<PAGE>
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
REPORT OF THE INVESTMENT ADVISER
- --------------------------------------------------------------------------------
DEAR SHAREHOLDER: January 22, 1996
We welcome this opportunity to provide you with information about Hyperion 1999
Term Trust, Inc. (the 'Trust') for its fiscal year ended November 30, 1995. The
Trust's shares are traded on the New York Stock Exchange under the symbol 'HTT'.
DESCRIPTION OF THE TRUST
The Trust is a closed-end investment company whose 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 instrumentalities or rated AAA
by a nationally recognized rating agency (e.g., Standard & Poor's Corporation or
Moody's Investors Service Inc.).
MARKET ENVIRONMENT
Over the past six months, the recovery in the fixed income markets has
continued. Interest rates, which have broadly declined since late 1994,
continued their downward path since May declining by roughly 50 basis points
over the period. The Federal Reserve Board (the 'Fed') has cut the Federal Funds
rate by 50 basis points since May, reducing the rate in 25 basis point
increments in July and December 1995.
The economy continues to grow at a moderate pace. Preliminary estimates for
fourth quarter economic activity were dampened by evidence of weak holiday sales
for retailers. The third quarter Gross Domestic Product ('GDP') growth rebounded
to 3.2% after posting a 1.3% growth rate in the second quarter of 1995. During
the fiscal year ended November 30, 1995, many economic aggregates, including the
employment rate and consumer confidence, were significantly stronger than they
were during the bond market rally of 1993.
Bond market rallies are never easy for mortgages. Since November 1994, there has
been more than a 200 basis point decline in interest rates, which once again put
mortgages to the test. The decline in interest rates resulted in a rise of
prepayment fears and actual prepayments. However, after seasonal summer peaks,
the actual dollar volume of prepayments declined in the last months of 1995
despite continued Fed interest rate cuts. The overall duration of the Lehman
mortgage index shortened from approximately 4.2 years to 2.9 years in 1995, and
the 30 year fixed rate mortgages declined by approximately 200 basis points
(i.e. from approximately 9.5% to approximately 7.5%). During this period, the
Lehman Mortgage Index returned 16.80%, 13 basis points below the returns on the
Merrill 5-Year Treasury Index.
PORTFOLIO STRATEGY AND PERFORMANCE
The Trust was positioned to maintain or increase its net asset value ('NAV') in
the event of rising interest rates. Declining interest rates caused the NAV to
decline from $7.72 on November 30, 1994 to $7.61 on November 30, 1995. By
November, however, the Trust was positioned with assets that benefited
significantly during a period of lower interest rates. This coupled with the
<PAGE>
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HYPERION 1999 TERM TRUST, INC.
REPORT OF THE INVESTMENT ADVISER (CONTINUED)
- --------------------------------------------------------------------------------
Trust's leverage, had a positive impact on the Trust's NAV as it increased to
$7.72 as of January 4, 1996.
During 1995, MBS have not kept pace with Treasury market total returns because
lower interest rates have increased the risk of mortgage refinancings. Over the
period, mortgage rates have declined almost as much as Treasury yields, which
significantly increases the proportion of outstanding mortgages that can be
favorably refinanced. Refinancing risk is largely limited to mortgages with
coupons above prevailing market rates. Currently, the Trust's portfolio consists
of MBS with low coupons and asset-backed securities ('ABS') that are not nearly
as susceptible to interest rate movements. We continue to seek investments with
a high degree of stability, in order to insulate the Trust from prepayments.
INVESTMENT OUTLOOK
We are cautiously optimistic about the bond market. Inflation continues to be
subdued, and although nominal interest rates appear low relative to historic
standards, real interest rates (the difference between interest rates and
inflation) are above long term averages. As a result, unless there is
significant improvement in the economy, we expect that there will be further
short-term interest rate decreases by the Fed during 1996.
The overall mortgage market faces challenges as declining interest rates enable
more mortgages to become refinancable. The Trust continues to be positioned to
avoid many of the risks associated with a mortgage refinancing boom by: 1)
investing in lower coupon MBS pass-throughs, well structured collateralized
mortgage obligations ('CMO'), planned amortization class ('PAC') bonds and high
quality ABS, and 2) significantly reducing interest-only security allocations.
The maintenance of relative principal stability and predictability is an ongoing
task, as mortgage securities require active management in an effort to achieve
this goal.
The chart on the following page shows the allocation of the Trust's holdings by
asset category on November 30, 1995.
2
<PAGE>
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HYPERION 1999 TERM TRUST, INC.
REPORT OF THE INVESTMENT ADVISER (CONCLUDED)
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS AS OF NOVEMBER 30, 1995*
[CHART]
U.S. Government Agency Pass-Through Certificates 48.4%
U.S. Government Agency Stripped Mortgage-Backed Securities 14.9
Municipal Zero Coupon Securities 12.8
U.S. Government Agency Collateralized Mortgage Obligations 8.7
Collateralized Mortgage Obligations 6.4
U.S. Treasury Obligations 4.0
Asset-Backed Securities 2.3
U.S. Government Agency Asset-Backed Security 1.5
Outstanding Options Purchased 0.9
Repurchase Agreement 0.1
* As a percentage of total investments.
CONCLUSION
We will continue to do our best to manage the Trust so that it attempts to
achieve its objectives. We appreciate the opportunity to serve your investment
needs and we thank you for your continued support. As always, we welcome your
questions and comments and encourage you to contact our Shareholder Services
Representatives at 1-800-HYPERION.
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 and Chief Operating Officer,
Hyperion Capital Management, Inc.
3
<PAGE>
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HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
November 30, 1995
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS--113.7%
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY ASSET-BACKED SECURITY
(REMIC)--2.2%
Federal National Mortgage Association
Series 1995-W1, Class A6
(Cost - $10,137,500) 8.10% 04/25/25 $ 10,000 $ 10,406,300
------------
U.S. GOVERNMENT AGENCY PASS-THROUGH
CERTIFICATES--71.0%
Federal Home Loan Mortgage Corporation
6.50 06/01/08-05/01/09 72,574# 72,574,067
------------
Federal National Mortgage Association
6.00 11/01/00-08/01/02 61,192# 60,867,295
6.50 07/01/10-10/01/10 48,774 48,743,510
TBA 7.00 08/01/01 28,103 28,585,531
TBA 8.00 01/01/25 67,470# 69,662,799
8.50 01/01/05 14,933# 15,558,394
TBA 9.00 01/01/99 8,750 9,201,150
------------
232,618,679
------------
Government National Mortgage Association
TBA 7.00 01/15/99 35,612 35,779,020
------------
TOTAL U.S. GOVERNMENT AGENCY PASS-THROUGH
CERTIFICATES (Cost - $331,971,475) 340,971,766
------------
U.S. GOVERNMENT AGENCY COLLATERALIZED MORTGAGE
OBLIGATIONS (REMICS)--12.8%
Federal Home Loan Mortgage Corporation
Series 1517, Class E 6.00 04/15/18 2,000 1,984,000
Series 1456, Class G 6.50 12/15/18 10,000 10,017,300
Series 55, Class D 9.00 11/15/14 2,304 2,360,496
------------
14,361,796
------------
Federal National Mortgage Association
Series 1994-50, Class PD 5.85 09/25/17 48,000# 47,170,080
------------
TOTAL U.S. GOVERNMENT AGENCY COLLATERALIZED MORTGAGE
OBLIGATIONS (REMICS)
(Cost - $58,284,718) 61,531,876
------------
U.S. GOVERNMENT AGENCY STRIPPED MORTGAGE-BACKED
SECURITIES--21.8%
INTEREST-ONLY SECURITIES--6.4%
Federal Home Loan Mortgage Corporation
Series 112, Class B 8.00 07/15/22 14,399 3,559,341
------------
Federal National Mortgage Association
Series 1994-M2, Class B, REMIC 1.25 02/25/01 118,323 5,860,520
Series X-109A, Class QC 6.00 07/25/07 9,600 2,515,488
Series 1994-23, Class PN 6.00 07/25/17 5,278 1,100,215
Series 1992-168, Class IO, REMIC 7.50 10/25/22 14,040 3,817,140
Series 153, Class 2 7.50 07/25/22 18,200 4,948,070
Series 162, Class 2 8.00 07/25/22 17,784 4,395,924
Series 64, Class 2 8.50 05/01/18 19,329 4,343,097
------------
26,980,454
------------
30,539,795
------------
</TABLE>
4
<PAGE>
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HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
November 30, 1995
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT & AGENCY OBLIGATIONS (CONCLUDED)
PRINCIPAL-ONLY SECURITIES--15.4%
Federal National Mortgage Association
Series 267, Class 1 0.00% 10/01/24 $ 90,802 $ 74,003,240
------------
TOTAL U.S. GOVERNMENT AGENCY STRIPPED
MORTGAGE-BACKED SECURITIES
(Cost - $104,608,795) 104,543,035
------------
U.S. TREASURY OBLIGATIONS--5.9%
U.S. Treasury Bills 0.00 02/01/96 7,898# 7,827,708
U.S. Treasury Notes 6.25 05/31/00 20,000# 20,553,200
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost - $28,122,533) 28,380,908
------------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(Cost - $533,125,021) 545,833,885
------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITY--3.3%
<S> <C> <C> <C> <C>
Neiman Marcus Group Credit Card Master Trust
Series 1995-1, Class A
(Cost - $14,997,656) 7.60 06/15/03 15,000 15,960,900
------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS)--9.3%
<S> <C> <C> <C> <C>
DLJ Mortgage Acceptance Corporation
Series 1993-M10, Class A2 7.20 07/15/03 9,441 9,702,314
First Boston Mortgage Securities Corporation
Series 1993-M1, Class 1A 6.75 09/25/06 24,633 24,929,627
Prudential Home Mortgage
Securities Co., Inc.
Series 1993-C61, Class A5 6.50 12/26/07 1,941 1,923,953
Merrill Lynch Mortgage Investors, Inc.
Series 1995-C1, Class A 7.07 05/25/15 7,959 8,170,287
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (REMICS)
(Cost - $44,608,706) 44,726,181
------------
</TABLE>
- --------------------------------------------------------------------------------
5
<PAGE>
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HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
November 30, 1995
Principal Market
Current Amount Value
Coupon Maturity (000s) (Note 1)
- -----------------------------------------------------------------------------------------------------------------
MUNICIPAL ZERO COUPON SECURITIES--18.7%
<S> <C> <C> <C> <C>
ARIZONA
Maricopa County Arizona, School District #4
FGIC (a) 07/01/99 $ 15,530 $ 13,262,465
Maricopa County Arizona, School District #28
FGIC (a) 07/01/00 2,500 2,033,900
Maricopa County Arizona, School District #213
FGIC (a) 07/01/00 3,860 3,140,342
Pima County Arizona, School District #10
FGIC (a) 07/01/00 2,000@ 1,627,120
------------
20,063,827
------------
KANSAS
Kansas City Kansas, Utility System
Revenue Bonds, AMBAC (a) 03/01/00 2,200 1,813,108
Revenue Bonds, AMBAC (a) 09/01/00 2,390@ 1,925,408
Revenue Bonds, AMBAC (a) 03/01/01 4,095 3,233,125
------------
6,971,641
------------
KENTUCKY
Owensboro Kentucky, Electric Light & Power
Series B, Revenue Bonds, AMBAC (a) 01/01/00 5,200 4,326,764
------------
MASSACHUSETTS
Massachusetts State, AMBAC (a) 06/01/99 4,400 3,803,844
------------
NEW JERSEY
New Jersey, Wastewater Treatment Trust
Series A, Revenue Bonds (a) 09/01/99 9,585 8,155,589
Series A, Revenue Bonds (a) 09/01/00 10,850 8,781,664
------------
16,937,253
------------
TEXAS
Austin Texas, Series B, MBIA (a) 09/01/00 3,560@ 2,874,664
Austin Texas, Utility System
Revenue Bonds, FGIC (a) 05/15/01 5,000 3,880,100
Harris County Texas, MBIA (a) 10/01/00 5,000@ 4,022,350
Harris County Texas, Flood Control, MBIA (a) 10/01/99 8,500 7,192,955
Klein Texas, Independent School District
PSFG (a) 02/01/00 3,000@ 2,486,880
Richardson Texas, Independent School District
AMBAC (a) 08/15/00 6,215 5,037,382
------------
25,494,331
------------
UTAH
Intermountain Power Agency Utah, Power Supply,
Revenue Bonds (a) 07/01/00 14,935@ 12,206,744
------------
TOTAL MUNICIPAL ZERO COUPON SECURITIES
(Cost - $88,030,456) 89,804,404
------------
</TABLE>
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6
<PAGE>
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HYPERION 1999 TERM TRUST, INC.
PORTFOLIO OF INVESTMENTS (CONCLUDED)
<TABLE>
<CAPTION>
November 30, 1995
Principal Market
Amount Value
(000s) (Note 1)
- -------------------------------------------------------------------------------------
OUTSTANDING OPTIONS PURCHASED--1.4%
<S> <C> <C>
CALL OPTIONS
December 95 U.S. Treasury Note, 6.50%, 08/15/05,
Call at 104.1875 expiring December 1995 $ 21,156 $ 171,998
December 95 U.S. Treasury Bond, 7.625%, 02/15/25,
Call at 112.21875 expiring December 1995 100,000 6,438,000
------------
TOTAL OUTSTANDING OPTIONS PURCHASED
(Premiums Paid - $ 2,997,768) 6,609,998
------------
<CAPTION>
- -------------------------------------------------------------------------------------
REPURCHASE AGREEMENT--0.2%
<S> <C> <C>
Dated 11/30/95, with State Street Bank and Trust
Company, 5.55%, due 12/1/95; proceeds: $960,148;
collateralized by $960,000 U.S Treasury Note,
6.00% due 8/31/97, value: $983,107
(Cost - $960,000) 960 960,000
------------
<CAPTION>
- -------------------------------------------------------------------------------------
TOTAL INVESTMENTS--146.6%
<S> <C> <C>
(Cost - $684,719,607) $703,895,368
CALL OPTION WRITTEN* - (0.0%) (162,548)
VARIATION MARGIN PAYABLE ON OPEN FUTURES
CONTRACTS**--(0.1%) (665,055)
LIABILITIES IN EXCESS OF OTHER ASSETS--(46.5%) (222,987,874)
------------
NET ASSETS--100.0% $480,079,891
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
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
FGIC Financial Guaranty Insurance Company
(a) Zero Coupon Bonds
AMBAC American Municipal Bond Assurance Corporation
MBIA Municipal Bond Insurance Association Insured Bond Certificate
PSFG Permanent School Fund Guaranteed
* Outstanding call option written as of November 30, 1995 is listed below
** Open futures contracts as of November 30, 1995 are as follows:
OPEN FUTURES
<TABLE>
<CAPTION>
VALUE AT
NOTIONAL EXPIRATION VALUE AT NOVEMBER 30, UNREALIZED
AMOUNT TYPE DATE TRADE DATE 1995 DEPRECIATION
- ------------- ------------------------ ---------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Short:
$52,000,000 30 Yr U.S. Treasury Note March 1996 $61,278,750 $61,896,250 $(617,500)
----------- ------------ --------------
----------- ------------ --------------
</TABLE>
CALL OPTION WRITTEN
<TABLE>
<CAPTION>
PRINCIPAL VALUE AT
AMOUNT OF PREMIUMS NOVEMBER 30, UNREALIZED
DESCRIPTION CONTRACTS RECEIVED 1995 APPRECIATION
- ------------------------------------------------- ----------- -------- ------------ --------------
<S> <C> <C> <C> <C>
December 95, GNMA 7.00%, 1/15/99, Strike at 99.75 $35,260,000 $213,488 $162,548 $50,940
-------- ------------ --------------
-------- ------------ --------------
</TABLE>
- ---------------
See notes to financial statements.
7
<PAGE>
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HYPERION 1999 TERM TRUST, INC.
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost-$684,719,607) (Note 1).............. $703,895,368
Cash............................................................ 548
Interest receivable............................................. 3,847,142
Deferred organization expenses and other assets (Note 1)........ 68,412
------------
Total assets.................................................. 707,811,470
------------
LIABILITIES:
Reverse repurchase agreements (Note 4).......................... 181,520,527
Payable for investments purchased............................... 44,756,117
Variation margin on open futures transactions (Note 1).......... 665,055
Interest payable (Note 4)....................................... 229,923
Investment advisory fee payable (Note 2)........................ 197,595
Written options outstanding, at value (premiums received,
$213,488)..................................................... 162,548
Administration fee payable (Note 2)............................. 54,393
Accrued expenses and other liabilities.......................... 145,421
------------
Total liabilities............................................. 227,731,579
------------
NET ASSETS (equivalent to $7.61 per share based on 63,112,639
shares outstanding) $480,079,891
------------
------------
COMPOSITION OF NET ASSETS:
Capital stock, at par (Note 5).................................. $ 631,126
Additional paid-in capital...................................... 591,913,726
Undistributed net investment income............................. 9,203,208
Accumulated net realized losses................................. (140,277,370)
Net unrealized appreciation..................................... 18,609,201
------------
Net assets applicable to capital stock outstanding.............. $480,079,891
------------
------------
</TABLE>
- ------------------
See notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
STATEMENT OF OPERATIONS
For the Year Ended November 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME (Note 1):
Interest...................................................... $49,421,326
-----------
EXPENSES:
Investment advisory fees (Note 2)............................. 2,470,311
Administration fees (Note 2).................................. 680,374
Insurance..................................................... 500,296
Legal......................................................... 385,114
Reports to shareholders....................................... 152,001
Custodian..................................................... 116,001
Audit and tax services........................................ 63,300
Registration.................................................. 56,003
Directors' fees............................................... 54,500
Transfer agency............................................... 51,000
Amortization of organization expenses (Note 1)................ 14,592
Miscellaneous................................................. 209,501
-----------
Total operating expenses................................... 4,752,993
Interest expense (Note 4)................................ 12,342,528
-----------
Total expenses............................................. 17,095,521
-----------
Net investment income......................................... 32,325,805
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS,
FUTURES AND OPTIONS (Notes 1 & 3):
Net realized gains (losses) on:
Investment transactions....................................... 15,413,384
Futures transactions.......................................... (42,165,295)
Option transactions........................................... (12,270,683)
-----------
(39,022,594)
-----------
Net change in unrealized appreciation (depreciation) on:
Investments................................................... 38,017,201
Futures....................................................... (5,555,269)
Options....................................................... 50,940
-----------
32,512,872
-----------
Net realized and unrealized losses on investments, futures and
options....................................................... (6,509,722)
-----------
Net increase in net assets resulting from operations............ $25,816,083
-----------
-----------
</TABLE>
- ---------------
See notes to financial statements.
9
<PAGE>
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HYPERION 1999 TERM TRUST, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
November 30, November 30,
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income......................... $ 32,325,805 $ 42,953,933
Net realized losses on investments, futures
and option transactions.................... (39,022,594) (1,361,786)
Net change in unrealized appreciation on
investments, futures and options........... 32,512,872 37,803,159
------------ ------------
Net increase in net assets resulting from
operations................................. 25,816,083 79,395,306
------------ ------------
DIVIDENDS TO SHAREHOLDERS (Note 1):
Net investment income......................... (33,000,107) (35,150,314)
------------ ------------
CAPITAL STOCK TRANSACTIONS (Note 5):
Cost of Trust shares repurchased and
retired.................................... -- (1,004,815)
------------ ------------
Total increase (decrease) in net assets.... (7,184,024) 43,240,177
NET ASSETS:
Beginning of period............................. 487,263,915 444,023,738
------------ ------------
End of period (including undistributed net
investment income of $9,203,208 and
$9,877,510, respectively)..................... $480,079,891 $487,263,915
------------ ------------
------------ ------------
</TABLE>
- ------------------
See notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
STATEMENT OF CASH FLOWS
For the Year Ended November 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INCREASE (DECREASE) IN CASH:
Cash flows used for operating activities:
Interest received......................................... $ 45,907,128
Operating expenses paid................................... (4,643,820)
Interest expense paid..................................... (12,201,785)
Purchase of short-term portfolio investments, net......... (11,987,683)
Purchase of long-term portfolio investments............... (3,380,653,736)
Proceeds from dispositions of long-term portfolio
investments and principal paydowns..................... 3,405,170,548
Net cash used for futures transactions.................... (47,208,853)
---------------
Net cash used for operating activities.................... (5,618,201)
---------------
Cash flows provided from financing activities:
Cash provided from reverse repurchase agreements, net..... 41,773,652
Cash dividends paid....................................... (36,155,739)
---------------
Net cash provided from financing activities............... 5,617,913
---------------
Net decrease in cash........................................ (288)
Cash at beginning of period................................. 836
---------------
Cash at end of period....................................... $ 548
---------------
---------------
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........ $ 25,816,083
---------------
Increase in investments................................... (24,855,661)
Increase in written options outstanding................... 162,548
Decrease in interest receivable........................... 274,915
Decrease in receivable for investments sold............... 11,403,653
Increase in variation margin.............................. 511,711
Decrease in other assets.................................. 84,487
Decrease in payable for investments purchased............. (19,181,366)
Increase in accrued expenses and other liabilities........ 165,429
---------------
Total adjustments...................................... (31,434,284)
---------------
Net cash used for operating activities...................... $ (5,618,201)
---------------
---------------
</TABLE>
- ------------------
See notes to financial statements.
11
<PAGE>
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For the Year For the Year For the Year For the Period
Ended Ended Ended June 28, 1992*
November 30, November 30, November 30, to
1995 1994 1993 November 30, 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................. $ 7.72 $ 7.02 $ 8.77 $ 9.38**
------------ ------------ ------------ -----------------
Net investment income................................. 0.51 0.68 0.72 0.32
Net realized and unrealized gains (losses) on
investments, futures and options.................... (0.10) 0.58 (1.73) (0.66)
------------ ------------ ------------ -----------------
Net increase (decrease) in net asset value resulting
from operations..................................... 0.41 1.26 (1.01) (0.34)
------------ ------------ ------------ -----------------
Dividends from net investment income.................. (0.52) (0.56) (0.74) (0.27)
------------ ------------ ------------ -----------------
Net asset value, end of period........................ $ 7.61 $ 7.72 $ 7.02 $ 8.77
------------ ------------ ------------ -----------------
------------ ------------ ------------ -----------------
Market price, end of period........................... $ 6.50 $ 6.875 $ 6.75 $ 10.00
------------ ------------ ------------ -----------------
------------ ------------ ------------ -----------------
TOTAL INVESTMENT RETURN+.............................. 1.91% 10.29% (26.53)% 9.22%(1)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTARY DATA:
Net assets, end of period (000s).................... $480,080 $487,264 $444,024 $ 554,894
Total operating expenses............................ 0.96% 0.83% 0.76% 0.80%(2)
Interest expense.................................... 2.50% 1.69% 1.61% 1.28%(2)
Net investment income............................... 6.55% 9.07% 8.98% 8.08%(2)
Portfolio turnover rate............................. 473% 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.
12
<PAGE>
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
November 30, 1995
- --------------------------------------------------------------------------------
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 ('MBS') and other debt securities for which market
quotations are not readily available at their fair value as determined in good
faith, utilizing procedures approved by the Board of Directors of the 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. The values of MBS can be significantly affected by changes in interest
rates.
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.
The Trust purchases or writes options to hedge against adverse market movements
or fluctuations in value caused by changes in interest rates. The Trust bears
the risk in purchasing an option that it will expire without being exercised. If
this occurs, the option expires worthless and the premium paid for the option is
a loss. The risk associated with writing call options is that the Trust may
forego the opportunity for a profit if the market value of the underlying
position increases and the option is exercised. The Trust will only write
options on positions held in its portfolio. The risk in writing a put option is
that the Trust may incur a loss if the market value of the underlying position
decreases and the option is exercised. In addition, the Trust bears the risk of
not being able to enter into a closing transaction for written options as a
result of an illiquid market.
Financial Futures Contracts: A futures contract is an agreement between two
parties to buy and sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by 'marking-to-market' on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the 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
13
<PAGE>
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1995
- --------------------------------------------------------------------------------
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 are amortized using the effective
yield to maturity method.
The Trust invests in financial futures contracts to hedge existing portfolio
securities 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 future contracts, interest rates and
the underlying hedged assets. The Trust is at risk that it may not be able to
close out a transaction because of an illiquid secondary market.
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.
For the year ended November 30, 1995, the Adviser earned $2,470,311 in
Investment Advisory fees.
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. For the year ended
November 30, 1995, the Administrator earned $680,374 in Administration fees.
The Administrator 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 paid
$465,250 to PMF during the year ended November 30, 1995.
On September 22, 1995, the Administrator notified PMF that it was terminating
its Sub-Administration Agreement with them effective November 30, 1995.
14
<PAGE>
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
November 30, 1995
- --------------------------------------------------------------------------------
The Administrator would then assume all responsibilities previously performed by
PMF.
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 November 30, 1995 aggregated $3,338,393,670 and $3,339,676,248,
respectively.
The federal income tax basis of the Trust's investments at November 30, 1995 was
$684,719,607 and, accordingly, net unrealized appreciation for federal income
tax purposes was $19,175,761 (gross unrealized appreciation--$35,091,931; gross
unrealized depreciation--$15,916,170). At May 31, 1995, the Trust had a capital
loss carryforward of approximately $107,959,000, of which $25,335,000 expires in
2001, $80,484,000 expires in 2002, and $2,140,000 expires in 2003. 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 Trust 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 enforce the Trust's obligation to
repurchase the securities, and the Trust's use of the proceeds of the reverse
repurchase agreement or the dollar roll agreement may effectively be restricted
pending such decision.
At November 30, 1995, the Trust had the following reverse repurchase agreements
outstanding:
<TABLE>
<CAPTION>
MATURITY IN
ZERO TO 30 DAYS
---------------
<S> <C>
Maturity Amount........................................ $ 181,857,871
---------------
Market Value of Assets Sold Under Agreements........... $ 185,450,008
---------------
Weighted Average Interest Rate......................... 5.88%
---------------
</TABLE>
The average daily balance of reverse repurchase agreements outstanding during
the period ended November 30, 1995 was approximately $208,607,758 at a weighted
average interest rate of 5.89%. The maximum amount of reverse repurchase
agreements outstanding at any time during the period was $276,957,179, as of May
31, 1995, which was 33.1% of total assets.
5. CAPITAL STOCK:
There are 75 million shares of $.01 par value common stock authorized. Of the
63,112,639 shares outstanding at November 30, 1995, the Adviser owned 10,639
shares.
The Trust is continuing its stock repurchase program, whereby an amount of up to
15% of the total outstanding common stock or approximately 9.5 million shares,
are authorized for repurchase. The purchase price may not exceed the
then-current net asset value. As of November 30, 1995, approximately 148,000
shares have been repurchased pursuant to this program at a cost of $1,004,815
and at an average discount of 9.78% from its net asset value. All repurchases
occurred during the year ended November 30, 1994.
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 those actions 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 actions under the
consolidated caption In re: Hyperion Securities Litigation Master File No.
93-CIV-7179 (MBM). Pursuant to
15
<PAGE>
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
November 30, 1995
- --------------------------------------------------------------------------------
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. The Adviser was added as a defendant in that
complaint. On April 8, 1994, the defendants moved to 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 which superseded the first amended
complaint. The allegations in the second consolidated amended complaint relate
to the accuracy 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 offering.
Defendants moved to dismiss the second consolidated amended complaint in
December 1994. Judge Michael B. Mukasey issued an opinion and order dated July
12, 1995 dismissing the second consolidated amended complaint without leave to
replead (granted 93-CIV 7179; July 18, 1995). The plaintiffs filed a motion to
reargue on July 27, 1995 and Judge Mukasey denied the motion to reargue on
September 6, 1995. Plaintiffs filed a notice of appeal to the Second Circuit
Court of Appeals on August 17, 1995. The appeal has been fully briefed and oral
argument of the appeal will likely occur in early 1996. Pursuant to the
Underwriting Agreement between the Trust and its underwriters, the Trust and the
Adviser 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 Adviser 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 Adviser, the
Adviser 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 Adviser. In addition,
the Trust's Articles of Incorporation provide for the indemnification of its
Directors. The Trust's Directors and Adviser have also notified the Trust of
their intention to seek indemnification. The Trust has incurred litigation
expenses for the year ended November 30, 1995 to the indemnified parties noted
above, based upon amounts which are deemed reimbursable in accordance with the
indemnification provisions. The Trust has included these amounts in legal fees.
The ultimate outcome of this litigation is not presently determinable.
7. FINANCIAL INSTRUMENTS:
The Trust regularly trades in financial instruments with off-balance sheet risk
in the normal course of its in-vesting activities to assist in managing exposure
to various market risks. These financial instruments include written options and
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Trust has in particular classes of financial instruments and does
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
Open futures contracts at November 30, 1995 are included in the portfolio of
investments and written options activity for the year ended November 30, 1995 is
as follows:
<TABLE>
<CAPTION>
WRITTEN CALL OPTION TRANSACTIONS
- ------------------------------------------
PRINCIPAL AMOUNTS
OF CONTRACTS
(000S OMITTED) PREMIUMS
----------------- ----------
<S> <C> <C>
Outstanding, beginning
of period ............ $ -- $ --
Options written....... 1,732,964 2,190,929
Options closed........ (1,584,579) (994,043)
Options exercised..... (75,000) (843,750)
Options expired....... (38,125) (139,648)
----------------- ----------
Outstanding, end of
period................ $ 35,260 $ 213,488
----------------- ----------
----------------- ----------
</TABLE>
At November 30, 1995, the Trust had segregated sufficient cash and/or securities
to cover any commitments under these contracts.
8. SUBSEQUENT EVENTS:
The Trust's Board of Directors declared the following regular monthly dividends:
<TABLE>
<CAPTION>
DIVIDEND RECORD PAYABLE
PER SHARE DATE DATE
- ---------- -------- --------
<S> <C> <C>
$0.03958 12/18/95 12/28/95
$0.03958 01/22/96 01/31/96
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
HYPERION 1999 TERM TRUST, INC.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Hyperion 1999 Term Trust, Inc. as of November
30, 1995, the related statements of operations and cash flows for the year then
ended, the statements of changes in net assets for the years ended November 30,
1995 and 1994 and the financial highlights for each of the years in the four-
year period ended November 30, 1995. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at November
30, 1995 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Hyperion 1999 Term
Trust, Inc. at November 30, 1995, the results of its operations, its cash flows,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
As discussed in Note 6 to the financial statements, the Trust is named as one of
several defendants in litigation alleging inadequate and misleading disclosure
in the registration statement and prospectus for the Trust.
DELOITTE & TOUCHE LLP
New York, New York
January 22, 1996
- --------------------------------------------------------------------------------
TAX INFORMATION
- --------------------------------------------------------------------------------
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Trust's fiscal year end (November
30, 1995) as to the federal tax status of distributions received by shareholders
during such fiscal year. Accordingly, we are advising you that all distributions
paid during the fiscal year were derived from net investment income and are
taxable as ordinary income. In addition, 4.90% of the Trust's distributions were
earned from U.S. Treasury obligations. None of the Trust's distributions qualify
for the dividends received deduction available to corporate shareholders.
Because the Trust's fiscal year is not the calendar year, another notification
will be sent with respect to calendar 1995. The second notification, which will
reflect the amount to be used by calendar year taxpayers on their federal, state
and local income tax returns, will be made in conjunction with Form 1099-DIV and
will be mailed in January 1996. Shareholders are advised to consult their own
tax advisers with respect to the tax consequences of their investment in the
Trust.
- --------------------------------------------------------------------------------
17
<PAGE>
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
SELECTED QUARTERLY FINANCIAL DATA
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS, FUTURES NET INCREASE (DECREASE)
AND OPTION IN NET ASSETS RESULTING
NET INVESTMENT INCOME TRANSACTIONS FROM OPERATIONS
---------------------- ----------------------- -----------------------
QUARTERLY PERIOD TOTAL INCOME AMOUNT PER SHARE AMOUNT PER SHARE AMOUNT PER SHARE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
June 26, 1992*
to August 31, 1992 $ 8,539,531 $ 7,129,135 $0.11 $(19,306,330) $ (0.30) $(12,177,195) $ (0.19)
September 1, 1992
to November 30, 1992 16,580,937 12,842,733 0.21 (22,483,352) (0.36) (9,640,619) (0.15)
December 1, 1992
to February 28, 1993 14,278,323 10,642,860 0.17 (31,400,517) (0.50) (20,757,657) (0.33)
March 1, 1993
to May 31, 1993 13,647,042 10,562,767 0.17 (5,780,313) (0.09) 4,782,454 0.08
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
June 1, 1995
to August 31, 1995 12,848,385 8,727,012 0.14 (12,253,807) (0.19) (3,526,795) (0.05)
September 1, 1995
to November 30, 1995 11,433,972 6,825,146 0.11 (15,999,089) (0.26) (9,173,943) (0.15)
<CAPTION>
DIVIDENDS AND
DISTRIBUTION SHARE PRICE
--------------------- ------------
QUARTERLY PERIOD AMOUNT PER SHARE HIGH LOW
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
June 26, 1992*
to August 31, 1992 $ 4,219,485 $0.07 $10 3/8 $10
September 1, 1992
to November 30, 1992 12,658,452 0.20 10 3/4 8 7/8
December 1, 1992
to February 28, 1993 12,658,452 0.20 10 9
March 1, 1993
to May 31, 1993 12,658,452 0.20 9 3/4 8 3/4
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
June 1, 1995
to August 31, 1995 7,888,401 0.12 7 1/2 6 3/4
September 1, 1995
to November 30, 1995 7,493,924 0.12 7 1/8 6 1/2
</TABLE>
* Commencement of Investment Operations
- --------------------------------------------------------------------------------
INVESTMENT ADVISER AND ADMINISTRATOR
HYPERION CAPITAL MANAGEMENT, INC.
520 Madison Avenue
New York, New York 10022
FOR GENERAL INFORMATION ABOUT THE FUND:
(800) HYPERION
CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
225 Franklin Street
Boston, Massachusetts 02116
TRANSFER AGENT
BOSTON FINANCIAL DATA SERVICES, INC.
2 Heritage Drive
North Quincy, Massachusetts 02171
FOR SHAREHOLDER SERVICES:
(800) 426-5523
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
Two World Financial Center
New York, New York 10281
LEGAL COUNSEL
GIBSON, DUNN & CRUTCHER
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
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>
- --------------------------------------------------------------------------------
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>
HYPERION
1999
TERM TRUST
ANNUAL REPORT
NOVEMBER 30, 1995
[LOGO]
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OFFICERS & DIRECTORS
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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
Joseph W. Sullivan
Treasurer
* Audit Committee Members
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HYPERION
Capital Management, Inc.
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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
