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: |
o 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 17, 2006
To the Stockholders:
The Annual Meeting of Stockholders of The Hyperion Strategic
Mortgage Income Fund, Inc. (the Fund) will be held
at Embassy Suites Hotel, 102 North End Avenue, New York, New
York 10282, on Tuesday, April 18, 2006 at 10:00 a.m.,
for the following purposes:
1. To elect directors (Proposal 1).
2. To transact any other business that may properly come
before the meeting.
The close of business on March 6, 2006 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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Daniel S. Kim
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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.
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) 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 Embassy Suites
Hotel, 102 North End Avenue, New York, New York 10282, at
10:00 a.m. on Tuesday, April 18, 2006 (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 17,
2006.
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 I Director, the new election of one
nominee for Class I Director and the re-election of one
nominee for Class III Director. The close of business on
March 6, 2006 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 10,144,002 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 DIRECTORS
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, 2006; 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 terms of Messrs. Louis P. Salvatore, member of
Class III, and Robert F. Birch, member of Class I,
currently serving on the Board of Directors, expire at this
years Annual Meeting. Mr. Stuart A. McFarland is
nominated as a Class I Director. 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. Salvatore and Birch and the election of
Mr. McFarland. Each 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 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 nominees currently proposed
to serve on the Board of Directors.
Information Concerning Nominees and Directors
The following table provides information concerning each of the
Directors and the nominees of the Board of Directors of the
Fund. The nominees are listed first in the table under the
Class III Disinterested Director Nominee and Class I
Disinterested Director Nominees. The terms of the Class II
and the other Class III Director 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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Director | |
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Disinterested Director Nominees
Class III Disinterested Director Nominee to serve until
2006 Annual Meeting of Stockholders: |
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Louis P. Salvatore
c/o Three World
Financial Center,
200 Vesey Street, 10th Floor,
New York, New York
10281-1010
Age 59
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Director, Chairman of the Audit Committee, Member of
Compensation and Nominating Committee
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. (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). |
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Class I Disinterested Director Nominee to serve until
2006 Annual Meeting of Stockholders: |
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Robert F. Birch
c/o Three World
Financial Center,
200 Vesey Street, 10th Floor,
New York, New York
10281-1010
Age 69
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Director, Member of the Audit Committee, Member of Nominating
and Compensation Committee, Member of Executive Committee
Elected for Three Year Term/Director since June 2002 |
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Director of several investment companies advised by the Advisor
or by its affiliates (1998-Present); President of New America
High Income Fund (1992-Present); Director of Brandywine Funds(3)
(2001-Present). |
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Class I Disinterested Director Nominee |
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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 58
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Director of Brandywine Funds (2003- Present); Director of New
Castle Investment Corp. (2000-Present); Chairman and Chief
Executive Officer of Federal City Bancorp/ Assurance Partners
Bank (2005-Present); Managing Partner of Federal City Capital
Advisors (1997-Present). |
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Interested Director
Class III Interested Director to serve until 2008 Annual
Meeting of Stockholders: |
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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 52
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Director
Elected for Three Year Term/ Director since December 2003
President
Elected Annually
Since June 2002 |
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Managing Partner (2005-Present), President (1998-Present) and
Chief Investment Officer (1993-2002) of the Advisor; President
and Director of Crystal River Capital, Inc. (2005-Present);
President of several investment companies advised by the Advisor
(1995-Present). |
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* Mr. Lai is an interested person as
defined in the 1940 Act because of affiliations with Hyperion
Capital 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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Number of | |
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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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Length of Time Served |
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Director | |
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Disinterested Director
Class II Disinterested Director to serve until 2007 Annual
Meeting of Stockholders: |
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Rodman L. Drake
c/o Three World
Financial Center,
200 Vesey Street, 10th Floor,
New York, New York
10281-1010
Age 62
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Chairman Elected December, 2003
Director, Member of the
Audit Committee, Chairman of
Nominating and Compensation Committee
Elected for Two Year
Term/Director since June 2002 |
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Chairman (since 2003) and Director of several investment
companies advised by the Advisor or by its affiliates
(1989-Present); Director of Crystal River Capital, Inc.
(2005-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, 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); Trustee of Excelsior Funds
(1994-Present). |
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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 2005 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 52
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President |
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Elected Annually
Since June 2002 |
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Please see Information Concerning Nominees/Directors. |
John H. Dolan*
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 52
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Vice President |
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Elected Annually Since June 2002 |
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Managing Partner (2005-Present), Chief Investment Strategist
(1998-Present) and Chief Investment Officer (2002-Present) of
the Advisor; Chief Investment Officer of Crystal River Capital,
Inc. (2005-Present). |
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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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Daniel S. Kim*
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 37
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Secretary & Chief Compliance Officer (CCO) |
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Elected Annualy CCO
Since September 2004; and
Secretary Since January 2005 |
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Director, General Counsel and CCO (September 2004-Present), and
Secretary (January 2005- Present) of the Advisor; Assistant
Secretary of Crystal River Capital, Inc. (2005-Present); CCO
(September 2004-Present), and Secretary (January 2005-Present)
of several investment companies advised by the Advisor; Vice
President, Asst. General Counsel and CCO (May 2001-August 2004)
of Oak Hill Capital Management, Inc.; Asst. General Counsel (May
2001-August 2004) of Oak Hill Advisors, LP; Lawyer (January
2001-April 2001) at Arkin Kaplan LLP. |
Thomas F. Doodian*
c/o Three World
Financial Center,
200 Vesey Street,
10th Floor,
New York, New York
10281-1010
Age 46
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Treasurer |
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Elected Annually
Since June 2002 |
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Managing Director, Chief Operating Officer (1998-Present) and
Director of Finance and Operations of the Advisor
(1995-Present); Treasurer of several investment companies
advised by the Advisor (1996-Present). |
Share Ownership
As of the Record Date, the Nominees, 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, 2005. The Fund Complex was comprised of
the Fund, The Hyperion Total Return Fund, Inc., Hyperion
Strategic Bond Fund, Inc. and Hyperion Collateralized Securities
Fund, Inc. as of December 31, 2005. As of February 22,
2006, there were four registered investment companies in the
Fund Complex. 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 Nominees/Directors |
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the Fund | |
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Investment Companies | |
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Disinterested Directors
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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 Director Nominees
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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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$10,001-$50,000 |
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$10,001-$50,000 |
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Stuart A. McFarland
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$0 |
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$0 |
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Interested Director
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Clifford E. Lai
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$50,001-$100,000 |
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Over $100,000 |
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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 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
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receive a fee of $17,000 per year plus $5,000 for the
Chairman of the Board and $2,500 for the Chairman of the Audit
Committee. The following table sets forth information concerning
the compensation received by Directors for the fiscal year ended
November 30, 2005.
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Directors | |
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Total Directors Compensation | |
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Aggregate Compensation | |
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from the Fund and the Fund | |
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from the Fund | |
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Complex | |
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Robert F. Birch
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$ |
17,000 |
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$ |
65,000 |
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Rodman L. Drake
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$ |
22,000 |
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$ |
80,000 |
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Louis P. Salvatore
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$ |
9,750 |
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$ |
19,500 |
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Standing Committees and Board Meetings
The Fund has a standing Audit Committee which was established
pursuant to Section 3(a)(58)(A) of the Securities Exchange
Act of 1934 and presently consists of Messrs. Birch, Drake
and Salvatore, 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 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 five (5) times, and the Audit Committee met
three (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 Committee meetings.
The Fund has a Nominating and Compensation Committee. The
Nominating and Compensation Committee presently consists of
Messrs. Birch, Drake and Salvatore. The Committee members
are Disinterested Directors. All Committee members are
independent as independence is defined in the New York Stock
Exchange, Inc.s listing standards. The Nominating and
Compensation Committee met one (1) time 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. |
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When identifying and evaluating prospective nominees, the
Committee shall review all recommendations in the same manner,
including those received by stockholders. The Committee shall
first determine if the prospective nominee meets the minimum
qualifications set forth above. Those proposed nominees meeting
the minimum qualifications set forth above will then be
considered by the Committee with respect to any other
qualifications deemed to be important by the Committee. Those
nominees meeting the minimum and other qualifications and
determined by the 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
www.hyperioncapital.com.
The Fund has an Executive Committee. The Executive
Committee presently consists of Messrs. Birch and Lai. 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 3 Directors who attended last years
meeting.
Audit Committee Report
On January 26, 2006, the Audit Committee reviewed and
discussed with management the Funds audited financial
statements as of and for the fiscal year ended November 30,
2005. 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.
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, 2005.
Louis P. Salvatore Audit Committee Chairman
Rodman L. Drake Audit Committee Member
Robert F. Birch Audit Committee Member
6
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 Fund present or represented by proxy at the
Annual Meeting. The Board of Directors recommends a vote
For approval of the election of the Nominees to the
Board of Directors.
GENERAL INFORMATION
MANAGEMENT AND SERVICE PROVIDERS
The Advisor
The Fund has entered into an Investment Advisory Agreement with
Hyperion Capital Management, Inc. (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
December 31, 2005, the Advisor and its affiliate had
approximately $18 billion in assets under management. The
Advisors clients include pensions, foundations and
endowments, insurance companies 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 the Managing Partner, President and a Director 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 is a Managing
Partner and Director 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, and Mr. Daniel S. Kim, CCO
and Secretary 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. Lai was Managing Director and Chief Investment
Strategist for Fixed Income at First Boston Asset Management
Corporation. Mr. Dolan is primarily responsible for the
day-to-day management
of the Funds portfolio. Mr. Dolan has also served as
Chief Investment Strategist 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 $948,388.
In addition to acting as advisor to the Fund, the Advisor acts
as investment advisor to the following other investment
companies at the indicated annual compensation.
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Investment Advisory | |
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Approximate Net Assets | |
Name of Fund |
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Management Fees | |
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at November 30, 2005 | |
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The Hyperion Total Return
Fund, Inc.
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0.65% of its average weekly net assets |
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$ |
274,210,361 |
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Hyperion Strategic Bond
Fund, Inc.
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0.65% of its average weekly net assets |
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$ |
180,437,266 |
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Hyperion Collateralized Securities
Fund, Inc.
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0.41% of its average weekly net assets |
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$ |
649,006,442 |
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The Administrator
The Fund has entered into an Administration Agreement with
Hyperion Capital 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 performs
administrative services necessary
7
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, 2005, the
Administrator earned $287,152 in administration fees. In
addition, the Administrator has entered into Administration
Agreements with three other investment companies, with the
following fee structures:
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Name |
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Administration Fee |
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The Hyperion Total Return Fund, Inc.
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A monthly fee paid at an annual rate of: 0.20% of its average
weekly net assets |
Hyperion Strategic Bond Fund, Inc. (formerly Lend Lease Hyperion
High Yield CMBS Fund, Inc.)
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A monthly fee paid at an annual rate of: 0.20% of its average
weekly net assets |
Hyperion Collateralized Securities Fund, Inc.
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Included in Management Fee discussion on previous page |
Brokerage Commissions
The Fund paid an aggregate of $7,061 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 and the
Sub-Advisor have
discretion to select brokers and dealers to execute portfolio
transactions initiated by the Advisor and the
Sub-Advisor and to
select the markets in which such transactions are to be
executed. The Investment Advisory and
Sub-Advisory Agreements
provide, in substance, that in executing portfolio transactions
and selecting brokers or dealers, the primary responsibility of
the Advisor and the
Sub-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 and the
Sub-Advisor will
consider all factors they deem 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.
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.
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, 2005, 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.
8
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 2007 must be received by the Fund for
inclusion in the Funds proxy statement and proxy relating
to that meeting no later than November 1, 2006.
EXPENSES OF PROXY SOLICITATION
The cost of preparing, mailing, and assembling material in
connection with this solicitation of proxies will be borne by
the 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 solicitors 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 17, 2006
9
PROXY
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
THIS PROXY SOLICITED ON BEHALF OF THE DIRECTORS
The undersigned hereby appoints DANIEL S. KIM 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 Embassy Suites Hotel, 102 North End Avenue, New York,
New York 10282, on Tuesday, April 18 2006 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 18, 2006
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 DIRECTORS.
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 Nominees of Class I and Class III
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NOMINEE |
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FOR ALL NOMINEES
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¡
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Louis P. Salvatore (Class III) |
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WITHHOLD AUTHORITY FOR ALL NOMINEES
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¡
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Robert F. Birch (Class I) |
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FOR ALL EXCEPT
(See instructions below)
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¡
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Stuart A. McFarland (Class I) |
Instruction: To withhold authority to vote for any individual nominee(s), mark FOR ALL
EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: l
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 two Class I and Class III
nominees and the election of one Class I nominee as Directors 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.