def14a
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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o Preliminary Proxy Statement
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o Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2)) |
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
Payment of Filing Fee (Check the appropriate box:)
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Title of each class of securities to which transactions applies:
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to Exchange
Act Rules 0-11 |
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(Set forth the amount on which the filing fee is calculated and state how it was determined): |
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Proposed maximum aggregate value of transaction:
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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. |
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Amount previously paid: |
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Form, Schedule or Registration Statement No.: |
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Filing Party: |
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Date Filed: |
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
Three World Financial Center, 200 Vesey Street,
10th Floor
New York, New York 10281-1010
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 16, 2007
To the Stockholders:
The Annual Meeting of Stockholders of The Hyperion Strategic
Mortgage Income Fund, Inc. (the Fund) will be held
at CIBC Auditorium (LL Level), 300 Madison Avenue, New York, NY
10017, on Tuesday, April 17, 2007, at 10:00 a.m., for
the following purposes:
1. To elect the Class II director (Proposal 1).
2. To transact any other business that may properly come
before the meeting.
The close of business on March 5, 2007 has been fixed as
the record date for the determination of stockholders entitled
to receive notice of and to vote at the meeting.
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By Order of the Board of Directors, |
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Jonathan C. Tyras
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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 FUND WILL BE UNABLE TO
CONDUCT ANY BUSINESS IF LESS THAN A MAJORITY OF THE SHARES
ELIGIBLE TO VOTE IS REPRESENTED. IN THAT EVENT, THE FUND, AT THE
STOCKHOLDERS EXPENSE, WOULD CONTINUE TO SOLICIT VOTES IN
AN ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR VOTE COULD BE
CRITICAL TO ENABLE THE FUND TO HOLD THE MEETING AS SCHEDULED, SO
PLEASE RETURN YOUR PROXY CARD IMMEDIATELY. YOU AND ALL OTHER
STOCKHOLDERS WILL BENEFIT FROM YOUR COOPERATION.
TABLE OF CONTENTS
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 Fund
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:
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Registration |
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Valid Signature | |
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Corporate Accounts
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(1) ABC Corp.
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ABC Corp. |
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(2) ABC Corp.
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John Doe, Treasurer |
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(3) ABC Corp. c/o John Doe, Treasurer
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John Doe |
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(4) ABC Corp. Profit Sharing Plan
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John Doe, Trustee |
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Trust Accounts
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(1) ABC Trust
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John B. Doe, Trustee |
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(2) Jane B. Doe, Trustee u/t/d 12/28/78
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Jane B. Doe |
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Custodial or Estate Accounts
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(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr.
UGMA
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John B. Smith |
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(2) Estate of John B. Smith
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John B. Smith, Jr., Executor |
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THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
Three World Financial Center, 200 Vesey Street, 10th Floor
New York, New York 10281-1010
PROXY STATEMENT
This proxy statement is furnished in connection with a
solicitation by the Board of Directors of The Hyperion Strategic
Mortgage Income Fund, Inc. (the Fund) of proxies to
be used at the Annual Meeting of Stockholders (the
Meeting) of the Fund to be held at CIBC Auditorium
(LL Level), 300 Madison Avenue, New York, NY 10017, at
10:00 a.m. on Tuesday, April 17, 2007 (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 March 16,
2007.
The annual report and semi-annual report are available free
of charge by calling the Fund at
1-800-497-3746 or
writing to the Fund at Attn: Shareholder Services, The Hyperion
Strategic Mortgage Income Fund, Inc., Three World Financial
Center, 200 Vesey Street, 10th Floor, New York, New York
10281-1010.
Stockholders who execute proxies retain the right to revoke them
by written notice received by the Secretary of the Fund 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 re-election of one
nominee for Class II Director. The close of business on
March 5, 2007 has been fixed as the record date (the
Record Date) for the determination of stockholders
entitled to receive notice of and to vote at the meeting. Each
stockholder is entitled to one vote for each share held. On the
Record Date there were 10,144,106 shares outstanding.
For purposes of determining the presence of a quorum for
transacting business related to Proposal 1 at the Meeting,
executed proxies marked as abstentions and broker
non-votes (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from
the beneficial owner or other persons entitled to vote shares on
a particular matter with respect to which the brokers or
nominees do not have discretionary power) will be treated as
shares that are present for quorum purposes but which have not
been voted. Accordingly, abstentions and broker non-votes will
have no effect on Proposal 1, for which the required vote
is a plurality of the votes cast.
PROPOSAL 1: ELECTION OF DIRECTOR
The Funds Articles of Incorporation provide that the
Funds 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, 2009; Class II, 2007; and Class III,
2008. 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
Fund by delaying the replacement of a majority of the Board of
Directors.
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. Drake, the only Class II
nominee. The nominee has indicated that he will serve if
elected, but if he should be unable to serve, the proxy or
proxies will be voted for any other person determined by the
persons named in the proxy in accordance with their judgment.
As described above, there is one nominee for election to the
Board of Directors at this time. Proxies cannot be voted for a
greater number of persons than the nominee currently proposed to
serve on the Board of Directors.
Information Concerning Nominee and Directors
The following table provides information concerning each of the
Directors and the nominee of the Board of Directors of the Fund.
The nominee is listed first in the table under the Class II
Disinterested Director Nominee. The terms of the Class I
and the Class III Directors do not expire this year. It is
the Funds policy that Directors will retire from the
Funds Board of Directors in the year in which a Director
reaches age 75.
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Number of | |
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Portfolios in | |
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Position(s) Held with Fund |
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Principal Occupation(s) |
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Fund Complex | |
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and Term of Office and |
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During Past 5 Years and |
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Overseen by | |
Name, Address and Age |
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Length of Time Served |
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Other Directorships Held by Director |
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Director | |
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Disinterested Directors
Class II Disinterested Director Nominee to serve until 2010
Annual Meeting of Stockholders |
Rodman L. Drake
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 64
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Chairman Elected December 2003 Director, Member of the
Audit Committee, Chairman of the Nominating and Compensation
Committee
Elected for Three Year Term/ Director since July 1989 |
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Chairman (since 2003) and Director of several investment
companies advised by the Advisor or by its affiliates
(1989-Present); Director and/or Lead Director of Crystal River
Capital, Inc. (CRZ) (2005-Present); Director of
Celgene Corporation (CELG) (2006-Present); Director
of Student Loan Corporation (STU)
(2005-Present); General Partner of Resource Capital
Fund I, II & III CIP L.P.
(1998-Present); Co-founder of Baringo Capital LLC
(2002-Present); Director of Jackson Hewitt Tax Service Inc.
(JTX) (2004-Present); Director of Animal Medical
Center (2002- Present); Director and/or Lead Director of Parsons
Brinckerhoff, Inc. (1995-Present); Chairman of Excelsior Funds
(1994-Present); Chairman of Laudus Funds (2006-Present). |
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Class I Disinterested Directors to serve until 2009
Annual Meeting of Stockholders: |
Robert F. Birch
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 71
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Director, Member of the Audit Committee, Member of the
Nominating and Compensation Committee, Member of the Executive
Committee
Elected for Three Year Term/ Director since December 1998 |
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Director of several investment companies advised by the Advisor
or by its affiliates (1998-Present); President and Director of
New America High Income Fund (1992- Present); Director of
Brandywine Funds(3) (2001-Present). |
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Stuart A. McFarland
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 59
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Director, Member of the Audit Committee, Member of the
Nominating and Compensation Committee
Elected for Three Year Term/ Director since April 2006 |
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Director of several investment companies advised by the Advisor
or by its affiliates (2006-Present); Director of Brandywine
Funds (2003-Present); Director of New Castle Investment Corp.
(2000-Present); Chairman and Chief Executive Officer of Federal
City Bancorp, Inc. (2005-Present); Managing Partner of Federal
City Capital Advisors, LLC (1997-Present). |
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Principal Occupation(s) |
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and Term of Office and |
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Length of Time Served |
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Director | |
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Class III Disinterested Director to serve until 2008
Annual Meeting of Stockholders: |
Louis P. Salvatore
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 60
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Director, Chairman of the Audit Committee, Member of the
Nominating and Compensation Committee
Elected for Two Year Term/ Director since September 2005 |
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Director of several investment companies advised by the Advisor
or by its affiliates (2005-Present); Director of Crystal River
Capital, Inc. (CRZ) (2005-Present); Director of
Turner Corp. (2003-Present); Director of Jackson Hewitt Tax
Services, Inc. (2004-Present); Employee of Arthur Andersen LLP
(2002-Present); Partner of Arthur Andersen LLP (1977-2002);
Director of Professional Services Insurance Company Ltd.
(2002-Present). |
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Interested Director
Class III Interested Director to serve until 2008 Annual
Meeting of Stockholders: |
Clifford E. Lai*
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 53
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Director, Member of the Executive Committee
Elected for Three Year Term/ Director since December 2003 |
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Managing Partner of Brookfield Asset Management, Inc.
(2006-Present); Managing Partner (2005-Present), Chairman (2006-
Present), President (1998-July 2006), Chief Investment Officer
(1993-2002) and Chief Executive Officer (2002-January 2007) of
the Advisor; President, Chief Executive Officer and Director of
Crystal River Capital, Inc. (CRZ) (2005-Present);
resident and Director of several investment companies advised by
the Advisor or by its affiliates (1995-Present); Co-Chairman
(2003-2006) and Board of Managers (1995-2006) of Hyperion GMAC
Capital Advisors, LLC (formerly Lend Lease Hyperion Capital LLC). |
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* Mr. Lai is an interested person as
defined in the 1940 Act because of affiliations with Hyperion
Brookfield Asset Management, Inc., the Funds advisor. As a
result of his service with the Advisor and certain affiliations
with the Advisor as described below, the Fund considers
Mr. Lai to be an interested person of the Fund
within the meaning of Section 2(a)(19) of the 1940 Act. |
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Officers of the Fund
The officers of the Fund are chosen each year at the first
meeting of the Board of Directors of the Fund 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 Fund. Except where
dates of service are noted, all officers listed below served as
such throughout the 2006 fiscal year. An asterisk (*) indicates
a person is an interested person as defined in the
1940 Act, because of affiliations with the Advisor. The
following table sets forth information concerning each officer
of the Fund who served during all or part of the last fiscal
year of the Fund:
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Term of Office and |
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Position(s) Held |
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Length of Time |
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Principal Occupation(s) |
Name, Address and Age |
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with Fund |
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Served |
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During Past 5 Years |
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Clifford E. Lai*
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 53
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President |
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Elected Annually
Since June 2002 |
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Please see Information Concerning Nominee and
Directors. |
John H. Dolan*
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 53
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Vice President |
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Elected Annually
Since June 2002 |
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Managing Partner (2005-Present), Director (2002-Present), Chief
Investment Strategist (1998-Present) and Chief Investment
Officer (2002- Present) of the Advisor; Chief Investment Officer
of Crystal River Capital, Inc. (CRZ) (2005-Present);
Board of Managers of Hyperion GMAC Capital Advisors, LLC
(formerly Lend Lease Hyperion Capital LLC) (1995-2006). |
Thomas F. Doodian*
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 47
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Treasurer |
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Elected Annually
Since June 2002 |
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Managing Director, Chief Operating Officer and Chief Financial
Officer of Brookfield Operations and Management Services, LLC
(January 2007-Present); Managing Director, Chief Operating
Officer and Chief Financial Officer of the Advisor (1998-2006);
Treasure of several investment companies advised by the Advisor
(1996-Present); Treasurer of Hyperion GMAC Capital Advisors, LLC
(formerly Lend Lease Hyperion Capital LLC) (1996-2006). |
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Term of Office and |
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Position(s) Held |
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Length of Time |
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Principal Occupation(s) |
Name, Address and Age |
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with Fund |
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Served |
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During Past 5 Years |
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Jonathan C. Tyras*
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 38
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Secretary |
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Elected November 2006** |
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Director, General Counsel and Secretary of the Advisor (October
2006-Present); Vice President, General Counsel and Assistant
Secretary of Crystal River Capital, Inc. (November
2006-Present); Secretary of several investment companies advised
by the Advisor (November 2006-Present); Attorney at Paul,
Hastings, Janofsky & Walker LLP (1998-October 2006). |
Josielyne K. Pacifico*
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 34
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Chief Compliance Officer (CCO) |
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Elected August 2006** |
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Vice President, CCO (August 2006- Present), Compliance Officer
(July 2005-August 2006), Assistant General Counsel (July
2006-Present) of the Advisor; CCO of several investment
companies advised by the Advisor (November 2006-Present);
Compliance Manager of Marsh & McLennan Companies
(2004-2005); Staff Attorney at the United States Securities and
Exchange Commission (2001-2004). |
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Interested person as defined by the Investment Company Act of
1940 (the 1940 Act) because of affiliations with
Hyperion Brookfield Asset Management, Inc., the Funds
Advisor. |
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** |
Daniel S. Kim served as the Secretary and CCO of the Fund and
the Advisor until August 2006. |
Share Ownership
As of the Record Date, the Nominee, Directors and executive
officers of the Fund solicited by this Proxy Statement
beneficially owned individually and collectively as a group less
than 1% of the outstanding shares of the Fund.
The following table sets forth the aggregate dollar range of
equity securities owned by each Director of the Fund and of all
funds overseen by each Director in the Fund Complex as of
December 31, 2006. The Fund Complex is comprised of
the Fund, The Hyperion Total Return Fund, Inc., Hyperion
Brookfield Income Fund, Inc. and Hyperion Collateralized
Securities Fund, Inc. as of December 31, 2006. The
information as to beneficial ownership is based on statements
furnished to the Fund by each Director.
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Aggregate Dollar Range of Equity | |
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Dollar Range of | |
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Securities in All Funds Overseen | |
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Equity Securities in | |
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by Director in Family of | |
Name of Nominee/Directors |
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the Fund | |
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Investment Companies | |
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Disinterested Director Nominee
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Rodman L. Drake
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$10,001-$50,000 |
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$50,001-$100,000 |
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Disinterested Directors
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Robert F. Birch
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$10,001-$50,000 |
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$50,001-$100,000 |
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Louis P. Salvatore
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$50,001-$100,000 |
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$50,001-$100,000 |
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Stuart A. McFarland
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$10,001-$50,000 |
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$10,001-$50,000 |
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Interested Director
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Clifford E. Lai
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$100,001-$500,000 |
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$500,001-$1,000,000 |
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Compensation of Directors and Executive Officers
No remuneration was paid by the Fund to persons who were
directors, officers or employees of the Advisor or officers or
employees of any affiliate thereof for their services as
Directors or officers of the Fund. Each Director of the Fund,
other than those who are officers or employees of the Advisor or
any affiliate thereof, is entitled to receive a fee of
$18,000 per year plus $5,000 for the Chairman of the Board
and $2,500 for the Chairman of the Audit Committee. The
following table sets forth information concerning the
compensation received by Directors for the fiscal year ended
November 30, 2006.
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Directors | |
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Total Directors Compensation | |
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Aggregate Compensation | |
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from the Fund and the Fund | |
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from the Fund | |
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Complex | |
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Robert F. Birch
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$ |
18,000 |
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$ |
60,000 |
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Rodman L. Drake
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$ |
23,000 |
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$ |
70,000 |
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Louis P. Salvatore
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$ |
20,500 |
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$ |
41,000 |
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Stuart A. McFarland
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$ |
18,000 |
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$ |
36,000 |
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Standing Committees and Board Meetings
The Fund has a standing Audit Committee which was established
pursuant to Section 38(a)(58)(A) of the Securities Exchange
Act of 1934 and presently consists of Messrs. Salvatore,
Birch, Drake and McFarland, all of whom are members of the Board
of Directors and are currently not interested
persons (as that term is defined in Section 2(a)(19)
of the 1940 Act) (Disinterested Directors) of the
Fund. All Audit Committee members are independent as
independence is defined in the New York Stock Exchange,
Inc.s listing standards. The principal functions of the
Funds Audit Committee are to select the Funds
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. The Board of Directors has adopted a
written charter for the Audit Committee. The report of the Audit
Committee is presented below. During the last fiscal year of the
Fund, the full Board of Directors met 5 times, and the Audit
Committee met 3 times. All of the members of the Audit Committee
attended all of the Audit Committee meetings. All of the
Directors attended at least 75% of the aggregate of the Board
meetings and the Audit Committee meetings.
The Fund has a Nominating and Compensation Committee. The
Nominating and Compensation Committee presently consists of
Messrs. Drake, McFarland, Salvatore, and Birch, all of whom
are Disinterested Directors. All Nominating and Compensation
Committee members are independent as independence is defined in
the New York Stock Exchange, Inc.s listing standards. The
Nominating and Compensation Committee met 2 times during the
last fiscal year of the Fund. The function of the Nominating and
Compensation Committee is to recommend candidates for election
to the Board as Disinterested Directors. The Nominating and
Compensation Committee evaluates candidates qualifications
for Board membership and their independence from the Funds
managers and other principal service providers.
The Nominating and Compensation Committee will consider nominees
recommended by stockholders, who, separately or as a group, own
at least one percent of the Funds shares. The minimum
requirements for proposed nominees include the following:
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1. |
With respect to nominations for Disinterested Directors,
nominees shall be independent of the Funds investment
adviser and other principal service providers. The Nominating
and Compensation Committee shall also consider the effect of any
relationship beyond those delineated in the 1940 Act that might
impair independence, such as business, financial or family
relationships with the investment adviser or its affiliates. |
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2. |
Disinterested Director nominees must qualify for service on the
Funds Audit Committee under the rules of the New York
Stock Exchange (including financial literacy requirements) or
other applicable securities exchange. |
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3. |
With respect to all Directors, nominees must qualify under all
applicable laws and regulations. |
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4. |
The proposed nominee must agree to purchase the Funds
shares if elected, consistent with the Funds current
policy on Director share purchases. |
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5. |
The Nominating and Compensation Committee may also require such
other factors as it may determine to be relevant. |
When identifying and evaluating prospective nominees, the
Nominating and Compensation Committee shall review all
recommendations in the same manner, including those received by
stockholders. The Nominating and Compensation Committee shall
first determine if the prospective nominee meets the minimum
qualifications set forth above. Those proposed nominees meeting
the minimum qualifications as set forth above will then be
considered by the Nominating and Compensation Committee with
respect to any other qualifications deemed to be important by
the Nominating and Compensation Committee. Those nominees
meeting the minimum and other qualifications and determined by
the Nominating and Compensation Committee as suitable shall be
included on the Funds proxy card.
Stockholder recommendations should be addressed to the
Nominating and Compensation Committee in care of the Secretary
of the Fund and sent to Three World Financial Center, 200 Vesey
Street, 10th Floor, New York, New York 10281-1010.
Stockholder recommendations should include biographical
information, including business experience for the past nine
years and a description of the qualifications of the proposed
nominee, along with a statement from the nominee that he or she
is willing to serve and meets the requirements to be a
Disinterested Director, if applicable. The Nominating and
Compensation Committee also determines the compensation paid to
the Disinterested Directors. The Board of Directors has adopted
a written charter for the Nominating and Compensation Committee
and the charter is available on the Funds website at
http://www.hyperionbrookfield.com.
The Fund has an Executive Committee. The Executive Committee
presently consists of Messrs. Lai and Birch. The function
of the Executive Committee is to take any action permitted by
Maryland law when the full Board of Directors cannot meet. The
Executive Committee did not need to meet during the last fiscal
year of the Fund.
Stockholder Communications with Board of Directors and Board
Attendance at Annual Meetings
The Funds Board of Directors provides a process for
stockholders to send communications to the Board of Directors.
Any stockholder who wishes to send a communication to the Board
of Directors of the Fund should send the communication to the
attention of the Funds Secretary at Three World Financial
Center, 200 Vesey Street, 10th Floor, New York, New York
10281-1010. If a stockholder wishes to send a communication
directly to an individual Director or to a Committee of the
Funds Board of Directors, then the communication should be
specifically addressed to such individual Director or Committee
and sent in care of the Funds Secretary at the same
address. All communications will be immediately forwarded to the
appropriate individual(s).
The Funds policy with respect to Directors
attendance at annual meetings is to encourage such attendance.
There were 4 Directors who attended last years
meeting.
Audit Committee Report
On January 25, 2007, the Audit Committee reviewed and
discussed with management the Funds audited financial
statements as of and for the fiscal year ended November 30,
2006. The Audit Committee discussed with Briggs,
Bunting & Dougherty, LLP (BBD) the matters
required to be discussed by Statement of Auditing Standards
No. 61, Communications with Audit Committees, as amended,
by the Auditing Standards Board of the American Institute of
Certified Public Accountants.
The Audit Committee received and reviewed the written
disclosures and the letter from BBD required by Independence
Standard No. 1, Independence Discussion with Audit
Committees, as amended, by the Independence Standards Board, and
have discussed with BBD, the independent registered public
accounting firms independence.
7
Based on the reviews and discussions referred to above, the
Audit Committee recommends to the Board of Directors that the
financial statements referred to above be included in the
Funds Annual Report to stockholders required by
Section 30(e) of the 1940 Act and
Rule 30d-1
thereunder for the fiscal year ended November 30, 2006.
Louis P. Salvatore Audit Committee Chairman
Robert F. Birch Audit Committee Member
Rodman L. Drake Audit Committee Member
Stuart A. McFarland Audit Committee Member
Required Vote
Election of the listed nominee for Director requires the
affirmative vote of the holders of a plurality of the shares of
common stock of the Fund present or represented by proxy at the
Annual Meeting. The Board of Directors recommends a vote
For approval of the election of the Nominee to the
Board of Directors.
GENERAL INFORMATION
MANAGEMENT AND SERVICE PROVIDERS
The Advisor
The Fund has entered into an Investment Advisory Agreement with
the Advisor. The Advisor, a wholly owned subsidiary of
Brookfield Asset Management, Inc., is a Delaware corporation
organized in February 1989 and 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 Three World Financial Center, 200 Vesey Street,
10th Floor, New York, New York 10281-1010. Subject to the
authority of the Board of Directors, the Advisor is responsible
for the overall management of the Funds business affairs.
As of November 30, 2006, the Advisor and its affiliate had
approximately $20.5 billion in assets under management. The
Advisors clients include pensions, foundations and
endowments, insurance companies, real estate investment trusts
and closed-end mutual funds. In its investment process, the
Advisor focuses on relative value opportunities, particularly in
the mortgage-backed securities (MBS) and
asset-backed securities (ABS) markets.
Mr. Clifford E. Lai, the President and a Director of the
Fund, is a Managing Partner and Chairman of the Board of the
Advisor, and may be entitled, in addition to receiving a salary
from the Advisor, to receive a bonus based upon a portion of the
Advisors profits. Mr. John J. Feeney, Jr. is a
Managing Partner, Director, President and Chief Executive
Officer of the Advisor. Mr. John H. Dolan is a Managing
Partner, Director and Chief Investment Officer of the Advisor
and Vice President of the Fund. Mr. Thomas F. Doodian,
Treasurer of the Fund, is also Managing Director, Chief
Operating Officer and Chief Financial Officer of Brookfield
Operations and Management Services, LLC, an affiliate of the
Advisor. Mr. Jonathan C. Tyras, Secretary of the Fund, and
Ms. Josielyne K. Pacifico, CCO of the Fund, are also
employees of the Advisor.
The Advisor provides advisory services to several other
registered investment companies, all of which invest in MBS. Its
management includes several individuals with extensive
experience in creating, evaluating and investing in MBS,
derivative MBS and ABS, and in using hedging techniques.
Mr. Dolan is primarily responsible for the
day-to-day management
of the Funds portfolio. Mr. Dolan has also served as
Chief Investment Officer of the Advisor since 1998. Investment
advisory fees paid by the Fund to the Advisor during the last
fiscal year of the Fund amounted to $918,215.
8
In addition to acting as advisor to the Fund, the Advisor acts
as investment advisor to the following other investment
companies at the indicated annual compensation.
|
|
|
|
|
|
|
|
|
|
|
Investment Advisory | |
|
Approximate Net Assets | |
Name of Fund |
|
Management Fees | |
|
at November 30, 2006 | |
|
|
| |
|
| |
The Hyperion Total Return
Fund, Inc.
|
|
|
0.65% of its average weekly net assets |
|
|
$ |
281,700,000 |
|
Hyperion Brookfield Income
Fund, Inc
|
|
|
0.50% of its average weekly net assets |
|
|
$ |
283,200,000 |
|
Hyperion Collateralized Securities
Fund, Inc.
|
|
|
0.41% of its average weekly net assets |
|
|
$ |
701,600,000 |
|
The Administrator
The Fund has entered into an Administration Agreement with
Hyperion Brookfield Asset Management, Inc. (the
Administrator). The Administrator is located at
Three World Financial Center, 200 Vesey Street, 10th Floor,
New York, New York 10281-1010. The Administrator has entered
into a sub-administration agreement with State Street Bank and
Trust Company (the
Sub-Administrator).
The Administrator and
Sub-Administrator
perform administrative services necessary for the operation of
the Fund, including maintaining certain books and records of the
Fund, and preparing reports and other documents required by
federal, state, and other applicable laws and regulations, and
provides the Fund with administrative office facilities. For
these services, the Fund pays a monthly fee at an annual rate of
0.20% of its average weekly assets. For the twelve month period
ended November 30, 2006, the Administrator earned $294,525
in administration fees. The Administrator is responsible for any
fees due to the
Sub-Administrator,
except NQ filing fees. The Administrator has entered into
Administration Agreements with three other investment companies,
with the following fee structure:
|
|
|
Name |
|
Administration Fee |
|
|
|
The Hyperion Total Return Fund, Inc.
|
|
A monthly fee paid at an annual rate of: 0.20% of its average
weekly net assets |
Hyperion Brookfield Income Fund, Inc.
|
|
A monthly fee paid at an annual rate of: 0.15% of its average
weekly net assets |
Hyperion Collateralized Securities Fund, Inc.
|
|
Included in Management Fee discussion on previous page |
Brokerage Commissions
The Fund paid an aggregate of $0 in brokerage commissions,
including future commissions, on its securities purchases during
its last fiscal year, all of which were paid to entities that
are not affiliated with the Fund or the Advisor. The Fund does
not participate and does not in the future intend to participate
in soft dollar or directed brokerage arrangements.
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 Investment 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 Fund. 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
Fund, the Advisor will consider all factors deemed relevant,
including the price, dealer spread, the size, type and
difficulty of the transaction involved, the firms general
execution and operation facilities and the firms 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.
9
The Funds Auditor
It is expected that at a meeting to be held on March 20,
2007, the Audit Committee will unanimously recommend the
selection of and the Directors will unanimously approve such
selection of BBD as the Funds independent registered
public accounting firm for the current fiscal year ending
November 30, 2007. A representative of BBD will be present
at the Meeting to respond to appropriate questions from
stockholders and will have an opportunity to make a statement,
if he or she chooses to do so.
The following table presents fees billed by BBD and
PriceWaterhouseCoopers LLP (PwC) for the fiscal year
ended November 30, 2006 and fees billed by PwC for the
fiscal year ended November 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BBD 2006 | |
|
PwC 2006 | |
|
PwC 2005 | |
|
|
| |
|
| |
|
| |
Audit fees
|
|
$ |
59,000 |
|
|
$ |
3,533 |
|
|
$ |
99,333 |
|
Audit-related
fees1
|
|
$ |
0 |
|
|
$ |
100 |
|
|
$ |
2,700 |
|
Tax
fees2
|
|
$ |
6,435 |
|
|
$ |
0 |
|
|
$ |
8,500 |
|
All other fees
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
|
(1) |
Audit-related fees consist of administrative costs related to
completion of the audit. |
|
|
(2) |
Tax fees consist of fees for review of tax returns and tax
distribution requirements. |
The Board of Directors has adopted a written charter for the
Audit Committee which is attached to this Proxy Statement as
Exhibit 1 (the Charter). The Audit Committee
reviews the Charter at least annually and may recommend changes
to the Board. Each member of the Audit Committee is independent
as independence is defined in the listing standards of the New
York Stock Exchange.
Brascan Financial (U.S.) Corporation purchased all the stock
ownership of the holding company indirectly owning Hyperion
Capital Management, Inc., the Funds investment manager, as
of April 28, 2005. PwC was unable to conclude that it
continued to be independent with respect to the Fund as a result
of this acquisition by the advisers new ultimate parent
corporation, Brascan Corp. that is now Brookfield Asset
Management, Inc. PwC resigned as the Funds Independent
Registered Public Accounting Firm, effective December 5,
2005. The Audit Committee of the Fund then submitted a
recommendation to the Board of Directors to engage BBD as the
Funds Independent Registered Public Accounting Firm for
the fiscal year ended November 30, 2005. During the fiscal
years ended November 30, 2004 and 2003, PwCs audit
reports contained no adverse opinion or disclaimer of opinion;
nor were their reports qualified as to uncertainty, audit scope
or accounting principles. Further, during the fiscal years ended
November 30, 2004 and 2003 and through December 5,
2005, there were no disagreements between the Fund and PwC on
accounting principles or practices, financial statement
disclosure or audit scope, which, if not resolved to the
satisfaction of PwC, would have caused them to make reference to
the disagreement in their reports.
During 2003, 2004 and through December 5, 2005, the date
the Board of Directors approved BBD as the Funds auditor,
the Fund did not consult BBD regarding either (1) the
application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that
might be rendered on the Funds financial statements, or
(2) any matter that was either the subject of a
disagreement or a reportable event, as such terms are defined in
Item 304 of
Regulation S-K.
The Fund provided PwC with a copy of these disclosures and PwC
furnished the Fund with a letter addressed to the Commission
stating that it agreed with the statements made by the Fund
herein.
COMPLIANCE WITH SECTION 16 REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934
requires the Funds officers and Directors and persons who
own more than ten percent of a registered class of the
Funds equity securities to file reports of ownership and
changes in ownership with the SEC and the New York Stock
Exchange. Officers, directors and greater than ten-percent
stockholders are required by SEC regulations to furnish the Fund
with copies of all Section 16(a) forms they file.
10
Based solely on its review of the copies of such forms received
by the Fund and written representations from certain reporting
persons that all applicable filing requirements for such persons
had been complied with, the Fund believes that, during the
fiscal year ended November 30, 2006, all filing
requirements applicable to the Funds officers, Directors,
and greater than ten-percent beneficial owners were complied
with.
FUND SHARES OWNED BY CERTAIN BENEFICIAL OWNERS
As of the Record Date to the best of the Funds knowledge,
no person owned beneficially more than five percent of the
Funds outstanding shares.
OTHER BUSINESS
The Board of Directors of the Fund 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 Fund that are intended to
be presented at the Funds next Annual Meeting of
Stockholders to be held in 2008 must be received by the Fund for
inclusion in the Funds proxy statement and proxy relating
to that meeting no later than November 1, 2007.
EXPENSES OF PROXY SOLICITATION
The cost of preparing, mailing, and assembling material in
connection with this solicitation of proxies will be borne by
Fund. In addition to the use of the mail, proxies may be
solicited personally by regular employees of the Fund, the
Advisor or The Altman Group, paid solicitor for the Fund, or by
telephone or telegraph. 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 Fund
for out-of-pocket
expenses incurred in this connection.
March 16, 2007
11
HYPERION FUNDS
The Hyperion Total Return Fund, Inc.
The Hyperion Strategic Mortgage Income Fund, Inc.
(As a single entity Fund, and collectively the
Funds)
Audit Committee Charter
1. Requirements for Membership: The Audit Committee
shall consist of at least three Directors, each of whom has no
relationship to the Fund or its management that may interfere
with the exercise of their independence from management and the
Fund (Independent). The restrictions contained in
Attachment A to this Charter with respect to the definition
of Independent shall apply to every Audit Committee member.
The Board of Directors for each Fund will determine annually
whether there is at least one member of the Audit Committee who
is an audit committee financial expert as defined in Item 3
of Form N-CSR.
Each member of the Audit Committee shall be financially
literate, as such qualification is interpreted by the Board of
Directors in its business judgment, or must become financially
literate within a reasonable period of time after appointment to
the Audit Committee. At least one member of the Audit Committee
must have accounting or related financial management expertise
as such qualification is interpreted by the Board of Directors
in its business judgment.
2. Purposes: The purposes of the Audit Committee are:
|
|
|
a. oversight of the Funds accounting and financial
reporting policies and practices, its internal control over
financial reporting and, as appropriate, to inquire into the
internal control over financial reporting of certain third-party
service providers; |
|
|
b. oversight of the quality and integrity of the
Funds financial statements and the independent audit
thereof; |
|
|
c. oversight, or, as appropriate, assist the Board of
Directors with oversight of, the Funds compliance with
legal and regulatory requirements that relate to the Funds
accounting and financial reporting, internal control over
financial reporting and independent audits; |
|
|
d. responsibility for the appointment, compensation,
retention and oversight of the work of any registered public
accounting firm engaged (including resolution of disagreements
between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit
report or performing other audit, review or attest services for
the Fund; |
|
|
e. maintenance of a liaison between the independent
auditors and the Board of Directors; |
|
|
f. establishment of procedures for the receipt, retention
and treatment of complaints regarding accounting, internal
accounting controls or auditing matters, including procedures
for the confidential, anonymous submission by employees of the
Fund, its investment adviser, administrator, principal
underwriter (if any), or any other provider of accounting
related services for the Fund of concerns regarding questionable
accounting or auditing matters; and |
|
|
g. preparation of an Audit Committee report as required by
Item 306 of
Regulation S-K to
be included in proxy statements relating to the election of
Directors. |
The independent auditors for the Fund shall report directly to
the Audit Committee and the Audit Committee shall regularly
report to the Board of Directors.
3. Duties and Powers: The duties and powers of the
Audit Committee are:
|
|
|
a. to approve prior to appointment the engagement of
auditors to annually prepare and issue an audit report or
related work or perform other audit, review or attest services
for the Fund and to review and evaluate matters potentially
affecting the independence and capabilities of the auditors. In
evaluating the |
12
|
|
|
auditors qualifications, performance and independence, the
Audit Committee must, among other things, obtain and review a
report by the auditor, at least annually, describing the
following items: |
|
|
|
(i) all relationships between the independent auditor and
the Fund, as well as the Funds investment adviser or any
control affiliate of the adviser that provides ongoing services
to the Fund; |
|
|
(ii) any material issues raised by the most recent internal
quality control review, or peer review, of the audit firm, or by
any inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the firm, and any steps
taken to deal with such issues; and |
|
|
(iii) the audit firms internal quality-control
procedures. |
|
|
|
b. to approve prior to appointment the engagement of the
auditor to provide non-audit services to the Fund, its
investment adviser or any entity controlling, controlled by, or
under common control with the investment adviser (adviser
affiliate) that provides ongoing services to the Fund, if
the engagement relates directly to the operations and financial
reporting of the Fund; |
|
|
c. to develop, to the extent deemed appropriate by the
Audit Committee, policies and procedures for pre-approval of the
engagement of the Funds auditors to provide any of the
services described in (a) or (b) above; |
|
|
d. to consider the controls applied to the auditors and any
measures taken by management in an effort to assure that all
items requiring pre-approval by the Audit Committee are
identified and referred to the Audit Committee in a timely
fashion; |
|
|
e. to consider whether the non-audit services provided by
the Funds auditor to the Funds investment adviser or
any adviser affiliate that provides ongoing services to the
Fund, which services were not pre-approved by the Audit
Committee, are compatible with maintaining the auditors
independence; |
|
|
f. to oversee the independent auditors, using meetings with
the auditors, including private meetings, as desired by the
Audit Committee or the auditors: (i) to review the plan for
and the scope of the annual audit and any special audits;
(ii) to discuss any matters of concern relating to the
financial statements, including any adjustment to the statements
recommended by the auditors, or other matters arising from the
audit; (iii) to consider the auditors comments with
respect to accounting and financial reporting policies,
procedures, and internal control over financial reporting
(including the Funds critical accounting policies and
practices), and to consider managements responses to the
comments; (iv) to the extent that Audit Committee deems
necessary or appropriate, to promote improvements in the quality
of the Funds accounting and financial reporting;
(v) to consider any reports of difficulties that may have
arisen in the course of the audit, including any limitations on
the scope of the audit, and managements response thereto;
(vi) to resolve disagreements between management and the
auditors regarding financial reporting; (vii) to review and
approve the fees proposed to be charged to the Fund by the
auditors for each audit and non-audit service; and
(viii) to review the form of opinion the auditors propose
to submit to the Board of Directors and the shareholders; |
|
|
g. to discuss with management and the independent auditor
the Funds annual audited financial statements and other
periodic financial statements, including, as applicable to a
Fund that is publicly traded on an Exchange, the Funds
disclosures under Managements Discussion of
Fund Performance; |
|
|
h. to receive at least annually a report from the
independent auditor 90 days prior to the filing of the
auditors report (or receive an updated report, if the
auditors annual report is presented to the Audit Committee
more than 90 days prior to the filing of the auditors
report) which includes the following: (i) all critical
accounting policies and practices used by the Fund,
(ii) all material alternative accounting treatments within
GAAP that have been discussed with management, including the
ramifications of the use of the alternative treatments and the
treatment preferred by the accounting firm, (3) other
material written communications between the independent auditor
and the management of the Fund, and (4) a description of
all non-audit services provided, including fees associated with
the services, to the Fund complex that were not subject to the
pre-approval requirements as discussed above. |
13
|
|
|
i. to consider the effect of any changes in accounting
principles or practices proposed by management or the auditors; |
|
|
j. to review security valuation procedures employed with
respect to any asset or class of asset for which there is not a
readily determinable market value; |
|
|
k. to review and discuss with management, including any
officers certifying the Funds
Form N-CSR, the
Funds audited financial statements as well as any
officers certifications and reports to be filed with the
Securities and Exchange Commission on behalf of the Fund; to
offer guidance with respect to such audited financial
statements, certifications and reports; and to determine whether
to recommend that the financial statements be included in the
annual report; |
|
|
l. to discuss all disclosures made by the Funds
officers certifying the Funds
Form N-CSR to the
Audit Committee, based on such officers most recent
evaluation as to (i) all significant deficiencies in the
design or operation of internal control over financial reporting
which could adversely affect the Funds ability to record,
process, summarize and report financial data, and (ii) any
fraud, whether or not material, that involves management or
other employees who have significant roles in the Funds
internal control over financial reporting; |
|
|
m. to investigate any improprieties or suspected
improprieties in Fund activities; and |
|
|
n. to discuss generally the Funds earnings press
releases, if any, as well as any financial information and
earnings guidance provided to analysts and rating agencies (if
any), e.g., the types of information to be disclosed and
the type of presentation to be made; |
|
|
o. to review in a general manner, but not as an Audit
Committee to assume responsibility for, the Funds
processes with respect to risk assessment and risk management; |
|
|
p. to set clear policies relating to the hiring by entities
within the Funds investment company complex of employees
or former employees of the independent auditors; |
|
|
q. to report on its activities to the Board of Directors on
a regular basis and to make any recommendations deemed necessary
or appropriate; and |
|
|
r. to perform such other functions and to have such powers
as may be necessary or appropriate in the efficient and lawful
discharge of the powers provided in this Charter. |
The Audit Committee shall have the resources and authority
appropriate to discharge its responsibilities, including
appropriate funding, as determined by the Audit Committee, for
payment of compensation to the auditors for the purpose of
preparing or issuing an audit report or performing other audit,
review or attest services for the Fund, the authority to retain
and compensate special counsel and other experts or consultants
as the Audit Committee deems necessary, the authority to obtain
specialized training for Audit Committee members, at the expense
of the Fund or series, as appropriate, and for ordinary
administrative expenses of the Audit Committee that are
necessary and appropriate to carry out the Audit
Committees duties.
The Audit Committee may delegate any portion of its authority,
including the authority to grant pre-approvals of audit and
permitted non-audit services, to a subcommittee of one or more
members. Any decisions of the subcommittee to grant pre-approval
shall be presented to the full Audit Committee at its next
regularly scheduled meeting.
4. Role of the Audit Committee: The function of the
Audit Committee is oversight; it is managements
responsibility to maintain appropriate systems for accounting
and internal control over financial reporting, and the
auditors responsibility to plan and carry out a proper
audit. Specifically, Funds management is responsible for:
(1) the preparation, presentation and integrity of the
Funds financial statements; (2) the maintenance of
appropriate accounting and financial reporting principles and
policies; and (3) the maintenance of internal control over
financial reporting and other procedures designed to assure
compliance with accounting standards and related laws and
regulations. The independent auditors are responsible for
planning and carrying out an audit consistent with applicable
legal and professional standards and the terms of their
14
engagement letter. Nothing in this Charter shall be construed to
reduce the responsibilities or liabilities of the Funds
service providers, including the auditors.
Although the Audit Committee is expected to take a detached and
questioning approach to the matters that come before it, the
review of a Funds financial statements by the Audit
Committee is not an audit, nor does the Audit Committees
review substitute for the responsibilities of the Funds
management for preparing, or the independent full-time employees
of the Fund and, in serving on this Audit Committee, are not,
and do not hold themselves out to be, acting as accountants or
auditors. As such, it is not the duty or responsibility of the
Audit Committee or its members to conduct field work
or other types of auditing or accounting reviews or procedures.
In discharging their duties, the members of the Audit Committee
are entitled to rely on information, opinions, reports, or
statements, including financial statements and other financial
data, if prepared or presented by: (1) one or more officers
of the Fund whom the Director reasonably believes to be reliable
and competent in the matters presented; (2) legal counsel,
public accountants, or other persons as to matters the Director
reasonably believes are within the persons professional or
expert competence; or (3) a Board committee of which the
Director is not a member.
5. Operations of the Audit Committee:
|
|
|
a. the Audit Committee shall meet on a regular basis and
may hold special meetings, as desired. Such meetings shall
include meetings with management and with the independent
auditors, as appropriate. The chair or a majority of the members
shall be authorized to call a meeting of the Audit Committee and
send notice thereof. |
|
|
b. the Audit Committee shall ordinarily meet in person;
however, members may attend telephonically, and the Audit
Committee may act by written consent, to the extent permitted by
law and by the Funds By-Laws. |
|
|
c. the Audit Committee shall have the authority to meet
privately and to admit non-members individually by invitation.
The Audit Committee shall hold regular meetings with management,
independent auditors and with personnel responsible for the
internal audit function, as appropriate. |
|
|
d. the Audit Committee shall prepare and retain minutes of
its meetings and appropriate documentation of decisions made
outside of meetings by delegated authority. |
|
|
e. the Audit Committee may select one of its members to be
the chair and may select a vice chair. |
|
|
f. a majority of the members of the Audit Committee shall
constitute a quorum for the transaction of business at any
meeting of the Audit Committee. The action of a majority of the
members of the Audit Committee present at a meeting at which a
quorum is present shall be the action of the Audit Committee. |
|
|
g. the Audit Committee has the authority to retain
independent counsel and other advisors as it deems appropriate
to discharge its responsibilities. |
|
|
h. the Audit Committee has the authority to request that
the Fund provide adequate funding for the Audit Committee. |
|
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i. the Audit Committee shall review and assess the adequacy
of this Charter on at least an annual basis. |
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j. the Audit Committee shall evaluate its performance at
least annually. |
Revised: November 7, 2006
15
ATTACHMENT A
AUDIT COMMITTEE CHARTER DEFINITIONS
Independent: In addition to the definition of Independent
provided in the text of the Charter, the following restrictions
shall apply to every Audit Committee member:
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(1). Employees. A Director who is an employee
(including non-employee executive officers) of the Fund or any
of its affiliates may not serve on the Audit Committee until
three years following the termination of his or her employment.
In the event the employment relationship is with a former parent
or predecessor of the Fund, the Director could serve on the
Audit Committee after three years following the termination of
the relationship between the Fund and the former parent or
predecessor. |
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(2). Business Relationship. A Director (i) who
is a partner, controlling shareholder, or executive officer of
an organization that has a business relationship with the Fund,
or (ii) who has a direct business relationship with the
Fund (e.g., a consultant) may serve on the Audit Committee only
if the Funds Board of Directors determines in its business
judgment that the relationship does not interfere with the
Directors exercise of independent judgment. In making a
determination regarding the independence of a Director pursuant
to this paragraph, the Board of Directors should consider, among
other things, the materiality of the relationship to the Fund,
to the Director, and, if applicable, to the organization with
which the Director is affiliated. |
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Business Relationships can include commercial,
industrial, banking, consulting, legal, accounting and other
relationships. A Director can have this relationship directly
with the Fund, or the Director can be a partner, officer or
employee of an organization that has such a relationship. The
Director may serve on the Audit Committee without the
above-referenced Board of Directors determination after
three years following the termination of, as applicable, either
(1) the relationship between the organization with which
the Director is affiliated and the Fund, (2) the
relationship between the Director and his or her partnership
status, shareholder interest or executive officer position, or
(3) the direct business relationship between the Director
and the Fund. |
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(3). Cross Compensation Committee Link. A Director
who is employed as an executive of another corporation where any
of the Funds executives serves on that corporations
compensation committee may not serve on the Audit Committee. |
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(4). Immediate Family. A Director who is an
Immediate Family member of an individual who is an executive
officer of the Fund or any of its affiliates cannot serve on the
Audit Committee until three years following the termination of
such employment relationship. |
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Immediate Family includes a persons spouse,
parents, children, siblings,
mothers-in-law and
fathers-in-law, sons
and daughters-in-law,
brothers and
sisters-in-law, and
anyone (other than employees) who shares such persons home. |
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(5). Compensation. The Audit Committee member may
not, other than in his or her capacity as a member of the Audit
Committee, the Board of Directors or any other Board committee:
(i) accept directly or indirectly any consulting, advisory
or other compensatory fee from the Fund or an affiliate of the
Fund; or (ii) be an interested person of the
Fund as defined in Section 2(a)(19) of the Investment
Company Act of 1940 (the 1940 Act). |
Revised: November 7, 2006
16
PROXY
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
THIS PROXY SOLICITED ON BEHALF OF THE DIRECTORS
The undersigned hereby appoints JONATHAN C. TYRAS and THOMAS F. DOODIAN 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 The Hyperion Strategic Mortgage
Income Fund, Inc. (the Fund) which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Fund to be held at the CIBC Auditorium (LL Level), 300 Madison Avenue, New
York, NY 10017, on Tuesday, April 17, 2007 at 10:00 a.m., and at any adjournments thereof. The
undersigned hereby acknowledges receipt of the Notice of Annual 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 any, and may
exercise all of the power or authority of said proxies hereunder. The undersigned hereby revokes
any proxy previously given.
(Continued and to be signed on the reverse side)
14475
ANNUAL MEETING OF STOCKHOLDERS OF
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
April 17, 2007
Please date, sign and mail your proxy card in the envelope provided as soon as possible.
Please detach and mail in the envelope provided.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTOR.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE. x
1. Election of Nominee of Class II Director
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NOMINEE |
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FOR NOMINEE
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¡
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Rodman L. Drake (Class II) |
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WITHHOLD AUTHORITY
FOR NOMINEE |
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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 the re-election of the Class II nominee as
Director in Proposal 1. Please refer to the Proxy Statement for a discussion of the Proposal.
PLEASE VOTE, DATE AND SIGN THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
To change the address on your account, please check the box at the right and indicate your new
address in the address space above.
Please note that changes to the registered name(s) on the
account may not be submitted via this method. o
Please check if you plan on attending the meeting. o
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Signature of Stockholder
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Date: |
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Signature of Stockholder
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Date: |
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Note: This proxy must be signed exactly as the name appears hereon. When shares are held jointly,
each holder should sign. When signing as executor, administrator, attorney, trustee or guardian,
please give full title. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.