<PAGE>
As filed with the Securities and Exchange Commission on April 28, 2000
1933 ACT FILE NO. 333-91129
1940 ACT FILE NO. 811-8309
--------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-2
(Check appropriate box or boxes)
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933 [_]
PRE-EFFECTIVE AMENDMENT NO. ___ [_]
POST-EFFECTIVE AMENDMENT NO. 2 [X]
AND/OR
REGISTRATION STATEMENT
Under
THE INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 8 [X]
CypressTree Senior Floating Rate Fund, Inc.
------------------------------------------
(Exact name of registrant as specified in Charter)
286 Congress Street
Boston, Massachusetts 02210
---------------------------
(Address of Principal Executive Officers)
Registrant's telephone number, including area code (617) 368-3535
-----------------------------------------------------------------
Alice T. Kane
President
CypressTree Senior Floating Rate Fund, Inc.
286 Congress Street
Boston, Massachusetts 02210
---------------------------
(Name and Address of agent for service)
Copies to:
Ruth S. Epstein, Esquire
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
If any of the securities being registered on this Form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [X]
It is proposed that this filing will become effective:
[_] when declared effective pursuant to section 8 (c)
[_] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 2000 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of Rule 486
[_] This post-effective amendment designates a new effective date for a
previously filed registration statement.
[_] This Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration
statement for the same offering is________.
This post-effective amendment incorporates a combined prospectus pursuant to
Rule 429, which relates to an earlier registration statement filed by the
Registrant on March 26, 1998 (See File No. 333-32529). This prospectus will
also be used in connection with sales of securities registered by the
Registrant under that registration statement.
<PAGE>
[LOGO OF CYPRESS TREE]
CypressTree Senior Floating Rate Fund, Inc.
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The CypressTree Senior Floating Rate Fund (the "Fund"), a closed-end invest-
ment company, seeks to provide as high a level of current income as is consis-
tent with the preservation of capital by investing primarily in senior secured
floating rate loans. The Fund is engaged in a continuous public offering of
its shares at the next determined net asset value per share without a sales
charge. American General Asset Management Corp. ("AGAM"), formerly known as
CypressTree Asset Management, Inc., is the Fund's investment adviser. AGAM has
engaged CypressTree Investment Management Company, Inc. ("CypressTree") as
subadviser to manage the investment of the Fund's assets.
In order to provide liquidity to shareholders, the Fund will make monthly
Repurchase Offers for a percentage of its outstanding shares, which we gener-
ally expect will be 10%. See "Repurchase Offers" on page 13.
Shares of the Fund involve investment risks, including the possible loss of
some or all of the principal investment. The Fund may invest all or substan-
tially all of its assets in securities that are rated below investment grade
by a nationally recognized statistical rating organization, or in comparable
unrated securities. See "Risk Factors" on page 10. The Fund may borrow, pri-
marily in connection with the Fund's monthly Repurchase Offers for its shares.
See "Repurchase Offers" on page 13 and "Borrowing by the Fund" on page 12.
No market presently exists for the Fund's shares and we do not currently an-
ticipate that a secondary market will develop for the Fund's shares. Fund
shares may not be readily marketable.
Shares of the Fund are not deposits or obligations of, or guaranteed or en-
dorsed by, any bank or other insured depository institution, and are not fed-
erally insured by the Federal Deposit Insurance Corporation, the Federal Re-
serve Board or any other government agency.
This Prospectus sets forth important information about the Fund that you
should know before investing; you should read and retain it for future refer-
ence. The Fund has filed a Statement of Additional Information dated May 1,
2000 with the Securities and Exchange Commission, which is incorporated by
reference herein. The Table of Contents of the Statement of Additional Infor-
mation appears at the end of this Prospectus. The Statement of Additional In-
formation is available without charge from the Fund or its Distributor, Ameri-
can General Funds Distributors, Inc., at 286 Congress Street, Boston, Massa-
chusetts 02210 ((800) 860-5575). The Statement of Additional Information and
other information about the Fund also are available on the Commission's
website (http://www.sec.gov).
The Repurchase Request Date will be the last business day of each month. The
Repurchase Price will be the Fund's net asset value as determined after the
close of business on the Pricing Date, which, under normal circumstances, we
expect will be the Repurchase Request Date. The Fund generally will pay repur-
chase proceeds on the next business day following the Pricing Date, and, in
any event, within five business days (or seven calendar days, whichever is
shorter) of the Pricing Date.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED ON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IN A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO PROCEEDS TO AS OF
PUBLIC(1) SALES LOAD(2) FUND(3) APRIL 24
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $ 9.79 None $ 9.79
- ---------------------------------------------------------------------------------------
Total $113,358,000 None $113,358,000
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) The shares are offered on a best efforts basis at a price equal to net as-
set value, which as of April 24, 2000 was $9.79 per share.
(2) American General Funds Distributors, Inc. will pay all distribution costs
from its own assets.
(3) Assuming the sale of shares currently registered but unsold as of April
24, 2000 at a price of $9.79, per share, and exclusion of approximately
$250,000 organizational and initial offering expenses payable by the Fund.
These expenses will be amortized over the five year period beginning April
6, 1998, the date the Fund commenced investment operations and charged
against the Fund's income.
American General Funds Distributors, Inc.
PROSPECTUS DATED MAY 1, 2000
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Fund Expenses............................................................... 3
Summary..................................................................... 4
The Fund.................................................................... 6
Investment Objective........................................................ 6
Use of Proceeds............................................................. 6
Investment Policies......................................................... 6
Investments................................................................. 6
Risk Factors................................................................ 10
Repurchase Offers........................................................... 13
Management of the Fund...................................................... 16
Valuing Fund Shares......................................................... 17
Performance Information..................................................... 18
How to Buy Fund Shares...................................................... 19
Shareholder Services........................................................ 19
Distributions............................................................... 21
Taxes....................................................................... 21
Description of Shares....................................................... 22
Reports to Shareholders..................................................... 24
Table of Contents of the Statement of Additional Information................ 25
</TABLE>
2
<PAGE>
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FUND EXPENSES
- -------------------------------------------------------------------------------
The following table and Example are designed to help you understand the di-
rect and indirect expenses associated with investing in the Fund. This infor-
mation is based on estimated amounts for the fiscal year ending December 31,
2000, after expense reimbursements currently in effect.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------------
<S> <C>
Sales Load (as a percentage of offering price)....................... None
Dividend Reinvestment Fees........................................... None
<CAPTION>
ANNUAL FUND EXPENSES
(as a percentage of average net assets attributable to common
shares)*
- ------------------------------------------------------------------------------
<S> <C>
Management Fee....................................................... 0.85%**
Interest Payments on Borrowed Funds.................................. 0.00%
Other Expenses (including administration fee of .40%**)
(after reimbursement)............................................... 0.40%***
Service Fee.......................................................... None
Early Withdrawal Charge.............................................. None
Total Annual Expenses................................................ 1.25%
</TABLE>
*See "Management of the Fund" for additional information.
**The management fee and administration fee are based on a percentage of the
Fund's average daily gross assets, (gross assets are total assets minus all
liabilities except debt).
***The Fund's investment adviser has agreed to reimburse the Fund's expenses
to the extent necessary so that total annualized Fund expenses do not exceed
1.25% of average daily gross assets (gross assets are total assets minus all
liabilities except debt). Absent such reimbursement, estimated expenses as a
percentage of average net assets would be: management fee of 0.85%, interest
payments on borrowed funds of 0.00%, administration fee of 0.40%, service fee
of 0.00%, and other expenses of 0.30%; and total annual expenses of 1.55%.
This agreement may be terminated by AGAM at any time after thirty (30) days'
written notice.
<TABLE>
<CAPTION>
EXAMPLE
- -----------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming 5% annual
return...................................... $13 $40 $69 $151
</TABLE>
Federal regulations require the Example to assume a 5% annual return, but
actual return will vary. The Example assumes reinvestment of all dividends and
distributions at net asset value.
The Example should not be considered a representation of future expenses be-
cause future expenses may be greater or less than those shown.
3
<PAGE>
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SUMMARY
- -------------------------------------------------------------------------------
Investment Objective
The Fund's investment objective is to provide as high a level of current in-
come as is consistent with the preservation of capital by investing primarily
in senior secured floating rate loans and other senior secured floating rate
debt obligations ("Loans"). See "Investment Objective" on page 6.
The Loans
The Loans are generally direct debt obligations undertaken by U.S. corpora-
tions in connection with recapitalizations, acquisitions, leveraged buy-outs,
and refinancings. The Loans have floating rates of interest that reset period-
ically and generally are tied to a rate such as the London Interbank Offered
Rate ("LIBOR") for 90-day dollar deposits. The Loans are secured and generally
hold the most senior position in the borrower's capitalization structure. In
selecting Loans, the Fund will employ credit standards that CypressTree has
established.
Under normal market conditions, the Fund will invest at least 80% of its to-
tal assets in Loans. The Fund may hold up to 20% of its total assets in cash,
investment grade short-term debt and medium term obligations, and unsecured
senior floating rate loans. See "Investment Policies" on page 6.
Repurchase Offers
The Fund is a closed-end investment company and, as such, does not redeem
its shares. We do not anticipate that a secondary market for Fund shares will
develop. In order to provide shareholders with liquidity and the ability to
receive net asset value on a disposition of shares, the Fund will conduct
monthly offers to repurchase at net asset value a percentage of its outstand-
ing shares, which we generally expect will be 10%. If a Repurchase Offer is
oversubscribed the Fund will repurchase shares pro rata, and may repurchase up
to an additional 2% of outstanding shares during any three-month period.
The "Repurchase Request Date" will be the last business day of each month.
The Repurchase Price will be the Fund's net asset value as determined after
the close of business on the Pricing Date, which, under normal circumstances,
we expect will be the Repurchase Request Date. The Fund expects to distribute
payment on the next business day; in any event, the Fund will pay repurchase
proceeds no later than five business days (or seven calendar days, whichever
period is shorter) after the Pricing Date (the "Repurchase Payment Deadline").
Shareholders will be sent notification of each upcoming Repurchase Offer 7 to
14 days before the next Repurchase Request Date. See "Repurchase Offers" on
page 13.
Investment Management
AGAM is the Fund's investment adviser. CypressTree, as subadviser to the
Fund, is responsible for managing the investment and reinvestment of the
Fund's assets. See "Management of the Fund" on page 15.
CypressTree was founded in 1996 by Bradford K. Gallagher and Jeffrey S. Gar-
ner as the nation's first independent investment advisory firm specializing in
the loan asset class. Mr. Garner was, prior to the establishment of
CypressTree, the portfolio manager for the Eaton Vance Senior Debt Portfolio
and its predecessor fund, Eaton Vance Prime Rate Reserves, since its inception
in 1989. CypressTree currently has approximately $2.7 billion in assets under
management. See "Management of the Fund--Portfolio Management."
Risk Factors
The Fund's net asset value is expected to be relatively stable during normal
market conditions because the Fund's assets will consist primarily of floating
rate Loans and short-term instruments. Nevertheless, there are circumstances
that could cause a decline in the Fund's net asset value. The Fund is not a
money market fund and its net asset value will fluctuate.
Investments in Loans involve certain risks, including, among others, risks
of nonpayment of principal and interest; collateral impairment;
nondiversification and borrower industry concentration; and lack of full li-
quidity, which may impair the Fund's ability to obtain full value for Loans
sold. In addition, your ability to liquidate your investment will be subject
to the limits on monthly Repurchase Offers. See "Risk Factors" on page 10.
The Fund may invest all or substantially all of its assets in Loans or other
securities that are rated below investment grade, or in comparable unrated se-
curities. It is expected that the Fund's Loans will consist primarily of Loans
made in connection with recapitalizations, acquisitions, leveraged buyouts and
refinancings. This type of Loan may involve more credit risks (including the
possibility of a default on the Loan or bankruptcy of the Borrower) and may be
more volatile in response to interest rate fluctuations and less liquid than
other Loans in which the Fund invests.
4
<PAGE>
Distributions
The Fund will declare distributions daily and pay distributions monthly.
Substantially all of the Fund's investment income, less Fund expenses, will be
declared daily as a distribution to shareholders of record at the time of the
declaration.
How to Buy Fund Shares
You may purchase shares directly by check or by wire by mailing a completed
application to the Fund's Transfer Agent or through Authorized Intermediaries.
You may be charged a fee if you effect transactions through a broker or agent.
An initial investment in the Fund must be at least $5,000, and additional in-
vestments must be at least $500. There is a $100 minimum initial and $50 addi-
tional investment requirement for purchases in connection with tax-sheltered
retirement accounts. The Fund reserves the right to waive any minimum invest-
ment requirements and to refuse any order for the purchase of shares. See "How
to Buy Fund Shares" on page 18.
This Summary is not complete and is qualified in its entirety by reference
to the more detailed information included elsewhere in the Fund's Prospectus
and in the Fund's Statement of Additional Information. You should read this
Summary in conjunction with the more detailed information included elsewhere.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
This table summarizes the Fund's financial history. The information has been
audited by Deloitte & Touche LLP, the Fund's independent auditors. The audit
report covering the period shown, along with the Fund's Financial Statements,
are included in the Fund's annual report, which is available upon request.
Per Share Operating Performance
(For a Share Outstanding Throughout the Period)
<TABLE>
-----------------------------------------------------------------------------
<CAPTION>
Period from
Year 4/6/98*
Ended through
12/31/99 12/31/98
-------- -----------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 9.93 $10.00
-----------------------------------------------------------------------------
Investment Operations:
Net investment income 0.69 0.53
Net realized and unrealized gain on investments 0.00 (0.07)
----------------
Total from investment operations 0.69 0.46
----------------
Distributions
Dividends from net investment income (0.69) (0.53)
-----------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.93 $ 9.93
-----------------------------------------------------------------------------
Total Return 7.16% 4.81%+
-----------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (000's) $90,692 $7,528
Ratio of net expenses to average net assets 0.72% 0.00%#
Ratio of net investment income to average net assets 6.81% 7.50%#
Portfolio turnover rate 28% 20%+
Expense ratio before fee waiver by adviser 1.77% 4.27%#
Net investment income before fee waiver by adviser 5.77% 3.74%#
</TABLE>
*Commencement of Operations
+Not annualized
#Annualized
5
<PAGE>
- -------------------------------------------------------------------------------
THE FUND
- -------------------------------------------------------------------------------
The Fund is a closed-end, non-diversified management investment company that
continuously offers its shares to the public. The Fund's principal office is
located at 286 Congress Street, Boston, Massachusetts 02210, and its telephone
number is (617) 368-3535. This prospectus will sometimes refer to the Fund as
"we".
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
The Fund's investment objective is to provide as high a level of current in-
come 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 ("Loans"). There is no assurance that
the Fund's objective will be achieved.
- -------------------------------------------------------------------------------
USE OF PROCEEDS
- -------------------------------------------------------------------------------
The Fund will invest net proceeds of this offering in accordance with the
Fund's investment objective and policies. The precise time frame for these in-
vestments will depend on the availability of Loans and other relevant condi-
tions. Pending such investment, the Fund will invest the net proceeds of this
offering in investment grade short-term or medium-term debt obligations.
- -------------------------------------------------------------------------------
INVESTMENT POLICIES
- -------------------------------------------------------------------------------
Under normal market conditions, the Fund will invest at least 80% of its to-
tal assets in Loans (i.e., senior secured floating rate loans and other
institutionally traded secured floating rate debt obligations). The Fund may
invest up to 20% of the Fund's total assets in cash, in investment grade
short-term and medium-term debt obligations, or in senior unsecured floating
rate loans ("Unsecured Loans").
Loans consist generally of direct obligations of companies (collectively,
"Borrowers"), primarily U.S. companies or their affiliates, undertaken to fi-
nance the growth of the Borrower's business, internally or externally, or to
finance a capital restructuring. Loans in which the Fund will invest are pri-
marily highly leveraged Loans made in connection with recapitalizations, ac-
quisitions, leveraged buyouts, and refinancings.
In selecting Loans, the Fund will employ credit standards established by
CypressTree. The Fund will purchase Loans only if, in CypressTree's judgment,
the Borrower can meet debt service on the Loan (except in the case of Discount
Loans as described below). The Fund will acquire Loans that are, in the judg-
ment of CypressTree, in the category of senior debt of the Borrower and that
generally hold the most senior position in the Borrower's capitalization
structure. A Borrower must also meet other criteria established by CypressTree
and deemed by it to be appropriate to the analysis of the Borrower and the
Loan.
The Fund's primary consideration in selecting Loans for investment by the
Fund is the Borrower's creditworthiness. Some of the Loans in which the Fund
invests are not currently rated by any nationally recognized statistical rat-
ing organization. The Fund has no minimum rating requirement for Loans. The
quality ratings assigned to other debt obligations of a Borrower are generally
not a material factor in evaluating Loans because these rated obligations typ-
ically will be subordinated to the Loans and will be unsecured. Instead,
CypressTree will perform its own independent credit analysis of the Borrower.
CypressTree's analysis will include an evaluation of the Borrower's industry
and business, its management and financial statements, and the particular
terms of the Loan that the Fund may acquire. CypressTree will use information
prepared and supplied by the Agent (as defined below) or other participants in
the Loans. CypressTree will continue to analyze in a similar manner on an on-
going basis any Loan in which the Fund invests. There can be no assurance that
the Fund will be able to acquire Loans satisfying the Fund's investment crite-
ria at acceptable prices.
- -------------------------------------------------------------------------------
INVESTMENTS
- -------------------------------------------------------------------------------
Loans
Characteristics of Loans
Each Loan will be secured by collateral that CypressTree believes to have a
market value, at the time of acquiring the Loan, that equals or exceeds the
principal amount of the Loan. The value of the collateral underlying a Loan
may decline after purchase, with the result that the Loan may no longer be
fully secured. The Fund
6
<PAGE>
will not necessarily dispose of such a Loan, even if the collateral impairment
would result in the Fund having less than 80% of its assets in fully secured
Loans.
The Loans typically will have a stated term of five to nine years. However,
because the Loans are frequently prepaid, their average credit exposure is ex-
pected to be two to three years. The degree to which Borrowers prepay Loans,
whether as a contractual requirement or at their election, may be affected by
general business conditions, the Borrower's financial condition, and competi-
tive conditions among lenders. Accordingly, prepayments cannot be predicted
with accuracy. Prepayments generally will not have a material effect on the
Fund's performance because, under normal market conditions, the Fund should be
able to reinvest prepayments in other Loans that have similar or identical
yields, and because receipt of prepayment and facility fees may mitigate any
adverse impact on the Fund's yield.
The rate of interest payable on Loans is the sum of a base lending rate plus
a specified spread. These base lending rates are generally the London
Interbank Offered Rate ("LIBOR") for 90-day dollar deposits, the Certificate
of Deposit ("CD") Rate of a designated U.S. bank, the Prime Rate of a desig-
nated U.S. bank, or another base lending rate used by commercial lenders. A
Borrower usually has the right to select the base lending rate and to change
the base lending rate at specified intervals.
The interest rate on LIBOR-based and CD Rate-based Loans is reset periodi-
cally at intervals ranging from 30 to 180 days, while the interest rate on
Prime Rate-based Loans floats daily as the Prime Rate changes. Investments in
Loans with a longer interest rate reset period may increase fluctuations in
the Fund's net asset value as a result of changes in interest rates. The Fund
will attempt to maintain a portfolio of Loans that will have a dollar-weighted
average period to next interest rate adjustment of approximately 90 days or
less.
The yield on a Loan primarily will depend on the terms of the underlying
Loan and the base lending rate chosen by the Borrower initially and on subse-
quent dates specified in the applicable loan agreement. The relationship be-
tween LIBOR, the CD Rate, and the Prime Rate will vary as market conditions
change. Borrowers tend to select the base lending rate that results in the
lowest interest cost, and the rate selected may change from time to time.
Agents and Intermediate Participants
Loans are typically originated, negotiated and structured by a U.S. or for-
eign commercial bank, insurance company, finance company or other financial
institution (the "Agent") for a lending syndicate of financial institutions.
The Borrower and the lender or lending syndicate enter into a loan agreement
(the "Loan Agreement"). The Agent typically administers and enforces the Loan
on behalf of the other lenders in the syndicate. In addition, an institution,
typically but not always the Agent (the "Collateral Bank"), holds any collat-
eral on behalf of the lenders. The Collateral Bank must be a qualified custo-
dian under the Investment Company Act of 1940, as amended (the "1940 Act").
The Fund may not act as an Agent, a Collateral Bank, a guarantor or sole nego-
tiator or structuror with respect to a Loan.
In a typical Loan, the Agent administers the terms of the Loan Agreement and
is responsible for the collection of principal and interest and fee payments
from the Borrower and the apportionment of these payments to the credit of all
lenders that are parties to the Loan Agreement. The Fund generally will rely
on the Agent to collect its portion of the payments on a Loan. Furthermore,
the Fund will rely on the Agent to use appropriate creditor remedies against
the Borrower. Typically, under Loan Agreements, the Agent is given broad dis-
cretion in monitoring the Borrower's performance under the Loan Agreement and
is obligated to use only the same care it would use in the management of its
own property. Upon an event of default, the Agent typically will act to en-
force the Loan Agreement after instruction from lenders holding a majority of
the Loan. The Borrower compensates the Agent for these services. This compen-
sation may include special fees paid on structuring and funding the Loan and
other fees paid on a continuing basis. The typical practice of an Agent or a
lender in relying exclusively or primarily on reports from the Borrower may
involve a risk of fraud by the Borrower.
If an Agent becomes insolvent, or has a receiver, conservator, or similar
official appointed for it by the appropriate bank regulatory authority or be-
comes a debtor in a bankruptcy proceeding, the Agent's appointment may be ter-
minated, and a successor agent would be appointed. Assets held by the Agent
under the Loan Agreement should remain available to holders of Loans. However,
if an appropriate regulator or court determines that assets held by the Agent
for the benefit of the Fund are subject to the claims of the Agent's general
or secured creditors, the Fund might incur certain costs and delays in realiz-
ing payment on a Loan or suffer a loss of principal and/or interest. Further-
more, in the event of the Borrower's bankruptcy or insolvency, the Borrower's
7
<PAGE>
obligation to repay the Loan may be subject to certain defenses that the Bor-
rower can assert as a result of improper conduct by the Agent.
The Fund's investment in a Loan may take the form of a "Participation."
Lenders may sell Loans to third parties called "Participants." Participations
may be acquired from a lender or from other Participants. If the Fund pur-
chases a Participation either from a lender or a Participant, the Fund will
not have established any direct contractual relationship with the Borrower.
The Fund would be required to rely on the lender or the Participant that sold
the Participation not only for the enforcement of the Fund's rights against
the Borrower but also for the receipt and processing of payments due to the
Fund under the Loan. The Fund is thus subject to the credit risk of both the
Borrower and the entity selling the Participation. Lenders and Participants
interposed between the Fund and a Borrower are referred to as "Intermediate
Participants."
In the case of Participations, because it may be necessary to assert through
an Intermediate Participant such rights as may exist against the Borrower in
the event the Borrower fails to pay principal and interest when due, the Fund
may be subject to delays, expenses and risks that are greater than those that
would be involved if the Fund could enforce its rights directly against the
Borrower. Moreover, under the terms of a Participation, the Fund may be re-
garded as a creditor of the Intermediate Participant (rather than of the Bor-
rower), so that the Fund also may be subject to the risk that the Intermediate
Participant may become insolvent. The agreement between the buyer and seller
may also limit the rights of the holder of the Loan to vote on certain changes
that may be made to the Loan Agreement, such as waiving a breach of a cove-
nant. However, in almost all cases, the holder of a Loan will have the right
to vote on certain fundamental issues such as changes in the principal amount,
payment dates, and interest rate.
CypressTree also analyzes and evaluates the financial condition of the Agent
and, if applicable, the Intermediate Participant. The Fund will invest in a
Loan only if the outstanding debt obligations of the Agent and Intermediate
Participants, if any, are, at the time of investment, investment grade (i.e.,
(a) rated BBB or better by Standard and Poor's Ratings Group ("S&P") or Baa or
better by Moody's Investors Service, Inc. ("Moody's"); or (b) rated A-3 or
better by S&P or P-3 or better by Moody's; or (c) determined by CypressTree to
be of comparable quality).
Although the Fund generally holds only Loans for which the Agent and Inter-
mediate Participants, if any, are banks, the Fund may acquire Loans from non-
bank financial institutions and Loans originated, negotiated and structured by
non-bank financial institutions, if the Loans conform to the credit require-
ments described above. As other types of Loans are developed and offered to
investors, CypressTree will consider making investments in these Loans, con-
sistent with the Fund's investment objective, policies and quality standards,
and in accordance with applicable custody and other requirements of the 1940
Act.
Discount Loans
The Fund may from time to time acquire Loans at a discount from their nomi-
nal value or with a facility fee that exceeds the fee traditionally received
in connection with the acquisition of Loans ("Discount Loans"). The Borrowers
with respect to Discount Loans may have experienced, or may be perceived to be
likely to experience, credit problems, including involvement in or recent
emergence from bankruptcy reorganization proceedings or other forms of credit
restructuring. In addition, Discount Loans may become available as a result of
an imbalance in the supply of and demand for certain Loans. The Fund may ac-
quire Discount Loans in order to realize an enhanced yield or capital appreci-
ation when CypressTree believes that the market has undervalued those Loans
due to an excessively negative assessment of a Borrower's creditworthiness or
an imbalance between supply and demand. The Fund may benefit from any appreci-
ation in value of a Discount Loan, even if the Fund does not obtain 100% of
the Loan's face value or the Borrower is not wholly successful in resolving
its credit problems.
Other Information About Loans
A Borrower must comply with various restrictive covenants contained in the
applicable Loan Agreement. In addition to requiring the scheduled payment of
interest and principal, these covenants may include restrictions on dividend
payments and other distributions to stockholders, provisions requiring the
Borrower to maintain specific financial ratios, and limits on total debt. The
Loan Agreement may also contain a covenant requiring the Borrower to prepay
the Loan with any free cash flow. Free cash flow generally is defined as net
cash flow after scheduled debt service payments and permitted capital expendi-
tures, and includes the proceeds from asset dispositions or securities sales.
A breach of a covenant that is not waived by the Agent (or by the lenders di-
rectly, as the case may be) is normally an event of default, which provides
the Agent or the lenders directly the right to call the outstanding Loan.
8
<PAGE>
The Fund may have certain obligations in connection with a Loan, such as,
under a revolving credit facility that is not fully drawn down to loan addi-
tional amounts under the terms of the facility. The Fund will not invest in
Loans that would require the Fund to make any additional investments in con-
nection with future advances if such commitments would exceed 20% of the
Fund's total assets or would cause the Fund to fail to meet the diversifica-
tion requirements described below. The Fund will maintain a segregated account
with its Custodian of liquid, high-grade debt obligations with a value equal
to the amount, if any, of the Loan that the Fund has obligated itself to make
to the Borrower, but that the Borrower has not yet requested.
The Fund may receive and/or pay certain fees in connection with its activi-
ties in buying, selling and holding Loans. These fees are in addition to in-
terest payments received, and may include facility fees, commitment fees,
amendment fees, commissions and prepayment penalty fees. When the Fund buys a
Loan, it may receive a facility fee, and when it sells a Loan, it may pay a
facility fee. The Fund may receive a commitment fee based on the undrawn por-
tion of the underlying line of credit portion of a Loan, or, in certain cir-
cumstances, the Fund may receive a prepayment penalty fee on the prepayment of
a Loan by a Borrower. The Fund may also receive other fees, including covenant
waiver fees and covenant modification fees.
From time to time AGAM, CypressTree or their affiliates may borrow money
from various banks in connection with their business activities. These banks
also may sell Loans to the Fund or acquire Loans from the Fund, or may be In-
termediate Participants with respect to Loans owned by the Fund. These banks
also may act as Agents for Loans that the Fund owns.
Unsecured Loans and Short-Term and Medium-Term Obligations
The Fund may hold up to 20% of its total assets in cash or invested in
short-term or medium-term debt obligations or in Unsecured Loans. The Fund
will invest only in Unsecured Loans that CypressTree determines have a credit
quality at least equal to that of the collateralized Loans in which the Fund
primarily invests. With respect to an Unsecured Loan, if the Borrower defaults
on its obligation, there is no specific collateral on which the Fund can fore-
close, although the Borrower typically will have assets that CypressTree be-
lieves exceed the amount of the Unsecured Loan at the time of purchase.
The short-term and medium-term debt obligations in which the Fund may invest
include, but are not limited to, senior Unsecured Loans with a remaining matu-
rity of one year or less, certificates of deposit, commercial paper, short-
term and medium-term notes, bonds with remaining maturities of less than five
years, obligations issued by the U.S. Government or any of its agencies or in-
strumentalities, and repurchase agreements. All of the debt instruments de-
scribed in this paragraph, other than Unsecured Loans, will be investment
grade (i.e., rated Baa, P-3 or better by Moody's or BBB, A-3 or better by S&P
or, if unrated, determined by CypressTree to be of comparable quality). For a
definition of the ratings assigned to instruments, see Appendix A to the
Statement of Additional Information. Pending investment of the proceeds of
Fund sales, or when CypressTree believes that investing for defensive purposes
is appropriate, more than 20% (up to 100%) of the Fund's total assets may be
temporarily held in cash or in the short-term and medium-term debt obligations
described in this paragraph.
Foreign Investments
The Fund also may acquire U.S. dollar denominated Loans made to non-U.S.
Borrowers (a) (i) located in any country whose unguaranteed, unsecured and
otherwise unsupported long-term sovereign debt obligations are rated A3 or
better by Moody's and A- or better by S&P or (ii) with significant U.S. dol-
lar-based revenues or significant U.S.-based operations and (b) located in a
country that does not impose withholding taxes on payment of principal, inter-
est, fees, or other payments to be made by the Borrower; provided, however,
that any such Borrower meets the credit standards established by CypressTree
for U.S. Borrowers, and no more than 25% of the Fund's net assets are invested
in Loans of non-U.S. Borrowers. Loans to non-U.S. Borrowers may involve cer-
tain special considerations not typically associated with investing in U.S.
Borrowers. Information about a foreign company may differ from that available
with respect to U.S. Borrowers, because foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to U.S. Borrowers.
There may be greater risk in valuing and monitoring the value of collateral
underlying Loans to non-U.S. Borrowers. There generally is less government su-
pervision and regulation of financial markets and listed companies in foreign
countries than in the United States. The Fund will not invest in Unsecured
Loans of non-U.S. Borrowers.
Repurchase Agreements
The Fund may enter into repurchase agreements with respect to its permitted
investments, but currently intends to do so only with member banks of the Fed-
eral Reserve System or with primary dealers in U.S.
9
<PAGE>
Government securities. Under a repurchase agreement, the Fund buys a security
at one price and simultaneously promises to sell that same security back to
the seller at a higher price. The Fund's repurchase agreements will provide
that the value of the collateral underlying the repurchase agreement always
will be at least 102% of the repurchase price, including any accrued interest
earned on the repurchase agreement, and will be marked to market daily. The
repurchase date is usually within seven days of the original purchase date. In
all cases, CypressTree must be satisfied with the creditworthiness of the
other party to the agreement before entering into a repurchase agreement. In
the event of the bankruptcy (or other insolvency proceeding) of the other
party to a repurchase agreement, the Fund might experience delays in recover-
ing its cash. To the extent that the value of the securities the Fund pur-
chased may have declined in the meantime, the Fund could experience a loss.
Other Investments
The Fund may acquire warrants and other equity securities as part of a unit
combining Loans and equity securities of the Borrower or its affiliates, but
only incidentally to the Fund's purchase of a Loan. The Fund also may acquire
equity securities issued in exchange for a Loan or issued in connection with a
Borrower's debt restructuring or reorganization, or if the acquisition, in
CypressTree's judgment, may enhance the value of a Loan or otherwise would be
consistent with the Fund's investment policies.
Fundamental Investment Restrictions And Policies
The Fund has adopted certain fundamental investment restrictions and poli-
cies which may not be changed unless authorized by a shareholder vote. These
are set forth in the Statement of Additional Information. Among these funda-
mental restrictions, the Fund may not purchase any security if, as a result of
the purchase, more than 25% of the Fund's total assets (taken at current val-
ue) would be invested in the securities of Borrowers and other issuers having
their principal business activities in the same industry (the electric, gas,
water and telephone utility industries being treated as separate industries
for the purpose of this restriction). There is no limitation on purchasing se-
curities the issuer of which is deemed to be in the financial institutions in-
dustry, which includes commercial banks, thrift institutions, insurance compa-
nies and finance companies. There is no limitation with respect to obligations
issued or guaranteed by the U.S. Government or any of its agencies or instru-
mentalities. Except for the fundamental restrictions and policies set forth as
such in the Fund's Statement of Additional Information, the Fund's investment
objective and policies are not fundamental policies and accordingly may be
changed by the Fund's Board of Directors without obtaining the approval of the
Fund's shareholders. Notwithstanding the Fund's investment policies and re-
strictions, the Fund may invest all or part of its investable assets in a man-
agement investment company with sustantially the same investment objective,
policies and restrictions as the Fund, which could allow creation of a
"master/feeder" structure.
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RISK FACTORS
- -------------------------------------------------------------------------------
Because the Fund's assets will include primarily floating rate loans and
other short-term instruments, CypressTree expects that the Fund's net asset
value will be relatively stable during normal market conditions. It is also
likely that the value of the portfolio will fluctuate less with changes in in-
terest rates than a portfolio that includes fixed-rate debt.
There are, of course, a number of factors that could cause a decline in the
Fund's net asset value, including loan default, changes in creditworthiness,
or a sudden and dramatic increase in interest rates. At the same time, a sud-
den and extreme decline in interest rates could result in an increase in the
Fund's net asset value.
The Fund has a limited operating history. The Fund is not a money market
fund and its net asset value will fluctuate.
Credit Risk
Under normal conditions, the Fund will invest at least 80% of its assets in
Loans. One of the most significant risks to investing in Loans is credit risk,
the risk that the Borrower will not pay interest or repay principal in a
timely manner. The Fund's receipt of principal and interest also depends on
the creditworthiness of Agents and Intermediate Participants. If payments are
late or do not occur at all, the dividends paid to investors and the net asset
value of the Fund may fall.
Loans made in connection with recapitalizations, acquisitions, leveraged
buy-outs, and refinancings may involve more credit risks than other Loans in
which the Fund invests, including the possibility of default on the Loan or
bankruptcy of the Borrower. This type of Loan may be more volatile and less
liquid than other Loans. We expect the Fund's Loans will be primarily this
type of Loan.
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<PAGE>
The Fund will generally invest in Loans that are most senior in a Borrower's
capitalization structure. These Loans require repayment ahead of other obliga-
tions if credit restructuring occurs. Still, many of these Borrowers may also
have non-investment grade subordinated debt that they may find difficult to
repay if economic conditions deteriorate. If this occurs, the Borrower may be
perceived as less creditworthy, may have difficulties obtaining financing to
cover short-term cash flow needs, and may even be forced into bankruptcy or
other forms of credit restructuring.
"Bridge" loans provide Borrowers with temporary financing until other assets
are sold, or longer term financing is arranged. The Fund may invest directly
in these types of Loans, or may invest in Loans of Borrowers that have ob-
tained bridge loans from other parties. Bridge loans are subject to the risk
that the Borrower may not find permanent financing to replace the bridge loan.
This could damage the Borrower's perceived creditworthiness.
Collateral Impairment
Collateral impairment is the risk that the value of the collateral for a
loan will fall. The Fund expects to invest in collateralized Loans, Loans se-
cured by other things of value the Borrower owns.
Loans are secured unless:
(a) The value of the collateral declines below the amount of the Loan, or
(b) The Fund's security interest in the collateral is invalidated for any
reason by a court, or
(c) The collateral is no longer required under the terms of the Loan Agree-
ment as the creditworthiness of the Borrower improves.
There is no guarantee that the sale of collateral would allow Borrowers to
meet their obligations should they become unable to repay principal or inter-
est, or that the collateral could be sold quickly and easily.
The value of the collateral will be set using several criteria:
. The Borrower's financial statements
. An independent appraisal
. The market value of the collateral
. Other customary techniques chosen by CypressTree
Collateral is valued generally with the understanding that the Borrower is
an ongoing concern. As a result, the value of the collateral may exceed its
immediate liquidation value.
Collateral may include:
(a) Working capital assets, such as accounts receivable and inventory
(b) Tangible fixed assets, such as real property, buildings and equipment
(c) Intangible assets, such as licenses, trademarks and patent rights (but
excluding goodwill),
(d) Security interests in shares of stock of subsidiaries or affiliates,
and
(e) Assets of shareholders of the Borrower, if the Borrower is a private
company.
If the collateral is the stock of the Borrower's subsidiaries or other af-
filiates, the Fund will be subject to the risk that this stock will decline in
value.
Any type of decline in the value of collateral could cause the Loan to be-
come undercollateralized or unsecured. In this case, there is usually no re-
quirement to pledge more collateral.
If a Borrower becomes involved in bankruptcy proceedings, a court may decide
that the Loan does not require repayment through the sale of collateral and
may even determine that other obligations be repaid first. Other things could
occur, including errors in paperwork, which could invalidate the Fund's secu-
rity interest in Loan collateral. If this occurs, the Fund is unlikely to re-
cover the full amount of the principal and interest due on the Loan.
Loans may be unsecured for brief periods if a Borrower's principal asset is
the stock of a related company which may not legally be pledged, until this
stock can be pledged or is exchanged for other assets.
Investments in Lower Quality Securities
The Fund may invest all or nearly all of its assets in Loans or other secu-
rities that are rated below investment grade by Moody's Investors Service,
similarly rated by another nationally recognized statistical rating organiza-
tion, or, if unrated, deemed by CypressTree to be of equivalent quality.
11
<PAGE>
Debt rated Baa or higher by Moody's is considered to be investment grade.
Moody's considers debt rated Baa by Moody's to have speculative characteris-
tics. Moody's considers debt rated Ba or B by Moody's to be predominantly
speculative regarding the issuer's ability to pay interest and repay princi-
pal. Moody's also uses the numerical modifiers 1, 2 and 3 to indicate where in
the generic rating classification a particular security ranks, with 1 being
the highest and 3 the lowest.
These ratings of debt securities represent the rating agency's opinion re-
garding their quality, they are not a guarantee of quality. Rating agencies
try to evaluate the safety of principal and interest payments, they do not
take into consideration the risks of fluctuations in market value. Because
rating agencies may not change ratings quickly in response to company changes,
an issuer's current financial condition may be better or worse than a rating
indicates.
Securities rated Ba and lower are the equivalent of high-yield, high-risk
bonds, commonly known as "junk bonds," and involve a high degree of risk. They
are generally more vulnerable to economic downturns or developments affecting
the Borrower. CypressTree does not expect to invest in any securities rated
lower than B3 at the time of investment. See Appendix A to the Statement of
Additional Information--"Description of Ratings" for a full description of
Moody's long-term debt ratings. In the event of a downgrade or decrease in the
rating of a Loan, CypressTree will consider whether to sell that Loan.
Typically, the market values of lower-quality loans change in response to
company changes more than the market values of higher quality loans. Higher
quality loans react primarily to fluctuations in the general level of interest
rates. Also, lower-quality debt securities tend to be more sensitive to eco-
nomic conditions and generally have more volatile prices than higher-quality
securities.
Non-Diversification and Industry Concentration
The Fund is classified as a "non-diversified" investment company within the
meaning of the 1940 Act. This means that the only limits on the amount the
Fund may invest in a single issue are the diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
See "Taxes" in the Statement of Additional Information for a description of
these requirements. The Fund plans to invest no more than 10% of its assets in
Loans of any one Borrower.
When the Fund chooses to invest a high percentage of its assets in the obli-
gations of just a few issuers, the value of the Fund's investments can react
more significantly to any one event than the value of a fund that is more di-
versified.
The Fund may acquire Loans made to Borrowers in any industry. The Fund will
not concentrate its investments in any one industry. However, because the Fund
may buy loans through intermediaries who may be legally considered issuers,
the Fund may be deemed concentrated in the financial services industry. Be-
cause this is so, the Fund is subject to certain risks. Some of the risks re-
lated to financial services include regulatory controls and legislative
changes that may limit lending or make it riskier or less profitable, and gen-
eral financial and economic conditions. See "Investment Restrictions" in the
Statement of Additional Information.
Illiquid Instruments
Not all Loans are easy to sell because of legal and contractual restric-
tions. Although Loans are traded among certain financial institutions, some of
the Loans that the Fund buys are not as liquid, or saleable, as typical in-
vestment grade debt and may be considered illiquid. It may be more difficult
to sell Loans where the creditworthiness of the Borrower has changed, or is
thought to have changed. Reselling loans may also become more difficult with
market changes or other concerns about Borrowers' ability to repay loans in
general.
This illiquidity may affect the Fund's ability to maintain its net asset
value if Loans must be sold. Over time, the liquidity of Loans should improve.
Securities and Exchange Commission ("SEC") rules and Board of Directors pro-
cedures require the Fund to maintain enough liquidity to make its monthly Re-
purchase Offers, generally expected to be 10% of outstanding shares, but there
are no other liquidity restrictions. See "Repurchase Offers."
Borrowing By The Fund
The Fund may borrow money in amounts up to 33 1/3% of the value of its total
assets to finance Repurchase Offers, for temporary, extraordinary or emergency
purposes. Although it currently does not intend to, the Fund also may issue
one or more series of preferred shares or borrow money to finance additional
investments but
12
<PAGE>
only when it believes that the return will exceed the costs of this strategy.
If costs do exceed returns, the return realized by the Fund's shareholders
will be adversely affected. While borrowing and issuing a class of preferred
stock having priority over the Fund's common shares create an opportunity for
greater income per common share, it also involves increased exposure to loss-
es. These risks may be reduced through borrowing and preferred stock with
floating rates of interest. Borrowing may also limit the Fund's freedom to pay
dividends or engage in other activities.
The Fund may establish an unsecured, discretionary credit facility (the "Fa-
cility") to partially finance Repurchases. The Facility would allow the Fund
to borrow up to $100,000,000 or 33 1/3% of the Fund's total assets, whichever
is less, on an unsecured, uncommitted basis. This Facility will have a float-
ing interest rate, such as LIBOR, to be selected at the Fund's option.
Under the 1940 Act, the Fund may only borrow money provided that right after
borrowing, the Fund has assets that equal 300% of the total outstanding prin-
cipal balance of indebtedness. Also, the 1940 Act requires that the fund may
only declare dividends or distributions or purchase capital stock provided
that right after doing so, the Fund has assets that equal 300% of total prin-
cipal balance of debt.
If the Fund cannot make distributions as a result of these requirements the
Fund may no longer qualify as a regulated investment company and could be re-
quired to pay additional taxes. The Fund may also be forced to sell invest-
ments on unfavorable terms if market fluctuations or other factors reduce the
required asset below what is required.
The Fund's willingness to borrow money for investment purposes, and the
amount it will borrow, will depend on many factors, the most important of
which are investment outlook, market conditions and interest rates. Successful
use of a borrowing strategy depends on CypressTree's ability to predict cor-
rectly interest rates and market movements, and there is no assurance that a
borrowing strategy will be successful during any period in which it is em-
ployed.
Any indebtedness issued by the Fund or borrowing by the Fund either:
(a) Will mature by the next Repurchase Request Date (as defined below under
"Repurchase Offers") or
(b) Can be redeemed, called or repaid by the Fund by the next Repurchase
Request Date without penalty or premium, if that is necessary to allow
the Fund to repurchase shares as required by the Board of Directors and
the 1940 Act.
Limited Availability of Loans
Investment in Loans that meet the Fund's standards may be subject to limited
availability. There is risk that the Fund may not be able to invest 80% or
more of its total assets in Loans.
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REPURCHASE OFFERS
- -------------------------------------------------------------------------------
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 of outstanding shares at net asset value ("Repur-
chase Offers"). Because the Fund is a closed-end fund, you will not be able to
redeem your shares on a daily basis.
As explained in more detail below, the "Repurchase Request Date" will be the
last business day of each month. Under normal circumstances, we expect that
the Fund will determine the net asset value applicable to repurchases on that
date. The Fund expects to distribute payment on the next business day, and
will distribute payment on or before the Repurchase Payment Deadline, which is
no later than five business days (or seven calendar days, whichever period is
shorter) after the Pricing Date. Shareholders will be sent notification of the
next Repurchase Offer 7 to 14 days prior to the next Repurchase Request Date.
It is unlikely that a secondary market for the Fund's shares will develop, and
the Distributor will not engage in any efforts to develop a secondary market.
Repurchase Amount
Each month, the Fund's Board of Directors will determine the percentage of
shares to be repurchased ("Repurchase Amount"). We expect that the Repurchase
Amount generally will be 10%, but it may vary between 5% and 25%, of shares
outstanding on the Repurchase Request Date. Currently, the Fund is subject to
an undertaking that the Repurchase Amount will not exceed 10%.
13
<PAGE>
There is no minimum number of shares that must be tendered before the Fund
will honor repurchase requests. In other words, if, in the aggregate, only one
share is tendered in a given month, the Fund must repurchase it. However,
there is a maximum Repurchase Amount, so you should be aware of the risk that
the Fund may not be able to repurchase all shares tendered in any given month.
See "Oversubscribed Repurchase Offers; Pro Rata Allocation."
Repurchase Requests
Shareholders will be sent a Notification of Repurchase Offer ("Notifica-
tion") 7 to 14 days before the next Repurchase Request Date. The Notification
will provide information about the Repurchase Offer, including the Repurchase
Amount, the Repurchase Request Date, and the means by which shareholders may
obtain the Fund's net asset value.
Shareholders who wish to tender shares for repurchase must notify the Fund
or their Authorized Intermediary on or before the Repurchase Request Date in a
manner designated by the Fund. The Repurchase Request Date is a deadline that
will be strictly observed. Shareholders and Authorized Intermediaries that
fail to submit Repurchase Requests in good order by this deadline will be un-
able to liquidate shares until a subsequent Repurchase Offer.
A shareholder may tender all or a portion of his or her holdings (although
the Fund may not be able to repurchase the shareholder's entire tender if ag-
gregate tenders exceed the Repurchase Amount (as discussed further below)). A
shareholder may withdraw or change a Repurchase Request at any point before
the Repurchase Request Date, but not after that date.
Determination of Repurchase Price
The Fund will establish the Repurchase Price at a share's net asset value as
determined after the close of business on the Pricing Date. Under normal cir-
cumstances, we expect that the Pricing Date generally will be the Repurchase
Request Date. In no event will the Pricing Date be more than three business
days after the Repurchase Request Date. The Fund will compute net asset value
daily (as described under "Valuing Fund Shares"), and you may obtain the daily
net asset value by calling 800-860-5575.
The Fund does not presently intend to deduct any repurchase fees from this
amount. However, in the future, the Board of Directors may determine to charge
a repurchase fee payable to the Fund reasonably to compensate it for its ex-
penses directly related to the repurchase. These fees could be used to compen-
sate the Fund for, among other things, its costs incurred in disposing of se-
curities or in borrowing in order to make payment for repurchased shares. Any
repurchase fee will never exceed two percent of the proceeds of the repur-
chase. It should be noted that the Board may implement repurchase fees without
a shareholder vote.
Payment
The Fund expects to distribute payment on the next business day after the
Pricing Date; in any event, the Fund will pay repurchase proceeds no later
than the Repurchase Payment Deadline, which is five business days (or seven
calendar days, whichever is shorter) after the Pricing Date. Repurchase pro-
ceeds will be paid by wire transfer or check.
Oversubscribed Repurchase Offers; Pro Rata Allocation
In any given month, shareholders may tender a number of shares that exceeds
the Repurchase Offer Amount (this prospectus refers to this situation as an
"Oversubscribed Repurchase Offer"). In the event of an Oversubscribed Repur-
chase Offer, the Fund may repurchase additional shares in excess of 10% but
only up to a maximum aggregate of 2% of the shares outstanding for any three
consecutive Repurchase Offers ("Additional Repurchase Amount").
For example, if in Month 1 the Fund offers to repurchase 10% of shares out-
standing, and shareholders tender 11%, the Fund could determine to repurchase
the extra 1% of shares outstanding. In that event, over the next two repur-
chase offers, the Fund only would be able to repurchase an aggregate of 1% of
shares outstanding pursuant to an Oversubscribed Repurchase Offer. If the Fund
determines not to repurchase the Additional Repurchase Amount, or if share-
holders tender an amount exceeding the Repurchase Offer Amount plus the Addi-
tional Repurchase Amount, the Fund will repurchase the shares tendered on a
pro rata basis. However, the Fund may determine to alter these pro rata allo-
cation procedures in two situations:
(a) the Fund may accept all shares tendered by persons who own in the ag-
gregate not more than a specified number of shares (which number will
not exceed 100 shares) before prorating shares tendered by others; or
14
<PAGE>
(b) the Fund may accept by lot shares tendered by shareholders who tender
all shares held by them and who, when tendering, elect to have either
all or none (or at least a minimum amount or none) accepted; however,
the Fund first must accept all shares tendered by shareholders who do
not make this election.
In the event of an Oversubscribed Repurchase Offer, shareholders may be un-
able to liquidate some or all of their investment during that monthly Repur-
chase Offer. A shareholder may have to wait until a later month to tender
shares that the Fund is unable to repurchase, and would be subject to the risk
of net asset value fluctuations during this time period.
Adoption of Repurchase Policy
The Board has adopted a resolution setting forth the Fund's fundamental pol-
icy to conduct Repurchase Offers ("Repurchase Policy"). The Repurchase Policy
may be changed only by a majority vote of the Fund's outstanding voting secu-
rities. The Repurchase Policy states that the Fund will make monthly Repur-
chase Offers, that the Repurchase Request Date will be the last business day
of the month, and that the Pricing Date will be no later than three business
days after the Repurchase Request Date. Under the Repurchase Policy, the Re-
purchase Amount may be from 5% to 25% of the Fund's shares outstanding on the
Repurchase Request Date. The Fund's undertaking to limit the Repurchase Amount
to 10% is not part of the Repurchase Policy and may be changed without a
shareholder vote. The Fund also may offer to repurchase its shares on a dis-
cretionary basis, not pursuant to its fundamental policy, not more frequently
than once every two years.
Liquidity Requirements
The Fund must maintain liquid assets equal to the Repurchase Offer Amount
from the time that the Notification is sent to shareholders until the Pricing
Date. The Fund will ensure that a percentage of its net assets equal to at
least 100 percent of the Repurchase Offer Amount consists of assets (a) that
can be sold or disposed of in the ordinary course of business at approximately
the price at which the Fund has valued the investment within the time period
between the Repurchase Request Date and the Repurchase Payment Deadline; or
(b) that mature by the Repurchase Payment Deadline.
The Board has adopted procedures that are reasonably designed to ensure that
the Fund's assets are sufficiently liquid so that the Fund can comply with the
Repurchase Policy and the liquidity requirements described in the previous
paragraph. If, at any time, the Fund falls out of compliance with these
liquidity requirements, the Board will take whatever action it deems
appropriate to ensure compliance.
The Fund intends to satisfy the liquidity requirements with cash on hand,
cash raised through borrowings, and Loans. There is some risk that the need to
sell Loans to fund Repurchase Offers may affect the market for those Loans. In
turn, this could diminish the Fund's net asset value.
Suspension or Postponement of a Repurchase Offer
The Fund may suspend or postpone a Repurchase Offer in limited circumstanc-
es, and only by vote of a majority of the Board of Directors, including a ma-
jority of the independent Directors. These circumstances are limited and in-
clude the following:
(a) if the repurchase would cause the Fund to lose its status as a regu-
lated investment company under Subchapter M of the Internal Revenue
Code;
(b) for any period during which an emergency exists as a result of which it
is not reasonably practicable for the Fund to dispose of securities it
owns or to determine the value of the Fund's net assets;
(c) for any other periods that the Securities and Exchange Commission per-
mits by order for the protection of shareholders;
(d) if the shares are listed on a national securities exchange or quoted in
an inter-dealer quotation system of a national securities association
(e.g., Nasdaq) and the repurchase would cause the shares to lose that
status; or
(e) during any period in which any market on which the shares are princi-
pally traded is closed, or during any period in which trading on the
market is restricted.
Consequences of Repurchase Offers
Although the Board believes that Repurchase Offers generally will be benefi-
cial to the Fund's shareholders, repurchases will decrease the Fund's total
assets and therefore have the possible effect of increasing the Fund's expense
ratio. Furthermore, if the Fund borrows to finance repurchases, interest on
that borrowing may reduce
15
<PAGE>
the Fund's net investment income. The Fund intends to offer new shares contin-
uously, which may alleviate these potential consequences, although there is no
assurance that the Fund will be able to secure new investments.
Repurchase Offers provide shareholders with the opportunity to dispose of
shares at net asset value. The Fund does not anticipate that a secondary mar-
ket will develop, but in the event that a secondary market were to develop, it
is possible that shares would trade in that market at a discount to net asset
value. The existence of periodic Repurchase Offers at net asset value may not
alleviate such a discount.
For a discussion of the federal income tax consequences of a repurchase, see
"Taxes."
Change of Notice and Monthly Board Meeting Requirements
Currently, the Fund's Board of Directors determines the amount of the Repur-
chase Offer once each month and shareholders receive a notice before each Re-
purchase Offer under rules of the SEC. The Fund may request approval from the
SEC to make its determination and provide notice to its shareholders on a
quarterly basis. If such approval is granted, then the Board would meet once
each quarter to determine the amount of the next three Repurchase Offers, and
you would receive one notice for those three Repurchase Offers.
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MANAGEMENT OF THE FUND
- -------------------------------------------------------------------------------
The Board of Directors (the "Board") oversees the management of the Fund and
elects its officers. The Fund's officers are responsible for the Fund's day-
to-day operations.
Advisory Arrangements
AGAM, formerly CypressTree Asset Management Corporation, Inc., is the in-
vestment adviser for the Fund. AGAM was formed in 1996, together with American
General Funds Distributors, Inc. ("Distributors"), to advise and distribute
mutual funds through broker-dealers, banks and other intermediaries. The ad-
dress of AGAM is 286 Congress, Boston, Massachusetts 02210, and the address of
Distributors is 286 Congress Street, Boston, Massachusetts 02210. AGAM also
serves as investment adviser to an open-end series fund with 15 separate in-
vestment portfolios managed by six different subadvisers, with approximately
$1.1 billion in aggregate assets. AGAM also serves as investment adviser to
another closed-end Fund investing in Loans.
AGAM is a subsidiary of American General Corporation, which on March 10,
2000 purchased its stock (the "Acquisition") from CypressTree Investments,
Inc. At meetings on February 27, 2000 and March 14, 2000, the Board approved
an interim investment advisory agreement between AGAM and the Fund to allow
AGAM to continue to serve as investment adviser to the Fund after the Acquisi-
tion. Pursuant to the 1940 Act, AGAM may only continue to serve as the invest-
ment adviser for the Fund beyond an interim period of 150 days if shareholders
of the Fund approve a new investment advisory agreement. At its February 27,
2000 and March 14, 2000 meetings, the Board also approved, and recommended
shareholder approval of, a new investment advisory agreement between AGAM and
the Fund.
Pursuant to the interim advisory agreement with the Fund (the "Advisory
Agreement"), AGAM oversees the administration of certain aspects of the busi-
ness and affairs of the Fund, and selects, contracts with and compensates the
subadviser to manage the Fund's assets. AGAM monitors the compliance of the
subadviser with the investment objectives and related policies of the Fund,
reviews the performance of the subadviser and reports periodically on such
performance to the Board of Directors. AGAM permits its directors, officers
and employees to serve as directors or officers of the Fund, without cost to
the Fund.
As compensation for its services, AGAM receives from the Fund an annual fee
paid monthly equal to the following percentage of average daily gross assets,
depending on the size of the Fund: 0.85% for the first $1 billion of average
daily gross assets; 0.80% for average daily gross assets of between $1 billion
and $2 billion; and 0.75% for average daily gross assets of more than $2 bil-
lion. For purposes of computing the advisory fee, average daily gross assets
are determined by deducting from total assets of the Fund all liabilities ex-
cept the principal amount of any indebtedness from money borrowed, including
debt securities issued by the Fund.
AGAM has agreed to waive a portion of its advisory fee or reimburse the Fund
in order to prevent the total expenses of the Fund, excluding taxes, portfolio
brokerage commissions, interest, certain litigation and indemnification ex-
penses, and extraordinary expenses, from exceeding 1.25% of average daily
gross assets. This agreement may be terminated by AGAM at any time on thirty
(30) days' written notice.
CypressTree has been retained by AGAM as the subadviser to the Fund to man-
age the investment and reinvestment of the Fund's assets. CypressTree was
founded in 1996 as the nation's first independent investment advisory firm
specializing in the loan asset class and currently has $2.7 billion in assets
under management. CypressTree is a wholly-owned subsidiary of Cypress Holding
Company, Inc., which is controlled by its management and Berkshire Fund IV,
L.P., a leveraged buyout firm.
16
<PAGE>
Pursuant to an interim subadvisory agreement between AGAM and CypressTree
approved at the Board meetings discussed above, (the "Subadvisory Agreement"),
CypressTree selects the investments made by the Fund and establishes and ap-
plies credit standards applicable to the Fund's investments in Loans. See "In-
vestment Policies." As compensation for its services as subadviser,
CypressTree receives from AGAM an annual fee paid monthly equal to the follow-
ing percentage of average daily gross assets, based on the size of the Fund:
0.45% for the first $1 billion of average daily gross assets; 0.40% for aver-
age daily gross assets between $1 billion and $2 billion; and 0.35% for aver-
age daily gross assets of more than $2 billion. Average daily gross assets are
computed as described above. The fee to CypressTree is paid by AGAM and is not
an additional charge to the Fund or its shareholders. For further information,
see "Advisory, Administration and Distribution Services" in the Statement of
Additional Information.
The interim subadvisory agreement allows CypressTree to continue to serve as
subadviser to the Fund after the Acquisition. Pursuant to the 1940 Act,
CypressTree may only continue to serve as subadviser for the Fund beyond an
interim period of 150 days if shareholders of the Fund approve a new
subadvisory agreement. At the Board meetings, the Board also approved, and
recommended shareholder approval of, a new investment advisory agreement be-
tween AGAM and CypressTree.
A shareholders' meeting at which the shareholders of the Fund will be asked
to consider the new Advisory and Subadvisory Agreements, among other matters,
is scheduled for June 1, 2000.
If the shareholders of the Fund vote to approve the Advisory and Subadvisory
Agreements, these agreements may be continued from year to year after June 1,
2001 so long as the continuance is approved at least annually (a) by the vote
of a majority of the Fund's Directors who are not "interested persons" of the
Fund or AGAM (or CypressTree in the case of the subadvisory agreement) cast in
person at a meeting specifically called for the purpose of voting on such ap-
proval and (b) by the vote of a majority of the Board of Directors or by the
vote of a majority of the outstanding Fund shares. The Advisory and
Subadvisory Agreements will terminate automatically in the event of their as-
signment. Each agreement may be terminated at any time without penalty on
sixty (60) days' notice by the Directors or AGAM, or, in the case of the
Subadvisory Agreement, by CypressTree, as well.
Portfolio Management
Jeffrey S. Garner, age 43, has been employed as CypressTree's Chief Invest-
ment Officer since 1996. As Chief Investment Officer, Mr. Garner is responsi-
ble for the overall supervision of CypressTree's investment management of the
Fund. From 1989 to 1996, Mr. Garner was a Vice President of Eaton Vance Man-
agement, where he served as the portfolio manager for the Senior Debt Portfo-
lio managed by Eaton Vance (the "master" fund for Eaton Vance Prime Rate Re-
serves, EV Classic Senior Floating-Rate Fund, and the EV Medallion Senior
Floating-Rate Funds) (the "Eaton Vance Senior Debt Portfolio").
Timothy M. Barns, age 42, is the Fund's portfolio manager. Mr. Barns has
been employed at CypressTree as a portfolio manager and investment analyst
since March 1998 and became the Fund's portfolio manager in March 1999. Mr.
Barns was a founding member of BankBoston's Leveraged Finance Group where he
managed a $2.5 billion senior loan portfolio. He has prior experience in
leveraged loan origination and the distressed loan workout departments at both
BankBoston and European American Bank.
Administration Agreement
AGAM will act as the Fund's administrator under an Administration Agreement
(the "Administration Agreement"). Under the Administration Agreement, AGAM is
responsible for managing the Fund's business affairs, subject to supervision
by the Fund's Board of Directors. AGAM reserves the right to delegate all or a
part of its obligations under the Administration Agreement to a third party.
Any delegation of administrative duties will not affect the administration fee
paid by the Fund.
Services provided by the administrator include recordkeeping, preparation
and filing of documents required to comply with federal and state securities
laws, supervising the activities of the Fund's custodian and transfer agent,
providing assistance in connection with the Directors' and shareholders' meet-
ings, providing services in connection with Repurchase Offers, and other ad-
ministrative services necessary to conduct the Fund's business. In return for
these services, facilities and payments, the Fund pays AGAM an annual fee paid
monthly equal to 0.40% annually of the average daily gross assets of the Fund
as compensation under the Administration Agreement. For purposes of computing
the administration fee, average daily gross assets are determined by deducting
from total assets of the Fund, all liabilities except the principal amount of
any indebtedness for money borrowed, including debt securities that the Fund
has issued.
17
<PAGE>
Fund Costs and Expenses
The Fund will be responsible for all of its costs and expenses not expressly
stated to be payable by AGAM under the Advisory Agreement or the Administra-
tion Agreement or by Distributor under its Distribution Agreement. See "Advi-
sory, Administration and Distribution Services" in the Statement of Additional
Information.
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VALUING FUND SHARES
- -------------------------------------------------------------------------------
The Fund values its shares once on each day the New York Stock Exchange
("NYSE") is open for trading as of the close of regular trading on the ex-
change. The Fund is informed that, as of the date of this prospectus, the NYSE
observes the following business holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
The Fund's net asset value per share is determined by State Street Bank &
Trust Company (as agent for the Fund) in the manner authorized by the Fund's
Board of Directors. State Street Bank & Trust Company also serves as Transfer
Agent and Custodian for the Fund and has custody of the Fund's assets. The
Custodian's address is 225 Franklin Street, Boston, Massachusetts 02110.
In determining the net asset value of a share of the Fund, the value of the
securities held by the Fund plus any cash or other assets (including interest
and dividends accumulated but not yet received) minus all liabilities (includ-
ing accrued expenses) is divided by the total number of shares of the Fund
outstanding at that time. Expenses, including the fees payable to AGAM, are
accrued daily.
Loans will be 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 CypressTree's opinion and for
which CypressTree 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 price
in the market.
Loans for which an active secondary market does not exist to a reliable de-
gree in CypressTree's opinion will be valued at fair value, which is intended
to approximate market value. In valuing a Loan at fair value, CypressTree 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 (other than short-term obligations but including
listed issues) 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 pri-
mary market for such securities, or the last quoted bid price for those secu-
rities for which the over-the-counter market is the primary market or for
listed securities in which there were no sales during the day. Positions in
options are valued at the last sale price on the principal trading market for
the option. Obligations purchased with remaining maturities of 60 days or less
are valued at amortized cost unless this method no longer produces fair valua-
tion. Repurchase agreements are valued at cost plus accrued interest. Rights
or warrants to acquire stock, or stock acquired pursuant to the exercise of a
right or warrant, may be valued taking into account various factors such as
original cost to the Fund, earnings and net worth of the issuer, market prices
for securities of similar issuers, assessment of the issuer's future prosperi-
ty, or liquidation value or third party transactions involving the issuer's
securities. 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.
- -------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
The Fund seeks to provide an effective yield that is higher than other
short-term instrument alternatives. From time to time, the Fund may include
its current and/or effective yield based on various specific time periods.
Yields will fluctuate from time to time and are not necessarily representative
of future results.
The current yield is calculated by annualizing the most recent monthly dis-
tribution (i.e., multiplying the distribution amount by 365/31 for a 31 day
month) and dividing the product by the current maximum offering
18
<PAGE>
price. The effective yield is calculated by dividing the current yield by 12
and adding 1. The resulting quotient is then taken to the 12th power and re-
duced by 1. The result is the effective yield.
On occasion, the Fund may compare its yield to: (a) LIBOR, quoted daily in
the Wall Street Journal, (b) the CD Rate as quoted daily in the Wall Street
Journal as the average of top rates paid by major New York banks on primary
new issues of negotiable CDs, usually on amounts of $1 million or more, (c)
the Prime Rate, quoted daily in The Wall Street Journal as the base rate on
corporate loans at large U.S. money center commercial banks, (d) one or more
averages compiled by Donoghue's Money Fund Report, a widely recognized inde-
pendent publication that monitors the performance of money market mutual
funds, (e) the average yield reported by the Bank Rate Monitor National
IndexTM for money market deposit accounts offered by the 100 leading banks and
thrift institutions in the ten largest standard metropolitan statistical
areas, (f) yield data published by Lipper Analytical Services, Inc., (g) the
yield on an investment in 90-day Treasury bills on a rolling basis, assuming
quarterly compounding, or (h) the yield on an index of loan funds comprised of
all continually offered closed-end bank loan funds, as categorized by Lipper
(the "loan fund index"). In addition, the Fund may compare the Prime Rate, the
Donoghue's averages and the other yield data described above to each other.
Yield comparisons should not be considered indicative of the Fund's yield or
relative performance for any future period.
Advertisements and communications to present or prospective shareholders
also may cite a total return for any period. Total return is calculated by
subtracting the net asset value of a single purchase of shares at a given date
from the net asset value of those shares (assuming reinvestment of distribu-
tions) on a later date. The difference divided by the original net asset value
is the total return. The Fund may include information about the total return
on the loan fund index, and compare that to the total return of the Fund and
other indices.
All dividends and distributions are assumed to be reinvested in additional
shares of the Fund at net asset value. Therefore, the calculation of the
Fund's total return and effective yield reflects the effect of compounding.
The calculation of total return, current yield and effective yield does not
reflect the amount of any shareholder income tax liability, which would reduce
the performance quoted. If the Fund's fees or expenses are waived or reim-
bursed, the Fund's performance will be higher.
Finally, the Fund may include information on the history of the Fund's net
asset value per share and the net asset value per share of the loan fund in-
dex, including comparisons between them, in advertisements and other material
furnished to present and prospective shareholders. Information about the per-
formance of the Fund or other investments is not necessarily indicative of fu-
ture performance and should not be considered a representation of what an in-
vestor's yield or total return may be in the future.
- -------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- -------------------------------------------------------------------------------
The Fund engages in a continuous public offering of its shares at net asset
value without an initial sales charge. Shares may be purchased directly,
through Distributors, or from certain financial services firms that have sales
agreements with Distributors ("Authorized Intermediaries"). Investors may be
charged a fee if they effect transactions through a broker or agent. The Fund
does not currently intend to list its shares on any national securities ex-
change or inter-dealer quotation system. Shares of the Fund also are available
for purchase by retirement plans and trusts created under the Uniform Gifts to
Minors Act.
An initial investment in the Fund must be at least $5,000. Once an account
has been established, the shareholder may make additional investments of $500
or more at any time. There is a $100 minimum initial and $50 additional in-
vestment requirement for purchases in connection with tax-sheltered retirement
accounts. The Fund reserves the right to waive any of these minimum investment
requirements. See "Shareholder Services."
From time to time the Fund may suspend the continuous offering of its shares
in response to market conditions or otherwise, and may later resume the con-
tinuous offering. During any such suspension, shareholders who reinvest their
distributions in additional shares will be permitted to continue reinvest-
ments, and the Fund may permit tax sheltered retirement plans that own shares
to purchase additional shares of the Fund.
The Fund may refuse any order for the purchase of shares.
The Fund is not an appropriate investment for investors who are market-tim-
ers. Investors who engage in excessive in-and-out trading activity generate
additional costs that are borne by all of the Fund's shareholders. To minimize
these costs, which reduce the ultimate returns achieved by all shareholders,
the Fund reserves the right to reject any purchase orders from investors iden-
tified as market-timers.
19
<PAGE>
Investors may purchase shares directly by check or by wire. Investors should
complete a Fund Application and mail it to the Fund's Transfer Agent, State
Street Bank & Trust Company. The Transfer Agent's address is Post Office Box
8360, Boston, Massachusetts 02266-8360. Investors purchasing shares by check
should include a check or money order payable in U.S. dollars, drawn on a U.S.
bank, and made payable to CypressTree Senior Floating Rate Fund, Inc. The Fund
will not accept cash, credit cards, third party checks, or credit card checks.
The Fund reserves the right to cancel any purchase for which a check does not
clear.
Investors also may purchase shares of the Fund by wire. If the Fund is un-
able to debit the predesignated bank account on the day of purchase, the Fund
may make additional attempts or may cancel the purchase.
If a purchase is cancelled for any reason, the investor will be responsible
for any losses or fees imposed by its bank and losses that may be incurred as
a result of any decline in the value of the cancelled purchase.
- -------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
The Fund offers the following optional services, at no extra charge. Any of
these services may be discontinued without penalty at any time. Investors may
obtain further information and an application for these services from Autho-
rized Intermediaries or from Distributors. The cost of administering these
services is borne by the Fund as an expense to all shareholders.
Dividend Reinvestment Plan
Dividends and distributions will be automatically reinvested at the net as-
set value per share next determined on the payable date of the dividend or
distribution. Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"),
all dividends and other distributions, net of any applicable withholding tax-
es, will be automatically reinvested in additional shares, newly issued by the
Fund, unless the shareholder otherwise instructs in writing the Fund's Trans-
fer Agent, as the Plan agent (the "Plan Agent"). There will be no charge to
participants for reinvesting dividends or other distributions. The Fund will
pay the Plan Agent's fees for the handling of reinvestment of distributions.
A shareholder whose shares are held by a broker-dealer or nominee that does
not provide a dividend reinvestment service may be required to have his or her
shares registered in his or her own name to participate in the Plan. Similar-
ly, a shareholder may be unable to transfer his or her account to certain bro-
ker-dealers and continue to participate in the Plan. Investors who own shares
registered in street name should contact the broker or nominee for details
concerning participation in the Plan.
The Plan Agent will maintain all participant accounts in the Plan and fur-
nish written confirmations of all transactions in the accounts, including in-
formation needed for personal and tax records. The Plan Agent may hold shares
in the participant's account in non-certificated form in the name of the Plan
Agent or the Plan Agent's nominee, and each shareholder's proxy will include
those shares purchased pursuant to the Plan. Participants in the Plan may
withdraw from the Plan on written notice to the Plan Agent.
In the case of a shareholder of record, such as a bank, broker-dealer or
nominee, that holds shares for others who are the beneficial owners, the Plan
Agent will administer the Plan on the basis of the number of shares certified
from time to time by the record shareholder as representing the total amount
registered in the shareholder's name and held for the account of beneficial
owners who participate in the Plan.
All registered holders of shares (other than brokers and nominees) will be
mailed information regarding the Plan, including a form with which they may
elect to terminate participation in the Plan and receive further dividends and
other distributions in cash. An election to terminate participation in the
Plan must be made in writing to the Plan Agent and should include the share-
holder's name and address as they appear on the account registration. An elec-
tion to terminate will be deemed to be an election by a shareholder to take
all subsequent distributions in cash until the election is changed. An elec-
tion will be effective only for distributions declared and having a record
date at least ten days after the date on which the election is received.
Shareholders who do not participate in the Plan will receive all dividends
and other distributions in cash, net of any applicable withholding taxes, paid
in U.S. dollars by check or wire transfer. Shareholders who do not wish to
have dividends and other distributions reinvested automatically should notify
the Plan Agent at Post Office Box 8360, Boston, Massachusetts 02266-8360. Div-
idends and other distributions with respect to shares registered in the name
of a broker-dealer or other nominee (i.e., in "street name") will be rein-
vested under the Plan unless the broker-dealer does not provide that service,
or if the nominee or the shareholder elects to receive dividends and other
distributions in cash.
20
<PAGE>
The Fund and the Plan Agent reserve the right to terminate the Plan as ap-
plied to any dividend or other distribution paid subsequent to notice of the
termination sent to the participants in the Plan at least 30 days before the
record date for the distribution. The Plan also may be amended by the Fund or
the Plan Agent, but (except when necessary or appropriate to comply with ap-
plicable law, rules or policies of a regulatory authority) only by at least 30
days' written notice to participants in the Plan. Shareholders should direct
all correspondence regarding the Plan to the Plan Agent, at Post Office Box
8360, Boston, Massachusetts 02266-8360.
The receipt of dividends and other distributions in shares under the Plan
will not relieve participants of any income tax (including withholding taxes)
that may be payable with respect to the distributions. See "Taxes."
Automatic Investment Plan
Shareholders may purchase shares of the Fund through the Fund's Automatic
Investment Plan. Once the $5,000 minimum investment has been made ($500 for
purchases in connection with tax-sheltered retirement accounts), shareholders
may make automatic cash investments of $500 or more each month or quarter from
the shareholder's bank account.
Tax-Sheltered Retirement Accounts
Shares of the Fund are available for purchase in connection with pension and
profit sharing plans, individual retirement account plans, and 403(b) retire-
ment plans. Detailed information concerning these plans and copies of the
plans are available from Distributors. This information should be read care-
fully and consultation with an attorney or tax adviser may be advisable. This
information sets forth the service fee charged for retirement plans and de-
scribes the federal income tax consequences of establishing a plan. Under each
tax-sheltered retirement account, all distributions will be automatically re-
invested in additional shares of the Fund.
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DISTRIBUTIONS
- -------------------------------------------------------------------------------
The Fund will declare distributions daily and pay distributions monthly.
Substantially all of the Fund's investment income, less Fund expenses, will be
declared daily as a distribution to shareholders of record as recorded by the
Transfer Agent at the time of declaration. Daily distribution crediting will
begin on the day after the Transfer Agent has received funds for the purchase
of Fund shares, even if orders to purchase shares had been placed with Autho-
rized Intermediaries. The Fund ordinarily will pay investment income distribu-
tions on the last day of each month, whether the shareholder elects to receive
cash or to reinvest in additional shares. The Fund will distribute realized
net capital gains, if any, at least annually, usually in December, after off-
set by any capital loss carryovers.
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TAXES
- -------------------------------------------------------------------------------
The Fund intends to satisfy those requirements relating to the sources of
its income, the distribution of its income, and the diversification of its as-
sets necessary to qualify for the special tax treatment afforded to regulated
investment companies under the Internal Revenue Code (the "Code"). In any tax-
able year in which it so qualifies, the Fund will not be liable for federal
income or excise taxes to the extent that it distributes its net investment
income and net realized capital gains to shareholders in accordance with the
timing requirements imposed by the Code. (For a detailed discussion of tax is-
sues pertaining to the Fund, see "Taxes" in the Statement of Additional Infor-
mation.)
Distributions paid by the Fund from its ordinary income or from an excess of
net short-term capital gain over net long-term capital loss will be treated as
ordinary income in the hands of the shareholders to the extent of the Fund's
earnings and profits. (Any such distributions in excess of the Fund's earnings
and profits first will reduce a shareholder's basis in his or her shares and,
after that basis is reduced to zero, will constitute capital gains to the
shareholder, assuming the shares are held as a capital asset.) Distributions,
if any, from the excess of net long-term capital gain over net short-term cap-
ital loss and designated as capital gains dividends are taxable to sharehold-
ers as long-term capital gain, regardless of the length of time the shares of
the Fund have been held by such shareholders and will generally be subject to
a maximum federal tax rate of 20%. Distributions will be taxed as described
above, whether received by the shareholders in cash or in additional shares.
It is not expected that any portion of distributions will be eligible for the
corporate dividends-received deduction.
Not later than 60 days after the close of the calendar year, the Fund will
provide its shareholders with a written notice designating the amounts of any
ordinary income dividends or capital gain dividends. If the Fund pays a
21
<PAGE>
dividend in January that was declared in the previous October, November or De-
cember to shareholders of record on a specified date in one of those months,
then such dividend will be treated for tax purposes as being paid by the Fund
and received by its shareholders on December 31 of the earlier year in which
the dividend was declared.
A holder of Fund shares who, pursuant to a Repurchase Offer, tenders all of
his or her Fund shares (and any Fund shares the holder is considered to own
pursuant to attribution rules contained in the Code) may realize a taxable
gain or loss depending upon the shareholder's basis in the shares. Such gain
or loss realized on the disposition of shares (whether pursuant to a Repur-
chase Offer or in connection with a sale or other taxable disposition of
shares in a secondary market) generally will be treated as long-term capital
gain or loss if the shares have been held as a capital asset for more than one
year and as short-term capital gain or loss if held as a capital asset for one
year or less. If Fund shares are sold at a loss after being held for six
months or less, the loss will be treated as long-term--instead of short-term--
capital loss to the extent of any capital gain distributions received on those
shares. All or a portion of any loss realized on a sale or exchange of shares
of the Fund will be disallowed if the shareholder acquires other Fund shares
within 30 days before or after the disposition. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed loss.
Different tax consequences may apply to tendering shareholders other than
fully-tendering shareholders described in the previous paragraph and to non-
tendering shareholders in connection with a Repurchase Offer. For example, if
a shareholder tenders fewer than all shares owned by or attributed to him or
her, the proceeds received could be treated as a taxable dividend, a return of
capital, or capital gain depending on the portion of shares tendered, the
Fund's earnings and profits, and the shareholder's basis in the tendered
shares. Moreover when a shareholder tenders fewer than all shares owned pursu-
ant to a Repurchase Offer, there is a risk that non-tendering shareholders may
be considered to have received a deemed distribution that is taxable to them
in whole or in part. Shareholders may wish to consult their tax advisors.
The Fund must withhold 31% from distributions and repurchase payments, if
any, payable to any individuals and certain other noncorporate shareholders
who have not furnished to the Fund a correct taxpayer identification number
("TIN") or a properly completed claim for exemption on Form W-8 or W-9, or who
are otherwise subject to such "backup withholding." When establishing an ac-
count, an investor must certify under penalties of perjury that the investor's
TIN (generally, his or her social security number) is correct and that the in-
vestor is not otherwise subject to backup withholding.
Nonresident alien individuals, foreign corporations and certain other for-
eign entities generally will be subject to a U.S. withholding tax at a rate of
30% (or lower treaty rate) on distributions from ordinary income and from the
excess of net short-term capital gain over net long-term capital loss. Distri-
butions to such shareholders from the excess of net long-term capital gain
over net short-term capital loss and any amount treated as gain from the sale
or other disposition of shares of the Fund generally will not be subject to
U.S. taxation, provided that the shareholder has certified nonresident alien
status. Different U.S. tax consequences may result if the shareholder is en-
gaged in a trade or business in the United States or is present in the United
States for specified periods of time during a taxable year. Foreign sharehold-
ers should consult their tax advisers regarding the U.S. and foreign tax con-
sequences of an investment in the Fund.
The discussion contained in this section is a general and abbreviated sum-
mary of certain federal tax considerations affecting the Fund and its share-
holders, and is not intended as tax advice or to address a shareholder's par-
ticular circumstances. This discussion does not address non-federal tax conse-
quences, or the special tax rules applicable to certain classes of investors,
such as retirement plans, tax-exempt entities, insurance companies and finan-
cial institutions. For further information, reference should be made to the
pertinent sections of the Code and the regulations promulgated thereunder,
which are subject to change by legislative, judicial, or administrative ac-
tion, either prospectively or retroactively. Investors are urged to consult
their tax advisors regarding specific questions as to federal, state, local,
or foreign taxes. The Fund does not provide any guarantee regarding the tax
consequences of investing in the Fund.
- -------------------------------------------------------------------------------
DESCRIPTION OF SHARES
- -------------------------------------------------------------------------------
The Fund is a corporation organized under Maryland law. The Fund was incor-
porated on July 16, 1997. The Fund's Board of Directors is responsible for the
overall management and supervision of its affairs.
The Fund currently has one class of shares of common stock, par value $0.01
per share, of which 1,000,000,000 shares have been authorized. Each such share
has equal voting, dividend, distribution and liquida-
22
<PAGE>
tion rights. Fractional shares may be voted in proportion to the amount of the
Fund's net asset value that they represent. Shares have no preemptive or con-
version rights and are freely transferable. When issued and outstanding, the
shares are fully paid and nonassessable by the Fund. Although there is no cur-
rent intent to do so, the Board of Directors has the ability to classify and
reclassify unissued shares, and could authorize issuance of a new class of
shares pursuant to this authority, consistent with the requirements of the
1940 Act. Shares of the Fund will be issued in uncertificated form.
The Fund's Articles of Incorporation generally may not be amended without
the affirmative vote of a majority of the outstanding shares of the Fund (or
such greater vote as is described below under "Anti-Takeover Provisions"). The
Fund will continue indefinitely.
The following table sets forth information for the only class of the Fund's
authorized securities, as of April 7, 2000
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Amount
Outstanding
Exclusive of Amount Held by Amount Outstanding
Shown Title of Registrant or for its Exclusive of Amount
Class Amount Authorized Account Shown Under(3)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock............ 1,000,000,000 shares None 8,420,878
</TABLE>
Anti-Takeover Provisions
The Fund has certain anti-takeover provisions in its Articles of Incorpora-
tion that are intended to limit, and could have the effect of limiting, the
ability of other entities or persons to acquire control of the Fund, to cause
the Fund to engage in certain transactions, or to modify the Fund's structure.
The affirmative vote or consent of the holders of two-thirds of each class,
voting separately, of the Fund's capital stock outstanding and entitled to
vote on the matter (a greater vote than that required by the 1940 Act), is re-
quired to authorize the conversion of the Fund from a closed-end to an open-
end investment company. However, if two-thirds of the Board of Directors rec-
ommends conversion, the approval by vote of the holders of a majority of the
outstanding shares entitled to vote on the matter will be sufficient. This
provision of the Fund's Articles of Incorporation may not be amended without
the affirmative vote or consent of two-thirds of the Fund's outstanding shares
of capital stock.
The affirmative vote or consent of the holders of at least three-fourths of
each class of the Fund's shares of capital stock outstanding and entitled to
vote on the matter, voting separately, is required to approve any of the fol-
lowing Fund transactions (the "Transactions"):
(a) merger, consolidation, or statutory share exchange with or into any
person;
(b) issuance of any Fund securities to any person for cash, securities, or
other property having a fair market value of $1,000,000 or more, except
for issuance or transfers of debt securities, sales of securities in
connection with a public offering, issuance of securities pursuant to a
dividend reinvestment plan, issuance of securities on the exercise of
any stock subscription rights distributed by the Fund, and portfolio
transactions effected in the ordinary course of business;
(c) sale, lease, exchange, mortgage, pledge, transfer, or other disposition
by the Fund of any assets having an aggregate fair market value of
$1,000,000 or more, except for portfolio transactions conducted in the
ordinary course of business;
(d) voluntary liquidation or dissolution of the Fund, or an amendment to
the Fund's Articles of Incorporation to terminate the Fund's existence;
or
(e) unless federal law requires a lesser vote, any shareholder proposal as
to specific investment decisions made or to be made with respect to the
Fund's assets as to which shareholder approval is required under Mary-
land or federal law.
In addition, in the case of a Transaction listed in (a), (b) or (c) above,
the affirmative vote or consent of the holders of at least two-thirds of each
class of the Fund's shares of capital stock outstanding and entitled to vote
on the matter, voting separately, excluding votes entitled to be cast by the
person (or an affiliate of the person) who is a party to the Transaction with
the Fund, is required.
However, the shareholder votes mentioned above will not be required with re-
spect to any Transaction (other than those set forth in (e) above) approved by
a vote of three-fourths of the Directors who do not have an interest
23
<PAGE>
in the Transaction, including a majority of the Continuing Directors (as de-
fined in the Articles of Incorporation) who do not have an interest in the
Transaction and who are not "Interested Directors," as that term is defined in
the 1940 Act. In that case, if Maryland law requires shareholder approval, the
affirmative vote of a majority of the shares of capital stock of the Fund out-
standing and entitled to vote on the matter, voting together as a single
class, is required.
The provisions of the Fund's Articles of Incorporation described in this
section relating to approval of Transactions may not be amended without the
affirmative vote or consent of three-fourths of the Fund's outstanding shares
of capital stock. For the full text of these provisions, see the Articles of
Incorporation on file with the Securities and Exchange Commission.
The provisions described in this section will make it more difficult to con-
vert the Fund to an open-end investment company and to consummate the Transac-
tions without the approval of the Board of Directors. These provisions could
have the effect of depriving shareholders of an opportunity to sell their
shares at a premium over prevailing market prices (in the event that a second-
ary market for the Fund shares develops) by discouraging a third party from
seeking to obtain control of the Fund in a tender offer or similar transac-
tion. However, the Board of Directors has considered these anti-takeover pro-
visions and believes that they are in the shareholders' best interests and
benefit shareholders by providing the advantage of potentially requiring per-
sons seeking control of the Fund to negotiate with its management regarding
the price to be paid to shareholders.
- -------------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS
- -------------------------------------------------------------------------------
The Fund will send semi-annual and annual reports to its shareholders. These
reports will include financial statements which, in the case of annual reports
will be audited by the Fund's independent certified public accountants. The
Fund will provide shareholders with information necessary to prepare federal
and state tax returns shortly after the end of each calendar year.
The Fund will describe the Repurchase Policy in its annual report to share-
holders. The annual report also will disclose the number of Repurchase Offers
conducted each year, the amount of each Repurchase Offer, the amount tendered
each month, and the extent to which the Fund repurchased shares in an Oversub-
scribed Repurchase Offer.
24
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS OF
THE STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund.................................................................... 1
Investment Restrictions and Fundamental Policies............................ 1
Repurchase Offer Fundamental Policy......................................... 2
Management.................................................................. 3
Advisory, Administration and Distribution Services.......................... 6
Portfolio Transactions...................................................... 7
Custodian................................................................... 8
Transfer Agent.............................................................. 8
Liquidity Requirements...................................................... 8
Taxes....................................................................... 9
Performance Information..................................................... 10
Indemnification............................................................. 10
Auditors and Financial Statements........................................... 11
Independent Auditor's Report................................................ 12
Other Information........................................................... 13
</TABLE>
25
<PAGE>
CypressTree Senior Floating Rate Fund
PROSPECTUS
May 1, 2000
INVESTMENT ADVISER
American General Asset Management Corp.
286 Congress Street
Boston, Massachusetts 02210
INVESTMENT SUBADVISER
CypressTree Investment Management Co., Inc.
125 High Street
Boston, Massachusetts 02110
ADMINISTRATOR
American General Asset Management Corp.
286 Congress Street
Boston, Massachusetts 02210
DISTRIBUTOR
American General Funds Distributors, Inc.
286 Congress Street
Boston, Massachusetts 02210
26
<PAGE>
0500-10009
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 2000
CypressTree Senior Floating Rate Fund, Inc.
286 Congress Street
Boston, Massachusetts 02210
617 368-3535
This statement of additional information is not a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by the
prospectus of CypressTree Senior Floating Rate Fund, Inc. (the "Fund") dated
May 1, 2000 and as further supplemented from time to time. This statement of
additional information should be read in conjunction with the prospectus, a copy
of which may be obtained without charge by contacting the Fund's Distributor,
American General Funds Distributors, Inc. at (800)860-5575.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS OF
THE STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund .................................................................. 1
Investment Restrictions and Fundamental Policies .......................... 1
Repurchase Offer Fundamental Policy ....................................... 2
Management ................................................................ 3
Advisory, Administration and Distribution Services ........................ 6
Portfolio Transactions .................................................... 7
Custodian ................................................................. 8
Transfer Agent ............................................................ 8
Liquidity Requirements .................................................... 8
Taxes ..................................................................... 9
Performance Information ................................................... 10
Indemnification ........................................................... 10
Auditors and Financial Statements ......................................... 11
Other Information ......................................................... 13
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
THE FUND
- --------------------------------------------------------------------------------
CypressTree Senior Floating Rate Fund, Inc. (the "Fund") is a closed-end,
non-diversified management investment company that continuously offers its
shares to the public. The Fund will conduct monthly repurchase offers for its
shares. The Fund's principal office is located at 286 Congress Street, Boston,
Massachusetts 02210. Capitalized terms used in this Statement of Additional
Information and not otherwise defined herein have the meanings given them in the
Fund's Prospectus.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS AND FUNDAMENTAL POLICIES
- --------------------------------------------------------------------------------
The following fundamental policies cannot be changed without the approval
of the holders of a majority of the Fund's outstanding voting securities. In
accordance with the requirements of the 1940 Act a "majority of the Fund's
outstanding voting securities" means the lesser of either: (a) the vote of 67
percent or more of the voting securities present at the annual or a special
meeting of the Fund's shareholders, if the holders of more than 50 percent of
the Fund's outstanding voting securities are present or represented by proxy; or
(b) the vote of more than 50 percent of the Fund's outstanding voting
securities. The Fund may not:
(a) Borrow money or issue senior securities, except as permitted by the
1940 Act;
(b) Invest more than 25% of the Fund's total assets (taken at current
value) in the securities of Borrowers and other issuers having their
principal business activities in the same industry (the electric, gas,
water and telephone industries being treated as separate industries for the
purpose of this restriction); provided that (i) there is no limitation on
purchasing securities the issuer of which is deemed to be in the financial
institutions industry, which includes commercial banks, thrift
institutions, insurance companies and finance companies and (ii) there is
no limitation with respect to obligations issued or guaranteed by the U.S.
Government or any of its agencies or instrumentalities;
(c) Make loans to other persons, except that the Fund may (i) acquire
Loans, debt securities and other obligations in which the Fund is
authorized to invest in accordance with its investment objective and
policies, (ii) enter into repurchase agreements, and (iii) lend its
portfolio securities;
(d) Underwrite securities issued by other persons, except insofar as it
may be deemed technically to be an underwriter under the Securities Act of
1933 in selling or disposing of an investment;
(e) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The purchase of Loans, securities or other investment assets
with the proceeds of a permitted borrowing or securities offering will not
be deemed to be the purchase of securities on margin;
(f) Purchase or sell real estate, although it may purchase and sell
securities secured by interests in real estate and securities of issuers
that invest or deal in real estate provided that the Fund reserves the
freedom of action to hold and to sell real estate acquired as a result of
the ownership of securities; or
(g) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities. Physical commodities do not include futures
contracts with respect to securities, securities indices or other financial
instruments.
The Fund has adopted the following nonfundamental investment policies which
may be changed by the Fund's Board of Directors without shareholder approval. As
a matter of nonfundamental policy, the Fund may not:
(a) make short sales of securities or maintain a short position, unless at
all times when a short position is open the Fund either owns an equal
amount of such securities or owns securities convertible into or
exchangeable for, without payment of any further consideration, securities
of the same issuer as, and equal in amount to, the securities sold short,
and in any event only to the extent that no more than 5% of its net assets
are committed to short sales;
(b) purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs;
(c) invest more than 10% of its total assets (taken at current value) in
the securities of issuers that, together with any predecessors, have a
record of less than three years continuous operation, except U.S.
Government securities, securities of issuers that are rated at least "A" by
at least one nationally recognized statistical rating
1
<PAGE>
organization, municipal obligations and obligations issued or
guaranteed by any foreign government or its agencies or
instrumentalities; or
(d) invest more than 10% of its total assets in Loans of any single
Borrower.
For the purpose of fundamental policies (a) and (e) and nonfundamental
investment policy (a), the Fund's arrangements (including escrow, margin and
collateral arrangements) with respect to transactions in all types of options
and futures contract transactions shall not be considered to be (a) a borrowing
of money or the issuance of securities (including senior securities) by the
Fund, (b) a pledge of the Fund's assets, (c) the purchase of a security on
margin, or (d) a short sale or position.
The Fund has no present intention of engaging in options or futures
transactions or in short sales, or of issuing preferred shares.
For the purpose of fundamental policy (b), the Fund will consider all
relevant factors in determining who is the issuer of the Loan, including the
Borrower's credit quality, the amount and quality of the collateral, the terms
of the Loan Agreement and other relevant agreements (including inter-creditor
agreements), the degree to which the credit of an interpositioned person was
deemed material to the decision to purchase the Loan, the interest rate
environment, and general economic conditions applicable to the Borrower and an
interpositioned person.
Notwithstanding the Fund's investment policies and restrictions, the Fund
may invest all or part of its investable assets in a management investment
company with substantially the same investment objective policies and
restrictions as the Fund. This could allow creation of a "master/feeder"
structure in the future.
If a percentage restriction on investment policies or the investment or use
of assets set forth above is adhered to at the time a transaction is effected,
later changes in percentage resulting from changing values will not be
considered a violation.
- --------------------------------------------------------------------------------
REPURCHASE OFFER FUNDAMENTAL POLICY
- --------------------------------------------------------------------------------
The Board of Directors has adopted a resolution setting forth the Fund's
fundamental policy that it will conduct monthly Repurchase Offers (the
"Repurchase Offer Fundamental Policy").
The Repurchase Offer Fundamental Policy sets the interval between each
Repurchase Offer at one month and provides that the Fund shall conduct a
Repurchase Offer each month (unless suspended or postponed in accordance with
regulatory requirements). The Repurchase Request Date will be the last business
day of the month. The Repurchase Offer Fundamental Policy also provides that the
repurchase pricing shall occur not later than three business days after the
Repurchase Request Date.
The Repurchase Offer Fundamental Policy only may be changed by a majority
vote of the Fund's outstanding voting securities. In accordance with the
requirements of the 1940 Act a "majority of the Fund's outstanding voting
securities" means the lesser of either: (a) the vote of 67 percent or more of
the voting securities present at the annual or a special meeting of the Fund's
shareholders, if the holders of more than 50 percent of the Fund's outstanding
voting securities are present or represented by proxy; or (b) the vote of more
than 50 percent of the Fund's outstanding voting securities.
2
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The Fund's Directors and officers and their business backgrounds are listed
below. Those Directors and officers who, as defined in the 1940 Act, are
"interested persons" of the Fund. AGAM, CypressTree, or Cypress by virtue of
their affiliation with any one or more of the Fund, AGAM, CypressTree, or
Cypress, are indicated by an asterisk (*) ("Interested Persons").
Directors and Officers of the Fund
<TABLE>
<CAPTION>
Year of
Name and Address Birth Position Held Business Background
- -------------------------- -------- ------------------------- --------------------------
<S> <C> <C> <C>
Alice T. Kane* 1948 Director; President President of American
286 Congress Street
Boston, MA 02210 General Fund Group
(1999-Present); Formerly,
Executive Vice President,
American General Investment
Management, L.P. (1998-1999);
Formerly Executive Vice
President, (1994-1998)
and General Counsel
(1986-1995) New York Life
Insurance Company;
Chair, MainStay Mutual Funds
(1994-1998); President of other
investment companies advised
by The Variable Annuity Life
Insurance Company
William F. Achtmeyer 1955 Director President and Chief
286 Congress Street
Boston, MA 02109 Executive Officer, The
Parthenon Group (8/91-
present); Trustee, North
American Funds (10/97-
present); Director, North
American Senior
Floating Rate Fund, Inc.
(8/98-present);
Director, Bain & Company
(9/77-6/96)
William F. Devin 1938 Director Member, Board of Governors,
286 Congress Street
Boston, MA 02210 Boston Stock Exchange (1/85-
Present); Director,
CypressTree Senior Floating
Rate Fund (7/97-Present);
Trustee, North American Funds
(10/97-Present); Retired
Executive Vice President,
Fidelity Capital Markets,
a division of National
Financial Services Corporation
in Boston
Kenneth J. Lavery 1949 Director Vice President, Massachusetts
286 Congress Street
Boston, MA 02210 Capital Resource Company
(5/82-Present); Director,
CypressTree Senior
Floating Rate Fund, Inc.
(7/97-Present); Trustee, North
American Funds (10/97-Present);
Director, North American
Senior Floating Rate Fund,
Inc. (2/98-Present)
John N. Packs* 1955 Vice President and Director of Research,
286 Congress Street
Boston, MA 02210 Assistant Treasurer AGAM (2000-Present);
Vice President, Cypress
Holding Company
(11/95-3/00); prior to
11/95, Investment
Professional, Allmerica
Financial Services
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Year of
Name and Address Birth Position Held Business Background
- ------------------------ -------- --------------------------------------------------------
<S> <C> <C> <C>
Joseph T. Grause, Jr.* 1952 Vice President President, AGAM (3/00-
286 Congress Street
Boston, MA 02210 President); Executive Vice
President Cypress Holding
Company, Inc. (1995-3/00);
Senior Vice President,
Sales and Marketing,
The Shareholder Services
Group, a subsidiary of
First Data Corporation
(1993-1995).
Arthur S. Loring* 1947 Director Managing Director,
286 Congress Street
Boston, MA 02210 Cypress Holding Company
(1998-present);
Director, North American Senior
Floating Rate Fund,
Inc. (8/98-present); Senior
Vice President and
General Counsel, FMR Corp.
(7/72-12/97);
Secretary, Fidelity Family of
Funds (7/83-12/97)
Thomas J. Brown* 1946 Treasurer Chief Financial Officer
286 Congress Street
Boston, MA 02210 and Vice President and Administrative Officer
AGAM (2000-Present);
Principal, Cypress
Holding Company (7/97-3/00);
Assistant Treasurer,
North American
Senior Floating Rate
Fund, Inc. (8/98-present);
Consultant to financial
services industry (1995-
7/97); Executive Vice
President, Boston
Company Advisors (8/94-
10/95);
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Year of
Name and Address Birth Position Held Business Background
- ----------------------- --------- ------------------------------------------------------------
<S> <C> <C> <C>
John I. Fitzgerald* 1948 Secretary Counsel, AGAM (3/00-Present);
286 Congress Street
Boston, MA 02110 and Vice Counsel, Distributors (3/00-Present); Counsel
President Cypress Holding Co. Inc. (4/97-3/00);
Executive Vice President-Legal Affairs.
Boston Stock Exchange (6/93-3/97)
</TABLE>
Messrs. Devin (Chairman) and Lavery and Achtmeyer are members of the
Administration Committee of the Board of Directors. The Administration Committee
makes recommendations to the Directors regarding the selection of the
independent certified public accountants, reviews with the accountants and the
Fund Treasurer accounting and auditing practices and procedures, accounting
records, and internal accounting controls, reviews the Fund's advisory contracts
and advisory fees, and acts as nominating committee with regard to disinterested
directors.
Messrs. Loring and Devin and Ms. Kane are members of the Pricing Committee
of the Board of Directors. The Pricing Committee is responsible for the
valuation and revaluation, between meetings of the Board, of investments for
which market quotations or sales prices are not readily available.
Messrs. Devin and Lavery and Ms. Kane are members of the Investment
Committee of the Board of Directors. The Investment Committee provides an
overview to the full Board of CypressTree's activities as subadviser.
The Fund, AGAM and CypressTree have adopted codes of ethics under Rule
17j-1 of the 1940 Act. Subject to reporting and other requirements, these codes
permit personnel subject to the codes to invest in securities, including
securities that may be purchased or held by the Fund. These codes can be
reviewed and copied at the Commission's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be obtained
by calling the Commission at 1-800-942-8090. These codes are also available on
the EDGAR Database on the Commission's Internet site at http://www.sec.gov.
Copies may be obtained, after paying a duplicating fee, by electronic request at
the following E-mail address: [email protected], or by writing the Commission's
Public Reference Section, Washington, D.C. 20549-0102.
Executive Compensation
The Fund pays the fees and expenses of those Directors who are not
Interested Persons (the "noninterested Directors"). The Directors who are
Interested Persons receive no compensation from the Fund. Noninterested
Directors receive $750 per quarter for each quarter during which the Director
serves, plus $750 for each meeting attended in person and $200 for each
telephone meeting. For the year ended December 31, 1999, the Directors earned
the following compensation in their capacities as Directors:
TOTAL COMPENSATION
AGGREGATE FROM FUND AND FUND
COMPENSATION COMPLEX PAID TO
NAME FROM FUND DIRECTORS*
- ---------------------- ---------------- ---------------------------
Bradford K. Gallagher $ 0 $ 0
William F. Achtmeyer $5,850 $17,150
William F. Devin $6,800 $19,800
Kenneth J. Lavery $6,800 $19,800
Arthur S. Loring $ 0 $ 0
Alice T. Kane $ 0 $ 0
- ------------
*Includes compensation for service as director of the Fund, as trustee of the
North American Funds, and as director of another closed-end investment company
also advised by AGAM. See "Advisory, Administration and Distribution Services."
Election of Directors
As permitted by Maryland law, there normally will be no meetings of Fund
shareholders for the purpose of electing Directors in any year in which no such
election is required under the 1940 Act. Under the 1940 Act, an annual meeting
to elect Directors only is required when less than a majority of the Directors
holding office have been elected by shareholders. If a meeting is required, the
Directors then in office will call a shareholders' meeting for the election of
Directors. If no meeting is required, the Directors will continue to hold office
and may appoint successor Directors. The shares of the Fund do not provide for
cumulative voting. As a result, the holders of more than 50% of the shares
voting for the election of Directors can elect 100% of the Directors and, in
this event, the holders of the remaining less than 50% of the shares voting on
the matter will not be able to elect any Directors.
Under the Fund's Articles of Incorporation, no person may serve as a
Director if shareholders holding seventy-five percent (75%) of shares entitled
to vote on the matter have removed him or her from office.
Principal Shareholders of Securities
None
5
<PAGE>
- --------------------------------------------------------------------------------
ADVISORY, ADMINISTRATION AND DISTRIBUTION SERVICES
- --------------------------------------------------------------------------------
AGAM is the Fund's investment adviser and administrator under an investment
advisory agreement ("Advisory Agreement") and an administration agreement (the
"Administration Agreement") between AGAM and the Fund. AGAM is a Delaware
corporation founded in 1996, and is a general investment advisory firm. The
Directors of AGAM are Alice T. Kane, Joseph T. Grause, Kent E. Barrett and John
E. Graf. AGAM is an affiliate of American General Corporation. Members of the
American General Corporation group of companies (the "American General Financial
Group") operate in each of the 50 states, the District of Columbia and Canada
and collectively engage in all forms of financial services. The American General
Financial Group has approximately $115 billion in assets and over $6 billion
stockholders' equity. Its address is 2929 Allen Parkway, Houston, Texas 77019.
CypressTree serves as the Fund's subadviser under an investment subadvisory
agreement (the "Subadvisory Agreement") between AGAM and CypressTree.
CypressTree is a Delaware corporation founded in August, 1996, and is engaged in
the business of providing investment advisory and other services to
institutional, offshore, and other clients with respect to portfolios consisting
primarily of Loans. Currently, CypressTree has approximately $2.7 billion assets
under management. The directors of CypressTree are Bradford K. Gallagher and J.
Christopher Clifford.
CypressTree is a wholly-owned subsidiary of Cypress Holding Company
("Cypress"). Cypress is a Delaware corporation founded in 1995, and is an
integrated investment management firm. The Directors of Cypress are Bradford K.
Gallagher and J. Christopher Clifford. The largest shareholders of Cypress are
Mr. Gallagher (approximately 15.6%), Berkshire Fund IV L.P., an investment
partnership (approximately 66.5%), Joseph T. Grause (approximately 7.8%) and
John N. Packs (approximately 1.3%). The remaining stock of Cypress is owned by
current and former Cypress employees.
In October 1997, AGAM and other certain affiliates of Cypress acquired from
NASL Financial Services, Inc. ("NASL Financial") that portion of NASL
Financial's business related to acting as investment adviser and distributor of
the North American Funds, an open-ended investment company offering shares in 15
different portfolios. The North American Funds currently have approximately $1.1
billion in assets. AGAM serves as investment adviser to the North American
Funds.
AGAM also serves as investment adviser to a closed-end fund with $273
million in assets, and CypressTree serves as investment subadviser to that fund.
The Fund will be responsible for all of its costs and expenses not
expressly stated to be payable by AGAM under the Advisory Agreement and the
Administration Agreement, by CypressTree under the Subadvisory Agreement, or by
Distributors under its Distribution Agreement. These costs and expenses may
include (without limitation): expenses of acquiring, holding and disposing of
securities and other investments, including brokerage commissions; shareholder
servicing expenses; investment advisory and administration fees; custody and
transfer agency fees and expenses, including those incurred for determining net
asset value and keeping accounting books and records; expenses of pricing and
valuation services; expenses of conducting repurchase offers; fees and expenses
of registering under the securities laws, and other governmental fees; expenses
of reports to shareholders and investors, proxy statements and other expenses of
shareholders' or investors' meetings; compensation and expenses of Directors not
affiliated with AGAM, CypressTree or Cypress; interest, taxes and corporate
fees; legal and accounting expenses; printing and mailing expenses; insurance
premiums; expenses incurred in connection with litigation in which the Fund is a
party and any legal obligation to indemnify its officers and Directors with
respect to litigation; membership dues in investment company organizations;
communications equipment expenses; and any nonrecurring or extraordinary
expenses.
In connection with the Acquisition, the Board approved an Interim Advisory
Agreement between AGAM and the Fund to permit AGAM to continue to serve as the
Fund's Investment Adviser. Under the 1940 Act, however, AGAM may only continue
to serve as the investment adviser for the Fund beyond an interim period of 150
days if the shareholders of the Fund approve a new advisory agreement. At its
February 27 and March 14, 2000 meetings, the Board also approved, and
recommended shareholder approval of, a new investment advisory agreement between
AGAM and the Fund. By its own terms, the subadvisory agreement between AGAM and
CypressTree also terminated upon the closing of the Acquisition. Since the
Acquisition, CypressTree has served as the subadviser pursuant to an interim
subadvisory agreement with the Fund approved by the Board at its February 27 and
March 10, 2000 meetings. Under the 1940 Act, CypressTree may only continue to
serve as subadviser for an interim period of 150 days if shareholders of the
Fund approve a new subadvisory agreement. At its February 27 and March 10, 2000
meetings, the Board also approved and recommended shareholder approval of a new
subadvisory agreement between AGAM and CypressTree.
If the shareholders of the Fund vote to approve the Advisory and
Subadvisory Agreements at the shareholder meeting scheduled for June 1, 2000,
these agreements may be continued from year to year after June 1, 2001 so long
as the continuance is approved at least annually (a) by the vote of a majority
of the Fund's Directors who are not "interested persons" of the Fund or AGAM (or
CypressTree in the case of the subadvisory agreement) cast in person at a
meeting specifically called for the purpose of voting on such approval and (b)
by the vote of a majority of the Board of Directors or by the vote of a majority
of the outstanding Fund shares. The Advisory and Subadvisory Agreements will
terminate automatically in the event of their assignment. The Subadvisory
Agreement will terminate automatically in the event of its assignment. The
Administration Agreement may be continued from year to year after December 15,
2000 so long as the continuance is approved annually (a) by the vote of a
majority of the Fund's Directors who are not "interested persons" of the Fund or
AGAM cast in person at a meeting specifically called for the purpose of voting
or such approval; and (b) by the vote of a majority of the Board of Directors or
by the vote of a majority of the outstanding Fund shares. Each agreement may be
terminated at any time without penalty on sixty (60) days' notice by the
Directors or AGAM or CypressTree,
6
<PAGE>
as applicable, or by the vote of the majority of the outstanding Fund shares.
Each agreement provides that, in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations or duties to the Fund
on the part of AGAM or CypressTree, as applicable, AGAM or CypressTree, as
applicable, will not be liable to the Fund for any loss incurred.
AGAM will receive fees under the Advisory Agreement and the Administration
Agreement. For a description of the compensation that the Fund pays AGAM under
the Advisory Agreement and Administration Agreement, see the Fund's current
Prospectus. For the fiscal years ended December 31, 1999 and December 31, 1998,
the Fund incurred $348,679 and $29,296 under the Advisory Agreement,
respectively and $164,208 and $13,787 under the Administration Agreement,
respectively. After expense reimbursements by AGAM, the Fund's payments under
the Advisory and Administration Agreements was $0 in 1998 and $80,814 in
1999.
AGAM has agreed to reimburse the Fund's expenses to the extent necessary so
that total annualized Fund expenses do not exceed 1.25% of average daily gross
assets. If AGAM had not agreed to reimburse these expenses, estimated Fund
expenses as a percentage of average daily net assets would be: management fee of
0.85%, interest payments on borrowed funds of 0.00%, administration fee of
0.40%, service fee of 0.00%, and other expenses of 0.30%; and total annual
expenses of 1.55%. This agreement may be terminated by AGAM at any time on
thirty (30) days' written notice.
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Board of Directors of the Fund and
oversight by AGAM, CypressTree is primarily responsible for the execution of the
Fund's portfolio transactions. In executing such transactions, CypressTree seeks
to obtain the best results for the Fund, taking into account such factors as
price (including the applicable fee, commission or spread), size of order,
difficulty of execution and operational facilities of the firm involved and the
firm's risk in positioning a block of securities. While CypressTree generally
seeks reasonably competitive fee or commission rates, the Fund does not
necessarily pay the lowest commission or spread available.
The Fund will purchase Loans in individually negotiated transactions with
commercial banks, thrifts, insurance companies, finance companies and other
financial institutions. In determining whether to purchase Loans from these
financial institutions, CypressTree may consider, among other factors, the
financial strength, professional ability, level of service and research
capability of the institution. While financial institutions generally are not
required to repurchase Loans which they have sold, they may act as principal or
on an agency basis in connection with the Fund's disposition of Loans. The Fund
has no obligation to deal with any bank, broker or dealer in execution of
transactions in portfolio securities.
Other securities in which the Fund may invest are traded primarily in the
over-the-counter markets, and the Fund intends to deal directly with the dealers
who make markets in the securities involved, except in those circumstances where
better prices and execution are available elsewhere. These dealers attempt to
profit from transactions by buying at the bid price and selling at the higher
asked price in the market for the obligations (the difference between the bid
and asked price customarily is referred to as the "spread"). The Fund also may
purchase fixed-income and other securities from underwriters, the cost of which
may include fees and concessions to the underwriters.
It is not anticipated that the Fund will pay significant brokerage
commissions. However, on occasion it may be necessary or desirable to purchase
or sell a security through a broker on an agency basis, in which case the Fund
will incur a brokerage commission. In executing all transactions, CypressTree
seeks to obtain the best results for the Fund. For the period from the start of
business to the date of this Statement of Additional Information, the Fund has
paid no brokerage commissions.
Consistent with the interests of the Fund, CypressTree may select brokers
to execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to CypressTree for its use in managing the Fund
and its other advisory accounts. Such services may include (a) furnishing
analyses, reports and information concerning issuers, industries, securities,
geographic regions, economic factors and trends, portfolio strategy, and
performance of accounts; and (b) effecting securities transactions and
performing functions incidental to those securities transactions (such as
clearance and settlement). Research and brokerage services received from such
brokers are in addition to, and not in lieu of, the services required to be
performed by CypressTree under the Subadvisory Agreement. A commission paid to
such brokers may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that CypressTree determines
in good faith that such commission is reasonable in relation to the value of the
services, in terms either of that particular transaction or the overall
responsibility of CypressTree to the Fund and its other clients. In reaching
this determination, CypressTree will not attempt to place a specific dollar
value on the brokerage and research services provided, or to determine what
portion of
7
<PAGE>
the compensation should be related to those services. The receipt of this
research will not reduce CypressTree's normal independent research activities.
However, it enables CypressTree to avoid the additional expenses that could be
incurred if CypressTree tried to develop comparable information through its own
efforts.
The Fund will not purchase securities from its affiliates in principal
transactions.
CypressTree is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance in the
distribution of shares of the Fund or shares of other Cypress funds to the
extent permitted by law.
CypressTree may allocate brokerage transactions to broker-dealers that have
entered into arrangements with CypressTree under which the broker-dealer
allocates a portion of the commission paid by each fund toward payment of the
fund's expenses, such as transfer agent fees or custodian fees. However, the
transaction quality must be comparable to those of other qualified broker-
dealers.
The frequency of portfolio purchases and sales (known as the "turnover
rate") will vary from year to year. It is anticipated that the Fund's turnover
rate will be between 50% and 100%. The Fund's portfolio turnover rate is not
expected to exceed 100%, but may vary greatly from year to year and will not be
a limiting factor when CypressTree deems portfolio changes appropriate. Although
the Fund generally does not intend to trade for short-term profits, the
securities held by the Fund will be sold whenever CypressTree believes it is
appropriate to do so, without regard to the length of time a particular security
may have been held. Higher portfolio turnover involves corresponding greater
brokerage commissions and other transaction costs that the Fund will bear
directly.
If purchases or sales of securities of the Fund and one or more other
investment companies or clients supervised by CypressTree are considered at or
about the same time, transactions in these securities will be allocated among
the several investment companies and clients in a manner deemed equitable to all
by CypressTree, taking into account the respective sizes of the funds and the
amount of securities to be purchased or sold. In some cases this procedure would
have a detrimental effect on the price or volume of the security so far as the
Fund is concerned. In other cases it is possible that the ability to participate
in volume transactions and to negotiate lower brokerage commissions will be
beneficial to the Fund.
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CUSTODIAN
- --------------------------------------------------------------------------------
State Street Bank & Trust Company (the "Custodian"), acts as custodian for
the Fund. Its principal business address is 225 Franklin Street, Boston,
Massachusetts 02110. The Custodian has custody of all the Fund's assets,
maintains the Fund's general ledger, and computes the daily net asset value of
Fund shares. The Custodian attends to details in connection with the sale,
exchange, substitution, transfer or other dealings with the Fund's investments,
receives and disburses all funds, and performs various other ministerial duties
on receipt of proper instructions from the Fund. The custody fees are
competitive within the industry.
AGAM, CypressTree, and their affiliates and their officers and employees
from time to time have transactions with various banks, including the Fund's
Custodian. It is the opinion of AGAM and CypressTree that the terms and
conditions of these transactions were not and will not be influenced by existing
or potential custodian or other relationships between the Fund and these
banks.
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TRANSFER AGENT
- --------------------------------------------------------------------------------
State Street Bank & Trust Company serves as transfer and dividend paying
agent and as registrar. Its principal business address is Post Office Box 8360,
Boston, Massachusetts 02266-8360.
- --------------------------------------------------------------------------------
LIQUIDITY REQUIREMENTS
- --------------------------------------------------------------------------------
From the time that the Fund sends a Notification to shareholders until the
Pricing Date, the Fund will maintain a percentage of the Fund's assets equal to
at least 100 percent of the Repurchase Offer Amount either in: (a) assets that
can be sold or disposed of in the ordinary course of business at approximately
the price at which the Fund has valued the investment within a period equal to
the period between the Repurchase Request Date and the next Repurchase Payment
Deadline; or (b) assets that mature by the next Repurchase Payment Deadline.
In the event that the Fund's assets fail to comply with the requirements in
the preceding paragraph, the Board shall cause the Fund to take such action as
the Board deems appropriate to ensure compliance.
8
<PAGE>
In supervising the Fund's operations and the actions of AGAM and
CypressTree, the Board has adopted written procedures (the "Liquidity
Procedures") reasonably designed, taking into account current market conditions
and the Fund's investment objectives, to ensure that the Fund's assets are
sufficiently liquid so that the Fund can comply with the Repurchase Offer
Fundamental Policy and with the liquidity requirements described above.
From time to time, the Board reviews the Fund's portfolio composition and
makes and approves such changes to the Liquidity Procedures as the Board deems
necessary.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Fund and the purchase, ownership, and disposition of Fund shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to shareholders in light of their
particular circumstances. This discussion is based upon present provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial and administrative ruling authorities, all
of which are subject to change, which change may be retroactive. Prospective
investors should consult their own tax advisers with regard to the federal tax
consequences of the purchase, ownership, or disposition of fund shares, as well
as the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
For a discussion of federal tax issues affecting shareholders in the Fund
please see "Taxes" in the Prospectus.
The Fund intends to qualify for the special tax treatment afforded
regulated investment companies ("RICs") under Subchapter M of the Code. To
qualify for that treatment, the Fund must distribute to its shareholders for
each taxable year at least 90% of its investment company taxable income
(consisting generally of net ordinary investment income, net short-term capital
gains, and net gains from certain foreign currency transactions) and must meet
several additional requirements. Among these requirements are the following: (a)
the Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of securities, and certain other related income; and
(b) the Fund must diversify its investments so that at the close of each quarter
of its taxable year, (i) at least 50% of the value of its total assets are
represented by cash and cash items, U.S. Government securities, securities of
other regulated investment companies and other securities limited in respect of
any one issuer to not more than 5% of the value of the Fund's total assets and
not more than 10% of that issuer's voting securities, and (ii) not more than 25%
of the value of its total assets may be invested in securities (other than U.S.
Government securities and securities of other regulated investment companies) of
any one issuer, or of two or more issuers controlled by the Fund and engaged in
the same, similar or related trades or businesses.
Provided that the Fund satisfies the above requirements, it will not be
subject to federal income tax on that part of its investment company taxable
income and the excess of net long-term capital gain over net short-term capital
loss that it distributes to shareholders.
The Fund will be subject to a nondeductible 4% federal excise tax to the
extent that it does not timely distribute during each calendar year 98% of its
ordinary income, determined on a calendar year basis, and 98% of its capital
gain net income, determined, in general, on an October 31 year end, plus certain
undistributed amounts from previous years. The Fund will be subject to the
excise tax only on the amount by which it does not meet the foregoing
distribution requirements. To avoid application of the excise tax, the Fund
intends to distribute its income in accordance with the calendar year
requirements.
A distribution will be treated as paid on December 31 of a calendar year if
it is declared by the Fund in October, November or December of that year with a
record date in such a month and paid by the Fund during January of the following
year. Such a distribution will be taxable to shareholders in the calendar year
in which the distribution is declared, rather than the calendar year in which it
is received.
Distributions
Distributions of investment company taxable income are taxable to a U.S.
shareholder as ordinary income, whether paid in cash or shares. Dividends paid
by the Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received by the Fund from U.S. corporations,
may, subject to limitation, be eligible for the dividends received deduction.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.
The excess of net long-term capital gains over net short-term capital
losses realized, distributed and properly designated by the Fund, whether paid
in cash or reinvested in Fund shares, will generally be taxable to shareholders
as long-term gain, regardless of how long a shareholder has held Fund shares.
Net capital gains from assets held for one year or less will be taxed as
ordinary income.
Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of newly
issued shares will receive a report as to the net asset value of the shares
received.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by the Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of the Fund just
prior to a distribution. The price of shares purchased at this time will include
the amount of the forthcoming distribution, but the distribution will generally
be taxable to the shareholder.
Dispositions
A holder of Fund shares who, pursuant to a Repurchase Offer, tenders all of
his or her Fund shares (and is not considered to own any other Fund shares
pursuant to attribution rules contained in the Code) may realize a taxable gain
or loss depending upon the shareholder's basis in the shares. Such gain or loss
realized on the disposition of shares (whether pursuant to a Repurchase Offer or
in connection with a sale or other taxable disposition of shares in a secondary
market) generally will be treated as long-term capital gain or loss if the
shares have been held as a capital asset for more than one year and as short-
term capital gain or loss if held as a capital asset for one year or less. If
Fund shares are sold at a loss after being held for six months or less, the loss
will be treated as long-term--instead of short-term--capital loss to the extent
of any capital gain distributions received on those shares. All or a portion of
any loss realized on a sale or exchange of shares of the Fund will be disallowed
if the shareholder acquires other Fund shares within 30 days before or after the
disposition. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss.
Different tax consequences may apply to tendering shareholders other than
fully-tendering shareholders described in the previous paragraph and to non-
tendering shareholders in connection with a Repurchase Offer. For example, if a
shareholder tenders fewer than all shares owned by or attributed to him or her,
the proceeds received could be treated as a taxable dividend, a return of
capital, or capital gain depending on the portion of shares tendered, the Fund's
earnings and profits, and the shareholder's basis in the tendered shares.
Moreover, when a shareholder tenders fewer than all shares owned pursuant to a
Repurchase Offer, there is a risk that non-tendering shareholders may be
considered to have received a deemed distribution that is taxable to them in
whole or in part. Shareholders may wish to consult their tax advisors.
Not later than 60 days after the close of the calendar year, the Fund will
provide its shareholders with a written notice designating the amounts of any
ordinary income dividends or capital gain dividends. If the Fund pays a dividend
in January that was declared in the previous October, November or December to
shareholders of record on a specified date in one of those months, then such
dividend will be treated for tax purposes as being paid by the Fund and received
by its shareholders on December 31 of the earlier year in which the dividend was
declared.
Backup Withholding
The Fund generally will be required to withhold federal income tax at a
rate of 31% ("backup withholding") from dividends paid (other than
exempt-interest dividends), capital gain distributions, and redemption proceeds
to shareholders if (1) the shareholder fails to furnish the Fund with the
shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the shareholder or the Fund that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he or she is not subject to backup
withholding. Any amounts withheld may be credited against the shareholder's
federal income tax liability.
Other Taxation
Distributions may be subject to additional state, local and foreign taxes,
depending on each shareholder's particular situation. Non-U.S. shareholders may
be subject to U.S. tax rules that differ significantly from those summarized
above, including the likelihood that ordinary income dividends to them would be
subject to withholding of U.S. tax at a rate of 30% (or a lower treaty rate, if
applicable).
Fund Investments
Market Discount. If the Fund purchases a debt security at a price lower
than the stated redemption price of such debt security, the excess of the stated
redemption price over the purchase price is "market discount". If the amount of
market discount is more than a de minimis amount, a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to the portion of the market discount on
the debt security that has accrued but has not previously been includable in
income. In general, the amount of market discount that must be included for each
period is equal to the lesser of (i) the amount of market discount accruing
during such period (plus any accrued market discount for prior periods not
previously taken into account) or (ii) the amount of the principal payment with
respect to such period. Generally, market discount accrues on a daily basis for
each day the debt security is held by the Fund at a constant rate over the time
remaining to the debt security's maturity or, at the election of the Fund, at a
constant yield to maturity which takes into account the semi-annual compounding
of interest. Gain realized on the disposition of a market discount obligation
must be recognized as ordinary interest income (not capital gain) to the extent
of the "accrued market discount".
Original Issue Discount. Certain debt securities acquired by the Fund may
be treated as debt securities that were originally issued at a discount. Very
generally, original issue discount is defined as the difference between the
price at which a security was issued and its stated redemption price at
maturity. Although no cash income on account of such discount is actually
received by the Fund, original issue discount that accrues on a debt security in
a given year generally is treated for federal income tax purposes as interest
and, therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies. Some debt securities may be
purchased by the Fund at a discount that exceeds the original issue discount on
such debt securities, if any. This additional discount represents market
discount for federal income tax purposes (see above).
Constructive Sales. Under certain circumstances, the Fund may recognize
gain from a constructive sale of an "appreciated financial position" it holds
if it enters into a short sale, forward contract or other transaction that
substantially reduces the risk of loss with respect to the appreciated position.
In that event, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's holding period in the property. Loss from a constructive sale
would be recognized when the property was subsequently disposed of, and its
character would depend on the Fund's holding period and the application of
various loss deferral provisions of the Code. Constructive sale treatment does
not apply to transactions closed in the 90-day period ending with the 30th day
after the close of the taxable year, if certain conditions are met.
Section 988 Gains or Losses. Gains or losses attributable to fluctuations
in exchange rates which occur between the time the Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt securities and
certain forward contracts denominated in a foreign currency, gains or losses
attributable to fluctuations in the value of the foreign currency between the
acquisition and disposition of the position also are treated as ordinary gain or
loss. These gains and losses, referred to under the Code as "section 988" gains
or losses, increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as ordinary
income. If section 988 losses exceed other investment company taxable income
during a taxable year, the Fund would not be able to make any ordinary dividend
distributions, or distributions made before the losses were realized would be
recharacterized as a return of capital to shareholders, rather than as an
ordinary dividend, reducing each shareholder's basis in his or her Fund shares.
Swaps
The federal income tax rules governing the taxation of interest rate swaps
are not entirely clear and may require the Fund to treat payments received under
such arrangements as ordinary income and to amortize payments under certain
circumstances. The Fund will limit its activity in this regard in order to
enable it to maintain its qualification as a RIC.
Foreign Withholding Taxes
The Fund may be subject to foreign withholding or other taxes with respect
to income on certain loans to foreign Borrowers. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes.
However, to the extent that foreign taxes are imposed, the taxes would reduce
the yield on the Loans. Because not more than 50% of the value of the Fund's
total assets at the close of any taxable year will consist of Loans to foreign
borrowers, the Fund will not be eligible to pass through to shareholders their
proportionate share of foreign taxes paid by the Fund, with the result that
shareholders will not be entitled to take any foreign tax credits or deductions
for foreign taxes paid by the Fund. However, the Fund may deduct foreign taxes
in calculating its distributable income.
9
<PAGE>
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PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The Fund's current yield for the one month period ending on December 31,
1999 was 7.14%. The Fund's effective yield for the same period was 7.38%.
The total investment return for the year ending December 31, 1999 was
7.12%. The net asset value of one share of the Fund on April 24, 2000 was
$9.79.
The Fund may advertise total return either on a cumulative or annualized
basis.
Current yield, effective yield, total investment return and net asset value
will fluctuate from time to time and are not necessarily representative of
future results. When redeemed shares may be worth more or less than their
original cost.
The Fund may also provide information about AGAM, CypressTree, their
affiliates and other related funds in sales material or advertisements provided
to investors or prospective investors. Sales material or advertisements also may
provide information on the use of investment professionals by investors. For
further information, see "Performance Information" in the Fund's
Prospectus.
Past performance is not indicative of future results. Investment return and
principal value will fluctuate. When redeemed, shares may be worth more or less
than their original cost.
- --------------------------------------------------------------------------------
INDEMNIFICATION
- --------------------------------------------------------------------------------
Under the Fund's By-Laws, each officer and director of the Fund will be
indemnified by the Fund to the full extent permitted under the General Laws of
the State of Maryland, except that such indemnity will not protect any such
person against any liability to the Fund or any stockholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. Absent a court determination that an officer or director
seeking indemnification was not liable on the merits or guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, the decision by the Fund to indemnify
such person must be based upon the reasonable determination of independent legal
counsel or the vote of a majority of a quorum of the non-interested directors
nor parties to the proceeding ("non-party independent directors"), after review
of the facts, that such officer or director is not guilty of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or on a plea of nolo contendere or its equivalent, will
not, of itself, create a presumption that any liability or expense arose by
reason of willful malfeasance, bad faith, gross negligence or reckless disregard
of the duties of the director's or officer's office.
Each officer and director of the Fund claiming indemnification will be
entitled to advances from the Fund for payment of the reasonable expenses
incurred by him or her in connection with proceedings to which he or she is a
party in the manner and to the full extent permitted under the General Laws of
the State of Maryland; provided, however, that the person seeking
indemnification will provide to the Fund a written affirmation of his or her
good faith belief that the standard of conduct necessary for indemnification by
the Fund has been met and a written undertaking to repay any such advance, if it
should ultimately be determined that the standard of conduct has not been met,
and provided further that at least one of the following additional conditions is
met: (a) the person seeking indemnification will provide a security in form and
amount acceptable to the Fund for his or her undertaking; (b) the Fund is
insured against losses arising by reason of the advance; (c) a majority of a
quorum of non-party independent directors, or independent legal counsel in a
written opinion, will determine, based on a review of facts readily available to
the Fund at the time the advance is proposed to be made, that there is reason to
believe that the person seeking indemnification will ultimately be found to be
entitled to indemnification.
The Fund may indemnify, make advances or purchase insurance to the extent
provided in its By-Laws on behalf of an employee or agent who is not an officer
or director of the Fund.
The indemnification provided by the Fund's By-Laws is not exclusive of any
rights to which those seeking indemnification may be entitled under any law,
agreement, vote of shareholders, or otherwise. The Fund's By-Laws
10
<PAGE>
do not authorize indemnification inconsistent with the 1940 Act or the
Securities Act of 1933. Any indemnification provided by the Fund's By-Laws will
continue as to a person who has ceased to be a director, officer, or employee,
and will inure to the benefit of that person's heirs, executors and
administrators. In addition, no amendment, modification or repeal of the
indemnification provisions of the By-Laws will adversely affect any right or
protection of an indemnitee that exists at the time of the amendment,
modification or repeal.
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AUDITORS AND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Deloitte & Touche LLP are the independent accountants for the Fund,
providing audit services, tax return preparation, and assistance and
consultation with respect to the preparation of filings with the Securities and
Exchange Commission. The auditors' address is 200 Berkeley Street, Boston,
Massachusetts 02116.
The Fund's audited financial statements for the fiscal year ended December
31, 1999, including the auditor's report, are set forth in the December 31, 1999
Annual Report and are incorporated herein by reference. Copies of the Fund's
Annual Report are available without charge by contacting the Fund's Distributor
American General Funds Distributors Inc. at 286 Congress Street Boston,
Massachsetts 02210, at (800) 872-8037.
11
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OTHER INFORMATION
- --------------------------------------------------------------------------------
The Fund's Prospectus and Statement of Additional Information do not contain
all of the information set forth in the Registration Statement that the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by its rules and regulations. The complete
Registration Statement also is available on the Commission's website
(http:\\www.sec.gov).
12
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APPENDIX A--DESCRIPTION OF RATINGS
- --------------------------------------------------------------------------------
Moody's Long-Term Debt Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together, with an Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper- medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its long-term debt ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic category.
13
<PAGE>
CypressTree Senior Floating Rate Fund, Inc.
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
INVESTMENT ADVISER
American General Asset Management Corp.
286 Congress Street
Boston, Massachusetts 02210
INVESTMENT SUBADVISER
CypressTree Investment Management Company, Inc.
125 High Street
Boston, Massachusetts 02110
ADMINISTRATOR
American General Asset Management Corp.
286 Congress Street
Boston, Massachusetts 02210
DISTRIBUTOR
American Funds Distributors, Inc.
286 Congress Street
Boston, Massachusetts 02210
14
<PAGE>
- --------------------------------------------------------------------------------
PART C
- --------------------------------------------------------------------------------
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
INCLUDED IN PART A: Financial Highlights.
INCORPORATED BY
REFERENCE IN PART B: (i) Portfolio of Investments, December 31, 1999
(ii) Statement of Assets and Liabilities, December
31, 1999
(iii) Statement of Operation - for the year ended
December 31, 1998 through December 31, 1999
(iv) Statement of Changes in Net Assets - for the
year ended December 31, 1999
(v) Statement of Cash Flows - year ended December
31, 1999
(vi) Notes to Financial Statements
(vii) Portfolio of Investments, December 31, 1999
(viii) Statement of Assets and Liabilities, December
31, 1999
(ix) Statement of Operations - for the year ended
December 31, 1999
(x) Statement of Changes in Net Assets - for the
year ended December 31, 1999
(xi) Statement of Cash Flows - for the year ended
December 31, 1999
(xii) Notes to Financial Statements
(2) EXHIBITS:
(a)(1) Amended and Restated Articles of Incorporation*
(b) By-Laws*
(c) Not applicable
(d) Not applicable
(e) Form of Dividend Reinvestment Plan*
(f) Not applicable
(g)(1) Form of Interim Advisory Agreement (filed herewith)
(g)(3) Form of Interim Subadvisory Agreement (filed herewith)
(h)(1) Form of Distribution Agreement**
(h)(2) Form of Dealer Agreement*
(i) Not applicable
(j) Form of Custodian Agreement*
(k) Form of Administration Agreement**
(l) Opinion and Consent of Counsel *****
(m) Not applicable
(n) Consent of Independent Auditors (filed herewith)
(o) Not applicable
(p) Investment Letter*
(q) Model Retirement Plan*
(r) Financial Data Schedule (Not Applicable)
(r)(1) Code of Ethics of the Fund and CypressTree (filed herewith)
(r)(2) Code of the Ethics of American General Asset Management Company
(filed herewith)
(z)(1) Power of Attorney of Bradford K. Gallagher***
(z)(2) Power of Attorney of William F. Devin***
(z)(3) Power of Attorney of William F. Achtmeyer***
(z)(4) Power of Attorney of Kenneth J. Lavery***
(z)(5) Power of Attorney of Arthur S. Loring****
(z)(6) Power of Attorney of Alice T. Kane (filed herewith)
*Filed as an exhibit to Pre-Effective Amendment No. 3 to Registration Statement
on Form N-2 of Registrant, filed March 26, 1998 File No. 333-32529 incorporated
herein by reference.
**Filed as an exhibit to Pre-Effective Amendment No. 1 to Registration Statement
on Form N-2 of Registrant, filed December 24, 1997 File No. 333-32529
incorporated herein by reference.
***Filed as an exhibit to Registration Statement on Form N-2 of Registrant,
filed July 31, 1997 File No. 333-32529 incorporated herein by reference.
****Filed as an exhibit to Post-Effective Amendment No. 2 to Registration
Statement on Form N-2 of Registrant, filed April 30, 1999 File No. 333-32529
incorporated herein by reference.
*****Filed as an exhibit on Form N-2 of Registrant, filed November 17, 1999
File No. 333-32529 incorporated herein by reference.
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<PAGE>
The following table sets forth the estimated expenses incurred in
connection with the offerings of Registrant:
Registration fees ........................................ $ 27,605.40
National Association of Securities Dealers, Inc. fees..... $ 10,000
Printing and engraving expenses .......................... $ 5,000
Fees and expenses of qualification under state securities
laws (excluding fees of counsel) ........................ $ 45,000
Accounting fees and expenses ............................. $ 1,500
Legal fees and expenses .................................. $ 15,000
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
<PAGE>
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
TITLE OF CLASS NUMBER OF RECORD HOLDERS AS OF APRIL 7, 2000
Common Stock 1371
ITEM 29. INDEMNIFICATION
The Registrant's Articles of Incorporation and By-Laws contain provisions
limiting the liability, and providing for indemnification, of the Directors and
officers under certain circumstances. Article IX of the Fund's Articles of
Incorporation, filed as Exhibit a to this Registration Statement, and Article
VIII of the Fund's By-Laws, filed as Exhibit b to this Registration Statement,
provide that the Fund shall indemnify its present and past Directors, officers,
employees and agents, and persons who are serving or have served at the Fund's
request in similar capacities for other entities to the maximum extent permitted
by applicable law (including Maryland law and the 1940 Act). Section 2-418(b) of
the Maryland General Corporation Law ("Maryland Code") permits the Fund to
indemnify its Directors unless it is established that the act or omission of the
Director was material to the matter giving rise to the preceding, and (a) the
act or omission was committed in bad faith or was the result of active and
deliberate dishonesty; (b) the Director actually received an improper personal
benefit in money, property or services or; or (c) in the case of any criminal
proceeding, the Director had reasonable cause to believe the act or omission was
unlawful. Indemnification may be made against judgments, penalties, fines,
settlements and reasonable expenses incurred by the Director in connection with
a proceeding, in accordance with the Maryland Code. Pursuant to Section 2-
418(j)(1) and Section 2-418(j)(2) of the Maryland Code, the Fund is permitted to
indemnify its officers, employees and agents to the same extent as its
Directors. The provisions set forth above apply insofar as consistent with
Section 17(h) of the 1940 Act, which prohibits indemnification of any Director
or officer of the Fund against any liability to the Fund or its shareholders to
which such director or officer otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Refer to the information set forth under the captions "Management of the
Fund" in the Prospectus and "Advisory, Administrative and Distribution Services"
in the Statement of Additional Information constituting Parts A and B,
respectively, of this Registration Statement, which summary is incorporated
herein by reference. For information as to the business, profession, vocation or
employment of a substantial nature of each director or officer of the adviser or
subadviser, reference is made to the respective Form ADV, as amended, filed
under the Investment Advisers Act of 1940.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder will be in the possession and custody of the
Registrant's custodian and transfer agent, State Street Bank & Trust Company,
with the exception of certain corporate documents and portfolio trading
documents which are in the possession and custody of AGAM, 286 Congress Street,
Boston, Massachusetts or CypressTree, 125 High Street, Boston, Massachusetts.
Registrant is informed that all applicable accounts, books and documents
required to be maintained by registered investment advisers are in the custody
and possession of AGAM and CypressTree.
<PAGE>
ITEM 32. MANAGEMENT SERVICES
None.
<PAGE>
ITEM 33. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) (a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(1) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(2) To reflect in the prospectus any facts or events after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(b) that, for the purpose of determining any liability under the 1993 Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of those securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(c) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(2) To send by first class mail or other means designed to ensure equally
prompt delivery, within two business days of receipt of a written or oral
request, any Statement of Additional Information.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that this Amendment meets all of
the requirements for effectiveness under paragraph (b) of Rule 486 and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and Commonwealth
of Massachusetts on the 28th day of April, 2000.
CypressTree Senior Floating Rate Fund, Inc.
By:
/s/ Alice T. Kane*
Alice T. Kane
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Alice T. Kane* Director, April 28, 2000
- -------------------------------------
Alice T. Kane Chief Executive Officer
/s/ William F. Devin** April 28, 2000
- ------------------------------------- Director
William F. Devin
/s/ William F. Achtmeyer** April 28, 2000
- ------------------------------------- Director
William F. Achtmeyer
/s/ Kenneth J. Lavery** April 28, 2000
- ------------------------------------- Director
Kenneth J. Lavery
/s/ Arthur S. Loring** April 28, 2000
- ------------------------------------- Director
Arthur S. Loring
/s/ Thomas J. Brown Principal Financial and April 28, 2000
- -------------------------------------
Thomas J. Brown Accounting Officer
</TABLE>
*BY /s/ John I. Fitzgerald, Attorney-in-Fact (pursuant to Power of Attorney
----------------------
filed herewith).
**BY /s/ John I. Fitzgerald, Attorney-in-Fact (pursuant to Power of Attorney
----------------------
filed as an exhibit to Registration Statement on Form N-2, filed July 31,
1997, File No. 333-32529).
***BY /s/ John I. Fitzgerald, Attorney-in-Fact (pursuant to Power of Attorney
----------------------
filed as an exhibit to Post-Effective Amendment No. 2 to Registration
Statement on Form N-2, filed April 30, 1999, File No. 333-32529).
<PAGE>
EXHIBIT (g)(1)(b)
INTERIM ADVISORY AGREEMENT
INTERIM ADVISORY AGREEMENT (the "Agreement") made as of March 10, 2000,
between CYPRESSTREE SENIOR FLOATING RATE FUND, INC., a Maryland corporation
(the "Fund"), and American General Asset Management Corp., a Delaware
corporation (the "Adviser").
WITNESSETH
WHEREAS, the Fund is registered with the Securities and Exchange Commission
as a closed-end management investment company under the Investment Company Act
of 1940, as amended (the "Investment Company Act");
WHEREAS, the Fund desires to retain the Adviser as investment manager to
furnish certain investment advisory services to the Fund, the and Adviser is
willing to furnish those services;
NOW THEREFORE, the parties agree as follows:
1. APPOINTMENT OF ADVISER
The Fund hereby appoints the Adviser, subject to the supervision of the
Directors of the Fund and the terms of this Agreement, as the investment adviser
for the Fund. The Adviser accepts such appointment and agrees to render the
services and to assume the obligations set forth in this Agreement commencing on
its effective date. The Adviser will be an independent contractor and will have
no authority to act for or represent the Fund in any way or otherwise be deemed
an agent unless expressly authorized in this Agreement or another writing by the
Fund and the Adviser.
2. DUTIES OF THE ADVISER
a. Subject to the general supervision of the Directors of the Fund and the
terms of this Agreement, the Adviser will at its own expense select,
contract with, and compensate an investment subadviser (the "Subadviser")
to manage the investments and determine the composition of the assets of
the Fund; provided, that any contract with the Subadviser (the "Subadvisory
Agreement") will be in compliance with and approved as required by the
Investment Company Act. Subject always to the direction and control of the
Directors of the Fund, the Adviser will monitor compliance of the
Subadviser with the investment objectives and investment policies, as set
forth in the Fund's registration statement as filed with the Securities and
Exchange Commission, and review and report to the Directors of the Fund on
the performance of the Subadviser.
b. The Adviser will oversee the administration of certain aspects of the
Fund's business and affairs and will furnish to the Fund the following
services:
<PAGE>
(1) Office and Other Facilities. The Adviser will furnish to the Fund
---------------------------
office space in the offices of the Adviser or in such other place as
may be agreed upon by the parties to this Agreement from time to time
and such other office facilities, utilities and office equipment as
are necessary for the Fund's operations.
(2) Directors and Officers. The Adviser agrees to permit individuals who
----------------------
are directors, officers or employees of the Adviser to serve (if duly
elected or appointed) as Directors or officers of the Fund, without
remuneration from or other cost to the Fund.
(3) Other Personnel. The Adviser will furnish to the Fund, at the Fund's
---------------
expense, any other personnel necessary for the operations of the Fund.
(4) Reports to Fund. The Adviser will furnish to or place at the disposal
---------------
of the Fund such information, reports, valuations, analyses and
opinions as the Fund may, at any time or from time to time, reasonably
request or as the Adviser may deem helpful to the Fund, provided that
the expenses associated with any such materials furnished by the
Adviser at the request of the Fund will be borne by the Fund.
3. EXPENSES ASSUMED BY THE FUND
In addition to paying the advisory fee provided for in Section 5, the Fund
will pay all expenses of its organization, operations and business not
specifically assumed or agreed to be paid by the Adviser as provided in this
Agreement, by the Subadviser as provided in the Subadvisory Agreement, by the
Administrator under an administration agreement, or by the principal underwriter
(the "Distributor") of the Fund's shares, as that term is defined in Section
2(a)(29) of the Investment Company Act, as provided in a distribution agreement.
Without limiting the generality of the foregoing, the Fund, in addition to
certain expenses specifically described in Section 2 above, will pay or arrange
for the payment of the following:
a. Custody and Accounting Services. All expenses of the transfer, receipt,
-------------------------------
safekeeping, servicing and accounting for the Fund's cash, securities, and
other property, including all charges of depositories, custodians and other
agents, if any;
b. Shareholder Servicing. All expenses of maintaining and servicing
---------------------
shareholder accounts, including all charges of the Fund's transfer,
shareholder recordkeeping, dividend disbursing, repurchase, and other
agents, if any;
c. Shareholder Communications. All expenses of preparing, setting in type,
--------------------------
printing, and distributing reports, repurchase notifications, and other
communications to shareholders;
-2-
<PAGE>
d. Shareholder Meetings. All expenses incidental to holding meetings of Fund
--------------------
shareholders, including the printing of notices and proxy material, and
proxy solicitation;
e. Prospectuses. All expenses of preparing, setting in type, and printing of
------------
annual or more frequent revisions of the Fund's prospectus and statement of
additional information and any supplements to those documents and of
mailing them to shareholders;
f. Pricing. All expenses of computing the net asset value per share for the
-------
Fund, including the cost of any equipment or services used for obtaining
price quotations and valuing its investment portfolio;
g. Communication Equipment. All charges for equipment or services used for
-----------------------
communication between the Adviser or the Fund and the custodian, transfer
agent or any other agent selected by the Fund;
h. Legal and Accounting Fees and Expenses. All charges for services and
--------------------------------------
expenses of the Fund's legal counsel and independent auditors;
i. Directors and Officers. Except as expressly provided otherwise in
----------------------
paragraph 2.b.(2), all compensation of Directors and officers, all expenses
incurred in connection with the service of Directors and officers, and all
expenses of meetings of the Directors and Committees of Directors;
j. Federal Registration Fees. All fees and expenses of registering and
-------------------------
maintaining the registration of the Fund under the Investment Company Act
and the registration of the Fund's shares under the Securities Act of 1933,
as amended (the "1933 Act"), including all fees and expenses incurred in
connection with the preparation, setting in type, printing and filing of
any registration statement and prospectus under the 1933 Act or the
Investment Company Act, and any amendments or supplements to those
documents that may be made from time to time;
k. State Registration Fees. All fees and expenses of qualifying and
-----------------------
maintaining qualification of the Fund and of the Fund's shares for sale
under securities laws of various states or jurisdictions, and of
registration and qualification of the Fund under all other laws applicable
to the Fund or its business activities (including registering the Fund as a
broker-dealer, or any officer of the Fund or any person as agent or
salesman of the Fund in any state);
l. Issue and Repurchase of Fund Shares. All expenses incurred in connection
-----------------------------------
with the issue, repurchase, and transfer of Fund shares, including the
expense of
-3-
<PAGE>
confirming all share transactions, of preparing and transmitting
certificates for shares of the Fund, and of sending notifications of
repurchase offers to shareholders;
m. Bonding and Insurance. All expenses of bond, liability and other insurance
---------------------
coverage required by law or regulation or deemed advisable by the Fund's
Directors including, without limitation, such bond, liability and other
insurance expense that may from time to time be allocated to the Fund in a
manner approved by its Directors;
n. Brokerage Commissions. All brokers' commissions and other charges incident
---------------------
to the purchase, sale, or lending of the Fund's portfolio securities;
o. Taxes. All taxes or governmental fees payable by or with respect to the
-----
Fund to federal, state, or other governmental agencies, domestic or
foreign, including stamp or other transfer taxes, and all expenses incurred
in the preparation of tax returns;
p. Trade Association Fees. All fees, dues, and other expenses incurred in
----------------------
connection with the Fund's membership in any trade association or other
investment organization; and
q. Nonrecurring and Extraordinary Expenses. Such nonrecurring expenses as may
---------------------------------------
arise, including the costs of actions, suits, or proceedings to which the
Fund is, or is threatened to be made, a party and the expenses the Fund may
incur as a result of its legal obligation to provide indemnification to its
Directors, officers, agents and shareholders.
4. COMPENSATION OF ADVISER
a. The Fund will pay the Adviser a fee, computed daily and paid monthly, on or
before the last business day of the month, at the following annualized
rate: 0.85% of the Fund's average daily net assets for average daily net
assets up to and including $1 billion; 0.80% of the Fund's average daily
net assets for average daily net assets between $1 billion and up to and
including $2 billion; and 0.75% of the Fund's average daily net assets for
average daily net assets in excess of $2 billion. In calculating the net
assets of the Fund for purposes of this computation, all liabilities of the
Fund will be deducted from gross assets except the principal amount of any
indebtedness for money borrowed, including debt securities issued by the
Fund.
b. If this Agreement becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of such
month or from the
-4-
<PAGE>
beginning of the prorated according to the proportion which that period
bears to the full month in which the effectiveness or termination occurs.
5. EXPENSE LIMITATION
From time to time, the Adviser may waive all or a portion of its fee
provided for under this Agreement, or agree to reimburse the Fund in order to
limit the Fund's aggregate expenses. The Adviser agrees to be bound by the terms
of any publicly announced waiver of its fee, or any limitation of the Fund's
expenses.
6. NON-EXCLUSIVITY
The services of the Adviser to the Fund are not to be deemed to be
exclusive, and the Adviser will be free to render investment advisory or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that the directors, officers, and
employees of the Adviser are not prohibited from engaging in any other business
activities or from rendering services to any other person, or from serving as
partners, officers, directors, trustees or employees of any other firm or
corporation, including other investment companies.
7. SUPPLEMENTAL ARRANGEMENTS
The Adviser may enter into arrangements with other persons affiliated with
the Adviser to enable it to fulfill its obligations under this Agreement for the
provision of certain personnel and facilities to the Adviser.
8. CONFLICTS OF INTEREST
It is understood that Directors, officers, agents and shareholders of the
Fund are or may be interested in the Adviser as directors, officers,
stockholders, or otherwise; that directors, officers, agents and stockholders of
the Adviser are or may be interested in the Fund as Directors, officers,
shareholders or otherwise; that the Adviser may be interested in the Fund; and
that the existence of any such dual interest will not affect the validity of
this Agreement or of any transactions under this Agreement except as otherwise
provided in the Articles of Incorporation of the Fund and the Articles of
Incorporation of the Adviser, respectively, or by specific provisions of
applicable law.
9. REGULATION
The Adviser will submit to all regulatory and administrative bodies having
jurisdiction over the services provided pursuant to this Agreement any
information, reports or other material which any such body by reason of this
Agreement may request or require pursuant to applicable laws and regulations.
The adviser will comply in all material
-5-
<PAGE>
respects with Rule 17k-1 under the Investment Company Act.
10. DURATION AND TERMINATION OF AGREEMENT
This Agreement will become effective on March 10, 2000 and will continue in
effect until a New Advisory Agreement is approved by shareholders of the Fund,
or for 150 days whichever is less.
If the shareholders of the Fund fail to approve the New Advisory Agreement
or any continuance of the Agreement, the Adviser will continue to act as
investment adviser with respect to the Fund pending the required approval of the
Agreement or its continuance or of a new contract with the Adviser or a
different adviser or other definitive action; provided, that the compensation
received by the Adviser in respect of the Fund such during such period is in
compliance with Rule 15a-4 under the Investment Company Act.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors of the Fund or by the vote of a majority of the
outstanding voting securities of the Fund, on sixty days' written notice to the
Adviser, or by the Adviser on sixty days' written notice to the Fund. This
Agreement will automatically terminate, without the payment of any penalty, in
the event of its assignment (as defined in the Investment Company Act).
11. PROVISION OF CERTAIN INFORMATION BY ADVISER
The Adviser will promptly notify the Fund in writing of the occurrence of
any of the following events:
a. the Adviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which the
Adviser is required to be registered as an investment adviser in order to
perform its obligations under this Agreement;
b. the Adviser is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Fund; and
c. the chief executive officer or controlling stockholder of the Adviser or
the portfolio manager of the Fund changes.
-6-
<PAGE>
12. AMENDMENTS TO THE AGREEMENT
This Agreement may be amended by written amendment signed by the parties,
provided that the terms of any material amendment shall be approved (i) by the
vote of a majority of the outstanding voting securities of the Fund and (ii) by
the vote of a majority of the Directors of the Fund who are not interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval, if such approval is required by law.
13. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
14. HEADINGS
The headings in the sections of this Agreement are inserted for convenience
of reference only and will not constitute a part of this Agreement.
15. NOTICES
All notices required to be given pursuant to this Agreement will be
delivered or mailed to the last known business address of the Fund or Adviser in
person or by registered mail or a private mail or delivery service providing the
sender with notice of receipt. Notice will be deemed given on the date delivered
or mailed in accordance with this section.
16. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule, or otherwise, the remainder of this Agreement will not
be affected.
17. GOVERNING LAW
The provisions of this Agreement will be construed and interpreted in
accordance with the laws of the Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of the Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter will control.
18. LIMITATION OF LIABILITY OF ADVISER
Neither the Adviser nor any of its officers, directors, or employees, nor
any person performing executive, administrative, trading, or other functions for
the Fund (at the
-7-
<PAGE>
direction or request of the Adviser) or the Adviser in connection with the
Adviser's discharge of its obligations undertaken or reasonably assumed with
respect to this Agreement, shall be liable for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except for loss resulting from willful
misfeasance, bad faith, or gross negligence in the performance of its or his
duties on behalf of the Fund or from reckless disregard by the Adviser or any
such person of the duties of the Adviser under this Agreement.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed under seal by their duly authorized officers as of the
date first set forth above.
CYPRESSTREE SENIOR FLOATING RATE
FUND, INC.
By: ________________________
American General Asset Management Corp.
By: ________________________
-8-
<PAGE>
Exhibit (g)(2)(b)
INTERIM SUBADVISORY AGREEMENT
THIS INTERIM SUBADVISORY AGREEMENT is made and entered into as of
March 10, 2000, between AMERICAN GENERAL ASSET MANAGEMENT CORP. (the
"Adviser"), a Delaware corporation registered under the Investment Advisers Act
of 1940, as amended (the "Advisers Act"), and CYPRESSTREE INVESTMENT MANAGEMENT
COMPANY, INC. (the "Subadviser"), a Delaware corporation also registered under
the Advisers Act.
WITNESSETH
WHEREAS, the Adviser, pursuant to an Interim Advisory Agreement with
the CYPRESSTREE Senior Floating Rate Fund, Inc., a Maryland Corporation (the
"Fund"), dated as of March 10, 2000, (the "Advisory Agreement"), has been
retained to act as investment adviser for the Fund;
WHEREAS, the Fund is registered with the Securities and Exchange
Commission (the "SEC") as a closed-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser desires to retain the Subadviser to provide a
continuous investment program for the Fund, and the Subadviser is willing to
render those services subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, the parties agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT AS SUBADVISER
The Fund desires to employ its capital by investing and reinvesting in
securities of the kind and in accordance with the limitations specified in the
Fund's Prospectus and Statement of Additional Information relating to the Fund
as may be in effect from time to time (collectively, the "Prospectus") and which
are filed with the SEC as part of the Fund's Registration Statement on Form N-2,
as amended from time to time, and in such manner and to such extent as may be
approved by the Board of Directors of the Fund. A copy of the Prospectus has
been provided to the Subadviser. The Adviser retains the Subadviser to act as
investment adviser for and to manage the Fund's Assets subject to the
supervision of the Adviser and the Board of Directors of the Fund and subject to
the terms of this Agreement, and the Subadviser accepts that employment. In this
capacity, the Subadviser will be responsible for the investment management of
the Fund's assets. It is recognized that the Subadviser now acts, and that from
time to time hereafter may act, as investment adviser to one or more other
investment companies and to fiduciary or other managed accounts and that the
Adviser and the Fund have no objection to those activities.
<PAGE>
-2-
2. DUTIES OF THE SUBADVISER
a. Investments. The Subadviser is authorized and directed and agrees, subject
-----------
to the stated investment policies and restrictions of the Fund as set forth
in the Prospectus and subject to the directions of the Adviser and the
Fund's Board of Directors, to purchase, hold and sell investments for the
Fund ("Fund Investments") and to monitor on a continuous basis the
performance of such Fund Investments. Subject to the supervision of the
Board of Directors and the Adviser and the terms and conditions of this
Agreement, including without limitation section 2(b), the Subadviser will:
(1) manage the Fund's Assets in accordance with the Fund's investment
objective, policies and limitations as stated in the Prospectus; (2) make
investment decisions for the Fund; (3) place purchase and sale orders for
portfolio transactions for the Fund; and (4) manage otherwise uninvested
Fund cash. In providing these services, the Subadviser will formulate and
implement a continuous program of investment, evaluation and, if
appropriate, sale and reinvestment of the Fund's Assets. The Adviser
agrees to provide to the Subadviser such assistance as may be reasonably
requested by the Subadviser in connection with its activities under this
Agreement, including, without limitation, information concerning the Fund,
its funds available (or to become available) for investment, and generally
as to the condition of the Fund's affairs.
b. Compliance with Applicable Laws and Governing Documents. In the
-------------------------------------------------------
performance of its duties and obligations under this Agreement, the
Subadviser will act in conformity with the Prospectus and with the
instructions and directions received in writing from the Adviser or the
Board of Directors of the Fund and will comply with the requirements of the
1940 Act, the Advisers Act, the Internal Revenue Code of 1986, as amended
(the "Code") (including the requirements for qualification as a regulated
investment company) and all other federal and state laws and regulations
applicable to its services under this Agreement.
The Adviser will provide the Subadviser with reasonable advance notice of
any change in the Fund's investment objectives, policies and restrictions
as stated in the Prospectus, and the Subadviser will, in the performance of
its duties and obligations under this Agreement, manage the Fund
Investments consistent with such changes. The Adviser acknowledges and
agrees that the Prospectus will at all times be in compliance with all
disclosure requirements under all applicable federal and state laws and
regulations relating to the Fund, including, without limitation, the 1940
Act and the rules and regulations under this Agreement, and that the
Subadviser will have no liability in connection therewith, except as to the
accuracy of material information furnished in writing by the Subadviser to
the Fund or to the Adviser specifically for inclusion in the Prospectus.
The Subadviser hereby agrees to provide to the Adviser in a timely manner
such information relating to the Subadviser and its relationship to, and
actions for, the Fund as may be required to be contained in the Prospectus.
<PAGE>
-3-
In fulfilling these requirements and its other requirements and obligations
under this Agreement, the Subadviser will be entitled to rely on and act in
accordance with (1) information provided to it by the Fund's administrator,
fund accountant, custodian or other service provider and (2) instructions,
which may be standing instructions, from the Adviser. The Adviser agrees to
provide or cause to be provided to the Subadviser on an ongoing basis upon
request by the Subadviser, such information as is requested by the
Subadviser for the performance of its obligations under this Agreement, and
the Subadviser will not be in breach of any term of this Agreement or be
deemed to have acted negligently if the Adviser fails to provide or cause
to be provided such information and the Subadviser relies on the
information most recently provided to it.
c. Voting of Proxies. The Subadviser will have the power to vote, either in
-----------------
person or by proxy, all securities in which the Fund may be invested from
time to time, and will not be required to seek instructions from the
Adviser or the Fund.
d. Agent. Subject to any other written instructions of the Adviser or the
-----
Fund, the Subadviser is hereby appointed the Adviser's and the Fund's agent
and attorney-in-fact for the limited purposes of executing account
documentation, agreements, contracts and other documents as the Subadviser
will be requested by brokers, dealers, counterparties and other persons in
connection with its management of the assets of the Fund.
e. Portfolio Transactions. Subject to the approval of the Board of Directors
----------------------
of the Fund, the Subadviser, in carrying out its duties hereunder, may
cause the Fund to pay a broker-dealer which furnishes brokerage or research
services as such services are defined under Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "34 Act"), a higher commission than
that which might be charged by another broker dealer which does not furnish
brokerage or research services or which furnishes brokerage or research
services deemed to be of lesser value, if such commission is deemed
reasonable in relation to the brokerage and research services provided by
the broker-dealer, viewed in terms of either that particular transaction or
the overall responsibilities of the Subadviser with respect to the accounts
as to which it exercises investment discretion (as such term is defined
under Section 3(a)(35) of the 34 Act).
It is recognized that the services provided by such brokers or other
entities may be useful to the Subadviser in connection with the
Subadviser's services to other clients. On occasions when the Subadviser
deems the purchase or sale of a security to be in the best interests of the
Fund as well as other clients of the Subadviser, the Subadviser, to the
extent permitted by applicable laws and regulations, may, but is under no
obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and
efficient execution. In that event, allocation of securities so sold or
purchased, as well as the
<PAGE>
-4-
expenses incurred in the transaction, will be made by the Subadviser in the
manner the Subadviser considers to be the most equitable and consistent
with its fiduciary obligations to the Fund and to its other clients over
time. It is recognized that in some cases, this procedure may adversely
affect the price paid or received by the Fund or the size of the position
obtainable for, or disposed of by, the Fund.
f. Certain Transactions. The Subadviser and any affiliated person of the
--------------------
Subadviser will not purchase securities or other instruments from or sell
securities or other instruments to the Fund; provided, however, the
-------- -------
Subadviser may purchase securities or other instruments from or sell
securities or other instruments to the Fund if the transaction is
permissible under applicable laws and regulations, including, without
limitation, the 1940 Act and the Advisers Act and the rules and regulations
promulgated under both those acts.
The Subadviser, including its Access Persons (as defined in Rule 17j-1(e)
under the 1940 Act), agrees to observe and comply with Rule 17j-1 and its
Code of Ethics (which will comply in all material respects with Rule 17j-1,
as amended from time to time). On a quarterly basis, the Subadviser will
either (i) certify to the Adviser that the Subadviser and its Access
Persons have complied with the Subadviser's Code of Ethics with respect to
the Fund's assets or (ii) identify any material violations that have
occurred with respect to the Fund's assets. In addition, the Subadviser
will report at least annually to the Adviser concerning any other
violations of the Subadviser's Code of Ethics that required significant
remedial action and that were not previously reported.
g. Books and Records. Pursuant both to the 1940 Act and the Advisers Act and
-----------------
the rules and regulations promulgated under those acts, the Subadviser will
maintain separate books and records of all matters pertaining to the Fund's
assets. The Fund's books and records will be available to the Adviser at
any time upon reasonable request during normal business hours and will be
available for telecopying without unreasonable delay to the Adviser during
any day that the Fund is open for business.
h. Information Concerning Fund Investments and Subadviser. From time to time
------------------------------------------------------
as the Adviser or the Fund may reasonably request (but no less often than
quarterly), the Subadviser will furnish or cause to be furnished the
requesting party reports on portfolio transactions and reports on Fund
Investments held in the portfolio, all in such detail as the Adviser or the
Fund may reasonably request. The Subadviser will also inform the Adviser
promptly of changes in portfolio managers responsible for Subadviser Assets
or of changes in the control of the Subadviser. The Subadviser will be
available to its officers and employees to meet with the Fund's Board of
Directors in person on reasonable notice to review the Fund Investments and
the Subadviser will report to the Board of Directors in writing on the Fund
Investments monthly.
<PAGE>
-5-
i. Custody Arrangements. The Subadviser will on each business day provide the
--------------------
Adviser and the Fund's custodian such information as the Adviser and the
Fund's custodian may reasonably request relating to all transactions
concerning the Fund Investments including, without limitation,
recommendations, in accordance with policies and procedures established by
the Directors, as to the fair value of securities for which market quotes
are not available.
3. INDEPENDENT CONTRACTOR
In the performance of its duties under this Agreement, the Subadviser
is an independent contractor and unless otherwise expressly provided in this
Agreement or otherwise authorized in writing, will have no authority to act for
or represent the Fund or the Adviser in any way or otherwise be deemed an agent
of the Fund or the Adviser.
4. EXPENSES
During the term of this Agreement, Subadviser will pay all expenses
incurred by it in connection with its activities under this Agreement other than
the cost of securities, commodities and other investments (including brokerage
fees and commissions and other transaction charges, if any) purchased for the
Fund. The Subadviser will not be responsible for any expenses of the operations
of the Fund including, without limitation, brokerage fees and commissions and
other transaction charges, if any. The Subadviser will not be responsible for
the Fund's or the Adviser's expenses.
5. COMPENSATION
A. The Adviser will pay the Subadviser a fee, computed daily and paid monthly
on or before the last business day of the month, at the following
annualized rate: 0.45% of the Fund's average daily net assets for average
daily net assets up to and including $1 billion; 0.40% of the Fund's
average daily net assets for average daily net assets between $1 billion
and up to and including $2 billion; and 0.35% of the Fund's average daily
net assets for average daily net assets in excess of $2 billion. In
calculating the net assets of the Fund, for purposes of this computation,
all liabilities of the Fund will be deducted from gross assets except the
principal amount of any indebtedness for money borrowed, including debt
securities issued by the Fund. However, during the term of their Interim
Subadvisory Agreement, the following conditions apply:
(i) The Compensation shall be held in an interest-bearing escrow
account with State Street Bank and Trust Company pursuant to an Escrow
Agreement substantially in the form attached hereto;
(ii) If a majority of a Fund's outstanding voting securities approve a
<PAGE>
-6-
Subadvisory Agreement with the Subadviser before 150 days after March 1,
2000, the amount in the escrow account (including interest earned thereon)
with respect to such Fund shall be paid to the Subadviser; and
(iii) If a majority of a Fund's outstanding voting securities do not
approve a new Subadvisory Agreement with the Subadviser, the Subadviser
shall be paid from the escrow account, the lesser of an amount equal to:
(a) any costs incurred in performing this Agreement (plus
interest earned on that amount in the escrow account); or
(b) the total amount in the escrow account (plus interest earned
thereon).
B. If this Agreement becomes effective or terminates before the end of any
month, the fee for the period from the effective date to the end of such
month or from the beginning of the prorated according to the proportion
which that period bears to the full month in which the effectiveness or
termination occurs.
C. Notwithstanding any other provision of this Agreement, the Subadviser may
from time to time agree not to impose all or a portion of its fee otherwise
payable under this Agreement (in advance of the time such fee or portion of
the fee would otherwise accrue). Any such fee reduction may be
discontinued or modified by the Subadviser at any time.
6. REPRESENTATION AND WARRANTIES OF SUBADVISER
The Subadviser represents and warrants to the Adviser and the Fund as
follows:
a. The Subadviser is registered as an investment adviser under the Advisers
Act;
b. The Subadviser is a corporation duly organized and validly existing under
the laws of the State of Delaware with the power to own and possess its
assets and carry on its business as it is now being conducted;
c. The execution, delivery and performance by the Subadviser of this Agreement
are within the Subadviser's powers and have been duly authorized by its
Board of Directors or shareholders, and no action by or in respect of, or
filing with, any governmental body, agency or official is required on the
part of the Subadviser for the execution, delivery and performance by the
Subadviser of this Agreement, and the execution, delivery and performance
by the Subadviser of this Agreement do not contravene or constitute a
default under (i) any provision of applicable law, rule or regulation, (ii)
the Subadviser's governing instruments, or (iii) any material
<PAGE>
-7-
agreement, judgment, injunction, order, decree or other instrument binding
upon the Subadviser;
d. The Form ADV of the Subadviser previously provided to the Adviser is a true
and complete copy of the form filed with the SEC and the information
contained therein is accurate and complete in all material respects.
7. REPRESENTATIONS AND WARRANTIES OF ADVISER
The Adviser represents and warrants to the Subadviser as follows:
a. The Adviser is registered as an investment adviser under the Advisers Act;
b. The Adviser is a corporation duly organized and validly existing under the
laws of the State of Delaware with the power to own and possess its assets
and carry on its business as it is now being conducted;
c. The execution, delivery and performance by the Adviser of this Agreement
are within the Adviser's powers and have been duly authorized by its Board
of Directors or shareholders, and no action by or in respect of, or filing
with, any governmental body, agency or official is required on the part of
the Adviser for the execution, delivery and performance by the Adviser of
this Agreement, and the execution, delivery and performance by the Adviser
of this Agreement do not contravene or constitute a default under (i) any
provision of applicable law, rule or regulation, (ii) the Adviser's
governing instruments, or (iii) any material agreement, judgment,
injunction, order, decree or other instrument binding upon the Adviser;
d. The Form ADV of the Adviser previously provided to the Subadviser is a true
and complete copy of the form filed with the SEC and the information
contained therein is accurate and complete in all material respects;
e. The Adviser acknowledges that it has received a copy of the Subadviser's
Form ADV prior to the execution of this Agreement;
f. The Fund is in compliance in all material respects, and during the term of
this Agreement will remain in compliance in all material respects, with all
federal and state laws, rules and regulations applicable to the Fund and
the operation of its business (other than those related to investment
objectives, policies and restrictions over which the Subadviser has
discretion pursuant to the terms hereof), including, without limitation,
applicable disclosure and filing obligations for prospectuses, statements
of additional information, registration statements, periodic reports to
shareholders and regulatory bodies, proxy statements and promotional
materials and advertisements; and
<PAGE>
-8-
g. The Fund is in compliance in all material respects, and during the term of
this Agreement will remain in compliance in all material respects, with the
terms and conditions of the Prospectus (other than those related to
investment objectives, policies and restrictions over which the Subadviser
has discretion pursuant to the terms hereof), including, without
limitation, provisions relating to the computation of the Fund's net asset
value and those relating to processing purchase, exchange and repurchase
requests.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; DUTY TO UPDATE INFORMATION
All representations and warranties made by the Subadviser and the
Adviser pursuant to Sections 6 and 7, respectively, will survive for the
duration of this Agreement and the parties to this Agreement will promptly
notify each other in writing upon becoming aware that any of the foregoing
representations and warranties are no longer true.
9. LIABILITY
Neither the Subadviser nor any of its officers, directors, or
employees, nor any person performing executive, administrative, trading, or
other functions for the Fund (at the direction or request of the Subadviser) or
the Subadviser in connection with the Subadviser's discharge of its obligations
undertaken or reasonably assumed with respect to this Agreement, shall be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates, except for loss
resulting from willful misfeasance, bad faith, or gross negligence in the
performance of its or his or her duties on behalf of the Fund or from reckless
disregard by the Subadviser or any such person of the duties of the Subadviser
under this Agreement.
10. DURATION AND TERMINATION
a. This Agreement will become effective on March 1, 2000 and will continue in
effect until a new Subadvisory Agreement between the Adviser and Subadviser
is approved by shareholders of the Fund or for 150 days, whichever is
less..
b. If the shareholders of the Fund fail to approve the Agreement or any
continuance of the Agreement, the Subadviser will continue to act as
subadviser with respect to the Fund pending the required approval of the
Agreement or its continuance or of a new contract with the Subadviser or a
different adviser or other definitive action; provided, that the
compensation received by the Subadviser in respect of the Fund during such
period is in compliance with Rule 15a-4 under the Investment Company Act.
c. This Agreement may be terminated at any time, without the payment
<PAGE>
-9-
of any penalty, by the Directors of the Fund, by the Adviser, or by the
vote of a majority of the outstanding voting securities of the Fund, on ten
days' written notice to the Subadviser; or by the Subadviser on sixty days'
written notice to the Fund and the Adviser. This Agreement may be
terminated immediately in the event of a material breach of any provision
of this Agreement by the other party to this Agreement. This Agreement will
automatically terminate, without the payment of any penalty, in the event
of its assignment (as defined in the Investment Company Act), or on
termination of the Advisory Agreement.
11. REFERENCE TO SUBADVISERS
Neither the Adviser, the Fund nor any affiliated person or agent of
the Adviser or the Fund will make reference to or use the name of "CypressTree
Investment Management Company" or any derivative thereof or logo associated with
that name, except references concerning the identity of and services provided by
the Subadviser to the Fund, which references will not differ in substance from
those included in the Prospectus and this Agreement, in any advertising or
promotional materials without the prior approval of the Subadviser, which
approval will not be unreasonably withheld or delayed.
Upon termination of this Agreement in accordance with Section 10(b) hereof,
the Adviser, the Fund and the Fund and their affiliates will cease to make such
reference or use such name (or derivative or logo).
12. PROVISION OF CERTAIN INFORMATION BY SUBADVISER
The Subadviser will promptly notify the Fund in writing of the
occurrence of any of the following events:
a. the Subadviser fails to be registered as an investment adviser under the
Investment Advisers Act or under the laws of any jurisdiction in which the
Adviser is required to be registered as an investment adviser in order to
perform its obligations under this Agreement;
b. the Subadviser is served or otherwise receives notice of any action, suit,
proceeding, inquiry or investigation, at law or in equity, before or by any
court, public board or body, involving the affairs of the Fund; and
c. the chief executive officer or controlling stockholder of the Subadviser or
the portfolio manager of the Fund changes.
13. AMENDMENT
This Agreement may be amended by written amendment signed by the
<PAGE>
-10-
parties, provided that the terms of any material amendment shall be approved (i)
by the vote of a majority of the outstanding voting securities of the Fund and
(ii) by the vote of a majority of the Directors of the Fund who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by law.
14. CONFIDENTIALITY
Subject to the duties of the Subadviser to comply with applicable law,
including any demand of any regulatory or taxing authority having jurisdiction,
the Subadviser will treat as confidential all records and other information
pertaining to the Fund or the Adviser that the Subadviser maintains or receives
as a result of its responsibilities under this Agreement. In addition, subject
to the duties to comply with any applicable law, the Adviser agrees to treat as
confidential any information concerning the Subadviser, including its investment
policies or objectives, that the Adviser receives as the result of its actions
under this Agreement.
15. NOTICE
All notices required to be given pursuant to this Agreement will be
delivered or mailed to the last known business address of the Fund, the Adviser,
or the Subadviser in person or by registered mail or a private mail or delivery
service providing the sender with notice of receipt. Notice will be deemed given
on the date delivered or mailed in accordance with this section.
16. GOVERNING LAW
The provisions of this Agreement will be construed and interpreted in
accordance with the laws of the Commonwealth of Massachusetts, or any of the
applicable provisions of the Investment Company Act. To the extent that the laws
of the Commonwealth of Massachusetts, or any of the provisions in this
Agreement, conflict with applicable provisions of the Investment Company Act,
the latter will control.
17. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed an original, all of which will together constitute one and
the same instrument.
18. CERTAIN DEFINITIONS
For the purposes of this Agreement, "interested person," "affiliated
person", "majority of outstanding voting securities" and "assignment" have their
respective meanings as set forth in the 1940 Act, subject, however, to such
exemptions as may be granted by the
<PAGE>
-11-
SEC.
19. HEADINGS
The headings in the sections of this Agreement are inserted for
convenience of reference only and will not constitute a part of this Agreement.
20. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule, or otherwise, the remainder of this Agreement will not
be affected.
21. ENTIRE AGREEMENT
This Agreement contains the entire understanding and agreement of the
parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
AMERICAN GENERAL ASSET
MANAGEMENT CORP.
By: _________________________
_____________________
CYPRESSTREE INVESTMENT
MANAGEMENT COMPANY, INC.
By: _________________________
______________________
<PAGE>
Exhibit 99-2N
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Post-Effective
Amendment No. 2 to the Registration Statement No. 333-91129 of CypressTree
Senior Floating Rate Fund, Inc. on Form N-2 of the Cypress Tree Senior Floating
Rate Fund, Inc. of our report dated February 22, 2000 appearing in the annual
report to shareholders for the year ended December 31, 1999 and to the
references to us under the heading "Financial Highlights" in the Prospectus and
"Auditors and Financial Statements" in the Statement of Additional Information
both of which are part of the Registration Statement.
/s/ DELOITTE & TOUCHE LLP
April 26, 2000
Boston, Massachusetts
<PAGE>
EXHIBIT (r)(1)
CYPRESSTREE INVESTMENTS
CODE OF ETHICS
--------------
December 14, 1999
Effective 1/1/00
1. Definitions
1.1 Cypress Fund. As used in this Code, "Cypress Fund" shall mean any
------------
entity registered as an open-end or closed-end investment company under the
Investment Company Act of 1940 for which CypressTree Asset Management
Corporation, Inc. or CypressTree Investment Management Company, Inc. serves as
the investment adviser or sub-adviser other than North American Funds.
1.2 CypressTree Investments. As used in this Code, "CypressTree
-----------------------
Investments" shall mean any entity established, now or in the future, as a
subsidiary of, or controlled by, Cypress Holding Company other than North
American Funds.
1.3 Access Person. As used in this Code, the term "access person" shall
-------------
mean any trustee, director, officer, general partner or advisory person of a
Cypress Fund or CypressTree Investments. It does not include a non-employee
director of CypressTree Investments.
1.4 Advisory Person. As used in this Code, the term "advisory person"
---------------
shall mean: (i) any adviser or sub-adviser of a Cypress Fund; (ii) any employee
of a Cypress Fund, of any company in a control relationship to a Cypress Fund or
of any investment adviser of a Cypress Fund, who, in connection with his or her
regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a security by a Cypress Fund, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales including any "Investment Person" or "Portfolio Manager" as
defined below; and (iii) any natural person in a control relationship to a
Cypress Fund who obtains information concerning recommendations made to a
Cypress Fund with regard to the purchase or sale of a security.
1.5 Active Consideration. A security or loan will be deemed to be under
--------------------
"active consideration" when a recommendation to purchase or sell a security or
loan has been made and communicated to the person or persons ultimately making
the decision to buy or sell the security or loan. A security or loan will be
deemed to be under "active consideration" whenever an advisory person focuses on
<PAGE>
a specific security or loan and seriously considers recommending the security or
loan to a Cypress Fund. A security or loan will be deemed to be under "active
consideration" until a Cypress Fund implements or rejects the recommendation or
until the proper advisory person decides not to recommend the purchase or sale
of the security or loan to a Cypress Fund. A security or loan will not be deemed
under "active consideration" if the security or loan is being reviewed only as
part of a general industry survey or other broad monitoring of the securities or
financial markets.
1.6 Beneficial Ownership. "Beneficial ownership" shall be interpreted in
--------------------
the same manner as it would be in determining whether a person is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934 and the rules
and regulations thereunder, except that the determination of direct or indirect
beneficial ownership shall apply to all securities which an access person has or
acquires.
1.7 Control. "Control" shall have the same meaning as that set forth in
-------
Section 2(a)(9) of the Investment Company Act.
1.8 Investment Person. As used in this Code, the term "Investment Person"
-----------------
shall mean a Portfolio Manager or any person, such as a securities analyst or
trader, who provides information and advice to a Portfolio Manager or who helps
execute a Portfolio Manager's decisions.
1.9 Portfolio Manager. As used in this Code, the term "Portfolio Manager"
-----------------
shall mean the person or persons with the direct responsibility and authority to
make investment decisions affecting any series of a Cypress Fund.
1.10 Security. "Security" shall have the meaning set forth in Section
--------
2(a)(36) the Investment Company Act, except that it shall not include securities
issued by the Government of the United States, short term debt securities which
are "government securities" within the meaning of Section 2(a)(16) of the
Investment Company Act, bankers' acceptances, bank certificates of deposit,
commercial paper and shares of registered open-end investment companies (i.e.,
mutual funds).
2
<PAGE>
1.11 Disinterested Trustee. As used in this Code, the term "disinterested
---------------------
trustee" shall mean a trustee/director of a Cypress Fund who is not an
"interested person" of a Cypress Fund within the meaning of Section 2(a)(19) of
the Investment Company Act.
1.12 Purchase or Sale of a Security. "Purchase or sale of a security"
------------------------------
includes, inter alia, the writing of an option to purchase or sell a security.
1.13 Supervisory Person. The General Counsel of the investment adviser of a
------------------
Cypress Fund or such other person designated by the Board of Directors or
his/her designee.
1.14 Loan. Senior secured floating rate loans and other senior secured
----
floating rate debt obligations which are generally direct debt obligations
undertaken by corporations in connection with recapitalizations, acquisitions,
leveraged buy-outs and re-financings.
1.15 Security Held or to be Acquired. The term "security held or to be
-------------------------------
acquired" means a security which, within the most recent 15 days: (A) has been
held by a Cypress Fund; or (B) is being or has been considered by a Cypress Fund
or its investment adviser for purchase by a Cypress Fund.
1.16 Additional Definitions. All other terms used in this Code shall be
----------------------
defined by reference to the Investment Company Act of 1940 or the Securities
Exchange Act of 1934.
2. Purpose of the Code
-------------------
This Code establishes rules of conduct for access persons of a Cypress Fund
and is designed to govern the personal securities activities of access persons.
The Code is required to contain provisions reasonably necessary to prevent
access persons from violating the anti-fraud provisions of Rule 17j-1 under the
Investment Company Act of 1940. In general, in connection with personal
securities transactions, access persons should: (1) always place the interests
of a Cypress Fund's shareholders first; (2) ensure that all personal securities
transactions are conducted in a manner that is both consistent with this Code
and so as to avoid any actual or potential conflict of interest or any abuse of
an access person's position of trust and responsibility; and (3) not take
inappropriate advantage of their
3
<PAGE>
positions. More specifically, this Code is designed to prevent certain practices
by access persons in connection with the purchase or sale, directly or
indirectly, by such access person of securities held or to be acquired by a
Cypress Fund. These include:
(a) employing any device, scheme or artifice to defraud a Cypress Fund;
(b) making any untrue statement of a material fact or omitting to state a
material fact that renders statements made to a Cypress Fund
misleading;
(c) engaging in any act, practice, or course of business that acts or
would act as a fraud or deceit upon a Cypress Fund; or
(d) engaging in any manipulative practice with respect to a Cypress Fund.
3. Prohibited Purchases and Sales
3.1 No person shall purchase or sell, directly or indirectly, any
security in which he or she has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership and which to his or her actual knowledge
at the time of such purchase or sale:
(a) is currently under active consideration for purchase or sale by a
Cypress Fund; or
(b) is a security held or to be acquired or to be acquired by a Cypress
Fund within the most recent fifteen days.
(c) is being purchased or sold by a Cypress Fund; provided however, that
such security may be purchased or sold by an access person if fifteen days have
elapsed from the date a Cypress Fund ceased activity in the purchase or sale of
such security or the Cypress Fund no longer holds the position except as noted
in Section 3.2 below.
3.2 No Portfolio Manager shall purchase or sell, directly or
indirectly, any security in which he or she has, or by reason of such
transaction acquires, any direct or indirect
4
<PAGE>
beneficial ownership within fifteen days before and after the particular series
of a Cypress Fund that he or she manages trades in that security.
3.3 The limitations and restrictions contained in this Section 3 also
relate to the Portfolio Manager of a Cypress Fund the investment objective of
which is to provide a high level of current income as is consistent with the
preservation of capital, by investing primarily in senior secured floating rate
loans that meet certain (or pre-determined) standards.
3.4 No Investment Person shall acquire any securities in an initial
public offering for his or her personal account unless prior approval has bee
obtained from the Supervisory Person. Trading in securities prior to the
completion of the first day of public trading is strictly prohibited.
3.5 No Investment Person shall acquire, directly or indirectly,
beneficial ownership of any security in a private placement without the prior
approval of the Supervisory Person. This approval shall take into account
whether the investment opportunity should be reserved for a Cypress Fund,
whether the opportunity is being offered to an individual by virtue of his or
her position with a Cypress Fund and any other relevant factors. If an
Investment Person has purchased a security in a private placement, then (a) such
Investment Person must disclose his or her ownership of the security if he or
she has a material role in a Cypress Fund's subsequent consideration to purchase
the security and (b) a Cypress Fund's decision to purchase the security will be
reviewed by at least two other Investment Persons with no personal interest in
the issuer.
3.6 No Investment Person shall profit from the purchase and sale, or
sale and purchase, of the same (or equivalent) securities of which such
Investment Person has beneficial ownership within 60 calendar days.
3.7 These prohibitions shall apply to the purchase or sale by any
access person of any convertible security, option or warrant of any issuer whose
underlying securities or senior secured floating rate loans and other senior
secured floating rate debt obligations are under active consideration by a
Cypress Fund.
5
<PAGE>
3.8 Any profits realized on transactions prohibited by this Section 3
shall be paid to the affected series of a Cypress Fund or to a charitable
organization designated by the Board of Trustees of a Cypress Fund.
3.9 These prohibitions shall not apply to purchases and sales
specified in Section 4 of this Code.
4. Exempt Transactions.
-------------------
The prohibitions in Section 3 of this Code shall not apply to the
following transactions by access persons:
(a) purchases or sales effected in any account over which an access
person has no direct or indirect influence or control;
(b) purchases or sales of securities which are not eligible for
purchase or sale by a Cypress Fund;
(c) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired;
(d) purchases or sales which are non-volitional on the part of either
the access person or a Cypress Fund;
(e) purchases which are part of an automatic dividend reinvestment
plan;
(f) purchases or sales approved by a majority vote of those
trustees/directors having no interest in the transaction (or by another
designated person or body not involved in the transaction) upon a showing of
good cause. Good cause will be deemed to exist where unexpected hardship
occasions the need for additional funds. A change in investment objectives will
not be deemed "good cause"; and
(g) purchases or sales approved by a majority vote of those
trustees/directors having no interest in the transactions (or by another
designated person or body not involved in the transaction) where the purchases
and sales have only a remote
6
<PAGE>
potential of harming a Cypress Fund because (1) such transactions are in a
highly institutionalized market and would have little effect on such market; or
(2) such transactions clearly are not related economically to the securities to
be purchased, sold or held by a Cypress Fund.
5. Prohibited Business Conduct
---------------------------
No access person shall, either directly or indirectly:
(a) engage in any business transaction or arrangement for personal
profit based on confidential information gained by way of employment with a
Cypress Fund or its investment adviser or sub-adviser or CypressTree
Investments;
(b) communicate non-public information about security transactions of
a Cypress Fund, whether current or prospective, to anyone unless necessary as
part of the regular course of a Cypress Fund's business. Non-public information
regarding particular securities or loan, including reports and recommendations
of any investment adviser or sub-adviser to a Cypress Fund, must not be given to
anyone who is not an officer or director of a Cypress Fund or the investment
adviser or sub-adviser without prior approval of the President of the Cypress
Fund;
(c) accept a gift, favor, or service of more than de minimis value
----------
from any person which, to the actual knowledge of such access person, does
business or might do business with the Cypress Fund, the Trust, the investment
adviser, or its affiliates;
(d) buy or sell any security or any other property from or to a
Cypress Fund.
No Investment Person shall serve on the Board of Directors of any
publicly traded company without prior authorization from the Supervisory Person
based upon a determination that such board service would be consistent with the
interests of the Cypress Fund and its shareholders. Any Investment Person so
authorized to serve as a director will be
7
<PAGE>
isolated from other persons making investment decisions for the Cypress Fund
through a "Chinese Wall" or other procedures. Please refer to the Chinese Wall
policy.
6. Reporting
---------
6.1 Every access person shall report to the Board of
Trustees/Directors of the a Cypress Fund or its designee any transaction in a
security or loan in which he or she has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership in the security or loan;
provided, however, that an access person shall not be required to make a report
with respect to transactions effected for any account over which he or she has
no direct or indirect influence or control.
6.2 Notwithstanding Section 6.1 of this Code, an access person need
not make a report where the report would duplicate information recorded pursuant
to Rules 204-2(a)(12) or 204-2(a)(13) under the Investment Advisers Act of 1940.
6.3 A transaction shall be reported not later than 10 days after the
end of the calendar quarter during which the transaction was effected pursuant
to the Policy and Procedures of CypressTree Investments for Personal Security
Transactions.
6.4 A disinterested trustee/director of a Cypress Fund need only
report a transaction in a security if the trustee/director, at the time of that
transaction, knew or, in the ordinary course of fulfilling his or her official
duties as a trustee/director of the Cypress Fund, should have known that, during
the 15 day period immediately preceding or after the date of the transaction by
the trustee/director, the security is or was under active consideration for
purchase or sale by a Cypress Fund or its investment adviser or sub-adviser or
is or was purchased or sold by a Cypress Fund.
6.5 Any reports required by this section shall state:
(a) the title and number of shares, and the principal amount of the
security involved;
(b) the date and nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
8
<PAGE>
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through whom the
transaction was effected.
The report may also contain a statement declaring that the reporting
or recording of any transaction shall not be construed as an admission by the
access person making the report that he or she has any direct or indirect
beneficial ownership in the security to which the report relates.
6.6 All access persons shall cause duplicate brokerage statements and
confirmations which set forth all transactions required to be reported hereunder
to be sent to the Supervisory Person.
6.7 Upon commencement of employment, each Investment Person shall
disclose his or her current personal securities holdings.
6.8 Each access person shall certify annually that he or she has read
and understood the Code and recognizes that he or she is subject to the Code.
Further, each access person is required to certify annually that he or she has
complied with all the requirements of the Code and that he or she disclosed or
reported all personal securities transactions required to be disclosed or
reported pursuant to the requirements of the Code.
6.9 At least annually, a Cypress Fund's investment adviser shall
report to the Board of Trustees/Directors regarding:
(a) all existing procedures concerning personal trading activities and
any procedural changes made during the past year;
(b) any recommended changes to the Code or procedures; and
(c) any violations which occurred during the past year with respect to
which significant remedial action was taken.
9
<PAGE>
6.10 Every access person aware of any violation of this Code shall
report the violation to the Supervisory Person in an expedient fashion.
7. Sanctions
---------
Upon learning of a violation of this Code, the Board of Trustees/Directors
of a Cypress Fund or its designee may impose any sanctions as it deems
appropriate under the circumstance, including, but not limited to, letters of
reprimand, suspension or termination of employment, disgorgement of profits and
notification to regulatory authorities in the case of Code violations which also
constitute fraudulent conduct.
8. Applicability of Code to Sub-advisers
-------------------------------------
Any person who is an access person because of his or her relationship with
a sub-adviser of a Cypress Fund is not subject to this Code provided that such
sub-adviser has adopted its own Code of Ethics that substantially complies with
Rule 17j-1 under the Investment Company Act of 1940.
9. Designation of Supervisory Person
---------------------------------
The Funds' Secretary is hereby designated as the Supervisory Person
responsible for determining compliance by the Funds with said Rule 17j-1.
<PAGE>
Exhibit 99(2)(6)
LIMITED POWER OF ATTORNEY
WITH RESPECT TO CYPRESSTREE SENIOR FLOATING RATE FUND, INC.
Know all men by these presents that Alice T. Kane, whose signature appears
below, hereby constitutes and appoints Jeffrey S. Garner, and John I.
Fitzgerald, and each of them, her attorneys-in-fact, each with the power of
substitution, for her in any and all capacities, to sign and registration
statements and amendments thereto for CypressTree Senior Floating Rate
Fund, Inc., and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitutes, may do or cause to be done by virtue hereof.
/s/ Alice T. Kane
______________________________
Alice T. Kane
President and Director
CypressTree Senior Floating Rate Fund, Inc.
March 10, 2000
Power of Attorney
<PAGE>
AGC INVESTMENT ADVISER/
INVESTMENT COMPANY
CODE OF ETHICS
I. Applicability
This Code of Ethics (the "Code") is applicable to all persons designated as
"Access Persons" of the subsidiary firms of American General Corporation ("AGC")
that are registered as investment advisers ("AGC Investment Advisers") with the
Securities and Exchange Commission (the "SEC"), and officers, directors,
trustees and Access Persons of any Investment Company (collectively, "Covered
Persons"). This Code is supplemented by a number of other AGC published
compliance policies, including the Insider Trading Policy as discussed below.
II. Overview of Regulatory Framework
The AGC Investment Advisers supervise the investment portfolios of registered
investment company accounts ("Investment Companies") and other investment
advisory client accounts (collectively, "Advisory Clients"). Pursuant to
investment advisory agreements with the Advisory Clients, the AGC Investment
Advisers are authorized to take all actions necessary and appropriate to carry
out the investment objectives and investment policies established for each
Advisory Client, including, but not limited to, the purchase and sale of
securities on each Advisory Client's behalf. In carrying out these contractual
obligations, the AGC Investment Advisers acknowledge that they have a fiduciary
duty to the Advisory Clients and that this duty is recognized under federal
securities laws and regulations. In particular, the Investment Advisers Act of
1940, as amended (the "Advisers Act"), establishes as a matter of federal law
the fiduciary status of investment advisers and regulates the relationship
between investment advisers and their advisory clients. The Advisers Act, among
other things, prohibits advisers from engaging in practices that constitute
fraud or deceit upon advisory clients, including the practice of an adviser or
an employee of an adviser trading privately in securities for personal benefit
at the same time that its advisory clients are caused to trade in the same
securities.
The Investment Company Act of 1940, as amended (the "1940 Act"), regulates and
controls the relationship between the AGC Investment Advisers and the Investment
Companies that they manage. The 1940 Act specifically prohibits certain types of
financial transactions, either directly or indirectly, involving both the
Investment Company and the Investment Adviser, or officers and employees of the
adviser, unless prior written approval is obtained from the SEC. The 1940 Act
also requires every investment company and each investment adviser for such
investment company to adopt a written code of ethics.
The AGC Investment Advisers and each Investment Company have adopted this
<PAGE>
Code in compliance with both the Advisers Act and the 1940 Act. This Code,
together with the compliance policies of the AGC Investment Advisers, is
designed to detect and prevent violations of the Adviser's Act and the 1940 Act.
The Insider Trading and Securities Fraud Enforcement Act of 1988 (the "Insider
Trading Act") requires all investment advisers to establish, maintain and
enforce written policies and procedures designed to detect and prevent both
insider trading and the misuse of material, nonpublic information. The AGC
Investment Advisers have adopted policies and procedures designed to detect and
prevent insider trading pursuant to the Insider Trading Act. Covered Persons
should examine this Code in conjunction with the provisions of the Insider
Trading Policy adopted by the AGC Investment Advisers.
All personal securities transactions must be conducted consistent with the Code
of Ethics and in a manner to avoid any actual or potential conflict of interest
or any abuse of a Covered Person's position of trust and responsibility. In
conducting personal securities transactions, Covered Persons must not take
inappropriate advantage of their positions and must at all times place the
interest of Advisory Clients first.
Although the AGC Investment Advisers respect the personal freedom and privacy of
their Covered Persons, they believe that, in the regulatory environment in which
they operate, these considerations are outweighed in certain circumstances by
the need to carry out their fiduciary duties to the fullest extent possible.
Therefore, the AGC Investment Advisers have adopted the standards outlined below
to prevent potential conflicts of interest between Covered Persons' personal
business activities and the investment activities of Advisory Clients.
III. Definitions
The following definitions are applicable to terms used in the Code:
1. Access Person. The term "Access Person" means any individual affiliated with
an AGC Investment Adviser or its Advisory Client in a control relationship who,
in connection with his or her regular functions or duties, makes, participates
in, or obtains information regarding the purchase or sale of a Security for an
Advisory Client, or whose functions relate to the making of any recommendations
with respect to these purchases or sales.
2. Beneficial Ownership. The term "Beneficial Ownership" includes accounts of a
spouse or domestic partner, minor children and relatives living in an Access
Person's home, as well as accounts of any other person if by reason of any
contract, understanding, relationship, agreement or other arrangement the Access
Person obtains benefits substantially equivalent to those of ownership,
including benefits associated with survivorship or inheritance. For purposes of
this Code, a prohibition or requirement applicable to any Access Person applies
also to transactions in securities for any account for which the Access Person
has a Beneficial Ownership, including transactions executed by the Access
<PAGE>
Person's spouse or relatives living in the Access Person's household, unless
such account is specifically exempted from such requirement by the Chief
Compliance Officer. A copy of a Release issued by the SEC on the meaning of the
term "Beneficial Ownership" is available upon request, and should be studied
carefully by any Access Person concerned with this definition before preparing
any report.
3. Compliance Officer. The term "Compliance Officer" means a member of the
Compliance Department of an AGC Investment Adviser who is responsible for
monitoring compliance with regulatory requirements and this Code of Ethics, and
any person designated by the Chief Compliance Officer who assists in performing
the above described duties.
4. Considered for Purchase or Sale. A security is being Considered for Purchase
or Sale when a recommendation to purchase or sell the security has been made and
communicated by an authorized Access Person in the course of his or her duties.
With respect to the person making the recommendation, a security is being
Considered for Purchase or Sale when the person seriously considers making such
a recommendation.
5. Control. The term "Control" has the same meaning as in Section 2(a)(9) of the
1940 Act (i.e., the power to exercise a controlling influence over the
management or policies of a company, unless such power is solely the result of
an official position with such company). Any person who owns beneficially,
either directly or through one or more controlled companies, more than 25% of
the voting securities of a company shall be presumed to control such company.
6. Exempt Officers, Directors and Trustees. The phrase "Exempt Officers,
Directors and Trustees" means an officer, director or trustee who is not an
"interested person" of an Investment Company within the meaning of Section
2(a)(19) of the 1940 Act. The determination as to the exempt status of any
officer, director, or trustee shall be made by the Chief Compliance Officer.
7. Investment Company. The term "Investment Company" means an investment company
affiliate of AGC which is registered with the SEC.
8. Investment Personnel. The term "Investment Personnel" includes those
employees who are authorized to make investment decisions or to recommend
securities transactions on behalf of clients, research analysts, and employees
who work directly with portfolio managers and traders in an assistant capacity.
9. Portfolio Manager. The term "Portfolio Manager" means a person with the
direct responsibility and authority to make investment decisions affecting an
Advisory Client, including, but not limited to, private placement, Investment
Company and private account Portfolio Managers.
10. Security or Securities. The term "Security" shall have the same meaning as
set forth in Section 2(a)(36) of the 1940 Act, except that it shall not include
shares of registered open-end investment companies, securities issued or
guaranteed by the U.S. Government, banker's acceptances, bank certificates of
deposit, and commercial paper. Any prohibition or reporting obligation relating
to
<PAGE>
a Security shall apply equally to any option, warrant or right to purchase or
sell the Security and to any Security convertible into or exchangeable for such
Security (i.e., a "Related Security").
IV. Standards of Conduct
1. No Covered Person may engage, directly or indirectly, in any business
transaction or arrangement for personal profit that is inconsistent with the
best interests of Advisory Clients; nor shall he or she make use of any
confidential information gained by reason of his or her affiliation with the AGC
Investment Advisers or their affiliates in order to derive a personal profit for
himself or herself or for any beneficial interest, in violation of the fiduciary
duty owed by the AGC Investment Advisers and their affiliates to Advisory
Clients.
2. No Access Person shall purchase or sell, directly or indirectly, any Security
(or Related Security) in which he or she has, or by reason of the transaction
acquires, any direct or indirect beneficial ownership and that he or she knows
or should have known, at the time of purchase or sale: (i) is being Considered
for Purchase or Sale for an Advisory Client; or (ii) is being purchased or sold
for an Advisory Client. Securities purchased or sold through basket trades for
index-based accounts may be exempted from this prohibition with the approval of
a Compliance Officer.
3. Access Persons and any other AGC employee may not trade in market options
(puts or calls), warrants or other derivative instruments of AGC securities.
Options granted to employees by AGC are not considered market options.
4. Access Persons who are senior officers (i.e., senior vice presidents and
above) of an AGC Investment Adviser may not engage in market transactions
involving AGC securities (including stock and stock options) from the last day
of each fiscal quarter until three business days after AGC releases its earnings
for that quarter.
5. When a Security in which a Portfolio Manager has Beneficial Ownership is
recommended to his/her client for purchase, the Portfolio Manager's interest
(including dates of acquisition and costs) must be disclosed to a Compliance
Officer prior to the recommendation being made. Securities purchased or sold
through basket trades for index-based accounts may be exempted from this
requirement with the approval of a Compliance Officer.
6. No Covered Person may use material, nonpublic information when engaging in
Securities transactions. For example, Covered Persons who are directors of
closed-end Investment Companies may not purchase the closed-end Investment
Company's Securities prior to a dividend distribution of which he or she has
knowledge. Any Access Person who obtains material, confidential information
(a) by reason of his or her employment;
(b) by entering into a special confidential relationship in the conduct of
his or her duties; or
<PAGE>
(c) inadvertently,
shall immediately report the receipt of such information to a Compliance
Officer.
7. Without obtaining prior written approval from a Compliance Officer, no Access
Person shall dispense any reports, recommendations, or other information
concerning Securities holdings or Securities transactions for Advisory Clients
to anyone outside or inside the AGC Investment Advisers, unless such persons
have a business need for this information as a part of their normal duties and
activities. However, Access Persons may disclose this information
(a) where there is a public report containing the same information;
(b) when the information is dispensed in accordance with compliance procedures
established to prevent conflicts of interest between the AGC Investment Advisers
and their Advisory Clients; or
(c) when the information is reported to directors or trustees of Advisory
Clients or to administrators or other fiduciaries of Advisory Clients and when
these persons receive the information in the course of carrying out their
fiduciary duties. Note: No such information may be dispensed without the prior
approval of a Compliance Officer.
8. No Access Person shall accept directly or indirectly from a broker/dealer or
any other person who transacts business with the AGC Investment Advisers or
their Advisory Clients gifts, gratuities, preferential treatment, valuable
consideration or favors that are excessive in value or frequency which might
reasonably be expected to interfere with or influence the exercise of
independent and objective judgment in carrying out such Access Person's duties
as a fiduciary. Additional limitations and prohibitions on the receipt of gifts
or entertainment can be found in AGC's Gift and Entertainment Policy.
9. No Access Person shall join an investment club, or enter into an investment
partnership (including hedge funds) without obtaining prior written approval
from a Compliance Officer.
10. Portfolio Managers are prohibited from buying or selling a Security,
directly or indirectly, within seven calendar days before and after any Advisory
Client trades in that same Security. All Access Persons are prohibited from
buying or selling a Security, directly or indirectly, within seven calendar days
after any Advisory Client trade and seven calendar days before any anticipated
trade for an Advisory Client in that same Security. With the prior written
approval of the Chief Compliance Officer, securities purchased or sold through
basket trades for index-based accounts may be exempted from this prohibition.
11. Access Persons are prohibited from profiting, directly or indirectly, in the
purchase and sale, or sale and purchase, of the same (or equivalent) Securities
within 60 calendar days. Securities exempted from the prior clearance
requirement as outlined in Section 1 of Article V below are also exempt from
this prohibition.
12. Access Persons shall not purchase, directly or indirectly, any Securities,
or by
<PAGE>
reason of a transaction, acquire direct or indirect beneficial ownership of
Securities, in an initial public offering.
13. Research Analysts are required to obtain prior approval from a Compliance
Officer prior to purchasing or selling an equity Security in an industry he or
she follows unless the analyst has communicated his or her idea to the
appropriate Portfolio Manager or Trader.
Note: The prohibitions outlined in sections 2, 10, 11, and 12 above do not apply
to accounts over which a broker or Power of Attorney has full investment
discretion, although the Compliance Department must be notified of such accounts
in writing and must receive duplicate account statements and confirmations.
V. Prior Clearance Requirements
1. No Access Person shall purchase or sell any Security without obtaining prior
written clearance from a Compliance Officer. This includes direct or indirect
purchases of the Security (e.g., purchases by an Access Person's spouse,
purchases for investment club accounts, etc.). The following Securities are
exempt from the prior clearance requirements (but not from personal trading
reporting requirements): commodities and commodity futures, DRIPs or stock
purchase plans sponsored by AGC or USLIFE Income Fund, Inc., other corporate
DRIPs, index-based securities, transactions for thrift and/or incentive plans
sponsored by AGC and (subject to applicable blackout periods) common stock of
AGC. Any Exempt Officer, Director or Trustee may at his or her option request
preclearance for any proposed purchase or sale.
2. Preclearance is effective only until the close of trading on the day it is
granted, although "after-hours" Internet trades are permitted with proper
pre-clearance, provided that the transaction is effected prior to midnight on
the day it is granted.
3. Limit Orders must be pre-cleared on the day the order is placed with a
broker, prior to the opening of the order. Limit orders are required to be
pre-cleared on subsequent days so long as the order remains open.
4. No Access Person shall acquire directly or indirectly any Beneficial
Ownership of Securities in a private placement without obtaining prior written
approval of the Chief Compliance Officer.
5. No Access Person shall serve on the board of directors of a publicly traded
company without obtaining prior written clearance from a Compliance Officer.
6. No Access Person shall: (i) act as an investment adviser to any other person
or entity for compensation; or (ii) obtain a significant interest in a
broker/dealer.
VI. Exempt Purchases and Sales
The prohibitions of Section 1 of Article IV and Section 1 of Article V shall not
apply to:
<PAGE>
1. Purchases or sales effected in any account over which the Access Person has
no direct or indirect influence or control.
2. Transactions in employee benefit plans or employer-sponsored investment
programs.
3. Purchases which are part of an automatic dividend reinvestment plan.
4. Purchases or sales effected upon the exercise of rights issued by the issuer
pro rata to all holders of a class of its Securities, to the extent the rights
were acquired from such issuer.
5. Purchases or sales effected for accounts for which a broker or Power of
Attorney has full investment discretion. The Compliance Department must be
notified of such accounts in writing and must receive duplicate account
statements and confirmations.
6. Other purchases or sales which are non-volitional (e.g., inherited securities
or Corporate Actions).
VII. Exceptions
1. Exceptions to this Code of Ethics will be granted only in rare circumstances,
and then only with the prior written approval of the Chief Compliance Officer.
Exceptions may be granted only when the Chief Compliance Officer believes that
the potential for conflict is remote. Copies of all written approvals will be
maintained by the Compliance Department and will describe the circumstances
surrounding and the justification for granting the exception. For exceptions
involving Covered Persons of an Investment Company, the Board of Directors of
the Investment Company will be notified at least annually regarding any
exceptions that have been granted pursuant to this provision.
2. The exceptions to the policies and procedures described in this Code of
Ethics should not be viewed as necessarily applicable to the other codes or
written standards of business conduct adopted by AGC or its subsidiaries which
may also be applicable to Access Persons covered under this Code. Exceptions to
these other requirements must be obtained independently.
VIII. Reporting
1. Reporting Obligation. Every Access Person shall report to a Compliance
Officer the information described in Section 3 below with respect to
transactions in any Security in which such Access Person has, or by reason of
such transaction acquires, any direct or indirect Beneficial Ownership in the
Security (e.g., purchases or sales by an Access Person's spouse).
2. Exempt Officers, Directors and Trustees. An Exempt Officer, Director or
Trustee shall report a transaction in a Security if such Officer, Director or
Trustee, at the time of the transaction, knew or, in the ordinary course of
fulfilling his or her official duties as an Exempt Officer, Director or Trustee,
should have known that, during the 15-day period immediately preceding or after
the date of the transaction in a Security by the Officer, Director or Trustee,
such Security
<PAGE>
was purchased or sold for an Advisory Client or was considered by such Advisory
Client for purchase or sale.
3. Form of Report. Quarterly reports of securities transactions shall be made no
later than 10 calendar days after the end of the calendar quarter in which the
transaction to which the report relates was effected, and shall contain the
following information:
(a) The date of the transaction, the issuer's name and the number of shares,
and/or the principal amount of the shares involved;
(b) the nature of the transaction, i.e., purchase, sale or any other type of
acquisition or disposition;
(c) the price at which the transaction was effected; and
(d) the name of the broker, dealer or bank with or through whom the
transaction was affected.
All reports shall be made on an appropriate form, as distributed by the
Compliance Department. Originals (not copies) of brokerage statements may be
attached to a signed report in lieu of setting forth the information otherwise
required.
4. Disclaimer of Beneficial Ownership. Quarterly reports of securities
transactions shall not be construed as an admission by the person making the
report that he or she has any direct or indirect Beneficial Ownership in the
Security to which the report relates.
5. Notification of Reporting Obligation. The quarterly report of securities
transactions is designed to comply with the requirements of the SEC under the
Advisers Act and the 1940 Act. Every Access Person has a continuing obligation
to file such reports in a timely manner. Information supplied on the reports is
available for inspection by the SEC at any time.
6. Disclosure of Personal Holdings. All Access Persons must disclose all
personal Securities holdings upon commencement of employment and thereafter on
an annual basis.
7. Disclosure of Interest in Transaction. No Covered Person shall recommend any
securities transaction for any Advisory Client without having disclosed his or
her interest, if any, in such Securities or the issuer thereof, including
without limitation: (a) his or her direct or indirect Beneficial Ownership of
any Securities of such issuer; (b) any contemplated transaction by such person
in such Securities; (c) any position with the issuer or its affiliates; (d) any
present or proposed business relationship between the issuer or its affiliates
and such person or any party in which such person has a significant interest;
and (e) any factors about the transaction that are potentially relevant to a
conflicts of interest analysis.
8. Confidentiality. All information obtained from any Covered Persons hereunder
shall be kept in strict confidence, except that reports of securities
transactions will be made available to the SEC or any other regulatory or
self-regulatory
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organization to the extent required by law or regulation.
IX. Certifications
1. All Access Persons, within 10 days of becoming an Access Person, shall
certify that they have: (a) received a copy of this Code; (b) read and
understood the provisions of this Code; and (c) agreed to serve the Advisory
Clients in accordance with the terms of this Code.
2. All Access Persons shall annually certify that they have: (a) read and
understood this Code; (b) complied with the principles of this Code; and (c)
disclosed or reported all personal securities transactions which are required by
the Code to be disclosed or reported.
X. Records of Securities Transactions
Every Access Person shall direct his or her broker to supply the Chief
Compliance Officer, on a timely basis, with duplicate copies of confirmations of
all personal Securities transactions and copies of periodic statements for
brokerage accounts.
XI. Sanctions
1. Any violation of this Code of Ethics shall be reported to and considered by
the Chief Compliance Officer and, in his or her discretion, by senior management
of the relevant AGC Investment Adviser. Such individuals or bodies shall impose
sanctions as deemed appropriate in the circumstances, and may include disgorging
of profits and termination of employment of the violator.
2. With respect to any Investment Company, the Chief Compliance Officer shall
furnish annually to the Investment Company's Board of Directors/Trustees a
report regarding the administration of this Code of Ethics, including any
material violations, and summarizing any reports filed hereunder. If the report
indicates that any changes are advisable, the Board of Directors/Trustees shall
make an appropriate recommendation to the Chief Compliance Officer.
