Exhibit (a)(1)(iii)


                                [HCM Letterhead]



                                                     August 31, 2004




Dear Stockholder:

     We are  enclosing a copy of the Hyperion  Strategic  Bond Fund,  Inc.  (the
"Fund")  offer to purchase  dated  August 31,  2004 (the  "Offer to  Purchase"),
292,825 issued and outstanding  shares (the "Shares").  The Offer to Purchase is
for cash at net asset value ("NAV") per share as of the  expiration  date of the
offer.  Together  with the Offer to Purchase we are sending you a form of Letter
of  Transmittal  (the  "Letter")  for use by  stockholders  that you should read
carefully.  Certain selected  financial  information with respect to the Fund is
set forth in the Offer to Purchase.

     If, after  reviewing the information set forth in the Offer to Purchase and
Letter,  you wish to tender  Shares for purchase by the Fund,  please follow the
instructions contained in the Offer to Purchase and Letter.

     Neither the Fund nor its Board of Directors makes any recommendation to any
stockholders as to whether or not to tender Shares. Each stockholder is urged to
consult his or her broker or tax adviser before  deciding  whether to tender any
Shares.

     The Fund's  fiscal  year-end was July 31,  2004.  In the Fund's last fiscal
year, the Fund  distributed  $12,775,362 to its  stockholders,  which represents
approximately  $0.69 per share. The last NAV calculated for the Fund on July 31,
2004 was $6.83 per share.  For the Fund's  fiscal year ended July 31, 2004,  the
Fund's  highest  NAV was $7.50 per share and its lowest NAV was $6.82 per share.
Requests  for  additional  copies of the Offer to  Purchase,  the Letter and any
other  tender  offer  documents  may be  directed to the  undersigned,  Hyperion
Capital  Management,  Inc. at (800) HYPERION.  Also, please feel free to contact
the undersigned,  should you have any other questions on the enclosed  material.
We appreciate your continued interest in the Hyperion Strategic Bond Fund, Inc.

                                              Yours truly,


                                              Hyperion Capital Management, Inc.