<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
HYPERION 1997 TERM TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
HYPERION 1997 TERM TRUST, INC.
520 Madison Avenue - New York, New York 10022
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
July 28, 1995
To the Stockholders:
The Annual Meeting of Stockholders of Hyperion 1997 Term Trust, Inc. (the
"Trust") will be held at The Drake Hotel, 440 Park Avenue at 56th Street, New
York, New York 10022 on Tuesday, October 17, 1995, at 9:00 a.m., for the
following purposes:
1. To elect directors (Proposal 1).
2. To ratify or reject the selection of Price Waterhouse LLP as the
independent accountants of the Trust for the fiscal year ending May 31,
1996 (Proposal 2).
3. To transact any other business that may properly come before the
meeting.
The close of business on July 21, 1995 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
meeting.
By Order of the Board of Directors,
Patricia A. Sloan
Secretary
WE NEED YOUR PROXY VOTE IMMEDIATELY.
YOU MAY THINK YOUR VOTE IS NOT IMPORTANT, BUT IT IS VITAL. THE MEETING OF
STOCKHOLDERS OF THE TRUST WILL BE UNABLE TO CONDUCT ANY BUSINESS IF LESS THAN A
MAJORITY OF THE SHARES ELIGIBLE TO VOTE IS REPRESENTED. IN THAT EVENT, THE
TRUST, AT STOCKHOLDERS' EXPENSE, WOULD CONTINUE TO SOLICIT VOTES IN AN ATTEMPT
TO ACHIEVE A QUORUM. CLEARLY, YOUR VOTE COULD BE CRITICAL TO ENABLE THE TRUST TO
HOLD THE MEETING AS SCHEDULED, SO PLEASE RETURN YOUR PROXY CARD IMMEDIATELY. YOU
AND ALL OTHER STOCKHOLDERS WILL BENEFIT FROM YOUR COOPERATION.
<PAGE> 3
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense to the Trust involved in validating your vote
if you fail to sign your proxy card properly.
1. Individual Accounts. Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts. Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration.
3. All Other Accounts. The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
------------ ---------------
<S> <C>
Corporate Accounts
(1) ABC Corp.............................................. ABC Corp.
(2) ABC Corp.............................................. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer.............................. John Doe
(4) ABC Corp. Profit Sharing Plan......................... John Doe, Trustee
Trust Accounts
(1) ABC Trust............................................. John B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78....................................... Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr.
UGMA................................................. John B. Smith
(2) John B. Smith......................................... John B. Smith, Jr., Executor
</TABLE>
<PAGE> 4
HYPERION 1997 TERM TRUST, INC.
520 Madison Avenue - New York, New York 10022
------------------------
PROXY STATEMENT
------------------------
This proxy statement is furnished in connection with a solicitation by the
Board of Directors of Hyperion 1997 Term Trust, Inc. (the "Trust") of proxies to
be used at the Annual Meeting of Stockholders of the Trust to be held at The
Drake Hotel, 440 Park Avenue at 56th Street, New York, New York 10022, at 9:00
a.m. on Tuesday, October 17, 1995 (and at any adjournment or adjournments
thereof) for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders. This proxy statement and the accompanying form of proxy are
first being mailed to stockholders on or about July 28, 1995. Stockholders who
execute proxies retain the right to revoke them by written notice received by
the Secretary of the Trust at any time before they are voted. Unrevoked proxies
will be voted in accordance with the specifications thereon and, unless
specified to the contrary, will be voted FOR the election of directors, and FOR
the ratification of the selection of Price Waterhouse LLP as the independent
accountants of the Trust for the fiscal year ending May 31, 1996. The close of
business on July 21, 1995 has been fixed as the record date for the
determination of stockholders entitled to notice of and to vote at the meeting.
Each stockholder is entitled to one vote for each share held. Abstentions will
be treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of any matter submitted to stockholders for a vote. Broker
non-votes will not be counted for purposes of determining the presence of a
quorum or determining whether a proposal has been approved. On the record date
there were 60,555,227 shares outstanding.
For a free copy of the Trust's annual report and/or most recent semi-annual
report, please call 1-800-HYPERION or write to Hyperion Capital Management,
Inc., 520 Madison Avenue, New York, N.Y. 10022.
PROPOSAL 1: ELECTION OF DIRECTORS
The Trust's Articles of Incorporation provide that the Trust's Board of
Directors shall be divided into three classes: Class I, Class II and Class III.
The terms of office of the classes elected shall expire at the Annual Meeting in
the year indicated or thereafter in each case when their respective successors
are elected and qualified: Class I, 1997; Class II, 1995; Class III, 1996. At
each subsequent annual election, Directors chosen to succeed those whose terms
are expiring will be identified as being of that same class and will be elected
for a three-year term. The effect of these staggered terms is to limit the
ability of other entities or persons to acquire control of the Trust by delaying
the replacement of a majority of the Board of Directors.
The terms of Kenneth C. Weiss, Lewis S. Ranieri and Patricia A. Sloan, the
three members of Class II currently serving on the Board of Directors of the
Trust, expire at this year's Annual Meeting. The persons named in the
accompanying form of proxy intend to vote at the Annual Meeting (unless directed
not to vote) for the re-election of Mr. Weiss, Mr. Ranieri and Ms. Sloan for a
three-year term to expire at the Annual Meeting to be held in 1998 or at the
termination of the Trust, whichever occurs first. Mr. Weiss, Mr. Ranieri and Ms.
Sloan have indicated that they will serve if elected, but if any or all of them
should be
1
<PAGE> 5
unable to serve, the proxy will be voted for any other person determined by the
persons named in the proxy in accordance with their judgment.
Only the terms of Mr. Weiss, Mr. Ranieri and Ms. Sloan will expire as of
this year's Annual Meeting of Stockholders; consequently there are only three
nominees for re-election to the Board of Directors at this time. Proxies cannot
be voted for a greater number of persons than the three nominees currently
proposed to serve on the Board of Directors.
The following table provides information concerning each of the seven
members of the Board of Directors of the Trust, including Mr. Weiss, Mr. Ranieri
and Ms. Sloan as nominees to serve as Class II directors until the 1998 Annual
Meeting of Stockholders or termination of the Trust:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATION OWNED, DIRECTLY
NAME AND OFFICES DURING PAST FIVE YEARS, DIRECTOR OR INDIRECTLY, ON
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE SINCE MAY 31, 1995(**)
---------------- --------------------------- -------- -----------------
<S> <C> <C> <C>
CLASS II NOMINEES TO SERVE UNTIL 1998 ANNUAL MEETING OF STOCKHOLDERS OR TERMINATION OF THE TRUST:
Kenneth C. Weiss*........ President and Chief Executive July 1992 5,291
Director, Chairman of Officer of Hyperion Capital
the Board of Management, Inc. (February
Directors 1992-Present). Chairman of the
Board, Director/Trustee and/or
officer of several investment com-
panies advised by Hyperion Capital
Management, Inc. (February 1992-
Present). Formerly Director of
First Boston Asset Management
(1988-February 1992). Director of
First Boston Corporation (until
1988). Age 43.
Lewis S. Ranieri*........ Chairman and Chief Executive Officer July 1992 9,500
Director of Ranieri & Co., Inc. (since 1988);
in addition, President of LSR
Hyperion Corp., a general partner
of the limited partnership that is
the general partner of Hyperion
Partners L.P. ("Hyperion
Partners") (since 1988). Director
and Chairman of the Board of Hype-
rion Capital Management, Inc.
(since 1989); Chairman of Bank
United of Texas FSB (since 1988)
and Hyperion Credit Services Corp.
(since 1992); Director and
President of Hyperion Funding 1993
Corp., the general partner of the
limited partnership that is the
general partner of Hyperion 1993
Fund L.P.; and, also Chairman and
President of various other direct
and indirect subsidiaries of
Hyperion Partners. Formerly Vice
Chairman of Salomon Brothers Inc
(until 1987). Age 48.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATION OWNED, DIRECTLY
NAME AND OFFICES DURING PAST FIVE YEARS, DIRECTOR OR INDIRECTLY, ON
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE SINCE MAY 31, 1995(**)
---------------- --------------------------- -------- -----------------
<S> <C> <C> <C>
Patricia A. Sloan*....... Managing Director of Ranieri & Co., July 1992 300
Director, Secretary Inc. (1988-Present). Secretary,
Director and/or Trustee of several
investment companies advised by
Hyperion Capital Management, Inc.
(1989-Present). Director of Bank
United of Texas FSB (1988-Present).
Formerly Director of the Financial
Institutions Group of Salomon Brothers
Inc (1972-1988). Age 51.
CLASS I DIRECTORS TO SERVE UNTIL 1997 ANNUAL MEETING OF STOCKHOLDERS:
Harry E. Petersen, Jr. .. Director and/or Trustee of several July 1992 200
Director, Member of the investment companies advised by Hy-
Audit Committee perion Capital Management, Inc.
(1992-Present). Director of
Lexington Corporate Properties,
Inc. (1993-Present). Consultant to
Advisers Capital Management, Inc.
(1992-Present). Consultant to
Ewing Capital, Inc.
(1993-Present). Formerly Con-
sultant on public and private
pension funds (1991-1993).
Formerly President of Lepercq
Realty Advisors (1988-1990). Age
70.
Leo M. Walsh, Jr......... Director and/or Trustee of several July 1992 1,000
Director, Chairman of investment companies advised by Hy-
the Audit Committee perion Capital Management, Inc.
(1989-Present). Financial
Consultant for Medco Containment
Services Inc. (1994-Present).
Financial Consultant for Synetic
Inc., a manufacturer of porous
plastic materials for health care
uses (1989-1994). Formerly
President, WW Acquisition Corp.
(1989-1990); Senior Executive Vice
President and Chief Operating
Officer of The Equitable Life
Assurance Society of the United
States ("The Equitable")
(1986-1988); Director of The
Equitable and Chairman of
Equitable Investment Corporation,
a holding company for The
Equitable's investment oriented
subsidiaries (1983-1988); Chairman
and Chief Executive Officer of
EQUICOR-Equitable HCA Corporation
(1987-1988). Age 62.
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
PRINCIPAL OCCUPATION OWNED, DIRECTLY
NAME AND OFFICES DURING PAST FIVE YEARS, DIRECTOR OR INDIRECTLY, ON
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE SINCE MAY 31, 1995(**)
---------------- --------------------------- -------- -----------------
<S> <C> <C> <C>
CLASS III DIRECTORS TO SERVE UNTIL 1996 ANNUAL MEETING OF STOCKHOLDERS:
Garth Marston............ Managing Director of M.E. July 1992 -0-
Director, Member of the Associates, a financial consulting
Audit Committee group (1986-Present). Director
and/or Trustee of several
investment companies advised by
Hyperion Capital Management, Inc.
(1989-Present). Currently a member
of the Board of Managers of the
Sun Life Assurance Company of
Canada (U.S.) Formerly Director
and interim Chief Executive
Officer of Florida Federal Savings
(1986-1988); Chairman of the Board
and Chief Executive Officer of The
Provident Institution for Savings
(1979-1986); Special Assignment
regarding partially call protected
Mortgage-Backed Securities for
Salomon Brothers Inc (1987). Age
68.
Rodman L. Drake.......... President, R.L. Drake & Co. Inc. July 1992 100
Director, Member of the (1993-Present). Director and/or
Audit Committee Trustee of several investment
companies advised by Hyperion
Capital Management, Inc.
(1989-Present). Consultant to
Rockefeller & Co. Inc.
(1990-Present). Co-Chairman of KMR
Power Corporation (1993-Present).
Chairman, Car Rental Systems do
Brasil S.A. (Hertz-Brazil)
(1994-Present). Formerly Managing
Director and Chief Executive
Officer of Cresap (1980-1990).
Trustee of Excelsior Funds.
Member, Investment Advisory Board,
Argentina Private Equity Fund Inc.
and Garantia L.P. (Brazil). Direc-
tor, Parsons Brinkerhoff, Inc. and
Latin American Growth Fund, Inc.
Age 52.
</TABLE>
- ---------------
* Interested person as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), because of affiliations with Hyperion Capital
Management, Inc., the Trust's Investment Advisor. See information below in
sections entitled "Interested Persons" and "Investment Advisor" for a
complete description of these individuals' interests in the Advisor.
** The holdings of no nominee represented more than 1% of the outstanding shares
of the Trust. Each nominee has sole voting and investment power with respect
to the listed shares, except with respect to the 200 shares beneficially
owned by Mr. Petersen, who shares voting power with his wife.
4
<PAGE> 8
OFFICERS OF THE TRUST. The officers of the Trust are chosen each year at
the first meeting of the Board of Directors of the Trust following the Annual
Meeting of Stockholders, to hold office until the meeting of the Board following
the next Annual Meeting of Stockholders and until their successors are chosen
and qualified. The Board of Directors has elected five officers of the Trust.
Except when dates of service are noted, all officers listed below served as such
throughout the 1995 fiscal year. The following sets forth information concerning
each officer of the Trust who served during all or part of the last fiscal year
of the Trust:
<TABLE>
<CAPTION>
NAME AND
PRINCIPAL OCCUPATION OFFICE AGE OFFICER SINCE
-------------------- ------ --- -------------
<S> <C> <C> <C>
Kenneth C. Weiss.......................... Chairman 43 July 1992
President and Chief Executive Officer of
Hyperion Capital Management, Inc.; see
information under "ELECTION OF
DIRECTORS."
Louis C. Lucido........................... President 46 July 1992
Managing Director and Chief Operating (October 1993-Pre-
Officer of Hyperion Capital Management, sent) Acting Trea-
Inc. (February 1992-Present). Formerly surer (July 1995-
Senior Vice President and Director of Present)
Progressive Capital Management (June
1991-February 1992). Formerly Senior
Vice President and Manager at Donaldson,
Lufkin and Jenrette (1988-January 1991).
Formerly Vice President of Smith Barney,
Harris Upham & Co. Incorporated
(1987-May 1988). Formerly Vice President
at Merrill Lynch, Pierce, Fenner & Smith
(1981-1987).
Clifford E. Lai........................... Senior Vice President 42 April 1993
Managing Director and Chief Investment
Officer of Hyperion Capital Management,
Inc. (March 1993-Present). Managing
Director and Chief Investment Strategist
for Fixed Income, First Boston Asset
Management (1989-1993). Vice President,
Morgan Stanley & Co. (1987-1989).
L. David Ricci............................ Vice President 31 September 1994
Vice President of Hyperion Capital
Management, Inc. (1992-Present).
Formerly Senior Securities Analyst of
Teachers Insurance and Annuity
Association (1988-1991).
Alan M. Mandel............................ Treasurer and Chief 37 July 1992
Vice President of Hyperion Capital Financial Officer (Resigned
Management, Inc. (1991-1994). Formerly December 1994)
Vice President of Mitchell Hutchins
Asset Management Inc. (1987-1991).
Deloitte Haskins & Sells (1985-1987).
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
NAME AND
PRINCIPAL OCCUPATION OFFICE AGE OFFICER SINCE
- -------------------- ------ --- -------------
<S> <C> <C> <C>
Paul Zavattoni............................ Treasurer 32 March 1995
Vice President of Hyperion Capital (Resigned
Management, Inc.; Assistant Treasurer July 1995)
(1992-1994) Treasurer (March 1995-July
1995). Formerly Assistant Vice President
of PaineWebber/Mitchell Hutchins Asset
Management (1988-1992). Fund Supervisor
with Smith Barney Harris Upham & Co.
(1985-1988).
Patricia A. Sloan......................... Secretary 51 June 1992
See information under "ELECTION OF DI-
RECTORS."
</TABLE>
At May 31, 1995, directors and officers of the Trust as a group owned
beneficially less than 1% of the outstanding shares of the Trust. No person, to
the knowledge of management, owned beneficially more than 5% of the Trust's
outstanding shares at that date. The business address of the Trust and its
officers and directors is 520 Madison Avenue, New York, New York 10022.
INTERESTED PERSONS. Mr. Ranieri serves as Director and Chairman of the
Board of the Advisor and Mr. Weiss serves as a Director, President and Chief
Executive Officer of the Advisor. Ms. Sloan is a special limited partner of
Hyperion Ventures, the sole general partner of Hyperion Partners L.P., of which
the Advisor is a wholly-owned subsidiary. As a result of their service with the
Advisor and certain affiliations with the Advisor as described below, the Trust
considers Messrs. Ranieri and Weiss and Ms. Sloan to be "Interested Persons" of
the Trust within the meaning of Section 2(a)(19) of the 1940 Act.
COMMITTEES AND BOARD OF DIRECTORS' MEETINGS. The Trust has a standing
Audit Committee presently consisting of Messrs. Walsh, Drake, Petersen and
Marston, all of whom are members of the Board of Directors and are currently
non-interested persons of the Trust. The principal functions of the Trust's
Audit Committee are to recommend to the Board the appointment of the Trust's
accountants, to review with the accountants the scope and anticipated costs of
their audit and to receive and consider a report from the accountants concerning
their conduct of the audit, including any comments or recommendations they might
want to make in that connection. During the last fiscal year, the full Board of
Directors met seven times. The Audit Committee met one time. Each director
attended at least 75% of the aggregate meetings of the Board and of any
Committee of which he was a member during the last fiscal year. The Trust has no
nominating, compensation or similar committees.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS. No remuneration was paid
by the Trust to persons who were directors, officers or employees of Hyperion
Capital Management, Inc. or any affiliate thereof for their services as
directors or officers of the Trust. Each director of the Trust, other than those
who are officers or employees of Hyperion Capital Management, Inc. or any
affiliate thereof, is entitled to receive a fee of $7,500 per year plus $1,000
for each Board of Directors' meeting attended by him. Members of the Audit
Committee receive $750 for each Audit Committee meeting attended, other than
meetings held on days when there is also a Directors' meeting.
6
<PAGE> 10
DIRECTORS' COMPENSATION TABLE
FOR THE TWELVE MONTH PERIOD ENDED 5/31/95
<TABLE>
<CAPTION>
TOTAL
DIRECTORS'
COMPENSATION
DIRECTORS' FROM THE TRUST
COMPENSATION AND THE FUND
FROM THE TRUST COMPLEX
-------------- ---------------
<S> <C> <C>
Rodman Drake..................................................... $ 11,625 $ 65,500
Garth Marston.................................................... 10,625 60,500
Harry E. Peterson, Jr............................................ 11,625 71,125
Leo M. Walsh, Jr................................................. 11,625 65,500
-------------- ---------------
$ 45,500 $ 262,625
=========== ============
</TABLE>
None of the Directors received any pension or retirement benefits from the Trust
or the Fund Complex. The Fund Complex consists of eight investment companies
(including the Trust) for which Hyperion Capital Management, Inc. acts as
investment advisor.
REQUIRED VOTE
Re-election of the listed nominees for director requires the affirmative
vote of the holders of a majority of the shares of Common Stock of the Trust
present or represented by proxy at the Annual Meeting.
PROPOSAL 2: RATIFICATION OR REJECTION OF
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Trust will consider, and it is expected that
they will recommend, the selection of Price Waterhouse LLP as independent
accountants of the Trust for the fiscal year ending May 31, 1996 at a meeting
scheduled to be held on September 19, 1995. The appointment of accountants is
approved annually by the Audit Committee of the Board of Directors and is
subsequently submitted to the stockholders for ratification or rejection. The
Trust has been advised by Price Waterhouse LLP, that at May 31, 1995, neither
that firm nor any of its partners had any direct or material indirect financial
interest in the Trust. A representative of Price Waterhouse LLP will be at the
meeting to answer questions concerning the Trust's financial statements and will
have an opportunity to make a statement if he chooses to do so.
REQUIRED VOTE
Ratification of the selection of Price Waterhouse LLP as independent
accountants of the Trust requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock of the Trust present or
represented by proxy at the Annual Meeting.
7
<PAGE> 11
ADDITIONAL INFORMATION
INVESTMENT ADVISOR
The Trust has engaged Hyperion Capital Management, Inc., the Advisor, to
provide professional investment management for the Trust pursuant to an Advisory
Agreement dated September 29, 1993. The Advisor is a Delaware corporation which
was organized in February, 1989. The Advisor is a registered investment adviser
under the Investment Advisers Act of 1940, as amended. The business address of
the Advisor and its officers and directors is 520 Madison Avenue, New York, New
York 10022.
The Advisor is an indirect, wholly-owned subsidiary of Hyperion Partners
L.P., a Delaware limited partnership ("Hyperion Partners"). The sole general
partner of Hyperion Partners is Hyperion Ventures L.P., a Delaware limited
partnership ("Hyperion Ventures"). Corporations owned principally by Lewis S.
Ranieri, Salvatore A. Ranieri and Scott A. Shay are the general partners of
Hyperion Ventures. Lewis S. Ranieri, a former Vice Chairman of Salomon Brothers
Inc ("Salomon Brothers"), is the Chairman of the Board of the Advisor and a
Director of the Trust. Messrs. Salvatore Ranieri and Shay are Directors of the
Advisor, but have no other positions with either the Advisor or the Trust.
Messrs. Salvatore Ranieri and Shay are principally engaged in the management of
the affairs of Hyperion Ventures and its affiliated entities. Since January
1990, Patricia A. Sloan, Secretary of the Trust, has been a special limited
partner of Hyperion Ventures and since July 1993, she has been a limited partner
of Hyperion Partners. Mr. Weiss, Chairman of the Board, Mr. Lucido, the
President and Acting Treasurer of the Trust, and Mr. Lai, Senior Vice President
of the Trust, are employees of the Advisor, and each may be entitled, in
addition to his salary from the Advisor, to receive a bonus based upon a portion
of the Advisor's profits, including any profit from a sale of the Advisor. Mr.
Ricci, a Vice President of the Trust, is also an employee of the Advisor. The
business address of Hyperion Partners and Hyperion Ventures is 50 Charles
Lindbergh Boulevard, Suite 500, Uniondale, New York 11553.
The Advisor provides advisory services to several other registered
investment companies and one offshore fund, all of which invest in
mortgage-backed securities. Its management includes several individuals with
extensive experience in creating, evaluating and investing in mortgage-backed
securities and asset-backed securities, and in the use of hedging techniques.
Lewis S. Ranieri, Chairman of the Advisor and a Director of the Trust, was
instrumental in the development of the secondary mortgage-backed securities
market and the creation and development of secondary markets for conventional
mortgage loans, CMOs and other mortgage-related securities. While at Salomon
Brothers, Mr. Ranieri directed that firm's activities in the mortgage, real
estate and government guaranteed areas. Kenneth C. Weiss, Chairman of the Trust
and the President and Chief Executive Officer of the Advisor, was a Director of
First Boston Asset Management and was a Director of First Boston Corporation.
Louis C. Lucido, Managing Director and Chief Operating Officer of the Advisor
and President and Acting Treasurer of the Trust, was Senior Vice President and
Director of Progressive Capital Management. Mr. Clifford E. Lai, Chief
Investment Officer of the Advisor and Senior Vice President of the Trust, was
Managing Director and Chief Investment Strategist for Fixed Income for First
Boston Asset Management.
INVESTMENT ADVISORY AGREEMENT
The Advisory Agreement was approved by Hyperion Capital Management, Inc.,
as the Trust's initial shareholder, on October 22, 1992 and by the Board of
Directors, including a majority of the directors who are not parties to the
agreement or interested persons of such party (as such term is defined in the
1940 Act) (the "Disinterested Directors"), on October 20, 1992. The Advisory
Agreement was approved by
8
<PAGE> 12
the shareholders at the initial Annual Meeting of Shareholders held on September
29, 1993. At that meeting, the Stockholders approved the continuance of the
Advisory Agreement. The Advisory Agreement provides that it shall continue from
year to year, but only so long as such continuation is specifically approved at
least annually by both (1) a vote of a majority of the Board of Directors or the
vote of a majority of the outstanding voting securities of the Trust (as
provided in the 1940 Act) and (2) the vote of a majority of the directors who
are not parties to the Advisory Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such approval. The Board of Directors will consider
continuation of the Advisory Agreement until October 1, 1996 at a meeting
scheduled to be held on September 19, 1995.
The Advisory Agreement may be terminated at any time without the payment of
any penalty, upon the vote of a majority of the Board of Directors or a majority
of the outstanding voting securities of the Trust or by the Advisor, on 60 days'
written notice by either party to the other. The Agreement will terminate
automatically in the event of its assignment (as such term is defined in the
1940 Act and the rules thereunder).
Pursuant to the Advisory Agreement, the Trust has retained the Advisor to
manage the investment of the Trust's assets and to provide such investment
research, advice and supervision, in conformity with the Trust's investment
objective and policies, as may be necessary for the operations of the Trust.
The Advisory Agreement provides, among other things, that the Advisor will
bear all expenses of its employees and overhead incurred in connection with its
duties under the Advisory Agreement, and will pay all salaries of the Trust's
directors and officers who are affiliated persons (as such term is defined in
the 1940 Act) of the Advisor. The Advisory Agreement provides that the Trust
shall pay to the Advisor a monthly fee for its services which is equal to .50%
per annum of the Trust's average weekly net assets (which, for purposes of
determining the Advisor's fee, shall be the average weekly value of the total
assets of the Trust, minus the sum of accrued liabilities (including accrued
expenses) of the Trust and any declared but unpaid dividends on the Common
Shares and any Preferred Shares (if such shares are issued in the future) and
any accumulated dividends on any Preferred Shares (but without deducting the
aggregate liquidation value of any Preferred Shares)). Investment advisory fees
paid by the Trust to the Advisor during the last fiscal year of the Trust
amounted to $2,443,947.
In addition to the Advisory Agreement, the Trust has entered into an
Administration Agreement with the Advisor pursuant to which the Advisor provides
the Trust with administrative office facilities and performs administrative
services necessary to 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. 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 Advisor, in its
capacity as Administrator, has entered into a Sub-Administration Agreement with
Prudential Mutual Fund Management, Inc., an indirect, wholly-owned subsidiary of
The Prudential Insurance Company of America, to which the Advisor delegates
certain of its administrative responsibilities. For these services, the Advisor
pays 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. Administration fees paid by the Trust to the Advisor during the
last fiscal year of the Trust amounted to $674,050, of which $461,031 was paid
by the Advisor to the Sub-Administrator.
9
<PAGE> 13
INVESTMENT COMPANIES MANAGED BY HYPERION CAPITAL MANAGEMENT, INC.
In addition to acting as advisor to the Trust, Hyperion Capital Management,
Inc. acts as investment advisor to the following other investment companies at
the indicated annual compensation.
<TABLE>
<CAPTION>
APPROXIMATE NET
ASSETS AT
MAY 31,
NAME OF FUND INVESTMENT ADVISORY FEE 1995
------------ ----------------------- ---------------
(IN MILLIONS)
<S> <C> <C>
The Hyperion Total Return
Fund, Inc.* 0.65% of the Fund's average weekly net assets $ 254.5
Hyperion 1999 Term Trust, Inc. 0.50% of the Trust's average weekly net assets 508.2
Hyperion 2002 Term Trust, Inc. 0.50% of the Trust's average weekly net assets 304.1
Hyperion 2005 Investment Grade
Opportunity Term Trust, Inc. 0.65% of the Trust's average weekly net assets 191.5
Short Duration U.S. Government 0.35% of the Portfolio's average daily net
Portfolio assets 37.3
</TABLE>
- ---------------
* The Advisor and The Hyperion Total Return Fund, Inc. (the "Fund") have entered
into a sub-advisory agreement with Pacholder Associates, Inc., an Ohio
corporation organized in 1983, to serve as an investment advisor with respect
to a portion of this Fund's assets.
BROKERAGE COMMISSIONS
Because it buys its portfolio securities in dealer markets, the Trust did
not pay any brokerage commissions on its securities purchases during its last
fiscal year. The Trust paid an aggregate of approximately $75,800 in futures and
options commissions during the last fiscal year, all of which were paid to
entities that are not affiliated with the Trust or the Advisor.
The Advisor has discretion to select brokers and dealers to execute
portfolio transactions initiated by the Advisor and to select the markets in
which such transactions are to be executed. The Advisory Agreement provides, in
substance, that in executing portfolio transactions and selecting brokers or
dealers, the primary responsibility of the Advisor is to seek the best
combination of net price and execution for the Trust. It is expected that
securities will ordinarily be purchased in primary markets, and that in
assessing the best net price and execution available to the Trust, the Advisor
will consider all factors it deems relevant, including the price, dealer spread,
the size, type and difficulty of the transaction involved, the firm's general
execution and operation facilities and the firm's risk in positioning the
securities involved. Transactions in foreign securities markets may involve the
payment of fixed brokerage commissions, which are generally higher than those in
the United States.
There are many instances when, in the judgment of the Advisor, more than
one firm can offer comparable execution services. In selecting such firms, the
Advisor is authorized to consider "brokerage and research services" (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934).
However, it is not the policy of the Advisor, absent special circumstances, to
pay higher commissions to a firm because it has supplied such services. The
Advisor is able to fulfill its obligations to furnish a continuous investment
program to the Trust without receiving such information from brokers; however,
it considers access to such information to be an important element of financial
management. Although such information is considered useful, its value is not
determinable, because it must be reviewed and assimilated by the Advisor, and
does not reduce the normal research activities of the
10
<PAGE> 14
Advisor in rendering advice under the Advisory Agreement. It is possible that
the expenses of the Advisor could be materially increased if it attempted to
purchase this type of information or generate it through its own staff. Any
research benefits derived are available for all clients of the Advisor, and the
Advisor may not use all research it receives from brokers and dealers in
connection with the Trust.
COMPLIANCE WITH SECTION 16 REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires the Trust's
officers and directors and persons who own more than ten percent of a registered
class of the Trust's equity securities to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Officers, directors and greater than ten-percent shareholders are
required by SEC regulations to furnish the Trust with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by the
Trust and written representations from certain reporting persons that all
applicable filing requirements for such persons had been complied with, the
Trust believes that, during the fiscal year ended May 31, 1995, with the
exception of a single Form 3 which was not timely filed by Mr. Ricci, Vice
President of the Trust, all filing requirements applicable to the Trust's
officers, directors, and greater than ten-percent beneficial owners were
complied with.
LITIGATION
During the months of October and November of 1993, several 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 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 accuracy of the defendants'
representations to investors about the Trust's investment objectives and the
level and adequacy of the disclosure in the Prospectus for the Trust used in
connection with its initial public offering. The 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 Investment 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.
11
<PAGE> 15
On July 14, 1995, the second consolidated amended complaint was dismissed
without leave to replead by U.S. District Court Judge Michael B. Mukasey, United
States District Court, Southern District of New York.
At this time the plaintiffs have not indicated whether they will attempt to
challenge the Court's decision.
OTHER BUSINESS
The Board of Directors of the Trust does not know of any other matter which
may come before the meeting. If any other matter properly comes before the
meeting, it is the intention of the persons named in the proxy to vote the
proxies in accordance with their judgment on that matter.
PROPOSALS TO BE SUBMITTED BY STOCKHOLDERS
All proposals by stockholders of the Trust that are intended to be
presented at the Trust's next Annual Meeting of Stockholders to be held in 1996
must be received by the Trust for inclusion in the Trust's proxy statement and
proxy relating to that meeting no later than April 15, 1996.
EXPENSES OF PROXY SOLICITATION
The cost of preparing, assembling and mailing material in connection with
this solicitation of proxies will be borne by the Trust. In addition to the use
of the mails, proxies may be solicited personally by regular employees of the
Trust, Hyperion Capital Management, Inc., Prudential Mutual Fund Management,
Inc., or Shareholder Communications Corp., paid solicitors for the Trust, or by
telephone or telegraph. The anticipated cost of solicitation by the paid
solicitors will be nominal. The Trust's agreement with Shareholder
Communications Corp. provides that such paid solicitors will perform a broker
search and deliver proxies in return for the payment of their fee plus the
expenses associated with this proxy solicitation. Brokerage houses, banks and
other fiduciaries will be requested to forward proxy solicitation material to
their principals to obtain authorization for the execution of proxies, and they
will be reimbursed by the Trust for out-of-pocket expenses incurred in this
connection.
July 28, 1995
12
<PAGE> 16
HYPERION 1997 TERM TRUST, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS.
The undersigned hereby appoints LEWIS S. RANIERI, KENNETH C. WEISS, LOUIS C.
LUCIDO and PATRICIA A. SLOAN, and each of them, attorneys and proxies for the
undersigned, with full power of substitution and revocation to represent the
undersigned and to vote on behalf of the undersigned all shares of Hyperion
1997 Term Trust, Inc. (the "Trust") which the undersigned is entitled to vote
at the Annual Meeting of Stockholders of the Trust to be held at The Drake
Hotel, 440 Park Avenue, New York, New York 10022, on Tuesday, October 17, 1995
at 9:00 a.m., and at any adjournments thereof. The undersigned hereby
acknowledges receipt of the Notice of Meeting and accompanying Proxy Statement
and hereby instructs said attorneys and proxies to vote said shares as
indicated hereon. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the Meeting. A majority of the
proxies present and acting at the Meeting in person or by substitute (or, if
only one shall be so present, then that one) shall have and may exercise all of
the power of authority of said proxies hereunder. The undersigned hereby
revokes any proxy previously given.
This Proxy, if properly executed, will be voted in the manner directed by the
stockholder, if no direction is made, this Proxy will be voted FOR election of
the nominees as Directors in Proposal 1 and FOR Proposal 2. Please refer to the
Proxy Statement for a discussion of the Proposals.
PLEASE SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
NOTE: Please sign exactly as your name appears on the Proxy. If joint owners,
EITHER may sign this Proxy. When signing as attorney, executor, administrator,
trustee, guardian, or corporate officer, please give full title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
________________________________ ___________________________________
________________________________ ___________________________________
________________________________ ___________________________________
<PAGE> 17
/X/ PLEASE MARK VOTES AS
IN THIS EXAMPLE
For All
1) Election of Directors: For Withhold Except
/ / / / / /
Class II
Kenneth C. Weiss, Lewis S. Ranieri
and Patricia A. Sloan
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE
THROUGH THE NOMINEE(S) NAME. YOUR SHARES WILL BE VOTED
FOR THE REMAINING NOMINEE(S).
2) Ratification or rejection of the For Against Abstain
selection of independent accountants / / / / / /
(a vote "For" is a vote for ratification).
I plan to attend the Annual Meeting of Yes No
Stockholders on October 17, 1995. / / / /
Mark box at right if comments or address / /
change have been noted on the reverse side
of this card.
Please be sure to sign and date this Proxy.
Date_______________________________________
___________________________________________
Signature(s), (Title(s), if applicable)
RECORD DATE SHARES:
