<PAGE>
CYPRESSTREE
Senior
Floating Rate
Fund
Semi-Annual Report
June 30, 2000
AMERICAN
GENERAL
Unaudited Financial Statements FINANCIAL GROUP
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
President's Message
--------------------------------------------------------------------------------
August 18, 2000
Dear Shareholder:
I am pleased to announce that in March, the Fund became part of American
General Corporation. Headquartered in Houston, American General is a leading
provider of retirement services, investments, life insurance and consumer
loans. The acquisition of the Fund by American General Corporation provides you
with the backing of one of the largest and most successful financial
organizations in the country. We believe that the additional access to
resources which American General offers, combined with our continuing
commitment to providing you with exceptional investment management and
excellent customer service will help you to reach your goals in the months and
years to come.
Fund Update
As of June 30, 2000, the CypressTree Senior Floating Rate Fund had an NAV of
$9.76 and a 30-day SEC yield of 8.30%. Overall, the Fund continues to maintain
a strong BB- credit profile and remains well diversified with investments in
103 issuers representing 30 industries. At June 30, 2000, the largest single
position in the Fund was International Technology Corp. at 1.84% and the
largest industry weighting was telecommunications at 10.1% of the portfolio.
For the twelve months ending June 30, 2000, the Fund remained almost 200 basis
points ahead of its benchmark, the DLJ Leveraged Loan Index Plus, posting a net
total return of 5.41% vs. 3.53% for the index. In the second quarter, the Fund
slightly underperformed the index by 39 basis points with a net total return of
1.44%. The Fund's underweighting in the energy and manufacturing sectors and an
overweighting of the service sector led to the Fund's underperformance in the
quarter, but those declines were partially offset by gains in Aurora Foods,
Knowles Electronics and Allied Waste.
Market Update
Loan market volatility remained at above average levels during the first half
of the year, though still well below the volatility experienced by the broader
fixed income and equity markets. Senior loan investors remained cautious,
favoring the higher-rated, more liquid end of the market. As a result, bid
levels for better credits continued to strengthen during the quarter, while
underperforming names and distressed loans weakened significantly. In this
environment, the Fund experienced its first default, when Safety-Kleen Corp.,
an industrial waste services company, filed for bankruptcy. Although the short-
term impact to the NAV of the Fund was negative, the event was anticipated and
we believe is a necessary step in the restructuring process for this company,
which remains a holding of the Fund. Another factor that has negatively
impacted the loan market is the continued weakness in the high yield market.
The high yield market represents a critical source of capital for below
investment grade companies and tends to be a key driver of senior loan issuance
and refinancings.
With volatility in the financial markets expected to remain high, we believe
that senior loans will continue to offer strong relative value to investors as
compared to other shorter-term investments. Senior loans continue to represent
an attractive investment choice for investors who are looking to earn a
reasonable level of income with minimal exposure to interest rate movements.
At American General, we are committed to you and to your investment future. You
have our promise that we will continue to strive to provide you with
disciplined investment management expertise and high quality customer service.
<PAGE>
If you have any questions about your investments, simply call us at 800-872-
8037. Due to recently extended coverage, you can now reach our representatives
any time between the hours of 9:00 to 7:00 PM, Eastern Time, Monday through
Friday. Thank you for your continued support.
Sincerely,
/s/ Alice T. Kane
Alice T. Kane
Chairman and President
North American Funds
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Portfolio Of Investments - June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity
Industry Description Type Date Par Value
-------- ----------- ---- -------- --- -----
<C> <S> <C> <C> <C> <C>
LOANS - 83.4%
Aerospace & Defense - 2.2%
K&F Industries Inc BTL-B 10/15/05 $ 644,366 $ 643,762
Titan Corporation BTL-C 2/23/07 748,125 751,398
United Defense Corp BTL-B 10/6/05 132,232 131,538
United Defense Corp BTL-C 10/6/06 204,768 203,693
-----------
1,730,391
Automobile - 6.0%
American Axle &
Manufacturing BTL-B 4/30/06 749,000 747,426
Collins & Aikman Corp BTL-B 12/31/05 238,000 235,204
Collins & Aikman Corp BTL-C 12/31/05 242,500 240,151
CSK Auto Inc BTL-B-2 10/31/03 997,500 987,525
Dura Automotive Systems
Inc BTL-B 3/31/06 500,000 500,547
Exide Corp BTL-B 3/18/05 247,467 243,229
Federal Mogul Corp BTL-B 2/24/05 497,143 467,107
J.L. French Automotive
Castings Inc BTL-B 10/21/06 392,140 390,833
Tenneco Automotive BTL-B 10/15/07 500,000 493,125
Tenneco Automotive BTL-C 4/15/08 500,000 493,125
-----------
4,798,272
Beverage, Food & Tobacco - 2.6%
Aurora Foods Inc BTL-A 6/30/05 139,691 125,023
Aurora Foods Inc BTL-B 9/30/06 1,091,408 989,544
B&G Foods Inc BTL-B 3/31/06 500,000 464,167
Tabletop Acquisition Corp BTL-B 3/31/07 498,750 500,932
-----------
2,079,666
Broadcasting & Entertainment - 3.3%
AMFM Inc BTL-A 11/19/01 1,250,000 1,248,243
Classic Cable Inc BTL-B 1/31/08 651,316 651,397
Muzak LLC BTL-B 12/31/06 497,500 496,775
Telemundo Group Inc BTL-B 2/28/06 248,125 246,264
-----------
2,642,679
Buildings & Real Estate - 4.3%
Atrium Companies Inc BTL-B 6/30/05 74,311 74,172
Atrium Companies Inc BTL-C 6/30/06 106,759 106,559
ClubCorp Inc BTL-B 3/24/07 997,500 999,683
Dal-Tile Intern'l BTL-B 12/31/03 248,479 243,572
Pebble Beach Co BTL-B 7/30/06 560,727 563,093
Prison Realty Trust Inc BTL 12/31/02 246,875 234,120
Prison Realty Trust Inc BTL-C 12/31/02 498,744 475,469
Tapco International
Corporation BTL-B 6/23/07 465,234 464,071
Tapco International
Corporation BTL-C 6/23/08 279,141 278,443
-----------
3,439,182
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Portfolio Of Investments - June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity
Industry Description Type Date Par Value
-------- ----------- ---- -------- --- -----
<C> <S> <C> <C> <C> <C>
Cargo Transport - 1.6%
Gemini Air Cargo Inc TL a 8/12/05 $ 784,821 $ 775,501
Kansas City Southern
Industries Inc BTL-B 1/11/07 500,000 502,545
-----------
1,278,046
Chemicals, Plastics & Rubber -
3.4%
Hexcel Corp BTL-B 9/14/05 456,102 453,821
Huntsman Corp BTL-C 10/7/04 750,000 751,172
Huntsman ICI Chemicals
LLC BTL-B 6/30/07 412,500 415,664
Huntsman ICI Chemicals
LLC BTL-C 6/30/08 412,500 415,664
Lyondell Petrochemical
Co BTL-B 6/30/05 134,725 136,141
Lyondell Petrochemical
Co BTL-E 12/31/03 539,897 555,856
-----------
2,728,318
Containers, Packaging & Glass -
3.8%
Graham Packaging Co BTL-B 1/31/06 261,521 261,043
Graham Packaging Co BTL-C 1 1/31/07 216,689 216,304
Graham Packaging Co BTL-C 2 1/31/07 510,453 509,670
Graphics Packaging Corp Bridge 8/12/02 315,938 310,705
Jefferson Smurfit BTL-B 3/31/06 31,944 32,000
RIC/Riverwood
International BTL-A 2/28/03 750,000 743,086
Stone Container BTL-D 10/1/03 996,762 999,445
-----------
3,072,253
Diversified & Conglomerate
Manufacturing - 4.2%
Alliance Laundry Systems
LLC BTL-B 6/30/05 500,000 497,500
CII Carbon LLC Hybrid TL 6/30/08 210,217 208,969
General Cable
Corporation BTL-B 5/27/07 671,016 668,500
GenTek Inc BTL-B 4/30/07 247,500 248,119
Goodman Manufacturing Co
LP BTL-B 7/31/05 237,802 235,238
Mueller Group Inc BTL-B 8/16/06 370,627 371,380
Mueller Group Inc BTL-C 8/16/07 370,000 370,751
Terex Corporation Delayed BTL-C 7/15/06 737,514 737,514
-----------
3,337,971
Diversified & Conglomerate Service
- 2.0%
infoUSA Inc BTL-B 6/30/06 903,092 882,772
United Rentals Inc BTL-C 6/30/06 750,000 740,781
-----------
1,623,553
Ecological - 4.5%
Allied Waste Industries BTL-B 7/21/06 340,909 320,354
Allied Waste Industries BTL-C 7/21/07 409,091 384,425
Intern'l Technology Corp BTL-B 6/11/06 1,469,799 1,461,531
Safety-Kleen Corp. BTL-A 4/3/04 230,656 92,262
Safety-Kleen Corp. BTL-B 4/3/05 497,468 199,540
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Portfolio Of Investments - June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity
Industry Description Type Date Par Value
-------- ----------- ---- -------- --- -----
<C> <S> <C> <C> <C> <C>
Ecological - continued
Safety-Kleen Corp. BTL-C 4/3/06 $ 497,468 $ 199,540
Stericycle Inc BTL-B 11/10/06 936,375 940,032
-----------
3,597,684
Electronics - 1.0%
Dynamic Details Inc. BTL-B 4/22/05 148,757 147,269
ON Semiconductor, Inc. BTL-B 8/4/06 313,771 316,320
ON Semiconductor, Inc. BTL-C 8/4/07 337,907 340,652
-----------
804,241
Farming & Agriculture - 0.6%
Hines Nurseries Inc BTL-B 2/28/05 500,000 500,000
-----------
Finance - 0.4%
Bridge Information
Systems Inc BTL-B 5/29/05 372,572 326,373
-----------
Grocery - 0.7%
Pathmark Stores Inc BTL-B 12/15/01 599,616 586,125
-----------
Healthcare, Education & Childcare
- 5.4%
Alliance Imaging Inc BTL-B 6/18/04 412,935 409,322
Alliance Imaging Inc BTL-C 12/18/04 587,065 581,928
Dade Behring Inc BTL-B 6/30/06 619,060 582,137
Dade Behring Inc BTL-C 6/30/07 619,060 582,137
Hanger Orthopedic Group BTL-B 1/1/08 497,500 467,961
King Pharmaceuticals Inc BTL-B 12/22/06 517,862 518,563
Quest Diagnostics Inc Bridge 8/16/01 953,488 950,211
Stryker Corp BTL-B 12/4/05 147,900 148,501
Stryker Corp BTL-C 12/4/06 52,757 52,971
-----------
4,293,731
Home & Office Furniturings, Housewares & Durable Consumer Products - 0.8%
Shop Vac Corp BTL-B 6/30/07 625,000 624,609
-----------
Hotels, Motels, Inns & Gaming -
4.0%
Extended Stay America
Inc BTL-D 6/7/07 1,000,000 1,001,875
Felcor Lodging Trust BTL-B 3/31/04 498,667 496,589
Starwood Hotels &
Resorts Trust Tr. 2 Loan 2/23/03 1,000,000 1,003,438
Wyndham International
Inc BTL-B 6/30/06 750,000 725,578
-----------
3,227,480
Insurance - 0.6%
Willis Corroon Group plc BTL-B 11/19/06 261,154 260,719
Willis Corroon Group plc BTL-C 11/19/07 111,923 111,736
Willis Corroon Group plc BTL-D 5/19/08 111,923 111,736
-----------
484,191
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Portfolio Of Investments - June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity
Industry Description Type Date Par Value
-------- ----------- ---- -------- --- -----
<C> <S> <C> <C> <C> <C>
Leisure, Amusement, Entertainment
- 2.5%
DreamWorks LLC BTL-B 1/15/09 $ 1,000,000 $ 1,006,563
Premier Parks Inc BTL-B 9/30/05 500,000 503,250
Regal Cinemas Inc BTL-B 5/27/06 247,930 197,813
Regal Cinemas Inc BTL-C 5/27/07 129,706 103,487
United Artists Theatre
Co BTL-B 4/21/06 97,348 71,672
United Artists Theatre
Co BTL-C 4/21/07 146,022 107,509
-----------
1,990,294
Machinery - 0.7%
Thermadyne Holdings Corp BTL-B 5/22/05 298,881 283,296
Thermadyne Holdings Corp BTL-C 5/22/06 298,881 283,296
-----------
566,592
Mining, Steel, Iron & Non-precious
Metals - 3.4%
Ispat Inland Inc Hybrid TL 7/16/05 494,953 490,485
Ispat Inland Inc Hybrid TL 2 7/16/06 494,953 490,485
Neenah Corp BTL-B 9/30/05 999,564 997,065
Peabody Holding Company
Inc BTL-B 6/30/06 712,500 711,431
-----------
2,689,466
Oil & Gas - 0.3%
TravelCenters of America
Inc BTL-B 3/27/05 247,240 248,013
-----------
Personal & Nondurable Consumer
Products (Mfg Only) - 1.8%
Amscan Holdings Inc Hybrid TL 12/31/04 242,965 225,957
Buhrmann NV US BTL-B 10/26/07 463,400 464,559
Sealy Mattress BTL-B 12/15/04 187,325 187,559
Sealy Mattress BTL-C 12/15/05 134,996 135,291
Sealy Mattress BTL-D 12/15/06 172,536 172,824
United Industries Corp BTL-B 1/20/06 245,625 237,028
-----------
1,423,218
Printing & Publishing - 8.1%
American Media Inc BTL-B 4/1/07 1,000,000 1,001,875
Benedek Broadcasting
Corp BTL-B 11/20/07 500,000 497,969
Big Flower Press Inc BTL-A 12/31/05 992,252 984,810
Hollinger Intern'l
Publishing BTL-B 12/31/04 1,000,000 1,003,750
Journal Register Co BTL-B 9/6/06 749,250 742,694
Lamar Advertising
Company BTL-B 8/1/06 750,000 751,406
Merrill Corp BTL-B 11/23/07 995,000 995,622
R.H. Donnelley Corp BTL-B 12/5/05 185,082 184,504
R.H. Donnelley Corp BTL-C 12/5/06 307,381 306,420
-----------
6,469,050
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Portfolio Of Investments - June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Maturity
Industry Description Type Date Par Value
-------- ----------- ---- -------- --- -----
<C> <S> <C> <C> <C> <C>
Retail Stores - 1.2%
SDM Corporation BTL-C 2/4/08 $ 500,000 $ 501,000
SDM Corporation BTL-E 2/4/09 500,000 501,000
-----------
1,002,000
Telecommunications - 10.0%
American Tower Corp BTL-B 12/31/07 1,000,000 1,003,563
Charter Communications
Holding Co LLC BTL-B 2/2/08 750,000 744,625
Charter Communications
Holding Co LLC BTL-B 11/5/08 250,000 249,781
Dobson Communication BTL-B 3/31/08 513,333 513,425
Dobson Communication BTL-B 3/23/07 224,677 225,052
Dobson Communication BTL-C 12/23/07 227,375 227,852
Dobson Communication BTL-C 3/31/09 586,667 586,772
McLeodUSA Corp BTL-B 5/31/08 500,000 500,313
Microcell Telecommunications
Inc BTL-B 3/1/06 500,000 498,907
Nextel Communications BTL-B 6/30/08 500,000 502,313
Nextel Communications BTL-C 12/31/08 500,000 502,313
NEXTLINK Communications Inc BTL-B 6/30/07 1,000,000 1,005,536
RCN Corp BTL-B 6/3/07 500,000 498,706
Rural Cellular Corp BTL-B 10/3/08 500,000 499,500
Rural Cellular Corp BTL-C 4/3/09 500,000 499,500
-----------
8,058,158
Textiles & Leather - 2.4%
Globe Manufacturing Co BTL-B 7/15/06 496,250 328,718
Polymer Group BTL-B 12/20/05 991,429 990,038
St John Knits Inc BTL-B 7/31/07 670,573 645,427
-----------
1,964,183
Transportation - 1.0%
American Commercial Lines
LLC BTL-B 6/30/06 363,189 351,612
American Commercial Lines
LLC BTL-C 6/30/07 494,808 479,036
-----------
830,648
Utilities - 0.6%
Western Resources Inc BTL-B 3/17/03 500,000 500,935
-----------
TOTAL LOANS (Cost $68,486,042) $66,917,322
-----------
SHORT-TERM INVESTMENTS - 14.4%
American Express Co., 6.42% 7/03/00 $10,029,422 $10,029,422
SSGA Money Market Fund 1,494,809 1,494,809
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $11,524,231) $11,524,231
-----------
TOTAL INVESTMENTS - 97.8% - (Cost $80,010,273)* $78,441,553
-----------
OTHER ASSETS AND LIABILITIES, NET - 2.2% $ 1,802,785
-----------
NET ASSETS - 100.0% $80,244,338
===========
</TABLE>
*The cost for Federal Income Tax purposes is the same.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Statement of Assets and Liabilities - June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in loans and securities, at value. (Identified
cost, $80,010,273.)
(See accompanying Portfolio of Investments)................... $78,441,553
Cash........................................................... 828,224
Receivables:
Investments sold............................................. 249,377
Fund shares sold............................................. 200,545
Interest on bank loans....................................... 743,576
From investment adviser...................................... 84,352
Unamortized organization costs................................. 137,623
Other assets................................................... 123,901
-----------
Total assets............................................... 80,809,151
-----------
LIABILITIES:
Payables:
Dividends.................................................... 538,572
Accrued expenses............................................. 26,241
-----------
Total liabilities.......................................... 564,813
-----------
NET ASSETS..................................................... $80,244,338
===========
NET ASSETS CONSIST OF:
Accumulated net realized gains (losses)...................... $ (112,567)
Unrealized appreciation (depreciation) on investments........ (1,568,720)
Capital shares at par value of $.01 (Note 3)................. 82,198
Additional paid-in capital................................... 81,843,427
-----------
Net assets................................................. $80,244,338
===========
Net Asset Value, Offering and Redemption Price per Share
($80,244,338/8,219,820 shares outstanding).................... $9.76
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Statement of Operations (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six Months
ended
June 30, 2000
------------------
<S> <C>
INVESTMENT INCOME:
Interest................................................. $ 3,737,373
Facility and other fee income............................ 54,828
-----------
Total income............................................ 3,792,201
-----------
EXPENSES:
Investment adviser fee (Note 5).......................... 354,943
Custody fee.............................................. 43,421
Transfer agent fee....................................... 20,162
Audit and legal fees..................................... 51,570
Accounting and administration fees (Note 5).............. 167,032
Directors fees and expenses.............................. 6,387
Amortization of organization expenses.................... 24,877
Registration and filing fees............................. 35,141
Miscellaneous............................................ 22,489
-----------
Expenses before waiver of fees by investment adviser..... 726,022
-----------
Waiver of fees by investment adviser (Note 6)............ (203,346)
-----------
Net expenses.......................................... 522,676
-----------
Net investment income................................. $ 3,269,525
-----------
REALIZED AND UNREALIZED GAIN/(LOSS):
Net realized (loss) on investment transactions........... $ (101,822)
Unrealized (depreciation) on investments................. (1,331,625)
-----------
Net realized and unrealized loss...................... (1,433,447)
-----------
Net increase in net assets resulting from operations...... $ 1,836,078
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months ended
June 30, 2000 Year ended
(Unaudited) December 31, 1999
---------------- -----------------
<S> <C> <C>
Increase/(Decrease) in Net Assets from:
OPERATIONS:
Net investment income................... $ 3,269,525 $ 2,818,490
Net realized gain/(loss) on investment
transactions........................... (101,822) 6,343
Change in unrealized depreciation on
investments............................ (1,331,625) (201,777)
------------ -----------
Net increase in net assets resulting from
operations.............................. 1,836,078 2,623,056
DISTRIBUTIONS FROM :
Net investment income................... (3,269,525) (2,818,490)
Decrease in net assets from capital share
transactions (Note 3)................... (9,013,727) 83,358,639
------------ -----------
Decrease in net assets................... (10,447,174) 83,163,205
------------ -----------
Net assets at beginning of period........ 90,691,512 7,528,307
------------ -----------
Net assets at end of period.............. $ 80,244,338 $90,691,512
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Statement of Cash Flows (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
ended
June 30, 2000
-------------
<S> <C>
Increase/(Decrease) in Cash
Cash Flows From (Used for) Operating Activities:
Purchase of loans............................................ $(18,095,783)
Interest and facility fees received.......................... 3,627,552
Purchase of short-term securities, net....................... 4,314,679
Proceeds from loans sold..................................... 21,095,508
Operating expenses paid...................................... (785,156)
------------
Net Cash used for operating activities........................ 10,156,800
------------
Cash Flows From (Used for) Financing Activities:
Proceeds from shares sold.................................... 31,716,416
Payments for shares redeemed................................. (41,968,788)
Cash dividends paid (not including reinvested dividends of
$2,113,415)................................................. (720,356)
------------
Net Cash from financing activities............................ (10,972,728)
------------
Net increase in Cash.......................................... (815,928)
Cash at beginning of period.................................. 1,644,152
------------
Cash at end of period........................................ $ 828,224
------------
Reconciliation of Net Increase in Net Assets from Operations
to Net Cash used for Operating Activities
Net increase in net assets from operations................... $ 1,836,078
Increase in interest and facility fees receivable............ (126,858)
Decrease in receivable for investments sold.................. 45,698
Decrease in unamortized organization costs................... 24,890
Increase in net accrued expenses............................. (178,299)
Net decrease in investments.................................. 8,555,291
------------
Net cash used for operating activities........................ $ 10,156,800
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Financial Highlights (For a Share Outstanding Throughout the Period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Period from
ended 4/6/98 *
June 30, 2000 Year ended through
(Unaudited) 12/31/99 12/31/98
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period...... $9.93 $9.93 $10.00
--------------------------------------------------------------------------------
Investment Operations:
Net investment income.................... 0.39 0.69 0.53
Net realized and unrealized gain on
investments............................. (0.17) 0.00 (0.07)
---------------------------
Total from investment operations......... 0.22 0.69 0.46
---------------------------
Distributions
Dividends from net investment income..... (0.39) (0.69) (0.53)
--------------------------------------------------------------------------------
Net Asset Value, End of Period............ $9.76 $9.93 $9.93
--------------------------------------------------------------------------------
Total Return.............................. 2.22% + 7.16% 4.81% +
--------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (000's)........ $80,244 $90,692 $7,528
Ratio of net expenses to average net
assets.................................. 1.25% # 0.72% 0.00% #
Ratio of net investment income to average
net assets.............................. 7.87% # 6.81% 7.50% #
Portfolio turnover rate.................. 26% + 28% 20% +
Expense ratio before fee waiver by
adviser................................. 1.75% # 1.77% 4.27% #
Net investment income before fee waiver
by adviser.............................. 7.37% # 5.77% 3.74% #
</TABLE>
*Commencement of Operations
+Not annualized
#Annualized
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Notes to Financial Statements
-------------------------------------------------------------------------------
1. ORGANIZATION OF THE FUND. The CypressTree Senior Floating Rate Fund, Inc.
(the "Fund") is a non-diversified closed-end, management investment company.
The Fund is organized as a Maryland Corporation and is registered under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to provide as high a level of current income as is consistent with the
preservation of capital by investing primarily in senior secured floating rate
loans and other institutionally traded senior secured floating rate debt
obligations.
Effective March 10, 2000, CypressTree Investments, Inc. ("CypressTree") sold
substantially all of its assets including all of the stock of CypressTree
Asset Management Corporation, Inc. ("CAM"), the Fund's investment adviser, and
all of the stock of CypressTree Funds Distributors, Inc. ("CFD"), the Fund's
distributor, to American General Corporation ("American General"). The
acquisition by American General of CypressTree's assets (herein "the
Acquisition") took place pursuant to a Purchase Agreement dated February 25,
2000. The names of these entities were then changed, so that CAM was renamed
American General Asset Management Corp. ("AGAM") and CFD became American
General Funds Distributors, Inc. ("AGFD").
AGAM, serves as investment adviser and principal underwriter for the Fund,
effective March 10, 2000, pursuant to approval by the Fund's Board of
Directors and the Fund's shareholders at a special shareholder meeting held on
June 1, 2000. CypressTree Investment Management Company, Inc. (CIMCO) serves
as the Fund's subadviser. AGFD serves as distributor for the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES. The policies described below are followed
when preparing the Fund's financial statements. These policies are in
accordance with generally accepted accounting principles ("GAAP").
Security Valuation. The Fund's investments in loan interests ("Loans") are
valued in accordance with guidelines established by the Board of Directors.
Under the Fund's current guidelines, Loans for which an active secondary
market exists to a reliable degree in CIMCO's opinion and for which CIMCO can
obtain at least two quotations from banks or dealers in Loans will be valued
by calculating the mean of the last available bid and asked prices in the
market for such Loans, and then using the mean of those two means. If only one
quote for a particular Loan is available, the Loan will be valued on the basis
of the mean of the last available bid and asked prices in the market. Loans
for which an active secondary market does not exist to a reliable degree in
CIMCO's opinion will be valued at fair value, which is intended to approximate
market value. In valuing a Loan at fair value, CIMCO will consider, among
other factors, (a) the creditworthiness of the borrower and any intermediate
participants, (b) the terms of the Loan, (c) recent prices in the market for
similar Loans, if any, and (d) recent prices in the market for instruments of
similar quality, rate, period until next interest rate reset and maturity.
Other portfolio securities may be valued on the basis of prices furnished by
one or more pricing services that determine prices for normal, institutional-
size trading units of such securities using market information, transactions
for comparable securities and various relationships between securities which
are generally recognized by institutional traders. In certain circumstances,
other portfolio securities are valued at the last sale price on the exchange
that is the primary market for such securities, or the last quoted bid price
for those securities for which the over-the-counter market is the primary
market or for listed securities in which there were no sales during the day.
Obligations purchased with remaining maturities of 60 days or less are valued
at amortized cost unless this method is determined not to produce fair
valuation. Repurchase agreements and investments in money market funds are
valued at cost plus accrued interest. Securities for which there exist no
price quotations or valuations and all other assets are valued at fair value
as determined in good faith by or on behalf of the Board of Directors of the
Fund.
Federal Income Taxes. It is the Fund's policy to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, as
amended, and to distribute all of its taxable income and any net realized gain
on investments to its shareholders each year. Accordingly, no federal income
tax provision is required.
Capital Loss Carryforwards. At June 30, 2000, the Fund has $10,745 in capital
loss carryforwards available to offset future recognized gains. This
carryforward amount expires in 2005.
11
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Notes to Financial Statements - (Continued)
-------------------------------------------------------------------------------
Note 2, continued
Distributions of Income and Gains. Distributions of net investment income are
declared as a dividend to shareholders of record as of the close of business
each day and are paid monthly. The Fund distributes realized net capital
gains, if any, at least annually, after offset by any capital loss carryovers.
Repurchase Agreements. The Fund may enter into repurchase agreements. When the
Fund enters into a repurchase agreement through its custodian, it receives
delivery of the underlying securities, the amount of which at the time of
purchase and each subsequent business day is required to be maintained at such
a level that the market value is at least equal to 102% of the resale price,
and the Fund will take constructive receipt of all securities underlying the
repurchase agreements until such agreements expire. If the seller defaults,
the Fund would suffer a loss to the extent that proceeds from the sale of
underlying securities were less than the repurchase price.
Deferred Organization Expenses. Costs incurred by the Fund in connection with
its organization are being amortized on a straight-line basis over 5 years.
Capital Accounts. The Fund reports the accumulated undistributed net
investment income (loss) and accumulated undistributed net realized gain
(loss) accounts on a basis approximating amounts available for future tax
distributions (or to offset future taxable realized gains when a capital loss
carryforward is available). Accordingly, the Fund may periodically make
reclassifications among certain capital accounts without impacting net asset
value.
Estimates. Preparing the financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates
and assumptions that affect the amounts reported for the reporting period and
as of the end of the reporting period. Actual results could differ from those
estimates.
Income. Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount. Facility fees received are
recognized as income over the stated life of the loan. Other income, including
amendment fees, commitment fees, letter of credit fees, etc., are recorded as
income when received or contractually due to the Fund.
Gains/Losses. Gains or losses realized on the sale of portfolio assets are
recognized on the trade date using the specific identification method.
3. CAPITAL SHARES. The Fund has 1,000,000,000 of $.01 par value shares
authorized that may be issued. Share activity for the period ended June 30,
2000 was as follows:
<TABLE>
<CAPTION>
Shares Capital
---------- ------------
<S> <C> <C>
Sold.............. 3,129,866 $ 30,841,544
Reinvestment of
distributions.... 214,644 2,113,415
Redeemed.......... (4,259,918) (41,968,686)
---------- ------------
Net
increase/(decrease).. (915,408) $ (9,013,727)
========== ============
Share activity for the year ended December 31, 1999 was as follows:
<CAPTION>
Shares Capital
---------- ------------
<S> <C> <C>
Sold.............. 9,988,918 $ 99,380,895
Reinvestment of
distributions.... 224,287 2,230,039
Redeemed.......... (1,836,164) (18,252,295)
---------- ------------
Net
increase/(decrease).. 8,377,041 $ 83,358,639
========== ============
</TABLE>
12
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Notes to Financial Statements - (Continued)
-------------------------------------------------------------------------------
Note 3, continued
In order to provide shareholders with liquidity and the ability to receive net
asset value on a disposition of shares, the Fund will make monthly offers to
repurchase a percentage (usually 10%) of outstanding shares at net asset
value. Shareholders will be sent a Notification of Repurchase Offer seven to
fourteen days before each monthly repurchase offer. During the period ended
June 30, 2000, the Fund made six Repurchase Offers, and actually redeemed the
amounts shown in the table below. In no case was a monthly Repurchase Offer
oversubscribed.
<TABLE>
<CAPTION>
Amount Tendered
--------------------
Shares Capital
--------- ----------
<S> <C> <C>
January................ 903,608 $8,972,825
February............... 506,162 5,026,188
March.................. 391,461 3,913,055
April.................. 1,000,011 9,820,106
May.................... 849,054 8,303,745
June................... 606,622 5,932,767
</TABLE>
4. PURCHASES AND SALES OF SECURITIES. During the period ended June 30, 2000,
the Fund's cost of purchases of Loans and proceeds from Loan sales were
$18,095,783 and $21,049,810, respectively. Unrealized appreciation and
depreciation in the value of those investments at June 30, 2000 for federal
income tax purposes were as follows:
<TABLE>
<S> <C>
Gross unrealized appreciation... $ 143,995
Gross unrealized depreciation... (1,712,715)
-----------
Net unrealized appreciation..... $(1,568,720)
===========
</TABLE>
5. INVESTMENT ADVISORY AGREEMENT. The Fund maintains an Investment Advisory
Agreement with AGAM ("Adviser"), who is responsible for managing the corporate
and business affairs of the Fund, and selects, contracts with and compensates
the subadviser to manage the Fund's assets. As compensation for its services
the Adviser receives from the Fund an annual fee equal to the following
percentage of average daily gross assets: 0.85% for the first $1 billion of
average daily gross assets; 0.80% for average daily gross assets between $1
billion and $2 billion; and 0.75% for average daily gross assets of more than
$2 billion. For purposes of computing the advisory fee, average daily gross
assets are determined by deducting from total assets of the Fund all
liabilities except the principal amount of any indebtedness from money
borrowed, including debt securities issued by the Fund.
AGAM has retained CIMCO to serve as the Fund's subadviser to manage the
investment and reinvestment of the Fund's assets. As compensation for its
services as subadviser, CIMCO is entitled to receives from AGAM an annual fee
paid monthly equal to the following percentage of average daily gross assets:
0.45% for the first $1 billion of average daily gross assets; 0.40% for
average daily gross assets between $1 billion and $2 billion; and 0.35% for
average daily gross assets of more than $2 billion. During the period ended
June 30, 2000, CIMCO voluntarily waived a portion of its compensation,
receiving 0.425% for the first $1 billion of average daily gross assets, 0.
36% for average daily gross assets between $1 billion and $2 billion; and
0.30% for average daily gross assets of more than $2 billion. Average daily
gross assets are computed as described above. The fee paid to CIMCO is not an
additional charge to the Fund or its shareholders.
AGAM, the Fund's Administrator under an Administration Agreement, is
responsible for managing the Fund's business affairs, subject to supervision
by the Fund's Board of Directors. For its services, AGAM receives an annual
fee equal to 0.40% of average daily gross assets of the Fund. Average daily
gross assets are computed as described above.
During the period ended June 30, 2000, the Fund engaged in purchase and sale
transactions with other investment vehicles managed by CIMCO. These purchase
and sale transactions complied with Rule 17a-7 under the Investment Company
Act of 1940, and amounted to $2,251,146.
13
<PAGE>
CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Notes to Financial Statements - (Continued)
-------------------------------------------------------------------------------
6. EXPENSE REIMBURSEMENT. Pursuant to the Investment Advisory Agreement, the
Adviser voluntarily reduced the advisory fee in order to maintain an expense
ratio on the Fund that does not exceed a certain voluntary rate. Currently,
the expenses of the Fund are capped at 1.25%. For the period ended June 30,
2000, the Adviser waived fees of $203,346.
7. DIRECTOR COMPENSATION. The Fund pays each Director who is not an employee
or a director of the Adviser or its affiliates a fee of $750 plus travel
expenses for each Board of Directors meeting attended, $200 for each telephone
meeting attended, and an annual retainer of $3,000.
14
<PAGE>
Directors
Alice T. Kane, Chairperson
Joseph T. Grause, Jr.
Dr. Judith L. Craven
William F. Devin
Dr. Timothy J. Ebner
Judge Gustavo E. Gonzales, Jr.
Kenneth J. Lavery
Dr. John E. Maupin, Jr.
Ben H. Love
Officers
Alice T. Kane, President
Joseph T. Grause, Jr., Vice President
Thomas J. Brown, Vice President
and Treasurer
John I. Fitzgerald, Vice President and
Secretary
John N. Packs, Vice President and
Assistant Treasurer
Independent Accountants
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
Adviser
American General Asset Management Corp.
286 Congress Street
Boston, MA 02210
Transfer and Dividend Agent
State Street Bank and Trust Company
P.O. Box 8505
Boston, MA 02266-8505
Distributor
American General Funds Distributors, Inc.
286 Congress Street
Boston, MA 02210
Shareholder Services
286 Congress Street
Boston, MA 02210
800-872-8037
<PAGE>
0700-10053
