UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

(Exact name of registrant as specified in charter)

Three World Financial Center, 200 Vesey Street, 10th Floor, New York, NY 10281-1010
(Address of principal executive offices) (Zip code)

Thomas F. Doodian, Three World Financial Center, 200 Vesey Street, New York, NY 10281-1010
(Name and address of agent for service)

Registrant’s telephone number, including area code: 212-549-8400

Date of fiscal year end: November 30, 2008

Date of reporting period: February 29, 2008

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, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.

 

 

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.
Portfolio of Investments (Unaudited)
February 29, 2008

Item 1. Schedule of Investments

										Principal
		Interest								Amount
		Rate				Maturity				(000s)				Value
U.S. GOVERNMENT & AGENCY OBLIGATIONS — 80.3%
U.S. Government Agency Pass-Through Certificates — 60.8%
Federal Home Loan Mortgage Corporation
Pool C69047			7.00	%			06/01/32			$	868			$	919,835
Pool H01847			7.00				09/01/37				2,664	@			2,779,670
Pool G01466			9.50				12/01/22				785				876,208
Pool 555559			10.00				03/01/21				685				802,506
															5,378,219
Federal National Mortgage Association
Pool 694391			5.50				03/01/33				3,249				3,280,722
Pool 753914			5.50				12/01/33				6,074	@			6,133,560
Pool 955347			5.83				10/01/37				1,997				2,055,496
Pool 949293			5.88				10/01/37				1,990				2,048,467
Pool 754355			6.00				12/01/33				2,467				2,531,544
Pool 761836			6.00				06/01/33				2,384				2,448,461
Pool 763643			6.00				01/01/34				5,175				5,303,867
Pool 255413			6.50				10/01/34				5,769	@			5,998,360
Pool 795367			6.50				09/01/34				1,999				2,078,278
Pool 809989			6.50				03/01/35				2,235				2,319,450
Pool 945836			6.50				08/01/37				4,831				4,982,368
Pool 948362			6.50				08/01/37				4,748				4,897,070
Pool 650131			7.00				07/01/32				1,170				1,248,696
Pool 887431			7.50				08/01/36				646				678,691
Pool 398800			8.00				06/01/12				325				339,801
Pool 827854			8.00				10/01/29				1,454				1,585,470
Pool 636449			8.50				04/01/32				1,394				1,538,130
Pool 823757			8.50				10/01/29				2,431				2,675,266
Pool 458132			9.49				03/15/31				1,102				1,236,325
															53,380,022
Total U.S. Government Agency Pass-Through Certificates
(Cost — $58,283,355)															58,758,241
U.S. Treasury Obligations — 19.5%
United States Treasury Notes			4.50				02/15/16				3,000	@			3,256,875
United States Treasury Notes			4.50				05/15/17				14,500	@			15,620,357
Total U.S. Treasury Obligations
(Cost — $17,142,895)															18,877,232
Total U.S. Government & Agency Obligations
(Cost — $75,426,250)															77,635,473
ASSET-BACKED SECURITIES — 10.8%
Housing Related Asset-Backed Securities — 9.3%
Asset Backed Funding Certificates
Series 2005-AQ1, Class B1* (b)			5.75/6.25				06/25/35				993				582,903
Series 2005-AQ1, Class B2* (b)			5.75/6.25				06/25/35				1,050				681,450
															1,264,353
Asset Backed Securities Corp. Home Equity
Series 2006-HE3, Class A4 (a) (d)			3.31	†			03/25/36				740				692,828
First Franklin Mortgage Loan Asset Backed Certificates
Series 2004-FFH2C, Class B1* (a) (d)			6.64	†			06/25/34				334				5,427
Green Tree Financial Corp.
Series 1995-6, Class M1 (c)			8.10				09/15/26				4,325				4,394,265
Mid-State Trust
Series 2004-1, Class M2			8.11				08/15/37				1,154				1,180,447
Securitized Asset-Backed Receivables LLC Trust
Series 2005-HE1, Class A1A* (a) (d)			3.44	†			10/25/35				1,412				1,391,398

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.
Portfolio of Investments (Unaudited)
February 29, 2008

										Principal
		Interest								Amount
		Rate				Maturity				(000s)				Value
ASSET-BACKED SECURITIES (continued)
Structured Asset Investment Loan Trust Series 2004-4, Class B* (b) (c) (d)			5.00/5.50	%			04/25/34			$	409			$	9,435
Total Housing Related Asset-Backed Securities
(Cost — $9,661,974)															8,938,153
Non-Housing Related Asset-Backed Securities — 1.5%
Airplanes Pass Through Trust Series 1R, Class A8 (cost $1,489,590)			3.50	†			03/15/19				1,586				1,482,568
Total Asset-Backed Securities
Cost — $11,151,564)															10,420,721
COMMERCIAL MORTGAGE BACKED SECURITIES — 28.1%
Banc America Commercial Mortgage, Inc.
Series 2007-2, Class L			5.37				04/10/49				1,127				419,974
Series 2007-2, Class K			5.70				04/10/49				3,000				1,187,673
Series 2006-1, Class J*			5.78				09/10/45				1,000				522,662
															2,130,309
Bear Stearns Commercial Mortgage Securities
Series 2006-PWR13, Class K			5.26				09/11/41				347				151,138
Series 2006-PWR11, Class H*			5.46				03/11/39				1,100				576,734
Series 2006-PWR13, Class H			6.03				09/11/41				2,450				1,309,454
Series 1999-C1, Class D			6.53				02/14/31				2,500				2,321,307
															4,358,633
CD 2006 CD2
Series 2006-CD2, Class J*			5.47				01/15/46				1,000				522,276
Credit Suisse Mortgage Capital Certificates
Series 2006-C4, Class L*			5.15				09/15/39				513				244,754
Series 2006-C4, Class M*			5.15				09/15/39				565				253,672
Series 2006-C1, Class K*			5.55	†			02/15/39				2,358				1,249,377
Series 2006-C4, Class K*			6.30				09/15/39				2,970				1,581,302
															3,329,105
GE Capital Commercial Mortgage Corp.
Series 2002-2A, Class G*			6.04				08/11/36				3,000				2,782,161
Series 2002-2A, Class H*			6.31				08/11/36				2,000				1,889,212
															4,671,373
GMAC Commercial Mortgage Securities
Series 2006-C1, Class G*			5.61				11/10/45				2,500				1,637,015
JP Morgan Chase Commercial Mortgage Securities
Series 2003-LN1, Class G*			5.43	†			10/15/37				1,600				1,356,314
Series 2006-CIBC14, Class H*			5.54	†			12/12/44				1,211				643,485
Series 2007-LD11, Class K*			5.82	†			06/15/49				1,879				748,951
															2,748,750
Morgan Stanley Capital I
Series 2006-WMC2, Class A2C (a) (d)			3.29	†			06/25/36				2,010				1,551,272
Series 2006-HE1, Class A3 (a) (d)			3.32	†			01/25/36				1,425				1,363,306
Series 2004-HQ4, Class G*			5.53				04/14/40				1,000				772,716
															3,687,294
UBS 400 Atlantic Street Mortgage Trust
Series 2002-C1A, Class B3*			7.19				01/11/22				2,000				2,206,000
Wachovia Bank Commercial Mortgage Trust
Series 2007-C31, Class L*			5.13				04/15/47				1,788				612,903
Series 2005-C16, Class H*			5.36	†			10/15/41				2,000				1,247,642
															1,860,545
Total Commercial Mortgage Backed Securities
(Cost — $36,082,282)															27,151,300

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.
Portfolio of Investments (Unaudited)
February 29, 2008

										Principal
		Interest								Amount
		Rate				Maturity				(000s)				Value
NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES — 27.9%
Subordinated Collateralized Mortgage Obligations — 27.9%
Banc of America Funding Corp.
Series 2005-2, Class B4			5.66	†%			04/25/35			$	846			$	529,499
Series 2005-2, Class B5			5.66	†			04/25/35				677				298,431
Series 2005-2, Class B6			5.66	†			04/25/35				509				100,017
															927,947
Bank of America Alternative Loan Trust
Series 2004-3, Class 30B4			5.50				04/25/34				968				264,179
Series 2004-3, Class 30B5			5.50				04/25/34				680				109,435
															373,614
Bank of America Mortgage Securities, Inc.
Series 2004-A, Class B4			4.04	†			02/25/34				1,533				969,410
Series 2003-10, Class 1B4			5.50				01/25/34				538				371,862
Series 2002-10, Class 1B3			6.00				11/25/32				1,379				1,375,628
Series 2007-4, Class B3*			6.19				12/28/37				249				142,426
															2,859,326
Cendant Mortgage Corp.
Series 2002-4, Class B1			6.50				07/25/32				2,358				2,387,975
Series 2002-4, Class B2			6.50				07/25/32				943				955,190
Series 2002-4, Class B3			6.50				07/25/32				550				532,103
Series 2002-4, Class B4			6.50				07/25/32				317				291,134
Series 2002-4, Class B5			6.50				07/25/32				238				221,142
Series 2002-4, Class B6*			6.50				07/25/32				317				190,365
															4,577,909
Countrywide Home Loans
Series 2003-J13, Class B3			5.22				01/25/34				353				226,549
Series 2003-J13, Class B5			5.22				01/25/34				265				66,303
Series 2007-11, Class B2			6.00				08/25/37				498				319,087
Series 2007-17, Class B1			6.24				10/25/37				572				387,977
															999,916
Fieldstone Mortgage Investment Corp.
Series 2006-3, Class 2A3 (b) (d)			3.30	†			11/25/36				1,105				821,645
First Horizon Alternative Mortgage Securities
Series 2005-AA6, Class B4			5.42	†			08/25/35				841				294,445
Series 2005-AA6, Class B5			5.42	†			08/25/35				792				118,768
Series 2005-AA6, Class B6			5.42	†			08/25/35				367				33,003
															446,216
First Horizon Mortgage Pass-Through Trust
Series 2005-4, Class B4*			5.45	†			07/25/35				409				198,497
Series 2005-5, Class B4*			5.46	†			10/25/35				703				283,501
Series 2005-5, Class B5*			5.46	†			10/25/35				527				79,083
Series 2005-5, Class B6*			5.46	†			10/25/35				528				26,422
															587,503
G3 Mortgage Reinsurance Ltd.
Series 1, Class E*			23.14	†			05/25/08				4,048				4,068,061
Harborview Mortgage Loan Trust
Series 2005-1, Class B4* (a)			4.87	†			03/19/35				511				298,905
Series 2005-1, Class B5* (a)			4.87	†			03/19/35				743				148,554
Series 2005-1, Class B6* (a)			4.87	†			03/19/35				779				62,313
Series 2005-2, Class B4* (a)			4.87	†			05/19/35				1,270				317,483
Series 2005-9, Class B11*			4.87	†			06/20/35				504				403,127
Series 2005-14, Class B4*			5.69	†			12/19/35				393				137,552
															1,367,934
IXIS Real Estate Capital Trust
Series 2006-HE3, Class A1(a) (d)			3.18				01/25/37				251				244,941

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.
Portfolio of Investments (Unaudited)
February 29, 2008

										Principal
		Interest								Amount
		Rate				Maturity				(000s)				Value
NON-AGENCY RESIDENTIAL MORTGAGE BACKED SECURITIES (continued)
JP Morgan Mortgage Trust
Series 2003-A1, Class B4			4.47	†%			10/25/33			$	531			$	298,353
Series 2007-CB18, Class G*			5.92				06/12/47				600				298,283
Series 2006-A6, Class B5			6.01				10/25/36				913				225,243
Series 2006-A6, Class B6			6.01				10/25/36				1,101				220,253
															1,042,132
RAAC Series
Series 2005-SP1, Class M3			5.51				09/25/34				309				202,016
Residential Funding Mortgage Securities I, Inc.
Series 2004-S1, Class B2			5.25				02/25/34				435				238,293
Series 2003-S7, Class B2			5.50				05/25/33				507				116,556
Series 2003-S7, Class B3			5.50				05/25/33				307				180,497
Series 2006-SA1, Class B2*			5.67				02/25/36				822				164,402
Series 2006-SA1, Class B3*			5.67				02/25/36				509				25,435
															725,183
Resix Finance Limited Credit-Linked Note
Series 2005-C, Class B7*			6.27	†			09/10/37				1,930				1,295,082
Series 2004-C, Class B7*			6.67	†			09/10/36				949				751,057
Series 2006-C, Class B9*			7.27	†			07/15/38				1,495				1,040,037
Series 2004-B, Class B8*			7.92	†			02/10/36				766				587,276
Series 2003-CB1, Class B8*			9.92	†			06/10/35				914				854,304
Series 2004-B, Class B9*			11.42	†			02/10/36				1,174				1,008,672
Series 2004-A, Class B10*			14.67	†			02/10/36				469				427,920
															5,964,348
Structured Asset Securities Corporation
Series 2005-6, Class B5			5.34	†			05/25/35				481				86,582
Series 2005-6, Class B6			5.34	†			05/25/35				481				57,721
Series 2005-6, Class B7			5.34	†			05/25/35				307				15,338
															159,641
Washington Mutual Mortgage Securities Corp.
Series 2005-AR2, Class B9			4.58	†			01/25/45				594				296,837
Series 2005-AR2, Class B10* (a)			4.58	†			01/25/45				1,419				820,600
Series 2002-AR12, Class B4			7.19	†			10/25/32				107				106,332
Series 2002-AR12, Class B5			7.19	†			10/25/32				80				79,391
Series 2002-AR12, Class B6			7.19	†			10/25/32				133				20,005
															1,323,165
Wells Fargo Mortgage Backed Securities Trust
Series 2002, Class B5			6.00				06/25/32				336				293,409
Total Subordinated Collateralized Mortgage Obligations (Cost — $41,057,686)															26,984,906
Total Non-Agency Residential Mortgage Backed Securities (Cost — $41,057,686)															26,984,906
SHORT TERM INVESTMENTS — 3.2%
Merrill Lynch Repurchase Agreement, dated 02/29/2008 (collateralized by $3,810,000 par FNMA Pool 735893, 5.00%, maturing 10/01/2035, valued at $3,757,017); proceeds $3,000,763			3.05				03/03/08				3,000				3,000,000
United States Treasury Bill			0.00				06/19/08				100	#			99,462
Total Short Term Investments (Cost — $3,099,022)															3,099,462

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.
Portfolio of Investments (Unaudited)
February 29, 2008

Principal

Interest

Amount

Rate

Maturity

(000s)

Value

Total Investments — 150.3% (Cost — $166,816,804)

$

145,291,862

Liabilities in Excess of Other Assets — (50.3)%

(48,606,774

)

NET ASSETS — 100.0%

$

96,685,088

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.
February 29, 2008

Valuation of Investments: Where market quotations are readily available, securities held by the Fund are valued based upon the current bid price, except preferred stocks, which are valued based upon the closing price. Securities may be valued by independent pricing services that have been approved by the Board of Directors. The prices provided by a pricing service take into account broker dealer market price quotations for institutional size trading in similar groups of securities, security quality, maturity, coupon and other security characteristics as well as any developments related to the specific securities. The Fund values mortgage-backed securities (“MBS”) and other debt securities for which market quotations are not readily available (approximately 5% of the investments in securities held by the Fund at February 29, 2008) at their fair value as determined in good faith, utilizing procedures approved by the Board of Directors of the Fund, on the basis of information provided by dealers in such securities. Some of the general factors which may be considered in determining fair value include the fundamental analytic data relating to the investment and an evaluation of the forces which influence the market in which these securities are purchased and sold. Determination of fair value involves subjective judgment, as the actual market value of a particular security can be established only by negotiations between the parties in a sales transaction. Debt securities having a remaining maturity of sixty days or less when purchased and debt securities originally purchased with maturities in excess of sixty days but which currently have maturities of sixty days or less are valued at amortized cost.

The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry or region. The values of MBS can be significantly affected by changes in interest rates or in the financial condition of an issuer or market.

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:

	•		Level 1 — quoted prices in active markets for identical securities
	•		Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
	•		Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used, as of February 29, 2008, in valuing the Fund’s assets carried at fair value:

		Investments in				Other Financial
Valuation Inputs		Securities				Instruments*
Level 1 — Quoted Prices		$	—			$	77,311
Level 2 — Other Significant Observable Inputs			140,888,162				(18,857,215	)
Level 3 — Significant Unobservable Inputs			4,403,700				—
Total		$	145,291,862			$	(18,779,904	)

*		Other financial instruments include futures and swap contracts.

Following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:

		Investments in				Other Financial
		Securities				Instruments
Balance as of December 1, 2007		$	5,379,930			$	—
Accrued discounts/premiums			—				—
Realized gain (loss)			2,623				—
Change in unrealized appreciation (depreciation)			363,397				—
Net purchases (sales)			(485,295	)			—
Transfers in and/or out of Level 3			(856,955	)			—
Balance as of February 29, 2008		$	4,403,700			$	—

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.
February 29, 2008

Reverse Repurchase Agreements: The Fund may enter into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements. Under a reverse repurchase agreement, the Fund sells securities and agrees to repurchase them at a mutually agreed upon date and price. Under the 1940 Act, reverse repurchase agreements will be regarded as a form of borrowing by the Fund unless, at the time it enters into a reverse repurchase agreement, it establishes and maintains a segregated account with its custodian containing securities from its portfolio having a value not less than the repurchase price (including accrued interest). The Fund has established and maintained such an account for each of its reverse repurchase agreements.

Reverse repurchase agreements involve the risk that the market value of the securities retained in lieu of sale by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund’s obligation to repurchase the securities, and the Fund’s use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision.

As of February 29, 2008, the Fund had the following reverse repurchase agreements outstanding:

						Maturity
Face Value				Description		Amount
$	15,587,500			Merrill Lynch 2.50%, dated 02/07/08, maturity date 03/06/08		$	15,617,119
	2,651,000			Lehman Brothers 3.20%, dated 02/22/08, maturity date 03/25/08			2,657,834
	5,783,000			Credit Suisse 3.17%, dated 02/22/08, maturity date 03/25/08			5,797,768
	3,273,750			Merrill Lynch 2.45%, dated 02/07/08, maturity date 03/06/08			3,279,988
	5,827,000			Bear Stearns 3.20%, dated 02/15/08, maturity date 03/17/08			5,843,057
$	33,122,250
				Maturity Amount, Including Interest Payable		$	33,195,766
				Market Value of Assets Sold Under Agreements		$	33,788,822
				Weighted Average Interest Rate			2.79	%

The average daily balance of reverse repurchase agreements outstanding during the three months ended February 29, 2008, was approximately $31,297,139 at a weighted average interest rate of 3.73%. The maximum amount of reverse repurchase agreements outstanding at any time during the period was $33,163,765 as of February 29, 2008, which was 24.89% of total assets.

Swap agreements: The Fund may enter into swap agreements to manage its exposure to various risks. An interest rate swap agreement involves the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. A total rate of return swap agreement is a derivative contract in which one party (the receiver) receives the total return of a specific index on a notional amount of principal from a second party (the seller) in return for paying a funding cost, which is usually quoted in relation to the London Inter-Bank Offer Rate (“LIBOR”). During the life of the agreement, there are periodic exchanges of cash flows in which the index receiver pays the LIBOR based interest on the notional principal amount and receives (or pays if the total return is negative or spreads widen) the index total return on the notional principal amount. A credit default swap is an agreement between a protection buyer and a protection seller whereby the buyer agrees to periodically pay the seller a premium, generally expressed in terms of interest on a notional principal amount, over a specified period in exchange for receiving compensation from the seller when an underlying reference debt obligation or index of reference debt obligations is subject to one or more specified adverse credit events (such as bankruptcy, failure to pay, acceleration of indebtedness, restructuring, or repudiation/moratorium). The Fund will usually enter into swaps on a net basis, i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Swaps are marked to market based upon quotations from market makers and the change, if any, along with an accrual for periodic payments due or owed is recorded as unrealized gain or loss in the Statement of Operations. Net payments on swap agreements are included as part of realized gain/loss in the Statement of Operations. Payments paid or received upon the opening of a swap agreement are included in Swap premiums paid or received in the Statement of Assets and Liabilities. These upfront payments are recorded as realized gain or loss in the Statement of Operations upon the termination or maturity of the swap. Entering into these agreements involves, to varying degrees, elements of credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks include the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform, that there may be unfavorable changes in the fluctuation of interest rates or the occurrence of adverse credit events on reference debt obligations.

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.
February 29, 2008

based upon quotations from market makers and the change, if any, along with an accrual for periodic payments due or owed is recorded as unrealized gain or loss in the Statement of Operations. Net payments on swap agreements are included as part of realized gain/loss in the Statement of Operations. Payments paid or received upon the opening of a swap agreement are included in Swap premiums paid or received in the Statement of Assets and Liabilities. These upfront payments are recorded as realized gain or loss in the Statement of Operations upon the termination or maturity of the swap. Entering into these agreements involves, to varying degrees, elements of credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks include the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform, that there may be unfavorable changes in the fluctuation of interest rates or the occurrence of adverse credit events on reference debt obligations.

As of February 29, 2008, the following swap agreements were outstanding:

										Net Unrealized
				Expiration						Appreciation /
Notional Amount				Date				Description		(Depreciation)
$	1,500,000				11/07/09			Agreement with JP Morgan, dated 11/05/07 to pay semi-annually the notional amount multiplied by 4.40% and to receive quarterly the notional amount multiplied by the 3 month USD-LIBOR-BBA.		$	(60,307	)
	2,000,000				11/08/09			Agreement with JP Morgan, dated 11/06/07 to pay semi-annually the notional amount multiplied by 4.45% and to receive quarterly the notional amount multiplied by the 3 month USD-LIBOR-BBA.			(82,522	)
	15,000,000				04/10/12			Agreement with JP Morgan, dated 03/28/07 to receive semi-annually the notional amount multiplied by 4.96% and to pay quarterly the notional amount multiplied by the 3 month USD-LIBOR-BBA.			1,214,267
	5,000,000				08/12/41			Agreement with Greenwich Capital, dated 12/01/06 to receive monthly the notional amount multiplied by 0.75% and to pay only in the event of a write down, or failure to pay a principal payment or an interest shortfall on MSC 2006-T23 H.			(5,631,929	)
	5,000,000				10/12/41			Agreement with Greenwich Capital, dated 12/01/06 to receive monthly the notional amount multiplied by 0.75% and to pay only in the event of a write down, or failure to pay a principal payment or an interest shortfall on BSCMS 2006-T24 H.			(3,304,930	)
	5,000,000				02/11/44			Agreement with Bear Stearns, dated 06/01/07 to receive monthly the notional amount multiplied by 2.35% and to pay only in the event of a write down, or failure to pay a principal payment or an interest shortfall on BSCMS 2007-PW15 H.			(2,808,393	)
	5,000,000				10/15/48			Agreement with Bear Stearns, dated 11/28/06 to receive monthly the notional amount multiplied by 0.75% and to pay only in the event of a write down, or failure to pay a principal payment or an interest shortfall on WBCMT 2006-C28 J.			(2,624,060	)
	5,000,000				01/15/49			Agreement with Bear Stearns, dated 06/01/07 to receive monthly the notional amount multiplied by 2.45% and to pay only in the event of a write down, or failure to pay a principal payment or an interest shortfall on CSMC 2007-C2 K.			(2,782,733	)
	5,000,000				11/12/49			Agreement with Bear Stearns, dated 06/01/07 to receive monthly the notional amount multiplied by 2.35% and to pay only in the event of a write down, or failure to pay a principal payment or an interest shortfall on MSC 2007-T25 H.			(2,776,678	)
										$	(18,857,215	)

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.
February 29, 2008

Financial Futures Contracts: A futures contract is an agreement between two parties to buy and sell a financial instrument for a set price on a future date. Initial margin deposits are made upon entering into futures contracts and can be either cash or securities. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by “marking-to-market” on a daily basis to reflect the market value of the contract at the end of each day’s trading. Variation margin payments are made or received, depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract.

The Fund invests in financial futures contracts to hedge against fluctuations in the value of portfolio securities caused by changes in prevailing market interest rates. Should interest rates move unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates and the underlying hedged assets. The Fund is at risk that it may not be able to close out a transaction because of an illiquid market.

As of February 29, 2008, the following futures contracts were outstanding:

Long:

Notional								Cost at				Value at				Unrealized
Amount				Type		Expiration Date		Trade Date				February 29, 2008				Appreciation
$	9,300,000			5 Yr. U.S. Treasury Note		Jun 2008		$	10,492,260			$	10,625,250			$	132,990

Short:

Notional								Cost at				Value at				Unrealized
Amount				Type		Expiration Date		Trade Date				February 29, 2008				Depreciation
$	2,700,000			10 Yr. U.S. Treasury Note		Jun 2008		$	3,110,915			$	3,166,594			$	(55,679	)

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.

THE HYPERION BROOKFIELD STRATEGIC MORTGAGE INCOME FUND, INC.

By:		/s/ Clifford E. Lai
		Clifford E. Lai
		Principal Executive Officer

Date: April 24, 2008

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 24, 2008
By:		/s/ Thomas F. Doodian
		Thomas F. Doodian
		Treasurer and Principal Financial Officer

Date: April 24, 2008