H Y P E R I O N
1999
TERM TRUST, INC.
Annual Report
November 30, 1999
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
Report of the Investment Advisor
- --------------------------------------------------------------------------------
January 21, 2000
Dear Shareholder:
In anticipation of an orderly wind down of the investment activities of the
Hyperion 1999 Term Trust, Inc. (the "Trust") on November 30, 1999, the
portfolio was invested during its annual period ending November 30, 1999 in
very liquid U.S. Treasury and Agency Obligations. These securities were
liquidated and the Trust's net assets were distributed to shareholders on
December 2, 1999.
Description of the Trust
The Trust announced on June 8, 1999, that as contemplated in its prospectus
dated June 18, 1992, it had adopted a plan of termination and intended to
liquidate its investments and distribute its net assets to shareholders on or
about November 30, 1999. On October 8, 1999, the Trust declared its final
monthly distribution payment of $0.03125 per share. This dividend was payable
on October 28, 1999, to shareholders of record on October 19, 1999. The Trust
liquidated all of its assets and distributed to shareholders amounts equal to
the net asset value of their shares as of December 2, 1999, in the form of
redemption proceeds. A Letter of Transmittal to be used in redeeming Trust
shares was sent out to all shareholders who held shares of the Trust in
certificate form. All trading in the Trust shares on the New York Stock
Exchange ceased on November 29, 1999. The redemption was treated as a sale of
securities that must be reported on your 1999 income tax return. In addition,
for tax purposes only, we anticipate that some of the 1999 distributions will
be classified as a return of principal.
If you have any questions relating to the termination or distribution of the
final assets of the Trust, please contact Shareholder Services at
1-800-HYPERION.
Sincerely,
ANDREW M. CARTER
Director and Chairman of the Board,
Hyperion 1999 Term Trust, Inc.
Chairman and Chief Executive Officer,
Hyperion Capital Management, Inc.
CLIFFORD E. LAI
President,
Hyperion 1999 Term Trust, Inc.
President and Chief Investment Officer,
Hyperion Capital Management, Inc.
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
Statement of Assets and Liabilities
November 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
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Assets:
Cash (Note 3) $ 446,638,207
-------------------
Liabilities:
Investment advisory fee payable (Note 4) 183,175
Administration fee payable (Note 4) 51,154
Accrued expenses and other liabilities 189,055
-------------------
Total liabilities 423,384
-------------------
Net Assets (equivalent to $727 per share based on
61,358,339 shares issued and outstanding) $ 446,214,823
===================
Composition of Net Assets:
Capital stock, at par value ($01) (Note 7) $ 613,583
Additional paid-in capital (Note 7) 580,123,157
Undistributed net investment income 11,786,309
Accumulated net realized loss (146,308,226)
===================
Net assets applicable to capital stock outstanding $ 446,214,823
===================
__________
See notes to financial statements
</TABLE>
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HYPERION 1999 TERM TRUST, INC.
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Investment Income (Note 2):
Interest $ 27,859,555
--------------------
Expenses:
Investment advisory fee (Note 4) 2,244,232
Insurance 1,968,335
Administration fee (Note 4) 626,116
Liquidation expenses 108,104
Custodian 106,208
Transfer agency 59,106
Directors' fees 57,500
Registration 56,611
Legal 54,236
Accounting and tax services 49,950
Reports to shareholders 47,288
Miscellaneous 49,845
--------------------
Total operating expenses 5,427,531
Interest expense (Note 6) 1,045,070
--------------------
Total expenses 6,472,601
--------------------
Net investment income 21,386,954
--------------------
Realized and Unrealized Gain (Loss) on Investments
and Futures Transactions (Note 2):
Net realized gain on:
Investments 2,343,200
Futures transactions 358,454
-------------------
Net realized gain on investments and futures transactions 2,701,654
-------------------
Net change in unrealized appreciation on investments (8,225,002)
--------------------
Net realized and unrealized loss on investments and futures transactions (5,523,348)
--------------------
Net increase in net assets resulting from operations $ 15,863,606
====================
</TABLE>
__________
See notes to financial statements
<TABLE>
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HYPERION 1999 TERM TRUST, INC.
Statements of Changes in Net Assets
For the Year Ended November 30,
---------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations:
Net investment income $ 21,386,954 $ 26,156,429
Net realized gain on investments, short sales and
futures transactions 2,701,654 10,584,704
Net change in unrealized appreciation on investments (8,225,002) (4,445,668)
------------------- --------------------
Net increase in net assets resulting from operations 15,863,606 32,295,465
------------------- --------------------
Dividends to Shareholders (Note 2):
Net investment income (22,882,662) (26,092,588)
------------------- --------------------
Capital Stock Transactions (Note 6):
Cost of Trust shares repurchased and retired - (1,315,955)
------------------- --------------------
Total increase (decrease) in net assets (7,019,056) 4,886,922
Net Assets:
Beginning of year 453,233,879 448,346,957
------------------- --------------------
End of year (including undistributed net investment income
of $11,786,309 and $13,282,017, respectively) $ 446,214,823 $ 453,233,879
=================== ====================
</TABLE>
__________
See notes to financial statements
- --------------------------------------------------------------------------------
HYPERION 1999 TERM TRUST, INC.
Statement of Cash Flows
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
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Increase (Decrease) in Cash:
Cash flows provided by operating activities:
Interest received (excluding net accretion of $595,839) $ 31,722,161
Interest expense paid (1,267,949)
Operating expenses paid (4,836,443)
Maturities of short-term portfolio investments 9,262,000
Purchases of long-term portfolio investments (43,957,318)
Proceeds from disposition of long-term portfolio investments and
principal paydowns 592,347,029
Net cash from futures transactions 358,454
-------------------
Net cash provided by operating activities 583,627,934
-------------------
Cash flows used for financing activities:
Net cash used for reverse repurchase agreements (113,977,625)
Cash dividends paid (23,012,114)
Cash used to repurchase and retire Trust shares -
------------------
Net cash used for financing activities (136,989,739)
-------------------
Net increase in cash 446,638,195
Cash at beginning of year 12
-------------------
Cash at end of year $ 446,638,207
===================
Reconciliation of Net Increase in Net Assets Resulting from
Operations to Net Cash Provided by Operating Activities:
Net increase in net assets resulting from operations $ 15,863,606
------------------
Decrease in investments 554,712,671
Decrease in net unrealized appreciation on investments 8,225,002
Decrease in interest receivable 4,458,445
Decrease in other assets 237,064
Increase in other liabilities 131,146
--------------------
Total adjustments 567,764,328
--------------------
Net cash provided by operating activities $ 583,627,934
====================
</TABLE>
__________
See notes to financial statements
<TABLE>
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HYPERION 1999 TERM TRUST, INC.
Financial Highlights For the Year Ended November 30,
---------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance:
Net asset value, beginning of the year $ 7.39 $ 7.28 $ 7.25 $ 7.61 $ 7.72
-------------- -------------- --------------- -------------- --------------
Net investment income 0.35 0.43 0.47 0.52 0.51
Net realized and unrealized gain (loss)
on investments, short sales and
futures transactions (0.10) 0.11 (0.01) (0.40) (0.10)
-------------- -------------- --------------- -------------- --------------
Net increase in net asset value resulting
from operations 0.25 0.54 0.46 0.12 0.41
-------------- -------------- --------------- -------------- --------------
Net effect of shares repurchased - - 0.01 - -
Dividends from net investment income (0.37) (0.43) (0.44) (0.48) (0.52)
-------------- -------------- --------------- -------------- --------------
Net asset value, end of year $ 7.27 $ 7.39 $ 7.28 $ 7.25 $ 7.61
============== ============== =============== ============== ==============
Market price, end of year $ 7.25 $ 7.1875 $ 6.875 $ 6.50 $ 6.50
============== ============== =============== ============== ==============
Total Investment Return + 6.50% 10.92% 12.90% 7.53% 1.91%
Ratios to Average Net Assets/Supplemental Data:
Net assets, end of year (000s) $446,215 $453,234 $448,347 $455,516 $480,080
Operating expenses 1.21% 0.79% 0.81% 0.83% 0.96%
Interest expense 0.23% 2.58% 2.27% 2.27% 2.50%
Total expenses 1.44% 3.37% 2.98% 3.10% 3.46%
Net investment income 4.76% 5.79% 6.57% 7.05% 6.55%
Portfolio turnover rate 13% 63% 50% 135% 473%
</TABLE>
________________
+ Total investment return is computed based upon the New York Stock Exchange
market price of the Trust's shares and excludes the effects of brokerage
commissions. Dividends and distributions are assumed to be reinvested at
the prices obtained under the Trust's dividend reinvestment plan.
________________
See notes to financial statements.
________________________________________________________________________________
HYPERION 1999 TERM TRUST, INC.
Notes to Financial Statements
November 30, 1999
________________________________________________________________________________
1. The Trust
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. On June 8, 1999,
the Board of Directors of the Trust adopted a plan of liquidation to
terminate the Trust effective November 30, 1999. In light of the Trust's
scheduled termination date of November 30, 1999, Hyperion Capital
Management, Inc. (the "Advisor" and "Administrator" of the Trust)
determined that the amount of portfolio risk required during the
remaining term of the Trust to attain the $10.00 per share terminal date
objective would, in its view, be inappropriate for the Trust and its
shareholders. Accordingly, the Trust's goal was to have the portfolio
invested in cash and/or cash equivalents by November, 1999.
After the end of the reporting period, the Trust distributed
substantially all of its net assets to shareholders on December 2, 1999.
The officers of the Advisor continue to formalize the Trust's dissolution
under Maryland law and its deregistration under the Investment Company
Act of 1940. The financial statements of the Trust have been prepared on
a liquidation basis.
2. Significant Accounting Policies
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Securities Transactions and Investment Income: Securities transactions
are recorded on the trade date. Realized gains and losses from securities
transactions are calculated on the identified cost basis. Interest income
is recorded on the accrual basis. Discounts and premiums on certain
securities are accreted and amortized using the effective yield to
maturity method.
Taxes: It is the Trust's intention to continue to meet the requirements
of the Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of its taxable income to its
shareholders. Therefore, no federal income or excise tax provision is
required.
Dividends and Distributions: The Trust declares and pays dividends
monthly from net investment income. Distributions of net realized capital
gains in excess of capital loss carryforwards are distributed at least
annually. Dividends and distributions are recorded on the ex-dividend
date. Dividends from net investment income and distributions from
realized gains from investment transactions have been determined in
accordance with Federal income tax regulations and may differ from net
investment income and realized gains recorded by the Trust for financial
reporting purposes. These differences, which could be temporary or
permanent in nature, may result in reclassification of distributions;
however, net investment income, net realized gains and net assets are not
affected.
Cash Flow Information: The 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. Additional information on cash
receipts and cash payments is presented in the Statement of Cash Flows.
Cash, as used in the Statement of Cash Flows, is the amount reported as
"Cash" in the Statement of Assets and Liabilities, and does not include
short-term investments.
Accounting practices that do not affect reporting activities on a cash
basis include carrying investments at value and accreting discounts and
amortizing premiums on debt obligations.
3. Cash
"Cash" as reported in the Statement of Assets and Liabilities at November
30, 1999 represents monies held in a non-interest bearing account with
the Trust's Custodian. On December 1, 1999, the Custodian transferred
the cash balance to an interest-bearing account.
4. Investment Advisory Agreement and Affiliated Transactions
The Trust has entered into an Investment Advisory Agreement with the
Advisor. The Advisor is responsible for the 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. During the year ended November 30,
1999, the Advisor received $2,244,232 in investment advisory fees.
The Trust has entered into an Administration Agreement with the
Administrator. The Administrator has entered into a sub-administration
agreement with Investors Capital Services, Inc. (the
"Sub-Administrator"). The Administrator and Sub-Administrator perform
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 providing the Trust with
administrative office facilities. For these services, the Trust pays to
the Administrator 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. During the year
ended November 30, 1999, the Administrator received $626,116 in
Administration fees. The Administrator is responsible for any fees due
the Sub-Administrator.
Certain officers and/or directors of the Trust are officers and/or
directors of the Advisor, Administrator and Sub-Administrator.
5. Purchases and Sales of Investments
Purchases and sales of investments, excluding short-term securities, U.S.
Government securities and reverse repurchase agreements, for the year
ended November 30, 1999, were $0 and $85,567,516, respectively.
Purchases and sales of U.S. Government securities, for the year ended
November 30, 1999, were $43,957,318 and $296,446,685, respectively. For
purposes of this footnote, U.S. Government securities include securities
issued by the U.S. Treasury, the Federal Home Loan Mortgage Corporation
and the Federal National Mortgage Association.
The Trust utilized $4,699,573 of capital loss carryforwards during the
tax year ended May 31, 1999. At tax year end May 31, 1999, the Trust had
a capital loss carryforward of $148,718,372 which may be used to offset
future net capital gains. Upon termination of the Trust, any remaining
capital loss carryforwards will expire unutilized.
6. Borrowings
The Trust may enter into reverse repurchase agreements with the same
parties with whom it may enter into repurchase agreements. Under a
reverse repurchase agreement, the Trust sells securities and agrees to
repurchase them at a mutually agreed upon date and price. Under the 1940
Act, reverse repurchase agreements will be regarded as a form of
borrowing by the Trust unless, at the time it enters into a reverse
repurchase agreement, it establishes and maintains a segregated account
with its custodian containing securities from its portfolio having a
value not less than the repurchase price (including accrued interest).
The Trust has established and maintained such an account for each of its
reverse repurchase agreements. Reverse repurchase agreements involve the
risk that the market value of the securities retained in lieu of sale by
the 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 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 may effectively be restricted pending such
decision.
6. Borrowings (continued)
At November 30, 1999, the Trust had no reverse repurchase agreements
outstanding.
The average daily balance of reverse repurchase agreements outstanding
during the year ended November 30, 1999 was $20,860,888 at a weighted
average interest rate of 5.01%. The maximum amount of reverse repurchase
agreements outstanding at any time during the year was $104,845,625, as
of December 1, 1998, which was 18.55% of total assets.
7. Capital Stock
There are 75 million shares of $.01 par value common stock authorized. Of
the 61,358,339 shares outstanding at November 30, 1999, the Advisor owned
25,639 shares.
As of November 30, 1999, 1,902,300 shares have been repurchased pursuant
to a stock repurchase program at a cost of $12,812,926 and an average
discount of 6.61% from its net asset value. For the year ended November
30, 1999, no shares have been repurchased. For the year ended November
30, 1998, 186,000 shares had been repurchased at a cost of $1,315,955, at
an average discount of 4.30%. All shares repurchased have been retired.
8. Concentration of Credit
At November 30, 1999, the Trust had approximately 101% of its net assets
invested in cash held in an account with State Street Bank and Trust
Company. To the extent such amount exceeds the $100,000 insured limit
provided by the Federal Deposit Insurance Corporation (FDIC), this
constitutes a concentration of credit in the banking industry with one
financial institution.
________________________________________________________________________________
HYPERION 1999 TERM TRUST, INC.
Report of the Independent Accountants
________________________________________________________________________________
To the Board of Directors and Shareholders of
Hyperion 1999 Term Trust, Inc.:
In our opinion, the accompanying statement of assets and liabilities, and
the related statements of operations, of cash flows and of changes in net
assets and the financial highlights present fairly, in all material
respects, the financial position of Hyperion 1999 Term Trust, Inc. (the
"Trust") at November 30, 1999, and the results of its operations and cash
flows for the year then ended, and the changes in its net assets and
financial highlights for each of the two years in the period then ended,
in conformity with accounting principles generally accepted in the United
States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
The financial highlights for the three years in the period ended November
30, 1997 were audited by other independent accountants whose report dated
January 9, 1998 expressed an unqualified opinion on those statements.
The accompanying financial statements have been prepared on a liquidation
basis. As described in Note 1 to the financial statements, the Board of
Directors of the Trust approved a plan of liquidation during 1999.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
January 21, 2000
- ---------------------------------------------------------------------------
TAX INFORMATION (unaudited)
- ---------------------------------------------------------------------------
The Trust is 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, 1999) as to the federal tax status of distributions
received by shareholders during such fiscal year. Accordingly, we are
advising you that the distributions paid during December through June of
the fiscal year were derived from net investment income and are taxable
as ordinary income, and distributions paid thereafter between July and
October will be considered return of principal for tax purposes. In
addition, 15.96% of the Trust's ordinary income distributions during the
fiscal year ended November 30, 1999 were earned from U.S. Treasury
obligations. None of the Trust's distributions qualifies 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 1999. 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,
2000. Shareholders are advised to consult their own tax advisors with
respect to the tax consequences of their investment in the Trust.
<TABLE>
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INVESTMENT ADVISOR AND ADMINISTRATOR TRANSFER AGENT
HYPERION CAPITAL MANAGEMENT, INC. BOSTON EQUISERVE, L.P.
One Liberty Plaza Investor Relations Department
165 Broadway, 36th Floor P.O. Box 8200
New York, New York 10006-1404 Boston, Massachusetts 02266-8200
For General Information about the Trust: For Shareholder Services:
(800) HYPERION (800) 426-5523
SUB-ADMINISTRATOR INDEPENDENT ACCOUNTANTS
INVESTORS CAPITAL SERVICES, INC. PRICEWATERHOUSECOOPERS LLP
600 Fifth Avenue, 26th Floor 1177 Avenue of the Americas
New York, New York 10020 New York, New York 10036
CUSTODIAN AND FUND ACCOUNTING AGENT LEGAL COUNSEL
STATE STREET BANK AND TRUST COMPANY SULLIVAN & WORCESTER LLP
225 Franklin Street 1025 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.
- --------------------------------------------------------------------------------
Officers & Directors
- --------------------------------------------------------------------------------
Andrew M. Carter
Chairman
Lewis S. Ranieri
Director
Robert F. Birch*
Director
Rodman L. Drake*
Director
Garth Marston
Director Emeritus
Leo M. Walsh, Jr.*
Director
Harry E. Petersen, Jr.*
Director
Patricia A. Sloan
Director & Secretary
Clifford E. Lai
President
Patricia A. Botta
Vice President
Thomas F. Doodian
Treasurer
* Audit Committee Members
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.
One Liberty Plaza
165 Broadway, 36th Floor
New York, NY 10006-1404
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> NOV-30-1999
<INVESTMENTS-AT-COST> 0
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</TABLE>
