SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
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 Section 240.14a-11(c) or Section
240.14a-12
Hyperion 2002 Term Trust, Inc.
(Name of Registrant/s 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] No fee required.
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
<PAGE>
HYPERION 2002 TERM TRUST, INC.
One Liberty Plaza New York, New York 10006-1404
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
July 31, 2000
To the Stockholders:
The Annual Meeting of Stockholders of Hyperion 2002 Term Trust, Inc.
(the "Trust") will be held at The Downtown Association, 60 Pine Street (between
William Street and Pearl Street), New York, New York 10005, on Tuesday, October
10, 2000, at 9:45 a.m., for the following purposes:
1. To elect directors (Proposal 1).
2. To ratify or reject the selection of PricewaterhouseCoopers
LLP as the independent accountants of the Trust for the
fiscal year ending May 31, 2001 (Proposal 2).
3. To transact any other business that may properly come before the
meeting.
The close of business on July 24, 2000 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 eliminate 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:
REGISTRATION VALID SIGNATURE
------------ ---------------
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
<PAGE>
HYPERION 2002 TERM TRUST, INC.
One Liberty Plaza * 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 2002 Term Trust, Inc. (the "Trust") of
proxies to be used at the Annual Meeting of Stockholders of the Trust to be
held at The Downtown Association, 60 Pine Street (between William Street and
Pearl Street), New York, New York 10005, at 9:45 a.m. on Tuesday, October 10,
2000, 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 31, 2000. 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 PricewaterhouseCoopers LLP as the independent accountants
of the Trust for the fiscal year ending May 31, 2001. The close of business on
July 24, 2000 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 30,446,839
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, 2000, Class II, 2001,
and Class III, 2002 or termination of the Trust. 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, 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 Mr. Ranieri and Ms. Sloan, and for the election of Mr. John
W. English to serve until the 2003 Annual Meeting of Stockholders or
termination of the Trust. Each nominee has indicated that he or she 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 re-election and one
nominee for 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
nominees and the five members of the Board of Directors who will continue to
serve after the Annual Meeting of the Trust:
1
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<TABLE>
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SHARES OF COMMON
STOCK
BENEFICIALLY OWNED
DIRECTLY OR
NAME AND OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS, INDIRECTLY, ON
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE DIRECTOR SINCE MAY 31,2000 (**)
-------------- --------------------------- -------------- ----------------
CLASS I NOMINEES TO SERVE UNTIL 2003 ANNUAL MEETING OF
STOCKHOLDERS OR TERMINATION OF THE TRUST:
Lewis S. Ranieri*
Director Chairman and Chief Executive Officer of July 1992 6,250
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 Vice Chairman of the
Board of Hyperion Capital Management, Inc.
(since December 1998); Director and Chairman
of the Board of Hyperion Capital Management,
Inc. (1989-November 1998); Chairman of the
Board (1989-December 1998) and/or Director
(since 1989) of several investment companies
advised by Hyperion Capital Management, Inc.
or by its affiliates; Director and Chairman
of Bank United Corp., and Director of Bank
United (since 1988); 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, Director of Lend Lease
Hyperion Mortgage Opportunity Fund, Inc.
(formerly Equitable Real Estate Hyperion
Mortgage Opportunity Fund, Inc.) and Lend
Lease Hyperion High Yield Commercial
Mortgage Fund, Inc. (formerly Equitable Real
Estate Hyperion High Yield Commercial
Mortgage Fund, Inc.) (1995-1999); Vice
Chairman of Salomon Brothers Inc (until
1987).
Age 53.
Patricia A. Sloan*
Director, Secretary Consultant (April 2000-Present) and July 1992 300
Managing Director of Ranieri & Co., Inc.
(1988-April 2000). Secretary, Director
and/or Trustee of several investment
companies advised by Hyperion Capital
Management, Inc. or by its affiliates
(1989-Present). Director of Bank United
Corp., the parent of Bank United (1988-
Present). Formerly Director of the
Financial Institutions Group of Salomon
Brothers Inc (1972-1988).
Age 56.
2
<PAGE>
SHARES OF COMMON
STOCK
BENEFICIALLY OWNED
DIRECTLY OR
NAME AND OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS, INDIRECTLY, ON
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE DIRECTOR SINCE MAY 31,2000 (**)
-------------- --------------------------- -------------- ----------------
John W. English
Director, Member of Director and former Chairman of the Board September 1999 200
The Audit Committee of HSBC's China Fund, Inc. (1993-Present),
Chairman and Director of State Street Bank's
Select Sector SPDR Trust (1999-Present);
Director of A.L.T. Films, Inc. (1999-
Present); Trustee of Northern Trust's
Northern Funds (1993-Present); Trustee of
Washington Mutual's WM Funds (1994-Present);
and Director of Intelliworxx, Inc. (1999-
Present).
Age 67.
CLASS II DIRECTORS TO SERVE UNTIL 2001 ANNUAL MEETING OF STOCKHOLDERS:
Rodman L. Drake
Director, Member of President, Continuation Investments Group Inc. July 1992 317
the Audit Committee (1997-Present). Director, Alliance Group
Services, Inc. (1988-Present). Director,
Hotelevision, Inc. (1999-Present). Chairman,
Metro Cash Card International (1999-Present).
Director and/or Trustee of several investment
companies advised by Hyperion Capital
Management, Inc. (1989-Present). Director,
Parsons Brinckerhoff, Inc. (1995-Present).
Formerly, Co-Chairman of KMR Power Corporation
(1993-1997); President, Mandrake Group (1993-
1997); Managing Director and Chief Executive
Officer of Cresap (1980-1990).
Age 57.
Andrew M. Carter*
Director, Chairman Chairman and Chief Executive Officer of July 1998 -
of the Board Hyperion Capital Management, Inc. (November
1998-Present). Vice Chairman of The China
Business Group (1996-Present). Director,
Manchester Capital Management (1997-Present).
Director, BioSignia (1999-Present). Presently
officer of four charitable boards: The New
England Conservatory, The Loomis Chaffee
School, The William E. Simon Graduate School
of Business Administration at the University
of Rochester, and The Big Brother Association
of Boston. Director of several investment
companies advised by Hyperion Capital
Management, Inc. (July 1998-Present). Formerly
President and Founding Principal, Andrew M.
Carter & Company (1994-1998); Director and
Senior Vice President, Jennison Associates
Capital Corp. (1975-1993); Founder, Standard
& Poor's/Carter, Doyle (1972-1975); Vice
President, Head of Fixed Income Group,
Wellington Management Co. (1968-1972); and
Manager of the Harvard Endowment bond
portfolio, Harvard Treasurer's Office (1964-
1968).
Age 60.
3
<PAGE>
SHARES OF COMMON
STOCK
BENEFICIALLY OWNED
DIRECTLY OR
NAME AND OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS, INDIRECTLY, ON
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE DIRECTOR SINCE MAY 31,2000 (**)
-------------- --------------------------- -------------- ----------------
CLASS III DIRECTORS TO SERVE UNTIL 2002 ANNUAL MEETING OF STOCKHOLDERS
OR TERMINATION OF THE TRUST:
Robert F. Birch
Director, Member of Chairman and President, New America High December 1998 1,800
the Audit Committee Income Fund (1992-Present). Chairman of the
Board and Co-Founder, The China Business Group,
Inc. (1996-Present). Formerly, Director and
Strategic Planning Consultant, Dewe Rogerson,
Ltd. (1994-1998); Chairman and Chief
Executive Officer, Memtek Corporation (1990-
1991); Associated with Finn Wishengrad Warnke
& Gayton, a consulting firm specializing in
work-outs of financially distressed companies
(1988-1989); President and Chief Executive
Officer, Gardner and Preston Moss, Inc. (1969-
1987).
Age 64.
Harry E. Petersen, Jr.
Director, Member of Director and/or Trustee of several investment July 1992 200
the Audit Committee companies advised by Hyperion Capital
Management, Inc. or by its affiliates (1992-
Present). Senior Advisor to Cornerstone Equity
Advisors, Inc. (1998-Present). Formerly,
Senior Advisor to Potomac Babson Inc. (1995-
1998); Director of Equitable Real Estate
Hyperion Mortgage Opportunity Fund, Inc. and
Equitable Real Estate Hyperion High Yield
Commercial Mortgage Fund, Inc. (1995-1997);
Director of Lexington Corporate Properties,
Inc. (1993-1997); Consultant to Advisers
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 75.
4
<PAGE>
SHARES OF COMMON
STOCK
BENEFICIALLY OWNED
DIRECTLY OR
NAME AND OFFICE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS, INDIRECTLY, ON
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE DIRECTOR SINCE MAY 31,2000 (**)
-------------- --------------------------- -------------- ----------------
Leo M. Walsh, Jr.
Director, Chairman Director and/or Trustee of several investment July 1992 7,000
of the Audit companies advised by Hyperion Capital
Committee Management, Inc. or by its affiliates (1989-
Present). Financial Consultant for Merck-Medco
Managed Care L.L.C. (formerly Medco Containment
Services Inc.) (1994-Present). Director of Lend
Lease Hyperion Mortgage Opportunity Fund, Inc.
(formerly, Equitable Real Estate Hyperion
Mortgage Opportunity Fund, Inc.) and Lend Lease
Hyperion High Yield CMBS Fund, Inc. (formerly,
Equitable Real Estate Hyperion High Yield
Commercial Mortgage Fund, Inc.)(1999-Present).
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 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 67.
* 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.
</TABLE>
5
<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 2000
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:
NAME AND
PRINCIPAL OCCUPATION OFFICE AGE OFFICER SINCE
-------------------- ------ --- -------------
Andrew M. Carter Chairman 60 December 1998
See information under "ELECTION OF DIRECTORS."
Clifford E. Lai President/ 47 June 1997
President (since December 1998) and Chief Senior Vice (April 1993-
Investment Officer, Hyperion Capital President June 1997)
Management, Inc. (March 1993-Present).
President of several investment companies
advised by Hyperion Capital Management, Inc.
or by its affiliates (1993-Present). Formerly
Managing Director and Chief Investment
Strategist for Fixed Income, First Boston Asset
Management (1989-1993); Vice President, Morgan
Stanley & Co. (1987-1989).
Patricia A. Botta Vice 43 March 1997
Director of Hyperion Capital Management, Inc. President
(1989-Present). Formerly with the Davco Group
(1988-1989) and with Salomon Brothers Inc
(1986-1988).
Patricia A. Sloan Secretary 56 February 1993
See information under "ELECTION OF DIRECTORS."
Thomas F. Doodian Treasurer 41 February 1998
Chief Operating Officer (since December 1998)
and Director of Finance and Operations,
Hyperion Capital Management, Inc. (July 1995-
November 1998). Treasurer of several
investment companies advised by Hyperion
Capital Management, Inc. (February 1998-
Present). Formerly Vice President in Mortgage
Backed Trading at Mabon Securities Corporation
(1994-1995); fixed income analyst, trader, and
Vice President and Controller at Credit Suisse
First Boston (1984-1994).
6
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AT MAY 31, 2000
-------------------------------------------------------------------------------------------------
Title of Name and Address of Amount and Nature of Percent Of
Class Beneficial Owner Beneficial Ownership Class Source
-------------------------------------------------------------------------------------------------
Common Tattersall Advisory Group, Inc. 10,271,500 shares 33.7% 13G
Stock 6802 Paragon Place, Suite 200
Richmond, Virginia 23230-1655
Common Karpus Management, Inc. 2,382,475 shares 7.83% 13D
Stock 17 Tobey Village Office Park
Pittsford, New York, 14534
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</TABLE>
At May 31, 2000, 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, its officers and directors is One Liberty Plaza,
New York, New York 10006-1404.
INTERESTED PERSONS. Mr. Ranieri serves as a Director and Vice
Chairman of the Board of the Advisor. Mr. Carter serves as the Chairman 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, Carter, 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, Birch
and English, 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 of the Trust, the full Board of Directors met four times, and the
Audit Committee met one time. All of the members of the Audit Committee
attended the Audit Committee meeting and all of the directors, except Mr.
English, attended at least 75% of the aggregate of the Board meetings and the
Audit Committee meeting. The Trust has Nominating and Compensation Committees.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS. No remuneration was
paid by the Trust to persons while they 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 $8,500 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 Board of Directors' meeting.
DIRECTORS' COMPENSATION TABLE FOR THE TWELVE MONTH PERIOD ENDED 5/31/00
Directors' Compensation Total Directors' Compensation
----------------------- -----------------------------
from the Trust from the Trust and the Fund Complex
-------------- -----------------------------------
Robert F. Birch...... $11,500 $23,000
Rodman L. Drake...... $11,500 $23,000
John W. English...... $3,750 $12,375
Harry E. Petersen, Jr. $11,500 $23,000
Leo M. Walsh, Jr. ... $11,500 $23,000
Kenneth C. Weiss.... $11,500 $23,000
------- -------
$61,250 $127,375
------- --------
------- --------
7
<PAGE>
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.
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 PricewaterhouseCoopers LLP as
independent accountants of the Trust for the fiscal year ending May 31, 2001 at
a meeting scheduled to be held on September 19, 2000. 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 PricewaterhouseCoopers LLP that at May
31, 2000, neither that firm nor any of its partners had any direct or material
indirect financial interest in the Trust. A representative of
PricewaterhouseCoopers 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 PricewaterhouseCoopers 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 Advisers 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 a Vice Chairman of the Board of the Advisor and 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. Mr. Carter is the Chairman and
Chief Executive Officer of the Advisor and Chairman of the Trust. 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. Lai, the President of the Trust and the
Advisor, 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. Ms. Botta, Vice President of the Trust, and
Mr. Doodian, Treasurer of the Trust, are also employees 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 primarily in
mortgage-backed securities. Its management includes several 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, Vice Chairman of the Advisor
and 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
8
<PAGE>
firm's activities in the mortgage, real estate and government guaranteed areas.
Clifford E. Lai, President and Chief Investment Officer of the Advisor and
President of the Trust, was formerly Managing Director and Chief Investment
Strategist for Fixed Income for First Boston Asset Management Corporation.
INVESTMENT ADVISORY AGREEMENT
On September 21, 1999, 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 Advisory Agreement through September 30,
2000. At the time of the Board's approval of the latest extension of the
Advisory Agreement, Messrs. Carter and Ranieri 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 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, 2001 at a meeting
scheduled for September 19, 2000.
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 $1,348,264.
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. The Advisor, in its
capacity as Administrator, has entered into a Sub-Administration Agreement with
Investors Capital Services, Inc., (the "Sub-Administrator") pursuant 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 average rate of 0.075% per annum of the
first $650 million of the Trust's average weekly net assets and 0.005% of any
amounts above $650 million. For the twelve month period ended May 31, 2000, the
Administrator earned $411,083 in Administration fees. In addition, the
Administrator has entered into Administration Agreements with the other
investment companies listed below, 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.
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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.
Investment Advisory Fee Approximate Net Assets at May 31, 2000
----------------------- --------------------------------------
(In Millions)
The Hyperion
Total Return
Fund, Inc.* 0.65% of the Fund's $208
average weekly net assets
Hyperion 2005 0.65% of the Trust's $151
Investment average weekly net assets
Grade
Opportunity
Term Trust,
Inc.
--------------
*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 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.
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, 2000, all filing
requirements applicable to the Trust's officers, directors, and greater than
ten-percent beneficial owners were complied with.
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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 2001
must be received by the Trust for inclusion in the Trust's proxy statement and
proxy relating to that meeting no later than March 30, 2001.
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.
July 31, 2000
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<PAGE>
HYPERION 2002 TERM TRUST, INC.
PROXY SOLICITED ON BEHALF OF THE DIRECTORS
The undersigned hereby appoints Andrew M. Carter and Clifford E. Lai,
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 2002 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 Downtown Association, 60 Pine Street (between
William Street and Pearl Street), New York, New York 10005, on Tuesday, October
10, 2000 at 9:45 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 , 2000
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 10,
2000
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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.
1. ELECTION OF DIRECTORS: FOR all nominees listed WITHHOLD authority to vote
(except as marked to for all nominees
the contrary below)
CLASS I:
John W. English
Lewis S. Ranieri
Patricia A. Sloan
(Instruction: To withhold authority to vote for any individual nominee(s),
write the name(s) of the nominee(s) on the line below.)
2. Ratification or rejection of the
selection of independent accountants
(a vote "FOR" is a vote for
ratification) FOR [ ] AGAINST [ ] ABSTAIN [ ]
PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
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