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 ------------ The Hyperion Strategic Mortgage Income Fund, Inc. --------------------------------------------------------------------- (Exact name of registrant as specified in charter) One Liberty Plaza, 165 Broadway, 36th Fl., New York, NY 10006-1404 ------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Thomas F. Doodian One Liberty Plaza, 165 Broadway, New York, NY 10006-1404 --------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-549-8400 -------------------- Date of fiscal year end: November 30, 2005 -------------------------- Date of reporting period: February 28, 2005 ----------------------- 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 ------------------- ------------------ 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. -------------- $ 250,990 ============== 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