UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-21102
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The Hyperion Strategic Mortgage Income Fund, Inc.
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(Exact name of registrant as specified in charter)
One Liberty Plaza, 165 Broadway, 36th Fl., New York, NY 10006-1404
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(Address of principal executive offices) (Zip code)
Thomas F. Doodian One Liberty Plaza, 165 Broadway, New York, NY 10006-1404
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-549-8400
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Date of fiscal year end: November 30, 2005
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Date of reporting period: February 28, 2005
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Form N-Q is to be used by management investment companies, other than
small business investment companies registered on Form N-5 (Sections 239.24 and
274.5 of this chapter), to file reports with the Commission, not later than 60
days after the close of the first and third fiscal quarters, pursuant to rule
30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The
Commission may use the information provided on Form N-Q in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-Q, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-Q
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to the Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
Item 1. Schedule of Investments
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
PORTFOLIO OF INVESTMENTS - (UNAUDITED)
February 28, 2005
Principal
Interest Amount
Rate Maturity (000s) Value
-------- -------- ------------ -----------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS - 62.50%
U.S. Government Agency Pass - Through Certificates - 55.10%
Federal Home Loan Mortgage Corporation
Pool A14559 6.50% 09/01/33 $ 3,320@ $ 3,459,397
Pool C68878 7.00 06/01/32 553# 583,013
Pool C69047 7.00 06/01/32 1,338 1,410,530
Pool G01466 9.50 12/01/22 1,734 1,939,771
Pool 555559 10.00 03/01/21 1,872 2,103,870
9,496,581
Federal National Mortgage Association
Pool 694391 5.50 03/01/33 4,583@ 4,627,746
Pool 753914 5.50 12/01/33 11,379@ 11,488,905
Pool 754355 6.00 12/01/33 7,573@ 7,775,013
Pool 761836 6.00 06/01/33 5,436@ 5,579,119
Pool 763643 6.00 01/01/34 8,761@ 8,994,436
Pool 255413 6.50 10/01/34 13,356@ 13,930,040
Pool 323982 6.50 10/01/06 458 467,275
Pool 626299 7.00 06/01/32 1,051 1,108,284
Pool 635095 7.00 06/01/32 1,459 1,538,677
Pool 641575 7.00 04/01/32 662 698,087
Pool 645399 7.00 05/01/32 3,138@ 3,308,730
Pool 645466 7.00 05/01/32 3,098@ 3,266,486
Pool 650131 7.00 07/01/32 1,649 1,739,768
Pool 398800 8.00 06/01/12 877 929,697
Pool 636449 8.50 04/01/32 3,173 3,437,146
Pool 458132 9.40 03/15/31 2,463@ 2,742,639
71,632,048
Total U.S. Government Agency Pass -Through Certificates
(Cost - $81,172,439) 81,128,629
U.S. Treasury Obligation - 7.40%
United States Treasury Note
(Cost - $11,054,988) 4.25 11/15/14 11,000@ 10,895,588
Total U.S. Government & Agency Obligations
(Cost - $92,227,427) 92,024,217
ASSET-BACKED SECURITIES - 32.00%
Housing Related Asset-Backed Securities - 30.10%
Argent Securities, Inc.
Series 2004-W3, Class M5*(a) 4.95+ 02/25/34 1,200 1,047,797
Asset Backed Funding Corp.
Series 2003-OPT1, Class M4(a) 5.45+ 07/25/32 3,000 3,078,219
Equity One ABS, Inc.
Series 2003-4, Class B2 7.40+ 11/25/33 1,000 1,008,771
First Franklin Mortgage Loan Asset Backed Certificates
Series 2004-FF4, Class M2(a) 3.90+ 06/25/34 2,000 1,999,990
Series 2003-FF4, Class M4(a) 5.55+ 10/25/33 3,000 3,114,600
Series 2003-FF1, Class M4(a) 5.65+ 03/25/33 2,000 2,028,432
Series 2003-FFH1, Class M4(a) 6.15+ 09/25/33 4,740 4,910,593
Series 2004-FFH1, Class B*(a) 6.15+ 03/25/34 1,550 1,463,856
Series 2004-FF2, Class B*(a) 6.15+ 03/25/34 900 854,389
Series 2004-FFH2C, Class B1*(a) 6.15+ 06/25/34 1,250 1,168,262
Series 2004-FF8, Class B4*(a) 6.15+ 10/25/34 1,250 1,159,955
16,700,077
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
PORTFOLIO OF INVESTMENTS - (UNAUDITED)
February 28, 2005
Principal
Interest Amount
Rate Maturity (000s) Value
-------- -------- ------------ -----------------
Green Tree Financial Corp.
Series 1997-6, Class B1 7.17 01/15/29 5,000 859,565
Series 1997-3, Class M1 7.53 03/15/28 2,000 1,300,000
2,159,565
Harborview Mortgage Loan Trust
Series 2005-1, Class B4*(a) 4.42+ 03/19/35 630 533,827
Series 2005-1, Class B5*(a) 4.42+ 03/19/35 915 593,463
Series 2005-1, Class B6*(a) 4.42+ 03/19/35 1,145 257,625
1,384,915
Long Beach Mortgage Loan Trust
Series 2004-3, Class M9(a) 5.65+ 07/25/34 2,500 2,550,975
Series 2002-5, Class M3(a) 5.90+ 11/25/32 2,500 2,555,602
5,106,577
Mid-State Trust
Series 2004-1, Class M2 8.11 08/15/37 1,785 1,795,454
Structured Asset Investment Loan Trust
Series 2003-BC8, Class M2(a) 4.40+ 08/25/33 3,000 3,035,154
Series 2004-4, Class B*(b) 5.00/5.50 04/25/34 1,500 1,329,884
Series 2004-11, Class M9(b) 5.00/5.50 01/25/35 1,900 1,769,447
Series 2004-7, Class B(a) 5.15+ 08/25/34 2,161 1,928,335
Series 2004-8, Class B1(a) 5.15+ 09/25/34 1,000 957,765
Series 2004-10, Class M7(a) 5.15+ 11/25/34 2,000 1,974,348
Series 2004-2, Class B*(a) 5.65+ 03/25/34 1,074 987,618
11,982,551
Total Housing Related Asset-Backed Securities
(Cost - $43,985,989) 44,263,926
Non-Housing Related Asset- Backed Securities - 1.90%
Airplanes Pass Through Trust
Series 1R, Class A8
(Cost - $2,689,214) 2.96+ 03/15/19 3,126 2,812,987
Total Asset-Backed Securities
(Cost - $46,675,203) 47,076,913
COMMERCIAL MORTGAGE BACKED SECURITIES - 28.40%
Bear Stearns Commercial Mortgage Securities
Series 1999-C1, Class D 6.53 02/14/31 2,500 2,721,575
Series 2000-WF1, Class E 7.92+ 02/15/32 2,000 2,263,360
4,984,935
Chase Commercial Mortgage Securities Corp.
Series 2000-2, Class I* 6.65 07/15/32 1,000 612,700
GE Capital Commercial Mortgage Corp.
Series 2002-2A, Class G* 6.04 08/11/36 3,000 3,141,789
Series 2000-1, Class G* 6.13 01/15/33 1,000 409,500
Series 2002-2A, Class H* 6.31 08/11/36 2,000 2,094,836
Series 2000-1, Class E 7.18+ 01/15/33 1,000 1,070,010
6,716,135
Government Lease Trust
Series 1999-C1A, Class B3* 4.00 05/18/11 2,500 2,275,987
JP Morgan Chase Commercial Mortgage Securities
Series 2003-LN1, Class G* 5.48+ 10/15/37 1,600 1,614,008
JP Morgan Commercial Mortgage Finance Corp.
Series 1999-C7, Class F* 6.00 10/15/35 2,000 2,051,120
LB-UBS Commercial Mortgage Trust
Series 2004-C8, Class G* 5.09+ 12/15/39 1,173 1,164,361
Morgan Stanley Capital I
Series 2001-TOP1, Class A4 6.66 02/15/33 4,500 4,943,520
Series 1999-WF1, Class E 7.01+ 11/15/31 5,500 5,992,657
Series 1999-FNV1, Class E 7.20+ 03/15/31 2,000 2,197,600
13,133,777
Nationslink Funding Corp.
Series 1998-2, Class E 7.11 08/20/30 4,000 4,359,072
UBS 400 Atlantic Street Mortgage Trust
Series 2002-C1A, Class B3* 7.19 01/11/22 2,000 2,195,340
Wachovia Bank Commercial Mortgage Trust
Series 2004-WL4A, Class H* 3.44+ 10/15/15 700 701,297
Series 2005-C16, Class H* 5.30+ 10/15/41 2,000 1,986,719
2,688,016
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
PORTFOLIO OF INVESTMENTS - (UNAUDITED)
February 28, 2005
Principal
Interest Amount
Rate Maturity (000s) Value
-------- -------- ------------ -----------------
Total Commercial Mortgage Backed Securities
(Cost - $41,077,006) 41,795,451
NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES - 24.90%
Subordinated Collateralized Mortgage Obligations - 24.90%
Bank of America Alternative Loan Trust
Series 2004-3, Class 30B4 5.50 04/25/34 1,007 799,728
Series 2004-3, Class 30B5 5.50 04/25/34 705 397,307
1,197,035
Bank of America Mortgage Securities, Inc.
Series 2004-A, Class B4 3.93+ 02/25/34 2,059 1,795,233
Series 2002-H, Class B4 4.71+ 08/25/32 241 233,673
Series 2002-H, Class B5 4.71+ 08/25/32 165 164,673
Series 2002-H, Class B6 4.71+ 08/25/32 403 354,285
Series 2003-10, Class 1B4 5.50 01/25/34 564 494,626
Series 2002-10, Class 1B3 6.00 11/25/32 1,458 1,484,836
Series 2002-9, Class 1B3 6.25 10/25/32 1,749 1,754,674
Series 2002-9, Class 1B4 6.25 10/25/32 1,166 1,163,021
7,445,021
Cendant Mortgage Corp.
Series 2002-4, Class B1 6.50 07/25/32 2,613 2,632,812
Series 2002-4, Class B2 6.50 07/25/32 1,045 1,052,778
Series 2002-4, Class B3 6.50 07/25/32 611 617,450
Series 2002-4, Class B4 6.50 07/25/32 349 336,284
Series 2002-4, Class B5 6.50 07/25/32 262 229,862
Series 2002-4, Class B6* 6.50 07/25/32 349 261,675
5,130,861
G3 Mortgage Reinsurance Ltd.
Series 1, Class E* 22.60+ 05/25/08 4,138 4,468,790
JP Morgan Mortgage Trust
Series 2003-A1, Class B4 4.50+ 10/25/33 537 407,820
Residential Finance Limited Partnership
Series 2002-A, Class B7 8.29+ 10/10/34 1,950 1,967,345
Residential Funding Mortgage Securities I, Inc.
Series 2004-S1, Class B2 5.25 02/25/34 456 293,835
Series 2003-S7, Class B3 5.50 05/25/33 323 232,157
Series 2003-S7, Class B2 5.50 05/25/33 533 213,025
739,017
Resix Finance Limited Credit-Linked Note
Series 2004-C, Class B7* 6.09+ 09/10/36 994 1,014,350
Series 2004-B, Class B8* 7.34+ 02/10/36 807 831,439
Series 2003-CB1, Class B8* 9.34+ 06/10/35 976 1,019,735
Series 2004-B, Class B9* 10.80+ 02/10/36 1,237 1,286,015
Series 2004-A, Class B10* 14.10+ 02/10/36 494 513,341
4,664,880
Structured Asset Mortgage Investments, Inc.
Series 2002-AR1, Class B4 4.52+ 03/25/32 891 843,326
Washington Mutual Mortgage Securities Corp.
Series 2002-AR12, Class B4 4.70+ 10/25/32 1,157 1,115,463
Series 2002-AR12, Class B5 4.70+ 10/25/32 868 817,728
Series 2002-AR12, Class B6 4.70+ 10/25/32 1,448 1,071,381
Series 2002-AR10, Class B4* 4.97+ 10/25/32 1,312 1,271,760
Series 2002-AR10, Class B5* 4.97+ 10/25/32 984 925,945
Series 2002-AR10, Class B6* 4.97+ 10/25/32 1,642 1,215,121
Series 2002-AR11, Class B5 5.13+ 10/25/32 776 746,035
Series 2002-AR11, Class B6 5.13+ 10/25/32 1,293 909,416
Series 2005-AR2, Class B10 3.89+ 01/25/45 1,793 1,423,264
9,496,113
Wells Fargo Mortgage Backed Securities Trust
Series 2002, Class B5 6.00 06/25/32 364 330,776
Total Subordinated Collateralized Mortgage Obligations
(Cost - $34,580,700) 36,690,984
Total Non-Agency Residential Mortgage Backed Securities
(Cost - $34,580,700) 36,690,984
Total Investments - 147.80%
(Cost - $214,560,336)** 217,587,565
Liabilities in Excess of Other Assets - (47.80)% -70,401,478
NET ASSETS - 100.00% $ 147,186,087
@ - Portion or entire principal amount delivered as collateral for reverse
repurchase agreement.
+ - Variable Rate Security: Interest rate is the rate in effect February 28,
2005.
* - Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may only be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(a) - Security is a "step up" bond where coupon increases or steps up at a
predetermined date. At that date these coupons increase to LIBOR plus a
predetermined margin
(b) - Security is a "step up" bond where coupon increases or steps up at a
predetermined date. Rates shown are current coupon and next coupon rate
when security steps up.
# - Portion or entire principal amount is held as collateral for open futures
contracts.
** - At February 28, 2005, the aggregate cost of investments for income tax
purposes was $214,560,336. Net unrealized appreciation aggregated
$3,027,229 of which $ 5,233,571 related to appreciated investment
securities and $2,206,342 related to depreciated investment securities.
See notes to financial statements.
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
February 28, 2005
At February 28, 2005 the Fund had the following reverse repurchase agreements
outstanding:
Maturity
Face Value Description Amount
---------- ----------- ------------------
$ 7,566,000 Goldman Sachs, 2.60%, dated 02/23/05, maturity date 03/23/05 $ 7,581,300
5,428,000 Goldman Sachs, 2.60%, dated 02/23/05, maturity date 03/23/05 5,438,977
13,532,000 Goldman Sachs 2.60%, dated 02/23/05, maturity date 03/23/05 13,559,365
2,500,000 Lehman Brothers 2.60%, dated 02/17/05, maturity date 03/08/05 2,503,431
11,000,000 Lehman Brothers 2.57%, dated 02/24/04, maturity date 03/01/05 11,003,926
3,378,000 Merrill Lynch 2.58%, dated 02/10/05, maturity date 03/08/05 3,384,294
8,742,000 Merrill Lynch 2.60%, dated 02/23/05, maturity date 03/21/05 8,758,416
10,503,000 Morgan Stanley 2.62%, dated 02/08/05, maturity date 03/23/05 10,535,869
3,200,000 Morgan Stanley 2.60%, dated 02/11/05, maturity date 03/11/05 3,206,471
4,500,000 Morgan Stanley 2.69%, dated 02/28/05, maturity date 03/30/05 4,510,088
1,955,000 Morgan Stanley 2.62%, dated 02/28/05, maturity date 03/15/05 1,957,134
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72,304,000
Maturity Amount, Including Interest Payable $ 72,439,271
Market Value of Assets Sold Under Agreements $ 73,977,288
Weighted Average Interest Rate 2.60%
The average daily balance of reverse repurchase agreements outstanding for the
three months ended February 28, 2005, was approximately $69,852,568 at a
weighted average interest rate of 2.29%. The maximum amount of reverse
repurchase agreements outstanding at any time during the period was $73,979,250
as of December 3, 2004, which was 33.33% of total assets.
As of February 28, 2005, the following swap agreements were outstanding:
Expiration Net Unrealized
Notional Amount Date Description Appreciation
$ 10,000,000 01/23/06 Agreement with Goldman Sachs Capital Markets, LP, $ 135,606
dated 01/21/04 to pay semi-annually the notional
amount multiplied by 2.005% and to receive
quarterly the notional amount multiplied by 3
month USD-LIBOR-BBA.
THE HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
February 28, 2005
Expiration Net Unrealized
Notional Amount Date Description Appreciation
--------------- ---------- ----------- --------------
$ 11,000,000 12/15/14 Agreement with Morgan Stanley Capital Services, $ 115,384
Inc., dated 12/13/04 to pay semi-annually the
notional amount multiplied by 4.555% and to
receive quarterly the notional amount multiplied
by 3 month USD-LIBOR-BBA.
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$ 250,990
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As of February 28, 2005, the following futures contract was outstanding:
SHORT:
Unrealized
Cost at Value at Appreciation/
Notional Amount Type Expiration Date Trade Date February 28, 2005 (Depreciation)
---------------- ---- --------------- ----------- ----------------- --------------
$ 8,400,000 10 Yr. U.S. Treasury Note March 2005 $ 9,396,120 9,313,500 $ 82,620
Item 2. Controls and Procedures.
(a) The Registrant's principal executive officer and principal financial
officer have concluded that the Registrant's Disclosure Controls and
Procedures are effective, based on their evaluation of such
Disclosure Controls and Procedures as of a date within 90 days of the
filing of this report on Form N-Q.
(b) As of the date of filing this Form N-Q, the Registrant's principal
executive officer and principal financial officer are aware of no
changes in the Registrant's internal control over financial reporting
that occurred during the Registrant's last fiscal quarter that has
materially affected or is reasonably likely to materially affect the
Registrant's internal control over financial reporting.
Item 3. Exhibits
(a) Certifications for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2(a)
under the Act. Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
HYPERION STRATEGIC MORTGAGE INCOME FUND, INC.
By: /s/ Clifford E. Lai
Clifford E. Lai
Principal Executive Officer
Date: April 26, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Clifford E. Lai
Clifford E. Lai
Principal Executive Officer
Date: April 26, 2005
By: /s/ Thomas F. Doodian
Thomas F. Doodian
Treasurer and Principal Financial Officer
Date: April 26, 2005