HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST INC, DEF 14A, 1997-02-25

HYPERION 2005 INVESTMENT GRADE OPPORTUNITY TERM TRUST INC
DEF 14A, 1997-02-25

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<PAGE>

HYPERION 2005 INVESTMENT GRADE OPPORTUNITY
TERM TRUST, INC.

520 Madison Avenue o New York, New York 10022

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

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

February 28, 1997

To the Stockholders:

The Annual Meeting of Stockholders of Hyperion 2005 Investment Grade
Opportunity Term Trust, Inc. (the 'Trust') will be held at The Millenium Hilton,
55 Church Street (next to the World Trade Center), New York, New York 10007, on
Tuesday, April 22, 1997, at 10:30 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 December
31, 1997 (Proposal 2).

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

The close of business on February 21, 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 2005 INVESTMENT GRADE OPPORTUNITY
TERM TRUST, INC.

520 Madison Avenue o New York, New York 10022

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

PROXY STATEMENT

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

This proxy statement is furnished in connection with a solicitation by the
Board of Directors of Hyperion 2005 Investment Grade Opportunity 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 10:30 a.m. on Tuesday, April
22, 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 February 28, 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 three 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 December 31, 1997. The close
of business on February 21, 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 20,990,273 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, 1998; Class II, 1999; and Class
III, 1997. 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., Lewis S. Ranieri and Kenneth C. Weiss,
the members of Class III, 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, Ranieri and Weiss. 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.

<PAGE>

As described above, there are three nominees 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 seven
members and nominees of the Board of Directors of the Trust:

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED DIRECTLY
PRINCIPAL OCCUPATION OR INDIRECTLY, ON
NAME AND OFFICE DURING PAST FIVE YEARS, DIRECTOR DECEMBER 31,
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE SINCE 1996(**)
- ------------------------------ --------------------------------------------- -------------- -----------------
CLASS III NOMINEES TO SERVE UNTIL 2000 ANNUAL MEETING
OF STOCKHOLDERS:
<S> <C> <C> <C>
Harry E. Petersen, Jr. ....... Director and/or Trustee of several invest- February 1993 200
Director, Member of the ment 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
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 72.

Lewis S. Ranieri* ............ Chairman and Chief Executive Officer of February 1993 0
Director Ranieri & Co., Inc. (since 1988); in addition,
President of LSR Hyperion Corp., a general
partner of the limited partnership that is
the general partner of Hyperion

Partners L.P. ('Hyperion Partners') (since
1988). Director and Chairman of the Board
of 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
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED DIRECTLY
PRINCIPAL OCCUPATION OR INDIRECTLY, ON
NAME AND OFFICE DURING PAST FIVE YEARS, DIRECTOR DECEMBER 31,
WITH THE TRUST OTHER DIRECTORSHIPS AND AGE SINCE 1996(**)
- ------------------------------ --------------------------------------------- -------------- -----------------
<S> <C> <C> <C>
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 sub-
sidiaries of Hyperion Partners. Formerly
Vice Chairman of Salomon Brothers, Inc.
(until 1987). Age 50.

Kenneth C. Weiss* ............ President and Chief Executive Officer of February 1993 14,962
Chairman of the Board Hyperion Capital Management, Inc. (February
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 Funds, Inc.
and their Investment Advisor

(1995-Present). Formerly Director of First
Boston Asset Management (1988-February
1992). Director of The First Boston
Corporation, (until 1988). Age 45.
<CAPTION>
CLASS I DIRECTORS TO SERVE UNTIL 1998 ANNUAL MEETING OF STOCKHOLDERS:
<S> <C> <C> <C>
Rodman L. Drake .............. President, Mandrake Group (1993-Present). February 1993 204
Director, Member of the Director and/or Trustee of several
Audit Committee investment companies advised by Hyperion
Capital Management, Inc. (1989-Present).
Co-Chairman of KMR Power Corporation
(1993-1997). Formerly, Consultant to
Rockefeller & Co., Inc. (1990-1996).
Formerly 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.
</TABLE>

<PAGE>

<CAPTION>
CLASS II DIRECTORS TO SERVE UNTIL 1999 ANNUAL MEETING OF STOCKHOLDERS:
<S> <C> <C> <C>

Garth Marston ................ Managing Director of M.E. Associates, a February 1993 0
Director, Member of the financial 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 Sav-
ings (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.

Leo M. Walsh, Jr. ............ Director and/or Trustee of several invest- February 1993 6,000
Director, Chairman of ment companies advised by Hyperion Capital
the 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.
(since 1995); Financial Consultant for
Merck-Medco Managed Care, Inc. (formerly
Medco Containment Services, Inc.)
(1994-Present). Formerly, Financial
Consultant for Synetic Inc., a manufac-
turer of porous plastic materials for
health care uses (1989-1994); President, WW
Acquisition Corp. (1989-1990); Senior
Executive Vice
</TABLE>

<PAGE>

and Chief Executive Officer of
EQUICOR-Equitable HCA Corporation
(1987-1988). Age 64.
</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.

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 six officers of the Trust. Except where dates of service
are noted, all officers listed below served as such throughout the 1996 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 February 1993
President and Chief Executive Officer of
Hyperion Capital Management, Inc.; See
information under 'ELECTION OF
DIRECTORS.'

Louis C. Lucido President 48 February 1993
Managing Director and Chief Operating
Officer of Hyperion Capital
Management, Inc. (February
1992-Present). President of several
investment companies advised by
Hyperion Capital Management, Inc.
(1992-Present). 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).
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NAME AND
PRINCIPAL OCCUPATION OFFICE AGE OFFICER SINCE
- ------------------------------------------- ------------ --- --------------
<S> <C> <C> <C>
Clifford E. Lai Senior Vice 43 April 1993
Managing Director and Chief Investment President
Officer, Hyperion Capital Management,
Inc. (March 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).

John N. Dunlevy Vice 38 April 1993
Director, Hyperion Capital Management, President
Inc. (July 1992-Present). Formerly,
Director and Portfolio Manager,
Teachers Insurance & Annuity
Association (1988-1992); Assistant
Vice President, Sumitomo Bank Ltd.
(1985-1988).

Patricia A. Sloan Secretary 53 February 1993
Managing Director of Ranieri & Co., Inc.
(1988-Present); See information under
'ELECTION OF DIRECTORS.'

Joseph W. Sullivan Treasurer 40 September 1995
Vice President of Hyperion Capital
Management, Inc. (August
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 DECEMBER 31, 1996

<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>
Common Stock Lowe, Brockenbrough & 1,805,700 shares 8.55% 13G
Tattersall, Inc.
6620 West Broad Street
Suite 300
Richmond, Virginia 23230
</TABLE>

At December 31, 1996, 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 520 Madison Avenue, New
York, New York 10022.

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

<PAGE>

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 four times, and the Audit Committee met one time.
All of the directors attended the Audit Committee meeting and all of the
directors attended 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 12/31/96

TOTAL DIRECTORS'
DIRECTORS' COMPENSATION
COMPENSATION FROM THE TRUST
FROM THE AND THE FUND
TRUST COMPLEX
------------ ----------------
Rodman L. Drake............... $ 11,500 $ 54,875
Garth Marston................. 10,500 45,000
Harry E. Petersen, Jr......... 11,500 54,875
Leo M. Walsh, Jr.............. 11,500 54,875
------------ ----------------
$ 45,000 $209,625
------------ ----------------
------------ ----------------

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 December 31, 1997 at a
meeting scheduled to be held on March 11, 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 December
31, 1996 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 May 23, 1995. 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 520 Madison Avenue, New York, New York
10022. 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 an indirect, wholly-owned subsidiary of Hyperion Partners
L.P., a Delaware limited partnership ('Hyperion Partners'). Hyperion Partners
acquired all of the shares of the Advisor held by Hyperion Holdings, Inc. in
exchange for a $20,000,000 note on January 15, 1993. 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, Mr. Lucido, President of the Trust,
and Mr. Lai, Senior Vice President of the Trust, are employees of the Advisor,
and each may be entitled, in addition to 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. Dunlevy, Vice President of the Trust, and
Mr. Sullivan, Treasurer of the Trust, are also employees of the Advisor. The
business address of Hyperion

<PAGE>

Partners and Hyperion Ventures is 50 Charles Lindbergh Boulevard, Suite 500,
Uniondale, New York 11553.

The Advisor provides advisory services to several other registered
investment companies and one offshore fund, all of which invest in
mortgage-backed securities. Its management includes several individuals with
extensive experience in creating, evaluating and investing in Mortgage-Backed
Securities, 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. Louis C. Lucido,
Managing Director and Chief Operating Officer of the Advisor and President of
the Trust, was Senior Vice President and Director of Progressive Capital
Management. Clifford E. Lai, Chief Investment Manager of the Advisor and Senior
Vice President of the Trust, was Managing Director and Chief Investment
Strategist for Fixed Income for First Boston Asset Management Corporation.

INVESTMENT ADVISORY AGREEMENT

On March 12, 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 March 31, 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 May 23, 1995. 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 March 31,
1998 at a meeting scheduled for March 11, 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 .65%
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

<PAGE>

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 earned by
the Trust to the Advisor during the last fiscal year of the Trust amounted to
$1,209,528.

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
December 31, 1996, the Administrator earned $294,818 in Administration fees.

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
DECEMBER 31,
NAME OF FUND INVESTMENT ADVISORY FEE 1996
- ------------------------------------- ---------------------------------------------- ---------------
(IN MILLIONS)
<S> <C> <C>
The Hyperion Total Return Fund, Inc.* 0.65% of the Fund's average weekly net assets $ 256.4
Hyperion 1997 Term Trust, Inc.** 0.50% of the Trust's average weekly net assets 417.0
Hyperion 1999 Term Trust, Inc. 0.50% of the Trust's average weekly net assets 450.8
Hyperion 2002 Term Trust, Inc. 0.50% of the Trust's average weekly net assets 300.4
</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.

** As of July 16, 1996, the Advisor voluntarily agreed to reduce its investment
advisory fee from 50 basis points (.50%) per annum to 20 basis points (.20%)
per annum.

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 $2,430 in futures 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

<PAGE>

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 ending December 31, 1996, all filing
requirements with one exception applicable to the Trust's officers, directors,
and greater than ten-percent beneficial owners were complied with. In one
instance, an amended Form 5 was filed to report one transaction not previously
reported on Form 4 on behalf of Kenneth C. Weiss for shares for which he was an
indirect beneficiary.

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 1998
must be received by the Trust for inclusion in the Trust's proxy statement and
proxy relating to that meeting no later than November 21, 1997.

<PAGE>

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.

February 28, 1997

<PAGE>

HYPERION 2005 INVESTMENT GRADE OPPORTUNITY
TERM TRUST, INC.
PROXY SOLICITED ON BEHALF OF THE DIRECTORS

The undersigned hereby appoints Lewis S. Ranieri, Kenneth C. Weiss,
Louis C. Lucido, 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 2005 Investment Grade Opportunity
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, April 22, 1997 at 10:30 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
April 22, 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 III:
Harry E. Petersen, Jr.
Lewis S. Ranieri
Kenneth C. Weiss
</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>
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.