------------
Net increase (decrease) in
net asset value resulting
from operations.......... 0.61 1.26 (1.01) (0.34)
------------ ------------ ------------ --------------
Dividends from net
investment income........ (0.28) (0.56) (0.74) (0.27)
------------ ------------ ------------ --------------
Net asset value, end of
period................... $ 8.05 $ 7.72 $ 7.02 $ 8.77
============= ============= ============= ==============
Market price, end of
period................... $ 7.25 $ 6,875 $ 6.75 $ 10.00
============= ============= ============= ==============
TOTAL INVESTMENT RETURN+.... 9.77%(1) 11.10% 26.53% 9.22%(1)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTARY DATA:
Net assets, end of period
(000s)...................... $508,163 $487,264 $444,024 $554,894
Total operating expenses...... 0.79%(2) 0.83% 0.76% 0.80%(2)
Interest expense.............. 2.61%(2) 1.69% 1.61% 1.28%(2)
Net investment income......... 6.83%(2) 9.07% 8.98% 8.08%(2)
Portfolio turnover rate....... 181% 745% 1,175% 111%
</TABLE>
---------------
* Commencement of investment operations.
** Net of offering costs of $0.02.
+ Total investment return is computed based upon the New York Stock Exchange
market price of the Trust's shares and excludes the effects of sales loads
or brokerage commissions.
(1) Not annualized.
(2) Annualized.
See notes to financial statements.
13
<PAGE> 14
--------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
May 31, 1995 (unaudited)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES:
Hyperion 1999 Term Trust, Inc. (the "Trust"), which was incorporated under the
laws of the State of Maryland on November 22, 1991, is registered under the
Investment Company Act of 1940 (the "1940 Act") as a diversified, closed-end
management investment company. The Trust had no transactions until June 16,
1992, when it sold 10,639 shares of common stock for $100,007 to Hyperion
Capital Management, Inc. (the "Adviser"). The Trust expects to distribute
substantially all of its net assets on or shortly before November 30, 1999 and
thereafter to terminate. The distribution and termination may require
shareholder approval. The Trust's investment objectives are to provide a high
level of current income consistent with investing only in securities of the
highest credit quality and to return at least $10.00 per share (the initial
public offering price per share) to investors on or shortly before November 30,
1999. No assurance can be given that the Trust's investment objectives will be
achieved.
Valuation of Investments: Where market quotations are readily available, Trust
securities are valued based upon the current bid price. The Trust 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 Directors of the Trust, on the
basis of information provided by dealers in such securities. Some of the general
factors which may be considered in determining fair value include the
fundamental analytic data relating to the investment and an evaluation of the
forces which influence the market in which these securities are purchased and
sold. Determination of fair value involves subjective judgment, as the actual
market value of a particular security can be established only by negotiations
between the parties in a sales transaction. Debt securities having a remaining
maturity of sixty days or less when purchased and debt securities originally
purchased with maturities in excess of sixty days but which currently have
maturities of sixty days or less are valued at amortized cost.
The ability of issuers of debt securities held by the Trust to meet their
obligations may be affected by economic developments in a specific industry or
region.
Options Written or Purchased: When the Trust sells or purchases an option, an
amount equal to the premium received or paid by the Trust is recorded as a
liability or an asset and is subsequently adjusted to the current market value
of the option written or purchased. Premiums received or paid from writing or
purchasing options which expire unexercised are treated by the Trust on the
expiration date as realized gains or losses. The difference between the premium
and the amount paid or received on effecting a closing purchase or sale
transaction, including brokerage commissions, is also treated as a realized gain
or loss. If an option is exercised, the premium paid or received is added to the
proceeds from the sale or cost of the purchase in determining whether the Trust
has realized a gain or a loss on investment transactions. The Trust, as writer
of an option, may have no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written option.
Financial Futures Contracts: A futures contract is an agreement between two
parties to buy and sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Trust records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract.
The Trust invests in financial futures contracts solely for the purpose of
hedging its existing portfolio securities or securities the Trust intends to
purchase against fluctuations in value caused by changes in prevailing market
interest rates. Should interest rates move unexpectedly, the Trust may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates and
the underlying hedged assets.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized gains and losses are calculated on the
identified cost basis. Interest income is recorded on the accrual basis.
Discounts and premiums on long term securities
14
<PAGE> 15
--------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1995 (unaudited)
--------------------------------------------------------------------------------
are amortized using the effective yield to maturity method.
Taxes: It is the Trust's intention to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to its shareholders. Therefore, no
federal income or excise tax provision is required.
Dividends and Distributions: The Trust declares and pays dividends monthly from
net investment income. Distributions of realized capital gains in excess of
capital loss carryforwards are distributed at least annually. Dividends and
distributions are recorded on the ex-dividend date.
Deferred Organization Expenses: A total of $68,000 was incurred in connection
with the organization of the Trust. These costs have been deferred and are being
amortized ratably over a period of sixty months from the date the Trust
commenced investment operations.
Cash Flow Information: The Trust invests in securities and distributes dividends
and distributions which are paid in cash or are reinvested at the discretion of
shareholders. These activities are reported in the Statement of Changes in Net
Assets and additional information on cash receipts and cash payments is
presented in the Statement of Cash Flows.
Accounting practices that do not affect reporting activities on a cash basis
include carrying investments at value and accreting discounts on debt
obligations. Cash, as used in the Statement of Cash Flows, is the amount
reported as "Cash" in the Statement of Assets and Liabilities.
Repurchase Agreements: The Trust, through its custodian, receives delivery of
the underlying collateral, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price, including
accrued interest. The Adviser is responsible for determining that the value of
these underlying securities is sufficient at all times. If the seller defaults
and the value of the collateral declines or if bankruptcy proceedings commence
with respect to the seller of the security, realization of the collateral by the
Trust may be delayed or limited.
2. INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS:
The Trust has entered into an Investment Advisory Agreement with the Adviser.
The Adviser is responsible for management of the Trust's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Trust. For such services, the Trust pays a
monthly fee at an annual rate of 0.50% of the Trust's average weekly net assets.
The Trust has entered into an Administration Agreement with Hyperion Capital
Management, Inc. (the "Administrator"). The Administrator performs
administrative services necessary for the operation of the Trust, including
maintaining certain books and records of the Trust, and preparing reports and
other documents required by federal, state, and other applicable laws and
regulations, and provides the Trust with administrative office facilities. For
these services the Trust pays a monthly fee at an annual rate of 0.17% of the
first $100 million of the Trust's average weekly net assets, 0.145% of the next
$150 million and 0.12% of any amounts above $250 million.
The Trust has entered into a Sub-Administrator Agreement with Prudential Mutual
Fund Management, Inc. ("PMF") (the "Sub-Administrator"), an indirect,
wholly-owned subsidiary of The Prudential Insurance Company of America, to whom
the Administrator will delegate certain of its administrative responsibilities.
For these services, the Administrator will pay out of its own assets the fee to
be paid to the Sub-Administrator computed at the rate of 0.12% per annum of the
first $100 million of the Trust's average weekly net assets, 0.10% of the next
$150 million and 0.08% of any amounts above $250 million.
The Administrator informed the Trust that it paid $231,029 to PMF during the six
months ended May 31, 1995.
Certain officers and/or directors of the Trust are officers and/or directors of
the Adviser.
3. PURCHASES AND SALES OF INVESTMENTS:
Purchases and sales of investments, other than short-term investments, for the
period ended May 31, 1995 aggregated $1,306,656,693 and $1,285,858,373,
respectively.
15
<PAGE> 16
--------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
May 31, 1995 (unaudited)
--------------------------------------------------------------------------------
The federal income tax basis of the Trust's investments at May 31, 1995 was
$714,996,065 and, accordingly, net unrealized appreciation for federal income
tax purposes was $14,543,422 (gross unrealized appreciation -- $15,707,372;
gross unrealized depreciation -- $1,163,950). At May 31, 1994, the Trust had a
capital loss carryforward of approximately $105,800,000 of which $25,300,000
expires in 2001 and $80,500,000 expires in 2002. However if the Trust terminates
as expected in 1999, the carryforward must be utilized by 1999 in order for
shareholders to realize a benefit.
4. BORROWINGS:
The Trust may enter into reverse repurchase agreements and dollar roll
agreements with the same parties with whom it may enter into repurchase
agreements. A dollar roll agreement is identical to a reverse repurchase
agreement except for the fact that substantially identical securities may be
repurchased. Under a reverse repurchase agreement or a dollar roll agreement,
the Trust sells securities and agrees to repurchase them, or substantially
similar securities in the case of a dollar roll agreement, at a mutually agreed
upon date and price. Under the 1940 Act, reverse repurchase agreements and
dollar roll agreements will be regarded as a form of borrowing by the Trust
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 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 Trust may decline below the price of the securities the Trust 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 reinforce the Trust obligation to
repurchase the securities, and the Trust use of the proceeds of the reverse
repurchase agreement or the dollar roll agreement may effectively be restricted
pending such decision.
At May 31, 1995, the Trust had the following reverse repurchase agreements
outstanding:
<TABLE>
<CAPTION>
MATURITY IN
ZERO TO 30
DAYS
-------------
<S> <C>
Maturity Amount.................. $ 276,957,179
-------------
Market Value of Assets Sold Under
Agreements..................... $ 282,981,594
-------------
Weighted Average Interest Rate... 5.99%
</TABLE>
The average daily balance of reverse repurchase agreements outstanding during
the period ended May 31, 1995, was approximately $216,543,089 at a weighted
average interest rate of 4.04%. The maximum amount of reverse repurchase
agreements outstanding at any time during the period was $285,640,031, as of
February 14, 1995, which was 34.4% of total assets.
5. CAPITAL STOCK:
There are 75,000,000 shares of $.01 par value common stock authorized. Of the
63,112,639 shares outstanding at May 31, 1995, the Adviser owned 10,639 shares.
6. LITIGATION:
During the months of October and November 1993, purported class action lawsuits
were instituted against the Trust and its directors, officers and underwriters
by certain shareholders of the Trust in the United States District Court,
Southern District of New York. The plaintiffs in that action generally alleged
that the defendants made inadequate and misleading disclosure in the
registration statement and prospectus for the Trust, in particular, as such
disclosure relates to the nature and risks of "interest-only mortgage strip
securities" and the Trust's investments in those instruments. A Pre-Trial Order
of Consolidation dated December 27, 1993 consolidated these and other actions
under the consolidated caption In re: Hyperion Securities Litigation Master File
No. 93-CIV-7179 (MBM). Pursuant to the terms of the Order of Consolidation, one
consolidated amended complaint was served upon the Trust and the other
defendants which superseded all other complaints previously filed. On April 8,
1994, the defendants requested that the Court dismiss the consolidated
complaint. Pursuant to an order dated October 3, 1994, the Court stayed all
discovery in the Action except for certain limited document discovery. In
November 1994, while the motion to dismiss was still pending, plaintiffs filed a
second consolidated amended complaint. The allegations in the second
consolidated amended complaint relate to the accu-
16
<PAGE> 17
--------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
May 31, 1995 (unaudited)
--------------------------------------------------------------------------------
racy of the defendants' representations to investors about the Trust's
investment objectives, and level and adequacy of the disclosure in the
Prospectus for the Trust used in connection with its initial public offerings.
Defendants moved to dismiss the second consolidated amended complaint in
December 1994. Pursuant to the Underwriting Agreement between the Trust and its
underwriters, the Trust and the Advisor have jointly and severally agreed to
indemnify the underwriters for their liabilities, losses and costs directly
related to certain contents of the prospectus and registration statement of the
Trust. The underwriters have provided notification to the Trust and the Advisor
that they intend to exercise their rights of indemnification in the event that
they are subject to liabilities, costs or losses that are covered by the
indemnity. In addition, pursuant to the Advisory Agreement between the Trust and
the Advisor, the Advisor is indemnified for all of its liabilities, losses and
costs in connection with any matter involving the Trust, except for actions
relating to the gross negligence, willful malfeasance or fraud of the Advisor.
At this time the Advisor has not notified the Trust of its intention to seek
indemnification. The ultimate outcome of this litigation is not presently
determinable, and no provision has been made in the Trust's financial statements
for the effect, if any, of such litigation.
7. SUBSEQUENT EVENTS:
The Trusts Board of Directors declared the following regular monthly dividends:
<TABLE>
<CAPTION>
DIVIDEND RECORD PAYABLE
PER SHARE DATE DATE
--------- -------- --------
<S> <C> <C>
$ 0.04583 6/19/95 6/29/95
$ 0.03958 7/17/95 7/27/95
</TABLE>
--------------------------------------------------------------------------------
PROXY RESULTS
--------------------------------------------------------------------------------
During the period ended May 31, 1995, Hyperion 1999 Term Trust, Inc.
shareholders voted on the following proposals at a shareholders' meeting on May
23, 1995. The description of each proposal and number of shares voted are as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
SHARES
SHARES VOTED
VOTED WITHOUT
FOR AUTHORITY
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. To elect the Fund's Board of Directors:
Harry E. Petersen, Jr. 30,832,471 1,161,241
Leo M. Walsh, Jr. 30,901,206 1,092,506
-------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's
independent auditors. 30,797,204 434,190 762,318
-------------------------------------------------------------------------------------------------------
3. To approve certain changes to the Fund's fundamental
investment restrictions (concerning short sales of
securities). 21,442,812 2,100,150 1,443,835
-------------------------------------------------------------------------------------------------------
4. To approve the Investment Advisory Agreement between
the Trust and Hyperion Capital Management, Inc. 29,403,441 1,243,300 1,346,971
-------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
--------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
SELECTED QUARTERLY FINANCIAL DATA
(unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS, FUTURES NET INCREASE (DECREASE)
NET INVESTMENT AND OPTION IN NET ASSETS RESULTING
INCOME TRANSACTIONS FROM OPERATIONS
TOTAL ----------------------- ------------------------ ------------------------
QUARTERLY PERIOD INCOME AMOUNT PER SHARE AMOUNT PER SHARE AMOUNT PER SHARE
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
June 1, 1993
to August 31, 1993 $11,325,312 $8,412,983 $0.13 $(27,675,828) $ (0.44) $(19,262,845) $ (0.31)
September 1, 1993
to November 30, 1993 18,307,264 15,895,853 0.25 (44,953,480) (0.70) (29,057,627) (0.45)
December 1, 1993
to February 28, 1994 14,880,602 12,231,574 0.19 12,367,705 0.20 24,599,279 0.39
March 1, 1994
to May 31, 1994 15,469,465 12,626,698 0.20 17,800,528 0.28 30,427,226 0.48
June 1, 1994
to August 31, 1994 7,142,378 9,904,737 0.16 (36,250,648) (0.57) (26,345,911) (0.41)
September 1, 1994
to November 30, 1994 17,379,627 8,190,924 0.13 42,523,788 0.67 50,714,712 0.80
December 1, 1994
to February 28, 1995 12,898,232 9,029,349 0.14 6,995,260 0.11 16,024,609 0.25
March 1, 1995
to May 31, 1995 12,240,737 7,744,298 0.12 14,747,914 0.24 22,492,212 0.36
<CAPTION>
DIVIDENDS AND SHARE
DISTRIBUTIONS PRICE
----------------------- ----------
QUARTERLY PERIOD AMOUNT PER SHARE HIGH LOW
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------
June 1, 1993
to August 31, 1993 $ 11,861,350 $0.19 $8 7/8 $7 1/2
September 1, 1993
to November 30, 1993 9,356,249 0.15 8 1/4 6 3/8
December 1, 1993
to February 28, 1994 8,299,440 0.13 7 6 1/4
March 1, 1994
to May 31, 1994 8,296,179 0.13 7 3/8 6 3/4
June 1, 1994
to August 31, 1994 9,082,485 0.15 7 1/4 6 1/2
September 1, 1994
to November 30, 1994 9,472,210 0.15 7 6 3/8
December 1, 1994
to February 28, 1995 8,940,494 0.14 7 6 1/2
March 1, 1995
to May 31, 1995 8,677,288 0.14 7 3/8 6 5/8
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT ADVISER AND ADMINISTRATOR TRANSFER AGENT
HYPERION CAPITAL MANAGEMENT, INC. BOSTON FINANCIAL DATA SERVICES, INC.
520 Madison Avenue 2 Heritage Drive
New York, New York 10022 North Quincy, Massachusetts 02171
FOR GENERAL INFORMATION ABOUT THE FUND: FOR SHAREHOLDER SERVICES:
(800) HYPERION (800) 426-5523
SUB-ADMINISTRATOR INDEPENDENT ACCOUNTANTS
PRUDENTIAL MUTUAL FUND MANAGEMENT, INC.
One Seaport Plaza DELOITTE & TOUCHE LLP
New York, New York 10292 2 World Financial Center
(212) 214-3332 New York, New York 10281
CUSTODIAN LEGAL COUNSEL
STATE STREET BANK AND TRUST COMPANY GIBSON, DUNN & CRUTCHER
225 Franklin Street 1050 Connecticut Avenue, N.W.
Boston, Massachusetts 02116 Washington, D.C. 20036
</TABLE>
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that periodically the Trust may purchase its shares in the
open market at prevailing market prices.
18
<PAGE> 19
--------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
--------------------------------------------------------------------------------
A Dividend Reinvestment Plan (the "Plan") is available to shareholders of the
Trust pursuant to which they may elect to have all dividends and distributions
of capital gains automatically reinvested by State Street Bank and Trust Company
(the "Plan Agent") in Trust shares. Shareholders who do not participate in the
Plan will receive all distributions in cash paid by check mailed directly to the
shareholder of record (or if the Shares are held in street or other nominee
name, then to the nominee) by the Trust's Custodian, as Dividend Disbursing
Agent.
The Plan Agent serves as agent for the shareholders in administering the Plan.
After the Trust declares a dividend or determines to make a capital gain
distribution, payable in cash, the participants in the Plan will receive the
equivalent amount in Trust shares valued at the market price determined as of
the time of purchase (generally, the payment date of the dividend or
distribution). The Plan Agent will, as agent for the participants, use the
amount otherwise payable as a dividend to participants to buy shares in the open
market, on the New York Stock Exchange or elsewhere, for the participants'
accounts. If, before the Plan Agent has completed its purchases, the market
price increases, the average per share purchase price paid by the Plan Agent may
exceed the market price of the shares at the time the dividend or other
distribution was declared. Share purchases under the Plan may have the effect of
increasing demand for the Trust's shares in the secondary market.
There is no charge to participants for reinvesting dividends or capital gain
distributions, except for certain brokerage commissions, as described below. The
Plan Agent's fees for handling the reinvestment of dividends and distributions
are paid by the Trust. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to the Plan Agent's open market
purchases in connection with the reinvestment of dividends and distributions.
The automatic reinvestment of dividends and distributions will not relieve
participants of any federal income tax that may be payable on such dividends or
distributions.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent. When a participant withdraws from the Plan or upon termination of
the Plan by the Trust, certificates for whole shares credited to his or her
account under the Plan will be issued and a cash payment will be made for any
fraction of a share credited to such account.
A brochure describing the Plan is available from the Plan Agent, State Street
Bank and Trust Company, by calling 1-800-426-5523.
If you wish to participate in the Plan and your shares are held in your name,
you may simply complete and mail the enrollment form in the brochure. If your
shares are held in the name of your brokerage firm, bank or other nominee, you
should ask them whether or how you can participate in the Plan. Shareholders
whose shares are held in the name of a brokerage firm, bank or other nominee and
are participating in the Plan may not be able to continue participating in the
Plan if they transfer their shares to a different brokerage firm, bank or other
nominee, since such shareholders may participate only if permitted by the
brokerage firm, bank or other nominee to which their shares are transferred.
19
<PAGE> 20
------------------------------------------------------
OFFICERS & DIRECTORS
------------------------------------------------------
Kenneth C. Weiss
Chairman
Lewis S. Ranieri
Director
Garth Marston*
Director
Rodman L. Drake*
Director
Leo M. Walsh, Jr.*
Director
Harry E. Petersen, Jr.*
Director
Patricia A. Sloan
Director & Secretary
Louis C. Lucido
President
Clifford E. Lai
Senior Vice President
Paul Zavattoni
Treasurer
* Audit Committee Members
----------------------------------------------------
[HYPERION CAPITAL MANAGEMENT, INC. LOGO]
----------------------------------------------------
The accompanying financial statements as of May 31, 1995 were not audited and
accordingly, no opinion is expressed on them.
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Trust shares.
HYPERION 1999 TERM TRUST, INC.
520 Madison Avenue
New York, NY 10022
H Y P E R I O N
1999
TERMTRUST
SEMI-ANNUAL REPORT
MAY 31, 1995
[ARTWORK]
