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<PAGE> PAGE 2
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<PAGE> PAGE 3
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SIGNATURE JOSEPH SULLIVAN
TITLE TREASURER
<TABLE> <S> <C>
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<CIK> 0000895415
<NAME> HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST INC.
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</TABLE>
EXHIBIT 99 - IN REFERENCE TO ITEM 77.B
February 23, 1996
To the Board of Directors of
Hyperion 2005 Investment Grade
Opportunity Term Trust, Inc.
In planning and performing our audit of the financial statements of
Hyperion 2005 Investment Grade Opportunity Term Trust, Inc. (the
"Trust"), for the period ended December 31, 1995, we considered its
internal control structure, including procedures for safeguarding
securities, in order to determine our auditing procedures for the
purposes of expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, and not to provide
assurance on the internal control structure.
The management of the Trust is responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal control
structure policies and procedures. Two of the objectives of an
internal control structure are to provide management with reasonable,
but not absolute, assurance that assets are appropriately safeguarded
against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's
authorization and recorded properly to permit preparation of
financial statements in conformity with generally accepted accounting
principles.
Because of inherent limitations in any internal control structure,
errors or irregularities may occur and may not be detected. Also,
projection of any evaluation of the structure to future periods is
subject to the risk that it may become inadequate because of changes
in conditions or that the effectiveness of the design and operation
may deteriorate.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure
that might be material weaknesses under standards established by the
American Institute of Certified Public Accountants. A material
weakness is a condition in which the design or operation of the
specific internal control structure elements does not reduce to a
relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their
assigned functions. However, we noted no matters involving the
internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined
above as of December 31, 1995.
This report is intended solely for the information and use of
management and the Securities and Exchange Commission.
PRICE WATERHOUSE LLP
1777 Avenue of the Americas
New York, NY 10036
EXHIBIT 22 - IN REFERENCE TO ITEM 77.C
During the fiscal year ended December 31, 1995, Hyperion 2005 Investment Grade
Opportunity Term Trust, Inc. ("Trust") shareholders voted on a proposal at a
shareholders meeting on May 23, 1995 to approve or disapprove the Investment
Advisory Agreement (the "Advisory Agreement"), dated February 17, 1993,
between the Trust and Hyperion Capital Management, Inc. (the "Advisor"),
including the proposed revision thereof.
Shares Shares Shares
Voted Voted Voted
For Against Abstain
Proposal
To approve or disapprove
the Investment Advisory
Agreement between the Trust
and Hyperion Capital
Management, Inc., including
the proposed revision thereof 18,193,218 371,510 388,077
Generally this amendment to the Advisory Agreement provides expressly that the
Advisory Agreement does not waive any rights the Trust may have under Federal
or state securities laws, modifies provisions regarding non-assignability, of
the Advisory Agreement to track more closely the requirements in the 1940 Act
and makes a number of minor stylistic or clarifying changes. A copy of the
approved amended Advisory Agreement showing the approved revisions follows:
HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST, INC.
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT made as of the 23rd day of May 1995 between Hyperion 2005
Investment Grade Opportunity Term Trust, Inc. (the "Trust") and Hyperion
Capital Management, Inc. ("HCM").
WITNESSETH:
WHEREAS, the Trust, a closed-end investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act") desires to appoint
HCM as the investment adviser of the Trust's cash, securities and other
properties.
NOW, THEREFORE, the parties hereto agree as follows:
1. Appointment and Status as Investment Adviser. The Trust hereby
appoints HCM as the investment manager with respect to the cash, securities
and other properties of the Trust (the "Investment Account") and HCM hereby
accepts this appointment, on the terms and conditions set forth herein. HCM
shall give the Trust the benefit of its best judgment, efforts and facilities
in rendering its services as investment adviser.
2. Management of Account. HCM represents that it is a registered
investment adviser under the Investment Advisers Act of 1940, as amended. HCM
shall supervise and direct, with full authority and at its discretion, on the
Trust's behalf and at the Trust's risk, the investment of the assets contained
in the Investment Account in such manner as HCM may deem advisable in
accordance with the Trust's final Prospectus (the "Prospectus") and
resolutions adopted by the Trust's Board of Directors (the "Investment
Guidelines"), subject at all times to the policies and control of the Trust
Board of Directors. HCM hereby acknowledges receipt of copies of the
Prospectus and the Investment Guidelines in effect on the date hereof. The
Trust will furnish HCM from time to time with copies, properly certified or
authenticated, of all amendments or supplements to the foregoing, if any, and
all documents, notices and reports filed with the Securities and Exchange
Commission (the "SEC"). The Trust may from time to time amend the Investment
Guidelines. HCM will not be bound to follow any amendment to the Investment
Guidelines, however, until it has received written notice of the amendment
from the Trust. HCM shall abide by any and all laws and regulations affecting
or governing its activities as a registered investment adviser, whether or not
any investment restrictions resulting from such laws and regulations are
incorporated by the Trust into the Investment Guidelines. In the performance
of its duties hereunder, HCM shall at all times conform to: (a) all applicable
provisions of the 1940 Act, (b) the provisions of the Registration Statement
(including the Prospectus) of the Trust under the 1940 Act, (c) the provisions
of the Trust's Articles of Incorporation and the Trust's By-Laws, as amended
from time to time, and (d) any other applicable provisions of federal and
state law, and the rules of any applicable national securities organization.
3. Brokerage. HCM shall be responsible for decisions to buy and sell
securities for the Trust, broker-dealer selection, and negotiation of
brokerage commission rates. HCM's primary consideration in effecting
securities transactions shall be to obtain the best price and execution on an
overall basis. In performing this function HCM shall comply with applicable
policies established by the Board of Directors and shall provide the Board of
Directors with such reports as the Board of Directors may require in order to
monitor the Trust's portfolio transaction activities. In certain instances
HCM may make purchases of underwritten issues at prices which include
underwriting fees. The purchase price paid to dealers serving as market
makers may include a spread between the bid and asked prices. To the extent
that the execution and prices offered by more than one dealer are comparable,
HCM may, in its discretion, effect transactions with dealers that furnish
statistical, research or other information or services which HCM deems to be
beneficial to the Trust's investment program. Such research services
supplement HCM's own research. Research services may include the following:
statistical and background information on the U.S. economy; forecasts and
interpretations with respect to the U.S. money market fixed income markets;
information on federal, state, local and foreign political developments;
portfolio management strategies; performance information on securities,
indices and investment accounts; information concerning prices of securities;
the providing of equipment used to communicate research information; and the
providing of access to consultants who supply research information. Certain
research services furnished by dealers may be useful to HCM with clients other
than the Trust. Similarly, any research services received by HCM through
placement of portfolio transactions of other clients may be of value to HCM in
fulfilling its obligations to the Trust. HCM is of the opinion that the
material received is beneficial in supplementing its research and analysis;
and therefore, it may benefit the Trust by improving the quality of HCM's
investment advice. The advisory fee paid by the Trust shall not be reduced
because HCM receives such services as HCM must evaluate information received
as a result of such services, and thus receipt of such services does not
reduce HCM's workload.
4. Control by Board of Directors. Any management or supervisory
activities undertaken by HCM pursuant to this Agreement, as well as any other
activities undertaken by HCM on behalf of the Trust pursuant thereto, shall at
all times be subject to any applicable directives of the Board of Directors of
the Trust.
5. Custody. The assets of the Investment Account shall be held by
State Street Bank and Trust Company (the "Custodian"), which entity the Trust
hereby represents has agreed to act as sole custodian for the Trust.
6. Limit of Liability. (a) HCM shall be liable for loss only by reason
of any act or omission taken or omitted as a result of its willful
misfeasance, bad faith or gross negligence. HCM shall not be responsible for
any loss incurred by reason of any act or omission of Trust, the Custodian or
any other party; provided, however, that HCM will make such efforts as it
deems reasonable to require that brokers, dealers and banks selected by HCM
perform their obligations with respect to the Trust. HCM shall have no
obligation to seek to obtain any material non-public ("inside") information
about any issuer of securities, nor to purchase or sell, or to recommend for
purchase or sale, for the Investment Account the securities of any issuer on
the basis of any such information as may come into its possession.
(b) The Trust shall indemnify HCM to the fullest extent permitted by
law against any and all judgments, fines, amounts paid in settlement and
reasonable expenses, including attorney's fees incurred by HCM as the result
of any action, suit or proceeding against HCM in its capacity as investment
adviser of the Trust except to the extent that such action, suit or proceeding
results from willful misfeasance, bad faith or gross negligence on the part of
HCM in the performance of its duties under this Agreement.
Nothing in this Agreement shall in any way constitute a waiver or
limitation of any rights which the Trust may have under federal or state
securities laws.
7. Representations and Warranties of the Trust. The Trust represents
and warrants to HCM that (a) this Agreement has been duly authorized, executed
and delivered by the Trust and constitutes its valid and binding obligation,
enforceable in accordance with its terms; (b) no governmental authorizations,
approvals, consents or filings are required in connection with the execution,
delivery or performance of this Agreement by the Trust; and (c) the execution,
delivery and performance of this Agreement by the Trust will not violate or
result in any default under the Trust's charter or by-laws, any material
contract or agreement to which the Trust is a party or by which it or its
assets (including the Investment Account) may be bound or to the best of its
knowledge any statute or any rule, regulation or order of any government
agency or body.
8. Directions to HCM. All directions by or on behalf of the Trust to
HCM shall be in writing signed either (a) by a director or officer of the
Trust, or (b) by a duly authorized agent of the Trust. HCM shall not be
liable for any act or omission taken or omitted in reliance upon any direction
from the Trust signed in accordance with the immediately preceding sentence.
HCM also shall not be liable for any act or omission taken or omitted in
reliance upon any instrument, certificate or paper HCM reasonably believes to
be genuine and to be signed or presented by the proper person or persons.
9. Reports. HCM shall render to the Board of Directors of the Trust
such periodic and special reports as the Directors may reasonably request.
10. Services to Other Clients. The services of HCM to the Trust are
not to be deemed to be exclusive, and HCM shall be free to render investment
advisory or other services to others (including other investment companies)
and to engage in other activities, so long as its services under this
Agreement are not impaired thereby. It is understood and agreed that officers
or directors of HCM may serve as officers or directors of the Trust, and that
officers or directors of the Trust may serve as officers or directors of HCM
to the extent permitted by law; and that the officers and directors of HCM are
not prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, trustees
or directors of any other firm, trust or corporation, including other
investment companies. HCM shall have no obligation to purchase or sell for
the Trust, or to recommend for purchase or sale by the Trust, any security
that HCM, its principals, affiliates or employees may purchase for themselves
or for any other clients.
11. Relationship with Affiliate. HCM is under common control with
Ranieri & Co., Inc., a registered broker-dealer. HCM is the sole shareholder
of Hyperion Distributors, Inc., a registered broker-dealer and member of the
National Association of Securities Dealers, Inc.. HCM does not execute
transactions with Ranieri & Co., Inc. as a broker-dealer for its clients,
including the Trust.
12. Expenses. The expenses connected with the Trust shall be allocable
between the Trust and HCM as follows:
(a) HCM shall furnish, at its expense and without cost to the Trust,
the services of one or more officers of the Trust, to the extent that such
officers may be required by the Trust, for the proper conduct of its affairs;
travel expenses of employees and officers of HCM; office space, equipment,
research services and supplies; expenses of maintaining accounts, books, and
records, except to the extent such services are provided by a third party
pursuant to a contract with the Trust; and
(b) The Trust assumes and shall pay or cause to be paid all other
expenses of the Trust, including, without limitation: payments to the Trust's
administrator and underwriters; the charges and expenses of any registrar, any
custodian or depository appointed by the Trust for the safekeeping of its
cash, portfolio securities and other property, and any transfer, dividend or
accounting agent or agents appointed by the Trust; brokers' commissions,
chargeable to the Trust in connection with portfolio securities transactions
to which the Trust is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Trust to federal, state or other
governmental agencies; the costs and the expenses of engraving or printing of
certificates representing shares of the Trust; all costs and expenses in
connection with registration and maintenance or registration of the Trust and
its shares with the SEC and various states and other jurisdictions (including
filing fees, legal fees and disbursements of counsel); the costs and expenses
of printing, including typesetting, prospectuses of the Trust and distributing
supplements thereto, if any, to the Trust's shareholders; all expenses of
shareholders and directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
directors or director members of any advisory board or committee who are not
"interested persons" of the Trust (as defined in the 1940 Act); all expenses
incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of Trust's shares; charges and expenses of legal
counsel, including counsel to the directors of the Trust who are not
"interested persons" (as defined in the 1940 Act) of the Trust and of
independent accountants, in connection with any matter relating to the Trust;
membership dues of industry associations; interest payable on Trust
borrowings; postage; insurance premiums on property or personnel (including
offices and directors) of the Trust which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other
charges and costs of the Trust's operation unless otherwise explicitly
provided herein.
13. Delegation of Responsibilities. HCM may, but shall not be under
any duty to, perform services on behalf of the Trust which are not required by
this Agreement upon the request of the Trust's Board of Directors. Such
services will be performed on behalf of the Trust and HCM's charge in
rendering such services may be billed monthly to the Trust, subject to
examination by the Trust's independent accountants. Payment or assumption by
HCM of any Trust expense that HCM is not required to pay or assume under this
Agreement shall not relieve HCM of any of its obligations to the Trust nor
obligate HCM to pay or assume any similar Trust expense on any subsequent
occasions.
14. Non-Assignability. This agreement shall automatically terminate
upon any assignment (as that term is defined in the 1940 Act) of this
Agreement by HCM.
15. Termination. This Agreement shall continue in effect for a period
of more than two years from the date hereof only so long as such continuance
is specifically approved at least annually in conformity with the requirements
of the 1940 Act; provided, however, that this Agreement may be terminated
without the payment of any penalty, by the Trust at any time, by the Board of
Directors of the Trust or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Trust or by HCM at any time,
without the payment of any penalty, on not more than 60 days' nor less than 30
days' written notice to the other party.
16. Notices. All notices and instructions with respect to securities
transactions or any other matters contemplated by this Agreement shall be
deemed duly given when delivered in writing to the addresses below or when
deposited by first-class mail addressed as follows:
(a) To the Trust:
Hyperion 2005 Investment Grade Opportunity
Term Trust, Inc.
520 Madison Avenue
New York, NY 10022
Attention: Mr. Louis C. Lucido
President
(b) To HCM:
Hyperion Capital Management, Inc.
520 Madison Avenue, 10th Floor
New York, NY 10022
Attention: Mr. Kenneth C. Weiss
President
17. Fees. In consideration of HCM's services provided under this
Agreement, the Trust shall pay to HCM monthly compensation at an annual
amount, calculated daily and paid monthly, equal to .65% of the Trust's
average weekly net assets.
18. Entire Agreement: Amendment. This Agreement states the entire
agreement of the parties with respect to management of the Investment Account
and may not be amended except by a writing signed by a duly authorized officer
of each of the parties hereto.
19. Governing Law. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretations thereof, if any, by
the United States courts or in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC issued pursuant to the
1940 Act. In addition, where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. Otherwise, this Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
20. Effective Date. This Agreement shall become effective on the day
and year first written above.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf by their duly authorized officers as of the day,
month and year first above written.
Hyperion 2005 Investment Grade
Opportunity Term Trust, Inc.
By:__________________________
Name: Louis C. Lucido
Title: President
Hyperion Capital Management, Inc.
By: _________________________
Name: Kenneth C. Weiss
Title: President
Date: May 23, 1995
EXHIBIT A
(To Investment Advisory Agreement)
SCHEDULE OF FEES
Base Fee
Hyperion Capital Management, Inc. ("HCM") will receive the following
investment advisory fee pursuant to the Investment Advisory Agreement. The
Trust shall pay to HCM a monthly fee which is equal to 0.65% per annum of the
Trust's weekly net assets (which, for the purposes of determining such 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 Trust's shares).
