HYPERION 1997 TERM TRUST INC, DEF 14A, 1997-09-09

HYPERION 1997 TERM TRUST INC
DEF 14A, 1997-09-09

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<PAGE>

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)

Filed by the Registrant / /

Filed by a Party other than the Registrant / /

Check the appropriate box:
/ / 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 Rule 14a-11(c) or Rule 14a-12

HYPERION 1997 TERM TRUST, INC.
------------------------------------------------------------------------
(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):

/ / No fee required

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:

(4) Date Filed:

<PAGE>

HYPERION 1997 TERM TRUST, INC.

One Liberty Plaza o New York, New York 10006-1404

------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

------------------------

September 8, 1997

To the Stockholders:

It is currently anticipated that Hyperion 1997 Term Trust, Inc. (the
'Trust') will terminate on or about its scheduled termination date, November 30,
1997. Nevertheless, it is still appropriate to hold the Annual Meeting of
Stockholders of the Trust at The Millenium Hilton, 55 Church Street (next to the
World Trade Center), New York, New York 10007, on Tuesday, October 14, 1997, 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, 1998 (Proposal 2).

3. To transact any other business that may properly come before the
meeting.

The close of business on July 22, 1997 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>

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>

HYPERION 1997 TERM TRUST, INC.

One Liberty Plaza o New York, New York 10006-1404

------------------------

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
Millenium Hilton, 55 Church Street (next to the World Trade Center), New York,
New York 10007, at 9:00 a.m. on Tuesday, October 14, 1997 (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 September 8, 1997. 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 the two nominees for director, 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, 1998. The close of business on July 22, 1997
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 matters 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 56,968,027 shares outstanding.

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 present directors in each class 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, 1998; and Class
III, 1999. 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 Harry E. Petersen, Jr. and Leo M. Walsh, Jr., the members of
Class I, currently serving on the Board of Directors, 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 so vote) for the re-election
of Messrs. Petersen and Walsh. Each nominee has indicated that he will serve if

elected, but if any nominee should be unable to serve, the proxy or proxies will
be voted for any other person or persons, as the case may be, determined by the
persons named in the proxy in accordance with their judgment.

As described above, there are two nominees for election to the Board of
Directors at this time. Proxies cannot be voted for a greater number of persons
than the two nominees currently proposed to serve on the Board of Directors.

<PAGE>

The following table provides information concerning each of the seven
members and nominees of the Board of Directors of the Trust:

Harry E. Petersen, Jr. .......... Director and/or Trustee of several investment July 1992 200
Director, Member of the companies advised by Hyperion Capital
Audit Committee Management, Inc. or by its affiliates
(1992-Present). Director of Equitable Real
Estate Hyperion Mortgage Opportunity Fund,
Inc. and Equitable Real Estate Hyperion High
Yield Commercial Mortgage Fund, Inc.
(1995-Present). Senior Advisor to Potomac
Babson, Inc. (1995-Present). Director of
Lexington Corporate Properties, Inc.
(1993-Present); Formerly, Consultant to Ad-
visers Capital Management, Inc. (1992-1995).
Consultant on public and private pension funds
(1991-1993); President of Lepercq Realty
Advisors (1988-1990). Member of Advisory
Council of Polytechnic University. Age 72.

Leo M. Walsh, Jr. ............... Director and/or Trustee of several investment July 1992 1,000
Director, Chairman of the companies advised by Hyperion Capital
Audit Committee Management, Inc. or by its affiliates
(1989-Present). Director of Equitable Real
Estate Hyperion Mortgage Opportunity Fund,
Inc. and Equitable Real Estate Hyperion High
Yield Commercial Mortgage Fund, Inc.
(1995-Present). Financial Consultant for
Merck-Medco Managed Care, L.L.C. (formerly

Medco Containment Services, Inc.)
(1994-Present). Formerly, Financial Consultant
for Synetic, Inc., a manufacturer of porous
plastic materials for health care uses
(1989-1994); 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 Invest-
ment 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 64.
</TABLE>

<PAGE>

Kenneth C. Weiss* ............... President and Chief Executive Officer of Hy- July 1992 5,646
Director, Chairman of the perion Capital Management, Inc. (February
Board of Directors 1992-Present). Chairman of the Board,
Director/ Trustee and/or officer of several
investment companies advised by Hyperion
Capital Management, Inc. or by its affiliates
(February 1992-Present). Director and
President of Equitable Real Estate Hyperion
Mortgage Opportunity Fund, Inc. and Equitable
Real Estate Hyperion High Yield Commercial
Mortgage Fund, Inc. and their Investment
Advisor (1995-Present). Formerly, Director of
First Boston Asset Management (1988-February
1992). Director of The First Boston Corpo-
ration (until 1988). Age 45.

Lewis S. Ranieri* ............... Chairman and Chief Executive Officer of Ranieri July 1992 9,500
Director & 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 Hyperion Capital
Management, Inc. (since 1989); Chairman of the
Board and/or Director of several investment
companies advised by Hyperion Capital
Management, Inc. or by its affiliates (since
1989); Director of Equitable Real Estate
Hyperion Mortgage Opportunity Fund, Inc. and
Equitable Real Estate Hyperion High Yield
Commercial Mortgage Fund, Inc. (since 1995);
Chairman of Bank United Corp., the parent of
Bank United (formerly 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 (since 1989). Formerly, Vice
Chairman of Salomon Brothers Inc (until 1987).
Age 50.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED DIRECTLY
PRINCIPAL OCCUPATION OR INDIRECTLY, ON
NAME AND OFFICE DURING PAST FIVE YEARS, DIRECTOR MAY 31,
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE SINCE 1997(**)
- --------------------------------- ------------------------------------------------ --------- -----------------
<S> <C> <C> <C>
Patricia A. Sloan* .............. Managing Director of Ranieri & Co., Inc. July 1992 300
Director, Secretary (1988-Present). Secretary, Director and/or
Trustee of several investment companies
advised by Hyperion Capital Management, Inc.
(1989-Present). Director of Bank United Corp.,
the parent of Bank United (formerly Bank
United of Texas FSB) (1988-Present). Formerly,
Director of the Financial Institutions Group
of Salomon Brothers Inc (1972-1988). Age 53.

<CAPTION>
CLASS III DIRECTORS TO SERVE UNTIL 1999 ANNUAL MEETING OF STOCKHOLDERS OR TERMINATION OF THE TRUST:
<S> <C> <C> <C>
Rodman L. Drake ................. President, Mandrake Group (1993-Present). July 1992 209

Director, Member of the Director and/or Trustee of several investment
Audit Committee companies advised by Hyperion Capital
Management, Inc. (1989-Present). Formerly,
Co-Chairman of KMR Power Corporation
(1993-1997); Formerly, Consultant to
Rockefeller & Co., Inc. (1990-1996); Managing
Director and Chief Executive Officer of Cresap
(1980-1990). Trustee of Excelsior Funds.
Director, Parsons Brinckerhoff, Inc. and Latin
American Growth Fund, Inc. Age 54.

Garth Marston ................... Managing Director of M.E. Associates, a fi- July 1992 0
Director, Member of the nancial consulting group (1986-Present).
Audit Committee 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 70.
</TABLE>

- ------------------
* Interested persons 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.

** The holdings of no director or nominee represented more than 1% of the
outstanding shares of the Trust.

<PAGE>

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 at the discretion of the Board of
Directors 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 where dates of service
are noted, all officers listed below served as such throughout the 1997 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 45 July 1992
President and Chief Executive Officer of Hyperion
Capital Management, Inc.; See information under 'ELECTION
OF DIRECTORS.'

Louis C. Lucido President 48 July 1992
Managing Director and Chief Operating Officer (resigned
of Hyperion Capital Management, Inc. (February 1992-June June 1997)
1997). President of several investment companies advised
by Hyperion Capital Management, Inc.(1992-June 1997).
Formerly, Senior Vice President and Director, Progressive
Capital Management, Inc. (1991-February 1992); Senior Vice
President and Manager, Donaldson Lufkin & Jenrette
(1988-1991); Vice President, Smith Barney, Harris Upham &
Co., Inc. (1987-1988); Vice President, Merrill Lynch,
Pierce, Fenner & Smith (1981-1987).

Clifford E. Lai President 43 June 1997
Managing Director and Chief Investment Officer,
Hyperion Capital Management, Inc. (March 1993-Present). Senior Vice President (April 1993 -
Formerly, Managing Director and Chief Investment June 1997)
Strategist for Fixed Income, First Boston Asset Management
(1989-1993); Vice President, Morgan Stanley & Co.
(1987-1989).

Patricia A. Botta Vice President 40 December 1996
Director of Hyperion Capital Management, Inc.
(1989-Present). Formerly, with the Davco Group (1988-1989)
and with Salomon Brothers Inc (1986-1988).

L. David Ricci Vice President 34 September 1994
Vice President of Hyperion Capital Management, Inc. (resigned
(1992-Present). Formerly, Senior Securities Analyst of June 1996)
Teachers Insurance and Annuity Association (1988-1991).

Patricia A. Sloan Secretary 53 July 1992
Managing Director of Ranieri & Co., Inc.
(1988-Present); See information under 'ELECTION OF
DIRECTORS.'
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND
PRINCIPAL OCCUPATION OFFICE AGE OFFICER SINCE
- -------------------------------------------------------------- ---------------------- --- ---------------
<S> <C> <C> <C>
Joseph W. Sullivan Treasurer 40 September 1995

Vice President of Hyperion Capital Management, Inc.
(August 1995-Present). Treasurer of several investment
companies advised by Hyperion Capital Management, Inc. or
by its affiliates (September 1995-Present). Formerly, Vice
President in Merrill Lynch & Co.'s Investment Banking
Division; Treasurer and Chief Financial Officer of several
Merrill Lynch subsidiaries, responsible for all financial
reporting, accounting, ministerial and administrative
services (1990-1995); Assistant Vice President of Standard
& Poor's Debt Rating Group (1988-1990); Assistant Vice
President and Operations Controller of Shearson Lehman
Hutton, Inc., engaged in the identification, analysis and
financial administration of public and private real estate
investment programs (1983-1987). A Licensed Certified
Public Accountant since 1981.
</TABLE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AT JUNE 30, 1997

<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS OF AMOUNT AND NATURE OF OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS SOURCE
- ------------------ ----------------------------- -------------------- ------- ------
<S> <C> <C> <C> <C>
Lowe, Brockenbrough & 4,956,200 shares 8.7% 13G
Common Stock Tattersall, Inc.
6620 West Broad Street
Suite 300
Richmond, Virginia 23230
</TABLE>

At May 31, 1997, directors and officers of the Trust as a group owned
beneficially less than 1% of the outstanding shares of the Trust. No person,
other than those listed above, 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 One Liberty
Plaza, New York, New York 10006-1404.

INTERESTED PERSONS. Mr. Ranieri serves as a 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 results of the audit, including any comments or recommendations they might
want to make in that connection. During the last fiscal year of the Trust, the
full Board of Directors met six times, and the Audit Committee met one time. All
of the directors, except

<PAGE>

Mr. Marston, attended the Audit Committee meeting and at least 75% of the
aggregate of the Board meetings and the Audit Committee meeting. 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. 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.

DIRECTORS' COMPENSATION TABLE
FOR THE TWELVE MONTH PERIOD ENDED 5/31/97

<TABLE>
<CAPTION>
TOTAL DIRECTORS'
DIRECTORS' COMPENSATION
COMPENSATION FROM THE TRUST
FROM THE AND THE FUND
TRUST COMPLEX
------------ ----------------
<S> <C> <C>
Rodman L. Drake............... $ 13,500 $ 55,750
Garth Marston................. 10,500 48,750
Harry E. Petersen, Jr......... 13,500 55,750
Leo M. Walsh, Jr.............. 13,500 55,750
------------ ----------------
$ 51,000 $216,000
------------ ----------------
------------ ----------------
</TABLE>

REQUIRED VOTE

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.

<PAGE>

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, 1998 at a meeting
scheduled to be held on September 23, 1997. The appointment of independent
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,
1997 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 or she 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.

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 advisor
under the Investment Advisors Act of 1940, as amended. The business address of
the Advisor and its officers and directors is One Liberty Plaza, New York, New
York 10006-1404. The Trust has also engaged Hyperion Capital Management, Inc. as
the Trust's administrator. The administrator's address is the same as that of
the Advisor.

The Advisor is a 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 1, 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, and Mr. Lai, President of the Trust, are employees
of the Advisor, and each may be entitled, in addition to receiving a 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. Sullivan, Treasurer 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

<PAGE>

individuals with extensive experience in creating, evaluating and investing in
Mortgage-Backed Securities, Derivative Mortgage-Backed Securities and
Asset-Backed Securities, and in using 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, President and Chief Executive Officer of the
Advisor and Chairman of the Board of the Trust, was a Director of First Boston
Asset Management Corporation and was a Director of The First Boston Corporation.
Clifford E. Lai, Chief Investment Officer of the Advisor and President of the
Trust, was Managing Director and Chief Investment Strategist for Fixed Income
for First Boston Asset Management Corporation.

On June 14, 1996, the Trust announced that in light of the current market
environment, and the Trust's scheduled termination date of November 30, 1997,
the Trust's Investment Advisor had 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, it is unlikely that the Trust will achieve its
objective to return $10.00 per share by the scheduled termination date.

On July 16, 1996, the Trust announced the following actions aimed at
increasing shareholder value. Specifically, the Board of Directors authorized
the Trust to purchase and retire up to 25% of its outstanding shares, or
approximately 15.1 million of the Trust's shares in the open market. In
accordance with the Board's resolution and applicable regulatory requirements,
shares will be repurchased at levels below the current net asset value ('NAV'),
inclusive of transaction costs. By doing so, the Trust will attempt to capture
the price difference between the market price and the Trust's current NAV. This
program is designed to attempt to reduce the discount on the Trust's shares
between its stock market price and NAV. During the year ended May 31, 1997, the
Trust repurchased 3,587,200 shares of its outstanding common stock at a cost of
$25,239,535 and at an average discount of 3.61% from its net asset value per
share. From the inception of the Trust through May 31, 1997, the Trust
repurchased 3,642,500 shares of its outstanding common stock or 6%. However, due
to the market price of the stock being very close to its NAV in recent months as
well as other market conditions, the Trust has not repurchased any of its common
stock in recent months. Given the Trust's short remaining time to its scheduled

termination date of November 30, 1997, the Advisor has increased the Trust's
investments in fixed-maturity securities that will mature on or about the
Trust's termination date. This has limited the Trust's exposure to NAV
volatility caused by interest rate movements and will continue to do so during
the Trust's remaining life. In light of the reduced profile of the Trust's
investment activities, the Advisor has reduced its investment advisory fee from
50 basis points (.50%) per annum to 20 basis points (.20%) per annum, an
effective 30 basis points reduction per annum.

INVESTMENT ADVISORY AGREEMENT

On September 17, 1996, the Board of Directors of the Trust, including those
persons identified as interested persons and 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 (the 'Disinterested Directors'),
approved extension of the revised Advisory Agreement through September 30, 1997.
At the time of the Board's approval of the latest extension of the Advisory
Agreement, Messrs. Lewis Ranieri, Weiss and Ms. Sloan were interested persons of
the Trust. The Advisory Agreement was last submitted to a vote of the
Stockholders of the Trust at the Annual Meeting of the Stockholders of the Trust
held on

<PAGE>

September 29, 1993. At that meeting, the Stockholders approved the continuance
of the revised Advisory Agreement. The Advisory Agreement provides that it will
continue from year to year, but only so long as such continuation is
specifically approved at least annually by both (1) the 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) by the vote of a
majority of the Disinterested Directors cast in person at a meeting called for
the purpose of voting on such approval. 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). The Board of
Directors will consider continuance of the Advisory Agreement until October 1,
1998 at a meeting scheduled for September 23, 1997.

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). On July 16, 1996, the
Advisor agreed to reduce its investment advisory fee from 50 basis points (.50%)
per annum to 20 basis points (.20%) per annum, an effective 30 basis points
reduction per annum. Investment advisory fees earned by the Trust to the Advisor
during the last fiscal year of the Trust amounted to $1,003,190.

ADMINISTRATION AGREEMENT

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 May
31, 1997, the Administrator earned $595,790 in Administration fees. In addition,
the Administrator has entered into Administration Agreements with the other
investment companies listed on the following page, generally under the same fee
structure as noted above. The only exception is the fee structure for services
rendered to the Hyperion Total Return Fund, Inc., which stipulates a fee paid
monthly at an annual rate of 0.20% of its average weekly assets.

<PAGE>

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 1997
- ------------------------------------- ---------------------------------------------- ---------------
(in Millions)
<S> <C> <C>
The Hyperion Total Return Fund, Inc.* 0.65% of the Fund's average weekly net assets $ 252.3

Hyperion 1999 Term Trust, Inc. 0.50% of the Trust's average weekly net assets 437.6

Hyperion 2002 Term Trust, Inc. 0.50% of the Trust's average weekly net assets 283.4

Hyperion 2005 Investment Grade
Opportunity Term Trust, Inc. 0.65% of the Trust's average weekly net assets 176.2
</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 $12,000 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.

In selecting brokers or dealers to execute particular transactions and in
evaluating the best net price and execution available, 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). The Advisor is also
authorized to cause the Trust to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction. The Advisor must
determine in good faith, however, that such commission was reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms of that particular transaction or in terms of all the accounts over which
the Advisor exercises investment discretion. Research services furnished by
brokers through whom the Trust effects securities transactions may be used by
the Advisor in servicing all of the accounts for which investment discretion is
exercised by the Advisor, and not all such services may be used by the Advisor
in connection with the Trust.

<PAGE>

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, 1997, 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 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 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. The Advisor
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. 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 U.S.
Court of Appeals for the Second Circuit on August 17, 1995. On October 15, 1996,
a three judge panel of the Court of Appeals for the Second Circuit in a two to
one vote affirmed Judge Michael B. Mukasey's July 12, 1995 opinion and order
dismissing with prejudice plaintiffs' second consolidated amended complaint for
failure to identify any misrepresentations or misleading omissions in the
registration statement and prospectus for the Trust. Appellants filed a petition
for rehearing and suggestion for rehearing in banc by the entire appellate court

on October 29, 1996. On January 7, 1997, the appellate court denied the
appellants' petition for rehearing in banc. On April 7, 1997, plaintiffs filed a
petition for a writ of certiorari in the Supreme Court of the United States. On
May 8, 1997, the defendants filed briefs in opposition to the petition for a
writ of certiorari in the Supreme Court of the United States. On June 9, 1997,
the Supreme Court of the United States denied the petition for a writ of
certiorari in Hyperion Securities Litigation, (under the name Marilyn Okley, et
al v. Hyperion 1999 Term Trust, Inc., et al), and no further appeals are
possible.

<PAGE>

The Trust, its directors, certain of its officers and underwriters and the
Advisor have been named as defendants in Moelis v. Hyperion 1997, et al
(hereafter referred to as 'Moelis'), a purported class action originally filed
on May 6, 1994 and amended shortly thereafter in the United States District
Court, Southern District of New York, Index No. 94-CIV-3328 (MBM). The claims in
the Moelis complaint allege, among other things, (i) that the prospectus and
several post-issuance reports and public statements were misleading by not
disclosing all of the risks involved in the Trust's investments in certain
mortgage-backed securities including 'interest-only strips', and (ii) that the
Trust would invest or had invested in U.S. Treasury Note commodity futures
contracts in violation of the Trust's investment objectives. The Moelis
complaint also alleges that it was false and misleading for the prospectus to
state that 'under current market conditions, the Trust does not intend to engage
in any futures, options or interest rate hedging transactions'. Plaintiff agreed
that the defendants need not respond to any of the claims in the Moelis
complaint pending the District Court's disposition of the motion to dismiss In
re: Hyperion Securities Litigation. Subsequent to the court's dismissal of the
second consolidated amended complaint In re: Hyperion Securities Litigation,
plaintiff sought leave to file a second amended complaint. Leave to do so was
granted orally by the Court on October 23, 1995, and the second amended
complaint was served on February 6, 1997. On April 4, 1997, defendants filed a
motion to dismiss the second amended complaint.

On August 4, 1997, the U.S. District Court for the Southern District of New
York entered an order preliminarily approving the settlement of the Moelis class
action pending against the defendants. The settlement is subject to final
approval by the court after its October 16, 1997 settlement hearing, as well as
other conditions. The settlement provides for a cash payment of $5,000,000
before plaintiff's legal fees and other costs. The settlement amount (none of
which is being paid by the Trust) will be allocated among persons and entities
who are not excluded and who purchased the Trust's common stock at any time
between issuance on October 23, 1992 and October 8, 1993. Notice has been sent
by plaintiff's counsel to all persons and entities that can be identified as
being entitled to share in the settlement payment. The defendants continue to
assert that the claims are without merit and believe that the proposed
settlement would be beneficial to the Trust.

The Trust, certain of its directors, and the Advisor have been named as
defendants in Karpus v. Hyperion Capital Management, Inc., et al, a purported
class action brought on behalf of Trust's shareholders that was filed in the

United States District Court, Southern District of New York on June 21, 1996
(File No. 96-CIV-4671). Plaintiff's original complaint was dismissed by the
District Court on November 15, 1996, with leave to replead. The amended
complaint alleged (as did the original) that the Trust failed to adhere to a
fundamental policy set forth in the registration statement by failing to
continue to reduce the sensitivity to changes in interest rates of the Trust
portfolio beginning in mid-1995, that this failure was reckless behavior on the
part of the defendants, and that these actions constitute a violation of the
1940 Act and are also breaches of fiduciary duty and trust. On April 2, 1997,
Judge Shira A. Scheindlin of the District Court dismissed with prejudice the
amended complaint. Plaintiff failed to file an appeal within the time permitted
for such filing.

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. In

<PAGE>

addition, the Trust's Articles of Incorporation provide for the indemnification
of its Directors. The Trust's Directors and Advisor have also notified the Trust
of their intention to seek indemnification. The Trust has incurred litigation
expenses for the year ended May 31, 1997 to the indemnified parties noted above,
based upon amounts which are deemed reimbursable in accordance with the
indemnification provisions. Pursuant to these indemnification provisions, the
Trust reimbursed $749,795 of litigation expenses to the Advisor during the year
ended May 31, 1997. This amount was previously advanced by the Advisor on behalf
of the Trust, its directors, certain of its officers and underwriters. The Trust
has included these amounts in legal fees.

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

It is expected that the Trust will terminate on or about November 30, 1997,
but in the event that it does not, 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 1998 must be received by the Trust for inclusion in

the Trust's proxy statement and proxy relating to that meeting no later than
April 30, 1998.

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., or Corporate Investor Communications,
Inc., 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 Corporate Investor Communications, Inc. 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.

September 8, 1997

<PAGE>

HYPERION 1997 TERM TRUST, INC.

PROXY SOLICITED ON BEHALF OF THE DIRECTORS

The undersigned hereby appoints Lewis S. Ranieri, Kenneth C. Weiss,
Joseph W. Sullivan, 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 Millenium Hilton, 55 Church Street (next to the
World Trade Center), New York, New York 10007, on Tuesday, October 14, 1997
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.

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.

Date , 1997

Signature(s), (Title(s), if
applicable)

PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN THE ENCLOSED
ENVELOPE

I PLAN DO NOT PLAN TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS ON
OCTOBER 14, 1997

<PAGE>

Please indicate your vote by an "X" in the appropriate box below.
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.

<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: FOR all nominees listed (except
as marked to the contrary below) WITHHOLD authority to
vote for all nominees

Class I:
Harry E. Petersen, Jr.
Leo M. Walsh, Jr.
</TABLE>

(Instruction: To withhold authority to vote for any individual nominee(s),
write the name(s) of the nominee(s) on the line below.)

<TABLE>
<S> <C> <C> <C>
2. Ratification or rejection of the
selection of independent accountants
(a vote "FOR" is a vote for ratification) FOR AGAINST ABSTAIN
</TABLE>

PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE.